The importance of the industrial sector is unquestionably paramount in laying the foundations of a strong economy. It provides jobs, supplies inputs to other sectors and powers the country’s trade balance in relations with other countries. To assess it, we study the extent of credit flow and prospects alongside the likes of core growth rate, which give us an idea of the industrial health of our country.
It is a widely accepted fact that a country’s economy is largely hinged upon a robust industrial sector, and to evaluate that effectively, following are the Indicators we make use of:
In this indicator, PMI stands for “Purchasing Managers’ Index”, and gives us a reading into the trends of the manufacturing sector, which is a major part of our economic make up.
The preparation of this index is based on a survey of senior executives and top managers within the manufacturing and supply chain sectors, who give their views on prevailing market conditions, and their projections for the near future. Working as a diffusion index, it allows us to figure out whether market conditions are expanding or contracting. Usually, having a figure below 50 means that it is contracting, and vice versa.
However, it is also quite worrying if the figure is only slightly above 50 (which happens to be the case with India in September 2019) as that means the market conditions are not expanding fast enough to warrant a celebration.
This index studies the growth or decline in the core industries that make up the backbone of an economy.
India has about 8 (electricity , steel, refinery products, crude oil, coal, cement, natural gas and fertilizers) of them, contributing a total of 40.27% in the total weight of items in the Index of Industrial Production.
A sizeable expansion in the output of these eight industries is usually a cause for rejoicing while a decline triggers concerns.
While India has experienced only a 0.20% de-growth as of June 2019 in this regard, a lack of expansion is also reason enough to worry.
It is measured by studying the outstanding amount of loans provided to businesses by banks, to assess whether the credit flow is adequate enough to leave the economy flushed with adequate liquidity.
With India’s credit been drying up of late, non-food credit growth in the fortnight ending 27 September slowed to as low as 8.7% year-on-year to ₹97.11 trillion
This indicator is used to measure how much cargo is being moved around the country via railroads, and is considered to be a major indicator of a nation’s economic health.
If the amount of commodities being transported by railways in bulk is high, it effectively means that more products are moving from place to place to be bought and sold, and that essentially means that the economy is doing well.
The Indian economy, which is experiencing a 2% fall in its rail freight traffic as of June 2019, is clearly not doing well enough.
Having taken stock of all the elements that help us evaluate the state of our industries, it is time to have a look at those that make up the prospects for our external sector.