Thursday8 August 2019 ★ FINANCIAL TIMES 3measures as well as further tariffs. Sepa-
rately, the central bank yesterday
announced stimulus measures designed
to boost lending to consumers and trou-
bled shadow banks.
RBI governor Shaktikanta Das,
appointed last year after a spat with the
Modi administration over central bank
independence, has embarked on rate-
cutting. But some economistsquestion
the wisdom of the RBI’s willingness to
keep cutting rates, particularly amid
concerns about its independence. While
the RBI has signalled that further rate
cuts are ahead, banks have not reduced
their own interest rates as swiftly.
Shilan Shah of Capital Economics
warned inflation might pick up later this
year or early next.
“A little bit of support for the econ-
omy would have been perfectly reason-
able,” he said. “The risk is that it goes too
far, which is essentially what we think is
going to happen.”
Vivek Dehejia, an economist at Carle-
ton University in Canada, argues that
deeper measures, such as labour law
reformand privatisation of some state
assets, would better help India achieve
its growth targets.
“Looser monetary policy is being used
as a substitute for unfinished macroeco-
nomic reforms,” he said.
Additional reporting by Siddarth Shri-
kanth
Notebookpage 8cut its growth forecast for this year to
6.9 per cent from 7 per cent, while the
World Bank said India fell behind
France as the world’s seventh largest
economy in 2018.
“Six per cent growth is seen as a disas-
ter,” said Sachchidanand Shukla, chief
economist of India’s multinational con-
glomerate Mahindra Group. “India is
dependent on the rest of the world for
capital... When there is a global trade
spat, liquidity becomes a challenge.”
For Prime Minister Narendra Modi,
who wants todouble the size of India’s
economyto $5tn by 2025, accelerating
growth has emerged as perhaps the
biggest test of his second term after
winning re-election in May.
But economists say the widening
global trade dispute will threaten India’s
ability to grow at the 8 per cent a year
that the government targets.
China’s decision to allow its currency
to slide belowRmb7 to the dollarin
response to new US tariffs threatens
India’s competitiveness as an exporter,
Mr Shukla said.
“If you have a neighbour which is one
of the world’s largest traders and econo-
mies, and they decide to drop their cur-
rency 5 to 10 per cent over the next six
months, you will be outpriced in the glo-
bal market,” he said. “The way that
China navigates its currency going for-
ward will have a huge bearing.”
India’s currency has also weakened in
recent weeks, and foreign investors
have taken money out of the country,
with a net $5.5bn leaving foreign portfo-
lios in July.
Uncomfortably for Mr Modi, India is
also now a target of US president Donald
Trump’s efforts to rebalance global
trade along more favourable terms for
the US. In June, Mr Trump announced
the US was scrapping duty exemptions
on about$6bn worth of Indian goods.
In response India raised tariffs on a
range of US goods, and last month intro-
duced a budget that includedstimulusBENJAMIN PARKIN— MUMBAIThe Reserve Bank of India has cut
interest rates for the fourth time this
year, joining other central banks across
the region in easing policy to battle an
intensifying global slowdown.
India broke with international con-
vention by cutting interest rates by 35
basis points instead of the usual incre-
ment of 25bp, bringing its benchmark
repo rate to 5.4 per cent, the lowest in
almost a decade.
Central bankers in New Zealand and
Thailand also slashed rates yesterday as
monetary authorities scrambled to
respond to concerns that the US-China
trade war will drag down their own
economies, particularly in the light of
China’s decision this week to let its cur-
rency weaken.
“Domestic economic activity contin-
ues to be weak, with the global slow-
down and escalating trade tensions pos-
ing downside risks,” the RBI said in a
statement.
The Reserve Bank of New Zealand
slashed its benchmark rate by 50bp to
1 per cent, against a forecast cut of 25bp.
Thailand’s central banktrimmed rates
by 25bp, its first cut since 2015. Aus-
tralia’s central bank embarked on back-
to-back cuts in June and July, taking its
cash rate to a record low of 1 per cent.
In India, the effects of a slowdown are
already being felt in everything from the
stock market, which suffered itsworst
July in 17 years, to a drop in car and
motorcycle sales.
