Increased Loan Rates And Crude To Put Indian Economy In Challenging Situation: Kotak
The Indian economy will have to face new challenges from foreign countries owing to crude prices and increasing interest rates. Uday Kotak, vice chairman of Kotak Mahindra Bank in his new year’s message to the employees of Kotak Group, said, “India will not be untouched by external developments. Oil prices have been strong and the short-term interest rate will not be as easy as 2017. Brent crude’s new level is estimated to be $50–60 a barrel. It won’t be feasible for India to go above $70. If oil prices rise, it will ultimately affect the living of the common man and they have to experience the pain of inflation.
Kotak said, “In the last three years, we had seen good macro and micro conditions. In 2018, we may have to see such a situation again.” At the same time, he said that due to increasing interest rate in the US, other regions such as the European Union will have to change their attitude of keeping the interest rates low. Focusing on keeping Reserve Bank of India (RBI) inflation below 4% can also be costly in the country. It expects to increase rates of 1.5–2% in the US to almost 3%. Right now, the rates in the US are 1.25–1.50%. Kotak Group, affiliated with Financial Services, has more than 48,000 employees.
Kotak also cautioned the people about the escalation of the stock market. He said, “The current round of expansion is increasingly attractive due to reaching new targets daily in the shares. I would advise investors to be cautious about the increase in share prices. Investors are going from equity to debt to equity. Looking at the fundamentals view, there is some shortage.”
He said that India has yet to make a long way to equalize China. Kotak said, “According to the latest figures of 2016, India’s per capita GDP is approximately $1,800, whereas in China it is $8,123 and in developed countries about $30,000. Considering the growth of 1% in the population, we will take 20% of the GDP growth of 8% per person, in order to achieve the real GDP growth of 9% to reach China’s current level. We need to take care of this reality with being excited.
Kotak said that new laws such as Goods and Services Tax (GST), Real Estate Regulation and Development Act, and Insolvency and Banker’s Code can be a bit difficult, but this will give positive results to the common man and the Indian economy in the long run.