Inflation At 10 Month High
Coupled with continued bull run in the Indian stock market, another problem is lurking that might hamper the country’s resolution to achieve higher economic growth with price stability. Inflation rate has just crossed the 5 percent mark for the first time in last 10 months. Week ending on 23rd February pegged the Wholesale Price index at 5.02 percent. Rising food price and increase in cost for manufacturing good are some reasons for the inflation to shoot up.
the apex bank in India is a bit worried about the recent spur in inflationary pressure. Mr YV Reddy, the Governor of Reserve Bank of India expressed his concern in a symposium held in Paris on “Globalization, Inflation and Monetary Policy” . According to him
“In the Indian context, considerable weight is currently accorded by the RBI to price and financial stability while recognizing it twin objectives of growth and stability”.
The Indian government is looking to control the the inflationary pressure below 5 percent and targeting to keep it around 4-5 percent. But still consumers are feeling the heat.
Industry And Govt. Differ On Inflationary Policies
Inflation has been rising and rising high touching a 13-months record at 6.68 during last week. Indian government has naturally become nervous as general election is not far away and it does not want to be seen a failure to control price rises just before election. So it has called a high level cabinet committee meeting as to how it can tackle the disturbing inflationary trend.
But it is almost clear on how it plans to from what P. Chidamabaram, the Finance Minister suggested! According to him inflation has to be curbed even if it is at the cost of growth. The Indian industry has sharply reacted to the suggestion made by Mr. Chidambaram. According to Mr. Sanjay Budhia, the Chairman of CII ( Confedaeration Of Indian Industry) – the government should adopt a policy that would support a balance between industrial growth and inflationary reduction. Any hasty measure by the government to bring down inflation would result in loosing the momentum of growth that India has seen over the last decade or so.
India To Get More Voting Rights At IMF
For long large developing economies like India and Brazil have been demanding a bigger say in the affairs and running of IMF. Finally, it seems their voice have been heard as the IMF board, in a recent in a recent proposal has made few changes in the voting structure of the 185-nation lending organization to make it more relevant.
The move is going to enhance the voting shares of emerging economies of India, China, Mexico, Brazil and South Korea. But it will also reduce the same voting shares of countries like Russia, Saudi Arabia, Venezuela, Chile, Argentina and Egypt. This is the first such change in the voting structure of the agency since its inception in 1944. The proposal pledges to increase each member’s vote by 3 times. Hence, India’s voting percentage will be 2.34 – up by a mere 0.42 share.
Free Trade Agreement Between EU And India Might Miss Deadline
The European Union (EU) and Indian government have been trying to come to a Free Trade Agreement for quite sometime now and it was to get formalized by the end of this year 2008. But what has been coming out of it has become a big frustrating experience for the Union Government.
The main contentious issues are still to be addressed properly and not only that, instead of problems being solved, they are mounting by the day. The negative list, non-tarrif barriers and other differences remain though time is running out. India wants its service industry to get more ground in the EU and the EU wants its products to have easy access to the vast Indian market.
A ministerial meeting is scheduled to be held next month between the two parties in order to sort out differences and exchange negative lists. But negative lists of both sides are growing by the day as more and more products and even allied industries are seeking protection in the negative lists. The EU has already handed over its negative list that might affect India’’s export of goods primarily based on petrochemical products, not to mention textiles, cosmetics, glassware, fertilizers and pharmaceuticals. Originally, India and the EU were supposed to keep 90 percent of the products under the agreement. But it seems that the figure will decrease to a great extent. The finalization of India’s negative list is still going on as more Indian companies or products are lobbying to get into the negative list to protect their business. It should be mentioned that, goods falling under the negative list would cost more due to high tarrifs.
According to a study by FICCI (Federation Of Indian Chambers Of Commerce and Industry), the Indo-EU trade could reach $572 billions by 2015 if the agreement is properly and timely implemented. Naturally, Kamal Nath, the Indian Commerce Minister is very disappointed with the slow pace of talks.
On the other hand, some experts feel that India should forget these kind of agreements and look for more pacts which would be integrated with India’s reform policies and thuse bore more fruits.