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Indian interest rate rises are hitting metal demand

Date: Fri, 29 Jul 2011 | Author: Paul Sanderson

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The eleventh interest rate rise in India in 18 months is beginning to reduce demand for metals.

The Reserve Bank of India has increased interest rates again in an effort to curb inflation. It increased rates by half a per cent to eight per cent, which businesses are warning is causing borrowing costs to be too high. In June, inflation in the country reached 9.44 per cent.

However, a mixture of rising costs of borrowing, less demand from the construction sector, and cheap Chinese imports is starting to impact on Indian demand for metals.

Apex Chamber of Commerce and Industry president PD Sharma said: “The eleventh interest rate hike in less than 18 months will further impact on construction activity and infrastructure projects.

“There is urgent need to provide special incentives to steel and engineering units and ensure that development projects, housing projects and infrastructure projects that are the lifeline of growth are not impacted in any way and also to impose stringent anti-dumping laws and more tariff barriers on Chinese goods to provide a level playing field to domestic units.”   

                
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