Output of machinery and equipment other than transport equipment rose 21 per cent in April-August. The rise in production of intermediate goods by 9.1 per cent during April-August and of basic chemicals and chemical products by 9.6 per cent may not be spectacular. Nevertheless, these are pointers to the changing industrial scenario. (Note in this context the post-August increases in prices of steel and petro-chemicals). More important than the overall growth of industrial production, as measured by the official index of industrial production (6 per cent in April-August, up from 4.2 per cent in the corresponding period of last year), is the fact that growth is radiating from consumer durables to capital goods via intermediates. A cyclical upturn is in place.

After over three years of recession, US sanctions and domestic political instability, the industrial economy is all set to accelerate. Many corporates have restructured. The glamour of equity has been rediscovered by the capital markets. The international rating agencies are now willing to give this country a chance. Foreign investors, both portfolio and direct, consider India a good prospect (certainly so after the setback to the civilian political authority in Pakistan and the travails foreign investors now face in China). Hopefully, the finance minister will not be overwhelmed by the dismal fiscal scenario into taking drastic measures. At stake is the strong revival of industrial investment. The banking system must stop being risk-averse. It has been a wet blanket for too long (and contributed to prolonging the investment slack). The Reserve Bank should not fight shy of prodding the banks to accommodate investment demand.