Is economy out of rut as inflation eases? Experts discuss

At last inflation appears to be easing. The October reading at 7.45 percent was below than that of September by almost half a percentage point. Also the core inflation and food inflation both appeared to be easing.
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Nov 19, 2012, 09.23 AM | Source: CNBC-TV18

Is economy out of rut as inflation eases? Experts discuss

At last inflation appears to be easing. The October reading at 7.45 percent was below than that of September by almost half a percentage point. Also the core inflation and food inflation both appeared to be easing.

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Is economy out of rut as inflation eases? Experts discuss

At last inflation appears to be easing. The October reading at 7.45 percent was below than that of September by almost half a percentage point. Also the core inflation and food inflation both appeared to be easing.

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At last inflation appears to be easing. The October reading at 7.45 percent was below than that of September by almost half a percentage point. Also the core inflation and food inflation both appeared to be easing.

On the other hand, the no show at the spectrum auction will probably bring a spring in the step to the government as the auction clearly makes the accusation of a Rs 1.76 lakh crore telecom scam looks like an overstatement.

So is the economy getting out of its rut?

In a CNBC-TV18's special show Indinomics, Saumitra Chaudhuri (Member of the Planning Commission and the PM's Economic Advisory Council) and Rajeev Malik (Economist, CLSA) analyse the implications.

Here is an edited transcript of their comments.

Q: The inflation number is easing but the governor of the Reserve Bank of India (RBI) says he is not impressed. How do you see the trajectory of inflation going forward? Do you think that atleast the momentum of inflation is behind us and the pace will decline further?

Chaudhuri: Actually it did not come as a big surprise to me. I thought the figure will be between 7.3 percent-7.4 percent, it came at 7.45 percent. Basically I think about a month ago, you did an interview with me in which I had said that inflationary momentum seems to be easing though the year-to-date or headline for year-on-year (YoY) inflation rate is still very high.

However, there seems to be some easing and that the depreciation of the rupee did not seem to reflect itself with higher manufactured goods prices, I presume that was because of lower pricing power and lower excess demand. That I think is what is being borne out and even if you look at that number of 7.45 percent, you will find that miscellaneous primary articles account for a lot of it.

Fortunately we do not seem to be getting the big pick up in perishable items which is a constant source of worry. I am not saying that we are out of the woods. We still have November and December and we can get unexpected surprise but by and large numbers should be giving a sense of a relief. Even if it is not comfort, certainly a sense of relief.

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