After my last piece on the budget, which proved to be reasonably popular, it did not give me much happiness to see the end result. The economy has started unraveling much faster than expected.
An unusually perceptive commentator on Twitter @barbarindian dredged out figures from the DOE report and presented them. Nothing here makes for a pretty picture. I have added a comment G or B to indicate Good News and Bad News against each of these items
- The overall growth of GDP at factor cost at constant prices, as per Advanced Estimates, is estimated at 6.9 per cent in 2011-12 as compared to the revised growth of 8.4 per cent during 2010-11. The growth in real GDP is placed at 6.1 per cent in the third quarter of 2011-12. (B) (worse still, 4th Quarter real GDP growth was just 5.1%.)
- The cumulative rainfall received for the country as a whole, during the pre-monsoon, 2012 (March 1 – May 31), has been 20 % below normal as on 16.5.2012. (B)
- Food grains (rice and wheat) stocks held by FCI and State agencies were 54.33 million tonnes as on March 1, 2012.
- Overall growth in the Index of Industrial Production (IIP) was (-) 3.5 per cent during March 2012 as compared to 9.4 per cent in March 2011. During April-March 2011-12, IIP growth was 2.8 per cent as compared to 8.2 per cent during April-March 2010-11. (B)
- Eight core Infrastructure industries grew by 2.0 per cent in March 2012 as compared to the growth of 6.5 per cent in March 2011. During April-March 2011-12, these sectors grew by 4.3 per cent as compared to 6.6 per cent during April-March 2010-11. (B)
- Broad money (M3) (up to April 20, 2012) increased by 2.3 per cent as compared to 2.2 per cent during the corresponding period of the last year. (B)
- Exports, in US dollar terms decreased by 5.71 per cent and imports increased by 24.28 per cent, during March 2012 over March 2011. The cumulative growth for April-March 2012 was 20.94 per cent and 32.15 per cent for exports imports respectively. (B)
- Foreign Currency Assets stood at US$ 261.5 billion in end April 2012 as compared to US$ 260.7 billion in end March 2012. (G)
- Rupee depreciated against US dollar, Pound Sterling, Japanese Yen and Euro in the month of April 2012 over March 2012. (B)
- Year-on-year inflation in terms of Wholesale Price Index was 7.23 per cent for the month of April 2012 as compared to 9.74 per cent in the corresponding month last year (G)
- Gross tax revenue April-February 2011-12 has increased by 12 per cent in comparison to the corresponding period in the previous year. (G)
So we have three pieces of Good News as against 7 of bad. And the seven items make for more bad news as they point to possibilities of worse to follow. For instance, there has been a marginal increase in the Forex reserves as on April 2012 as compared to March 2012. However, when seen in the context of increasing import growth and decreasing export growth, it presages further decrease in forex reserves. Hitherto, the RBI had been playing the role of a stern watchdog and ensuring that the forex reserves, money supply and fiscal deficit were kept in check. I am sure that they must be putting up the right notes to the Finance Ministry and ensuring that they perform their role as far as possible. However, this Govt. has gone rogue with populist policies that threaten to bust the Bank and send the country hurtling into bankruptcy. All this is being done, merely to placate an ignorant high command that is eager to put into practice schoolboy or schoolgirl socialism, egged on by jholawalas who think that Naxalites are Gandhians with guns.
Just take a look at these stats culled from the document released by the Reserve Bank of India http://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/39AT_BCS090512.pdf . This again is courtesy @barbarindian. Am greatly indebted to him for fishing out the numbers from various Govt and RBI sources.
The NDA left a trade deficit in 2004 of Rs 657 billion. As at the end of 2011, after 7 years of blessed UPA rule, we end up with a trade deficit of Rs 5409 billion. The news gets even gloomier. Cumulative Trade Deficit as on December 2011 for the last fiscal year is Rs 3343 billion. And we have not got stats for the current calendar year yet! Going by trends, we can expect an increase of roughly 1400 billion which will ensure that we get closer to Rs 5000 billion trade deficit.
We now have a potent cocktail of increase in money supply (http://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=26560), a burgeoning trade deficit, increases in borrowings, as per projections and possible inflation that will kick in with a lag. The lag is due to delay in feeling the effects of the weakening Rupee. Next we have the presence of 800 pound gorillas known as mega scams, which are going to put more pressure on the fiscal deficit.
Do you wonder why the stock market has tanked, GDP growth is down to 5.3% on an annualised basis and overall inflation is walloping the daylights out of the Mango Man, or Aam Aadmi, who cannot afford mangoes? All because of schoolboy or schoolgirl socialism, an electorate that is easily fooled and an opposition that knows only how to snatch defeat from the jaws of victory. In an environment such as this, what chances of any increase in investments. Even the black money coming in through the PN route seems to have crawled back where it came from!
Yet there is hope in the form of Narendra Modi and it looks like his time is well nigh. Pray and hope my countrymen, for that is all you have!