As expected, India has joined Australia in lifting rates more than once to try and control a strong recovery.
Vietnam and Malaysia have also lifted rates, China has started a small tightening via lifting asset ratios and curtailing bank lending and Singapore has boosted the value of the Singapore dollar as a first, and possibly only step to start controlling a strong rebound.
But only Australia and India have lifted rates two times or more.
High inflation was the driver for the second rate rise in a month; in fact India’s inflation is on the verge of tipping over into double digits.
India isn’t as vital to the global economy as China, so its inflation problem draws nowhere near the sort of western concern that China’s does.
While price inflation, the main indicator in the country for price pressures, is running at 9.9%; China’s comparable index is around 5.9% at the moment.
India’s a real concern, China’s not yet, but certainly causing concerns, even after consumer price inflation fell last month.
These price pressures are linked to soaring food costs (especially sugar) caused by the poor monsoon last year, and higher oil prices.
With its two rate rises, India is the largest economy to tighten monetary policy with successive rate rises.
India’s industrial production has picked up during the past six months to return to 10% plus growth (on an annual basis).
Food inflation has been running at 15%-20%, but expectations that the coming monsoon won’t be poor for a second year, have helped put a lid on price rises in recent months.
World sugar prices have more than halved in the past four months on expectations that the shortfall in Indian output won’t be anywhere near as bad as previously thought.
India’s Reserve Bank raised the repo rate, a key lending rate, 0.25% to 5.25% and increased the cash reserve ratio, the amount of money banks are required to hold with the central bank, by the same amount to 6%.
India therefore joined Australia in lifting rates in successive months of 2010. Australia though had three successive rate rises in late 2009.
Tuesday night the Swedish central bank held its key rate steady at 0.25%, but said it would look to start increasing it from June-July onwards.
In the annual policy statement, also issued yesterday, the RBI said
The "economic recovery, which began around the second quarter of 2009-10, has since shown sustained improvement.
" Industrial recovery has become more broad-based and is expected to take firmer hold on the back of rising domestic and external demand.
"After a continuous decline for nearly a year, exports and imports have expanded since October/November 2009.
"Flow of resources to the commercial sector from both bank and non-bank sources has picked up.
"Surveys by the RBI as well as others suggest that business optimism has improved.
"On balance, under the assumption of a normal monsoon and sustained good performance of the industry and services sectors, for policy purposes, the Reserve Bank projects real GDP growth for 2010-11 at 8.0 per cent with an upside bias.
"The developments on the inflation front are, however, worrisome.
"Headline wholesale price index (WPI) inflation accelerated from 1.5 per cent in October 2009 to 9.9 per cent by March 2010.
"There has been a significant change in the drivers of inflation in recent months.
"What was initially a process driven by food prices has now become more generalised.
"This is reflected in non-food manufactured products inflation rising from (-) 0.4 per cent in November 2009 to 4.7 per cent in March 2010.
Going forward, three major uncertainties cloud the outlook for inflation.
"First, the prospects of the monsoon in 2010-11 are not yet clear.
"Second, crude prices continue to be volatile. Third, there is evidence of demand side pressures building up.
"On balance, keeping in view domestic demand-supply balance and the global trend in commodity prices, the baseline projection for WPI inflation for March 2011 is placed at 5.5 per cent."
That inflation rate in 11 months time will still be above the current repo rate from the central bank, indicating that there will have to be several more rate rises.
