Just a day after Standard and Poor's India wake-up call for pro-active macroeconomic measures to kick-start the economy or face the prospect of losing its ‘investment grade' sovereign rating, the country's industrial engine appeared to run out of fuel and clocked a near-zero growth rate at 0.1 per cent in April, the beginning of the new fiscal year.
A dejected Finance Minister Pranab Mukherjee, who on Monday rejected the S&P report on the Indian economic scenario, said: “I am disappointed. Industry has not yet picked up. Negative sentiments are there. We have to take steps to give positive signals.”
These positive signals are likely to be unveiled in the months ahead. Commenting on S&P's observations on India's problem in policy and decision-making, Mr. Mukherjee said: “ ... from their point of view they have expressed their apprehension ...We have taken note of it and ... we shall have to sort out our own problems and for that, we are taking necessary steps.”
Besides, he said, as the “announcements made in the budget will take at least two to three months to show impact,” they did not reflect in the data for April.
Even as the growth rate in positive terrain marked a turnaround from the 3.2 per cent contraction seen in March, it was way below the 5.3 per cent expansion in April 2011, giving clear signals that business confidence and investor sentiment were at their lowest ebb in recent times.
Not surprisingly, the government expressed disappointment over industry failing to shift gear, but the bourses cheered the negative IIP (index of industrial production) numbers and rose to their highs for the month in the hope that the Reserve Bank of India is now left with no alternative to shoring up the economy by easing its key policy rates and making cheaper bank funds available to industry.
The IIP data makes for dismal reading. Clear evidence of tepid domestic demand owing to the ongoing global slowdown came for as many as 10 out of the 22 segments, including capital goods and mining, posting negative growth. More worrisome was the capital goods output — seen as a sign of new investments — which contracted by a massive 16.3 per cent in April 2012 as compared to a robust growth of 6.6 per cent in the same month of 2011.
