India’s newly installed central bank Governor Raghuram Rajan burnished his international credentials at a 2005 U.S. conference warning about the danger of a potential crisis. Now he has one of his own to contend with.
Indian Prime Minister Manmohan Singh’s $21 billion-a-year program to provide cheap food for the poor threatens to impede the nation’s efforts to pare the widest budget deficit in major emerging countries.
The Indian central bank’s second interest-rate cut this year to spur growth was overshadowed by political drama as a key ally withdrew support for the coalition government, imperiling a push for reforms to revive investment.
The cost of fixing five-year borrowing costs in India rose the most in two months this week on speculation companies are expanding production and improving earnings even after eight interest-rate increases.
India’s central bank will consider reducing interest rates for the first time since April after government efforts to pare the budget deficit stemmed a slide in the rupee, boosting scope to stimulate the economy.