Tunnel vision leads to errors.

Industrial production increased by 2.6% in July compared to July last year. IIP decreased by 1.8% in June, revised figure from 2.2% earlier, and by 2.8% in May, decreasing 1.1% in the April to June quarter. Livemint, 12 August. Retail inflation has fallen to 9.52% in August from 9.64% in July and 9.87% in June. The downward trend in retail inflation coupled with very good monsoon rains, which may bring down food prices, has prompted many experts to predict that the economy has bottomed out and that a V shaped recovery is to be expected. We certainly hope so but we are not sure of how much truth is behind such predictions. The economic growth since 2004 was almost entirely due to enormous amounts of foreign money flooding into developing economies because of very low rates of interest in developed countries. Following the sub-prime collapse interest rates were reduced to zero in western countries prompting Indian companies to go on a borrowing binge. That maybe coming to an end if the Federal Reserve decides to start reducing its bond buying program. To win elections the Congress started many social schemes purely to bribe voters which increased inflation and the fiscal deficit. As prices of goods increased people cut down on their spending which reduced company revenues and tax collection. Regardless of consequences and prodded by a foreigner, with no patriotic feeling for India, the Congress increased social spending and piled on taxes to pay for them. This only added to inflation and reduced consumer demand even further. To hang on to power the Congress bribed other parties with ministerial posts, resulting in 77 ministers with their complement of useless civil servants, each with huge salary and perks. To keep the various parties happy the CBI was forced to drop charges of serious corruption against various thugs, thus encouraging them to steal even more. National resources such as telecom spectrum and mines were gifted to friends and relatives. We imported 12.02 million tonnes of thermal coal in June, up 52.5% from 7.88 million tonnes last year. Livemint, 26 August. Total imports to March 2014 could be a record 165 million tonnes from 137.56 million in 2012-13. For any real growth taxes must be reduced so that people have money to spend. Sadly our pundits look at only a few figures ignoring the rest. That is why their predictions are wild.