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 British Fighters on Frontline of Islamic State Information War

It’s estimated that several hundred British citizens are fighting for Islamic State alongside other foreign jihadists More

Pakistan's Political Turmoil Again Shines Spotlight on Military

Thousands of protesters calling for PM Sharif to step down continue protests in front of parliament, as critics fear political impasse could spur another military coup More

Photogallery Ebola Quarantines Spark Anxiety in Liberian Capital

Food prices rise sharply as residents attempting purchases clash with security forces, leaving one person dead 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.
Native Bees May Help Save Cropsi
X
Deborah Block
August 22, 2014 12:23 AM
U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video Native Bees May Help Save Crops

U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video US Defense Officials Plan for Long-Term Strategy to Contain Islamic State

U.S. defense officials say American air strikes in Iraq have helped deter Islamic State militants for the time being, but that a broad international effort is needed to defeat the extremists permanently. Defense Secretary Chuck Hagel warned Thursday that the group formerly known as the Islamic State in Iraq and the Levant, or ISIL, is better organized, and financially and militarily stronger than any other known terrorist group. Zlatica Hoke has more.
Video

Video Drug-Resistant Malaria Spreads in Southeast Asia

On Thailand’s border with Myanmar, also known as Burma, a malaria research and treatment clinic is stepping up efforts to eliminate a drug-resistant form of the parasite - before it spreads abroad. Steve Sandford reports from Mae Sot, Thailand.
Video

Video Gaza Conflict, Hamas Popularity Challenge Abbas

The Palestinian unity government of Mahmoud Abbas has failed to convince Hamas to agree to Egyptian-negotiated terms with Israel on a Gaza cease-fire. VOA State Department Correspondent Scott Stearns reports on what the Gaza conflict means for President Abbas, with whom U.S. officials have worked for years on a two-state solution to the Israeli-Palestinian conflict.
Video

Video Nigeria's 'Nollywood' Movie Industry Rolls in High Gear

Twenty years after its birth in a video shop in Lagos, Nigeria's "Nollywood" is one of the most prolific film industries on earth. Despite low budgets and whirlwind production schedules, Nigerian films are wildly popular in Africa and industry professionals say they hope, in the future, their films will be as great in quality as they are in quantity. Heather Murdock has more for VOA from Lagos.
Video

Video UN Launches 'Biggest Aid Operation in 30 Years' in Iraq

The United Nations has launched what it describes as one of the biggest aid operations in 30 years in northern Iraq, as hundreds of thousands of refugees flee the extremist Sunni militant group calling itself the Islamic State. As Kurdish and Iraqi forces battle the Sunni insurgents, the fighting has forced more people to flee their homes. Kurdish authorities say the international community must act now to avert a humanitarian catastrophe. Henry Ridgwell reports for VOA from London.
Video

Video Cambodian American Hip Hop Artist Sings of Personal Struggles

A growing underground movement of Cambodian American hip hop artists is rapping about the struggles of living in urban America. Most, if not all of them, are refugees or children of refugees who came to the United States from Cambodia to escape the Khmer Rouge genocide of the 1970s. Through their music, the artists hope to give voice to immigrants who have been struggling quietly for years. Elizabeth Lee reports from Long Beach, California.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.

AppleAndroid