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

ASEAN Ministers Set to Push for South China Sea Agreements

According to documents obtained by VOA Khmer, ministers will stand up for 'freedom of navigation, unimpeded lawful maritime commerce, trade and over flight' More

Puerto Rico Defaults on $58M Debt Payment

Payment was due Saturday, default is first in country's 117 years as a United States possession More

Turkish Public Fears Jihadists More Than Kurds

Turkey facing twin threats of terrorism by Islamic State and PKK Kurdish separatists, says President Erdogan’s ruling AK Party 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.
Iraqi Yazidis Fear Death of Their Communityi
X
Sharon Behn
August 03, 2015 2:23 PM
A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Iraqi Yazidis Fear Death of Their Community

A year ago on August 3, Islamic State militants stormed the homelands of Iraq’s Yazidi minority, killing hundreds of men and enslaving thousands of women. The scenes of desperate Yazidi families crowding on the top of Sinjar mountain without food or water spurred Kurdish fighters into action, an emergency airlift and the start of the U.S. airstrike campaign against the Islamic State Sunni extremists. VOA's Sharon Benh reports from northern Iraq.
Video

Video Bangkok Warned It Soon Could Be Submerged

Italy's Venice and America's New Orleans are not the only cities gradually submerging. The nearly ten million residents of the Bangkok urban area now must confront warnings the city could become uninhabitable in a few decades. VOA Correspondent Steve Herman reports from the Thai capital.
Video

Video Inclusive Gym Gets People With Disabilities in Fitness Spirit

Individuals with special needs are 58 percent more likely to be obese than the general population. According to the U.S. Centers for Disease Control, they also have an increased likelihood of anxiety, depression and social isolation. But a sports club outside Washington wants to make a difference in these people's lives. With Carol Pearson narrating, VOA's June Soh reports.
Video

Video Astronauts Train Underwater for Deep Space Missions

Manned deep space missions are still a long way off, but space agencies are already testing procedures, equipment and human stamina for operations in extreme environment conditions. Small groups of astronauts take turns in spending days in an underwater lab, off Florida’s southern coast, simulating future missions to some remote world. VOA’s George Putic reports.
Video

Video Special Olympics Show Competitors' Skill, Determination

Special Olympics competitions will wrap up Saturday in Los Angeles, and the closing ceremony for athletes with intellectual disabilities will be held Sunday night. In a week of competition, athletes have shown what they can do through skill and determination. VOA's Mike O'Sullivan reports.
Video

Video Civil Rights Leaders Struggled to Achieve Voting Rights Act

Fifty years ago, lawmakers approved, and U.S. President Lyndon Johnson signed, the Voting Rights Act of 1965. The measure outlawed racial discrimination in voting, giving millions of blacks in many parts of the southern United States federal enforcement of the right to vote. Correspondent Chris Simkins introduces us to some civil rights leaders who were on the front lines in the struggle for voting rights.
Video

Video Shooter’s Grill: Serving Food with a Touch of the Second Amendment

Shooter's Grill, a restaurant in Rifle, Colorado, attracts visitors from all over the world as well as local patrons. The reason? Waitresses openly carry loaded firearms as they serve food, and customers are welcome to carry them, too. VOA's Enming Liu and Lin Yang paid a visit to Shooter's Grill, and heard different opinions about this unique establishment.
Video

Video Despite Controversy, Business Owner Continues Sale of Confederate Flags

At Cooter’s, a store in rural Sperryville, Virginia, about 120 kilometers west of Washington, D.C., Confederate flags are flying off the shelves. The red, white and blue battle flag, with 13 white stars representing the Confederate states, was carried by southern forces during the U.S. Civil War in the 1860s. The South had seceded from the Union over several key issues of disagreement, including slavery. VOA’s Deborah Block has the story.
Video

Video Booming London Property a ‘Haven for Dirty Money’

Billions of dollars of so-called ‘dirty money’ from the proceeds of crime - especially from Russia - are being laundered through the London property market, according to anti-corruption activists. As Henry Ridgwell reports from the British capital, the government has pledged to crack down on the practice.
Video

Video Hometown of Boy Scouts of America Founder Reacts to Gay Leader Decision

Ottawa, Illinois, is the hometown of W.D. Boyce, who founded the Boy Scouts of America in 1910. In Ottawa, where Scouting remains an important part of the legacy of the community, the end of the organization's ban on openly gay adult leaders was seen as inevitable. VOA's Kane Farabaugh reports.

VOA Blogs