BOMBAY, 8 July — Over the past few months talk about the Indian economy only bought a frown on the face, accompanied by a crease on the forehead. In fact news about the economy was the last thing anyone wanted to hear or discuss. When the news is not good, no one wants to know about it, but if it is good all are eager to hear it.
Now it looks like that good times are here and people are once again eager to know about the economy. Official news has it that the Indian industry is showing definite signs of improvement in performance. According to the Center for Monitoring India Economy, the aggregate financials for the quarter ended March 2002 reflected a 29 percent growth in net profit which is fantastic considering the sharp decline it had reported in earlier two quarters.
This increase in net profit mainly reflects the buoyant financial performance of select sectors like petroleum products, pharmaceuticals, prime movers and two- and three-wheelers. But what is sobering is that the industry’s aggregate sales fell by 1.9 percent during this quarter, reflecting no improvement in total demand.
As per the data released, price and production trends after March suggest an improvement in the performance of sectors like cement, steel, polymers, man-made fibers, textiles, commercial vehicles, motorcycles and gems and jewelry. Cement sales were up during April-May 2002 although prices remained weak and its consumption is expected to grow by eight to 10 percent during the current fiscal. The steel sector’s performance improved in March 2002 and thereafter its prices have been rising steadily, following a rise in international prices. Tata Steel initiated its third price hike this year on July 1 and one more price hike is planned for next month. Steel production has also recorded growth for eight months in a row, following a demand from sectors like automobiles and consumer durables.
At this juncture too, there is some serious news. The data released indicates that though most of the core sector or rather the Old Economy sectors have bounced back, the performance of sectors like tea, coffee, fertilizers, aluminum, computer hardware, hotels and software services are yet to come out of the woods.
What about India’s agriculture performance? After all India is an agrarian country with more than half its population still living in the villages. India’s Agriculture Ministry has pegged India’s overall agriculture and allied sector growth including livestock, horticulture and forestry at 6.12 percent. The foodgrain output including cereals and pulses increased by 7.8 percent to 211.32 million tons from 195.92 million tons, the overall agricultural and allied sector growth is estimated to be 6.12 percent. The most significant growth of 26.71 and 12.6 percent has been in pulses and oilseeds even though the country remains deficient in both the commodities. The only commodity to have shown a negative growth of 2.3 percent is sugarcane.
Riding high on the strong fundamentals of agriculture and financial services, the revised estimate of economic growth for this fiscal is pegged at 5.4 percent against 4 percent in the previous fiscal. The higher-than-expected growth was on account of a pickup in the third and fourth quarters at 6.2 percent and 6.4 percent, respectively. The GDP performance started out at a 3.5 percent growth in the first quarter of 2001-02 against a high 5.4 percent in the previous fiscal before touching a peak in the last quarter. India’s GDP stood at Rs. 12,58,231 crore over the quick estimates of GDP for 2000-01 of Rs. 11,93,922 crore.
The other superlative performance was by the financial sector which posted a 7.8 percent growth against a much lower 2.9 percent in 2000-01. In the banking sector, aggregate deposits mobilized by scheduled commercial banks amounted to Rs. 11,97,290 crore as on June 14, representing a growth of Rs. 697 crore over the previous week’s and a year-on-year growth of 19.2 percent.
The best news is on India’s foreign exchange (forex) reserves front. India’s forex reserves have shot up by half a billion dollars in one week to cross the $57 billion mark during the week ended June 21. According to figures released by the Reserve Bank of India, India’s total foreign exchange reserves including gold and SDR, went up $542 million during the week ended June 21 to $ 57,066 million ($57.06 billion). Even Foreign Direct Investments (FDIs) have gone up. FDI inflows into India amounted to $1.89 billion in the first five months of 2002, according to the Ministry of Commerce and Industry. The growth over the same period of the previous year was 60 percent. In January-May 2001, FDI inflows were $1.18 billion.
With all these facts, the RBI governor seems to be quite gung-ho and said that the economy is estimated to grow in a range of 6 percent to 6.5 percent during the current fiscal while the interest rate will continue to remain soft. And fiscal deficit? India’s fiscal deficit rose to 5.9 percent during the last financial year compared to the budget target of 4.7 percent. This year the government targets to keep the fiscal deficit at 5.3 percent.
Well, it does look like things have started looking up for the Indian economy and one can only hope that the momentum is kept up. If that is done, then it would be right to say that the Asian tiger is all set to roar again!