An elephant can run fast, once it gets going.

There is much happiness at the news that the Indian economy grew by 7.9% in the last quarter of the last financial year, ending 31 March. An analysis covering a period of 24 quarters found that 309 firms in the BSE 500 had an increase in net profits of 21.87%. That is very good news not just for the companies but for banks as well because they can hope that some of their bad loans will be paid back. With civil servants getting a bonanza of a 23.5% rise in their salaries and a prediction of a good monsoon this year consumer demand is expected to increase. All of which is very good news but in India there is always one limiting factor, and that is inflation. Growth in agriculture, forestry and fishing increased marginally to 1.2% from previous estimate of 1.1%, this despite a punishing drought over 2 years because of El Nino. However, manufacturing growth was 9.3% against an estimate of 9.5% and Index of Industrial Production rose by only 2%. This means that if consumer demand were to rise significantly prices will rise faster because of supply side constraints. After falling for 17 months the Wholesale Price Index turned positive in April, growing by 0.3%. The price of oil has risen to over $50 a barrel from below $30 in February, which enabled the government to keep the fiscal deficit at 3.9% by increasing taxes on fuel. We imported 202.1 million tonnes of crude oil last year at a cost of $64.4 billion, so any rise in the cost of crude will increase cost of transport and add to inflation. The good news for us is that Iran is planning to increase production of oil substantially after lifting of economic sanctions, which will put a lid on the price of crude. Another very good news is that the fertility rate in India is falling although the population will continue to grow because we are living longer. This is hugely welcome because already there is a crisis in providing jobs for the 12 million young people who join the jobs market every year. Wherever there is enormous demand there will be crooks to take advantage of the vulnerable. Private educational institutions have exploded all over the country to provide useless pieces of paper at the cost of millions of rupees to desperate students. Only 7% of graduates with MBA degrees are fit to be employed. The rest can only hope of getting less than Rs 10,000 per month, if they get any job at all. So bad is the shortage of skills that companies are re-employing retired people to get their work done. Vast numbers of people with poor education and low paying jobs results in very high inequality in income, which results in a high incidence of violent crimes. The government is giving loans to those who want to set up their own business, starting from Rs 50,000 to Rs 1 million, depending on the size of the business. If states reform labor laws growth will accelerate. India is mocked as a slow lumbering elephant. We may yet become an elephant on steroids.