The economic news is not as good as it seems at first glance.
The government said last week that the economy had grown at an annual rate of 7.6% in the second quarter of this fiscal year. Most economists were expecting a lower number. Wholesale price inflation, too, is down to a six-month low of 8.84%. While that is still too high for comfort, there is growing evidence that wholesale price pressures are easing in India.
Yet, these numbers should not raise false hopes. The economic growth numbers for the second quarter do not capture the severity of the global slowdown, which worsened after September. The real damage to our growth rate will be evident when the data for the third quarter is released next year. But the trade numbers that were released on Monday give us advance warning of the troubles that lie ahead. Exports in October were 12.1% lower than a year ago, the first time they have shrunk in three years.
The inflation data is not uniformly good. Consumer prices are still growing at double digits. They should eventually follow the trend in wholesale prices, but they can be an election issue in the months ahead.