[Investors Please Listen] Roti, Kapda aur Makaan Indicators (RKMI) February, 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:

1. WPI inflation sharply declined to 5.3% in Jan compared to 12.6% in Aug due to high base, falling global commodity prices, domestic fuel price cut and various duty cuts.
2. Consumer durables saw the largest contraction of 12.8% in December, resulting in a dismal   -6.7% growth in Q4 significantly lower than 10.8% growth in Q3 2008. Growth in auto sector sales for Q42008 is disappointing (-9.8% for two-wheelers and -47% for CVs).
3. Merchandise export growth contracted for third month. Imports also declined with non-oil imports surprisingly high. But non-oil imports are volatile and this might be an aberration.
4. Credit growth reached its peak in Oct as external credit had dried up. But since Nov, it is declining and reached 19% in Jan due to both banks' risk aversion and slowing credit demand. Mortgage rate is finally showing signs of softening on aggressive monetary easing.

What to Watch For:

1. Will the recent duty cuts together with pre-poll expected diesel price cut bring forward the deflationary period to Apr- May instead of the previously envisaged June-July?
2. Will the 20-40% salary rise along with 6% DA hike for Govt employees (constituting 60% of workforce in organized sector, 11% of households) and unaffected rural economy support consumption?
3. Will the recent duty cut in cement and steel together with lower house prices (as announced by DLF already) and lower mortgage rate help the struggling construction industry?

Will RBI cut rate as GDP growth numbers disappoint and WPI falls sharply

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