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Need immediate steps to prevent further economic damage: Assocham

business Updated: May 27, 2012 10:58 IST

India may not be heading towards a balance of payment crisis, but its macro-economic situation is worsening by the day calling for urgent steps to ensure no further damage is done to the economy, a survey of leading economists and select industry leaders has pointed out.

Out of the 58 economists and CEOs covered under the Assocham poll in the last one week, as many as 53 said India’s macro economic situation has suddenly worsened.

"India may not yet be heading towards a balance of payment crisis, but the macro-economic situation of the country is worsening by the day calling for almost emergent steps to ensure that no further damage is done to the economy," Assocham said.

It was a combination of flip-flop on domestic policies and the global uncertainties arising mainly from the troubled euro-zone which played a spoilsport for the Indian economy, it said.

"Breaking out of scams, one after the other, resorting to taxation policies which are perceived to be unfriendly to the global investors, political compulsions of the government in not pursuing the economic reforms are the major factors which have led to a worrying state of economy, which was booming till two years ago," it said.

Majority of the respondents said India’s macro economic situation has suddenly worsened.

"The worst disaster is coming from a huge uncertainty on the rupee value and its free fall. Everybody out there in the business world is feeling shaky," the survey said.

Rupee has depreciated by over 13% since early March and has even touched a low of Rs. 56.38 last week.

It said that a whole lot of sectors like automobile, tourism, steel, oil, gems and jewellery, real estate are feeling the heat of rising dollar and weakening rupee.

"While cost of raw material imports has gone up significantly with rupee weakening, inflation is raising its ugly head and is adding to the nervousness among the industry, bankers and policy makers," it added.

This would be catastrophic and depress the demand in the manufacturing sector, the largest employment source after agriculture and services, it said.

However, the chamber hoped that RBI will take a balanced view when it reviews the credit policy next month.