Emergic: Rajesh Jain's Blog

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India’s Economy

June 10th, 2007 · No Comments

The Economist writes: “India needs a period of slower growth to reduce these excesses and this requires higher interest rates. Constrained by politicians, the RBI’s tightening has been timid. In the past year interest rates have risen by less than the rate of inflation has, so rates have fallen in real terms. Relative to consumer-price inflation, the overnight lending rate of 7.75% is close to zero in real terms. That is much lower even than China’s real benchmark lending rate of 3.6% (only China’s deposit rates are lower). Indeed, India probably has the lowest real interest rates of any major economy, despite having one of the world’s fastest growth rates. Without more tightening, expect the sweltering heat to continue.”

Tags: Emerging Markets

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