And There Is The Possibility of Credit Rating Downgrade
Although the Indian economy showed streaks of optimism in September after the government’s economic reforms program, it did not take long to become sluggish again. India’s stock index and as well as its currency has weakened since October. Finance minister P. Chidambaram was right to mention that India’s economy can not be insulated due to the economic crisis the world is going through.
In 2012, the Indian economy is expected to grow 5.5 to 6 percent. Growth is expected at 7 percent in 2013. Beyond 2013, growth should be back to 8 percent. However, the International Monetary Fund (IMF) slashed India’s growth forecast from 6.1 percent to 4.9 percent.
Industrial output showed slight signs of growth, but not enough to invigorate the economy. High inflation is also a concern – although it seems like inflation has eased slightly recently. The Reserve Bank of India (RBI) has kept interest rates unchanged in last policy review. The expectations that RBI would lower interest rates did not happen. The RBI is to announce its next monetary policy on December 18.
Public sector enterprises have been blaming high borrowing costs for the sluggishness of Asia’s 3rd largest economy. Higher borrowing costs curb consumers spending and lower industrial output. The government has been blaming public sector enterprises for sitting on large amounts of cash without putting them on investments to help the economy grow. And then there is the recent fear that rating agency Standard & Poor’s might downgrade India’s credit rating. However, India’s government is in decline and a credit rating downgrade will not happen as India is taking all the necessary steps to ride through the economic crisis.
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