Highlights • Future growth on much firmer footing – across manufacturing, services and agriculture sectors • But corporate hiring and investment to stay flat for another quarter • Tax collections - Boost in advance tax but indirect tax collections much lower than expected • Good rabi output expected, of course, if weather holds up • Inflation concerns will reflect in small increase in CRR and rate hikes by RBI this month With the worst of the economic crisis behind us, we look ahead to forecast trends for the decade ahead – growth is set to be much faster than the last ten years. The driving force of the decade? Transport, storage and communications - a large road network is going to be operational, ports are rapidly improving, air transport infrastructure is being overhauled, and most important, a strong ecosystem has been created for the telecom sector. The mainstay of the Indian economy for so many decades, agriculture could well grow faster than the expected 3.4% - a rural road network has been built up, high agri commodity prices would improve terms of trade towards this sector, rural human capital has improved tremendously in the 2000s, new technologies are about to enter on a mass scale, agri reforms such as the APMC acts are being overhauled. Though it is difficult, to time the tipping point, in Indian agriculture – we would expect it to be somewhere after the middle of the decade though we may need to wait till the 2020s for the full impact of these changes to be felt. Rapidly growing domestic and international markets will keep manufacturing opportunities buoyant, but there would be spoilers in the shape of energy, wage price inflation, the unresolved labour and land issues. Bottom-line? Overall GDP growth will be around 9.6% annually, even if the government does not do anything radically different. It would be higher if agriculture and electricity, gas and water supply are able to break through their long term institutional constraints. It would be lower if inflation eats into macro-economic stability and law and order conditions get out of hand. This does translate into greater per capita income and changed households budgets. Here again, transport, education, health and recreation would all be among the most rapidly growing items of consumer expenditures. The tipping point is not so much in health or education in the aggregate, but in goods and services that promise better lifestyles. Despite such a rosy scenario, India will not rid itself of poverty - almost 200 million persons are likely to remain extremely poor by the end of the decade. Social safety nets would continue to be critical – the impact of these on the fisc can be minimised if governance and institutional change remove inefficiencies in distribution. Indians remain one of the most optimistic people on the globe, growth prospects are bright even as numerous issues need to be resolved. But the true test of success would be when the energy in entrepreneurs and consumers brings us a greener, more equitable decade. P.S A more detailed explanation of these forecasts and trends, with graphs was published in the Indian Express, available now on our website. Sumita Kale and Laveesh Bhandari 5th January 2010, Indicus Analytics Sumita Kale is Chief Economist, and Laveesh Bhandari is Director, Indicus Analytics.

1. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
The
Emerging
Economy
– Monthly Newsletter from Indicus
Analytics
5th January 2010
Highlights
• Future growth on much firmer footing – across
manufacturing, services and agriculture sectors
• But corporate hiring and investment to stay flat
for another quarter
• Tax collections - Boost in advance tax but
indirect tax collections much lower than
expected
• Good rabi output expected, of course, if weather
holds up
• Inflation concerns will reflect in small increase
in CRR and rate hikes by RBI this month

2. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
With the worst of the economic crisis behind us, we look
ahead to forecast trends for the decade ahead – growth is
set to be much faster than the last ten years. The driving
force of the decade? Transport, storage and
communications - a large road network is going to be
operational, ports are rapidly improving, air transport
infrastructure is being overhauled, and most important, a
strong ecosystem has been created for the telecom
sector.
The mainstay of the Indian economy for so many decades,
agriculture could well grow faster than the expected 3.4%
- a rural road network has been built up, high agri
commodity prices would improve terms of trade towards
this sector, rural human capital has improved
tremendously in the 2000s, new technologies are about to
enter on a mass scale, agri reforms such as the APMC acts
are being overhauled. Though it is difficult, to time the
tipping point, in Indian agriculture – we would expect it to
be somewhere after the middle of the decade though we
may need to wait till the 2020s for the full impact of these
changes to be felt.
Rapidly growing domestic and international markets will
keep manufacturing opportunities buoyant, but there
would be spoilers in the shape of energy, wage price
inflation, the unresolved labour and land issues.
Bottom-line? Overall GDP growth will be around 9.6%
annually, even if the government does not do anything
radically different. It would be higher if agriculture and
electricity, gas and water supply are able to break through
their long term institutional constraints. It would be lower
if inflation eats into macro-economic stability and law and
order conditions get out of hand.

3. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
This does translate into greater per capita income and
changed households budgets. Here again, transport,
education, health and recreation would all be among the
most rapidly growing items of consumer expenditures.
The tipping point is not so much in health or education in
the aggregate, but in goods and services that promise
better lifestyles.
Despite such a rosy scenario, India will not rid itself of
poverty - almost 200 million persons are likely to remain
extremely poor by the end of the decade. Social safety
nets would continue to be critical – the impact of these on
the fisc can be minimised if governance and institutional
change remove inefficiencies in distribution.
Indians remain one of the most optimistic people on the
globe, growth prospects are bright even as numerous
issues need to be resolved. But the true test of success
would be when the energy in entrepreneurs and
consumers brings us a greener, more equitable decade.
P.S A more detailed explanation of these forecasts and
trends, with graphs was published in the Indian Express,
available now on our website.
Sumita Kale and Laveesh Bhandari
5th January 2010, 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.

4. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
Economic Growth
• HSBC Markit Purchasing Managers Index rose
again for the first time in 3 months to 55.6 in
December. New orders index at 60.1 was at its
highest this year.
• IIP rose by 10.3% in October over last year’s low
growth of 0.1%, with manufacturing reviving at
11.1%, mining at 8.2% and electricity at 4.7%.
• Electricity generation in November stood 3.27%
higher than last year. In December, provisional
output estimates put growth at 6.2%.
• Cement production increased by 12.7% in
November over last year, with sales rising by
11.3%.
• Steel production (total finished steel, alloy + non-
alloy) was at 38.961 million tonnes during April-
November, 2009, a growth of 2.5% over the
previous year. Consumption of total finished steel
(alloy + non-alloy) was at 34.304 million tonnes
during April-November, 2009, a growth of 6.8%.
• Telecom added 17.65 million new subscribers in
November bringing tele-density to 46.32, highest
growth is in Circle B. Total broadband subscribers
reached 7.57 million.
• Rail freight traffic increased by 9.22% in
November, revenue earnings from commodity-
wise freight traffic rose by 10.08% during the
period April-November over the same period last
year.
• Hiring in November grew at 8.4% over the
previous month, with auto, telecom and insurance
showing strongest growth. Of the top 7 cities, 6
saw an uptrend in hiring, according to Naukri
Jobspeak index.
• Vehicle sales continued to rise in December –
Maruti became the first car in India to cross the 1

5. Indicus Analytics, An Economics Research Firm
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lakh sales mark , 1,00,874 units, Tata Motors
recorded 100% growth in the month over last
year, Hero Honda sales rose by 74%, TVS Motor
by 34.06%, Bajaj Auto by 77 %.
• Rabi crop sowing stood at 85% of normal sown
area, 1.8% up from last year – Prominent crops
with increase in sowing this year so far include
wheat (2.3%), rice(46.2%), gram and lentil (11.4
and 11.6% respectively) while those which are still
below last year’s sowing mark include peas( -
10.6%), jowar( -9.2%), urad (-5.1%), oilseeds
(-3.7%).
• Advance tax collections rise 20% in the April-
December period, compared to last year as
companies cut costs and met buoyant demand.
Automobiles, consumer goods and metal firms led
the rise. Direct tax collection, which includes
corporate and personal taxes, rose by 8.1% to
touch Rs. 2.27 billion in the period till December.
Read
Renovating our image
http://www.telegraphindia.com/1091229/jsp/opinion/st
ory_11919270.jsp
India 2020 – what will we be like
http://www.business-
standard.com/india/news/india-2020will-we-be-
like/381393/
India to overtake China in 2020
http://economictimes.indiatimes.com/Swaminathan-S-
A-Aiyar/India-to-overtake-China-in-2020-
Swaminathan-Aiyar/articleshow/5401241.cms
Inflation

6. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• WPI All Commodities inflation has been rising rapidly
as the base effect has run out – stands at 4.8% for
November, while manufactured products inflation
stands at 4.0% - both provisional estimates.
• Latest primary articles inflation is at 15.5% for the
week ending 19th December while the group of fuel,
power, light and lubricants has turned positive, the
first time since December 2008.
• Consumer price inflation continued to go higher in
November – 13.51% CPI IW and 15.65% for CPI AL.
This is on top of a double-digit inflation for last
November.
• Crude oil traded in the range of $78.68 to $70.1 in
December, up by 85.6% over last December’s low
prices. While there is pressure on the govt. to raise
fuel prices domestically, there is some cushion
coming in from the rising rupee exchange rate so far.
• PMI survey reports pressure on manufacturers to
raise prices - steel prices have already been
increased in January, keeping with the buoyant
domestic market, auto makers are looking to raise
prices in line with rising input costs etc.
• Sugar surged again in the last week of December
with apprehensions that output estimates would not
be met.
Read
The price of oil in 2010
http://in.reuters.com/article/economicNews/idINIndia-4
5123220100104
Interest Rates
• The yield on the 10 year benchmark gilt rose in
December from being less than 7.2% in the last
week of November to touch 7.6934 on the 1st of
January.

7. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• Rising inflation numbers as well as input price rise
raise concerns of rate hike by the RBI in the January
end review. While CRR is set to be hiked in all
probability, there is likely to be a rise in the reverse
repo of 25 basis points as the RBI will signal its
readiness to stem inflation.
• World-wide 2010 will see central bankers raising
rates, though the timing and quantum will depend on
individual domestic factors.
Read
Fed’s road to neutral is riddled with potholes
http://www.bloomberg.com/apps/news?
pid=20601039&sid=apuJ4PPRa2MM
Bank of Korea hints at rate hike in 2010
http://www.forextv.com/Forex/News/ShowStory.jsp?
seq=1168687&category=Economic+News
Exchange Rates
• BoP statistics released for April-September 2009 :
1. Lower trade deficit (US $ 58.2 billion) led by lower
oil import bills
2. Lower net invisible surplus (US $ 39.6 billion) led
by lower software services and decline in business
services and investment income
3. Higher current account deficit (US $ 18.6 billion)
due to lower net invisibles
4. Large net capital inflows mainly led by turnaround
in FII inflows and steady FDI inflows
5. Increase in reserves (excluding valuation) of US $
9.5 billion (as against a decline in reserves of US $
2.5 billion in April-September 2008) due to large
capital inflows and SDRs allocations by the IMF

8. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• Exports during November 2009 valued at US $13.199
billion, 18.2 % higher in dollar terms and 12.4 %
higher in rupee terms than last November.
• Imports in November 2009 are provisionally
estimated at US $22.888 billion, lower than last
November by 2.6 % in dollar terms (minus 7.4 % in
rupee terms)
• Oil imports during November 2009 were valued at US
$6.389 billion, 7.3 % higher than last year. Non-oil
imports at US $16.5 billion was 5.9 % lower than last
November.
• The trade deficit for April- November, 2009 was
estimated at US $66.183 billion which was lower
than the deficit of US $ 100.152 billion during April-
November, 2008.
• FII net inflows in equity markets of $ 2.198 billion in
December brought the total of net inflows in 2009 to
$17.457 billion.
• Forex reserves for India stand at $ 283.499 in the
week ending 25th December 2009.
• The rupee has been fairly stable in December,
moving in the range 46.2 – 46.9 to the dollar and is
expected to stay within the 46-47 range in January.
Read
Major currency risk in 2010
http://www.emecklai.com/JoyToTheWorld.aspx?
Type=C22
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9. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
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