In general, the market works on demand and supply with respect to determining the prices which means demand will increase if the price decreases and vice-versa from the buyer’s point of view but in the case of supply which is from the seller’s point of view, supply increases if prices increases and vice-versa.
In short, Demand has an inverse relation and supply has a direct relation with prices respectively.
Now let’s have a look at real numbers with respect to various macro factors.
Repo rate is the rate at which the central bank of a country lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.
RBI has maintained the repo rate at 4% and as a result of it bank have lowered their lending rates in general so that the credit system continues its flow and money continues its flow.
On point to point basis, the weighted average lending rate on fresh loans for all banks came down from 8.07 percent in April to 7.98 percent in November. So loans were cheaper but the increase in credit was just 3.3 percent over March.
As of November, growth in credit to manufacturing (being driven by large industry) was negative while that in the service sector was just 0.8 percent.
Ideally, in a normal scenario, lower interest rates should reflect high credit growth.
(A weighted average interest rate is an average that is adjusted to reflect the contribution of each loan to the total debt. The weighted average multiplies each loan's interest rate by the loan balance and divides the sum by the total loan balance)
During the year so far, the forex reserves of the country increased by around $58 Billion, normally it gives rise to rupee appreciation but the dollar rate has fallen from ₹72.5-73 in April to ₹74-75 by December.
Happy reading....!!!!
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