Should we start to celebrate?

First the Consumer Price Index fell to 8.1% last month from 8.79% in January. This is certainly much better than 11.17% in 2012 and a scorching 14.97% in 2009. Then came the Wholesale Price Index which fell to 4.68% last month compared to 5.05% in January. The fall in inflation rates is mainly because of a fall in the rates of rises in food prices. Food price inflation fell from 11.95% this time last year to 8.12%. Vegetable price inflation fell to 3.99% from 19.88% and price inflation of wheat fell from a whopping 21.81% to 6.52% but milk prices rose by 8.45% compared to 4.52% last year. So, should we pour a wee dram of Indian Made Foreign Liquor to toast these figures. Er, turns out that they may not be as good as they appear. Firstly, prices are still rising, albeit at a slower rate and even that maybe because of a high base effect. For instance if the price of an article rises from Rs 10 to Rs 20 it is a rise of 100% but if the price rises from Rs 50 to Rs 60 then the rise is only 20%. Secondly, the fall in vegetable prices was seasonal and due to a prolific monsoon but as the winter vegetables start to disappear and summer sets in, with the threat of an El Nino this year, prices could soar again. Industrial output increased by a measly 0.1% in January after falling by 0.2% in December. Manufacturing contracted by 0.7% and capital goods, which is the key indicator of demand in the economy, fell by 4.2%. Between April and January manufacturing fell by 1.5% and mining by 0.4% while electricity rose by 5.7%. Excellent monsoon rains filled up all reservoirs so hydroelectric output, which is almost free, should have increased. Yet electricity rates have been soaring because the price of gas paid to Reliance was suddenly doubled from $4.2 to $8.4 per million BTU by the outgoing Congress government and also because we are importing expensive coal from Indonesia and Australia while sitting on more than 250 billion tonnes of coal ores. If power companies have to buy gas at these rates they maybe compelled to shut down because power will become prohibitively expensive. Expensive power will increase manufacturing costs and increase inflation. All this is being done so that the new government which will be formed in May cannot function as the economy collapses so that the Congress can pass on the blame. The time to start celebrations will be if the Congress ceases to exist.