Rants of a nerd
Economics
6 months ago
The Daily Capitalist has a set of charts up from OECD showing how this slowdown is globally coordinated. While most countries are in a slowdown mode, India seems to be really headed for a hard landing.
Longer term growth picture
0I will come back to last week’s Industrial Production print later, but I wanted to get this chart out of the way. It shows the longer term trend in industrial production (going back to the start of the new series in 2005). What is interesting is that growth never went back to pre-crisis trend in recent years. Between 2005 and 2008, the annual growth was close to 14%, while 2009-2011 growth was under 8%. The post crisis slow growth goes back before the current “policy paralysis” and points to a possibly structural slowdown in industry. There is some good work out by JP Morgan showing how capital equipment is a major cause of slowdown in the last couple of years and it is possibly due to macro-economic instability (high fiscal deficit and unstable inflation).
IIP Chart (Log Scale) 2004-2011
6 months ago
Quick shout out to Swaminomics for doing a good job in bringing out one of the major ills with our country. The problem of unemployment / underemployment can be substantially reduced if starting new businesses was easier.
Inflation pinching hard as usual
0The Indian inflation rate for October printed at 9.7% (year on year), about the same as the previous month. The worry is that the month/month inflation rate is again up sharply at around 9.3% annualized rate, significantly above the 5-6% or so rate it has been running at for this financial year.
A part of this unexpected rise is probably explained by the severe depreciation of the Rupee in recent months. In addition there are some individual commodities that seem to have had a large impact (tomatoes which form 0.3% of the index was up 100%, adding 30 bps to the overall inflation rate).
Overall if inflation remains at or below this m/m run rate, we should see inflation drop below 8% on a year-on-year basis by December which should allow the Reserve Bank to ease liquidity and start cutting rates the April-June quarter.