Inflation, as measured by the Wholesale Price Index, rose to 11.89% for the week ending Jun 28 vs. 11.63% last week and 4.42% a year ago. Component wise, primary articles were up 10.8%; manufactured products were up 10.6%, fuel price index was up 16.3%. Like the past, the price index of iron-ore is up +46%, basic metals +22%, manufactured food products +16.7%, chemicals +9.5% and textiles +5.8%, and the continued uptrend in industrial fuels.
Upward revisions to the index continued like in the past, with the May 3 data being revised up 90bps from 7.83% to 8.73%. Kindly note that the Government seems to be suppressing the facts giving tailored numbers and then revising it in retrospect. Only a good monsoon can save the Indian economy now.
May 08 Industrial Production:
Industrial Production growth slowed to 3.8% vs. 10.6% last May. On a cumulative basis, growth during April-May 2009 has halved to 5% from 10.9% levels seen last year. On a sectoral basis, 11 of the 17 industry groups posted positive growth. Trends in beverages, and tobacco remained strong (+31.1%yoy in May08), several groups posted negative growth – manufactured food products (-8.6%), jute and fibre textiles (-9%), wood products (-31%) and rubber /plastic /petro products (-10.4%) and metal products (-4.9%).
According to RBI sources, real inflation maybe around 13%. Given that supply-side measures are not helping, it appears that little can be done other than tempering demand by raising rates. However, Corporate India is in better shape and work in the making is unlikely to be stopped.