Opinion | Economy goes from bad to worse
Coal, crude oil, natural gas, refinery products, cement, steel, and electricity all contracted
The long shadow that has got cast on the Indian economy only seems to get longer. In September, the country’s “core sector" recorded its worst output performance in 14 years in September. Output in its eight constituent industries shrank 5.2% during the month, down from a growth figure of 4.3% a year ago. That the shrinkage is fairly broad-based speaks of an economy in crisis. Coal, crude oil, natural gas, refinery products, cement, steel, and electricity all contracted. Only fertilizer production bucked the trend, rising 5.4%.
The core sector has a 40% weightage in the Index of Industrial Production (IIP). Needless to say, this will show up in the month’s IIP data, which in turn will drag GDP growth down for the quarter ended September. In another sign of stalling economic activity, India’s joblessness rate rose to a three-year high of 8.5%. There is no saying when the outlook will brighten. According to IHS Markit, India’s manufacturing Purchasing Managers’ Index (PMI) fell to a more than two-year low of 50.6 in October, from 51.4 the previous month. The PMI survey takes into account several factors such as new orders, inventory levels, production, supplier deliveries, etc, to gauge activity levels.
All of this brings into question the government’s revival programme. As outlined in this year’s Economic Survey, an investment rescue was expected to lead the way. While a series of steps have been taken for this, such as a cut in corporate tax rates, it may be a long while before any of it bears results. Now that consumption has fallen into a rut, emergency near-term demand recovery tools may need to be pressed into service.
More money needs to be put in the hands of consumers. But do we have the fiscal space?
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