Rangarajan: India will preserve economic stimulus

10-15-2009 08:16

Dr. Chakravarthi Rangarajan, Chairman of the Prime Minister's Economic Advisory Council, believes that the Republic of India is likely to preserve its economic stimulus during the year that ends March 31, while it is not expected that the Central Bank of India will alter its “accommodative” fiscal policy at this moment.

Preserve economic stimulus

India’s central bank could prefer to eliminate the surplus of the financial system since the inflation rate will rise during the next months, while the central bank is not likely to increase benchmark interest rates, according to the former Governor of the Reserve Bank of India. The financial regulator could also end its open-market debt acquiring, which was utilized during the previous months to add cash, as India’s economy, that represents a value of 1.2 trillion US Dollar, could show a growth rate of 6 – 6.5% during this fiscal year, Rangarajan commented in the capital of India.
He continued by saying: “The monetary policy by the Reserve Bank of India has been accommodative, which is not likely to change, unless inflationary pressures will be extremely strong.”

Protection

India’s central bank has maintained its policy levels at record lows while in the period October 2008 – April 2009 it reduced the repurchase, or overnight lending level, six times in order to protect the nation’s economy against the worldwide slump. The Indian GDP climbed 6.1% in the second quarter; which was the first rise since 2007.

Before industrialized countries

The financial regulator estimates that the Indian inflation level will rise to 5% in March, in comparison to 0.7% in week 39. The Governor of the Reserve Bank of India (RBI) commented previously in October that he could be forced to raise interest rates even before industrialized countries. It is possible that the RBI “not alters the policy level but discontinues open-market transactions” in order to slow the pace of price rises, the chairman of the Prime Minister’s Economic Advisory Council stated.

Real up on economic outlook

The Brazilian Real rose versus the US Dollar and various other key-currencies due to favorable international and domestic circumstances, while optimistic data and the corrected economic expansion also bolstered the Real.

At the moment, the Federative Republic of Brazil has one of the highest interest levels of the major economies worldwide and these rates are expected to continue to rise in 2010 if economic expansion in Brazil will be affirmed, which has been indicated by speculations, providing the Brazilian currency support to hit the strongest level against the Sterling and the Greenback this year.