Author: Mathew Joseph, ICRIER

Food inflation is reaching new heights in India, petrol prices have seen a hike for the second time in a month and the crisis is now threatening to arrest the country’s growth momentum. But to put the blame on crop failure alone, as the government is trying to do, is erroneous.

Food inflation crossed the 20 per cent mark in December 2009 and remained at that level for several months. Read more…

Author: Mathew Joseph, ICRIER

India is beginning to bounce back from the global financial crisis. But the IMF has warned that large capital inflows from Foreign Institutional Investors (FIIs) could disrupt this recovery. An analysis of policy options proposed in a recent IMF report reveals, however, that past methods of dealing with FII inflows are inadequate and that market-based capital controls may be the only sufficient response. According to the recent IMF publication the World Economic Outlook (WEO), India’s GDP growth rate may leap from 5.7 per cent to 8.8 per cent between 2009 – 2010. This is even higher than the most optimistic projections by the Indian finance ministry. Less encouraging, however, is the IMF’s simultaneously released Global Financial Stability Report (GFSR) in which policy response options are suggested for dealing with capital inflow surges from advanced countries in emerging economies.

While the global economic recovery has been better than anticipated, the IMF identifies two risks: one that affects advanced countries and the other emerging economies. Read more…

Authors: Mathew Joseph and Karan Singh, ICRIER

The sharp fall in US domestic consumption after the financial crisis has to be offset by a rise in net exports. For the US economy to recover then, the dollar must depreciate against the Chinese yuan. This devaluation is proving to be difficult, as the Chinese are resisting a yuan appreciation through massive intervention in the currency markets. The disastrous effects on the Japanese economy of the G7-managed appreciation of the yen in the mid-eighties have made the Chinese wary of a sharp appreciation in the yuan.

But while much focus is put on the US dollar’s depreciation against the yuan, what about the US dollar’s depreciation against the rupee?
Read more…