http://www.bloomberg.com/news/2013-02-06/imf-says-india-should-hold-rates-until-inflation-is-contained.html
This article discusses the issues inflation can cause when a country seeks to boost its growth rate through monetary policy. The central bank seeks to enact a policy of monetary easing to lower interest rates and boost growth since India's GDP growth rate has been slow recently. However, they are unable to reduce interest rates to the degree that they seek since it might cause undue inflationary pressures in a country where inflation is already fairly high compared to most of the developing world.
To counteract this, the central government has announced policy decisions aimed at curbing the fiscal deficit and reducing spending in order to curb inflation. The IMF has predicted India's growth at 6% and agrees with India's central bank that the room for monetary easing is limited due to inflationary pressures.
This article discusses the issues inflation can cause when a country seeks to boost its growth rate through monetary policy. The central bank seeks to enact a policy of monetary easing to lower interest rates and boost growth since India's GDP growth rate has been slow recently. However, they are unable to reduce interest rates to the degree that they seek since it might cause undue inflationary pressures in a country where inflation is already fairly high compared to most of the developing world.
To counteract this, the central government has announced policy decisions aimed at curbing the fiscal deficit and reducing spending in order to curb inflation. The IMF has predicted India's growth at 6% and agrees with India's central bank that the room for monetary easing is limited due to inflationary pressures.
In the article it says the rupee Has gone down 4% against the dollar, and that the current-account gap was $22.31 billion in the quarter ended Sept. 30. Isn't this a sign of India's trade deficit, as well as the lack of confidence from European investors?
ReplyDeleteThis is certainly correct. India has also been suffering from issues regarding foreign investment and confidence from overseas investors - mostly due to relatively tight restrictions on foreign investment.
DeleteThe government is, however, attempting to correct this issue as well by loosening restrictions and passing FDI reform bills, in a bid to attract more investment from America and Europe.