Indian economy is a work in progress

India is known for its social and religious diversity, but when this diversity comes to figures related to the economy it can be confusing. Is the economy on the path to good health or is it still languishing from a hangover from the Manmohan Singh era?

Sure, the figures of industrial production are high at five per cent for March, though on a low base, and one will have to see whether it sustains in the next quarter. GDP growth is also being pegged at a robust 7.5 per cent. However, the most disturbing figures released recently were for labour employment, investment and credit growth. During the Manmohan Singh government, there were high growth periods without job creation. So there is a lot of catching up for the Narendra Modi government to do.

The figures for the October-December quarter reveal that only 1.75 lakh new jobs were created, most of them in the textiles and IT-BPO sectors. Perhaps government figures don’t capture employment generated though schemes like Swachh Bharat and Clean Ganga, etc. Generating employment requires investment and skilling. On this score credit offtake grew just 12.7 per cent to Rs 68.3 lakh crore in the fortnight to April 3, 2015, the lowest since 1996.

It is well known that while big corporates are borrowing through cheaper alternatives abroad, the small and medium enterprises are deprived of credit because interest rates are a barrier and make them uncompetitive. For instance, despite the RBI cutting rates by half a per cent this year, only seven of the 47 banks cut their lending rates by a measly quarter per cent. Investments of Rs 9.8 lakh crore have been promised but how much will materialise remains to be seen.

Projects worth Rs 59,600 crore have been revived but how many are in takeoff stage is not known. It is true that the government has taken several administrative measures to improve governance and ease of doing business, but they have yet to show on the ground. Corruption is still rampant. Agriculture, a large job creator, is still subject to the vagaries of the monsoon and banks disperse less than 30 per cent of agricultural loans through their rural branches, according to a study by scholars of the Tata Institute of Social Sciences.

Perhaps Prime Minister Modi should look into this. India’s economic health seems a work in progress, and as industry patriarch Ratan Tata told students: Mr Modi is at the present moment still in the early stages of defining what he believes India could be, and all of us hope that he can deliver that new India to all of us. We’ve seen some starting points, he has some obstacles obviously, but he has a lot of benefits too.