Contraction in the Economy

Due to various reasons economy is facing lot of contraction in the demand line.

If you see the December IIP (Index of Industrial Production) numbers which shows -2% Vs September's 1.7% (revised from 2.8%) we are still in the declining stage rather than at the bottom. Here I would like to mention one thing, I dont believe in YoY measurement as in the case of Inflation. See its very simple we cant compare a top of the bullish market numbers with the bottom of the bearish market. Anyway I dont want divulge from the topic of economic contraction to measurement methods.

If you go into the details of the IIPs there is overall contraction across the market irrespective of manufacturing, consumer durables, consumer goods, mining & capital goods.

And not only IIP numbers but Inflation numbers are also showing that only. If you see the Inflation numbers released today, which shows 4.39% Vs 5.07% indicating the massive drop in the consumer demand. If you compare the inflation of this week & last week, there is the drop of 68 Basis points and this is continuing from last couple of months. Every month there is a drop of 200 to 300 Basis Points in inflation numbers indicating the economic deflation which may lead to recession. Of course BASE EFFECT is doing its part in reduction, but if you look at various angles inflation is coming down due to less-demand, crude oil price & foregoing of consumption.

So government must come up with some populist policies like tax reductions across the sectors for the industries & as well as common man, employment schemes, investment in sectors which can be implemented as early as possible in Interim Budget. And RBI must reduce REPO & REVERSE REPO.