A 50 basis point change doesn't indicate anything. It's normal to interest rate by 50 points. Tell me when there is a 200-500 points difference. India has higher inflation because it is facing both Demand and supply side inflation unlike Indonesia which is only facing supply side inflation with plateauing demand. As for currency, India doesn't manipulate its Currency much, India has a huge load of Forex reserve to take care of the currency fluctuation. The recent currency devaluation is linked to major pull out by FII due to US rate hike, this is a global phenomena.
The only possible reason for India's rate hike is to curb demand, not currency.
Once again, every body knows that US Federal Reserve (The Fed) policy to stop quantitative easing and start tightening their monetary policy is one of the main reason of many developing country currencies depreciation. This is why many country central bank needs to increase interest rate to make them competitive enough compared to USD in which I think it is one of the main reasons of why India Central Bank wants to increase interest rate.
My assumption is due to the fact that India in essence is more hype in getting more growth than curbing the inflation, it can be seen in historic data where India inflation is relatively high compared to other nations.
50 basis point change does indicate the Central Bank is ready to increase rate if necessary, it is the signal given to the financial market since for quite long India doesnt increase the rate, India as far as I know lower interest rate since 2020 as World Economy is struck with Pandemi as one of the stimulus measure to help cushion the economic crisis during that time.
Many of movement in currency is also derived from sentiment in the financial market and future expectation of Central Bank policy. This is the other reason, for example, of why Turkish Lira was so rapidly falling in previous months ( Erdogan lower interest rate policy to tackle inflation is against market system logic which make financial institutions lost confident in Turkish Lira )
Indonesia Central Bank until now hasnt increase the interest rate
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PS : Devaluation is the policy to devalue our own currency, you should say depreciation instead to tell about the lost value of your currency due to market mechanism.
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What make inflation in Indonesia is not high ?
LOL what plateauing demand ? In 2020 Indonesia GDP growth is not as worse as in India with nearly minus 7 percent growth, the rebound happened in India economy Q1, Q2, and Q3 is more due to the low base of growth happened in 2020 due to lock down measure imposed by India gov. ( Fiscal year/Jan-Desember)
Indonesia retail sales, domestic consumption does increase in 2021, this is why we can post 3.7 percent growth and in Q 4 the growth is 5 percent.
In 2022, as the the economy is getting opened and mobility is increasing, the domestic consumption is also getting higher. Now tell me what is the figure of India domestic consumption in Q4 2021 ( Oct-Desember) ? Since India can only post 5.4 % growth in that period, not much different with Indonesian growth at around 5 %. Better use real growth rather than projected one.
In Q1 2022, Indonesia can post another 5 percent growth where the inflation in Q 1 is still about 2.4 percent. The growth is more driven by Domestic consumption, government spending, and Investment growth ( around 30 %) . While in term of export and import, despite having trade surplus of 9.3 billion USD in Q1, the figure is actually too small to significantly push the GDP Q1 figure.
Gov subsidy and food production (supply side intervention)
The reason of why Indonesia inflation is small is not due to plateu demand as you think, but it is due to subsidy given by government for gasoline retail sales, and also because we are big producers of coal where domestic price is capped much lower than international price ( market price ), so it makes our power plant that provide electricity to industry and house hold can give much cheaper rate compared to other nations in general. Due to that fact, Indonesian industry can still produce goods and services to domestic market without much pressure from the electricity cost ( supply side ). India actually has huge coal production as well with much lower domestic price, only 20 % of coal domestic consumption in India is sourced from import.
Indonesia is also a big agricultural country where we can self sufficient with our main food like rice ( supply side ).
So because the inflation comes from supply side, Indonesian economic policy is to fix the supply side with several measures like subsidy, state owned enterprises muscle, and other government intervention in the supply side of the economy.
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