India is headed for an economic slowdown along with the rest of the globe, but some claim that the pause will be brief and exchange traded funds (ETFs) and investments should manage to stage a recovery in short order.
After the situation stabilizes, the economy is projected for fast growth, Premier Manmohan Singh said earlier this week.
Singh’s statement to parliament was his first on the impact of the financial turmoil on India’s fast-growing economy and came as the central bank cut its key short-term lending rate by a full percentage point, reports AFP. The rate cut is meant to keep markets calm domestically, and to help trigger economic growth again.
This is the first rate cut since 2004, as the key repurchase rate was cut from 9% to 8%, reports Cherion Thomas for Bloomberg. The bank also cut its cash reserve ratio 2.5% from 6.5%. These moves are intended to help shore up the economy and brace for slower economic growth, only to come back full force the next time around.
India and China are the only BRIC economies that have joined with other global policy makers to cut interest rates to avoid a recession. Declining demand in India is already showing. Output at factories, utilities and minues has risen 1.3% in August after a 7.4% gain in July. Borrowing costs are draining consumer demand.
WisdomTree India Earnings (EPI) is down 54.7% since its Feb. 26 inception.