Impact of Inflation

Looking at the figures released yesterday the inflation has maintained an upward tick. While the upward move was statistically expected the worrying part is the build of inflation this fiscal that is around 6% and which is higher than last year. If we look at the components, the numbers worry me more because the inflation has been higher because of basic items like tea, pulses, spices etc. If we exclude the drop in prices of items like aviation turbine fuel and light diesel oil the inflation figures would become more worrisome. If the current trend continues we would land up at an annual figure of between 8-10% that would translate into 20% inflation at the consumer level. Looking at the trend I think the government has to become more proactive to control inflation than RBI.

Indian State of Economy

The possibility of the Indian economy showing positive signs in the 2nd quarter of the current fiscal are quite high, I expect this number to be good in view of the government stimulus that has helped lift consumer spending. Growth may not be very broad based, with gains mainly coming in the in consumer spending. I do not see much support coming in from exports. One would need to look at the numbers minus the auto numbers; one should look at figures that can give a fair idea of consumer spending, real estate investment, inventory and most importantly the inflation and agricultural output to come to any conclusion about the state of the economy.