A month ago Fearful Symmetry bemoaned the Reserve Bank of India’s (RBI) “late cycle tightening zeal”, particularly the lack of respect shown to a possible negative financial shock combined with a domestic slowdown in India that “should be trusted” to bring inflationary pressures to bear in 2012.
This month, Fearful Symmetry clarifies the reality that is India’s economy – interally investment driven, but financed from abroad, and that foreign sourced finance is “highly vulnerable to downswings that incorporate or are driven by negative financial shocks” (sound familiar?)
Further, data suggests the Indian economy is “underwhelming” with decelerating industrial production and a slumping service PMI, whilst inflation continues to be high (9.7% headline over the year) mainly due to food and fuel.