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    Highlights • Stronger recovery across the globe – trend to continue at slow pace • RBI refrains from rate hike in October, expect action only after January • Inflation in consumer prices continues unabated, expect reduction in pressures only by January • Exports decline reduced, horizon appears brighter • Overall – a positive outlook on the economy over the next quarter Good tidings from across the globe as manufacturing showed stronger signs of revival even in advanced economies that were the epicentre of the crisis. India still appears the brightest growth prospect for the year-ahead; all estimates seem to be converging on a 6.5% growth rate for the current year. The stimulus package meanwhile will continue to stay, the FM has said there are no immediate plans to even think of an exit strategy, “I will take a view on it as and when we are convinced that the economy has come out of the worst situation and is in the firm path of recovery” he said at the Economic Editors Conference in Delhi last week. That begs the question what defines the path of recovery? The simple long term problem remains – would a ‘recovery’ be sustainable if it has the same basis as the previous high growth trend? Engineering even this much of a recovery as we see now has come at a cost. Tax revenues in September rose by a bare 0.8%, and are down by 7.6% for the first half of this year. Custom and excise revenue were lower by 33% and 23% respectively for the period April-September, compared to last year. The fiscal deficit by the end of September stood at Rs. 197775 crores, last year it was Rs. 102654 crores. We think it is irresponsible to let investment and consumption decisions continue to be based on these current parameters. Everyone should be aware that this is a ‘punch bowl’ that will be taken away sometime and make appropriate plans. Monetary policy too is looking worldwide at when and how to exit from the current low rates, each country will take its path according to domestic compulsions. But rate hikes are inevitable sometime next year. The ‘happy’ times can only last a short while. On the agri front, with rains in October, the kharif sowing recovered to some extent, though rice still remains badly hit, the deficiency in acreage sown has dropped from 61% in mid-September to 15% in mid-October. Sugarcane production will be lower this year globally, heavy rain in Brazil has left 10% of the crop unharvested. Raw sugar prices can surge to 30 year highs by December-January, according to some commodity analysts. Imports by India therefore will bear the brunt of this price rise. Bitter-sweet times ahead. On the squabbling on the political front, the less said the better.

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    Highlights • Stronger recovery across the globe – trend to continue at slow pace • RBI refrains from rate hike in October, expect action only after January • Inflation in consumer prices continues unabated, expect reduction in pressures only by January • Exports decline reduced, horizon appears brighter • Overall – a positive outlook on the economy over the next quarter Good tidings from across the globe as manufacturing showed stronger signs of revival even in advanced economies that were the epicentre of the crisis. India still appears the brightest growth prospect for the year-ahead; all estimates seem to be converging on a 6.5% growth rate for the current year. The stimulus package meanwhile will continue to stay, the FM has said there are no immediate plans to even think of an exit strategy, “I will take a view on it as and when we are convinced that the economy has come out of the worst situation and is in the firm path of recovery” he said at the Economic Editors Conference in Delhi last week. That begs the question what defines the path of recovery? The simple long term problem remains – would a ‘recovery’ be sustainable if it has the same basis as the previous high growth trend? Engineering even this much of a recovery as we see now has come at a cost. Tax revenues in September rose by a bare 0.8%, and are down by 7.6% for the first half of this year. Custom and excise revenue were lower by 33% and 23% respectively for the period April-September, compared to last year. The fiscal deficit by the end of September stood at Rs. 197775 crores, last year it was Rs. 102654 crores. We think it is irresponsible to let investment and consumption decisions continue to be based on these current parameters. Everyone should be aware that this is a ‘punch bowl’ that will be taken away sometime and make appropriate plans. Monetary policy too is looking worldwide at when and how to exit from the current low rates, each country will take its path according to domestic compulsions. But rate hikes are inevitable sometime next year. The ‘happy’ times can only last a short while. On the agri front, with rains in October, the kharif sowing recovered to some extent, though rice still remains badly hit, the deficiency in acreage sown has dropped from 61% in mid-September to 15% in mid-October. Sugarcane production will be lower this year globally, heavy rain in Brazil has left 10% of the crop unharvested. Raw sugar prices can surge to 30 year highs by December-January, according to some commodity analysts. Imports by India therefore will bear the brunt of this price rise. Bitter-sweet times ahead. On the squabbling on the political front, the less said the better.

