Indian Economy – The Price Rise

The Indian economy is affected in a big way by the monetary policies made by the Reserve Bank of India with respect to the rupee. The policies are dictated to a large extent by global economic trends and their likely consequences vis-a-vis the Indian economy.

The Reserve Bank of India, also known as RBI which is the central banking institution of India and controls the monetary policy of the rupee as well as US$300.21 billion of currency reserves is trying to reduce persistently high price increases, which have stayed over eight percent for the past eighteen months. It raised interest rates by 0.25 percent to 8.5 percent in the last week. The central bank has increase interest rates by just under 4 percent since March of the previous year. Growth dawdled to almost 8 percent in the three months to June; this is the slowest it has been in the last 2 years.

Indian Economy – On the Supply Issue

When it comes to the Indian economy, the primary reason why inflation in India is so stubborn is supply constraints, stated a well known economist. The lack of basic infrastructure, skills gaps and product markets raise costs. In the meantime, bad irrigation means that unexpected low rainfall will see the prices of food on the rise. As the rupee drops, and thus adds more to the inflation problem, to improve the Indian economy, India must tighten fiscal policy.

Indian Economy – Global # 4

The fourth-largest economy in the world behind the United States, China and Japan is India. Figures from 2010 illustrate that the Japanese economy was worth $4.31 trillion, with India following right behind at $4.06 trillion India might soon fall into the third place by surpassing Japan in terms of GDP (Gross Domestic Product) which is calculated in accordance to the domestic purchasing power of the rupee, which is also known as purchasing power parity.

After March’s devastating tsunami and earthquakes, Japan’s economy is widely expected to contract while the Indian economy will grow between seven and eight percent this financial year. The next six-to-eight months may see India surging ahead of Japan. Some leading experts on worldwide economic trends are of the opinion that by that time, in terms of purchase power parity, the Indian economy would be the world’s third largest.

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