Dealing with the capital surge

Overview

The flood of liquidity released by quantitative easing in the West will continue to pour into India and other emerging markets during 2010. But the biggest driver of India’s monetary policy over the next 12 months is likely to be accelerating WPI inflation, which is expected to exceed 6.5 per cent year on year by March 2010. The resulting political pressure on a government wary of angry voters could lead to faster-than-expected appreciation of the...