Highlights • As last newsletter predicted, manufacturing recovery has begun. • Yet, exports will continue to stay depressed, SMEs will take a while to feel the positive swing. • Prospects for emerging economies brighten, capital flows in. • Inflows are notoriously fickle, so watch out for any turnaround if political factors disappoint. India: Kal, aaj aur kal The numbers are coming in clearer every month as Indian manufacturing recovers, thanks to strong domestic demand, due in large part to money from the pay commission, NREGS, high support prices for agri products last year etc. The fiscal stimulus began much before the global crisis hit India. We are not in anyway close to double digit growth, but the slump does seem to be over. Meanwhile, the stock market believes that all is well with the world, which isn’t true, of course, and if the election outcome disappoints in a fractured mandate, expect a rude shock once again.

1. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
The Emerging Economy
– Monthly Newsletter from Indicus
Analytics
8th
May 2009
Highlights
• As last newsletter predicted, manufacturing
recovery has begun.
• Yet, exports will continue to stay depressed,
SMEs will take a while to feel the positive swing.
• Prospects for emerging economies brighten,
capital flows in.
• Inflows are notoriously fickle, so watch out for
any turnaround if political factors disappoint.
India: Kal, aaj aur kal
The numbers are coming in clearer every month as Indian
manufacturing recovers, thanks to strong domestic
demand, due in large part to money from the pay
commission, NREGS, high support prices for agri products
last year etc. The fiscal stimulus began much before the
global crisis hit India. We are not in anyway close to
double digit growth, but the slump does seem to be over.
Meanwhile, the stock market believes that all is well with
the world, which isn’t true, of course, and if the election
outcome disappoints in a fractured mandate, expect a
rude shock once again.
The main problem however will come up later this year, or
may even surface next year when the high fiscal deficit

2. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
will combine with rising demand to raise inflation levels
substantially. Even now, the WPI which had been forecast
by many to hit negative numbers, is still reluctant to
oblige; even with the high base effect, large positive week
on week rises have kept the WPI inflation in the positive
zone. The new CPI indices are due to come into force from
next year, while the current data for March has not been
released yet, which is another issue altogether.
Worldwide, as prices reflect the expectations of demand,
we can expect higher levels in basic commodities like
crude, copper, steel etc. as news of recovery in emerging
economies impacts these markets. Again, we caution that
this does not mean a hike into levels above $100 a barrel
for crude, for instance, but the range of $40-50 of the
past 3 months will move to higher levels of $60-70,
consumers, the government and the firms must be
prepared for this.
The Election Commission has had its hands full this past
month and we will be extremely grateful when the code of
conduct is lifted and life can go back to normal. EC
permission is needed for a range of items: bus fare cuts in
Tamil Nadu, relaxation in import duty on sugar..and now
the release of consumer price index numbers. In the case
of the CPI, the electorate already has a better idea about
the inflation affecting their consumption baskets,
regardless of what the government data may be saying. It
is only analysts who are interested in the numbers and
even they look at these numbers with scepticism. Yet, the
EC’s code of conduct actually goes to indicate how much
of government influence continues in our lives and how
much more liberalisation is needed. We have always been
of the opinion that cash vouchers are a much better,
equitable method of reducing the burden on the poor,
rather than price determination by the government.

3. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
The EC should actually also rename all government
programmes, airports, ports etc, that are associated with
political parties, that would be a service to the electorate!
Sumita Kale and Laveesh Bhandari
6th
May 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.
Economic Growth
• IIP contracted again in February with a negative
1.2% growth, though January numbers are now
revised from negative to positive territory with
growth of 0.4%, numbers still to undergo final
revision.
• Manufacturing fell by 1.4% in February, over
last year’s growth of 9.6%.
• Cement production grew by 10.43% in March
while sales grew by 10.35%.
• The six core sectors grew at 2.9% in March, the
same rate as March 2008, with cement,
electricity and petroleum refineries doing better
than before.
• ABN AMRO’s PMI survey shows expansion in
industrial activity in April, at 53.3 it stands
much above the trough of 44.2 in December.
Bulk of the boost came from domestic demand.
• Electricity generation in April showed good
growth of 6.01% over last year, producing
2.67% more than the planned generation for
the month.

