India Q1 FY 2011-2012 GDP growth below 8 percent

India's economy grew by just 7.7% in the first quarter of the 2011-12 financial year, compared to 8.8% growth in the same three-month period last fiscal. 

Diesel prices hiked by Rs 3, LPG by Rs 50

The government today decided to raise diesel prices by Rs 3 per litre and domestic LPG cylinder prices by Rs 50.

Kerosene prices hiked by Rs 2 per litre. It scrapped import duty on petroleum products by 5%, Oil Minister S Jaipal Reddy said. Customs duty on diesel cut from 7.5% to 2.5%, he said.

The oil refining companies currently incur an under-recovery or revenue loss of Rs 13.72 on every litre of diesel, Rs 26.16 on every litre of kerosene and Rs 381 for every LPG cylinder.

The probability of another round of rate hike in July by RBI has increased substantially after this decision. High food inflation numbers published yesterday were already enough to suspect another rate hike to combat inflation. But this round of another fuel price hike would add to the inflation pressure and could compel RBI to increase rates by at least 25 bps if not 50 bps.

Food Inflation @ 10 week high

Food inflation in India today touched a two-and-half-month high of 9.13% in the week ended June 11 on the back of costlier fruits, milk, onions and protein-based items.The latest food inflation numbers are the highest since the week ended March 26, 2011, when the rate of price rise of food items touched 9.18%.

　

The latest forecast by India Meteorological Department's (IMD) suggest that the monsoon is expected to be 95% of the long term average. A below normal monsoon can have a serious fallout on agricultural output.If inflation does not moderate by june end RBI might go for another rate hike of 25 bps if not 50 bps.

Interest rate effect - Infrastructure growth falls to 5.2%

High interst rate has started showing its colors on the infrastructure and overall growth of the economy. As per the data released on 1st June the growth of the six core infrastructure industries in April had fallen to 5.2%. In March 2011 the infrastructure growth was 7.4%.

Yesterday the GDP growth numbers were reported as 7.8% way below the street estimates.

RBI has increased interest rates by 300 basis points in last 1 year and the market is expecting another round of 25 bps rate hike on 16th June by RBI.