Emerging Economy March 2009 - Indicus Analytics
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• The organized sector reels under the slowdown – will get worse this summer.
• Slowdown perceptible across economy - auto, cement, telecom bring small joy.
• As predicted RBI cuts rates reluctantly in March – this effort will fail as well.
• Government bent upon making it worse – resorts to highest ever borrowings.
• India rating crashes, set to fall further.
• Lower agri output spells bad news for prices ahead.
• Hardly any signs of turnaround yet – but hope can sometimes carry the day.
India: Kal, aaj aur kal
We did say last time that if the RBI cuts rates, it would do so only in March – that’s what happened, and as we expected (as did the RBI) the markets were not impressed. The monetary overtures were overshadowed by the grim news on the fiscal front, as the government put forth demands for the highest borrowings ever of Rs. 3.6 trillion. The flip-flop over the budget was particularly disturbing, as was the three times revision of borrowings over the year – all with not a bit of apology. The problem is that under the excuse of ‘exceptional times’, all that talk of moving towards controlled budgeting and market based pricing in fuel has gone up in vapour. Meanwhile, amidst all this turmoil, we don’t have a full time Finance Minister, a clear indication that the economy really isn’t a priority.
The quarterly GDP data is showing a sharp falling trend; even though we take this data with a pinch of salt, we would advise everyone to take the falling trend very seriously. International efforts are showing that nothing is working quickly enough, and we also know that no macro-economic models are working.
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