India’s 7.6% annual growth in the 2016 fiscal year has made it a standout performer amid a sluggish global economic environment. So far, this year, the GDP numbers look good and a bountiful monsoon will help further. Benign global oil prices will also add to the headline GDP number since India imports over 75% of its crude oil requirement.

But there are some reasons to worry. Data released over the last few weeks show that the bad-loan mess in the banking system remains serious, industrial production has fallen for two straight months, and unemployment is at a five-year high.
 

Industrial production

The index of industrial production, which measures the country’s factory output, fell for the second straight month in August, Central Statistics Office data showed on Oct. 10. The index fell 0.7% in August, following a 2.5% drop in July. Manufacturing and mining growth contracted in August, indicating that a recovery is still far away. In the first five months of the current fiscal year (April-August), the IIP contracted 0.3% compared to an expansion of 4.1% in the same period a year ago.

“Manufacturing performance continues to face headwinds from subdued business and investment environment,” the Reserve Bank of India said in its bi-monthly monetary policy review statement on Oct. 04.
 

Bad loans

Former RBI governor Raghuram Rajan’s goal of purging Indian banks of toxic loans remains unfulfilled, new data shows. On October 10, Reutersreported that non-performing assets in the Indian banking system had shot up from $121 billion in December 2015 to $138 billion in June 2016, according to RBI data. The central bank has given banks a March 2017 deadline to make provisions for bad loans. So, many big lenders have posted massive losses in recent quarters. Yet, the bad-loan pile is only getting bigger.

Meanwhile, the government is now also planning to consolidate public sector banks to make the system more efficient. It will soon merge two large banks based in Mumbai, Reuters reported on October 11.
 

Out of work

In 2015-16, the unemployment rate in Asia’s third-largest economy stood at a five-year high, according to a Labour Bureau report dated September 15. This is critical at a time when the Modi government is pushing its ambitious “Make in India” initiative to boost manufacturing and job creation. Employment was a top item in the election manifesto of Modi’s Bharatiya Janata Party. The all-India survey by the Labour Bureau showed that 77% of the households that participated in it did not have a regular salaried or wage-earning member.

This article first appeared on Quartz.

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