The unending flow of foreign money into Indian markets is worrying the RBI. On Tuesday deputy governor Subir Gokarn said the bank’s looking at ways of dealing with the deluge. He also described the foreign inflows as a potential threat. Gokarn’s statement came a day after finance minister Pranab Mukherjee said there was no need to intervene in the markets at the moment. More than $19.7 billion worth of foreign funds have entered Indian markets in 2010.
And capital inflows are not Gokarn only concern. He also warned that inflation rates continue to be well above the comfort zone. India’s headline inflation was at eight point five percent in August. But that’s still above the end-of-fiscal target of six percent. And while Gokarn said the RBI has almost finished normalizing its monetary policy, it’s scheduled to make public its mid-term policy review on the second of November.
India’s services sector has grown at slower rate in September The HSBC Markit Business Activity Index was at 55.6 for the month. That’s compared to August’s 59.3. Back in June, the index was at 64. Any reading above 50 indicates a gain.