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Economic crisis round the corner: Assocham

Despite manifestations of a surplus economy, the real GDP growth rate in 2001-02 is expected to hover between 5.5 per cent and 5.8 per cent and unless the complacency over India's growth resilience is overcome, an economic crisis reminiscent of early 1991 may hit the country, says an Assocham study.

The analysis by the Associated Chambers of Commerce and Industry of India reveals that with the only exception of encouraging reports on the progress of the monsoon till the third week of July 2001, there is hardly any good news on the economic front.

On the contrary, the US 64 crisis, growing weaknesses of the financial system, decelerating growth of tax revenues and the expected backlash of the global economic slowdown, do not augur well for resuscitating economic recovery, it said.

While the progress of the monsoon so far has been favourable, the precipitation of rains in the next six to eight weeks will be very crucial for healthy growth of crops. The agricultural sector would witness a substantial rebound in terms of physical production, but given the likely downward pressure on prices, the income contribution from this sector is unlikely to expand by more than 3.5 to 4 per cent, according to the study.

The industrial sector has been severely hit as is evident from a modest growth in the first quarter of the current financial year. Out of the 17 major industry classifications, there are not even two or three segments about which we can feel confident of scoring a double-digit growth. In contrast, the automobile sector, consumer durable, capital goods and most core sector industries are either experiencing cutback in production or the prospect of negligible growth. All in all, it will be an uphill task to achieve an overall industrial growth of more than 5 per cent in 2001-02, the Chamber says.

The expectation is that real GDP growth to be range-bound between 5.5 and 5.8 per cent in 2001-02. It is unfortunate that despite the manifestations of a 'surplus' economy, be it in mounting stocks of foodgrains, forex reserves, liquidity with banks, undisbursed assistance of financial institutions, or unutilised capacities in industry, we have not been able to strategise these for growth acceleration, the Assocham said.

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