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    54 views8 pages

    Emerging Economy November 2009 Indicus Analytics

    Uploaded by

    Indicus Analytics
    Highlights • Stronger recovery across the globe – trend to continue at slow pace • RBI refrains from rate hike in October, expect action only after January • Inflation in consumer prices continues unabated, expect reduction in pressures only by January • Exports decline reduced, horizon appears brighter • Overall – a positive outlook on the economy over the next quarter Good tidings from across the globe as manufacturing showed stronger signs of revival even in advanced economies that were the epicentre of the crisis. India still appears the brightest growth prospect for the year-ahead; all estimates seem to be converging on a 6.5% growth rate for the current year. The stimulus package meanwhile will continue to stay, the FM has said there are no immediate plans to even think of an exit strategy, “I will take a view on it as and when we are convinced that the economy has come out of the worst situation and is in the firm path of recovery” he said at the Economic Editors Conference in Delhi last week. That begs the question what defines the path of recovery? The simple long term problem remains – would a ‘recovery’ be sustainable if it has the same basis as the previous high growth trend? Engineering even this much of a recovery as we see now has come at a cost. Tax revenues in September rose by a bare 0.8%, and are down by 7.6% for the first half of this year. Custom and excise revenue were lower by 33% and 23% respectively for the period April-September, compared to last year. The fiscal deficit by the end of September stood at Rs. 197775 crores, last year it was Rs. 102654 crores. We think it is irresponsible to let investment and consumption decisions continue to be based on these current parameters. Everyone should be aware that this is a ‘punch bowl’ that will be taken away sometime and make appropriate plans. Monetary policy too is looking worldwide at when and how to exit from the current low rates, each country will take its path according to domestic compulsions. But rate hikes are inevitable sometime next year. The ‘happy’ times can only last a short while. On the agri front, with rains in October, the kharif sowing recovered to some extent, though rice still remains badly hit, the deficiency in acreage sown has dropped from 61% in mid-September to 15% in mid-October. Sugarcane production will be lower this year globally, heavy rain in Brazil has left 10% of the crop unharvested. Raw sugar prices can surge to 30 year highs by December-January, according to some commodity analysts. Imports by India therefore will bear the brunt of this price rise. Bitter-sweet times ahead. On the squabbling on the political front, the less said the better.

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    of 8

    Indicus Analytics, An Economics Research Firm

    http://indicus.net/Newsletter/Emerging_Economy.aspx

    The Emerging
    Economy
    – Monthly Newsletter from
    Indicus Analytics
    9th November 2009

    Highlights
    • Stronger recovery across the globe – trend to
    continue at slow pace
    • RBI refrains from rate hike in October, expect
    action only after January
    • Inflation in consumer prices continues
    unabated, expect reduction in pressures only by
    January
    • Exports decline reduced, horizon appears
    brighter
    • Overall – a positive outlook on the economy
    over the next quarter

    Good tidings from across the globe as manufacturing


    showed stronger signs of revival even in advanced
    economies that were the epicentre of the crisis. India still
    appears the brightest growth prospect for the year-ahead;
    all estimates seem to be converging on a 6.5% growth
    rate for the current year.
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    The stimulus package meanwhile will continue to stay, the


    FM has said there are no immediate plans to even think of
    an exit strategy, “I will take a view on it as and when we
    are convinced that the economy has come out of the
    worst situation and is in the firm path of recovery” he said
    at the Economic Editors Conference in Delhi last week.
    That begs the question what defines the path of recovery?
    The simple long term problem remains – would a
    ‘recovery’ be sustainable if it has the same basis as the
    previous high growth trend?

    Engineering even this much of a recovery as we see now


    has come at a cost. Tax revenues in September rose by a
    bare 0.8%, and are down by 7.6% for the first half of this
    year. Custom and excise revenue were lower by 33% and
    23% respectively for the period April-September,
    compared to last year. The fiscal deficit by the end of
    September stood at Rs. 197775 crores, last year it was
    Rs. 102654 crores. We think it is irresponsible to let
    investment and consumption decisions continue to be
    based on these current parameters. Everyone should be
    aware that this is a ‘punch bowl’ that will be taken away
    sometime and make appropriate plans. Monetary policy
    too is looking worldwide at when and how to exit from the
    current low rates, each country will take its path according
    to domestic compulsions. But rate hikes are inevitable
    sometime next year. The ‘happy’ times can only last a
    short while.

    On the agri front, with rains in October, the kharif sowing


    recovered to some extent, though rice still remains badly
    hit, the deficiency in acreage sown has dropped from 61%
    in mid-September to 15% in mid-October. Sugarcane
    production will be lower this year globally, heavy rain in
    Brazil has left 10% of the crop unharvested. Raw sugar
    prices can surge to 30 year highs by December-January,
    according to some commodity analysts. Imports by India
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    therefore will bear the brunt of this price rise. Bitter-sweet


    times ahead.

    On the squabbling on the political front, the less said the


    better.

    Please visit our homepage for updated interactive time


    series graphs of economic indicators and blog posts
    throughout the month.

    Sumita Kale and Laveesh Bhandari

    9th November 2009, Indicus Analytics

    Sumita Kale is Chief Economist, and Laveesh Bhandari is


    Director, Indicus Analytics. They can be contacted at
    sumita@indicus.net and laveesh@indicus.net.

