The condition of Indian economy is worsening day by day with the value of rupee falling consistently against the strong US Dollar. For the past few months, both consumers and producers have been badly hit by the financial crisis, resulting in drastic measures being taken by the latter to secure profit margins. Now, reports have claimed that the coming times are going to be really torrid for masses, who will have to endure a rough ride to procure loans for things like home and car. Analysts have emerged with detailed statistical conclusions, which foresee a sharp rise in interest rates.
Statistics suggest that the 10 year yield on government securities touched its highest mark post the Lehman era at an alarming 9.27 per cent. Notably, the 10-year benchmark rate can be defined as the highest level of risk-free rate that a person can get in the country. Usually, this number becomes the apex rate for financial entities like lenders and banks in India. It is being said that this rise is the result of the adverse liquidity scenario that was created out of the stringent monetary measures taken recently.
Industry experts believe that this rise in the interest rates is likely to make a deep impact on certain types of consumers. This includes customers who have opted for floating rate plan for home loans and people who are purchasing new cars. An expert, in a recent interview tried to cite reasons for this kind of steep rise in interest rates. "Local as well as global factors are contributing to this rise in rates in India. On the local front, RBI's recent steps to curb liquidity to stem the weakness of the rupee has not had its intended impact and that is leading bond market players to assign high uncertainty premium to G-sec rates,” the person was quoted as saying.
As a result of this development, analysts have projected that the situation might worsen for the car market in particular in the short run. Stating a relevant example, an expert said that it would be easier for a consumer to opt of taking a car loan rather than a home loan, which he or she has already procure or is planning to do so. It should be noted that the recent times have not been good for the Indian car market as sales have dropped significantly. The condition of the Indian economy, with the constantly falling value of the rupee, has had an adverse effect on the profit margins of auto makers. Experts feel that the festive season has the potential to stage a turnaround for the auto industry as people buy new cars in this time period. However, the rise in interest rates is likely to influence the decision of consumers, who will be reluctant make the purchase. Notably, there are a number of models lined up for launch in coming months, such as new Skoda Octavia, Nissan Terrano, BMW 1 Series, Hyundai Grand i10 and Toyota Camry Hybrid.
