Latest news with #consumption
Yahoo
10 hours ago
- Business
- Yahoo
India slashes interest rates, but who will borrow?
By Swati Bhat and Siddhi Nayak MUMBAI (Reuters) -India's central bank is rolling out aggressive monetary easing to revive consumption and investment in the world's fifth-largest economy, but the payoff hinges on whether banks ramp up credit and companies want to take on more debt in uncertain economic conditions. The Reserve Bank of India on Friday cut its key repo rate by a larger-than-expected 50 basis points and slashed banks' cash reserve ratio (CRR) by 100 bps, taking advantage of cooling inflation as U.S. President Donald Trump's tariff threats add to global uncertainty. The RBI's pivot comes at a crucial moment. A strong monsoon is expected to lift rural incomes and sentiment, but urban consumption and private investment remain tepid. The policy shift is in line with the government's broader push to support small and medium enterprises (SMEs), critical to create jobs in the world's most populous country. By unlocking bank funds, the central bank is betting that cheaper credit will revive urban demand, stimulate SME investment, and complement the rural boost — helping broaden the economic recovery. "Boosting consumption alone will not lead to long-term structural growth, the idea is to also boost investments by small and medium sized (SME) firms where there is a large appetite," said a source familiar with the central bank's thinking. RBI Governor Sanjay Malhotra said the measures aim to push growth toward a higher 'aspirational' trajectory of 7% to 8%. India's economy is estimated to have grown by 6.5% in the year to March and is expected to maintain that pace in fiscal 2026. The RBI did not immediately respond to a request for comment. Nearly 80% of retail and SME loans are now linked to external benchmarks such as the repo rate, meaning borrowers will see interest costs drop almost immediately, said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India. Banks, however, have typically perceived SMEs as high-risk, charging them interest rates much above those offered to larger companies. Ghosh estimated that the easing could free up 500–600 billion rupees ($5.8 billion–$7 billion) for spending and investment. "The RBI's current focus is to support momentum in capital formation for more durable growth," said Ghosh, who was among the few economists to predict a 50-bps cut. ALL EYES ON BANKS NOW The success of the RBI's pivot now rests with banks' willingness to lend and borrowers' readiness to take on leverage. In 2023, a sharp uptick in unsecured loans prompted tighter norms by the RBI alongside concerns raised about elevated credit-deposit ratios at certain private banks. This prompted banks to go slow on these segments and moderated bank credit growth. Bank credit rose 11.2% in April compared with 15.3% a year earlier but was sharply below high-teen levels seen in 2023. Demand from large companies remains muted, as many are sitting on cash and prefer tapping bond markets or external borrowing, said a source at a state-run bank. In contrast, mid- and small-sized firms — which lack those options — are likely to benefit from the additional liquidity created by the CRR cut and the RBI has privately urged banks to focus on this segment, the source said. "Basically, they (RBI) have done all what they can from their side and left the ball in banks' and borrowers' courts," the source said. Retail credit segments like mortgages, SME lending and loans against gold are expected to see a pickup, bankers said. "We expect lending towards sectors like mortgages, MSME and gold to rise after this surprise CRR cut," said Virat Diwanji, national head-consumer banking at Federal Bank. Still, some analysts caution that the impact may remain limited to consumption, with little spillover to private investment. "We believe the transmission will be felt mostly through the consumption cycle," said Seshadri Sen, head of research and strategist at Emkay Global Financial Services. "Banks are far better geared to lend to this segment and will focus here to quickly ramp up loan growth. We see little impact of these cuts on corporate credit and private capex," he added. ($1 = 85.5600 Indian rupees) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Zawya
2 days ago
- Business
- Zawya
Japan's Q1 GDP contraction narrows on consumption improvement, revised figure shows
TOKYO - Japan's economy contracted less than initially estimated in the January-March quarter, government data showed on Monday, with consumption figures revised upwards at a time when uncertainty surrounding U.S. tariffs is clouding the outlook. Gross domestic product shrank an annualised 0.2% in the three months through March 31, showed revised data from the Cabinet Office, rather than 0.7% announced on May 16 which matched economists' median forecast. Versus the previous quarter, the revision translates as flat in price-adjusted terms compared with an initially estimated 0.2% contraction. The revision does little to allay analyst concern that economic growth was losing momentum even before U.S. President Donald Trump implemented his so-called reciprocal tariffs on April 2. "It wasn't a revision that changed our view on the overall economy," said economist Uichiro Nozaki at Nomura Securities. Private consumption, which accounts for more than half of Japan's economy, grew 0.1%, versus flat in the initial reading. Contributing to the revision was the inclusion of restaurant and games sales data which has since become available. The capital expenditure component of GDP, a barometer of private demand-led strength, expanded 1.1% in the first quarter, revised from 1.4%. Economists had estimated 1.3%. An upward revision in private inventory contributed to reducing the degree of contraction in the overall figure, the government said. External demand, or exports minus imports, knocked 0.8 percentage point off growth, as in the initial reading. Conversely, domestic demand contributed 0.8 percentage point. Japan faces a 24% U.S. tariff from July unless it can negotiate a lower rate. With automobile-related companies comprising Japan's biggest industry, the government is also seeking an exemption for Japan's automakers from a 25% tariff. "In terms of the April-June quarter and beyond, there are a number of concerns, such as worries about exports and weak domestic demand," said economist Kazutaka Maeda at Meiji Yasuda Research Institute. "It is unclear how the tariff negotiations will turn out, but given the scale of the automotive industry, it will be difficult for the U.S. to back down easily, meaning the talks will be quite difficult." Policymakers and analysts are concerned that trade tension unleashed by U.S. tariffs may complicate the Bank of Japan's efforts to normalise monetary policy. The central bank is set to hold a two-day policy meeting early next week. Monday's revised data is not likely to have much influence on the meeting outcome, said Nomura's Nozaki. The BOJ is more concerned about tariff negotiations and their impact on exports and the overall economy once they are concluded. "For the BOJ, the basic approach to assessing the economy will be to monitor both the immediate data and the status of negotiations" to make policy decisions, Nozaki said. (Reporting by Satoshi Sugiyama; Additional reporting by Makiko Yamazaki and Yoshifumi Takemoto; Graphics by Pasit Kongkunakornkul; Editing by Chang-Ran Kim and Christopher Cushing)
Bloomberg
2 days ago
- Business
- Bloomberg
Julius Baer Sees Consumption Revival in India Taking Stocks to Record High
Julius Baer Group is expecting Indian stocks to hit a new high in the second half of the fiscal year, as domestic consumption recovers. 'The biggest theme going forward will be a revival in consumption in India,' Nitin Raheja, head of discretionary equities at Julius Baer India, said in an interview. One third of his portfolio is in consumption-linked themes and he's increasing bets on retailers focused on tier-two cities and apparel firms.
Bloomberg
4 days ago
- Business
- Bloomberg
Dutch Central Bank Warns Government Collapse Will Hit Economy
The fall of the Dutch coalition will negatively impact investment and consumption, according to the country's central bank. 'Although we should not exaggerate the impact of the government collapse, it does contribute to uncertainty, and that is not good for investments and consumption,' Olaf Sleijpen, the central bank's executive director of monetary affairs and financial stability, told reporters on Friday, adding that he can't put a number on it.
NHK
4 days ago
- Business
- NHK
May seen as turning point for us inflation trend
The downward trend in US inflation looks set to end. As the Trump administration's tariff measures drive price increases, an analyst says that will likely depress consumption and growth.
