Starting in 2008, the financial crisis affected most of the countries in the world. Recently, a light of global economic recovery was shed on many of these countries. However, a new challenge aroused in the Asian currency price market. In India, people hope that the government can change a record-low currency trading situation, accelerating inflation. Furthermore, they hope India’s economy can find its way back to the normal path.
The rupee, down about 12 percent against the dollar in the past six months, has been hurt by a record current-account deficit and the prospect of a reduced U.S. monetary stimulus. India's government raised two rates on July 15 and tightened lenders’ reserve ratios to curb the supply of rupees, joining nations from Brazil to Indonesia in fighting currency weakness.
In India, three fiscal stimulus packages have been unveiled since December 2008 to help the economic recovery. Shortly thereafter, the currency price began to feel the pressure and the Indian government raised borrowing costs in 2010. As consumer-price inflation accelerated to 9.87 percent in June, the government decided to attract investment from small businesses and to raise the tariffs in order to take down the price acceleration and narrow the trade gap.
As the India's governor said last year, economic growth will need to be sacrificed in the short term to ease inflation. High inflation definitely leads to an economic bubble as investments tend to involve the real-estate market and stock market under economic easing policies. Therefore, the government’s main job now is to control the inflation rate and curb price climbing. What do you think India should do to fight the price pressure?