Dalal Street

India’s industrial production zoomed into the positive territory with the April Index of Industrial Production (IIP) recording a positive growth of 1.4% against a revised estimate of (-) 0.4% for March 2009.

The growth in the index is supported by all the constituents with electricity production witnessing a growth of 7.1%, manufacturing activity growing by 0.7% and mining output expanding by 3.8% on a year-on-year basis.

Looking at the use based classification, basic goods grew by 4.6% while intermediate goods were up by 7.1%. Capital goods however showed a negative growth of 1.3%, reflecting that despite positive signals being shown by the demand side of economy, investment will probably recover slowly. Consumer goods also recorded a negative growth of 4.7%, primarily due to negative growth in non-durable goods segment at 10.4% while the durable consumer goods grew at 16.9%.

Despite positive signals being seen in major economies around the world, the International Monetary Fund (IMF) and the World Bank seem to be not convinced about a possible turn around of global economy rapidly. The multilateral institutions said that the recovery process was still fragile and over optimism may soon turn into another disaster until the policy makers ensure that inflation stays out of the picture.

The IMF chief Strauss-Kahn said at a meet in Montreal that the forecast of IMF for recovery of global economic in early 2010 was intact although it may not be considered automatic and policy makers needed to ensure that suitable policies for a sustainable recovery were in place.

Some other economists have pointedut out a visible quick recovery in global economy may soon turn into another disaster through sharp rise in prices. If there is another runaway inflation story as was witnessed in first half of 2008, it may become very difficult for developing economies to ensure regular supply of even essential items.