Posted by: qmaxim | November 12, 2009

Indian economy – end of downturn?

I was occasionally following world economic forum summit India which is underway in New Delhi. During this event Newspapers , Economy focused TV channels were full of economists, business leaders and politicians.

When economic woes started up last year, politicos and others at first went on a denial mode saying that it won’t effect India. Then they went overboard with so called stimulus where instead of spending the money on sectors like building infrastructure, & on subsidizing sectors adversely effected (like textiles, diamonds), money was spent on things like loan write off and other populist programs.

At that time, I made couple of points in my blog:

– I mentioned that lack of money in most cases was not the issue, implementation (things such as infrastructure) was the issue.

– Though the banks had sufficient funds they were unwilling to lend to people with dubious credit record, & people were not making big purchases due to prevailing economic uncertainty.

I also mentioned that economic recovery is going to take much longer than 6 months to 1 year estimated / claimed by several experts.

From discussions now it is clear that recovery is going to take at least 2 years to reach 9% levels, with this year economy clocking 6.5-7%.

In view of the fact that infrastructure development has still not taken off , export sector still not performing, agriculture not performing well, I think it is still unlikely.

According to some reports, even the spurt seen in purchase of automobiles is to some extent contributed by the money getting diverted from loan write off to buying automobiles/ bikes etc.

Now, first part of what I have said is pretty much what most of the participants are saying now.

Another funny thing is that inflation is supposed to be negative, any lay person will know that this is not true with price of house hold items going through the roof. This is due to wrong items being measured and unreliable data.

But,yesterday I saw even a top economist saying that inflation was negative until recently!!

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