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.

1. 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.
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

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

3. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
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%.
• Final monsoon deficit for the country ended at
23% below normal. With post-monsoon rains in
October, water levels in reservoirs continued to

4. Indicus Analytics, An Economics Research Firm
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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.
• Provisional inflation for the week ending October
17th
is 1.51%

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

6. 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

7. Indicus Analytics, An Economics Research Firm
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India shining, India scraping
Recommendations
A Rs. 60,000 crore scandal
India’s mollycoddled ironmen
India’s rural markets: myth or reality
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

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