Today I came to know that ECB (European Central Bank) cut the deposit rate from 0 % to - 0.1%. It also reduced the prime lending rate from 0.25 to 0.15%. The inflation rate in Europe is 0.5 %. What does this mean? If you put your money into bank in India, a savings interest of 4 % is given but if a person in Europe wants to keep his savings in bank there, the bank will charge him 0.1% for the same and no interest would be given, first.
Second if someone wants to take loan be it the person or a company, it will be available at a rate so cheap as 0.1 percent. (This may be a bit higher if other considerations are taken into account as this is the Central bank's rate.)
Now let us understand the implications of it. The growth there in Europe is static. Economy is not moving and so the return from the industries or even investments there is not good. This is the reason why they are putting their money in developing economy where risk and returns are favourable. No wonder why Indian Equity Indexes are showing unprecedented highs. FIIs are putting huge amount of money in India and this has translated in the movement of share prices of small and mid size enterprizes in India.
Another favorable scenario can be considered that where India has a high interest rates environment, in Europe the loans are so cheaper. Now those companies having good corporate governance and good credit history are able to get cheaper loans from those markets and this way they would be able to utilize these funds to translate that into good topline and bottom line growth.
Also India can't remain isolated from the world banking environment. In near future we would be able to see easing of interest rate and it would be a long term easing scenario soon. Just wait and see..
India, Jai ho!
https://www.facebook.com/manoj.sapiens मित्रों यदि मेरा यह पोस्ट आपके दिल को जरा भी छू कर गुजरा हो तो मुझे विश्वास है कि आप मेरे इस प्रयास को लाइक दे कर मुझे और भी अच्छा लिखने की प्रेरणा, स्नेह और आशीर्वाद देंगे। आप अगर मुझे मेरे फेसबुक प्रोफाइल पर फॉलो करते हैं तो आपको मेरे शेयर किये सारे पोस्ट्स आपके नोटिफिकेशन्स में मिलते रहेंगे। मुझे फॉलो करने के लिए ऊपर दिए फेसबुक लिंक को क्लिक कर मेरे टाइम लाइन पर जा कर फॉलो के लिंक को क्लिक करें। धन्यवाद।
Second if someone wants to take loan be it the person or a company, it will be available at a rate so cheap as 0.1 percent. (This may be a bit higher if other considerations are taken into account as this is the Central bank's rate.)
Now let us understand the implications of it. The growth there in Europe is static. Economy is not moving and so the return from the industries or even investments there is not good. This is the reason why they are putting their money in developing economy where risk and returns are favourable. No wonder why Indian Equity Indexes are showing unprecedented highs. FIIs are putting huge amount of money in India and this has translated in the movement of share prices of small and mid size enterprizes in India.
Another favorable scenario can be considered that where India has a high interest rates environment, in Europe the loans are so cheaper. Now those companies having good corporate governance and good credit history are able to get cheaper loans from those markets and this way they would be able to utilize these funds to translate that into good topline and bottom line growth.
Also India can't remain isolated from the world banking environment. In near future we would be able to see easing of interest rate and it would be a long term easing scenario soon. Just wait and see..
India, Jai ho!
https://www.facebook.com/manoj.sapiens मित्रों यदि मेरा यह पोस्ट आपके दिल को जरा भी छू कर गुजरा हो तो मुझे विश्वास है कि आप मेरे इस प्रयास को लाइक दे कर मुझे और भी अच्छा लिखने की प्रेरणा, स्नेह और आशीर्वाद देंगे। आप अगर मुझे मेरे फेसबुक प्रोफाइल पर फॉलो करते हैं तो आपको मेरे शेयर किये सारे पोस्ट्स आपके नोटिफिकेशन्स में मिलते रहेंगे। मुझे फॉलो करने के लिए ऊपर दिए फेसबुक लिंक को क्लिक कर मेरे टाइम लाइन पर जा कर फॉलो के लिंक को क्लिक करें। धन्यवाद।
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