At the G-20 Sherpa’s meeting later this month, India is set to highlight external risks such as aggressive policy action and high public debt in advanced economies that pose a risk to its growth and create inflationary pressures.
“While domestic factors are largely conducive for maintaining a high growth, external risks such as low interest rates are leading to a surge of capital flows into India. This is ultimately leading to an asset price bubble and soaring commodity prices within the country, making it difficult to curb prices,” a finance ministry official said.
G-20 deputies or ‘sherpas’ are scheduled to meet in Paris between April 28 and 29 to prepare the groundwork for the meeting of heads of states in November at Cannes. Planning Commission deputy chairman Montek Singh Ahluwalia is India’s Sherpa at the summit.
To tide over the financial crisis of 2008 and fears of a double dip recession following the Eurozone debt crisis, advanced economies like the US and the UK are using quantitative easing and near zero interest rates. The policies have led to a spurt of capital flows into developing countries like India which offer higher interest rates and better growth prospects, that are in turn creating an asset price bubble and spurt in commodity and credit prices. Between April 2010 and January 2011, India received FDI of $22.058 billion and FIIs investments to the tune of $ 31.031 billion raising concerns over the huge FII inflows.
“If fiscal stress in the advanced economies like the US and the EU continue, then they will have to continue with the easy money and countries like India, China and Brazil will have to bear the brunt. This is a critical issue which will have to be taken up and some middle ground will have to be found,” said Abheek Barua, chief economist at HDFC Bank, adding that the issue of regulation of commodity markets should also be taken up in order to prevent price spurts.
Source: http://www.indianexpress.com
“While domestic factors are largely conducive for maintaining a high growth, external risks such as low interest rates are leading to a surge of capital flows into India. This is ultimately leading to an asset price bubble and soaring commodity prices within the country, making it difficult to curb prices,” a finance ministry official said.
G-20 deputies or ‘sherpas’ are scheduled to meet in Paris between April 28 and 29 to prepare the groundwork for the meeting of heads of states in November at Cannes. Planning Commission deputy chairman Montek Singh Ahluwalia is India’s Sherpa at the summit.
To tide over the financial crisis of 2008 and fears of a double dip recession following the Eurozone debt crisis, advanced economies like the US and the UK are using quantitative easing and near zero interest rates. The policies have led to a spurt of capital flows into developing countries like India which offer higher interest rates and better growth prospects, that are in turn creating an asset price bubble and spurt in commodity and credit prices. Between April 2010 and January 2011, India received FDI of $22.058 billion and FIIs investments to the tune of $ 31.031 billion raising concerns over the huge FII inflows.
“If fiscal stress in the advanced economies like the US and the EU continue, then they will have to continue with the easy money and countries like India, China and Brazil will have to bear the brunt. This is a critical issue which will have to be taken up and some middle ground will have to be found,” said Abheek Barua, chief economist at HDFC Bank, adding that the issue of regulation of commodity markets should also be taken up in order to prevent price spurts.
Source: http://www.indianexpress.com
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