State Bank of India has announced it will be increasing interest rates, after the Reserve Bank of India announced it would be increasing rates as well, as a means to slow inflation, while ICICI Bank announced plans to do the same thing.
The banks stated higher costs associated with deposits, and stated the need to pass those costs onto consumers, though also providing the caveat of the measure being a temporary one that will last only for the next few years at the most, contingent on continuing economic factors and other realities.
Other Indian banks have either already raised interest rates or are convening to discuss doing so, which will likely occur with the majority of the banks. The first to do so was YES Bank, while others have announced lending difficulties, though most of them expect these particular problems to be temporary, though market realities will likely influence such a position quite significantly.
Many of these banks experienced stock drops as a result of, or coinciding with, such announcements, coming on the heels of major banking failures in North America and Europe, which has thrown the global economy into disarray. Although the United States has, fortunately for investors and others, chosen not to increase interest rates, other countries have seen such increases occur repeatedly; though in the case of India, the banks have not had to deal with complete calamitous collapse as they have in the case of, for example, Greece or the United States.
However, it is altogether likely that, despite the relatively healthy economy of many emerging markets, especially India, most countries should expect relatively slow or flat growth for the next few years, especially with the American economy likely to stagnate in the near future, with relatively poor prospects for growth. However, the emergence of several nations from the doldrums of recession has already occurred, and many developing nations are seeing continued growth with the global economic crisis becoming, gradually, a thing of the past.
On the other hand, those markets that rely on American consumerism as a significant part of their economy will likely suffer from such reliance, which will likely lead to a few developments; countries shifting their economic production to systems or sectors that rely less upon the purchases from foreign markets in general, or from the United States in particular. The American economy is declining at the same time as many other regions and countries are seeing a long-term boom, likely to continue for quite some time, especially with a burgeoning and emerging middle class, which will allow the economy to run internally rather than exist as a subsidiary of a wealthier group of nations.
Such a shift is unlikely to happen quickly, and the United States will more likely than not reassert itself to some degree, the height of which remains to be seen; but the world is inevitably shifting toward an economic system propped up by multiple economies, rather than a single, overpowering force, and such a shift, while not necessarily the best future for the United States, will contribute more to the overall stability of the global economy, and is as important as it is inevitable.
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