Editor Speaks
Monday, February 22, 2010

India is all set to listen to its finance minister... "I rise to....". Before Pranab-babu gives out his budget speech, we would like to give you bird's eye view on global developments. The call for continuing stimulus or not, of course, is entirely under finance ministry's purview.

Export and import statistics for the United States and China released last week offered the latest signs that world trade was starting to recover from the global financial crisis.

Needless to say, the US is our largest trading partner and shipping revival is hugely dependent up on China's health.

China said its exports climbed 21 percent in January from a year earlier, while imports surged 85.5 percent. The healthy jump in exports could fuel further calls from the United States and the European Union for China to break the peg of its currency, the renminbi, to the dollar and allow the renminbi to appreciate.

In the United States, foreign demand for American goods like meat and auto parts increased in December. Exports rose 3.3 percent, to $142.7 billion, continuing an upward trend. That was not enough, however, to offset the 4.8 percent increase in imports, which totaled $182.9 billion. The increase in imports suggested that American businesses and consumers were growing more confident about spending.

A surge in exports helped narrow the politically important trade gap with China, which retreated 10.3 percent.

Oil imports rose sharply in December, contributing to the swelling trade gap, reaching $28.1 billion, from $24.4 billion in November.

China's exports have recovered more rapidly, partly because the low value of the renminbi has kept Chinese goods relatively inexpensive in foreign markets. The rebound has been so rapid in fact that some factory executives in the Pearl River delta region near Hong Kong have begun complaining of shortages of steel containers in which to ship their goods. Container shipping companies have begun to raise rates and remove discounts.

China's imports in January rose impressively, in line with economists' expectations, because imports a year ago were so weak. Many Chinese export factories nearly stopped buying raw materials then as their orders dried up, but they have been restocking since late spring.

Exports and imports both benefited this year from the timing of Chinese New Year, which will be Sunday. It fell on Jan. 26 last year, and a weeklong holiday at the end of January last year helped curtail economic activity in China.

The China trade surplus was $14.17 billion last month, compared with $18.43 billion in December and $39.1 billion in January of last year, according to figures released by the General Administration of Customs in China.

Back home, strong rebound in the second half of 2009-10 drives growth rate upwards.

l Strong rebound in the third and fourth quarter especially industry.

l Outcome in the farm sector much better than feared earlier in part due to proactive measures by government.

What about growth?

Projected growth is 7.2% in 2009/10, 8.2% in 2010/11 and 9.0% in 2011/12

In 2009/10:

l Agriculture : -0.2 % (1.6% in 2008/09)

l Industry (including construction) : 8.6% (3.9% in 2008/09)

l Services: 8.7 % (9.8% in 2008/09)

So what is the great news?

Growth may be even higher than 7.2%, driven by strong revival in manufacturing and construction.

Developed countries have come out of recession but it is a weak recovery with downside risks to growth.

So what do you think about fiscal stimulus?

Is the right time to say good bye to it? Write to us.a

Views may emailed to BSN on editorial@bhandarkarpub.com.