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Showing posts from May, 2011

Interest Rates.. on the rise

On March 15, 2011 in a paper entitled “Growth – moderation to come” I argued that domestic liquidity remains scarce, as the rise in credit has been higher than that in new deposits and the Reserve Bank of India was not done yet with monetary tightening. Two weeks later the RBI hiked interest rates by 50 basis points. More recently, the State Bank followed with a rise in lending and deposit rates by 75 basis points. Its benchmark prime rate now stands at 14% and the base rate, below which it will not lend, at 9.25%. This will affect both consumption and new investment.

The Index of Industrial Production has been on a declining trend for several months and that for capital goods – an indicator of new investment – actually fell by 18.4% in February 2011. Whilst automotive sales have managed to cling on, it is unlikely that this buoyancy would be sustained in the coming months. Consumers will come under pressure with higher commitments and rising EMIs on home and personal loans. Purchase …

Head winds ahead

On March 15, 2011 in a paper entitled “Growth – moderation to come” I argued that domestic liquidity remains scarce, as the rise in credit has been higher than that in new deposits and the Reserve Bank of India was not done yet with monetary tightening. Two weeks later the RBI hiked interest rates by 50 basis points. More recently, the State Bank followed with a rise in lending and deposit rates by 75 basis points. Its benchmark prime rate now stands at 14% and the base rate, below which it will not lend, at 9.25%. This will affect both consumption and new investment.

The Index of Industrial Production has been on a declining trend for several months and that for capital goods – an indicator of new investment – actually fell by 18.4% in February 2011. Whilst automotive sales have managed to cling on, it is unlikely that this buoyancy would be sustained in the coming months. Consumers will come under pressure with higher commitments and rising EMIs on home and personal loans. Purchase …

The mirror cracked from side to side

Barak Obama and his colleagues sat through the agonising final moments when 79 men of the United States Special Forces descended on a compound in Abbotabad. This was the culmination of several months of painstaking effort in gathering intelligence to locate the whereabouts of Osama bin Laden. A few minutes later it was all over as Mr Obama remarked “We got him”. The final chapter in the search for America’s most wanted has now concluded. But another, in its turbulent relationship with Pakistan, has just begun.

US law makers are furious that Mr bin Laden was hiding not in some remote mountain cave in the Frontier Province, as was widely believed, but 30 miles away from Pakistan’s capital and a few hundred yards from the boundary walls of its top military academy. The Senate Intelligence Committee is pressing Islamabad for answers to two questions. First, what did the Pakistani army and its intelligence agents know about Mr bin Laden’s whereabouts, and second, when did they know it? Fran…