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Indian Economy Next Quarter
Delayed monsoon spreads rapidly, MET deptt. hopes it will hold-up.
Late monsoon and heat wave in June hits sowing for rice, oilseeds and pulses – expect pressure on prices.
Growth heading upwards, monsoon and the US economy could still be spoilers.
Government shows intention of reforms – implementation and governance issues remain stumbling blocks.
Disinvestment is on the cards finally.
Fuel price hike with no debate augurs well for deregulation.
India : Kal, aaj aur kal
The world is upbeat about India again. We are to be the fastest growing economy in 2010 at 8%, says the World Bank. So we finally get to beat China at the race, never mind that China is way ahead of us in per capita income and development indicators. In fact, this year, India is projected to be the only major economy to show a positive growth (2%) in steel consumption, according to the World Steel Association.
The Economic Survey 2008-09 also sees growth in the 6.5-7.5% range this year, assuming a normal monsoon and a bottoming out of US recession by September. This is in line with our growth estimate of 6.6% given a few months earlier. Returning to the high growth path of recent years however needs significant reforms, says the Survey and presents a formidable wish-list of measures. Suffice to say, this hope will not materialise in the near future.
But talk aside, inability to deal with upcoming risks is a serious failing of our policymakers. We had predicted, in our May newsletter, that crude would move away from the $ 40-50 range of the previous months into a higher range of $60-70, as expectations of global recovery became stronger. Crude did trade in this predicted range in the month of June. While we are glad that the fuel price hike took place this time with less fuss and without countless EGoM meetings, the fact remains that this hike does not cover the increase in petro costs fully.