IndusView, Monday September 29 (London): While the United States Federal Reserve Bank (Fed) is expected to raise interest rates in Spring 2015, the Reserve Bank of India (RBI) is likely to maintain them in order to battle un-simmering inflation.
The world’s largest economy registered an annualized growth of 4% in the second quarter 2014, beating expectations of 3.1% and confirming its recovery is back on track. The U.S. central bank has kept America’s short-term interest rates near zero since the end of 2008, as it battled to fuel growth after the financial crisis. A rise next year would represent the first rate increase in more than eight years; the last increase occurred in June 2006.
In India, industrial growth, which had revived in the April-June quarter and grew by 4.2%, slipped in July to a mere 0.5% for want of stimulus. The only sector that performed well was power generation with an increase by 11.2% year-on-year (y-o-y). Capital goods and durable consumer goods have underperformed, indicating weak demand. Inflation going by the wholesale price index dropped to 3.7% – its lowest in five years – but inflation at the retail level remained high at 7.8%.
“Prime Minister Modi could learn a lesson or two from the U.S. economic revival,” said Bundeep Singh Rangar, Chairman of London-based consulting firm IndusView. “India still needs to boost growth while the U.S. economy seems back on track.”
The U.S. is the only ‘superpower’ in the world today, with almost nine times India’s GDP and with a per-capita 33 times more than India’s. The U.S. is also the best example of the power of entrepreneurship enhancing prosperity of its people.
Modi will attend the United Nations General Assembly session in New York and then fly to Washington DC for the meeting with Obama at the White House on September 30. In his invitation letter, President Obama reiterated his invitation — that first came in a phone conversation with Modi on May 16 — and resolved to work closely with Modi to make India-U.S. relations “a defining partnership for the 21st Century”.
Modi, who was denied visa by the U.S. in 2005 due to the Gujarat riots, said he was of the view that “re-energizing the partnership between India and the U.S. would send an important message to the region and beyond”. Modi was Chief Minister of the State of Gujarat when violence against its minority Muslim population resulted in the deaths of 790 Muslims and 254 Hindus.
“The U.S. and India have always been unfriendly friends. Now is the time to make themselves friendlier,” said Rangar. “From energy, to defense, to counter-terrorism, to trade, America and India have many overlapping national interests and need to strengthen their relationship to realize their efforts to collaborate.”
The U.S. Senate passed a unanimous resolution designating Sept. 30 as U.S-India Partnership Day. The resolution emphasizes the mutual benefits of a thriving U.S-India partnership, stressing the importance of increasing collaboration in order to promote stability, democracy, and economic prosperity in the 21st century.