India\\\'s economy poised to rebound

Tax consultants in India are now saying that the economic growth rate will improve to 6.2 per cent in current fiscal and can go up to 8.0 per cent in the next three years on back of favourable domestic and global environment. "A combination of structural correction, confidence in new government and favourable global conditions could propel economic growth to beyond 8.0 per cent in three years".
For the last one year this writer has been repeatedly pointing out that the present state of India's economy is nothing but a short-term affair and rebound will be there in near future. This forecast was based on the very basic indicator. India has huge resources -- human, physical, technological and IT specifically, that eagerly await the invitation of being explored. The latest trends indicate that the worst is going to be over shortly.
Let us look at the very current trends. Backed by better performance by the power, fertiliser and cement sectors, the production of eight core industries increased by 4.2 per cent in April, 2014.  The coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity sectors expanded by 3.7 per cent in the same month last year. Growth in these industries decelerated to 2.7 per cent during the financial year 2013-14.  
Of the eight industries, electricity production increased by 11.2 per cent in April, fertilisers output rose by 11.1 per cent, cement by 6.7 per cent and coal by 3.3 per cent - all at a faster pace than a year earlier.  Steel production increased by 3.1 per cent compared with 10.1 per cent in the same month of the previous year.  
Production in the crude oil, natural gas, and petroleum refinery sectors contracted by 0.1 per cent, 7.7 per cent and 2.2 per cent respectively during the month.
Showing no signs of recovery, the index of industrial production remained in the negative territory for the second month in a row, contracting by 0.5 per cent in March, 2014 due to declining output in the manufacturing sector, especially capital goods.
India, also the third largest market for trucks, has improved its ranking in global textiles and apparel exports. According to recent data released by UN Comtrade, India now stands at second position in global textiles exports beating its competitors Italy, Germany and Bangladesh, with China still holding the top position. No doubt, the government policy of diversification of market and product base has helped to venture into the newer markets which paid dividends.  India's share of global textiles export has increased by 17.5 per cent in 2013. Currently India's textiles exports are $40.2 billion. This growth is phenomenal as the global textiles growth rate is only 4.7 per cent. India registered a growth of 23 per cent beating China and Bangladesh which have registered 11.4 per cent and 15.4 per cent growth, respectively.
Though in April, 2014 Consumer Price Index (CPI) inflation accelerated to a three-month high of 8.59 per cent compared with 8.31 per cent in March, 2014, Reserve Bank of India (RBI) reiterated CPI inflation target of 8.0 per cent by January 2015 and 6.0 per cent by 2016. A number of good steps are being taken which could definitely help the economy to shark off the falling tendency and look forward with confidence in as much the political stability is there to expect.
The Reserve Bank of India (RBI) in the latest bi-monthly monetary policy review kept the repo rate unchanged at 8.0 per cent. The Cash Reserve Ratio was also unchanged at 4.0 per cent. Besides, RBI reduced the liquidity provided under the export credit refinance facility from 50 per cent of eligible export credit outstanding to 32 per cent with immediate effect. RBI shall also continue to provide liquidity under 7-day and 14-day term repos of up to 0.75 per cent of net demand and time liabilities (NDTL) of the banking system. With 25-basis point repo rate hike, RBI has opted to reverse the trend of rate cuts in the first five months of 2013. Actually, the policy statement has put inflation back in the spotlight, as the central bank expects both retail and wholesale inflation to remain elevated through the year.
It is high time India became tough in the arena of bank loan recovery. The RBI is expected to change the guidelines soon for dealing with Special Mention Accounts making it mandatory for banks to set up joint lenders' forums as soon as a borrower delays payments beyond 30 days. Bankers in the know said they were expecting revised rules soon, adding the idea was aimed at giving banks more time to come up with action plans to deal with stressed accounts.
In the rural sector farm and non-farm activities are not pepped up. Productivity is lower in a number of items even compared to China. In many cases farmers are not getting the maximum yield due to unscientific practices. Scientific agriculture advice is crucial for efficient crop production. Farmers should produce the crop products with export quality by conserving natural resources.  Not only in case of agro-production, the same is true for industrial sector also. Scholars observe that with a workforce that exceeds 450 million and is largely without sophisticated skills, inclusion will remain partial without robust growth in industries like apparels. India has little option but to reform its labour laws that have been identified as the fundamental barriers to the growth of employment-intensive manufacturing.
Dr B K Mukhopadhyay, a Management Economist and an international commentator on economic and business             affairs, is attached to the West                Bengal State University.                              [email protected]