It is good news on the exports, consumer price inflation and manufacturing output fronts. Exports came in at double digits and the highest in six months, consumer inflation, including food and vegetables, is down, and the Index of Industrial Production is at a 13-month high. Even manufacturing in April has grown at 2.6 per cent from a negative 1.2 per cent in the previous month. Whilst these are initial signs of an economy on the mend, it is still too early to say if they herald a positive trend. Exports, particularly engineering, have grown because of the turnaround in the US and European economies and the IMF has predicted a higher growth rate for them this year. The current account deficit looks good because of the continuing fall in gold imports.
The only negative that shows that the underlying bias continues to be weak is decrease in imports. While falling imports are good if they are in products that we now produce domestically, the concern is that there has been a continuous contraction in imports of machinery and project goods. This is an indication that production of capital goods has yet to pick up for a healthy manufacturing sector and for investment to start flowing in. Maybe the May and June figures will provide a truer picture. But, for now, the Narendra Modi government has something to build on and perhaps that is why it has opted for continuity in several areas.
