As the world’s fastest growing economies, India, 16 announced that this year the fifth interest rate hike, has been shown to control inflationary pressures. However, in the second half of the world’s major economies, growth prospects may be the context has changed, analysts expect India to raise interest rates this year, this is likely to come to an end. This is also the other Asian economies, the recent monetary policy in the development of the main tone.

Strong inflationary pressures the central bank

16 Bank of India announced that it will raise the benchmark reverse repo rate by 50 basis points, to 5%, the interest rate increase also exceeded market expectations. Most economists had expected interest rate increase of 25 basis points. At the same time, the central bank will raise the repo rate by 25 basis points, to 6%.

Economists said the latest move to see from the Reserve Bank of India is still a hard line stance on inflation. The 16 statement, the central bank said, in general, the authorities that economic growth remains solid, while inflation “in the coming months may still remain high.”

Government of India released this week, the country’s industrial output in July surged 13.8% year on year, is more than double the increase the previous month. August, India’s merchandise exports surged 22.5%, worth 16.6 billion U.S. dollars.

Royal Bank of Scotland economist Kapoor in India, said India’s central bank, the persistently high inflation is the greatest challenge. India’s inflation rate exceeded double digits earlier this year after a slowdown in recent months, but still uncomfortably high. Government of India 14, the latest data released by the Indian benchmark wholesale price index in August rose 8.5%, slightly less than 7 month 9.97%.

Inflation lead to a more serious social problems, especially accounting for up to three-quarters of low-income people. Last week, hundreds of thousands of Indian workers launched a nationwide strike to protest price increases. The Indian government has suggested, in order to alleviate the negative effects of rising prices, the rise in lending rates will be tolerated. India’s finance minister said this week that India needs to continue to be vigilant on inflation, and, where necessary, use various tools to control inflation.

Newman, Managing Director of HSBC’s investment banking, said the Indian government’s priority should be to raise interest rates to curb price pressures. He noted that price stability is to revitalize an important prerequisite for private expenditure.

The second quarter, India’s private consumption growth weakened, an increase of only 0.3% growth rate the previous quarter to reach 2.6%. Newman believes that consumption growth weak, inflation is likely to be growing by the drag on economic growth which is not good news.

Like China, India is the world’s fastest growing economies in the world. The second quarter of this year, India’s GDP grew 8.8%, the highest since the beginning of 2008 quarterly increase. Government of India from April 1 start of the fiscal year set target level of 8.5% economic growth in the previous fiscal year, only 7.4%.

Face greater inflationary pressures, some industry insiders expect the central bank may then take a strong stance of monetary policy. Pan Mumbai Mahindra Bank analysts said that unless global economic conditions deteriorate significantly from now, or he expects there will be a central bank to raise interest rates during the year. Royal Bank of Scotland Kapoor also said that compared to other economies in the world, India is faced with totally different economic and inflation situation.

However, some analysts believe that interest rate increase this week, India is likely to raise interest rates this round of the last, this year’s monetary tightening could stop there. Taking into account the coming months remains uncertain global economic trends, some people worry that the Indian economy may be “high low” trend, which is the government’s growth target to achieve a challenge this year.

This week at the Summer Davos in Tianjin forum, many experts have pointed out that the world economy slowing again, is unlikely, but worries still exist in the development can not be ignored. Noted economist Cheng Siwei said that although the world economy embarked on the road to recovery, there are some uncertain factors, such as the debt crisis in Europe, such as high unemployment and the U.S. mid-term elections, which are increasing the world economic recovery instability.

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