As prices rise, fall in factory growth

rcscwc

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As prices rise, fall in factory growth

Already battered by high inflation, the government knocked against a fresh problem on Wednesday — a possible industrial slowdown, barely a month before it presents the Union budget. A widely watched factory output barometer, released Wednesday, showed industrial growth was 2.7% in November last year, its slowest pace in 18 months, and a sharp decline from 11.3% in the previous month.

Following Tuesday's meeting on prices called by Prime Minister Manmohan Singh, finance minister Pranab Mukherjee, agriculture minister Sharad Pawar, chief economic adviser Kaushik Basu and cabinet secretary KM Chandrasekhar brainstormed throughout Wednesday to firm up a strategy to fight rising prices.

Twin devils

2.7% Industrial growth in November 2010, an 8.6% drop from 11.3% in October
18.32% Food inflation rate for week ended December 25, 2010, caused by high cost of onions and other vegetables
Dilemma
Analysts and India Inc expect RBI to raise key interest rates to pull down inflation — a move that could have an adverse impact on industrial output
The government's response to inflation is being drafted by Basu and will be presented to the PM on Thursday, sources said. Freeing up imports of commodities to bolster supplies is emerging as the cornerstone of the government's short-term response to cooling prices. A plan to raise prices of subsidised foodgrains for those above the poverty line has also been shelved indefinitely.

"In the absolute short term, we have to rein in prices of food articles. Whatever needs to be done to source these commodities from inside or outside India will be done as soon as possible," a top economic manager of the government said.

This is a strong indication that the government could temporarily ease a slew of tariffs and duties it levies on several essential imported commodities. "The commerce and civil supplies ministries are working closely to organise this," the top official said.

The government's response to inflation will also include effective distribution of these commodities. "If they have to be moved to areas within India where there is scarcity, then it will be done on a war-footing," the official said.

Futures trading — which has often been cited as a reason for price rise — is also likely to be curbed in several commodities.

However, the economy's problems have compounded thus: industrial growth has slid, inflation is high and higher interests could make borrowing costlier. If the Reserve Bank does raise key lending rates, expected on January 25, then companies — the backbone of India's sizzling growth — could defer planned investments.

This could hurt both growth and jobs.

LINK

Hmm. But rising prices are because of coalition compulsions, thus spake the yuvaraja of Congi.
 
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Armand2REP

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Sounds like India walking the tight rope like China between high inflation and lagging industrial output. Put too much interest points and throw in the breaks
 

rcscwc

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Excuse me, sir. China has no relevance here.

After all we live here not in China.
 

Armand2REP

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Excuse me, sir. China has no relevance here.

After all we live here not in China.
Don't be so myopic son. You can learn something by looking at other countries, like what to do and not to do. China is walking the same tightrope, they only raise interest rates 50 basis points which is half a percent... nothing. Instead they raise bank reserves and it has absolutely no affect. Only interest rates really effect the market. Watch what happens to China and learn from their mistakes.
 

rcscwc

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Don't be so myopic son. You can learn something by looking at other countries, like what to do and not to do. China is walking the same tightrope, they only raise interest rates 50 basis points which is half a percent... nothing. Instead they raise bank reserves and it has absolutely no affect. Only interest rates really effect the market. Watch what happens to China and learn from their mistakes.
Again, my dear [I am much older than you], we do not live in China, but here, very much in India. Talk of India. Watch hat is happening in India: Rising prices, falling industrial production.
 

Armand2REP

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Again, my dear [I am much older than you], we do not live in China, but here, very much in India. Talk of India. Watch hat is happening in India: Rising prices, falling industrial production.
You are much older than me yet you call me sir? You really have no idea how old I am or my experience so stow it. Watch the hat drop, interest rates rise so industrial output falls. No way to get around it in India or China. India's growth train is slowing same as China. You think rising prices are based on coalition compulsions. It is far more global than that... myopic.
 

rcscwc

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Hmm. Did I say rising prices are due to coalition? Sir, read the OP again. It is RG who is saying it. NCP reacted strongly to this remark, asking Congi to take a leaf from Italy.

Immature conjectires betray your raw age.
 

sob

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These are difficult times for the Mandarins at the finance ministry- Rising prices, slowing down in IIP and the stock market taking a beating.

I will not worry too much on the Index of Industrial output as the base period last year was very high. It just means that the industry output is growing but at a much slower rate. But than what we had were very good export figures released last week.

The tightrope will be to balance between inflation and the money supply.Here the GOI is making a big mistake as the main reason for price increase is not shortages but constraints in the supply system. We have food grains rotting in stores but not available in the market. This will require the GOI to work out an efficient delivery system. The other problem is the fuel inflation. We still are in an era of administered prices so the Govt has sufficient room to tweak the duties, but lack the will to do so.
 

Armand2REP

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Hmm. Did I say rising prices are due to coalition? Sir, read the OP again. It is RG who is saying it. NCP reacted strongly to this remark, asking Congi to take a leaf from Italy.

Immature conjectires betray your raw age.
I didn't know "spake" was a word. Maybe if you wrote the correct English?
 

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Its time UPA does some course correction, there is a real need for a major cabinet reshuffle. This term has been just one disaster after another. Let's hope they don't harm India growth momentum.
 

Armand2REP

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OK, I will leave and watch the thread get buried. bye!
 

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