Lower interest rates to boost demand

Uncertain global economic conditions, combined with outflow of foreign funds from stock markets, among other factors, saw rupee plunging to nearly 70 against the US dollar. However, in recent weeks, the rupee has recovered and is trading at little over 60 level against the dollar. The government has also initiated various measures to boost the economy. Industrial growth slowed in August after staging a tentative recovery in the previous month, dragged down by continued weakness in the manufacturing and mining sectors, raising fresh worries for the government. Industrial output rose 0.6% in August compared to a 2% expansion in the year earlier month. The manufacturing sector fell 0.1% in August compared to 2.4% expansion in August 2012 while the mining sector contracted 0.2% compared to a decline of 0.3% in the previous year-ago period.

The industrial segment has been hit hard by a combination of factors ranging from stubborn inflation, high interest rates, slowing demand, regulatory and policy delays. India Inc stepped up calls for cutting interest rates to boost demand and jumpstart industrial activity. Increased lending to consumers at lower interest rates will greatly benefit industry by encouraging festival season demand.

On Saturday, RSS4 grade closed at `.165 a kg at Kottayam. While National Multi Commodity Exchange October futures closed at `.164.48 a kg, November at `.166.02, December at `.168.03 January 2014 at `.169.78 and February at `.171.83 a kg. On Friday, RSS3 grade closed at `.157.34 a kg at Bangkok, while Malaysian SMR20 closed at `.146.43 a kg. While Tokyo Commodity Exchange, October futures series closed at ¥251 a kg, November at ¥253, December at ¥255.9, January 2014 at ¥259, February at ¥261.9 and the contract for delivery in March 2014 at ¥264.5 a kg. On Monday market is expected to be in green.

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Read lot more in Rubber4U – 15th October 2013 issue