India finance minister says more rate hikes likely
Indian Finance Minister Pranab Mukherjee said Wednesday more monetary
and fiscal steps were in the pipeline to tame stubborn inflation.
On Tuesday, India’s central bank increased rates by a
higher-than-expected 50 basis points, the 11th rise since March 2010, as
it struggles to combat near double-digit inflation.
“We will continue to take monetary and fiscal steps” to curb prices,
the finance minister told reporters in New Delhi, adding this was not
“the end of the tunnel.”
Mukherjee urged business leaders not to be alarmed by the string of
rate increases the longest streak of monetary tightening in a decade
after they voiced worry about their impact on the economy.
He told reporters that while there was deceleration in industrial
production and slower growth in sectors sensitive to interest rates, he
was confident “the Indian economy would be in a position to come back.”
On Tuesday, the Confederation of Indian Industry (CII) business umbrella
group said the sharp rate rise was “a matter of great concern” when data
indicates a “clear slowdown” in industrial output.
Business leaders have said the string of interest rate hikes is
making borrowing much more expensive for industry and slowing needed
Mukherjee said inflation, running at 9.44 percent, should be around
six to seven percent by year-end and recalled India had lived before
with high inflation of 24 per cent in 1974 and 18 percent in 1990.
The government earlier this month cut its growth forecast for this
financial year to 8.6 percent from nine percent to reflect the impact of
the rate hikes to tame inflation, the highest among global economies
But economists say growth this fiscal year could slow further,
possibly to below 8.0 percent. India’s economy grew by just 7.8 percent
in the January-March quarter, the lowest in five quarters.
NEW DELHI, AFP