Worrying figures

The industrial output data for the month of September, which have now been released, are not a good augury as they do not support the optimistic claims about fast economic growth. The downbeat figures were one reason for the whacking the stock markets received in the last few days, though there were global reasons also. In a climate where high growth has been taken for granted, the fall in output growth across most of the sectors attests to the existence of problems which need to be better understood and addressed. What is of concern is that this decline is not a sudden development because of the emergence of a one-time factor. Looking at the behaviour of the indicators over the past few months, a persisting trend of slow growth is discernible.

The September output growth at 4.4 per cent was the lowest for the past 10 months. The capital goods sector actually declined by 4.2 per cent against a growth of about 8 per cent during the same period last year. The sector is a good indicator of capital investment and therefore slackness in it will turn out to be a negative for growth. Other important sectors have also shown indifferent performance. Manufacturing and power sectors expanded at a pace much slower than required at this stage of growth. The growth in manufacturing was very uneven too. Out of the 17 industries in the purview of the IIP, five contributed to 76 per cent of the output. But for the performance of the five, the overall figures would have presented a worse picture. The only sector that beat expectations was the consumer durables. The sector did well in September and has consistently outperformed in the last many months. But that is not the best consolation in view of the disappointment caused by the performance of other sectors.

Finance minister Pranab Mukherjee has said it was difficult to understand the reasons for the fall in the numbers. The underlying  momentum in the economy may still be intact but there are factors that constrain continued growth. The inability of the infrastructure sector to grow according to the requirements and problems with credit availability may be among them. The trend needs to be reversed in the coming months, if the growth momentum is not to be lost. That calls for decisions at the level of policy and more effective action at the implementation level.

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