II. Answer the following questions:

1. What shows that the risk of the economy overheating has faded?

2. What happened to the wholesale-price inflation in mid-May despite rapid growth in the country?

3. Is there any need for the RBI to ease policy or at least not to tighten it further?

4. What was the result when the government allowed Indian companies to take advantage of lower interest rates abroad than at home?

5. How was the RBI able to regain control over monetary policy and so focus on containing inflation?

6. According to Chetan Ahya of Morgan Stanley, what factors caused the inflation?

7. What alarming symptoms of overheating does the economy still show?

III. According to the text, are the following statements true or false?

1. JP Morgan estimates that growth in the three months to March accelerated to a seasonally adjusted annual rate of 21%.

2. Wholesale-price inflation fell to 5.1% in mid-April, down from 6.7% in January and close to the Reserve Bank of India's (RBI) inflation target of 10 % for 2007- 08.

3. Several economic commentators have concluded that the panic earlier this year over rising inflation wasn’t exaggerated

4. The jump in the rupee reflects an abrupt change in policy by the RBI.

5. Until March the central bank was intervening heavily to hold the currency down.

6. The bank “sterilized” the increase in foreign reserves by selling securities to customers.

7. The RBI's job had been made even harder by the government, which last year encouraged capital inflows by raising the ceiling on foreign borrowing by firms, allowing Indian companies to take advantage of lower interest rates abroad than at home.

8. By abandoning its attempt to hold the rupee down against the dollar, the RBI is now unable to regain control over monetary policy and so focus on containing inflation.

9. The economy still shows alarming symptoms of overheating, such as

soaring house prices, credit growth of 28% over the past 12 months and 15%-plus average rises in wages for skilled workers.

10. India probably has the highest real interest rates of any major economy, despite having one of the world's slowest growth rates.

IV. Complete each sentence with the correct form of the word.

squeeze	howl	snag	mop up	pressure	bond
monetary	rampant	term	rage	reserve	deficit
competitive	currency	capacity	suck	inflation	capital

1. The economy continues to overheat despite a rising ___________.

2. ___________ conditions have been further ________ by the Indian rupee.

3. The ______ is that sterilization is expensive because the RBI has to pay much more on the ______ it issues to ______ liquidity than it earns on dollar __________.

4. All Asian economies have faced upward ________ on their currencies but India is the only one where the government has foolishly invited more _________ inflows.

5. But exporters are ________ about their loss of ________ and a fierce debate is ______ among economists over what should be done about the currency.

6. Industrial ______ utilisation has risen to a record high, and ______ domestic demand _______ in 41% more imports than a year ago in April, pushing the trade _______ to a record level.

7. Relative to consumer-price ______ , the overnight lending rate of 7.75% is close to zero in real ______.