Negative

1. A subdued world economic outlook accompanied by sluggish global trade.
2. Most telling monsoon deficiency in two decades The late arrival of the monsoon, combined with deficient or scanty rain, weakened the growth momentum in the second quarter.
3. Unsettling geo-political conditions A tense situation on the western border combined with imponderables arising from the situation in the Gulf and elsewhere, compounded this weakness
4. High international oil prices
5. Portfolio investment inflows through the foreign institutional investors (FII) route turned negative at $258 million, partly on account of the heightened border tension in the first quarter.
6. Domestic capital markets remained subdued There were only six issues (worth Rs.952 crore) during the first half of the current year compared with twelve issues (worth Rs.2, 360 crore) during the corresponding previous period. Net resources raised by mutual funds during the first half of the year were also much lower than that during the corresponding period of the previous year.
7. The fiscal deficit for the first half of the current year at Rs.57, 746 crore was only marginally higher than the deficit in the corresponding previous period. Revenue receipts increased by 15.9 per cent in the first half of the current year, while total receipts increased by 12 per cent. In the same period, aggregate revenue expenditure and capital expenditure increased by 13.5 per cent and 3.6 per cent, respectively. As proportions of their respective budgeted amounts, revenue receipts, total receipts, revenue expenditure and capital expenditure were 37.5 per cent, 39.6 per cent, 41 per cent and 33 per cent, respectively. The remainder of the year could, however, see some pressures on both revenue and expenditure. Unanticipated weakening of the growth momentum may affect revenue collections in the absence of appropriate corrective measures. Expenditure management would also pose larger challenges from enhanced food subsidies on account of higher farm support prices, higher fertilizer subsidy from augmented retention prices, larger subsidies resulting from distribution of liquid petroleum gas (LPG) and kerosene at below market prices and unanticipated expenditure on drought relief.
8. Disbursements from All India Financial Institutions (AIFI), however, declined by 46 per cent (net of mergers effect) in the first half of the current year, relative to the corresponding previous period. This drop in disbursements is reflective of a relatively soft investment demand, along with the weak financial position of institutions like IDBI and IFCI.
9. A harsh drought, in 14 States of the Union is likely to dampen this year''s GDP growth expectations.
10. Overall growth of the steel industry has been somewhat constrained due to relatively slow revival of demand, competition from cheap imports, and prohibitive barriers in the form of anti-dumping and countervailing duty petitions moved by the European Union, USA and Canada.
11. Exports of leather and manufactures, electronic goods, tea, coffee, marine products, tobacco and oil meals have not performed satisfactorily in the current financial year so far. Exports of petroleum products, which had surged in the last two years, have also shown signs of deceleration.
12. Import growth, as per DGCI&S data, continues to be modest in the current year. This is after a subdued growth of 2.2 per cent in 2001-02, which was mainly due to a 10.5 per cent decline in the value of petroleum imports caused by a moderation in international crude oil prices. While overall imports increased by 8.5 per cent in April-September 2002, a large part of the increase came from a 13.4 per cent rise in the value of petroleum imports fueled by high international crude oil prices.
13. Total import of 300 "sensitive" items rose by 10.6 per cent in April-August 2002, mainly on account of a significant increase in the import of edible oils. Imports of food grains, alcoholic beverages and cotton and silk products declined, while imports of milk and milk products, fruits and vegetables (including almonds) and automobiles increased.
14. FDI inflows were $1,358 million in April to August 2002, lower than the $1,469 million observed in the first five months of the previous year. Weak investor sentiment, and sluggish performance of the Indian stock markets resulted in a net outflow of $248 million through the FII route in the first five months of the current financial year, relative to the large inflow of $873 million in the corresponding period of the previous year. Total foreign investment inflows were $1,130 million in the first five months of the current year compared to $2,839 million in the corresponding period of the previous year.

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