Forum Views ()
Forum Replies ()
Read more with google mobile :
India shifts monetary gears as economy rebounds
Yahoo!
My Yahoo!
Mail
More Yahoo! Services
Account Options
New User? Sign Up
Sign In
Help
Yahoo! Search
web search
Home
Singapore
Asia Pacific
World
Business
Entertainment
Sports
Technology
Singapore
Asia Pacific
World
India shifts monetary gears as economy rebounds
AFP - Sunday, January 31
Send
IM Story
Print
India shifts monetary gears as economy rebounds
Slideshow: Full Photo Coverage: Business & Economy
NEW DELHI (AFP) - – India's central bank has shifted gear from the ultra-loose monetary policy used to help the economy rebound but it will go slow in hiking interest rates to ensure growth stays on track, analysts say.
Late last week at a policy meeting, the central bank left borrowing rates at record lows to support continued expansion of Asia's third-largest economy.
But in a bid to keep a lid on resurgent inflation, the bank took a key first step towards exiting from the aggressively expansionary stance that it adopted to help India's economy ride out the global slump.
It moved to siphon off excess liquidity from the financial system by raising the cash reserve ratio -- the percentage amount commercial banks must keep on deposit -- by 75 basis points to 5.75 percent.
"The central bank has embarked on a handle-with-care monetary exit," said Rajeev Malik, economist at Australia's Macquarie Securities.
"Inflation has become more important, but the Reserve Bank of India has not taken its eyes off growth dynamics."
Analysts say India's central bank is trying to achieve a delicate balance of curbing inflation -- which has accelerated in the past few months to 7.31 percent -- while not choking growth.
Even though central bank governor Duvvuri Subbarao forecast strong economic expansion in his policy statement, he said he did not want to remove monetary stimulus too fast because the recovery is yet fully to take hold.
And it is not only Indian policymakers who are performing such a juggling act as they wait for the economy to show clear signs of healing, the bank said.
Worldwide there is "uncertainty about the pace and shape of global recovery" and whether it "will unravel" if stimulus is withdrawn prematurely, its report noted.
India's economy expanded by 7.9 percent in the fiscal second quarter with car and mobile phone sales booming and the share market on a roll.
But growth has been driven mainly by government stimulus, tax breaks and cheap interest rates that have provided vital juice for the economy during the worst global financial crisis since the 1930s.
Also, while India's cost-of-living has risen steeply recently, the central bank says interest rate hikes cannot cure the problem in this instance.
Food inflation, driven by crop shortages, is running at 17.4 percent and accounts for 80 percent of overall inflation, economists say.
The weakest monsoon in nearly four decades has hit agricultural output but the central bank expects food costs to decline as new winter crops are harvested.
After March, "inflation is likely to drop, and probably quite sharply," said HSBC economist Robert Prior-Wandesforde.
However, analysts predict that as food inflation comes down, non-food inflation will begin emerging as a bigger problem as global commodity prices rise and demand improves on the back of a recovering economy.
They expect that to prompt the central bank to slowly raise benchmark interest rates with the first hikes expected around April.
After half a dozen rate cuts since October 2008, the repo -- the rate at which the bank lends to commercial banks -- stands at 4.75 percent, while the reverse repo, the rate at which it borrows from banks, is 3.25 percent.
"We're seeing the beginning of monetary tightening" in India, said Vaibhav Agrawal, research vice-president at Angel Broking.
"But the rate hike process will be gradual over a period of two years and will be unlikely to stifle demand," he added.
