The sharp first- quarter slowdown is likely to have brakes on the US Federal Reserve’s plan, if there were any, of raising interest rate from near-zero.
A likely rate increase expected at the end of the Fed’s two-day meeting on Wednesday didn’t take place, in a development watched closely the world over, including India.
A rate hike will trigger a flight of foreign capital from India, it’s feared, and speculation about it happening way back in 2013 had mauled the rupee, sending it into a free-fall.
India is much better prepared now, officials have assured repeatedly, but the hike continues to be counted as major external challenge.
Interest rates have been a historic of near-zero to make credit easy and affordable to help the American economy recover from the 2008 recession. As signs of improvement stacked up, speculation started about a rate hike, indicated by the Fed itself.
The US economy grew by 0.2% in the first quarter compared to 2.2% and 5% in the previous two.