Although there has been a positive trend on the different economic fronts, the prevailing power crisis is now posing a serious threat to production in agriculture and industrial sectors as well as in services industries.

"The country's economy continued to show positive signs of improvement in several areas, though these were overshadowed by political agitations and poor performance in a few sectors," said Metropolitan Chamber of Commerce and Industry (MCCI) in its January-March 06 review.

The review said, "On the positive side, the industrial sector, barring the electricity sub-sector, depicted a much higher rate of growth compared to the earlier two quarters of the year. In January-February 2006 period of Q3 FY06 export growth increased to 27.01 percent from 10.67 percent in the same period of FY05, the trade balance has recorded a smaller deficit, and the current account deficit has turned into a surplus, thanks to increased remittances."

One percent growth in the quarterly industrial production (QIP) indicates employment creation of about 17000 people.

"As against these positive features, the economy faced problems on a

number of fronts, which require urgent solutions. The agriculture sector has not performed well due mainly to inadequate supplies and high cost of inputs, but partly also due to erratic rainfall and flash floods. The already poor performance of the power sector has further worsened, posing a threat to production in agriculture and industrial sectors as well as in service sector industries," the report added.

The report also said power scenario in the country develops to be a serious concern in the review quarter. Load shedding with inadequate power supply has affected in a major way, output of large industries, irrigation and production of small and medium enterprises.

The effect of power failure spread all over the industrial sector. Activities in the readymade garment (RMG) industry were particularly affected due to tight time schedule demanded by the customer. The production loss in the RMG was 30 percent, the report said.

Another affected area was computer industry, which suffered 20 percent loss of production due to power crisis. In engineering and electronic industries, 10 to 20 percent productions was lost once again due to power failure, halted production and resulted in the decline of average productivity.

Besides, service sector particularly health sub-sector suffered badly from power failure. In the hospitals, modern medicine relies heavily on electronic monitoring and failure of the supply or equipment resulted in loss of quality of services, the report said.

The rate of inflation remains high despite the use of light monetary policy by the central bank. Tax revenue collection has remained below target. Net foreign aid receipt in July-February, 2005-2006 was just about a half of what was received during the same period of the last fiscal, the chamber said.

As a result, the government had to increase its borrowing from the banking system, thereby reducing the availability of bank credit for the private sector, it added.

In fact, the flow of credit to the private sector was sharply slowed in February 2006. In February 2006, credit growth to the private sector declined to 16% from 20% in February 2006. Implementation of the ADP remained below target, a major casualty of which is the infrastructure projects, which are crucial for industrial expansion and economic growth, the MCCI added.