Are we in an industrial recession

The cumulative growth in industrial production for April-August FY09 stands at 4.9% y-o-y against 10% for the period April-August FY08. The factors behind the deceleration is the impact of prior monetary tightening, with high borrowing costs overseas holding out no reprieve from elevated interest rates back home.

 First, interest rates are clearly at peak off will be softened. The real lending rate, at 8.75%, is still pretty well aligned to the 8% neutral, as defined by our estimated 8% real GDP growth rate.
Second, a weaker rupee should help exports however,i think rupee will regain ground on RBI intervention, reduced global risk aversion, lower oil prices and a US dollar peak off. Third, the long overdue liberalisation of the rupee expenditure limit in case of external commercial borrowing should support domestic capital expenditure and capital goods production.