``Politics has continued to wreak havoc on economics. With the fall of government in April, we are going through the longest tenure for a care-taker government leaving the economic policy-making process in a state of limbo for as many as six months,'' the broking arm of Development Bank of Singapore said in its quarterly `India Economic Outlook'.

With political uncertainty continuing, DBS feels that major investments are unlikely to take place until the new government is in place. ``This means the first half and probably the third quarter of 1999-2000 are completely written-off with respect to major new investments,'' it said.

It said full-scale war having been averted, nevertheless, the Kargil crisis has created the need for higher defenceexpenditure in the near future.

However, it feels that there will be an improvement in the economy over the last fiscal and expects the recovery process to be slow with industrial growth of around 5.5 per cent for the full year compared to 3.9 per cent in 1998-99. The industrial growth in April this year was 6.8 per cent with manufacturing sector growing by 7.8 per cent.

Other factors, according to DBS Securities, for mild recovery is the faltering of credit growth. ``April had seen an unusual increase in credit off-take, the numbers in May, by when the Kargil crisis had also become public, were less optimistic,'' it said.

Apart from these, other signals that lead DBS to believe that the industrial recovery will be mild are the decline in non-oil imports. While non-oil imports declined by 11.6 per cent, oil imports spurted by 36 per cent during May.

``The decline in non-oil imports is a factor that is casting a doubt over the economic recovery,'' it said, adding though industrial production has grownby 6.8 per cent and manufacturing by 7.8 per cent with a major spurt in capital goods. ``This could be on account of import substitution rather than incremental demand,'' it said.

On various sectors which have shown impressive growth in the beginning of 1999-2000, it said commercial vehicle sales growth though strong, bears the impact of the decline in 1998-99. In absolute terms, the sales are lower than in 1997-98 said DBS Securities.

A small part of the spurt in cement despatches is because of the base effect (despatches had declined in may 1998) but a part of it could be on account of the government, whose tenure has been shortened, pushing through some new projects and project completions before election, it added.