The Index of Industrial Production numbers for November 2008 has provided some (but mostly optical) relief from the steady onslaught of bad economic news.
The overall index showed an increase of 2.4 per cent over November 2007, which is not a great performance but apparently different from the 1.4 per cent decline in the previous month.
However, the base effect seems to be largely responsible for both numbers.
The October base was relatively high, with the index having grown by about 12 per cent in October 2007, while the November base was just the opposite, with the index having increased by a mere 4.9 per cent over the previous year.
Stripped of the base effect, the optical improvement disappears and there is little question that the industrial sector is in a virtually no-growth period.
On the face of it, this is likely to persist for some time. Even if the successive interest rate cuts and the various other measures that have been taken by the Reserve Bank of India and the government are enough to reverse the slowdown, the effects are unlikely to be visible until later in the year.
The disaggregated picture generally validates the main explanations for the slowdown. Exports are clearly in the doldrums, having declined by almost 10 per cent in November.
The most significant impact of this is visible in the performance of the 'Leather and Leather Goods' segment, which declined by over 13 per cent in November.
'Other Manufacturing Industries', which includes gems and jewellery, another significant export, declined by over 16 per cent.
The only major export category that bucked the trend was 'Textile Products', in which production volumes were estimated to grow by 6 per cent in November.
The other major factor to which the slowdown has been attributed is high interest rates, which is expected to have a significant impact on, among other things, automobiles, construction and consumer durables.
As it happens, the 'Transportation Equipment and Parts' segment saw its output decline by almost 9 per cent in November.
'Metal Products', which provides significant inputs to construction, declined by almost the same proportion, while 'Non-metallic Mineral Products', which largely reflects cement production, grew by 2.3 per cent.
Finally, 'Consumer Durables', a use-based category, declined by 4.2 per cent, over and above a 5.5 per cent decline in November 2007. This category has clearly been struggling for quite a while.
The disaggregated picture provides some clues about the pattern and duration of the downturn. Clearly, exports will not recover until the most important markets, the US and the European Union, do.
At best, this will happen towards the end of 2009, with many analysts expressing scepticism about even that. Until then, domestic policy cannot realistically do anything to stimulate output; it can only hope to provide a safety net, particularly for workers who are in danger of losing jobs.
However, there is more room for optimism on the interest rate front.
If the slowdown in the relevant sectors is, in fact, largely attributable to high interest rates, then the recent changes in direction must favour a turnaround in these sectors, though it could be argued that the interest rate cuts have not gone far enough.
The missing link, of course, is the apparent reluctance of banks to lend money to people who might want to buy houses, cars or appliances. Until this flow of credit begins, a turnaround is not in prospect.
However, the conditions, in terms of liquidity, are being put into place.
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