Home / Knowledge / News / High inflation rates to persist over the next few months
High inflation rates to persist over the next few months
05
Aug '08
Although the increase in the repo rate by 50 bps was unexpected, the firmness of its anti-inflationary stance sends a strong signal to the markets that the Reserve Bank of India (RBI) sees spiralling inflation as a far greater threat than slowing growth.

Coming soon after a similar move last month, Tuesday's announcement leaves no one in any doubt about the central bank's determination to bring the rate of inflation down as quickly as possible.

While the measures will have an adverse impact on demand through higher interest rates, which are bound to increase, given the tight liquidity conditions, the threat that rising inflationary expectations poses to medium-term growth performance is real and justifies the aggressive anti-inflationary stance taken by the RBI, even if it comes at some cost in the form of slower growth in the immediate future.

Dr. Subir Gokarn, Chief Economist, Standard & Poor's Asia Pacific, said: “We have to accept the fact that a trade-off between growth and inflation in the current circumstances is inevitable.

Despite the clear signs that growth is slowing, as seen in the recent industrial production numbers, it is far too early for the Reserve Bank of India to move to a neutral position, let alone reverse course.

Even after all that has been done, inflationary pressures may still be aggravated by global developments but, for the moment, the current policy stance is the most appropriate one.”

Mr. Dharmakirti Joshi, Principal Economist, CRISIL, added: “The decision to raise the repo rate by 50 bps rather than the much-anticipated 25 bps was motivated by two factors.

One, the fiscal situation, particularly on account of the loan waiver and the implementation of Pay Commission recommendations, is providing a demand stimulus, which can only intensify the inflationary pressure.

Two, since domestic fuel prices do not fully reflect the global price scenario, energy prices are not helping to reduce demand to the fullest possible extent. This also adds to demand-side inflationary pressures.”

With high inflation rates likely to persist over the next few months, we do expect further tightening in or before the next scheduled announcement at the end of October.

Our current outlook for key macroeconomic indicators for 2008-09 are as follows: GDP growth at 7.8 per cent; average wholesale inflation for the year at 11.5-12 per cent, although this will fall sharply in March 2009; year-end yield on 10-year government securities in the range of 8.8-9 per cent; and, the year-end rupee-dollar exchange rate at Rs.41.5-42/$.

The policy stance will clearly have a negative bearing on the growth outlook for 2009-10, but this is an expected part of the adjustment process, which will help to preserve a favourable medium- term trend.

Credit Rating Information Services of India Limited


Must ReadView All

Pakistan govt notifies 50% duty drawback on exports

Textiles | On 21st Oct 2017

Pakistan govt notifies 50% duty drawback on exports

The Pakistan government has notified the ‘Duty Drawback of Taxes...

Ghana sets up task force to clamp down on textile piracy

Textiles | On 21st Oct 2017

Ghana sets up task force to clamp down on textile piracy

Ghana’s ministry of trade and industry has set up a taskforce to...

Courtesy: Coach

Fashion | On 21st Oct 2017

US company Coach to change name to Tapestry from Oct 31

Coach Inc., a New York-based house of modern luxury accessories and...

Interviews View All

Saket Garg
Garg Corporation

The biggest challenge is lack of skilled workforce and competition from...

Anshul Sood
Oceedee

‘Indian footwear market is nascent and largely a trend follower’

Top executives
Textile & apparel bodies

The decision is transformational

Abhishek Pachauri

Reckon Industries adapts latest systems for manufacturing from designing...

Rikesh Mistry

Jupiter Comtex Pvt Ltd, established in 1973, started its textile machinery ...

Hardik Sanghvi

Idealin Fogging Systems has been engaged in designing and manufacturing...

Iago Castro Asensio
RCfil Distribuciones S.L.

Iago Castro Asensio, International Business Manager of RCfil...

Suresh Patel
Sidwin Fabric

Sidwin Fabric is a manufacturer and exporter of polypropylene textiles and ...

Mark Paterson
Technical Absorbents Ltd

Mark Paterson, R&D manager of Technical Absorbents Ltd talks about Super...

Mike Hoffman
Gildan Activewear SRL

Gildan Activewear, a manufacturer and marketer of branded clothing and...

Sidharth Sinha
Sidharth Sinha

<b>Sidharth Sinha</b> has contributed to the successful rebirth and...

Nisha Chanda
Whistling Woods International School of Fashion

<div>A lack of upgraded courses in costume designing and fashion as per...

Press Release

Press Release

Letter to Editor

Letter to Editor

RSS Feed

RSS Feed

Submit your press release on


editorial@fibre2fashion.com

Letter To Editor






(Max. 8000 char.)

Search Companies





SEARCH

October 2017

Subscribe today and get the latest update on Textiles, Fashion, Apparel and so on.

news category


Related Categories:

Planning to Take the Leap towards
Sustainability?

Do you see sustainability as a route to business growth?

Yes No

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes No

Active Poll

Do you see sustainability as a route to business growth?

Yes
77.1%
No
12.9%
Skip
10.0%

Total Votes: 70

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes No

Active Poll

Do you think the sustainability space has the needed tools and resources available for a business to lead change?

Yes
61.4%
No
28.6%
Skip
10.0%

Total Votes: 70

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes No

Active Poll

Do you think adopting a sustainable approach will be a profitable move for your business?

Yes
85.7%
No
10.0%
Skip
4.3%

Total Votes: 70

Thanks for your valuable feedback. Claim your free latest sustainability e-book.

Active Poll

Do you want the world to know about your sustainability journey and your business’ environmental footprint?

Yes
75.7%
No
11.4%
Skip
12.9%

Total Votes: 70


E-News Insight
Subscribe Today and Get the
Latest News Update in Your Mail Box.
Advanced Search