Hopes of a quick turnaround ( an abrupt or unexpected change, especially one that results in a more favourable situation) in the economy have turned out to be quite premature ( occurring or done before the usual or proper time; too early )  in light of the latest set of economic data released on Friday. The Commerce and Industry Ministry reported that core sector output, which is measured by tracking the performance of eight major industries including cement, steel, and crude oil, contracted ( decrease in size, number, or range) by a sharp 5.2% in September.

This is its worst fall in 14 years. Seven out of the eight core industries witnessed ( have knowledge of (a development) from observation or experience) a contraction ( the process of becoming smaller), with the coal sector being the worst hit, shrinking ( become or make smaller in size or amount) by over 20%. The latest figures are in stark ( severe or bare in appearance or outline) contrast to core sector growth of 4.3% reported during the same month last year. Given that core sector contraction was only 0.5% in August, the trend points towards a worsening of the economic situation. At the moment, it seems quite likely that gloomy ( dark or poorly lit, especially so as to appear depressing or frightening) core sector performance will affect GDP growth in the second quarter as well as the full financial year.

It is worth noting that while a few high-frequency data points had shown some signs of a nascent ( (especially of a process or organization) just coming into existence and beginning to display signs of future potential) revival ( an improvement in the condition, strength, or fortunes of someone or something) in the economy in September, most still remain mired ( involve someone or something in (a difficult situation)) in a slump ( fail or decline substantially). Plus, the present contraction in the core sector, which represents the capital base of the economy, suggests that the negative effects of the fall in consumption are spreading across the entire production chain.In further bad news, data released by the Centre for Monitoring Indian Economy showed that unemployment in October rose to a three-year high of 8.5% in October.

This marks a sharp jump from 7.2% in September. If growth fails to pick up, the unemployment scene could get ugly and further contribute to the demand slowdown. What is even more worrying is the fact that the current slowdown comes in the midst ( the middle part or )  of a spree ( a spell or sustained period of unrestrained activity of a particular kind)  of aggressive rate cuts amounting to 135 basis points by the Reserve Bank of India since February this year.Lending in the festival season has picked up with banks extending over ₹1 lakh crore in the period between mid-September and mid-October. Yet, growth in credit this financial year till now is a flat 0.2% only.

Festival season sales have shown an uptick ( a small increase or slight upward trend) with increase in sales of automobiles and also consumer durables. But it remains to be seen if this trend sustains. The government at the Centre is clearly in an unenviable ( difficult, undesirable, or unpleasant) position with very little fiscal leeway ( the amount of freedom to move or act that is available)  to boost growth by increasing its spending. Some of the reforms announced in the last few months may show some positive results with time. But without more meaningful structural reforms to address long-term problems such as the private sector’s reluctance ( unwillingness or disinclination to do something) to invest, it is unlikely that India will move towards the heady ( having a strong or exhilarating ) days of 8%-plus growth any time soon.