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HindustanTimes Fri,25 Jul 2014

The devil is in the detail
Hindustan Times
September 13, 2013
First Published: 02:33 IST(13/9/2013)
Last Updated: 03:27 IST(13/9/2013)

For an economy that is struggling to scramble out of a crippling slowdown, the latest industrial output data comes as a pleasant surprise. The millions of factories peppered across India produced 2.6% more output in July as compared to a contraction of 1.8% in the previous month and a decline of 0.1% in the same month of the previous year.

Capital goods output, a measure of investment activity, grew by 15.6% during the month. The moderation in retail inflation to 9.52% in August from 9.64% in the previous month, despite a sharply depreciating rupee, adds to the cheer in these otherwise strained times.

Seen in isolation, this data would imply that the Indian economy has turned around the corner.

Yet, the time to open the bubbly may still be a few months away.  A few devils, however, may be hiding behind the official numbers. Consumer durables' output fell 9.3% during July clearly mirroring what most shop-end evidence was throwing up. 

Spending on television, refrigerators and cars continues to remain muted, squeezed by high prices and low income growth. This is also showing up the production numbers.

Ration, TV, communication equipment and apparatus output fell 20.8% during the month, while car and vehicle plants wheeled out 4.2% less output in July compared to the same month of the previous year.

That manufacturing output did not grow at all in July in the previous year may partly explain the giant leap in factory growth numbers.  Policy inertia has hurt infrastructure output and the numbers reflect these amply.

Hopes of a recovery in the broader economy have sprung up anew in the wake of the latest set of numbers.  The best way to aid this incipient turnaround is to prompt people to spend more.

In times of persistent high prices, spending power can rise only by spinning jobs and multiplying income. These are extraordinary times. A gamble for growth through some unorthodox policy steps may be worth a try.


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