If you’ve been focusing on end-of-year business performance this week instead India’s macroeconomy, you’ve missed a lot. This flowchart highlights key events of the past week and the ultimate drivers: Global uncertainty, inflation, and upcoming state elections.
Frontier Strategy Group’s prognosis for India’s economy in 2012 is relatively grim. However, we continue to hear from clients that India is a critical growth market. A “grim” outlook for India still means 7.7% GDP growth in 2012, compared to 3.5% in Brazil and Russia.
- FSG is monitoring ongoing developments in Europe and its impact on key emerging markets like India
- In November inflation slowed to its slowest in a year, but still missed expectations. The expected wholesale price index was 9.02%; the actual was slightly higher at 9.11%.
- Seven states will go to the polls in 2012 to elect their legislative assemblies, among them Uttar Pradesh, Gujarat, and Punjab, some of the most important political states in the country.
- News on December 9 showed export data was overstated by about 5% across 2011, due to misclassification and errors in the Commerce Ministry.
- The rupee closed at an all-time low of 53.7 to the dollar on Wednesday, spurred by European debt concerns, a flight to the dollar, and bad news on industrial production.
- The rupee is likely to fall lower in the next month, as local companies buy up dollars to hedge their exposure from dollar-denominated debt.
- India’s Index of Industrial Production (IIP) contracted 5.1% percent in November, its steepest fall in over two years.
- In response to the IIP contraction, the Prime Minister is asking key ministries like power, coal, and steel to submit a wish list of legislation that is currently stuck in committee, with the intent of hastening implementation.
- Discussions around the Food Security Bill at the beginning of this week were inconclusive, and iIt is likely to be discussed during the next Cabinet meeting on December 18. The Bill gives 64% of the population the legal entitlement to subsidized food grain, and would expand the government’s food grain procurement by 20%.
- The Union Cabinet just cleared 3 bills on judicial accountability, protection of whistleblowers, and a Citizens’ Charter for grievance redressal.
- Anna Hazare is threatening a hunger strike starting December 27 if the Lokpal Bill does not pass.
- The Lokpal Bill is building up to a vote in the next two weeks. The government has an ambitious agenda: December 19, the Cabinet clears the bill; December 20, the bill is introduced in the Lok Sabha; and on December 21, the bill is introduced in Rajya Sabha. December 22 is the end of the winter session.