Inflation jumps; industrial output rebounds

The Government and the RBI have their task cut out as far as containing prices is concerned. Inflation, based on the Wholesale Price Index (WPI), shot up further in the last week of March, putting more pressure on the Congress-led coalition regime ahead of several state elections and next year's general election. The point-to-point inflation jumped to 7.41% in the week ended March 29 from 7% in the previous week, the Commerce & Industry Ministry said. The inflation rate is now at the highest level since November 8, 2004. The annual inflation rate was 5.94% during the corresponding week of the previous year.

The WPI for All Commodities stood at 226.0 in the week under review as against 224.8 in the week ended March 22. The index for Primary Articles rose to 8.89% from 8.96% in the preceding week, while the index for Fuel & Power increased to 6.65% from 6.69%. The index for Manufactured Products surged to 7.12% from 6.31%. The index for Basic Metals, Alloys & Metal Products group rose by 3.8% to 290.8. The Government revised inflation for the week ended Feb. 2, 2008 to 4.74% from the preliminary forecast of 4.07%.

Meanwhile, there's some good news for the Indian economy. The industrial production rebounded sharply in February on the back of improved performance of the electricity sector and healthy growth in mining, even as manufacturing continued to struggle. The Index of Industrial Production (IIP) stood at 273.9 in February compared to 252.2 in the same month of last year, translating into a growth of 8.6% versus 11% in February 2007. The February IIP number is much better than the January one, when industrial output had grown by a revised 5.8%. The provisional figure for January was 5.3%. For the first 11 months of the current financial year, industrial production grew by 8.7% compared to 11.2% in the corresponding period of the previous fiscal year.

Mining output in February was 7.5%, the same as last year. Electricity output expanded by 9.8% as against just 3.3% in February 2007. Meanwhile, manufacturing growth slipped to 8.6% in February from 12% in February 2007. For the April-February 2007-08 period, the three sectors recorded a growth rate of 5.1%, 9.1% and 6.6% respectively versus 5%, 12.2% and 7.2% in the same period last year. The Capital Goods sector registered a growth rate of 10.4% in February as against just 2.1% in January and 18% a year ago. Consumer durables grew by 3.3% compared to a drop of 3.1% in January and 1.8% growth in February 2007.

Industrial output had shrunk in January, heightening concerns about the health of the Indian economy amid high interest rates, a stronger currency and a global slowdown. But, now with industrial production picking up in February, the Government can heave a sigh of relief and the Reserve Bank of India (RBI) can consider hiking the CRR to check inflation, which appears to be spiraling out of control.