The kind of economic news and statistics that has been staple diet for the last six months would be enough to make even the most optimistic bull in the Indian economy see red, what with shrinking growth rates, collapsing profits, mounting losses on balance sheets, unemployment and etcetera. It is, therefore, interesting to note the recent buzz about the emergence of some green shoots of recovery. So, what really is the correct reading of the signal from the economy? The answer is a bit of red and a bit of green, with the balance set to be determined by critical policy decisions in the next few weeks and months. Here’s the where, how and why.

Consider first the sectors which remain in the red and where there are few, if any, signs of recovery. All of these fall into the broad category of export-oriented sectors. The distress in key sectors like textiles and gems and jewellery is evident and acute. Lakhs of people have lost their jobs and factories/ workshops remain idle as orders from big Western markets have completely dried up.

Unfortunately, the rich OCED economies are forecast, by most estimates, to contract by up to 6 per cent in calendar year 2009. And hardly anyone is predicting a recovery before 2010, which means India’s export-oriented sectors are set for a prolonged slump — the statistics are bearing out this trend with exports falling sharply for four months in succession. But remember that exports are still less than 30 per cent of India’s GDP and therefore play a less significant role in determining our overall economic prospects, unlike say in China or other parts of East Asia where exports often exceed 50 per cent of GDP.

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