As it stands, the climb out of India’s longest-ever economic slowdown in the post-1991 period will be a very slow one. Particularly because all hope of growth is so dependent on an election
Is the Indian economy finally turning the corner? A lame duck government heading towards an election is desperately hoping for a decisive ‘yes’ as an answer. No effort is spared to tom-tom even the faintest positive indicator as green shoots of recovery. Unfortunately, these green shoots just don’t grow enough to alleviate India’s bleak economic landscape.
A welter of economic figures is sending out mixed signals. Clutching-at-any-straw government economic managers take heart from second quarter overall growth figures, which are a bit higher than the first quarter numbers. HSBC India’s purchasing managers’ index (PMI) for November shows a slight improvement. The current account deficit is much lower than the worrying levels of around 5 percent that it had touched.
But hold the hurrahs a bit. All the positive signs have shaky foundations. Industrial production was flat in April-October, and bellwether sectors like capital goods and consumer goods are in the dumps. Imports may not be filling the gap. Non-oil imports in April-November dipped 9.5 percent. The infrastructure sector is lagging. The climb out of India’s longest-ever economic slowdown in the post-1991 period will be a very slow one.
Across sectors, the private sector is wary of investing. Everybody is waiting and watching—to see what the 2014 general elections have in store. Never before has economic growth been so dependent on an election. What industry is looking for is a decisive government, with a clear reformist agenda for the economy. But if industry is going to hold off taking investment decisions till mid-2014, then there’s no chance of the economy reviving till the end of the year, perhaps even later. And if any new government continues with bad economic policies or waffles over decisions, then there’s little hope for India.
(This story appears in the 10 January, 2014 issue of Forbes India. To visit our Archives, click here.)