Market Darling India Has Issues As Inflation Hits Record Low

The investors of the Earth that accumulate in India: the sudden cure of the economy persists.

Consumer price inflation hit a new high in June, which showed that the economy of $ 2.3 billion is in trouble amid the government’s reforms, an altered loan crisis, a widening production gap and Increased unemployment.

Although bond markets have rebounded as investors bet on the latest data will lead to a rate cut by the Reserve Bank of India, figures show that the economy faces obstacles, even when the stock market rises, rs Rallies and major economies of the world are moving towards a new era higher borrowing costs.

“There is no pressure on the RBI to cut rates,” said Madan Sabnavis, chief economist of CARE Ratings, by telephone from Mumbai, before the data. “There is a lot of excess funds available in the system, but investments and loans do not happen.”

Part of the pessimism stems from the fact that India is still trying to recover from an interest ban that disrupted employment for millions, forcing farmers to make sales of agricultural products and manufacturing packaging sector.

The introduction of a tax on goods and services on July 1 has only added to the confusion, while excess bad loans means that companies do not pay loan to invest in third largest economy in Asia.

Bank credit to the sector contracted from May to May, while deposits were reduced as a result of the high nominal value of prohibition bills in November, leaving the banking system to cope with excess liquidity.

Data on Wednesday showed that general inflation of consumer prices of 1.5% in the year to June, up from 2.2% a year in a month and compared with forecasts of a reading of 1.6%. This is below the medium-term objective of 4% of RBI and the bottom of its projection of 2% for the first half.

Meanwhile, industrial production rose 1.7% in the 12 months through May, up from 2.8% in April and below forecasts of 2% in a Bloomberg survey, support for the latest data showed Deceleration in the manufacturing sector before the introduction of the GST.

Arvind Subramanian, the government’s top economic adviser, said India is experiencing a “paradigm shift” in inflation.

“This low number and its implications on the underlying pressures on prices – as well as the latest PII data recently released – is something I’m sure politicians will think about very, very carefully,” it said in a statement.

Worried by lawmakers, falling inflation may predict a slowdown in growth and demand. During the January-March quarter, India has grown by 6.1% compared to the previous year, below the five-year average of 6.9%.

It is still a robust rate for the Western world, but it is not enough to give jobs to millions of people joining the workforce every year.

Arvind Subramanian, the government’s top economic adviser, said India is experiencing a “paradigm shift” in inflation.

“This low number and its implications on the underlying pressures on prices – as well as the latest PII data recently released – is something I’m sure politicians will think about very, very carefully,” it said in a statement.

Worried by lawmakers, falling inflation may predict a slowdown in growth and demand. During the January-March quarter, India has grown by 6.1% compared to the previous year, below the five-year average of 6.9%.

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