    Economic Growth

    • IIP burst into double digit growth in August at


    10.4% for the first time since October 2007. With
    a low base effect from last year, this implies that
    growth is trending back, albeit slowly.
    • Manufacturing grew at 10.2%, mining at 12.9%
    and electricity at 10.6%, showing well rounded
    growth
    • Infrastructure industries had slower growth in
    September, at 4%, the same rate as last
    September, with only the electricity sector
    outperforming its last year’s growth.
    • Electricity generation had low growth in October,
    provisionally estimated at 3.97%.
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    • Final monsoon deficit for the country ended at


    23% below normal. With post-monsoon rains in
    October, water levels in reservoirs continued to
    rise to reach 96.08 BCM , but were still 87% of
    last year and 94% of the ten year average levels.
    • For the kharif crop, sowing has recovered with the
    late rains, down by 15.7% for rice, up by 5.6% for
    pulses, while cotton has increased in acreage by
    13.4%.
    • The HSBC-Markit PMI survey showed a slightly
    lower level of expansion in October at 54.5 levels
    of the index, new orders index fell to 56.7 while
    employment index rose to 50 and export orders
    reached the highest level since August 2008.
    • Indian Railways freight earnings rose by 7.5%
    over the period April-September, with the Net
    Tonne Kilometres rising by 8.4%.
    • Employment is looking up, the Naukri Jobspeak
    index showed a rise in hiring activity in
    September, higher by 4% over August numbers.
    • Auto sales continued their rise in double digits
    through October, Maruti sales rose by 21%,
    Hyundai rose by 41%, Tata/Fiat JV rose by 28%.
    In two-wheelers, Hero Honda saw near flat sales in
    October over last year, while Bajaj Auto had a
    52% growth.

    Read
    Signs of global recovery reinforced by manufacturing data

    Inflation

    • As stated in the last newsletter, WPI final inflation


    went into the positive territory from August itself,
    as revisions are revealing.
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    • Provisional inflation for the week ending October


    17th is 1.51%
    • September consumer price data shows high
    inflation at 11.64% for CPI IW and 13.19% for CPI
    AL.
    • Sugar prices have risen to a record high, up
    31.02% since March end with estimates of lower
    production this year. However imports are
    scheduled to restrain the price hike.
    • Steel prices have been cut and HSBC- Markit PMI
    survey data for October shows a moderation in
    both input and output price indices, giving some
    relief to policy makers.
    • Brent crude hit a high of $ 78.36 in October, as
    global recovery has sent a spurt in the price. Last
    October prices crashed from an initial $92 to $60
    by the end of the month.

    Read

    Special PDS basket trimmed

    Interest Rates

    • With the October review setting hopes for a rate


    hike, the 10 year benchmark gilt rose to 7.4404% on
    23rd October, before calming down to 7.3004% at the
    end of the month.
    • While the RBI did not raise key rates, the SLR was
    raised by one percentage point and a clear mandate
    for raising rates in the near future has been set out.
    • The RBI is expected to raise rates in early January,
    essentially to curb inflation expections, however the
    growth-inflation trade-off is being closely monitored
    to restrict damage to recovery.
    • Every country is looking at its domestic compulsions
    to move towards an exit strategy: Australia raised
    rates for the second month in a row
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    Read

    Implications of Central Banks’ Exit Strategy

    Monetary policy and fiscal consolidation

    Exchange Rates

    • Exports during September were valued at US $


    13.608 billion, 13.8 per cent lower in dollar terms
    (8.4 per cent lower in Rupee terms) than last
    September, a deceleration of the negative trend.
    • Imports during September were valued at US $
    21.377 billion lower by 31.3 per cent in dollar terms
    (27.0 per cent in Rupee terms) than last
    September.
    • Oil imports were 33.5 per cent lower than last
    September while non-oil imports were lower by 30.4
    per cent.
    • Trade deficit for the period April- September stood at
    $ 46.73 billion, compared to $76.1 billion last year.
    • FII inflows continue, $1.947 billion in equity and
    $1.48 in debt during the month of October.
    • The RBI bought 200 tonnes of IMF gold to shore up
    the latter’s finances. Forex reserves stood at $
    285.52 billion on October 23rd, up $29.552 billion
    from last year.
    • The rupee surged to 45.8 to a dollar in mid-October
    but has since fallen again to levels of 47-47.5, as the
    dollar recovers some of its lost value.

    Read
    Indian exports decline least this year as global slump
    eases
    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    India shining, India scraping

    Recommendations

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    India’s mollycoddled ironmen

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    RBI warns of inflation amid growth

    Rising food prices drive inflation to 1.21%

    Coarse cereals can do the job too

    Gurgaon’s success masks Haryana’s woes


    Indicus Analytics, An Economics Research Firm
    http://indicus.net/Newsletter/Emerging_Economy.aspx

    For query or placing orders on


    Indicus Products
    please contact

    Indicus Analytics Pvt. Ltd.


    2nd Floor, Nehru House,
    4 Bahadur Shah Zafar Marg
    New Delhi- 110002.
    Phone: 91-11-42512400/01
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