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Industrial Growth Up

After last year's misery, finally, a revival in industrial growth. A sign of things to come?

Industry: Shine again

Never mind the farms. How is industry faring? Recovering. That's what it looks like. Industrial production grew by 3.8 per cent, year-on-year, in May 2002, compared to the anemic 1.7 per cent of May 2001 (for those with a short memory, remember that industrial production typically grows in double digits for the economy to boom, as in the mid-1990s).

Bear in mind that the figures were recorded before the monsoon problem; but they're an indication all the same. After a long period of gloom, the blast furnaces are glowing again. Manufacturing growth was up in May, as was growth in basic and capital goods. Capital goods grew by 0.6 per cent, as against a 3.9 per cent fall in production last year.

The recovery has been corroborated by the independent think-tank, Centre for Monitoring the Indian Economy (CMIE), which has forecast that India's industrial sector would grow by about 4 per cent compared to 2.7 per cent last year.

The oldest of the 'old economy' is on a comeback trail as well. Take the mining sector. It saw its growth zoom to 7 per cent, up from a negative 0.5 per cent in May 2001. The electricity sector, though, reported a mere 2.4 per cent growth (a little lower than three per cent in May 2001). Intermediate groups and consumer durables (figures collatde as a whole) reported lower growth too, confirming the suspicion that the durable bounce of a few marketers was nothing but the reward of their own trend-defying marketing efforts, rather than a general sector-wide recovery.

What does all that mean for the prospects of an overall economic recovery?

Consider the global context. The International Monetary Fund (IMF) expects the world economy to grow at 2.8 per cent in 2002 and 4.0 per cent in 2003, compared to last's year growth rate of 2.5 per cent. The Economist's poll GDP forecasters for USA is 2.8 per cent and 3.5 per cent in 2002 and 2003 respectively. This could imply a mild recovery, though the chance of a 'double-dip' recession could delay the festivities.

What about India? Industrialists certainly seem buoyant. A CII poll of Indian CEOs, conducted earlier this summer, showed that most companies were looking forward to double-digit growth in sales and profits in 2002-03. The news on the monsoon front, though, would have tempered some of that optimism, for sure. But the blast furnaces don't seem ready to dim any time soon.

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