Out of the economic gloom comes a ray of light in the form of the index of industrial production for September. The figures were a little better than those for August. The index grew by only 4.8 per cent. This meagre growth — larger, of course, than the 1.3 per cent registered in August — may have been caused by increased production in factories to meet the festive season in October. It is noteworthy that manufacturing accounted for the lion’s share of the index — as high as 80 per cent. What should be kept in mind is that in July 2008, the index had registered a growth of 7.10 per cent. It is now possible to compute the growth rate for the first half of the current fiscal year: 4.9 per cent for the overall index and 5.2 per cent for manufacturing. Both of these are substantially lower than what was recorded in 2007-08 over a similar period. The reality can no longer be pushed aside: economic growth is slowing down, and is doing so very fast. Yet the prime minister, Manmohan Singh, remains optimistic. He admitted that prospects of growth were a bit cloudy because of the international economic downturn, but he was confident that the long-term outlook for the Indian economy was “strong and robust”. The finance minister, P. Chidambaram, found the figures for industrial production to be “encouraging”. These are all very brave words that fly in the face of the reality.

There is every good reason, most economists feel, to expect that the industrial growth figures for October will be lower than those for September. Reports are coming in that most companies are putting their plans for investment on the shelves till the climate changes and improves. The rhetoric of optimism has to be tempered by the fact that India is in a crisis caused by factors external to the economy. The crisis in the United States of America has resulted in a shortage of liquidity, and a shrinkage in demand in the West. This will inevitably affect India’s foreign exchange reserves adversely. There are some signs to counteract these features. The most important of these is the fall in global oil prices, which will relieve the government and not force it to raise the domestic price of petroleum products. The problem of liquidity also seems to have eased from what it was in September. The question is, are these signs enough to generate faith and confidence, the two significant drivers of investment?