India’s Shrinking Business Cycle
October 19, 2012 2 Comments
If y
ou have a ladder of fixed income instruments or are looking to take on debt,it helps to be able to have a feel for the interest rate cycle.I came across come interesting inputs to help in this effort in yesterday’s newspaper.
The chief takeaways of this article are:
1.By watching the long-term investments in infrastructure,maybe 10-15 years into the future,we can call the GDP growth rate.At present it is likely to be 5-7 %.
2.The current RBI governor has commented that the potential growth output frontier has shrunk to about 7.5%.
3.During the growth phase of the business cycle,when the growth reaches,85% of the capacity,which is about 6.5% growth,RBI will likely apply the brakes.
4..The business cycle time period has reduced from a previous 7-8 years to 1.5-2 years.
About Keerthika Singaravel
Interesting, we live in an unusual economic climate at the moment, so I wonder if the old rules will apply to what will be happening over the next few years.
My personal take is that modifications of the old will continue till such time as there is a complete breakdown.Unfortunately I just don’t know the time and place of this event,just that in a digitally interconnected world it is likely to happen in the blink of an eye which may not give us much time to react to save ourselves.