The Prime Minister’s Economic Advisory Council expects growth to pick up to as much as 6.7%, and the IMF forecasts 6%. We believe both forecasts are optimistic, and expect growth to remain sluggish. India will be lucky if growth doesn’t fall below 5%. The Council’s report suggests that higher GDP ...

Though Q4 growth fell to 4.24% y/y, seasonally adjusted growth rebounded from a shocking 0.54% in Q3 to the superior 5.94%. Still, net sales of non-financial, non-oil companies seem to have shrunk in real terms over the past year. This is fairly unusual in India: we last saw similar values during the ...

After slowing powerfully, to 6.2% in fiscal year 2011-2012 from 9.3% the year before, there are signs that the Indian economy is slowing further. The major growth driver, private corporate investment, is stagnating. The significant fiscal deficit and consumer price inflation are both increasing the ...

In the run-up to the May 2014 elections, the UPA would ordinarily have taken a populist approach to spending, with a binge on new welfare programs and subsidies. The fiscal deficit has been running at about 6% since 1999, a situation that has spilled over into the large current account deficit, hampering ...

Output growth trends are fairly troubling, with a GDP proxy methodology showing Q3 2012 sales flat in seasonally adjusted terms. This is a more negative result than conventional measures of output show. Inflation appears to be falling, possibly assisted by soft conditions on output growth. Food, tradeables ...

When P. Chidambaram began his new stint as Minister of Finance this summer, there was much optimism that economic policy would improve. But, with domestic and global conditions fairly challenging, concerns have deepened in recent weeks. The situation facing investment, output, prices and markets is ...

P. Chidambaram has begun the process of healing Indian economic policy. The economy is in bad shape and the going will be difficult. The most important problem is that of low investment demand. However, to some extent, low investment demand in the coming two years is baked in and cannot be easily changed....

After a disastrous three years under Pranab Mukherjee, the Finance Ministry is getting back on track, under a far more competent team. Led by new Finance Minister P. Chidambaram, and key advisers Arvind Mayaram, Raghuram Rajan and Sumit Bose, we expect a revival of the ministry as an engine of sensible ...

If Finance Minister Pranab Mukherjee becomes president of India – a probable, but not certain, event – Prime Minister Manmohan Singh will temporarily assume the duties of finance minister. If this happens, ethical standards and professional capabilities at the ministry should rise. But since the 80-year-old ...

Finance Minister Pranab Mukherjee is likely to be named president, a ceremonial position, and to step down from the finance ministry June 24th. This will likely pave the way for a more technocratic Ministry of Finance. Though deeper policy problems that require complex political maneuvering are likely ...

Over the coming year, the current account deficit is likely to be 4 per cent of GDP or roughly $80 billion. Under normal circumstances, this is not an outlandishly large number. However, difficulties of domestic policy have created uncertainties which could trigger off unpleasant outcomes. Two kinds ...

Business cycle conditions are likely to continue to be weak, with new investment projects initiated lying below the long-period median. However, the outlook for private investment is better than commonly supposed. The bulk of the problem lies with the political drift, organizational capability and fiscal ...

The macroeconomy is showing a combination of slowing business cycle conditions and easing inflation. While the first good news on inflation in several years is now visible, RBI is likely to be cautious in cutting rates, given the stubborn problems of persistent inflationary expectations. In the aftermath ...

Elections in Uttar Pradesh, the biggest state of India, have begun. This is shaping up as a fork in the road for the UPA-2 administration and the Congress Party. The really important question is not about which party in UP comes through as the largest single party but whether the Congress party will ...

Data about the flow of new investment projects which are initiated in each quarter is now visible for the Oct-Nov-Dec 2011 quarter. With both private and public investment, the values visible remain below the long-period median. There is slight evidence of both private and public investment projects ...

Food prices have eased. Given the large weight of food in the CPI, this has yielded two months of reduced CPI inflation. At the same time, the recent rupee depreciation has yielded a sharp shock to tradeables prices. This is likely to feed back into non-tradeables in December, January and February. ...

The most reliable information about business-cycle conditions in the Jul-Aug-Sep 2011 quarter is now available: the year-on-year growth of the net sales of listed firms. This shows nominal growth of 18.74 percent. Even if inflation was 10 percent, this implies real growth of 8.74 percent. This shows ...

It is common knowledge that Indian GDP growth has slowed. This common knowledge is based on flawed measurement. The best available data, which runs till the Apr-May-Jun 2011 quarter, does not suggest a slowdown. What we have, instead, is leading indicators of a slowdown: a slackening of investment, ...

The IIP data release, which shows industrial production growth in July 2011 at 3.3% above the level of July 2010 (in real terms), is an exaggerated statement about the difficulties in the economy. We prefer to focus on private sector information, such as firms’ net sales growth for non-financials, which ...

Given the important role of investment, and particularly private corporate investment, in Indian GDP, a slowdown in investment is an important concern in assessing business cycle conditions. One of the good early measures of investment activity is the new project announcements visible in the CMIE Capex ...

The economic policy process has been substantially slowed down by the focus first, on corruption scandals, and then on the cabinet reshuffle. This is exacting a significant toll upon the economy. In an ideal situation, in a few months, both problems should be well out of the way. However, in a gloomy ...

Politics in the Indian state of Tamil Nadu (TN) was dominated by a party named the DMK, which stood for a certain mix of politics and business. In recent weeks, the DMK has been decimated by the loss of elections in TN and enforcement actions connected with the 2G spectrum scandal. Politics in the Indian ...