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Simon Cameron-Moore
Mumbai, July 4: India's economy has been hearing some good news lately -- and not just from Kashmir where Indian troops are recapturing one strategic height after another from infiltrators dug in on icy ridges.
Gun smoke on the north-west frontier and looming elections have partly obscured the country's improving fortunes, but a series of data last week showed an economy in active recovery mode after a three-year slowdown.
The spoiler, as always, is the chronically high fiscal deficit, which remains around 8 per cent of GDP, adding in the states' deficits and loss-making public sector units.
But even on this score finance minister Yashwant Sinha can rub his hands over latest data. Indirect tax revenue collections were up more than 20 per cent in June over a year ago.
Whoever heads the finance ministry after the elections in three months time will be picking up the bill for Kashmir.
The border conflict is unlikely to cost much itself, but after several years of getting a raw deal India's militarycommanders will be forwarding every requisition order possible to upgrade equipment. And right now few politicians would refuse them.
An upturn in the economy and the relief of low inflation will help meet the costs.
Exports have been a black spot for three years but in the two months of April and May, they rose 6 per cent -- admittedly boosted by a downward revision to May 1998 numbers.
Software companies, the new stars of corporate India, expect a near 50 per cent rise in exports in 1999/2000 (April-March), to earn India over $4 billion, after a 68 per cent growth last year.
Revised data for the final quarter of 1998-99 showed gross domestic product (GDP) rose 8.4 per cent in the January-March period, largely thanks to a fertile agricultural performance.
Industry minister Sikander Bakht last week forecast industrial growth will recover to 6 per cent this year, after slumping to 3.8 per cent in 1998-99.
Depressed business leaders have been fed up of phantom recoveries, but there is burgeoningevidence that several parts of the economy are beginning to punch their weight.
A report on infrastructure industries in late June showed cement companies notched a 21 per cent increase in production during April-May, against less than 5 per cent a year ago.
Oil refinery output was up 17.4 per cent, after a near 3 per cent fall a year ago, and will go up further as Reliance Petroleum's giant Jamnagar refinery comes onstream.
As if on cue, truck and bus tyre production rose over 20 per cent in May, and commercial vehicle sales in April-May rose nearly 34 per cent. Everything is relative to an abysmal 1998.
But steel, chemicals and textiles are still struggling.
There are few fresh capacity additions anywhere. Smaller companies are still going out of business, but the survivors are looking in better shape.
Consumption, particularly from the rural sector, is strong, with growth fuelled by India's rising population.
Investors have read the writing on the wall and piled into cyclical industry stocksover the past two months, helping the benchmark Sensex rally back over 4,000 to levels not seen since May 1998 when India conducted nuclear tests.
A budget in late February aimed at boosting capital markets helped the stock market rally, and it has since recovered from the frights of first seeing the government toppled in late April and then the eruption of the Kashmir crisis in late May.
Industry's cost-cutting and keener pricing have helped bring down wholesale price index (WPI) inflation to its lowest levels since the mid-1980s.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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