While it was in the wilderness, it was the claim of Bharatiya Janata Party’s leader that better days were coming and that one only had to wait for it to come to power. Now it has been in power for 11 months; enough time has passed for it to keep its word. Actually, who rules and who opposes has little to do with the performance of an economy. Still, it is a good time to ask whether times have changed, for the better or worse.
Government statisticians have a primitive measure of growth, namely the monthly year-on-year rate of change. By this measure, industrial production has been growing at about 4 per cent for the last four months. That is modest by the standards of 2008-11, when it was growing at about 8 per cent. It fell for the first time in years in October 2011. Then it showed no growth for the next couple of years. It turned the corner in April 2014. Since then it has been showing modest growth. The figures pale into insignificance in comparison with the early years of Congress rule – growth reached levels then that have never been seen in the recorded history of India, starting in late 19th century.
As I have just said, governments are not responsible for growth rates under their rule – though they can be irresponsible. It also happens often that high growth is followed by low growth and vice versa – some economies suffer from trade cycles, though India has not shown cycles over pronounced periods. The point is that the dip in industrial growth seems to have ended, and modest growth has established itself in the past few months.
Industry consists of manufacturing and electricity; it is the former that is showing recovery. The UPA government had invested heavily in power generation, which in its last months grew at close to 10 per cent. That has come down to 4-5 per cent – about the same as manufacturing, which was stagnating and is now recovering. The recovery does not extend to mining; the world market for iron ore is stagnating, and domestic coal production cannot be increased, because the best coal resources are in the beautiful tribal lands of Jharkhand, which cannot be touched for both ethnic and environmental grounds. Gautam Adani, that clever businessman of our west coast, had the bright idea of getting coal from the north coast of Australia, but the environmentalists there are agitating against the threat he poses to their coastal environment; so coal may give way to coral.
One of the industries that have recovered spectacularly is cars. Cars are still a luxury in India. When people are doing well, they start buying cars and driving off into the hills; when they do badly, they fall off the cliff and avoid cars. Car production was rising at 10 per cent and more in the year before last. Then it staged an equally dramatic fall. Then the whole economy started doing badly, and the banks ran out of borrowers. So they started giving cheap car loans. So now, growth in car output has recovered to 10 per cent. But despite Suresh Prabhu’s ambitious plans for railways, production of other transport equipment continues to do badly; even trucks and buses are not finding buyers. Part of the problem is that Jawaharlal Nehru National Urban Renewal Mission is named after the wrong politician, so the finance minister is not inclined to fund it. He should give it a name of his choice.
Electronic appliances are even more subject to economic ups and downs; their output had fallen to a half a more over the last year. Their slump also is moderating. But IT hardware shows no sign of recovering; its output has fallen by a third in the last year.
Steel and metals looked like staging a recovery after the change of government, but their growth is slowing down. Machinery output is not rising much, but its slump has ended. Cement too is showing extremely slow growth. Altogether, capital goods are just crawling.
Hydrocarbons looked like coming out of the slump late in 2014 as fracking led American production to revive and prices came down; but the upturn has ended. But growth in chemicals is reviving, and plastics are growing rapidly.
Taking all the figures together, industry is no longer in such trouble as it was in 2013. Its output is growing very modestly. But the picture varies across the industries; capital goods industries in particular are doing poorly. This is the context of the prime minister’s invitation to global industry to come and make it in India. Normally, industrialists do not like competition, and are not friendly towards foreigners coming in. But desperate situations call for unusual solutions; the prime minister is well aware of this. He wants to breathe new life into Indian industry, which can come only from abroad.
