By Ruma Dubey

The sky is not exactly coming crashing down on our heads but surely, the December IIP numbers does indicate the beginning of a slowdown. The Indian economy is not about to tumble down into the grave but there are now sure signs that it is indeed ailing.

Rising inflation was and is the biggest concern of the Govt. And consistent rates hike is all the action taken. And the effect of that is evident on the growth numbers. Apart from that, lets be realistic and stop living in a fools paradise. Surely all good things always come to an end. So if last December we were celebrating a double digit growth in capital goods and manufacturing, surely it all had to moderate some time or the other.

The higher base effect of December 2009 shows December 2010 in a much poorer light but MoM, the picture does not look all that bad. Take a look at the table given below for a clearer picture.

What is worrisome at this juncture is that despite so many rate hikes, inflation remains high in the double digits. And these rate hikes are now anchoring down the growth rates. Yet, the RBI is expected to trudge along and continue with its rate hikes in March and May. A collective rate hike of another 50 bps is not ruled out. Thus given this situation, we are looking at a situation wherein growth could remain somber for the next 3 to 6 months.

Corruption and lack of policy action from the Govt has tarnished the image of the country badly. Inaction, in short has led to foreign investors getting wary about currently putting money in India. Inflation is a problem in almost all the countries but the apathy and poor governance is emerging as a bigger problem. 'Banana Republic' is a word being whispered around the elite and intelligentsia drawing room conversations.

All these factors have led to virtually lack of new investments in the country over the past few months. The negative growth in capital goods sector is an indicator of the same. No new investments and even the existing ones floundering is worrisome. The stock market sensed all this long time ago, what with the infra stock being beaten down persistently since the past 2-3 months.

The picture does look gloomy right now. When the markets are down, everything gets magnified into a bigger negative. Yet, at this juncture, things do look uphill. The Govt is yet to wake up and smell the coffee as it keeps on upping the growth rate estimates without really doing much. Yes, it is banking on agriculture growth to fill the gap left by falling IIP numbers. And it expects inflation to get tamed to 7% by March. Obviously, it forgets to take into account rising crude price.

All eyes will now be on the Budget. More importantly, whether or not the Parliament will begin work on 21st Feb.

Warren Buffet famously said, "Price is what you pay. Value is what we get". But surely India is today paying the price for falling values.