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Indian Economy After Two Years of Modi Govt
May 16, 2016

On May 16, 2014, Narendra Modi-led BJP emerged victorious in the general elections. It's been exactly two years since that day. So, one may rightfully ask: Where is the Indian economy headed? Has Modi's economic agenda worked for the economy?

Of course, one cannot have a binary 'yes' or 'no' answer to such a question. But there has be some parameter to judge the business landscape.

The RBI recently published its 32nd round of Quarterly Order Books, Inventories and Capacity Utilisation Survey (OBICUS) for quarter ended December 2015. OBICUS captures actual data from the companies in the manufacturing sector. In all, 1,058 manufacturing sector companies responded in this round of the survey.

Among other factors, one key factor that gives us a good picture about how the demand scenario is shaping up is to see the trend in capacity utilisation rates.

The chart of the day shows the trend in capacity utilization rates across nine quarters from Oct-Dec 2013 to Oct-Dec 2015. It is worth noting that the utilisation rates may not be comparable sequentially as the demand may be affected by seasonal factors. So, a year-on-year comparison may be more appropriate. If you consider the utilisation rate of 72.5% in 3QFY16 (Oct-Dec 2015), it is an improvement from 71.7% a year ago. But it is still lower than the utilisation rates recorded in 3QFY14 (Oct-Dec 2013) when the UPA-II was in power at the Centre.

This reflects that the manufacturing sector is not out of the woods yet despite oil prices being advantageous. While the Modi government may like to revel in the theory that India is a 'bright spot' in a gloomy world, we stand by RBI Governor Raghuram Rajan's realism: In the land of the blind, the one-eyed man is king.

Data Source: RBI

This Chart Of The Day was published in The 5 Minute WrapUp - The Economy Is Paying the 'Price' Of the Vote...

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