The ‘achhe din’ that never came

The virtual stagnation in industrial growth rep­orted for February does not augur well for the economy. A nominal 0.1% industrial growth, a 20-month low, compares very poorly with 1.7% reported for January and 6.9% the same month a year ago. This confirms the belief that ‘Make in India’, a signature project and promise of Prime Minister Narendra Modi to attract foreign investments, has not led to tangible fresh capacities on the ground. When the BJP was swept to power in 2014, the Modi government had boasted that
it would speed up manufacturing sector growth to 12–14%, push up its share in GDP to 25% by 2022 and create 100 million jobs in industry alone. Five years down the line, not only has none of it happened, the economy is not even moving in that direction. Even domestic private investment has faltered in these five years. The industrial growth figures of the last 11 months is a testimony to the dismal picture. Barring public investment, nothing else seems to have happened to push up industrial growth even marginally.

The 4% industrial growth for the 11 months to February is weaker than the 4.3% posted in same period the previous year. Neither has export manufacturing grown to pick up the slack. The idea of India as a resurgent economic power under him, peddled by Modi to seek votes, has fallen flat. The Purchasing Managers Index (PMI) points to weakened demand for import items in the consumer sector. Also, weakened consumption demand has been flagged for downward revision in GDP growth for 2019-20 to 7.2% from the earlier 7.4%. The combination of modest exports growth, continuing rural distress and non-availability of credit are not a conducive environment for industrial revival and thereby for economic growth in the short term.

A whopping 8.8% contraction in capital goods in February, on the back of a 3.4% drop in January, signifies that investments have eluded Indian industry. The 8.9% growth in capital goods during April–October 2018 had initially raised the prospects of a possible revival in the investments cycle. But, midway, investments seem to have lost steam. In most other sectors, like primary goods, infrastructure goods and consumer goods, growth has been muted, thereby hinting at a broader industrial weakness. The Annual Survey of Industries (ASI) data points out that industrial growth in the first half of the Modi government’s tenure was anaemic and wage growth fell. Foreign Direct Investment in manufacturing has been pegged at just 28% of total inflows, far below the 48% during UPA-2. So, where is the much-promised ‘achhe din’, please?