It is hard to believe, but true: a small increase in industrial production is being met with sighs of relief, if not whoops of joy. That tells us a lot about the mood in Indian industry right now.
The government on Friday released data on industrial output cranked out in April. It was a modest 1.4% higher than a year ago, but still a huge relief after the decline reported in the previous two months. Other bits of data— such as purchasing managers’ indices, cement dispatches and car sales—suggest that demand for industrial goods is stabilizing. China, too, has reported very good numbers this week.
Extra public spending and rapid interest rate cuts seem to have helped. What happens next will be watched closely. There are risks here. The new government will want to spend on infrastructure, but is constrained by a scary deficit. The Reserve Bank of India has less space to cut interest rates further. And a strong rupee will curb exports.
Thus, it is important that business investment picks up soon. But we doubt firms are in a position to take big risks.