Highlights • Economic slump has bottomed out – expect slow recovery ahead • 2009-10 growth forecasts will be revised upwards by most as the year progresses • Expectations of global growth resurgence fuels commodities and crude prices • Dollar dives, rupee surges to 47 - more trouble for exporters ahead • Fuel price deregulation on the cards • But all is not well – and overheated stock markets need to cool a bit India: Kal, aaj aur kal The numbers all seem to be looking up, the stock markets all seem to be rising once again, and cheer is back. There is spring in the air. One wonders what happened suddenly to make everything so nice. Anyhow, things as predicted are improving – largely because of heavy government interventions internationally. The lower interest rates in India are also starting to have their impact – this was all predicted, as interest rate reductions take some time to play out. But what is also predicted is that things will take a few months more to stabilise - we estimate growth for this financial year to be an unexciting 6.6%.

1. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
The Emerging Economy
– Monthly Newsletter from Indicus
Analytics
3rd June 2009
Highlights
• Economic slump has bottomed out – expect slow
recovery ahead
• 2009-10 growth forecasts will be revised upwards
by most as the year progresses
• Expectations of global growth resurgence fuels
commodities and crude prices
• Dollar dives, rupee surges to 47 - more trouble for
exporters ahead
• Fuel price deregulation on the cards
• But all is not well – and overheated stock markets
need to cool a bit
India: Kal, aaj aur kal
The numbers all seem to be looking up, the stock markets
all seem to be rising once again, and cheer is back. There
is spring in the air. One wonders what happened
suddenly to make everything so nice. Anyhow, things as
predicted are improving – largely because of heavy
government interventions internationally. The lower
interest rates in India are also starting to have their

2. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
impact – this was all predicted, as interest rate reductions
take some time to play out. But what is also predicted is
that things will take a few months more to stabilise - we
estimate growth for this financial year to be an unexciting
6.6%.
Meanwhile companies in many sectors will continue to be
cash starved, jobs will be lost, new hiring will remain low.
So while things will get better, don’t expect too much. The
trouble is that the situation was so bleak a quarter ago
that any small improvement has a big impact on our
collective psyche. The financial market types have just not
learnt anything – over-reacting is built in their DNA. Let’s
hope another bubble is not created.
At the same time everyone – including economists – is
blaming economists for not predicting the fall. But we
know of at-least ten well known economic thinkers who
were writing that something was going very wrong, these
‘good times’ were heading for a crash. Swami Aiyar of
ET, was actually week after week, increasing his
probability of crash figures. No one wanted to listen to
them then.
And now again, no one seems to listen when anyone who
has any sense is pointing out an impending crisis -
governments should not spend this much – we are
creating a bigger problem than we tried to solve.
Hopefully the new UPA government will be a bit more
conservative than the last one. The Budget should reflect
on the need to get back to some revised form of FRBM,
ideally with a roadmap. With growth looking up, it is time
for the government to begin to step back.
What worries us is the volatility in prices – whether in
crude, forex, commodities, grain etc. – the rupee which
had fallen below 52 to a dollar in early March has now

3. Indicus Analytics, An Economics Research Firm
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swung up past 47 to a dollar on 1st June. Crude which had
fallen to a low of $ 35 a barrel in December is now trading
close to $70. In May, the Reuters- Jefferies CRB
Commodities index rose 14%, its highest monthly gain
since 1974. Firms, governments and consumers must
keep themselves aware of the ‘surprises’ that the markets
can continue to throw at them, given that there are still
many unresolved issues lurking in the global economy.
In short, the financial and commodities markets are still
not working in a sane manner nationally and
internationally; don’t listen to the people who man them.
Don’t listen to the corporate bigwigs. Don’t listen to the,
yes, economists who say things are back on track. And
don’t listen to any government that says they have it all
under control. India will at the very least face two
pressures in the coming quarters and years – on the price
and forex rate fronts. And high deficits will not help.
But we have a good team running the show. We wish the
new government good luck in the months and years
ahead. We have high expectations from them.
PS. Please visit our new homepage for interactive time
series graphs of economic indicators
http://www.indicus.net/
Sumita Kale and Laveesh Bhandari
3rd June 2009, Indicus Analytics
Dr. 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
• GDP for 2008-09Q4 comes in at 5.8% with full
year growth at 6.7%, revised down from January
estimate of 7.1%.
• Q3 numbers were revised upwards from 5.3% to
5.8% growth as agricultural numbers were
stronger, as were community, defence and public
services growth.
• The Markit PMI survey of 500 firms (earlier known
as the ABN-AMRO NTC survey) showed resurgence
in May in manufacturing activity, with the index at
55.7 in May compared to 53.3 in April. More
importantly, the new orders index rose to 59.9,
the highest since September.
• IIP numbers for March showed a steep decline by
2.3% from last March, even as provisional
estimates for December and February were both
revised upwards.
• December IIP growth had been first set at a
negative 2%, now revised to a final minus 0.2%.
• April saw higher growth for cement production at
12.32% and sales at 13.03% exceeded March
growth estimates of 10.43% and 10.35%
respectively.
• Maruti and Hero Honda continue their winning
streak with double digit growth in May with 10%
and 23% growth respectively as their rural market
focus paid off. Other manufacturers, including
BMW are now relooking strategy in smaller towns
to boost sales.
• Telecom added 11.09 million subscribers in the
wireless network, bringing teledensity to 37.94.
• Recovery in the Baltic Dry Index , which measures
the shipping freight costs for commodities. This
index had hit an all-time high of 11,793 on May 20
2008, and breached a 22 year low of 663 in

