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25/06/2012 03:44:52 AM
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Publish Date25/06/2012 03:44:52 AM
Last Update25/06/2012 07:41:45 AM
India witnessed a sharp decline in its currency which is adding to the inflationary pressures, just like what happened in China when it was victimized by inflation due to its weakening currency.
India plans to ease its monetary policies and take new measures to support the rupee and curb its massive decline against the dollar, which threatens the nation’s economy as it adds inflationary pressures, causing a rise in companies’ costs especially to repay foreign debt.
The rupee fell by 20% in the past year, which led to a rise in prices. Meanwhile, the government and the central bank are discussing how to solve this critical situation, and may announce their plans this week.
On the other hand, the central bank is expected to cut its benchmark interest rate during the upcoming period in order to control the rupee’s decline. The Reserve Bank of India refrained from lowering rates this month due to the rapid increase in inflation pressures that prevented the bank from acting in favor of growth.
India’s companies are facing a record $5.3 billion of maturing foreign-currency debt this year. This could drain these companies especially amid the escalating debt crisis in Europe.
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