So we are recovering! What next? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

So we are recovering! What next?

Dec 3, 2009

The last couple of days saw many economists busy trying to upgrade India's GDP estimates for the year. Backed by government stimulus and strong industrial growth, our economy grew by 7.9% in 2QFY10. Everyone is happy. And so are we. In all the brouhaha surrounding the GDP figures, everyone missed few other economic indicators released a couple of days back.

The manufacturing sector which grew by 9.25% YoY became the star performer in India's half-yearly GDP act. The export-import figures have their own story to tell. In October 2009, Indian exports fell 6.6% YoY to US$ 13.2 bn. It has been witnessing a dip for 13 months in a row now. But the pace of fall has slowed down due to some demand revival in the global markets. Imports also continued to fall at US$ 21.9 bn in October, down by 15% YoY. Here again, the fall has slowed down hinting of some revival in investment activity. The industry is importing capital equipments and machinery as suggested by growing industrial output. Companies are reviving the projects that were kept on the back-burner on account of slump in demand. So export import figures are slowly inching towards positive growth.

In short, during this quarter we grew at our fastest speed since the last 6 quarters. But, is the recovery finally here? We cannot be so sure. Should the government call back its pro-growth stimulus measures? We are not sure either.

Though the manufacturing activity has been expanding since the last 8 months, November saw a slack in its pace. Manufacturing growth was lowest in November on account of slow growth in output, new business and employment. There is a surge in the input prices which is also pushing the output prices upwards. Price inflation has already started pinching the industry as well as consumers.

The GDP growth attained in the last quarter was on the back of industrial output which most likely offset poor agricultural production. This growth is likely to slow down as the impact of bad monsoon coupled with rising commodity prices takes full effect. We believe that inflation has become an important variable in the equation. It will play a decisive role in government's policy going forward.

To conclude, even though India has posted strong growth rates in the past couple of quarters, the overall recovery still seems a tad fragile. Whether the government changes its fiscal stance will be apparent in the next quarter when the impact of poor monsoons on GDP becomes clearer. Given that inflation has been inching upwards, a hike in interest rates seems more likely. But this most probably may take place next fiscal rather than this one.

Equitymaster requests your view! Post a comment on "So we are recovering! What next?". Click here!


More Views on News

An Important Hurricane Update for Energy Traders (Fast Profits Daily)

Sep 22, 2020

In this video, I'll show you how the extended hurricane season in the US will affect traders in crude oil and natural gas.

Mutual Fund Investors Will Now Be Allotted Units Based on NAV of the Day AMCs Receive Funds (Outside View)

Sep 22, 2020

PersonalFN explains how SEBI's new circular on mutual funds impact investors.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

How Much Money Should an Investor Set Aside for Trading? (Fast Profits Daily)

Sep 21, 2020

In this video, I'll give you a simple equation which you can use to decide how much money you can set aside for trading.

Kotak Standard Multicap Fund: Strategizing Growth with Focused Approach (Outside View)

Sep 21, 2020

PersonalFN's analysis on the features and performance of Kotak Standard Multicap Fund.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms


Sep 22, 2020 03:37 PM