Arab Today, arab today india\s central bank expected to halt rate hikes
Last Updated : GMT 16:22:08
Arab Today, arab today
Arab Today, arab today

India\'s central bank expected to halt rate hikes

Arab Today, arab today

Arab Today, arab today India\'s central bank expected to halt rate hikes

New Delhi - AFP

India\'s central bank was expected to keep interest rates on hold Friday, as a depreciating rupee and signs of an overall economic slowdown add to concerns over sustained high inflation. Policymakers from the Reserve Bank of India (RBI) will meet in the financial hub, Mumbai, to decide whether to signal a pause in its aggressive cycle of rate hikes. The RBI has raised interest rates 13 times since March 2010, angering business leaders who say it has hit growth and investor confidence in the South Asian giant. The bank\'s repo rate at which it lends to commercial banks is at a near three-year high of 8.50 percent while the reverse repo rate that it pays banks for deposits is at 7.50 percent -- its highest in more than a decade. Analysts and economists widely believe the RBI will soften its hawkish stance, after saying at its last mid-quarter monetary policy meeting in October that the likelihood of another rise was \"relatively low\". Friday\'s meeting comes on the back of a government announcement on Wednesday that headline annual inflation had dropped to a year\'s low of 9.11 percent in November from 9.73 percent in October. At the same time, however, the Ministry of Commerce and Industry revised upwards its provisional inflation data for September from 9.72 percent to 10.0 percent -- the first time it had hit double figures since July 2010. Predictions of a pause have mounted after the latest industrial output figures showed 5.1 percent negative growth in September, including in key sectors like mining, manufacturing and capital goods. RBI governor Duvvuri Subbarao maintains that the bank\'s main thrust has been to tackle high inflation, even at the expense of short-term growth. But there have been growing calls for him to change tack, amid fears that India may struggle to meet even the government\'s revised estimate of 7.5 percent economic expansion this financial year. Some private economists predict the growth figure will be nearer 7.0 percent or lower. \"We must turn our attention now to reviving growth as quickly as possible,\" Finance Minister Pranab Mukherjee told reporters this week, acknowledging that the battle against inflation had hit investment. High inflation has added to pressure on the government, which has been on the defensive after a series of high-profile corruption scandals plus charges of ineffectiveness and policy paralysis. Last month, Prime Minister Manmohan Singh\'s administration proposed opening up the country\'s vast retail sector to foreign players such as Tesco and Wal-mart but was forced to backtrack after widespread protests. Higher rates of growth are seen as essential to help improve the lives of India\'s 1.2 billion people, 75 percent of whom live on less than $2 a day, according to the World Bank. Inflation has risen due to the increasing cost of food, as well as the higher price of global commodities, including imported crude oil and fuel. The cost of imports has also increased because of the depreciating rupee, which has fallen to record lows against the dollar, as investors seek safe haven in the US currency in an uncertain global economic climate. Some analysts suggested that the RBI could take into account core inflation -- the rate of price rises of non-food manufactured items -- which has increased slightly, hitting prices of imported goods. Others said the RBI may even cut the cash reserve ratio -- the minimum amount banks have to deposit with the RBI -- to boost liquidity in the market.

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