That India’s inexorably “decelerating trend, which began four years ago”, to quote the just released Trade and Development Report 2019 by the UN Conference on Trade and Development in Geneva, would find resonance in the latest core sector figures from the Commerce and Industry Ministry, showing the seriousness of the country’s economic plight, with output of eight core infrastructure industries contracting by 5.2 per cent in September, was hardly unexpected.
These alarming figures are the lowest in the decade and it is cold comfort that India is still growing faster than most economies because much of the country is reeling under the severity of the slowdown over a broad canvas.
The facetious remarks of many, who claim to speak for the ruling party, are slowly beginning to disgust even the faithful as the Reserve Bank of India announced that economic growth of the first quarter had slipped to a six-year low of five per cent, which forced it to revise its gross domestic product growth rate projection to 6.1 per cent from 6.9 per cent that it had initially envisaged for the current fiscal.
Confirmation of the dismal state of affairs come from the core sector, which has not been as grim in either the 2011-12 base or the 2004-05 base series, as emphasized by India Ratings and Research, which underscores that even on a cumulative basis, the performance is “dismal”.
Save for fertilizers, which reports a 5.4 per cent increase in output year-on-year, every other sector disappoints with coal representing the worst with a steep 20.5 per cent decline.
Crude and natural gas reported declines of 5.4 per cent and 4.9 per cent respectively, while refinery products were down 6.7 per cent, cement down 2.1 per cent, steel 0.3 per cent, and electricity 3.7 per cent, as the comparative core industries’ April-September numbers between 2018 and 2019 showed a fall to 1.3 per cent against 5.5 per cent.
The double- digit y-o-y drop in thermal generation in September 2019 from 3.1 per cent in the previous month epitomizes the overall plight. Indeed, this slump in energy consumption, especially electricity and refinery products may well be linked to overall demand and is reflected, for example, in the sorry showing of an 83 per cent drop in its second quarter profit of Indian Oil Corporation.
While ICRA expects the Index of Industrial Production to report a contraction of between 2.5 and 3.5 per cent in September, the chief economist of Care Ratings points out that the October IIP growth will be in the negative zone courtesy the fall in the infra industries (weight of around 40 per cent in IIP) coupled with the auto and consumer durable segments moving to the negative territory.
The question is what impact will this have on the second quarter growth numbers and how far the Indian economy will sink before realization dawns on its managers that a five trillion dollar dream should not be preceded by a nightmare for the ordinary Indian.