Friday, February 17, 2012

The fall and fall of India's industrial growth

National Fertilizers Limited, Panipat
Some days back, one of my friends forwarded me a mail, the subject was - Do you want to walk in between the ship wrecks? I opened the mail and looked in to the pictures - it’s about Aral Sea which ended up as desert because of mammoth water diversion projects in the rivers feeding the Sea. Another day, there was a news paper report on a ghost town - cities which are abandoned by industry as well as people. These two were the images came to my mind while I was reading about India's falling industrial output and growth rates. We may not have any ghost towns - thanks to our huge population. Of course, you can complain that the comparison is not proper but not totally off-topic.

It’s not long time back, I wrote about the fall of IIP (Index of Industrial Production) in April – September 2011. The decline of IIP in last December replayed this continuing saga once again but in a tragic way. The general index for the December 2011 is just 1.8% higher compared to the level in the month of December 2010. According to the reports, the growth rates in Mining, Manufacturing and Electricity sectors for December 2011 are -3.7%, 1.8% and 9.1% as compared to December 2010.

Growth in manufacturing output is 1.8% compared to 8.7% in 2010 same month. Factory growth also slipped in to a lower level in December 2011 compared to 5.94% in November and 8.1% in December 2010.  More or less same story repeats in Mining sector, Basic good sector etc. Capital Goods sector witnessed a staggering 16.5% contraction compared to the growth of 20.2% in previous year's same month. Interestingly, compared to the same month in the previous year tobacco products registered a 24.3% growth, Cigarettes alone showed an explosive growth of 48.0%!!!

Where we are heading, after being called as an emerging country for the last two decades are we again slipping in to contraction? We should not consider the growth rates as granted. In fact we are still in the middle of a long marathon, which doesn’t have any end, but rewards will be given to the people who are keeping the pace or atleast not sleeping in the middle.

We can accuse everyone for the slump in growth rate - to recession, sluggish growth in US, struggling European economy, Somalian pirates to the electrical line man who took more time to solve the electricity connection to a manufacturing plant. But will it create any sympathy, no. We are no longer considered as a third world power who is begging for food> Unfortunately the truth is we are not also the industrial power house whose ports are always busy in exporting the manufactured products and transhipments. We are somewhere in between, and we should always remember that.

So for the policy makers in New Delhi should take time to explore the solutions for saving the dying industrial towns like Kanpur, opening the closed borders of north east (for trade with SE Asia) and propagate our trade all over the world. If today we are doing well, tomorrow somebody will listen to our voice in international forums otherwise it will end up as the stray thoughts of an outsider!!!


Some other disappointing news: BIFR urged to speed up revival of 44 textile mills
555 textile mills closed in four States in Oct

Photo Courtesy: National Fertilizers Limited, India

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