India and China use Liquidity Differently to Tame Inflation

December 18th, 2010
in News, Banking

The Financial Express:  Moody’s has said that China and India, both facing strong inflation threats, have adopted divergent macroeconomic strategies for tackling the problem. 

Follow up:

India is actively injecting liquidity into the financial system, while China is actively removing excess liquidity. The divergence in macroeconomic management was highlighted by the respective central banks in commentaries this week.   Both central banks have been tightening monetary policy settings to contain inflation pressures, said Moody’s.

Even as China remains reluctant to increase interest rates, India will continue to hike rates in the new year.  Despite the rhetoric regarding the similarities between the neighbouring economies during this week’s summit between India and China, the differences between the two emerging giants remain extensive. Though both may boast of billion-plus populations with increasing education and entrepreneurial potential, but China and India’s respective paths to macroeconomic prosperity remain starkly different.  Read more.....

Hat tip to Sanjeev Kulkarni.

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