In an analysis on the state of the economy, FICCI has said that recovery is taking place in various segments including consumer goods, steel, cement and housing. ``At this juncture, a cut in interest rate will boost the aggregate demand. Also with inflation, measured in terms of the Wholesale Price Index at a record low of 2.5 per cent, the Prime Lending Rate of 14 to 15 per cent is wholly untenable,'' it said.

With comfortable foreign exchange reserves a buoyancy of revenues - excise realisation going up by 30 per cent for the first three months of the current financial year and customs by 14 per cent - it is the right time for a reduction in the interest rate by two percentage points. One chamber said that the capital market was buoyant and that trend was going to be a sustainable one. ``With thecontinued buoyancy, many corporates might go to the capital market to raise resources, thereby helping a turnaround in the primary market.''

Export growth rate had picked up from a negative rate of 12 per cent in October 1998 to a respectful 6 per cent in December 1998. It touched 10 per cent in March 1999. Indications are such that in the first quarter of 1999-2000, exports would have gone up.

Another positive indicator was that foreign institutional investors (FIIs) had invested Rs 996 crore in April 1999. In January, the figure was Rs 496 crore. In the manufacturing segment, steel sector's growth rate in April 1999 over April 1998 was 4.1 per cent while in the automobile sector it was 50 per cent. Pharmaceutical sector grew in April 1999 by 15 per cent compared to the previous year. Electronic components and software also registered an impressive growth of 15 per cent and 65 per cent respectively in April 1999 over April 1998 which are indicative of economic recovery.

Recently leading foreigninvestment firm JP Morgan had also argued for a cut in interest rates in India following a good industrial growth, a stable currency, low inflation rate.