Recommend
Send
IM Story
Print
Related Articles
Better times not coming soon for Saudi firms-survey Reuters - 40 minutes ago
Etisalat Q4 profit rises 39 pct, misses forecasts Reuters - 51 minutes ago
Qatar may help real estate after banks-experts Reuters - 54 minutes ago
MIDEAST STOCKS-Emirates NBD weighs on Dubai; markets mixed Reuters - 1 hour 29 minutes ago
Leumi appointment panel OKs Maor as director-report Reuters - 1 hour 30 minutes ago
News Search
Top Stories
Bankers leave Davos battered by blame game
Obama trims US space ambitions
GlaxoSmithKline to axe 4,000 jobs in US, Europe
Gandhi ashes scattered off South Africa
Italy halts bluefin fishing for a year: EU
More Top Stories »
Related Full Coverage
China Economychina economy
All Full Coverage »
ADVERTISEMENT
Most Popular
Most Viewed
Most Recommended
Gandhi ashes scattered off South Africa
Got a decision to make? Have some sugar, study says
GlaxoSmithKline to axe 4,000 jobs in US, Europe
Bankers resigned to reform after Davos bust-up
US angers China with Taiwan arms package
More Most Viewed »
Woman who saved Anne Frank's diary dead at 100
Scientists praise Obama as Doomsday clock reset
More Most Recommended »
Elsewhere on Yahoo!
Financial news on Yahoo! Finance
Stars and latest movies
Best travel destinations
More on Yahoo! News
Home
Singapore
Asia Pacific
World
Business
Entertainment
Sports
Technology
Subscribe to our news feeds
Top StoriesMy Yahoo!RSS
» More news feeds | What are news feeds?
Also on Yahoo
Answers
Groups
Mail
Messenger
Mobile
Travel
Finance
Movies
Sports
Games
» All Yahoo! Services
Site Highlights
Singapore
Full Coverage
Most Popular
Asia Entertainment
Photos
Copyright © 2010 Yahoo! Southeast Asia Pte. Ltd. (Co. Reg. No. 199700735D). All Rights Reserved.
Terms of Service |
Privacy Policy |
Community |
Intellectual Property Rights Policy |
Help
Other News on Sunday, 31 January 2010 Iran puts 16 opposition supporters on trial
Italy halts bluefin fishing for a year: EU
Haiti faces long, difficult road to recovery
|
Davos ends with recovery warning after banking bust-up
Police: Suicide bomber kills 2 at Iraqi restaurant
Italian judges stage walk-out against Berlusconi
Thousands rally to urge Russia's Putin to resign
|
Gandhi ashes scattered off South Africa
Iran warns protesters as post-vote trial starts
Iran executes two men for rape
Iran opposition in implicit call for protest on Feb 11
Sri Lanka's losing candidate vows protests
|
Thai PM: There won't be a coup d'etat
Pearl Harbor merging with Hickam Air Force Base
NATO airstrike kills 4 Afghan soldiers in mix-up
Obama taking populist tone in fight over jobs
AP Interview: Months ahead key to Afghan fight
US military airlifts of Haiti quake victims halted
Washington Times names Dealey as top editor
Southeastern US stares down icy, snowy weekend
Oregon legislators say 'Whew,' go back to work
Afghan govt condemns NATO airstrike on soldiers
NM bill first step toward carbon storage
Teen held in 80-year-old Ohio churchgoer's death
NYC fire in immigrant housing kills at least 5
Bigelow, Cameron, Tarantino vie for director honor
China will move on yuan when stimulus packages end: banker
Pakistan keeps policy rate unchanged at 12.5 pct
Three Americans Killed In Afghanistan
Music world preps for Sunday's Grammys
Grammy weekend begins with Neil Young tribute
Crystal Cathedral makes deep cuts as revenues drop
US Marines facing a 'different war' in Afghanistan
GlaxoSmithKline to axe 4,000 jobs in US, Europe
UN chief calls for treaty to prevent cyber war
U.S. halt to Haiti evacuations stirs fears for sick
|
Obama trims US space ambitions
Sudan rejects three presidential candidates
Seized North Korea arms were bound for Iran: Thailand
|
Sudan rejects three presidential candidates
|
Court Stops Dispensary From Selling Medical Marijuana
President Obama Orders Federal Support For State Of Oklahoma
Moderate China quake kills one: state media
US, China locked in dispute over Taiwan arms sale
Earthquake strikes southwestern China, killing 1
Malaysian court fines lovers 4 buffaloes, pig
