India holds rates steady on growth
concerns
India's central bank held key interest rates steady as it
struggles to foster growth amid high inflation, and took steps to curb currency
speculation, lifting the rupee from all-time lows Friday.
The Reserve Bank of India kept the short-term lending rate,
or repo rate, at 8.5 percent and the reverse repo rate — the rate it pays to
banks for deposits, at 7.5 percent. The bank also kept the cash reserve ratio
for commercial lenders unchanged at 6.0 percent.
Growth slipped to a two-year low of 6.9 percent in the
September quarter and industrial production fell 5.1 percent in October, its
first contraction since June 2009. But inflation remains above 9 percent.
The bank's 13 rate hikes since March 2010 have kept it out
of step with many other emerging economies, which have started to ease monetary
policy as global growth slows.
The Reserve Bank noted that Brazil, Indonesia, Israel and
Thailand have all cut their policy rates, while China cut reserve requirements.
In India, the Reserve Bank has been waging a lonely — and
largely ineffective — fight on inflation. New Delhi has failed to back the bank
with fiscal consolidation or enact difficult policy changes that could unlock
supply-side bottlenecks, pushing down prices and unleashing growth.
India is largely a cash economy, so rate hikes have little
direct impact on most consumer demand. They do, however, hit investment, which
can curtail supply and make inflation even worse.
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