Dipping growth

It has rarely happened before: Industrial growth at 1.8 per cent and wholesale inflation at 9.7 per cent. October was the 22nd consecutive month where the wholesale price index (WPI)-based inflation ruled at above 8 per cent, and the 11th at 9 per cent-plus. This combination of high inflation and low growth raises two questions: How much of this anaemic growth is due to high inflation itself and, more importantly, when does such inflation assert itself on output? Following an extended period of low (egven negative) growth rates from October 2008 to November 2009, courtesy the global economic crisis, Indian industry staged a recovery towards end-2009. That was precisely when the WPI inflation, too, began heading up to the 8-9 per cent levels, where it has stubbornly remained since January 2010. For a while then, higher output seems to have coexisted with a phenomenon of rising prices only for their trajectories to differ thereafter.

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