A cosy consensus is building up that the Indian economy is recovering. There is little doubt that several positive policy actions, coupled with some fortuitous global factors, including falling oil prices are pushing the economy on a forward trajectory. But it is equally true that a full recovery is still some time away and we need to be patient as well as cautious – this is the message the latest IIP numbers seem to bring us. Our factory output declined in January, with manufacturing continuing to play the spoilsport. This data raises some concern, but we need not panic. At the same time, complacency should be avoided by our policy makers.

The January IIP data shows a sharp decline of 20.4 percent in capital goods, indicating continued slowdown in investments. It is good to see that basic goods, intermediate goods and consumer durables recorded some gains, but again no growth in the consumer goods sub–index reflects muted demand at the retail level. This situation demands attention. Several industry bodies have raised the demand for a rate cut by the central bank in its forthcoming monetary policy next month. The Budget 2016 has come up with some welcome proposals to address the tax woes of the manufacturing sector, and I think now a rate cut could certainly act as a catalyst to bring back buoyancy in both investment and demand.

Reform must continue for recovery to happen. Last week, the real estate bill was passed by the upper house. This is a welcome development and I think the regulation can lead towards greater transparency and more FDI into the sector. Also, I think the passage of the Aadhar bill can revolutionise the subsidies sector. But there are two other landmark legislation – the GST bill and the bankruptcy bill – which are still pending ratification by the Parliament and I hope they would be passed during the ongoing Budget session. The faster the government can introduce these key reforms, the earlier growth can take off.

Meanwhile, the government came out with a good piece news for the MSME sector. It has decided to relax the procurement norms for start-up MSMEs. According to the decision, if a MSME unit can deliver the goods and services as per prescribed technical and quality specifications, the norms on prior experience and prior turnover will be relaxed for the unit. It is a welcome decision as the move will help the start–up MSMEs to take part in the mandatory 20 percent public procurement from MSMEs. But at the same time, I think the Centre should tighten the noose around the PSUs, most of which are still showing a callous attitude towards the policy.

I invite your opinions.