India’s consumption of petroleum products hit a record 183.50 million tonnes in the fiscal just ended, growing by 10.9 per cent over 2014-15. That shouldn’t surprise, given the sharp fall in oil prices which would certainly have helped boost demand. But the fact that annual consumption growth was even higher at 14.7 per cent in the January-March quarter and 16.4 per cent in March alone points to an increase not attributable simply to lower prices. Moreover, it wasn’t only petrol and diesel that posted strong growth of 21.6 and 15.1 per cent, respectively, in March. Equally significant was the rise in consumption of products used for construction or industrial purposes: Bitumen (16.9 per cent), petroleum coke (42.9 per cent) and furnace oil (39.4 per cent). Seen along with other indicators like sales of medium and heavy commercial vehicles (up 29.9 per cent in 2015-16), cement production (13.5 per cent increase year-on-year in February) and electricity generation (9.2 per cent growth in February), they suggest some kind of nascent economic recovery underway.
The primary source of the above revival — it may be too early to call it so — seems to be government spending, especially on road construction. 2015-16 saw 6,029 km of national highways being built, which was not just an all-time high, but also a substantial jump over the 4,340 km, 3,950 km and 5,732 km that got constructed in the preceding three fiscals. With both the national highways as well as the rural roads programme back on track — for which the Narendra Modi government can take some credit — it becomes relatively easy to account for the uptick in demand for trucks, cement and, of course, bitumen. Construction equipment manufacturers, too, have been reporting higher orders on the back of more projects being awarded and also being implemented on the ground. But all this is hardly indicative of a broad-based recovery, which is still far away. The real estate sector, a major driver of construction activity and job creation, continues to be in the doldrums. Even worse is agriculture, where two consecutive bad monsoons and declining price realisations in most crops have taken a heavy toll on rural incomes and spending.
This is where an above-normal monsoon — which is what the met department has forecast — would make a difference, both directly for the farm sector and also for overall sentiment. If the current momentum in road construction is extended to railways, and the Modi government also pushes through big-ticket reform legislation relating to the goods and services tax and insolvency/ bankruptcy resolution, a good monsoon may provide just the added stimulus to revive animals spirits and usher in an all-round investment-led recovery. That’s when green shoots would turn into full-fledged plants.