This series of splashes began in November 2008 as my attempt to track the effect of recession on some of the aspects of the Indian economy- mainly the trade deficit, inflation and the  oil pool deficit.Over the last eight months, India has gone through the 15th Lok Sabha General elections where in spite of all fears of a badly fractured mandate, the electorate has been wise enough to give a verdict that allowed the formation of a relatively stable government at the center. The Indian stock markets gave a thumbs up to the verdict with back to back upper circuits. Globally the recession seems to be ebbing with home sales and retail sales perking up in the US and the pace of job losses slowing down. It is time now to track how some of the pointers of the Indian economy are doing eight months down the line.

Inflation and Real Estate

Inflation has fallen to .48% for the week ended 23rd May 2009 as per the data released on the 4th June 2009. This has given ample space to the RBI to try to cut down the interest rates in order to boost the rate sensitive sectors of the economy. With the focus being on the infrastructure sector, construction and real estate sector must be hoping for better times ahead. The one good thing that has happened as a result of effects of recession is that the focus seems to be coming back to the need of providing affordable housing to the people. After Nano, Tatas have announced their plan to provide affordable housing to the people accross cities including Delhi, Mumbai and Bangaluru.

In my opinion, the RBI should go in for a round of rate cuts, not only to provide a fillip to the industry but also to create headroom to raise interest rates, if needed , without hurting the economy.

Trade figures

The bad news on the exports front continues. The Indian exports in April 2009 dropped nearly 33% on a year on year basis to $10.7 billion while the provisional May 2009 figures suggest another over 30% drop to $10.8 billion. Probably some stimulus in the coming budget would arrest this trend. The Indian imports have been witnessing a sharper fall mainly on account of the drop in the crude oil prices. The imports in April 2009 declines by 36.6% to $15.7 billion - the oil imports being down by 58.5% to $3.6 billion while the non-oil imports stood at $12.1 billion, down by 24.6%. As a result the trade deficit has narrowed down to $5 billion in the month of April 2009.

Indian Export-Import Figures 09  ( all figures in $billion )

The cumulative trade deficit in the first 4 months of the year 2009 has been around 20 billion dollars which is a substantial drop on a year on year basis. Just an year ago, the booming trade deficit was threatening to impairing our economy. Now the government must act on the escape that recession has provided and take steps to arrest the downward spiral in our exports as well as take steps to reduce our dependence on petroleum imports before the next boom in crude prices cripples our economy.

Mr. Manmohan Singh had promised that he would tackle the effects of recession within 100 days if voted back to power. The stage is all set for the Indian Dream to take off. Lets see if the architect of the 1991 reforms can pull it off once again. The coming budget would have some pointers as to what the future has in store for us. 

Till then, keep Cplashing,

-AF