Economic nirvana

Economic nirvana

Is India headed towards one version of economic nirvana—with accelerating output and decelerating inflation?

Two bits of data released this week point to this pleasant possibility. The government said on Friday that wholesale prices in the week ended 2 June were 4.8% higher than a year ago, lower than their pace of change just a few months ago. Earlier, IIP showed that industrial output in April jumped 13.6% over the year.

C. Rangarajan, chairman of the PM’s Economic Advisory Council, has said that the danger of overheating is receding. There is likely to be a chorus of voices asking RBI to be more sanguine about inflation and stop interest rate hikes. But the jump in IIP has been exaggerated by what has happened in a couple of industries. And the final inflation number has been often revised upwards this year, though quietly.

The signs are comforting, but it is too premature to ask RBI to let its guard down.