Friday, 12 Sep, 2025
Some analysts think Nirmala Sitharaman to be one of the unluckiest finance minsters India has had. When she became Finance Minister in May 2019 after Prime Minister Narendra Modi won a second consecutive term, the Indian economy was performing very poorly.
Some analysts think Nirmala Sitharaman to be one of the unluckiest finance minsters India has had. When she became Finance Minister in May 2019 after Prime Minister Narendra Modi won a second consecutive term, the Indian economy was performing very poorly. The GDP growth rate in 2018-19 had fallen to 6.1 and declined further to 4% in 2019-20. Many analysts and economists though were enthused by her bold decisions to cut corporate taxes and launch PLI (Production Linked Incentives) schemes across a range of sectors. Most were convinced these would revive both investment and manufacturing. But then the once in a century Covid pandemic struck and GDP actually declined by 7.7% in 2020-21. There was a smart recovery soon and GDP grew by 8.7% in 2021-22. But the Russian invasion of Ukraine and its massive impact on oil and commodity supplies threatened to derail India’s economic recovery and simultaneously punish poor Indians with high inflation.
But Lady Luck seems to be finally smiling on the Finance Minister. A story published today in India Tracker shows how the danger of persistently high inflation has now passed. In what could be described as a positive double whammy, the Ministry of Statistics & Programme Implementation released numbers for the index of industrial production that clearly indicates that the recovery of the India is sustaining momentum. The latest data available for June 2022 shows that industrial growth registered a very healthy double digit growth at 12.3%. This was the second consecutive month of double digit growth with May displaying a phenomenal growth rate of 19.6%. Of course, this incredible number was because the massive second wave had badly impacted industrial activity in May 2021. Most analysts think that while slowing investments and higher interest rates have slowed down the momentum somewhat, industrial growth will still clock a near double digit growth rate in July when figures are released in mid September.
The accompanying chart clearly shows how well industrial growth has recovered in the second quarter of the calendar year 2022 compared to the first quarter. In January this year, the rate of industrial growth was a very anaemic 1.3%. It improved marginally to 1.9% in March. Since then, the growth rates have been spectacular, despite the global economic and inflationary headwinds caused by the Russian invasion of Ukraine. More important, consumer sentiments, that remained depressed for two years, are finally improving. The top honchos of FMCG, automobile, mobile handset and consumer durable companies are confident of record breaking sales in the forthcoming festival season that will come soon after the Kharif harvest comes to the market. Perhaps the only sign of worry is the drastic slowdown in export growth witnessed in July 2022. Most large export destinations of India are showing signs of slipping into recession. If that happens, export growth of goods, that crossed a record $ 420 billion in 2021-22, will flatten. That will have an adverse impact on manufacturing, and hence industrial growth since manufacturing accounts for more than three fourth of the index of industrial production.
