Latest News
-
Honasa Consumer to Strengthen Operations by Merging Fusion Cosmeceutics and Just4Kids -
Wipro Reports 7.8% Decline in Q4 Net Profit; CEO Highlights Economic Challenges -
IREDA Hits Record Annual PAT of Rs 1,252 Cr in FY24; Q4 Profits Up by 33% -
Massive Employee Exodus Hits India's Top IT Companies in FY23-24 -
Air India Enhances Operational Efficiency with New Crew Management System -
BlackRock Acquires Shares in Electrosteel Castings and PTC India for Rs 207 Crore -
IndiGo Enhances Domestic Routes with Direct Chennai-Durgapur Flights -
Tesla to Recall Nearly 4,000 Cybertrucks Over Accelerator Pedal Fault -
Reliance, ONGC, Tata, Adanis: Energy Stocks Didn't Get The Memo Of Bears, Up 12% In 30-Days; 10 Stocks To BUY -
Sebi to Enhance Price Discovery for Firms Trading Below Book Value
Is another rate hike necessary?
The RBI with its anti-inflationary stance has raised key policy rates 11 times since March 2010 by 325 basis points i.e. from 4.75% lows to 8%, the ceaseless move which has not tamed sticky inflation but has definitely weakened the growth.
The July inflation stood high at 9.22% and August inflation is expected to release by the government later in a day, where estimates say it will be as high as 9.7%. High inflation numbers will again hurt India's gloomy growth story.
But the central question is, 'Is another rate hike necessary?"
No, it is really not necessary. There are multiple reasons for that.
Laggard Growth: While GDP has declined to from 8% to 7.7% for the second quarter in a row in April-June and another rate hike might have severe implications.
Industrial Production: Industrial Production Growth has already dipped from 6.6% in June to 3.3% in July due to companies rising borrowing cost in line with rising interest rates.
Currency fluctuations: Rupee is under continuous pressure from dollar, which has already made imports expensive for Indian government. India is world's largest importer of pulses, cooking oil and fertilizers, which could again aggravate rising food inflation. Depreciating rupee also have an adverse impact on India's crude oil imports, making crude expensive, thus fuelling more inflation.
Global financial crisis: There is a fear that developed economies are heading for another recession and global financial crisis have already hurt the sentiments of emerging economies including India. A series of bad news coming from western regions is also another very factor putting pressure on Indian companies, having their sales impacted.
Therefore, considering all the reasons that are stated above another rate hike could have an untoward impact on Indian economy.
GoodReturns.in
