News / Asia

Interest Rate Hikes Take Toll on Indian Economy

A man welds a wheel used for packing medicine inside a factory in the western Indian city of Ahmedabad. India's factory sector expanded at its slowest pace in more than two years in August as export orders shrank amid weakening global demand, September 2,
A man welds a wheel used for packing medicine inside a factory in the western Indian city of Ahmedabad. India's factory sector expanded at its slowest pace in more than two years in August as export orders shrank amid weakening global demand, September 2,

A series of interest rate hikes is beginning to take a toll on the Indian economy. The rate increases have slowed economic growth and dampened business confidence.

Second quarter economic growth, from April to June, fell to 7.7 percent compared to 8.8 percent during the same period last year. But the numbers have caused little surprise.

Economists have been warning that 11 interest rate hikes in the last year and a half by the Central Bank would stunt economic growth.

The interest rate hikes are meant to curb inflation, which the Central Bank says is a greater challenge to the economy than a marginal slowdown. In fact, yet another rate hike is expected this month because inflation continues to remain above nine per cent.

For an economy that has been surging in recent years, the interest rate hikes are dampening optimism. A recent survey by the Federation of Indian Chambers of Commerce and Industry said business confidence has slumped to a two-year low as companies are rattled by a slowing domestic and global economy.

D.H. Pai Panindiker, an economist at the RPG Goenka Foundation, says investment has slowed in recent months.  “The high rate of interest itself knocks down many profitable projects. Lucrative projects become non viable. Apart from that industry cannot raise capital because the share market has been bearish. Since January, share prices have come down by nearly 13 to 14 percent. That makes it difficult for companies to raise new capital,” Panindiker stated.

The worst-hit sectors are construction and automobile manufacturing, as higher interest rates have dampened demand for houses and cars.      

Businesses are also concerned with what observers call a “policy paralysis” in the government. Preoccupied with defusing a widespread anti-corruption protest movement, the government has failed to move forward with long-awaited economic reforms that would attract more foreign investment and give business a boost.

Economist Panindiker says there are concerns about the future. “The mood now is not very cheerful... As far as the common man is concerned he is worried about inflation, as far as industry is concerned, they are worried about growth and investment,” Panindiker stated.

India is Asia’s third biggest economy and had emerged virtually unscathed from the 2008 financial crisis. But the recent dip in growth is causing some worry, particularly amid mounting fears of a new global slowdown.

You May Like

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

Euro falls after European Central Bank announces a bigger-than-expected $67 billion-a-month quantitative easing program More

Saudi King’s Death Clears Succession Route

Prince Mohammed Bin Nayef is Saudi Arabia's New Crown Prince-in-waiting More

Cloud Hangs Over US Counterterrorism Efforts in Yemen

Sources say resignations of Yemen's president, government has left US anti-terror operations 'paralyzed,' yet an American military 'footprint' remains More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Worldwide Photo Workshops Empower Youthi
X
Julie Taboh
January 23, 2015 11:08 PM
Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.
Video

Video US Marching Bands Grow Into a Show of Their Own

The 2014 Super Bowl halftime show was the most-watched in history - attracting an estimated 115 million viewers. That event featured pop star Bruno Mars. But the halftime show tradition started with marching bands, which still dominate the entertainment at U.S. high school and college American football games. But as Enming Liu reports in this story narrated by Adrianna Zhang, marching bands have grown into a show of their own.
Video

Video Secular, Religious Kurds Face Off in Southeast Turkey

Turkey’s predominantly Kurdish southeast has been rocked by violence between religious and secular Kurds. Dorian Jones reports on the reasons behind the stand-off from the region's main city of Diyarbakir, which suffered the bloodiest fighting.
Video

Video Kenya: Misuse of Antibiotics Leading to Resistance by Immune System

In Kenya, the rise of drug resistant bacteria could reverse the gains made by medical science over diseases that were once treatable. Kenyans could be at risk of fatalities as a result if the power in antibiotics is not preserved. Lenny Ruvaga has more on the story from Nairobi.
Video

Video Solar-Powered Plane Getting Ready to Circumnavigate Globe

Pilots of the solar plane that already set records flying without a drop of fuel are close to making their first attempt to fly the craft around the globe. They plan to do it in 25 flying days over a five month period. VOA’s George Putic reports.
Video

Video How Experts Decide Ethiopia Has the Best Coffee

Ethiopia’s coffee has been ranked as the best in the world by an international group of coffee connoisseurs. Not surprisingly, coffee is a top export for the country. But at home it is a source of pride. Marthe van der Wolf in Addis Ababa decided to find out what makes the bean and brew so special and how experts make their determinations.
Video

Video Yazidi Refugees at Center of Political Fight Between Turkey, Kurds

The treatment of thousands of Yazidis refugees who fled to Turkey to escape attacks by Islamic State militants has become the center of a dispute between the Turkish government and the country's pro-Kurdish movement. VOA's Dorian Jones reports.
Video

Video World’s Richest 1% Forecast to Own More Than Half of Global Wealth

The combined wealth of the world's richest 1 percent will overtake that of the remaining 99 percent at some point in 2016, according to the anti-poverty charity Oxfam. Campaigners are demanding that policymakers take action to address the widening gap between the ‘haves’ and the ‘have nots’, as Henry Ridgwell reports for VOA from London.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid