India’s strong Rupee and availability of surplus cash with the its banks, has affected its export markets. In the current fiscal year, the Indian Government expects the economy to grow more than 9 percent for the third successive year. For the Central Bank, managing liquidity has become a most challenging task.

Fast and significant appreciation of the Indian Rupee and excess inflow of foreign money has only added to inflationary pressures and resulted in overheating of country’s economy. The magnitude of the capital inflows mean serious repercussions on domestic business as well as exports.

To counter the impacts of this surging inflow of foreign money, Indian government has now announced some curbs on overseas borrowing by its local companies. Details on this can be read at http://www.india-briefing.com.

The government expects that these measures will weaken the rupee and bring immediate relief to India’s highly profitable software and outsourcing industry, whose dollars earnings have been hit by the appreciating Rupee. Curbs on these corporate borrowings is therefore a step, Indian government has taken to check capital inflows, without hurting the direct foreign or portfolio investments.

China on the other hand is tightening its grip on foreign investors in China’s real estate business, banning them from borrowing offshore. The objective is to control the rising property prices and use this control as one of the steps to cool the economy. China’s urban property inflation has already risen by 7.1 per cent. Such moves will restrict foreign investors who take advantage of lower interest rates to borrow funds from outside China and reduce the inflation caused by such borrowings.

This entry was posted on Monday, August 13th, 2007 at 12:06 pm and is filed under Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.