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Economic data: Pointing upwards

Sep 16, 2002

Continued positive signals from the economic data like strength in IIP index, strong growth recorded by commercial vehicles, cement shipments and buoyancy in tax collections indicate to a recovery. However, as the real impact of drought would only be palpable in the coming months, one would have to wait before building in high expectations. The IIP (Index for Industrial Production) posted a 6.4% growth for the month of July’02 as compared to 2.6% in July’01. The Index of Industrial Production grew by four per cent in June 2002. Given the poor growth rates observed offlate, a 6.4% growth in July certainly raises hopes of a recovery. The cumulative growth in the IIP during the first quarter of 2002-03 worked out 3.9 per cent. This was a substantial improvement over the 2.3 per cent growth recorded in the first quarter of 2001-02.

The performance of commercial vehicle industry, which can also be considered as a barometer for economic activity has improved significantly during the current fiscal year. During each month from May to July 2002, production recorded a sharp year-on-year growth. As a result, during April-July 2002, production registered a 34% growth as against 16% decline in the corresponding period of 2001. Both the segments of commercial vehicles have shown substantial improvement in production. Heavy and medium vehicle production grew by 34% per cent during April-July 2002 as against a 4.9% growth registered in the same period of 2001. Production of light commercial vehicles recorded 28% growth during April-July 2002, reflecting largely a recovery from 34% decline witnessed in the corresponding period of 2001.

Cement consumption in July 2002 was 8.9 m tonnes, 28% higher than consumption in July 2001. During April-July 2002, cement consumption grew by 13.4% as against a 0.2% decline recorded in the corresponding period of 2001. Healthy growth in consumption is largely attributed to the infrastructure projects and large scale construction of highways. The golden quadrilateral and North-South, East-West corridor projects continue to generate healthy demand for cement.

The capital goods industries also showing some signs of a slow turnaround. Growth in the first quarter of 2002-03 was 1.6%. This compares well with the six per cent decline in the corresponding quarter of 2001-02. Considering these numbers, one can conclude that the recovery is for real. However, the sustainablity of this recovery needs to be watched carefully in the following months. The real impact of the slow growth in agriculture, on the back of drought, may only be seen in the coming months.

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