Monday, August 8, 2011

Boon for India

Oil prices have come down by 15% from its recent highs and it is expected that other commodities too will follow the same trend. Standard & Poor’s (S&P) has downgraded US Economy’s Long-Term Sovereign Credit Rating to AA+ from AAA with a negative outlook, which is good for India, as it will help the Reserve Bank of India in its battle against inflation.

If the US goes into recession, it is expected that Brent prices may come down to $80/bbl, which will have a positive impact on India’s current account. Not only will this help battle inflation, it will also keep fiscal deficit in check.

While the short-term impact would be more obvious in terms of market uncertainties (Stock market will open in 300 negative on 9th August), the long term impact may be more prolonged. But uncertain global environment could however depress India’s exposure to global markets, which in turn may have an effect on India’s GDP growth.

Many experts believe that India should be able to withstand any possible problems following S&P’s US downgrade. However, S&P has warned that even as there is no immediate impact on the Asia-Pacific sovereign ratings, the potential longer-term consequences of a weaker financing environment, slower growth and higher risk aversion are the negative factors.

Read lot more in Rubber4U – 15th August 2011 issue

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