Mumbai, Nov. 11: The first shoots of an industrial revival have started sprouting and, if left to blossom, could pull the recession-racked economy out of the funk.
The Centre for Monitoring Indian Economy (CMIE), one of the country’s premier think-tanks and research repository, says it is raising its forecast for full-year industrial growth to 4 per cent from 3 per cent earlier. CMIE mavens say their optimism is rooted in encouraging output readings from mining, food products and textiles sector in the first five months of 2002-03.
Not everything on the agency’s radar has brightened though. Services, which generate almost half of the country’s goods and services, will perform worse than was thought a few months back. Its forecast has been trimmed to 6 per cent from 6.5 per cent estimated earlier and 6.5 per cent in 2001-02, largely because of its linkages with drought-scarred agriculture.
The heady assessment for industry is a U-turn from estimates put out in August, when the research house beamed a gloomy growth forecast — it said GDP growth would be only 3.1 per cent this year. This was down from the 4.5 per cent previously thought, and a far cry from 5.4 per cent last year.
However, better times ahead for the industry — the growth forecast for which was pruned in August to 3 per cent from 3.5 per cent — will not rub off on the entire economy, which should grow along lines expected earlier. “Despite this increase in industrial growth, a slowdown is expected in the second half,” it said.
Industry, which makes up 27 per cent of national income, grew a modest 2.8 per cent in 2001-02, but things have been brisk this year. In August, it racked up a tally of 5.7 per cent against 3 per cent a year ago. That leap took the cumulative growth rate in April-August to 4.9 per cent, up from 2.4 per cent a year earlier. What has vexed economists is that August figures represent a cool-off from July’s blistering 6.4 per cent. Most have blamed it on the worst drought in nearly 15 years.
In October, CMIE had lowered the farm sector growth forecasts after a poor monsoon. The sector contracted 3.5 per cent, much more than the anticipated decline of 2.5 per cent. This was a reversal from 2001-02, when it grew at the rate of 5.7 per cent.
To take the pressure off farms and hasten growth, McKinsey had suggested that the focus be swivelled to manufacturing. The example is China, which has achieved growth rates of 8 per cent by doing just that. McKinsey recommended a list of sweeping reforms that India must carry out in its tax and labour laws.