The country's overall economic situation has worsened over the July-March period of the current fiscal year, reports Metropolitan Chamber of Commerce and Industry (MCCI).

Responding to an MCCI questionnaire, 13 out of 15 leading entrepreneurs of the country blamed law and order uncertainties and some ad hoc revenue and tariff measures of the government for

causing the setback.

"The overall performance of the economy has been lower than what was targeted. GDP [gross domestic product] growth has slowed down. Government's revenue collection has fallen. Remittances have gone down. Exports have not fully recovered and the inflation rate is rising," concluded the recently released Review of Economic Situation of the chamber analysing key economic

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indicators for the first three-quarters of FY 2003-2004.

The bleak picture sketched in the review shows the rate of inflation to rise to 5.35 percent in December 2003 from 3.73 percent in December 2002, largely due to higher food prices and a slowdown in production.

The chamber finds the recent monetary policy measures -- cut in bank rate and reduction in commercial bank lending rates -- as unable to boost domestic demand.

It also observes that private investment has not picked up, even though the cost of credit has been lowered. Imports of capital goods have fallen, which the chamber maintains as indicating weak investors' confidence and entrepreneurial initiative.

With manufacturing registering a weak growth and agriculture being stagnated, the only sectors that posted some significant growth during the nine months are electricity, mining (gas) and some service subsectors, particularly transport and communications.

The deceleration in growth of the manufacturing sector has resulted in loss of employment and a lower growth of government revenue, in particular from domestic Vat (value-added tax) and excise duties, the chamber reports.

As "individual representations to the government have not resulted in the desired review" of the ad hoc policy interventions, mainly in the tariff area, the MCCI has decided to hold a business convention soon in conjunction with other trade bodies.

The convention will "prepare a package of specific recommendations for submission to the prime minister" with request for immediate implementation of the urgent ones and the rest to be incorporated in the next budget, the chamber announces.

"Since law and order continues to remain a major concern to the business community, the convention might appeal to the opposition party not to adopt any political programme which will disrupt business." The convention, at the same time, will 'remind' the government that without improvement in law and order, it will not be possible to achieve economic benefits and, for that matter, welfare of the people, the announcement adds.

According to the review, in the first six months of FY 2003-2004, export growth was 14 percent, compared to 5.4 percent in the corresponding six months of the previous fiscal. Import also saw a higher growth at 18.4 percent, which was 8.7 percent in the corresponding six months of the previous fiscal. The import surge has widened the trade deficit by 29.5 percent.

Remittances grew at much lower rate of 11.2 percent, against 24.7 percent last year.

The MCCI, however, expects the economic situation to record some improvement in the next quarter, with better performance of agriculture, certain segments of manufacturing sector and service sub-sectors.