Economy
RBI feels growth trends require more aggressive stimulus: Moody's
Describing the Reserve Bank of India's 50 basis points cut in its short term lending rate as more than what markets expected, international credit ratings agency Moody's on Tuesday said the move indicates the RBI wanted to give an "aggressive stimulus" to subdued growth trends.
 
"The 50 basis point cut in the repo rate was higher than the market expectation of 25 basis points. This suggests that the RBI sees underlying growth trends as subdued enough to require more aggressive stimulus," Moody's Investors Service associate managing director Atsi Sheth said in a statement.
 
The RBI on Tuesday cut its repo rate, at which it lends to commercial banks, by 50 basis points, but made a pitch for passing it on to consumers in the form of cheaper personal and commercial credit. Stakeholders expected a 25-basis-point cut.
 
While the repurchase rate, or the interest charged on short-term borrowings, stands cut to 6.75 percent, it will take commercial banks to lower their own lending rates for personal, automobile, housing and commercial loans, translating into lower EMIs.
 
"The economic impact of the cut will depend on the speed and extent to which it translates into lower borrowing costs for households and investors," Sheth said.
 
Fears over deficient rains in the current monsoon season and gradual progress of reforms had prompted Moody's last month to lower India's growth forecast for this year by 50 basis points to 7 percent.
 
"We have revised our GDP growth (for India) forecast down to around 7 percent in light of a drier than average monsoon although rainfall was not as low as feared at the start of the season," it said in its latest "Global Macro Outlook 2015-16" released on Tuesday.
 
"One main risk to our forecast is that the pace of reforms slows significantly as consensus behind the need for reform weakens once the least controversial aspects of the government's plan have been implemented," it said.
 
One such reform, as indicated above, is the introduction of a pan-India goods and services tax regime, which is a lengthy process -- beginning with an amendment to the Constitution and approvals by at least 15 states.
 
Welcoming the RBI's decision, Finance Minister Arun Jaitley said on Tuesday this will support growth while showing that inflationary pressures were now moderating.
 
"Today's rate cut will boost investment and growth. We are looking forward now to the transmission of these cuts, which will help boost economy and confidence," the finance minister said in New Delhi.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Passing RBI rate cut to borrowers may take 1 or 2 quarters: Official
Passing the Reserve Bank of India's 50 basis point rate cut by commercial banks to their borrowers may take around one or two quarters, a top official of City Union Bank said on Tuesday.
 
"The direction and the quantum of rate reduction are clear. What remains is the timing for the banks to pass on the rate cut to their borrowers," N. Kamakodi, managing director and CEO of City Union Bank, told IANS.
 
He said reduction in bank interest rates on deposits will also take one-three months.
 
Kamakodi dubbed the RBI's cut on short-term lending rate to banks by 50 basis points as a "pleasant surprise" as the industry was expecting cut of only around 25 basis points.
 
According to Kamakodi, the bank's lending rate was determined by demand and supply.
 
"The growth of deposits has overtaken credit growth now. Some banks have already reduced their lending rates by quarter to half percent, based on the earlier rate cuts by the RBI," Kamakodi said.
 
RBI Governor Raghuram Rajan, in his fourth bi-monthly monetary policy statement for the current fiscal, said the markets/banks have passed on the earlier rate cuts only to a limited extent.
 
"Median base lending rates of banks have fallen by only about 30 basis points, despite extremely easy liquidity conditions," the governor said.
 
"It is a fraction of the 75 basis points of the policy rate reduction during January-June, even after the passage of eight months, since the first rate reduction by the Reserve Bank. Bank deposit rates have, however, been reduced significantly, suggesting further transmission is possible."
 
Kamakodi said the RBI has till date cut the policy rate by 1.25 percent and some banks have already cut their lending rates.
 
He said there will not be much of a difference between public and private banks in their lending rate reductions but the timing of the reduction may vary.
 
Kamakodi said the banking sector is expected to log a credit growth of around 10-13 percent this fiscal.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Made in China goods bad for environment: Study
Products made in China may cost you less but they are associated with significantly higher carbon dioxide (CO2) emissions than the same products made elsewhere, claims new research.
 
"The amazing increase in Chinese manufacturing over the past 15 years has driven the world economy to new heights and supplied consumers in developed countries with tremendous quantities of lower-cost goods," said study co-author Steven Davis, assistant professor of Earth system science at University of California, Irvine, US. 
 
"But all of this has come at substantial cost to the environment," Davis noted.
 
The researchers attributed China's high emissions intensity - the quantity of CO2 emitted per dollar of goods produced - to the nation's antiquated manufacturing processes and reliance on coal.
 
"The CO2 emissions related to China's exports are large not just because they export a lot of stuff or because they specialise in energy-demanding industries, but because their manufacturing technologies are less advanced and they rely primarily on coal for energy," study co-author Klaus Hubacek, professor of geographical science at University of Maryland said.
 
The findings suggest that consumption of Chinese-made goods by consumers in advanced economies is potentially accelerating global climate change, a problem without national borders.
 
For this study, researchers paid particular attention to Chinese regions with high emissions intensity. 
 
They found that steel mills, mineral processors and petrochemical plants in Guizhou, Inner Mongolia, Ningxia, Yunnan and Shanxi are among China's dirtiest industries. 
 
Davis and his colleagues suggest that developed countries could do a lot to alleviate carbon pollution by helping improve manufacturing processes in these areas.
 
"This analysis can help policymakers in China and internationally identify the industries and provinces in which efforts to promote less energy-intensive manufacturing equipment and practices would have the largest leverage to reduce CO2 emissions," study lead author Zhu Liu, research associate at Harvard University, pointed out.
 
"Given the differences we observed within industries and across provinces in China, many opportunities would involve creating incentives to promote the adoption of Chinese best practices," Liu said.
 
The study was published in the journal Nature Climate Change.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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