THE two words mostly in use among some economic commentators and ministers these days are “Green Shoots”. Even when we are in the midst of low growth and high inflation, these die-hard optimists want to see the so-called green shoots in an otherwise barren land, trying unsuccessfully to cheer the stock market.
Somewhat similar comments were made, after the government releases on November 12, the Index of Industrial Production (IIP) which showed a mere two per cent growth in factory output in September. A positive trend is seen and celebrated, because since in August, the annualised IIP growth was 0.4 per cent .Comparatively we are better off, thus the green shoots !
Even if we grant that at the Index level, the IIP has started ticking, the party spoiler has come in the form of retail inflation –Consumer Price Index well above 10 per cent, thus raising prospects of the Reserve Bank of India revising upward interest rates yet again and choking the economic growth further.
The macro picture, if you like, looks pretty grim. This will be evident when we disaggregate the IIP data. We will find 11 out of 22 industry groups in the manufacturing sector still in the negative zone in September as compared to the same month last year. Capital goods which is a good barometer whether or not investment taking place was down by 6.8 per cent. Consumer durables were down by 10.8 per cent reflecting a poor consumer confidence in the state of economy at this particular point of time.
Country produced 28.5 per cent less commercial vehicles in September compared to the same period last year. Hot rolled steel sheets which are used as raw material for several other industries dropped by a huge 58.1 per cent .
The data has a lot of meaning . For instance when we have a big fall in commercial vehicles, it shows how precarious is the entire transport system, which is fuelled by the economic growth.
As stated in the earlier piece, when it comes to inflation the government has clearly given up and left the common people to for themselves. How does one explain, otherwise over 12 per cent increase in retail prices of cereals when we are going to harvest a bumper crop –both Rabi and Khariff thanks to good monsoon.
Those government economists like Planning Commission Deputy Chairman Montek Singh Ahluwalia who were feeding the common man with solace that good monsoon would result in lowering of prices should explain a 45 per cent increase in the Consumer Price Index for vegetables in September.
After a brief respite, rupee is losing fastly again against dollar and other hard currencies, making in the process the cost of imported goods expensive with a cascading effect, like in the case of crude oil. While global factors are surely at play, it is our job to manage our currency exchange rate , which can be done only if India has sound fundamentals- which are not seen at the moment.
The problem is that some of the ministers have started hurling their frustration at those who show them the mirror. The case is that when global financial giant did its assessment about India’s political economy and indicated that under Mr Narendra Modi, the NDA may form the next government- a development which should please the investors and the industry, Commerce and Industry Minister Mr Anand Sharma would not take it . He would hit back at Goldman Sachs asking them “not to mess” around with Indian political system.
When the going is good, you would use reports of the same Goldman Sachs and boasts how India would be among the top BRICS economies. When the assessment does not suit the establishment, it tries to hit back.
Be it IMF or Goldman Sachs, their reports on the Indian economy have been trashed not by some NGOs but by the Indian ministers, betraying frustrations about things drifting away.
The common man does not understand the language of US tapering and all other financial jargons. He is going to ask you the explanation in a layman’s language for the kind of mismanagement of the economy, about which you want to brag about by a White Paper , telling the world you have done reforms.
What reforms? You had opened FDI in multi-brand retail. Then what happened, who has come? The sole candidate- Walmart is cut up and you have the arrogance not even to grant them a meeting- will you show all this in your White Paper on reforms?