The bottom is yet to be reached.

Has the bottom been reached? Those who look at uncontrolled inflation, uncontrolled spending, which will increase fiscal deficit, and the way that the rupee is being shored up with increased borrowing are fearful of what will happen if the US starts to withdraw its stimulus rapidly or growth in the world economy falters. The Congress is still trying to push its delusion of growth at all costs, arguing that the IMF forecast of 4.25% growth, despite robust farm production due to fantastic monsoon rains, in this financial year is wrong and growth will be between 5-5.5%. " I know that the World Economic Outlook report does not share my optimism, but I may tell you that we do not share their pessimism," said our most revered Finance Minister. Pity politicians cannot be punished for economic treason. So what should we believe? The HSBC Services Purchasing Managers Index is down to a dismal 44.6 in September from 47.6 in August, the lowest in 4 years. Any figure below 50 denotes contraction. That is no surprise because retail inflation rose by 9.84% in September as compared to 9.52% in august while wholesale prices rose by a 7 month high 6.46% in September compared to 6.1% in August. When people are being hammered by rising prices and taxes they are likely to cut expenses in eating out and travelling. If services, which constitute 60% of the economy, start cutting jobs then demand is likely to fall further. Surely manufacturing is growing because Indian products have become cheaper due to the fall in the value of the rupee? The index measuring both manufacturing and services has gone down to 46.1% in September from 47.6% in August and 48.4% in July. Both sectors are shedding jobs. After expanding by 2.7% in August industrial production grew by a microscopic 0.6% in August. The solution surely is to let the rupee fall to its true value, reduce taxes to stimulate demand and push exports by spending on roads, ports and electricity. The good monsoons will hopefully bring down food prices and limit the rise in inflation. But the Congress cannot do that. It has earmarked massive spending in social schemes to bribe its vote bank to try to win the coming elections. This will raise fiscal deficit and invite a credit rating downgrade. And so the bottom keeps dropping.