The growth in the industrial production index at 2.5 per cent in March, over a weak 0.6 per cent in February, appears positive, but it’s a weak subtext of the overall 2013 growth story. It is well known this year has seen the lowest industrial growth since economic liberalisation began in 1991-92. So the March growth figures call for muted satisfaction as the numbers show that only 10 of the 22 industries in the manufacturing sector witnessed growth, and 11 of them grew even slower than in the same period last year. The importance of manufacturing, that includes food products, textiles, apparel, rubber and plastic goods, machinery and equipment, cannot be underplayed as it is the sector which has the capacity to provide large-scale employment in a country with huge joblessness.
Growth in core sectors like coal, crude oil, natural gas and steel further reflects huge concerns as the status of the infrastructure space has also been subdued in 2013. While economists predict industrial activity could pick up in 2014 by about 4-5 per cent, there are a lot of “ifs” and “buts”.
These challenging, imponderable “ifs” and “buts” include an early start to hundreds of projects that have been held up for different reasons, not the least being government permissions, investments and an investment-friendly environment. It is extremely relevant that the Reserve Bank’s observation in its annual credit policy announcement predicted that the outlook for industrial investment remains “subdued”, with the pipeline of new investment drying up and existing projects stalled by bottlenecks and implementation gaps. As the RBI sees it, revival of growth is not possible without the revival of investment, and investment sentiment remains inhibited due to subdued business confidence and dented business profitability. So it’s a vicious circle that can be broken mainly by the government if it acts with urgency and out-of-the-box thinking in getting the economy moving.
India’s entrepreneurs, both young, old and those aspiring to join their ranks, are raring to go forward if only the government could concentrate on loosening and erasing the impediments that are stifling growth. It has wasted two years in “policy paralysis” and even now most announcements remain just announcements, which even the rating agencies are not buying in the long term. The current political instability and the Congress’ one-point agenda to save the Prime Minister from political attacks from different quarters do not bode well for the Indian economy. It threatens to derail the sense of urgency that Union finance minister P. Chidambaram is trying to bring in to get a slew of projects going across the board.