The numbers all seem to be looking up, the stock markets all seem to be rising once again, and cheer is back. There is spring in the air. One wonders what happened suddenly to make everything so nice. Anyhow, things as predicted are improving – largely because of heavy government interventions internationally. The lower interest rates in India are also starting to have their impact – this was all predicted, as interest rate reductions take some time to play out. But what is also predicted is that things will take a few months more to stabilise - we estimate growth for this financial year to be an unexciting 6.6%.

Meanwhile companies in many sectors will continue to be cash starved, jobs will be lost, new hiring will remain low. So while things will get better, don’t expect too much. The trouble is that the situation was so bleak a quarter ago that any small improvement has a big impact on our collective psyche. The financial market types have just not learnt anything – over-reacting is built in their DNA. Let’s hope another bubble is not created.

At the same time everyone – including economists – is blaming economists for not predicting the fall. But we know of at-least ten well known economic thinkers who were writing that something was going very wrong, these ‘good times’ were heading for a crash. Swami Aiyar of ET, was actually week after week, increasing his probability of crash figures. No one wanted to listen to them then.

And now again, no one seems to listen when anyone who has any sense is pointing out an impending crisis - governments should not spend this much – we are creating a bigger problem than we tried to solve. Hopefully the new UPA government will be a bit more conservative than the last one. The Budget should reflect on the need to get back to some revised form of FRBM, ideally with a roadmap. With growth looking up, it is time for the government to begin to step back.

What worries us is the volatility in prices – whether in crude, forex, commodities, grain etc. – the rupee which had fallen below 52 to a dollar in early March has now swung up past 47 to a dollar on 1st June. Crude which had fallen to a low of $ 35 a barrel in December is now trading close to $70. In May, the Reuters- Jefferies CRB Commodities index rose 14%, its highest monthly gain since 1974. Firms, governments and consumers must keep themselves aware of the ‘surprises’ that the markets can continue to throw at them, given that there are still many unresolved issues lurking in the global economy.

In short, the financial and commodities markets are still not working in a sane manner nationally and internationally; don’t listen to the people who man them. Don’t listen to the corporate bigwigs. Don’t listen to the, yes, economists who say things are back on track. And don’t listen to any government that says they have it all under control. India will at the very least face two pressures in the coming quarters and years – on the price and forex rate fronts. And high deficits will not help.

But we have a good team running the show. We wish the new government good luck in the months and years ahead. We have high expectations from them.