• JUNE 11, 2009

Recovery will be gradual

Asian economies still a long way from recovery
Talks of recovery have been doing the rounds for the past three months now and stock markets across the world including Asia have rallied considerably since then. But are the economic indicators emitting positive signals? Not really, at least as far as some of the Asian economies are concerned. Of course, the dramatic drop that was seen last year has stalled, but at the same time any significant recovery in Asia still seems to be a long way off. For instance as reported in the New York Times, orders for machinery in Japan, which is a useful barometer of capital investment plans and for the economy as a whole, fell by 5.4% in April from a month earlier.

Similarly, weakness in exports continues to haunt the economies of Philippines, South Korea and Taiwan. While China too seems to be showing some signs of revival, the growth rate nevertheless is most likely to be a shadow of what it had achieved before the crisis erupted. As far as India is concerned, Manmohan Singh's view on the economy logging in a growth of 7% this fiscal bodes well indeed. Various stimulus packages announced by governments across the world have begun to make their positive impact felt. But the message is unmistakable. Recovery for the global economy and the Asian region will be a gradual process and it would be na´ve to assume otherwise.

The standoff in real estate continues
While we are on the topic of recovery, how is that really shaping up in the real estate sector in India? The real estate sector received a real drubbing when the crisis erupted as demand for homes fell, compelling industry players to lower prices. It appears that this move has helped to a certain extent as demand for home sales seems to have inched up. However, this cannot be construed as a major recovery, which is likely to be some time away, as buyers await further reductions in prices.

Builders, on their part, have been doing away with their focus on premium housing and affordable housing is now forming a bigger part of their agenda. Further, a slew of interest rate cuts have also lent a ray of hope to builders that demand for homes will once again start kicking in. But are prospective buyers convinced? Not really as they contend that the ground reality has not changed much. Expectations are still palpable of further reduction in prices but builders are wary of going in for any more lowering of prices. Once again, recovery in this sector, if any, will be feeble in the near term atleast.

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