Green shoots of recovery in the world economy are for real.

I like the arguments of Sivaraman. There are two things I would like to point out. One is that India as an economy has a bad connect to the problems of US and the like. My argument is when an American earns less, consumes less (may be relatively saves more) he is denying countries like China in terms of production more and is denying countries like India less. It is the drought condition of India that can affect Indian economy relatively more. The second thing I would like to point out is the fact that when it comes to responding to a crisis, US leads the world. It is responding. US was, is and will continue to be in a situation to influence the global response to the crisis. There is no denying the fact that stimuli are articificial and tentative by definition and cannot solve the problems of an economy. There is no denying the fact that the double dip recession is a more likely phenomenon. And the recovery cannot be V nor even U and it may be a W with unequal bends within W. It may be a W helped out by a hook. But the fact remains that US will continue to gain in terms of productivity, innovations, channeling investments into alternate energies and keep the economic activity going in a direction that is helpful for revival. A weakening Dollar is inevitable but the positives will emerge from the emerging markets consuming more - the rest of the world will consume more in terms of US goods and services, weapons, technology, education and tourism. US corporates with knowledge and other capabilities will be available for acquisition, triggering capital flows into various sectors. Such capital flows will not only be trans atlantic, in the new world order such flows will be even trans pacific. These will happen till currencies establish a new sustainable equilibrium. Over time, it will be the massive consumption of India and China that will become a growth engine that can help the world move on, notwithstanding engines elsewhere not propelling growth, as they used to - including the engine of US economy. This is the long term scenario I see. In the medium term I see India overcoming its drought on the strength of food security and Govt spend, tackling the fiscal deficit and inflation and over all maintaining a growth of 6% if not 9% growth. Arguments are there on either side - providing for different takes. I see a bias in favour of green shoots insofar as Indian economy is concerned outnumbering the yellow weeds. This is notwithstanding the imbalances that may happen to the stock market which behaves not only based on economic fundamentals but also on the basis of liquidity flows.

The world economy lurched toward recovery even as fears lingered on financial markets, brightening the sky for talks between G20 finance ministers in London later this week.Australia surprised with a jump in growth in the second quarter, US manufacturing expanded, European economies continued their gradual emergence from the worst crisis in decades and company results showed an upturn.

Finance ministers from the Group of 20, which comprises leading developed and developing nations, will be meeting in London at the weekend to lay the groundwork for a G20 economic summit in Pittsburgh on September 24-25.World leaders have been upbeat but equally cautious about declaring victory in the epic battle against recession and have warned that recovery will be slow as they focus on the looming dilemma of how to exit stimulus programmes.

In the United States, Barack Obama on Tuesday said the growth in US manufacturing in August for the first time in 19 months was a sign that we are on the path to economic recovery.Analysts at Dutch bank ING said in a research note to clients: "A stronger US manufacturing sector could help underpin the global recovery, and provide support for commodity prices."

The good news is that the recovery in the US manufacturing and housing sectors appears to be gathering pace.

Of course the Indian economy is not an exception and will go inline with the global economies. It will take a lot of time to recover however the situation has improved significantly and so far we have seen an extremely rapid movement in the economy. Moreover, the G-20 Summit, will play a crucial role in the overall economic recovery as the global leaders were committed to monitor the situation and decision which were taken in G-20 Summit, London.

The Positive sign is the growth of GDP growth rate and global cues of developments and markets churning back prove the point that the trajectory of growth is in place.

I don't think that India were in recession any time during last year. Yes growth rate of India has come down to around 6% from 9% and few sectors has performed little badly in last year due to decline in global demand. One area that has affected the most is exports.

I don't think that the term what we are using green shoot or yellow weed is applicable to Indian context. Yes these terms are applicable to Europen and US economy where contraction were very high.

Our banking sector almost uneffected by this credit crisis and take the example of stock market that too hovering around 15000-16000, just 25% decline from all time hight.

These thing doesn't indicate any recession activity it just convey the fall in growth rate which will pickup again within 3-6 month. 

What I feel about the situation here in India is our financial institutions were not exposed to the subprime mess. I believe only Kotak and ICICI were exposed to around 180mn and 80mn. Kotak had a refund agreement in case of default or they got a refund before the disuruption. I think ICICI lost. This is peanuts compared to what happened in othe countries. There there erupted the credit cruntch due to the interbank market ceasing completely which I believe is still the case. In India since our interbank market is still active due to the risk averse nature of our banking system we had nothing much to worry from the begining except for the fear phsychosis generated from abroad which helped in pulling down the markets. It was probably due to citbank pulling out 5bn dollars for correcting their changed position in risk that occured there in US and some other portfolio investors pulling out for the same reason. This caused some anxiety in the market and pulled down our manufacturing a little bit and hurting already levereged companies who were well placed for growth in the globablized scenario like Suzlon, wokhardt and others who had to pledge their promoter shares for more collateral due to price lowering of their shares. Now the markets are back up and I think the credit situation is easing and the past 8 months upswing can take our economy up. The revenue expectations were also tampered due to the market fall and we have a budget deficit for this reason. I think we had nothing much to worry except to be cautious which I think we did and I believe we are back in business except for aggresively invested companies who had to sell off some of their newly formed divisions or subsidiaries to meet the margin calls from creditors.

Except for the export dependent sectors - software, diamond cutting, garments, leather exports etc- the indian economy dependent on indigenous demand - is that too affected ?

I dont think. and if that section is affected, it is due to intrinsic reasons such as failure of monsoon etc.

But the itzy glitzy urban inida assumes that the whole indian economy is down and hence painst a very negative picture.

Like Gopalan sir said there are strong signs from fmcg , automobile, it etc. It seems the worst is over and many economists are predicting recovery by the end of this quarter.

But spread is worrying corporate all over the world, unemployment is hurting many of the top economies, consumption is low and also there are widespread corrections going on. The massive spending for revival will have it’s own side effects like what is happening in china. Corrections, flue etc are slowing down recovery, but I think there are signs of recovery at least in sector terms.