“Indian inflation is moving as expected. While the
slowdown has added pressure on the Reserve Bank of India to reduce interest
rates I feel interest rates are not enough to propel the economy. It is a
complex situation for the central bank. Weak rupee and continuing inflation
limit its headroom for RBI. At most the RBI will lower the rate by a quarter of
a percentage point. India’s fiscal deficit and food prices are among risks to
inflation and falling rupee adds to the woes of the RBI. India also faces a
trade deficit that swelled to a record $184.9 billion in the fiscal year ended
March. India’s pace of price increases remains the fastest in the largest
emerging economies.”
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