India’s economic growth seems to be back to the pre-crisis trend, but inflation is worrying, says World Bank in its report titled ‘India Economic Update, December 2010’ released today.

“Inflation came down to 7.5 percent in November but then accelerated again to 8.4 percent in December because of a renewed food supply shock,” said World Bank data based till December 2101. In the same month, inflation went to 18.32 percent which saw rise of prices of Onions at sold at more than Rs 50-60 per kg at several outlets all over the country. Other food prices rose sharply too.

Food inflation for the week ended February 5 fell to  a nine-week low at 11.05 percent, which is still high.

However, the World Bank predicts that inflation will fall to single digit figures by the end of next month. “Assuming that the December resurgence in food inflation is temporary, overall wholesale price inflation is likely to decelerate to 7 percent by end-March 2011 and further during the coming fiscal year, although uncertainty over international commodity prices persists,” the report said.

Last month, the Reserve Bank also upped the inflation projection to 7 per cent by March-end.

“While inflation has become more broad based, capacity utilisation, industrial production, import, and credit indicators do not point to overheating,” the report on India Economic Update said.

The report added that Indian economy recovery is robust. It also endorsed Indian government’s claim on maintaining growth at 8.5 to nine percent. “Looking forward, GDP growth looks set to regain the pre-crisis trend of around 8.5-9 percent in this year and the next (FY2011-12),” it said.

Read the report