Rising interest rates in the US will have an adverse effect on India

New Delhi: Inflation in the US has reached a 20-year high. The US Department of Labor has released 18-month inflation figures for January. It has risen to 4.5%. This is the highest level of inflation in the US after 19. Experts did not expect such a sharp rise in inflation. With inflation reaching a 30-year high, the US Federal Reserve will soon raise interest rates, which will have an adverse effect on India.

The Federal Reserve will raise interest rates sharply to control inflation in the US. This will increase the yield in America. This will allow foreign funds to withdraw money from emerging markets and invest in the US. Third, rising interest rates in the US will make it more expensive for Indian companies to raise money there.

In fact, when inflation is very high in any country of the world, it affects other countries as well. Especially when it comes to the US economy, high inflation is likely to have an impact on other countries, including India. First, the effect is in the form of high import inflation. This means that we now have to pay more for the things we import from America. Their prices in the domestic market will also be higher. It will have a direct impact on local inflation.

The Federal Reserve did not expect inflation to rise sharply in the US. The consumer price index was just 1.2 per cent in February last year. Then it slowly increased. That in March. It has risen to 4.5 per cent in April, 7.5 per cent in May, 7.5 per cent in June, 4.5 per cent in June, 4.5 per cent in October, 3.1 per cent in December and 4.5 per cent in January.

In the year 2020, the greatest impact of the Corona epidemic was on economic activities. The lockdown brought economic activity to a standstill. People were locked in houses. More than 20 million people were unemployed. This led to a sharp decline in industrial production.

Companies have not made new investments for fear of the epidemic continuing. However, the recovery in the US economy started earlier than expected. The government was helped by liquidity measures by the government and the Federal Reserve. Vaccination boosted people's confidence. With this the demand started increasing. Demand has increased but supply has not. As a result, inflation has reached a 20-year high.