Mixed signals about India’s economy

I’m a bit confused:

RBI survey says that inflation will remain double digit for most of the year at will drop slightly at 9 per cent by the end early 2009 (Reuters reports)

Then we have the Palaniappan Chidambaram, the finance minister, telling us that interest rate will ease in the next six to 12 month, however, he does not provide any figures or substantial evidence on how this will happen.  (See Reuters report)

Then came some solid data: “India’s Exports Rise 23.5% to $14.66 Billion in June”, says Bloomberg. Now this sounds good. But if you read between the lines “the trade deficit crossed $30 billion for the
first three months of the 2008/09 fiscal year, 42 percent higher than in the previous year,” according to Reuters.

Then we find out that India is the second best place in the world to invest in after China, according to a survey by Development Counsellors International, who interviewed 281 executives.
So what does this mean?

Is India still a success story or is going through a reality check? Is it back to boom days or doomed ones again?

Well, for the time being there are more questions than answers. And stats, surveys, spin from government ministers doesn’t seem to provide any clarity to the future of the economy.

Snap news: Markets and Rupee crumble

Bombay Stock Exchange’s Sensex index was down more than 4 per cent in early trading on Friday on the back of Wall Streets falls and fears of more bad news on inflation, which is expected to increase to 11.29 per cent. The rupee also fell sharply against the dollar after crude reached a new record high yesterday at $140.39.

The Sensex was down 4.3 percent, or 615.68 points, at 13,806.54 with all its components were in the red, according to Reuters.

The rupee dropped as much as 0.5 percent to 42.885 against the dollar before trading at 42.8225 as of 10:22 am in Mumbai, according to Bloomberg.

Main stocks at a glance:

World Bank: In India it’s hard to do business. Are they right?

Arvind Panagariya, an economics professor at Columbia University and author of India: the emerging giant, says quite clearly: NO!

In a comment piece in the Economic Times, he criticised the World Bank for ranking India 120th out of 178 countries in its 2008 ‘Ease of Doing Business’ index. The rankings suggest that it is easier to do business in Bangladesh, Pakistan, Nepal and Bhutan than in India. But is that what businesses experience?

Mixed reaction to RBI’s decision to hike rates

The central bank’s second unscheduled interest rate rise was broadly expected, however, Indian economist and market pundits feel that the RBI’s governor Yaga Venugopal Reddy did not keep his word of taking a “determined and calibrated”action against inflation.

The general mood in Mumbai is that a 50 bp increase was exaggerated, as economist fear that it will hurt the country’s growth rate.