Furthering to my previous post on Indian economy, following are the indicators which indicate that the Indian economy has already bottomed out. Let’s have a look.
There are two interesting things to be noted here. One, India's PMI came out be actually higher than that of China’s 53.1 in May09. And the second one is that domestic demand has been the key driving factor behind it. Exports have been on the falling spree since last eight months as the global demand has dried up completely. So hats off to India’s domestic demand which has helped Indian economy weather through these trying times.
OECD leading indicators: The OECD Composite Leading Indicators (CLIs) for India increased by 0.4 point to 93.9 in Apr09, against 93.5 in the previous month. Buy the way this was the first time in last two years when the OECD leading indicators posted an increase for India, indicating that Indian economy has hit the bottom of the economic cycle.
Industrial production turns positive: This has been the latest flavour of the month. Beating all market expectation, India’s industrial production slipped into positive territory in Apr’09. India’s IIP grew 1.4% (y/y) in Apr’09. Industrial production growth for Mar09 has also been revised upwardly to - 0.8% from -2.3% estimated earlier. Core sector also grew 4.3% in the same month. The problem regarding the industrial production being red for quite some time now seems to be subsiding.
All these indicators suggest a possible recovery going forward. However, the government still has to do a lot many things to put the Indian economy back on the high growth trajectory. Let’s wait for the budget, which will be presented in the first week of July’09. The government has to address many issues regarding the growth. Infrastructure should get a proper attention too. At the same time the government will have to maintain a fiscal balance as well. Let’s hope the government will be able to manage it well.
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Very nicely analysed.
ReplyDeleteDo you think that we can decouple our economy from the US and Europe and continue to grow on the basis of domestic demand?
Thanx Puneet,
ReplyDeleteWell, I really never believed in the decoupling hypothesis. I like the way American consumers spend. If we want a very high growth rate, we have to look back to the developed countries. But without that also India can grow quite reasonably say around 4-5% or so.
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ReplyDeleteThanks a lot my reader.
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