The numbers are coming in clearer every month as Indian manufacturing recovers, thanks to strong domestic demand, due in large part to money from the pay commission, NREGS, high support prices for agri products last year etc. The fiscal stimulus began much before the global crisis hit India. We are not in anyway close to double digit growth, but the slump does seem to be over. Meanwhile, the stock market believes that all is well with the world, which isn?t true, of course, and if the election outcome disappoints in a fractured mandate, expect a rude shock once again.

The main problem however will come up later this year, or may even surface next year when the high fiscal deficit will combine with rising demand to raise inflation levels substantially. Even now, the WPI which had been forecast by many to hit negative numbers, is still reluctant to oblige; even with the high base effect, large positive week on week rises have kept the WPI inflation in the positive zone. The new CPI indices are due to come into force from next year, while the current data for March has not been released yet, which is another issue altogether. Worldwide, as prices reflect the expectations of demand, we can expect higher levels in basic commodities like crude, copper, steel etc. as news of recovery in emerging economies impacts these markets. Again, we caution that this does not mean a hike into levels above $100 a barrel for crude, for instance, but the range of $40-50 of the past 3 months will move to higher levels of $60-70, consumers, the government and the firms must be prepared for this.

The Election Commission has had its hands full this past month and we will be extremely grateful when the code of conduct is lifted and life can go back to normal. EC permission is needed for a range of items: bus fare cuts in Tamil Nadu, relaxation in import duty on sugar..and now the release of consumer price index numbers. In the case of the CPI, the electorate already has a better idea about the inflation affecting their consumption baskets, regardless of what the government data may be saying. It is only analysts who are interested in the numbers and even they look at these numbers with scepticism. Yet, the EC?s code of conduct actually goes to indicate how much of government influence continues in our lives and how much more liberalisation is needed. We have always been of the opinion that cash vouchers are a much better, equitable method of reducing the burden on the poor, rather than price determination by the government.

The EC should actually also rename all government programmes, airports, ports etc, that are associated with political parties, that would be a service to the electorate!