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December. It has now crossed the 3,000 mark for
the first time since October.
• Boosted by coal(13.2%), cement (11.2%) and
electricity(6.0%), April IIP for infrastructure
industries grew by 4.3%, compared to 2.3% last
April. Steel showed positive growth of 1.6% over
last April, when it had declined by 0.6%.
• Rail freight traffic increased by 3.05% in April over
the last year.
• Air passenger traffic going through a slump –
domestic passenger traffic fell by 15.4% in March,
while international passenger traffic fell by just
1.8%. In air cargo, international freight has fallen
harder at 5.5% in March, while domestic cargo has
dropped by 2.4% over last March.
• Naukri Jobspeak index on hiring fell again in April,
though April and May are usually low hiring
months. The index is down 32% from its July
levels. This index began in July 2008, there are no
year on year growth numbers.
Read
Shipping rates ride out the storm
http://www.business-standard.com/india/news/shipping-
firms-ride-outstorm/359726/
India’s 2009-10 growth forecasts to 7%
http://www.livemint.com/2009/06/01114926/India8217s-
200910-growth-f.html?h=E

6. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
Inflation
• While provisional WPI inflation has remained low
averaging 0.4% in April and May so far, it is the
upward revisions for March data that point to
inflationary pressures in the system.
• CPI numbers finally released put inflation lower
than previous months for CPI AL at 9.09% in April.
• April CPI IW however stands at 150, a rise from
the level of 148 which it had held since October
(except a dip to 147 in December). Inflation for
April therefore is 8.70%.
• Crude oil has surged back again sharply to cross
$65 a barrel and China has raised prices by 6-7%.
• NCDEXAGRI index shows a decline over the month
of May in spot prices of 20 agricultural
commodities. On 29th May, the index was higher
by 7.2% than last year.
Read
BBC World Service Food Price Index
http://news.bbc.co.uk/2/hi/business/8059560.stm
China raises prices 6% to7% on gasoline, diesel fuel
http://online.wsj.com/article/SB1243810342310
70303.html
A little hope a dangerous thing for commodities
http://www.reuters.com/article/ousiv/idUSTRE5512582
0090602

7. Indicus Analytics, An Economics Research Firm
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Interest Rates
• Yield on the 10 year benchmark gilt trended slightly
upwards at the end of May, touching 6.6941% on
29th May.
• With large government borrowings in the offing this
year and no official borrowing schedule out as yet,
yields are expected to harden slightly, even as there
is pressure on the RBI to cut rates further given the
low growth and inflation numbers.
• While corporates are asking for a 400-600 basis
point cut in lending rates, bankers are reluctant to
cut more than 50-100 basis points. (Read interview
with Dr. Mohan below for views on bank
compulsions.)
• Even though inflation numbers are low world over,
policy rate have now more or less reached stable
levels – Australia kept the rate unchanged at 3%,
South Korea, Thailand are seen as done with their
rate cuts, Bank of England is expected to hold rates
at the low of 0.5%.
Read
Interviews with Rakesh Mohan
http://www.livemint.com/2009/05/27173009/Government
-has-space-for-more.html
http://www.business-standard.com/india/news/weve-
handled-crisis-much-better-than-anyone-else-
inworld/359685/
Federal Reserve puzzled by yield curve steepening
http://www.reuters.com/article/wtUSInvestingNews/idUST
RE54U1NZ20090531
Factbox: Global Interest Rates 2009

8. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
http://www.reuters.com/article/usDollarRpt/idUSGLOBAL2
0090601
Exchange Rates
• Exports in April were valued at 33.2% lower in dollar
terms than April 2008 (16.4% in rupee terms), while
imports fell by 36.6% in dollar terms and 20.6% in
rupee terms.
• Oil imports at $ 3.6 billion in April 09 were 58.5%
lower than April 08, while non-oil imports at $12.1
billion were 24.6% lower than previous April.
• This brings the trade deficit interestingly, lower at
$5.004 billion in April 09 compared to $8.75 billion in
April 08.
• FII net inflows rose from $ 1300.70 million in April to
$ 4144.80 million in May.
• As capital inflows continued into emerging
economies, with better news from Asia, the rupee
surged up from its 50.22 to a dollar at the end of
April to 47.29 at the end of May.
Read
ECB’s Constancio sees no accelerated dollar fall
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The other imbalance
The economics of chota recharge
Why some cities are getting younger and why some are
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9. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
India is witnessing a durables revolution
Beyond the fields
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10. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
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