Is it time for RBI to exit a loose monetary policy and raise interest rates?
Inflation raises its ugly head
If inflation policy is a guide to interest rate policy, India and Korea are likely to be the first nations to raise interest rates in Asia. Inflation levels are higher than interest rates in both countries. According to Macquarie Research, real interest rate is minus 7.14 percent in India and for Korea it is 0.16 percent. Kaushal Sampat, COO, Dun & Bradstreet says, “D&B expects that RBI may increase the CRR [cash reserve ratio] by 50 basis points by the end of the current fiscal. This may happen in two phases — a 25 basis points hike by the end of December 2009 and another 25 basis points by end of March 2010.”
Factories are working; optimism is higher
(This story appears in the 06 November, 2009 issue of Forbes India. To visit our Archives, click here.)