Clearly the process of the slowdown that started as early as March'10, continues. A look at the three month moving average data (3-MMA) confirmed the slowdown from March and now, with Monetary tightening starting to take effect, slowdown is but a natural consequence. Add to that negative signals emanating from the capital goods sector and things indeed look less than sound, atleast in the short to medium term.
With inflation likely to remain at elevated levels as is the interest rate, 2011 will be quite a difficult year for India. This also exposes the basic frailty of the Indian economy. A supply constrained economy like ours is expected to face inflationary pressures if the economy starts to grow fast over a period of time.
All actually boils down to the basic problems that continues to haunt the economy:
1) Inadequate physical infrastructure
2) Continuous under-investment in agriculture
3) Clear lack of accountability in governance
4) Policy decisions with political overtones that result in wrong policy choices etc
An economy that flatters to deceive, I expect the FY 2012 GDP growth to hover between 8 to 8.2%, with a downside risk. Its a shame really, given the potential that is there.
I will conclude with my favouraite phrase - India is growing despite the politicians and not because of them