A small sign of hope

The 2.24 per cent rise in industrial production figures for January is encouraging in a scenario of gloom and doom, at a time when one of India’s top industrialists said this week he would prefer to go out of the country to invest. If such growth levels continue in February and March, it just might mean that some turnaround is visible. But it is still a very low growth rate. A lot will depend on finance minister P. Chidambaram seriously pursuing his decision to monitor capex by both the private and public sector. But the consumer price index at nearly 11 per cent for February, against 10.8 per cent in January, that was announced the same day, is a major setback for inflation control. It reflects the government’s absolute inability to control food inflation, at a 33-month high (or 13.4 per cent). So even if the Reserve Bank does cut interest rates next week it will hardly help control inflation. Both the government and India Inc are resting their hopes on the RBI cutting rates to spur growth. It will be interesting if the government and India Inc can give an assurance that if interest rates are really cut, they would deliver a certain growth percentage. This will reveal how much interest rate cuts actually spur growth, in contrast to other factors like delays in government decision-making that impede growth.