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Faltoo Bakwas

By | September 2011
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NEW DELHI — India’s central government, convulsed by a series of corruption scandals, is under increasing pressure to deal with the potentially conflicting challenges of rising inflation and slowing growth. Add to Portfolio

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Activa scooters under assembly at a Honda plant in Rajasthan state. After a surge ahead in 2010, vehicle sales are slowing. But any effort to deal with the underlying problems that plague the Indian economy runs directly into powerful political interests. On Tuesday, India’s government said inflation increased 9.1 percent in May, compared with a year earlier, a higher rate than expected. That came atop troubling economic data indicating India’s gross domestic product growth had slowed, as companies spent less, foreign investment dropped and bad loans piled up at some banks. While India’s long-term prospects remain strong, many economists and analysts say the country’s central government needs to act quickly to ensure the short-term problems do not intensify. While slower growth could help curb inflation, critics are not confident the government has the policy finesse to address either problem adequately. India faces “an unpleasant trinity of moderating growth, high inflation and monetary tightening,” said Rajeev Malik, senior economist for the investment bank CLSA in Singapore. “It is very important that the government get its act together and begin to do something.” In the first three months of this year, India’s annual growth rate of gross domestic product slipped to 7.8 percent — down from an 8.3 percent annual rate in the fourth quarter of last year, and short of analysts’ predictions. The central government, led by Prime Minister Manmohan Singh, has been rocked by allegations of corruption and investigations into sweetheart deals worth billions of dollars between government ministers and businesses of various types — most notably one involving...

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