India is in a cloud of economic optimism but its industrial data are in a permanent fog

Optimism the Indian economy will soon recover, despite no sign that it is anywhere near doing so, has increasingly led forecasters to overestimate industrial production growth.

Incessant official revisions to the data, after initial forecasts are proved wrong, also mean investors and companies don’t have a clear and timely view.

This too could be another thing holding back Asia’s third largest economy.

The latest industrial data came as a shock this week.

Factory output contracted by 2.2 percent in June from a year earlier, nearly twice as bad as the 1.2 percent fall predicted in the Reuters poll.

That was the eleventh month since January 2012, and the third in a row, in which economists have overestimated it.

Yet more lagging from Italy and Greece

At this stage in the euro zone crisis, we probably don’t need to be reminded how uncompetitive the peripheral economies are. (Arguably, of course, they would not be economically peripheral if they were more competitive, but that is for tautologists to debate).  The United Nations, in the form of UNCTAD, has just pinpointed another weakness, however — huge underperformance  in foreign directed investing, or FDI.

The numbers it has just released only go as far as 2010, so the real crisis cauldron has yet to come.  But they show that Greece and Italy have been punching way below their weight.

Greece has attracted a relatively small amount of foreign direct investment compared to other countries in the European Union (EU). In 2010, Greece’s share in the EU’s GDP was 1.9 per cent. In the same year, however, the inward FDI stock of Greece amounted to €26.2 billion ($35.0 billion), or less than 0.5 percent of the combined FDI stock of EU countries. Similarly, Greece’s share in the total outward FDI stock of EU countries was 0.4 per cent.

Time to promote the EU?


Member states of the European Union like to think of themselves as partners, sharing in a common future. But when it comes to business, things tend to go by the board. Consider, for example, the scramble to outdo each other in attracting  investment from outside the bloc.

Jose Guimon, a lecturer in international economics at the Universidad Autonoma de Madrid, reckons this should change. In a new paper for the Vale Columbia Centre on Sustainable International Investment, Guimon says it is time for an EU Investment Promotion Agency.

What he has in mind is something along the lines of  Invest in America, the U.S. government’s attempt to coordinate promotion of the United States as a desitination for foreign direct investment.