Signs of industrial recovery, at last–Economic Times–14.03.2018

The latest figures suggest a welcome boom in the industrial economy, with growth trends perhaps the strongest in two decades. The Index of Industrial Production for January has risen acredible 7.5% (over the like period last year), with the growth notably buoyant for three successive months now. The newest figures show that growth has gone up by a handsome 8.7% in the all-important manufacturing segment, is upbeat in electricity and somewhat lacklustre in mining. Credit revival could sustain the momentum.
Some of the present upside in industrial output a whole year and more after demonetisation may be due to the likely slump in production then, particularly in the informal sector. However, the growth seems broad-based: motor vehicles production is up by about 26%, computers and other electronic items have risen by a solid 22%. Also, disaggregated data show solid 14.6% growth in capital goods, which is a broad indicator of investment demand in the pipeline. Further, output is bullish for consumer durables as well as non-durables.
However, there are a few heads where production has declined, such as wearing apparel; the output of textiles also seem much subdued. It is entirely possible that the huge reported pile-up of GST credits due to exporters is having a wholly avoidable negative effect on output. Prompt corrective policy action is called for by the GST Council. We also need much more predictable policy in mining and evacuation, so as to gainfully boost output and value-addition going forward. To better gauge economic output, we now need a regular index of services output. Besides, the Central Statistics Office needs to better leverage information technology to provide more segmented, accurate and timely data for the industrial index as well.
This piece appeared as an editorial opinion in the print edition of The Economic Times.
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