Rajeev Deshpande/TNN

New Delhi, Feb 20: In what would be music to the UPA government's ears just ahead of a close electoral race, the two stimulus packages it has devised seem  to have begun to show results with an upturn in key sectors like steel, cement, autos, food and beverages and railway freight.

Cabinet secretary K M Chandrashekhar told TOI in an interview that strong rural demand seemed to be shoring up the economy. "I think we are seeing the first clear signs of a turnaround. The spending on flagship and infrastructure programmes and steady hikes in MSPs for wheat and rice seem to have kept the economy afloat, driving demand," he said.

The data now flowing in is easing some of the worry lines in government as the negative trends are not only levelling out, but the graph has begun to inch upwards again. Though these are early days, government hopes that with adequate follow-up measures, particularly with states that are key to the revival recipe, the trends will hold and strengthen.

The data shows that the cement sector has grown 9.97% in December 2008 as compared to November and the year on year increase is 11%. Steel, which had declined steadily through September, October and November last year has shown a recovery in December 2008 and January 2009 and has now touched the May 2008 figure of 22.86 metric tonnes when the sectoral growth rate was 4.1%. Though the steel sector has been slow, its climb back into positive figures is seen as reason for cheer.

Cement and steel are seen as key drivers with the construction sector seen to have a significant impact on the growth sentiment. Similarly, some of the gloom over the automobile sector seems to be lifting, with the January 2009 figures in the passenger vehicles sector showing a 32% rise over December 2008 while the increase for commercial vehicles is 23% over a similar time frame.

The growth in commercial vehicles is particularly encouraging since higher demand for transport vehicles is often viewed as a lead indicator of positive trends in the rest of the industrial sector.

Interestingly, FMCGs are growing again. "There is a record growth in year on year terms at 26.4% for the quarter ended December 31, 2008," the top bureaucrat said. Food and beverages also registered a record 28% growth in the quarter ended December 31, 2008, indicating that the hospitality industry and food retailers may not have been badly hit. Some of the high-end sales may have gone down, but the rest are doing well.

The growth in railway freight had declined to 2.25% in October-November, 2008, but the December 2008 figures show a heartening growth of 7%, which the government feels will mark a climb back to more healthy growth.

The official data is in sync with the feeback ToI has recieved from several industrialists with business interests in these sectors. Most of them said that the economic slowdown had begun to decelerate and the growth worm was slowly but steadily moving northwards again.

The government feels that its efforts to pump money into the rural economy and the public sector are paying off even though the export sector remains a worry due to a fall in orders. Here, too, the government feels that the movement of the rupee in recent weeks may well provide some succour to exporters. "The depreciation of the rupee may provide a cushion to the exporters," said Chandrashekhar.

He said there is a time lag before the full effect of the measures taken by the government would begin to show. "We have had meetings with the states and the RBI is also in the picture. The mechanism will work at the state level to address sectoral issues, let's say SMEs, to resolve the problem quickly. I don't think liquidity is going to be an issue," said Chandrashekhar.

The Cabinet secretary said credit windows had been opened to NBFCs to ensure infrastructure areas like roads are not hit because contractors working on PPP projects run out of money. Similarly, RBI has liberalized norms for external commercial borrowings. Chandrashekhar did stress the need for sustained follow-up, particularly during the election months.