Forecasting a six per cent GDP (gross domestic product) growth, it said some large sectors have shown signs of a turnaround. ``Commercial vehicle sales grew 60 per cent while production grew 49 per cent during the quarter over the corresponding period last year," I-Sec's April-June 1999 macro-economic update said.

Cement dispatches grew 27 per cent while production of finished steel grew in April and May after nine successive months of decline, it said. "Global prices have firmed up in many commodities and the increase in landed prices of these would also help Indian producers.These factors could be indicating that the much-awaited industrial turnaround is imminent," I-Sec said.

There were also contrary signals, it warned. "Non-oil imports have declined 10 per cent during April-May 1999 over the corresponding period last year," it said.

"Inflation of manufactured products has dipped below two per cent. This indicates the inability of producers to increase prices in the absence of strong demand. However, manufacturers have raised prices of cement, automobiles and steel in the recent past and it has to be seen whether these prices can be sustained," it said.

I-Sec said the growth in cement sales is believed to be due to an increase in demand from the housing sector and could peter out in the absence of large-scale industrial and infrastructure investments. "Automobile sales could be due to the cyclical phenomenon of de-stocking; one has to keep an eye on the growth after dealers restock," it said.

"Further more, there is no evidence of a pick-up in real sector investments. Insum, we believe that though there are reasons to be a bit optimistic about a recovery, it is not yet time to start celebrating."

Data from the services sector, however, supported the economic recovery hypothesis, I-Sec said. Truck freight rates had risen during the quarter over year-ago level, revenue-earning freight carried by the railways had also gone up during April and May while traffic at major ports grew had also grown, it said.

With the two-month old Kashmir conflict out of the way, it appeared that additional expenditure on this account had been kept to manageable limits and damage to the economy was not too significant, I-Sec said. Politics remains the main concern, it said. The report said current indications suggest no political party is likely to obtain a clear majority in the general elections due in September. "Lack of political stability could hinder real sector investment and impact the prospects of economic turnaround adversely," I-Sec said.