Fiscal 2008-09 ended with industry growing by a pathetic 2.35%. It is likely that this estimate will be revised upwards in the next release. Yet, the growth will be low. There are two reasons for this. First, the index of industrial production is still measured poorly. And secondly, because industry was hit by the Global Liquidity Crisis during the second half of the year.

The CSO and the Department of Industrial Policy & Promotion are fixing the measurement problems. Hopefully, in the next few months this problem will be solved. RBI and the government have squarely addressed the second problem of liquidity. As a result, in 2009-10, the IIP should not only perform well but it will also be measured well. I believe the recovery from the global hit in October 2008 is already well underway. A clear mandate from the electorate for continuity and stability of the political arrangements only adds to the confidence regarding India?s resurgence in 2009-10.

I believe that industry will lead this recovery. Agriculture may suffer a bit because rains may be inadequate. At least the expectations are somewhat muted. Agriculture has seen a good run for an extraordinary four years in a row already and demand for some crops, such as cotton, is internationally low. Besides, agriculture?s share is so low that it cannot lead a recovery.

The services sector has been a major catalyst of growth in recent times. Yet, the domination of trade and transport besides public administration in its heterogeneous composition is likely to hurt. The first two are expected to suffer because of poor international prospects in 2009-10. The WTO and the Unctad expect international trade to fall by 6-9%. The corresponding fall in India?s external trade and its impact on trade and transport will cast a shadow on GDP computations.

Industry is well poised to offset the losses in the other sectors, partly. Partly because industry?s share too, in the economy is not high enough to completely offset the lags in other sectors. Nevertheless, a recovery in industry is always a lot more appealing than in any other sector. Industry, better than any other sector, exploits India?s natural resources, human capital and domestic needs.

Signs of a strong recovery are already seen in many industries. Automobiles and cement have been the best known cases in recent months. Production of commercial vehicles in March 2009 was 30% higher than in February. And, sales was 35% higher. Sales of cars and two-wheelers vaulted, both, y-o-y and m-o-m in February and in March. Cement capacity utilisation in March was 102.5%; production and consumption was up 10.4% each.

But, automobiles and cement are not the only industries to demonstrate a quick and smart turnaround. Steel, aluminium, capital goods, electricity and petroleum are some of the other large industries fuelling this turnaround.

Steel production by Tata Steel and JSW in the quarter ended March 2009 was 32% and 42% higher than the respective production in the previous quarter. JSW commissioned its 3 million-tonne steel project at Thorangallu, Karnataka, in February. We expect at least six million tonnes of additional capacity to be added by the industry in 2009-10.

Aluminium production has been growing handsomely since December 2008 following an increase in capacity. The production in March 2009 was 16.3% higher than a year ago. We expect a further 3.7 lakh tonne increase in capacity in 2009-10 and a 10.7% increase in output.

Electricity generating capacity is similarly expected to grow handsomely in 2009-10. Thanks to the continued investments boom, the capital goods industry has orders on hand that can keep it busy for nearly three years. Capital goods production grew by 12-15% in January and February 2009.

But, if industry is so well poised for a recovery and the major industries did pretty well in March 2009, then why did the IIP tank in March 2009? Is the growth fragile? The answer lies in the sources of the fall in the IIP in recent months. Large industries such as sugar, edible oils and tea have been suffering a decline in output because of the poor performance of the corresponding crops. Sugar and tea prices have shot up in response to the fall in output. The fall in output is not a reflection of poor demand but a fall in supplies of inputs. Domestic demand is robust as is seen in the sales of automobiles and cement.

The IIP?s fall however, does reflect a fall in international demand. This is best seen in the poor performance of the textiles industry. Based on this recovery story of Indian industry, CMIE has projected a 6.6% growth in real GDP in 2009-10. But, if the sentiments continue to improve as they have and also seem poised to, the growth could accelerate sooner than believed hitherto. Even at 6.6%, India will be the fastest growing economy in the world in 2009. The IMF?s latest projections as of April 22, 2009 show that China will grow at 6.5% in 2009. No other country of significant size and economic relevance is projected to grow by over 6%. IMF?s forecast of 4.5% growth for India is pessimistic. We believe that the Indian economy will grow much faster and Indian industry will lead this recovery.

?The author heads the Centre for Monitoring Indian Economy