India has other reasons to worry about besides US Fed Powell – Vophs India

India’s long-standing status as the world’s fastest-growing economy could be under threat.

Weaker domestic consumption, along with a potentially aggressive withdrawal of easy money from the US and Europe, could occur The motivation for this shift.

Late last week, the chair of the US Federal Reserve Jerome Powell warned”Some inconvenience to households and businesses“In his efforts to curb inflation. He said an “unusually large” rate hike was due in September. “We have to stick with it until the job is done.”

300-325 basis point (bps) increase likely Today it increased to 71.5%. (Aug. 29), up from 55% a week earlier, according to the CME FedWatch tool.

All this seems to have spooked US stocks and then emerging markets. India’s benchmark stock indices, Nifty 50 and Sensex, were trading around 1.5 percent lower today. Sensex is losing more than 1,000 points. In early trade.

MSCI’s broadest index of Asia-Pacific stocks, of which India is a component, fell 2.3% after Powell’s speech. The index posted its biggest decline since June 13.

Indian markets will remain volatile.

Market experts believe that aggressive growth in advanced economies will eat into Indian equity gains, while also curbing foreign interest in its stocks.

“A sharp rise in the dollar index above 109 and a 3.1% rise in 10-year bond yields is negative for capital flows to EMs. [emerging markets] Like India. FPIs [foreign portfolio investors] Buying in India is unlikely to continue in this scenario,” said VK Vijaykumar, chief investment strategist at Geojit Financial Services.

Today the rupee fell. A record low 80.11 per dollar and is expected to fall further to 81-82 per dollar in the coming days.

India’s troubles, however, do not end there.

India needs to focus on consumption.

In the last few years, it has seen an economic recovery. Driven by investmentEspecially since the covid-19 pandemic.

The consumption-led growth model was crucial because it revitalized social security schemes. Most economists, meanwhile, have kept their GDP estimates for the quarter ending in June below the Reserve Bank of India’s 16.2 percent.

While growth is expected due to the economy. Low base effect And a Pickup in the service sectorFrom July to September the speed can be halved. Reuters poll of economists has said. It indicated that growth could pick up further by the end of the year as interest rates rise.

“By supporting growth through investment, the government has fired only one engine while forgetting the stimulus that domestic consumption provides. This is why India’s growth is still below the pre-pandemic trend. is down,” said Kunal Kundu, India economist at Societe Generale. NDTV.

India is struggling with high unemployment and record low real wages, which also cloud its prospects.

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