Girish's Blog

India's bonds had their biggest plunge in seven months yesterday after Reddy unexpectedly raised short-term rates. It isn't additional rate hikes that traders fear -- it's that rapid growth will fuel inflation. The Reserve Bank of India was right to raise its overnight borrowing rate to a three-year high of 5.5 percent from 5.25 percent. Its fourth increase in 15 months proved two things. One, Reddy isn't in the pocket of politicians hoping he'd stop boosting rates. Two, inflation is a bigger threat than many in the markets appreciate. Investors need not panic. By raising its growth forecast for the fiscal year ending March 31 to 8 percent from 7.5 percent, the central bank effectively admitted its rate increases aren't working. Reddy remains on the case, though. In a region in which many central banks are holding borrowing costs too low, India is throwing down the gauntlet. Reddy's balancing act is a pa...

Budget season is approaching in India and I can still remember the annual budget TV broadcast and the talking heads who followed - basically the communists saying that the changes announced were "anti-poor" and the businessmen being "cautiously optimistic". The Finance Ministry has a good website which provides links to the Union Budgets and Economic surveys. "The economy had registered a growth rate of 8.5 per cent in 2003-04, the highest ever except in 1975-76 and 1988-89. .... The year 2004-05, after starting with a point-to-point, annual inflation rate of 4.5 per cent on April 3, 2004 witnessed a peak level of inflation at 8.7 per cent on August 28, 2004 , the highest in the last four years. However, inflation has been on a declining trend and stood at ...