The growth of large-scale manufacturing in the first quarter of the current fiscal year is the first growth in that sector for some time. As this includes both import-substitution and export industries, without growth in large-scale manufacturing, there would not only be no pick-up in GDP growth, but exports would not increase. There would be no path opened for any relief of the country’s debt trap, from which escape requires large trade surpluses. It cannot be described as healthy for the economy, but there has been an increase in foreign loan inflows in the first quarter by 33 percent, which has led to profit repatriation by foreign firms jumping by 39 percent in four months.
There has been a decline in inflation, but there has not been an increase in growth. This implied that while those in employment would not find it as hard to make ends meet, but there were not enough new jobs being created to absorb all of the job-seekers entering the market. It should be noted that large-scale manufacturing would drive this job creation, which would also be crucial because the youth bulge needs economic growth if it is to be absorbed in the workforce. The general consensus has been that the past start-stop cycles have so eroded business confidence, that the current escape from default has not been taken as a new beginning, but as the upside of a cycle that will end in another bust. This view cannot be dismissed out of hand, as every escape from default has meant greater baggage, and the naysayers feel that the baggage will be too heavy this time. However, one of the metrics of an improvement was always large-scale manufacturing, and the recovery might not seem much at 4.08 percent, but considering that it indicates growth after decline, it is positive.
However, one swallow does not a spring make, a single quarter’s growth does not a recovery make, not one which will lead the business community to mobilise and make the kind of investment that sustained and adequate growth needs. The government has every right to feel that it must be doing something right, but it cannot afford to rest on its laurels. The main question that remains to be answered is whether this is the first sign of a change, or whether it is a one-off aberration.
