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Commentary

Indian Inflation Down to 8%; China Losing Steam

Indian Inflation data was out today – a figure of 8% will be deeply satisfying. With the petrol price last week, we should see even lower figures coming up very soon. Load up on gilt funds! Interest rates are going down further, I’m sure – another 1% drop in the yield will give a 7% on the gilt. (Prices of gilts are inversely related to interest rates. And exponentially so)

Meanwhile China is deflating – inflation’s down to 2.4% from 4% in October.

This is quite deep in the doo-doo area for China, where people are unlikely to know what to do – most of the working population today has only seen a hugely growing economy, or at worst, a flat one. [Note: This is quite the same in India] A drop in fortunes is perhaps forgivable, but the current situation isn’t a drop, it’s a vapourization, so to speak.

Exports are down 2.2% – a figure that sounds docile, until you realize the recent past has seen 19% and 26% (in October 2008, and in 2007, respectively). Imports are down 15%. Little wonder then, that raw material exporters are suffering all over the world. It’s so dire people are in disbelief, as a statement summarises:

“We’ve never experienced this before. We don’t know what happened,”

And still, there are predictions of 7.5% GDP growth. This is going to be quite remarkable if it is achieved – and not just for China, for India too, where the government “lowers” its target to 7.5%.

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