The country’s claim to bethe world’s
fastest growing large economywas
recently undermined after gross
domestic product growth fell to 5.8 per
cent in the first quarter of 2019, the
lowest in five years. Yesterday, the RBIINTERNATIONAL
Stimulus measures
Indian central
bank battles
global slowdown
with rate cut
Other Asian nations ease
monetary policy as RBI
lowers growth forecastRough ride: a steel plant in Odisha, India. The country is a target of US efforts to rebalance trade—Dhiraj Singh/BloombergAMY KAZMIN— NEW DELHIKashmir endured its third day of secu-
rity lockdown yesterday with Indian
prime minister Narendra Modi prom-
ising a “better tomorrow awaits”, after
his government ended the territory’s
specialautonomyand stepped up New
Delhi’s control.All communication links within Kash-
mir and to the outside world remained
cut off, while schools and colleges have
beensuspendedindefinitely.
“We are like prisoners there,” a Kash-
miri businessman, who flew out of the
state yesterday afternoon, told the
Financial Times. “We cannot communi-
cate with anyone except our neigh-
bours... It was very difficult to reach
the airport. Everywhere the army stops
you and you have to argue with them.”
While the prime minister hailed the
“courage and resilience” of the state’s
residents in a series of tweets, tens of
thousands of heavily armed security
personnel used barricades and barbed
wire to restrict public movement.
The businessman, who works in the
tourism industry, said that local anger —
now repressed by the security clamp-
down — could erupt at any time.
“As soon as they lift the siege, people
will come out on the streets,” he said.
“Every Kashmiri thinks, ‘We have to
resist. We have to come out and fight
for our rights’. They could have done
this process democratically. What theyhave done is more like a dictatorship.”
In his tweets Mr Modi hailed the nulli-
fication of a longstanding constitutional
provision that had allowed the state of
Jammu and Kashmir to make itsown
laws,which included a restriction on
outsiders buying property in the state.
Pakistan, which claims Kashmir as its
own, announced yesterday it was down-
grading its diplomatic relations with
India, recalling its high commissioner to
New Delhi and expelling India’s high
commissioner.
Mr Modi accused Kashmir’s main-
stream political parties — whose leaders
were arrested on Monday — for failing to
deliver prosperity and development to a
region still scarred from two decades of
violent separatist insurgency that has
claimed more than 45,000 lives.
New Delhi has also demoted the
region from a fully fledged state to a
union territory, which will give the cen-
tral government direct control over
policing and land policy. “For years,
vested interest groups who believed in
emotional blackmail never cared for
people’s empowerment,” Mr Modi
tweeted. “[ Jammu and Kashmir] is now
free from their shackles.”
The changes in Kashmir would “bring
the youth into the mainstream and
give them innumerable opportunities to
showcase their skills and talents.
Local infrastructure will significantly
improve.”
New Delhi has given no indication of
how long it will maintain the lockdown.
Mr Modi’s Hindu nationalist
Bharatiya Janata party has long called
for an end to Muslim-majority Kash-
mir’s legal autonomy and its restrictions
on outsiders acquiring property there.
His majority in the lower house of par-
liament, following his landslide re-elec-
tion in May, empowered him to act.
In a special session in Pakistan’s par-
liament, Prime Minister Imran Khan
warned the changes in Kashmir could
lead to renewed violence and suffering
for Kashmiris, and that Pakistan would
raise the issue in international forums
including the UN Security Council.
Additional reporting by Stephanie Findlay
and Farhan BokhariSecurity lockdown
Modi vows ‘better tomorrow’
for Kashmir under New Delhi
Narendra Modi: says territory is now
free of vested interests’ shackles
РЕ
ЛИЗЗNarendra Modi: says territory is nowNarendra Modi: says territory is nowППОДГОТОВИЛАГРУППАNarendra Modi: says territory is nowNarendra Modi: says territory is now"What's "What's "What'sNews"VK.COM/WSNWSVK.COM/WSNWSNarendra Modi: says territory is now
VK.COM/WSNWSNarendra Modi: says territory is now
free of vested interests’ shacklesfree of vested interests’ shacklesVK.COM/WSNWS