Signs Of Recovery

Updated: May 23 2003, 05:30am hrs
There are clear signs of an industrial recovery. The Central Statistical Organisations (CSO) latest estimate says that the industrial output has grown close to six per cent during 2002-03. In the index of industrial production (IIP), manufacturing growth has gone up by six per cent and mining by 5.8 per cent in the year. Even electricity generation has posted a positive growth. In five out of nine years, the IIP has clocked an average growth of six per cent. Yet it has not been able to bounce back to the 13.1 per cent growth achieved in 1995-96. This is quite simply because the Indian industry has not been able to recoup the enthusiasm and entrepreneurial ethos it showed in the early years of economic reforms.

Though there is no need to go gaga over the vastly improved showing of the industrial sector, there is reason to be discreetly happy. The performance has come about in the midst of bad agriculture, outbreak of Sars, global slowdown and the waning impact of the Iraq war. Particularly noteworthy is the performance of the manufacturing sector that not long ago raised the fear of deindustrialisation. Manufacturing has close to 80 per cent weight in the IIP and its recovery therefore raises the hope that it will help realise a six per cent plus growth of GDP in 2003-04.

That hope hinges on the fact that the impact of sluggish demand from a bad agriculture has almost petered out. The index for capital goods, broadly a proxy for investment in plant and machinery, has risen by 10.4 per cent as against a contraction of 3.4 per cent last year. Consumer goods have improved by 7.2 per cent to indicate that demand is no longer a constraint as it has been in the recent past. This is not all. The CSO says as many as 13 out of 17 sectors have shown positive growth this time. Product groups such as beverages, tobacco and related products, transport equipment, jute and other textiles (excluding cotton) and food products in particular have done well.

Yet thrust of the recovery has come from the robust performance of the automobile industry. Its positive spin-off on other related industries such as tyres, engines and steel have further spurred offtake of a number of related goods. In 2002-03, major infrastructure sectors like coal, crude oil, electricity, and transport did fairly well to prop up recovery. Yet, the fear of industrial growth tapering off to less than five per cent in the current year may become a fact if the monsoon plays truant.