India left in an uncomfortable position as interest rates continue to rise

As corporations deal with rising input costs and pass higher prices on to customers, India’s annual wholesale inflation rate surged to 14.55% in March, finishing a year in double digits. A proxy for producer pricing, wholesale prices have risen as input costs for things like petroleum, metals, and chemicals have increased. According to Mugunthan Siva from India Avenue Investment, controlling inflation allows bottlenecks to be eased for growth, which India desperately needs. He highlights that the sustained high level of oil prices will undoubtedly put pressure on India. 10-year bonds have climbed from a low of 5.8% in July 2020 to 7.2%, reflecting the need of the hour – RBI inflation control – and a shift in discourse from growth-focused to inflation-focused. Rate hikes of 50 to 100 basis points are expected in India over FY23 (March year-end) to limit inflation, with the Central Bank beginning to drain some surplus liquidity from the system.