Recession Ahoy!!

All indicators point to a recession in Indian Economy.

The current growth rate is not sustainable. The raising of CRR by RBI has squeezed the liquidity out of the system. There just isn't enough money floating around.

The consumption has shown a marked decrease in growth during 2007. It has started hurting industrial production. Export has slowed down as pending orders are executed and hardly any new orders have been signed during the past 6 months. The blue eyed baby, IT Exports, has been hit badly by the Rupee appreciation. Public investments in real rupee terms has not increased substantially. Investments in Capital Intensive Industries are likely to slow down as threat of excess capacity loom large as investments are market driven.

The burgeoning forex reserves is more due to higher rates of interest prevalent here and cannot be counted upon. The impact of high oil prices on economy will be felt by around now. A hike in fuel prices post Gujarat elections is on the cards.

Disinvestments and financial sector reforms are on hold. With uncertainty over the survival of the Government anticipated post Gujarat elections, implementation of already announced schemes is likely to become tardy. Lack of leadership at the top has started hurting the economy.

With the US economy entering a definite recession, its impact on the Indian Economy will be adverse. Rupee will continue to appreciate against Dollar and is predicted to touch the Rs 35 mark in the near term. This will further hamper exports.

Finally, though the official inflation figures show a level of comfort, the ground reality is different. Prices of essential commodities are on an all time high. This will ensure that more money will be spent on consumption than on savings.

Bold policy initiatives are the need of the hour. But we cant even expect to dream about it from Dr.Manmohan Singh's Government.

"Easwaro Rakshathu"