Fundamentals of Indian economy is shifting down wards very fast with weakening export markets, higher inflation and shortage of talented workforce
Anusha Parikh
Jul. 10, 2008

The index of six core infrastructure industries (coal mining, crude output, refinery throughput, electricity, cement, and finished steel) account for just over one-fourth of the Index of Industrial Production (IIP). In the past it has forecast accurately recession in India close to six to nine months ahead of time.

The latest core sector data led economists to reduce their forecasts for IIP growth for May from nearly 6.5 per cent to around 5.8 per cent for the same month.

The econometric models are clearly showing a recession by end of the year with possible negative GDP growth and more 18% inflation at the same time. In India commodity based inflation takes a year to dissipate within the core economy.

The problem this time is much more serious than before. The slowdown is accompanied with uneven distribution of wealth, unpopularity of a minority Government and heavy inflation. Confirming the econometric models, the data for the infrastructure sector released in India today shows that output grew in the low single digits at 3.5 per cent in the month of May, over 7.8 per cent in the same month last year. It is a clear pointer to a continuing slowdown in overall industrial production growth.

Negative GDP is something no Indian can believe at this stage. Indian politicians are busy making the European and American leaders happy. Unfortunately they are chasing business models that have already collapsed because of lack of commonsense and reckless financial management.

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