That the steep fall in industrial production numbers, mainly in manufacturing, came as a shocker to analysts and economists alike makes one wonder if these figures really reflect the state of manufacturing. Is it possible that those compiling these statistics are not taking into account manufacturing activity in different and distant parts of the country?
We have a huge parallel economy, a huge informal sector and the fact that there could be huge under-reporting or no reporting could make these figures questionable. But this is counterbalanced by the fact that investment is not coming on the desired scale, and also demand is not picking up as the purchasing power of people is down. Minister of state for commerce Nirmala Sitharaman has said there have been several enquiries on the “Make in India” campaign, but these are still enquiries.
As finance minister Arun Jaitley noted, the government is going full speed ahead with reforms, but even something like the Goods and Services Tax will take months, if not a year, to see the light of day. Raising investment caps in insurance and defence are welcome, but these are just the first steps, and must be followed up by investors.
Corruption remains one of the key hindrances in the ease of doing business in India, and there is no visible sign of the government combating it. While corruption at the top may been somewhat checked, it continues unhindered at the middle and lower levels. There must be some way the government can control this, either through executive fiat that all decisions should be taken within a timeframe or the permission is deemed granted, or it can use the BJP or RSS cadre to track corrupt practices. Speakers at a recent India-Israel session talked of not being able to negotiate the system, and top businessmen at a recent closed-door CII meeting are also said to have expressed the same views. If this is said as the Narendra Modi government is in its seventh month, it only shows the much talked-about governance and eradication of corruption have not been translated into action.
The government, and the economy, is in a state much like the Mahabharata’s “chakravyuha”, the maze Abhimanyu could get into but couldn’t get out of. It is undeniable that the government has cleared major environmental hurdles and given approval to projects worth lakhs of crores, while work has begun on three-fourths of the 16 major road projects cleared. But as rating agency Crisil notes, some challenges such as significant de-leveraging of businesses due to huge debt, excess capacities and sluggish sales/weak consumption demand still challenge fresh investments. Perhaps the Prime Minister needs to think more innovatively of ways to get out of this “chakravyuha”.
