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From Komfie Manalo, Opalesque Asia:
The Reserve Bank of India (RBI), the nations central bank is hoping to tame persistent inflation by raising interest rates for the ninth time since March 2010, bringing them to 7.25% (up 0.50%). At the same time, the RBI announced that the reverse repo rate would be raised to 6.25%, while the cash reserve ratio was retained at 6%.
In a report prepared by London-based Lalcap founder Deepak Lalwani said that Indias decision to gradually tighten interest rates "has failed to cool down inflation fuelled initially by high food and fuel prices, and recently by demand pressures."
Moving forward, Indias monetary policy makers turned hawkish by declaring that reducing inflation is a key priority to encourage economic growth in the short term.
"The RBI forecasts WPI inflation to remain close to the March 2011 level in the first half of fiscal 2012 (April-October 2011) before declining to 6% by end March 2012. Our forecast is a less optimistic 8%. Meanwhile, the RBI's baseline GDP growth forecast for fiscal 2012 is 8%, assuming oil at $110 per barrel - ours is broadly in line at 7.8%," Lalwani said.
The government projects the economy to expand 8.6% for the fiscal year that ended March 2011, but Lalwani said his estimate indicates an 8.8% growth. India will announce its official growth figures in mid-June.
Prime Minister Dr Manmohan Singh is bracing for sl...................... To view our full article Click here
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