India’s manufacturing could get boost from rate cut

Following a drop in India’s GDP growth to a six-year low of 5% in the second quarter, borrowing rates have been lowered to 5.15% with the aim to kick-start the economy, reported ITTO.

According to the Reserve Bank of India (RBI), the economy is likely to face more risks in the near term from a combination of domestic and global issues.

Over the past few months, domestic manufacturers have experienced subdued demand which prompted a cut back in production, efforts to reduce inventories and fewer purchases from suppliers. Analysts said this was partly why the RBI to cut interest rates in early October. The October cut was the fifth cut in 2019 and it had an immediate impact on the rupee/dollar exchange rate which dipped below 71 to the US dollar.

The quarter percent cut in rates is aimed at kick-starting the economy lifting it from its six-year low. Borrowing rates have been lowered to 5.15% which should help boost the housing market. However, a CREDIA spokesperson recently commented that the government’s US$1.4 billion fund to finance stalled housing projects is unlikely to succeed as the sector is facing its worst crisis in decades because consumer and business confidence are at a low level.