The power of 9 comes of help

The year 2009 had opened with anxiety and unease over how the world’s worst financial crisis in seven decades would play out in India. Sceptics had predicted that more pain would follow, while optimists placed their bets on India’s resilience.

Looking back, it would seem the optimist has won the bet, at least for now. And as a numerologist would say, nine — many people say it brings good luck — has worked for India and its economy.

The numbers tell the story:

* After a temporary slump, the broader economy is back on a track of accelerating growth. The country’s gross domestic product expanded 7.9 per cent in the July-September period, up from 6.1 per cent and 5.8 per cent in the preceding two quarters. Over the next two quarters, the finance ministry forecasts, it could grow close to 9 per cent.

* Foreign investors are renewing their faith in the India Story. Portfolio investors (FIIs), who pulled out a record $11.9 billion (Rs 57,000 crore) from Indian stocks in 2008, have invested
$17.1 billion (Rs 80,000 crore) so far this year.

The return of the FIIs has helped the Sensex, the benchmark index of the Bombay Stock Exchange, stage an unexpected rebound. It closed at 17,361 points on Thursday, the last trading day, compared to the January 1 opening of 9,720. That represents a 79-per-cent surge — a gain that has helped investors nearly wipe off the losses from a free fall in stock prices in 2008.

* Car sales are back on the fast track, totalling 1.3 million units between January and November, or nearly 20 per cent more than 1.1 million cars India sold through all of 2008.

* Mobile telephony reached another milestone, crossing the 500-million subscribers mark last month and sustained a pace of sales that stayed a step ahead of expectations.

This is not an exhaustive list, but is a fair illustration of the fact that India’s economy has taken in its stride the ripples of the tumultuous collapse of global financial giants such as Lehman Brothers in 2008.

The credit is due as much to entrepreneurial resilience as to some timely intervention by the government, which brought a slew of stimulus measures to cushion businesses against falling demand.

The verdict of the April-May parliamentary elections that led to the formation of a stable Congress-led United Progressive Alliance government helped restore investors’ confidence. The UPA government also set a milestone as far as numbers go — presenting a budget that exceeded Rs 1 trillion (Rs 1,020,838 crore, to be precise) for the first time.

There are some numbers that are discomforting, though.

Rising prices, especially of food items, pose a serious challenge. After steadily falling through the year, the annual inflation rate based on whole sale prices shot up from 1.3 per cent in October to 4.78 per cent in November. Worse, at close to 20 per cent, food inflation rate has reached an alarming level, largely on the back of shortages that have only got worse following a drought that hit kharif output.

A rising inflation rate is a double-whammy for a majority of Indians, who have seen their earnings remain unchanged. It also puts pressure on monetary authorities to increase interest rate that, in turn, could undo the economic rebound.
There are also worries over deteriorating government finances. While the stimulus measures have helped the Indian economy tide over the global slump, these have dug a big hole in the exchequer.

The fiscal deficit, which is the gap between what the government earns and spends, is expected to grow 21 per cent to
Rs 4,00,996 crore — a figure that, experts say, is unsustainable and carries serious downside risks for the broader economy.

Our ability to rein in prices and the fiscal deficit will hold the key to deciding if 2010 will be as good as the second half of 2009.