Looking at the relative performance across industry groups, the picture is quite uneven. Some have shown healthy growth, with the highest being recorded by the furniture and miscellaneous manufacturing category at 60 per cent. Basic metals, the largest group in the basket, grew by a reasonable eight per cent. Other segments that did well were tobacco products (37 per cent) and electrical machinery (33 per cent). In contrast, several groups showed sharp declines, with radio, TV and communication equipment declining by 40 per cent, and computing equipment by 29 per cent. Motor vehicle sales, which showed quite a rebound in June, did not do so well in May, declining by over seven per cent. Clearly, the reassuring growth in the overall index papers over a very widely dispersed performance across sectors - so not yet a sustainable upturn.
Whether the uptick is transitory or robust will partly depend on factors outside the government's control - such as the monsoon and oil prices. It will, of course, have to do whatever necessary to buffer the economy from their impact. An important lesson from the 2002 drought was the value of the highways programme in providing rural employment, which proved to be an effective safety net. All opportunities such as this need to be quickly activated, with the added support of the rural employment guarantee scheme. But, beyond this, several of the budgetary initiatives relating to infrastructure, private investment and employment need to be implemented with great urgency. A sustained recovery is very much in the hands of the government and its ability to clear the bottlenecks that have hindered investment activity. With the prospects of aggravated food inflation likely to keep interest rates frozen for a while longer than earlier anticipated, the government will, in fact, have to work doubly hard to provide growth stimuli. Its economic mettle will obviously be put to serious test in its first year.