China: U.S. arms sales to Taiwan hurt national security
Indian parents vie for nursery school admissions
US troops more than welcome in Haiti _ for now
Miss Virginia wins 2010 Miss America crown
Pakistan: 25 dead in suicide bomb, US missile hit
Seized North Korea arms were bound for Iran
Haiti holds 10 US citizens over trafficking concerns
Anger as NATO airstrike kills 4 Afghan soldiers
Cambodian, Thai troops clash on border: Phnom Penh
Books pulled from Amazon.com in pricing dispute
31 emaciated horses rescued in Ohio; 6 others die
Obama seeks $200M to help cities host 9/11 trials
Idaho man says 10 Americans detained in Haiti
Japan's listed firms keep boosting profits: report
Asia-Pacific trade deal faces skeptical Americans
China will move on yuan when stimulus packages end: banker
Michael Jackson, Leonard Cohen win special Grammys
|
Winter's Bone, Restrepo win top Sundance awards
|
'Winter's Bone,' 'Restrepo' earn Sundance honors
"Winter's Bone", "Restrepo" win top Sundance awards
Miss Virginia wins 2010 Miss America crown
Michael Jackson, Leonard Cohen win special Grammys
AP NewsAlert
Pat Tillman cover-up focus of Sundance documentary
Ex-Nevada deputy relieved over bribery acquittal
Rip Torn charged with breaking into Conn. bank
Egypt's veil wearers see it as barrier to harassment
Saudi couple forced to divorce reunited by court
French government on the defensive rival's new trial
Bankers leave Davos battered by blame game
U.N. official to visit North Korea next month
|
Israel: Slain Hamas leader key arms smuggler
China Threatens Sanctions Over U.S.-Taiwan Arms Deal
Slain Hamas leader helped Gaza get arms
Saudi couple forced to divorce reunited by court
|
Gaddafi chides African Union after leadership change
|
Karzai renews call for Taliban to reconcile
Pope calls on business, government to save jobs
|
Pakistan army probes report of Taliban leader's death
|
Yemen clashes continue, ceasefire offer rejected
|
Slain Hamas leader helped Gaza get arms: spokesman
|
Obama pushes nuclear energy to boost climate bill
Haiti holds US citizens suspected of child trafficking
January death rate signal of tough year in Afghan war
Filipino troops kill 3 communist rebels in clash
UN chief to send special envoy to North Korea
China activist to end protest at Tokyo airport
UN must speak out over Cambodian rehab centres: HRW
Report: Chinese sub entered Taiwan waters
New study fails to bridge Japan, China history divide
Experts: US arms deal won't hurt Taiwan-China ties
Mexican president in Japan for three day visit
S.Lanka premier targets army officers: source
Pakistan: Mule steps on land mine, kills 2 troops
India shifts monetary gears as economy rebounds
China's online travel market booming
Japan carmakers must restore reputation: media
It's ladies' night at the Grammys
|
Bigelow wins Directors top award for Hurt Locker
|
Actor Rip Torn arrested drunk, armed in Conn. bank
|
Kathryn Bigelow tops directors with `Hurt Locker'
'Hurt Locker' director wins key Oscars indicator
Actor Rip Torn arrested drunk, armed in Conn. bank
In Italy, 'Madonna hospital' cares for quake-damaged art
Thousands attend 'Lost' sneak preview
Mormon role in gay marriage ban scrutinized at Sundance
'Restrepo,' 'Winter's Bone' take top Sundance honors
Greece at new risk of being pushed off euro
Bodies of missing Tenn. mom, Jo Ann Bain, and daughter found
Female Breasts Are Bigger Than Ever
AMD Trinity Accelerated Processing Units Now in Volume Production
The Avengers (2012 film), made the second biggest opening- and single-day gross of all-time
AMD to Start Production of piledriver
Ivy Bridge Quad-Core, Four-Thread Desktop CPUs
Islamists Protest Lady Gaga's Concert in Indonesia
Japan Successfully Broadcasts an 8K Signal Over the Air
ECB boosts loans to 1 trillion Euro to stop credit crunch
Egypt : Mohammed Morsi won with 52 percent
What do you call 100,000 Frenchmen with their hands up
AMD Launches AMD Embedded R-Series APU Platform
Fed Should not Ignore Emerging Market Crisis
Fed casts shadow over India, emerging markets
Why are Chinese tourists so rude? A few insights