Sunday, April 13, 2008

Latest IIP figures

The latest IIP figures (graph from ToI), for February 2008, reveals that the economic growth is on track, albeit at a slightly reduced rate. The comparative April-February figures for 2006-07 and 2007-08 reveals only a slight slowdown. The capital goods sector bounced back to show 10.4% growth, from the 2.1% growth in January, 2008.

This slight slowdown is in keeping with the increasing probability of a US recession inspired global economic slowdown and rising global inflation. It may also be a welcome slowdown, as there were enough indications that the economy was overheating (rising inflation being the most prominent) and supply side constraints like infrastructure bottlenecks were beginning to assert themselves. This is also a reminder that we cannot sustain high, close to double-digit economic growth rates, without substantially ramping up our investments in agriculture and infrastructure.

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