The current recovery is quite patchy and will not go on for long. Economists said consumption is up but that this merely follows last year's multifold wage increase. Bank credit has risen but not capital expenditure, exports have grown but not the country's export range or markets with the sole exception of software, which still only accounts for less then 1.5 per cent of GDP, they added. Retail car sales in the April-February period were up 60 per cent, and commercial vehicle sales rose over 26 per cent in the same period. Construction activity is also up.
Investment is also a cause for worry.
Bank credit grew nearly 20 per cent last year and industrial growth doubled to seven per cent, but corporates are not expanding or adding capacity. Yet non-oil imports, an indicator of investment, slackened. The recent easing of bank lending rates may not help either since India has been relaxing rates since 1996. State-run banks formerly charged prime customers 16.5 per cent on advances in 1996. Now those rates are just over 11 per cent.