It is so funny to see politicians and some fund managers say India’s interest rates are very high in real terms (if inflation is 3% and interest rates are 10% reeal rate of interest is 7%). So interest rates should come down. Also if the $ is now at 52 or 53 to a rupee, it is safe to invest in India.
Assuming you can borrow in US at 3% and invest in India at 10% – it is a fantastic spread. RBI cannot allow this, so RBI has to hold interest rates low. However, the biggest borrower (who acts to keep the interest rates low) is a worry – government borrowing is likely to be quite high.
There is a feeling that industry which is worried about the slowdown is wary of borrowing and there is no great demand for money (again downward pressure). However industry may be wanting banks to lend to its end customers (auto and real estate in particular).
However Tata Motors, Indian Hotels, Tech Mahindra are all borrowing from the retail and institutional lenders at 10.5% + admin costs = say 11% p.a.
where do YOU think interest rates will settle?
My guess is as good as yours!
Post Footer automatically generated by Add Post Footer Plugin for wordpress.