The impact of

Global interest rate

hikes on India’s
economy
 Introduction

• The federal Reserve’s rate increase has sparked

widespread discussion.
• The European Central Bank follows suit with its
9th consecutive rate hike.
• India’s central bank faces a challenging situation.
Reasons for inflation in the US

• Supply disruptions due to covid

• Increase in spending capabilities due to covid led savings
and government cheques
• Contrary to expectations, the US economy grew at 2.4% in
the April-June quarter of 2023.
Capital Account Implications

Shrinking yield spreads

Not raising interest rates and foreign investors’ risk-
01 could lead to capital 02 reward ratio
outflows.

Rising US rates and

Investors seek markets
narrowing rate gaps puts
03
5 with higher interest rates. 04 pressure on the RBI
 PRESENT
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it
 Impact of a Stronger US dollar

• Stronger US dollar poses challenges for India’s

developing economy.
• Imported goods and services become more
expensive.
• Inflationary pressure due to the rising cost of imports
• Effects on trade balance
 Factors aiding decision making

• Eurozone’s negative money supply and weakening

Inflationary forces.
• US Consumer Price Index (CPI) and Labour Market
cooling off.
• Decrease in headline inflation in India.
• Rise in automobile sales.
• Higher Industrial Production Index (IIP) numbers.
 PRESENT
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it
Prudent Fiscal Measures

Boosting economic Potential for Global attention

growth sustained towards ‘Make in
economic growth India’ slogan.

Domestic
Indian Government’s
manufacturing
fiscal measures can
and job creation
aid RBI’s economic
through ‘Make in
management.
India’.
 Foreign direct
investment can offset Less impact of interest
short-term capital rate changes
movements. Foreign
Direct
Investment
and
Economic
Stability
Attraction of Foreign
Maintaining stability in Direct Investment
the economy (FDI)
THANKS!
Made By :
Mahi
Yash
Sumedha
Anshul Patil
Khushi Chandekar