Rising interest rates engendered to curb inflation may stunt India’s GDP from a competitive 9% at the beginning of 2011, to a relatively mediocre 7.7% in FY 2011-2012, Credit Suisse’s Robert Prior Wandesforde tells Economic Times.
Indian GDP growth has approached 10% in 2010.
The big concern is that inflation will rise beyond 6% in FY2011-2012 depending on commodity prices like food and fuel.
Three huge factors affecting GDP growth will be:
1. Rise in oil prices
2. Tightening Reserve Bank of India (RBI) regulations
3. Strong exchange rates
A recovering US economy could mean increased foreign direct investment in India, but the rate hikes look to scare off capital inflow.
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