Bloomberg News

MF Global’s Verma Says India Rates to Keep Borrowing Costs High

October 25, 2011

Oct. 25 (Bloomberg) -- Anjali Verma, an economist with MF Global Sify Securities Pvt., comments on the impact of an increase in India’s key interest rates on borrowing costs and investments by companies.

India’s central bank today raised the repurchase rate to 8.5 percent from 8.25 percent, an outcome predicted by 18 of 28 economists in a Bloomberg News survey. Verma spoke in a telephone interview from Mumbai.

“With this rate hike, the pressure on banks to keep their rate elevated will remain for some more time. If today the rate hike hadn’t come, probably a few months later, banks would have started to reduce their rates. The savings rate deregulation is another reason for banks to keep borrowing rates elevated. Therefore the pressure on investment will remain for some time.

‘‘Capital goods, infrastructure, real estate will remain under stress for some time. For all these sectors it takes time for demand to come back on track. By the fourth quarter, things could start to look better for these companies.’’

--Editor: Abhay Singh

To contact the reporter on this story: Malavika Sharma in New Delhi at msharma52@bloomberg.net.

To contact the editor responsible for this story: Frank Longid at flongid@bloomberg.net.


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