Rising rates pinch India Inc as govt battles scams
The benefit of the base rate has evaporated for India Inc. Instead, costs have begun to pinch as the government battles scams in and outside Parliament, putting a plug on expenditure and making money scarce in the market. The base rates were expected to shave off borrowing costs for companies from the banking sector, besides introducing more transparency in the pricing of loans, when introduced just six months ago. But banks, faced with a massive shortage of funds, are in no position to offer easy loans to companies for the rest of the financial year. As a result, industry is expected to close out 2010-11 with a rate of interest far higher than what it had started out in April. The high cost of borrowing will impact capital investment, working capital requirements of industry and could impact production too.
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