Tag Archives: Inflation

Can India control Inflation and Manage to Reach Growth Targets

Indian economy faces tough times in coming quarters and Finance Ministry might find it difficult to keep inflation in control. Major trouble for the Indian economy is the expected slowdown in demand in western countries. The export related sectors might feel major impact on earnings and margins.

RBI has increased the base rates by 11 times since March 2010. The
interest rates for home loans have increased, putting more pressure on home loan consumers. New home loans have become expensive and this has bad effect on real estate sector.

With increasing borrowing costs, business owners are finding it difficult to raise money in India. There are many projects in infrastructure and power generation sector, which need higher investments.

With expected decline in manufacturing sector growth numbers, Indian companies may not be able to maintain the current margins. Stock market valuations for most companies have declined in the recent times. Banking, Real Estate and Technology stocks are trading near their 52-week lows. Major real estate companies are facing troubles for their housing projects. Brokerage houses across the world have given mixed outlook for Indian markets.

RBI expects inflation to remain higher for upcoming two quarters. The report points out that Inflation may reach 7% by March 2012. US Dollar has crossed Rs 46 level as FIIs continued selling during the past two weeks.

Goldman Sachs has said in recent research report that inflation will fall to six percent by March 2012. Goldman Sachs gives reduction in demand as major reason for the decline in inflation however, it is not sure that inflation can fall so much within 9 months. The oil prices are expected to remain strong in India and we have noticed in past that the oil prices generally do not go down in the country.

Inflation may touch double digit, says FM

Finance Minister Pranab Mukherjee has informed that there could be a double-digit inflation this March.

Mukherjee said this while taking part in the discussion on the General Budget for the Financial Year 2010-11 at the Rajya Sabha.

However, he believes that the current rise in food prices will go down very soon. The government is taking all the necessary steps to tackle the food inflation, said the minister.

But at the same time, he has also expressed his concerns over the possible double digit rate of inflation in the current month. Hence, it is going to be a hectic and troublesome financial year end for the Indian consumers.

In the month of February, the country’s annual rate of inflation had risen to 9.89 per cent. This figure was the highest in the last 16 months. In January, this was reported to be 8.56 per cent.

Rise in food price is undoubtedly pushing the rate up. On the contrary, the annual food inflation has also ended with as high as 17.81 per cent for the last week of February.

While India shows good growth rate figures, this inflation could be a major roadblock.