Most industrial items show modest growth of 5-7 per cent so far, with only machinery and metal products recording robust growth.

"However, several heavy-weight items - commercial vehicles, cement and bulk chemicals, have shown little growth and even small contraction," ICRA said in its latest report.

Although foodgrain output has hit a new record of 205.91 mt in last fiscal, offtake through public distribution system (PDS) declined sharply so far leading to "relentless" rise in the minimum support prices (MSP), ICRA said.

If prices of food items rise further, the losses on agri items on account of PDS would be higher, leading to rise in food subsidy Bill of the government, it said. Under these circumstances, ICRA said "an expansion of 1.5 per cent in real agricultural incomes, in addition to 8.25 per cent growth in non-agricultural GDP should see a 6.6 per cent growth in aggregate GDP."

For anything significantly more, industrial activity will have to pick up a greater head of stream, and there is little indications that this might happen, the rating agency said in its report `Money & Finance'.

ICRA's projections comes in the wake of the rosy picture painted by finance minister Yashwant Sinha saying the country was poised for seven plus percentage growth this year. The Central Statistical Organisation (CSO) pegged the growth rate at 6.9 while the Reserve Bank of India (RBI) placed the figure at 6.5-7.0 per cent. ICRA said it is "reasonable" to expect non-agricultural component, consisting of industry and services (contributing to about 74.5 per cent of GDP), to expand at over eight per cent during 2000-01 considering the sales and revenue outlook, and exports growth.

"At the same time, there are indications that the pace of acceleration in several sectors have tended to slow down in recent months...A 6.2 per cent of overall gdp growth is expected from the non-agricultural sector," it said.With monsoons looking good, a modest expansion of 1.5 per cent in agriculture, both from foodgrain and non-foodgrain component, should be realised, ICRA said.

The current rise in inflation rate, ICRA said, is mainly due to energy and to some extent on account of food prices. "If energy and food is excluded, rest of the commodities which makes 70 per cent of base weight, are showing a annual inflation between 1.5 and 1.8 per cent," it said.

The report also said current account deficit is expected to be between $6-7 billion (1.3 per cent of GDP) with the impact of higher oil prices becoming less dramatic in the coming months of 2000-01.