April 18 : The figure for industrial production for February, at 15.1 per cent, was good even though it was slightly lower than the previous month. But, as in the previous month, sub-sectors like basic goods, electricity and consumer non-durables have continued to lag behind the robust growth
registered in other sectors, like consumer durables. There is no widespread industrial resurgence. Fifteen per cent growth in a normal situation would be a cause to rejoice, but because this is on a lower base there is cause for subdued jubilation. This is not to underestimate the good industrial growth registered in February, but it is necessary to remember that the growth is not uniform. A big question mark hangs over mining, which is the basis for growth in the basic goods sector. The mining business is primarily concentrated in regions within the Maoist/Naxalite corridor in the mineral-rich eastern states of Jharkhand, Orissa, Bihar, Chhattisgarh and parts of West Bengal up to parts of Maharashtra and Karnataka. If this supply is jeopardised by the Naxalite movement, it could reflect, maybe not immediately but over time, on the production of iron ore, non-ferrous metals and steel. In the area not too distant from Dantewada, now known for the massacre of 76 CRPF personnel, the Tatas, Essar and NMDC are putting up steel plants with significant capacities. It is said that NMDC has been having a problem for the last six to seven years putting up its iron plant. It is not only the Naxalites but also tribals and adivasis fighting independently for livelihoods and rights that are sought to be taken away by the conglomerates. Arcelor Mittal and Posco have been having problems putting up their plants. Vedanta is having a major problem with the tribals in the forests of Kalahandi, southern Orissa, where they are said to survive on berries and ants. So, it is not just the Naxalites but various other sections of the population that are up in arms against the exploitation of the mineral wealth of the country at the cost of further impoverishing the poor.
So, while the figures for industrial production are broadly positive, they are a good pointer to where the economy is going, what needs to be done and which areas require special attention. Other areas, like textiles and gems and jewellery, which are export-dependent to a large extent, have also still to pick up momentum.
An encouraging factor is that the achievements on the industrial front are not entirely due to the stimulus package because, unlike in countries like the US, UK, other European nations and China, the Indian stimulus package was more in the nature of tax concessions, one-time waivers and benefits from direct taxes.
The inflation rates are also where they were, meaning the wholesale number is slightly lower than the previous month. It has not reached double digits but it is a hair’s breadth from it. Industry will have to accept that interest rates cannot always remain low, and at some point, will have to be hiked. So they will have to be innovative in weathering the storm of high interest rates. There is optimism about economic growth, at least in the section of India represented by the vast and growing middle class and above on the social ladder. The base of this ladder, which consists of crores of impoverished people, is another story and will have to be tackled gradually if resurgence in economic growth is to be real and inclusive.