4. Indicus Analytics, An Economics Research Firm
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• However, ABN AMRO survey showed that power
cuts had held up production schedules in many
cases in the same month.
• Maruti, Hyundai etc. show positive growth in
sales in April over last year, though far from
double digit numbers.
• Hero Honda continues to defy trend with 29.5%
growth in April.
• 15.64 million subscribers added on in March as
part of the telecom growth story, teledensity
reaches 36.98%, while broadband subscribers
cross 6 million.
• Air passenger traffic fell 3.1% for international
traffic and 8.9% for domestic traffic, while total
cargo declined by 11.3% in February 2009 over
the past year.
• Uneven weather is expected to hit wheat output
in states like Punjab, bringing down the
production estimates by 10-20%.
• Hiring according to the Naukri JobSpeak fell in
March, compared to the February index, a sign
that companies were still in the process of
consolidation.
Read
Emerging giants offer hope economy turning
http://www.guardian.co.uk/business/feedarticle/8488079
Land grab, the race for the world’s farmland
http://www.independent.co.uk/news/business/analysis-
and-features/land-grab-the-race-for-the-worlds-farmland-
1677852.html
Inflation

5. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• Inflation measured by the Wholesale Price Index
which, some were expecting to go into negative
zone by March, has actually been on the
uptrend, with large positive seen week on week
changes in April.
• Provisional WPI inflation rose to 0.57% for the
week ending April 18th
, while final numbers for
February continued their downward revision.
• Consumer price indices for March are not
available as the Election Commission has
reportedly prevented the release.
• Crude oil has moved up significantly from the
lows in December and hovers around $50 a
barrel now.
• Spike in crude oil, copper etc, cannot be ruled
out going ahead as signs of recovery in China,
India and Russia raise expectations of demand
once again.
Read
Election code prevents release of CPI numbers
http://news.in.msn.com/business/article.aspx?cp-
documentid=3005655
New Consumer Price Index likely by August 2010
http://economictimes.indiatimes.com/News/Eco
nomy/New-consumer-price-index-likely-by-
August-2010/articleshow/4478706.cms
Interest Rates
• Yield on the 10 year benchmark gilt settled lower to
average 6.46% in April, compared to the average of
6.63% the previous month.

6. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• Banks reduced their PLRs and loan rates, in
accordance with the lower rate regime signalled by
the RBI.
• Government borrowings are expected to be even
higher than budgeted once the new government sets
the agenda for the year ahead.
• Ways and Means Advances to the government from
the RBI have exceeded Rs. 40,000 crore, double the
limit of Rs. 20,000 crores as election expenses and
earlier sops are financed.
• After the spate of rate cuts around the globe, now
countries are going at different speeds depending on
domestic factors – Australia has kept rates on hold,
South Africa may have hit its floor as well, Brazil
expects to slow down pace of cuts, ECB is expected
to give its last rate cut in May.
Read
Are gilt funds losing their shine?
http://www.livemint.com/2009/04/26230413/Are-gilt-
funds-losing-their-sh.html?h=B
Reserve Bank Australia keeps rates on hold
http://www.news.com.au/business/money/story/0,28323,
25432700-5016110,00.html
Exchange Rates
• Exports dropped the highest ever by 33.3% in March
over the previous year in dollar terms, and 15.3% in
rupee terms. Imports fell by 34.0% in dollar terms
and 16.2% in rupee terms.
• Trade deficit for 2008-09 has provisionally been set
at $119 billion, compared to $88.4 billion in 2007-08.

7. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
• Capital inflows resume - $1.3 billion in equity in
April, making the rupee rise.
• Forex reserves that had fallen steadily from its peak
of $ 316 billion in May have stabilised since
November, and on 24th
April stood at $ 253 billion.
• External Commercial Borrowings dropped by 42% in
2008-09 as the global financial sector reeled. About
500 companies raised $18.38 billion compared to
625 firms the previous year sourcing $30.94 billion.
• The rupee which had dropped significantly to the low
of Rs. 52.06 to a dollar in early March has now
rebounded to around 50 levels again as capital
inflows boosted the value.
Read
Asian currencies climb as funds return
http://www.bloomberg.com/apps/news?
pid=20601087&sid=aD_8M2vH0GDI&refer=home

8. Indicus Analytics, An Economics Research Firm
http://indicus.net/Newsletter/Emerging_Economy.aspx
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