RKM Indicators_Jan, 2009

Roti, Kapda aur Makaan Indicators (RKMI) : tell us how Indians' material needs (Roti, Kapda aur Makaan) are growing (demand) and being satisfied (supply) and therefore, what India's future economic (GDP) growth will look like. The data comprising the "Roti" indicator guides us on food prices and inflation. The data comprising the "Kapda" indicator guides us on consumption trends (not just clothes but all consumer goods). We have not restricted our interpretation of Makaan to real estate. The data comprising the "Makaan" indicator guides us on overall investment trends. It includes investment, infrastructure, credit as well as trade. Note that there are several other indicators that we use in forming our economic views. This is just a snapshot of the regular, reliable, readily available data that we thought would interest our readers. What do the latest RKMI tell us: WPI inflation declined to 6.5% in Dec, almost half from its peak value of 12.6% in August. Food inflation continues to be in double digit, particularly fruits and vegetables.   Consumer durables saw the largest contraction of 4.2% in November, down from an average 10.8% growth in Q3 2008. Growth in auto sector sales continues to disappoint Merchandise export growth contracted for second month. Imports also declined – non-oil imports declined significantly.   Credit growth reached its peak in Oct as external credit had dried up. But since Nov, it is declining as credit demand went down on continued high lending rate. What to Watch For: Will the seasonal factors bring down the prices of vegetables and fruits as food prices are inelastic to economic slowdown? Even as the rural consumption continue to hold up since it is unaffected by global downturn, how long will it take for urban consumption to revive given various fiscal stimulus packages? Will the recent initiatives of allowing accelerated depreciation for CVs revive commercial vehicle sales or a slowdown in industrial output will continue to impact the sales negatively? Will the moral suasion by finance ministry and RBI prompt bankers to cut lending rate and boost credit growth in coming months?

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