Will We Witness a Stable Interest Rate Regime for Some Time?

Worldwide, interest rates are stable now. Although, the expectation that they would come down has not materialized so far.

The good news is that inflation is not rising. It seems stable for now, although not coming down.

Most central banks in the world are bracing up for interest rates to remain high for somewhat longer. 

In India, the situation is somewhat interesting. 

Inflation is expected to cool off as the winter approaches.

Interest rates are elevated, but the demand situation in the country seems robust. All economic data shows there is no sign of a slowdown.

But are there signs to be worried about? Will war in the Middle East raise crude prices? Will there be higher inflation?

Let’s look at some of the economic indicators and try to figure out what the future holds. 

GST Collection Data Indicates Robust Demand

The average monthly gross collection in FY 2023-24 is ₹1.65 lakh crore, which is 11% higher than the average monthly gross collection for the first half of FY 2022-23 where it was ₹1.49 lakh crore.

With the onset of the festival season, the GST collection started looking up further. GST collection in October rose 13% to Rs 1.72 lakh crore, second highest ever.

This shows that consumers have sound confidence in the economy right now, and they are not worried about any downturn in their financial situation.

However, let’s not judge the economy with one data point. 

Let’s look at some more economic indicators.

More Economic Indicators

Let’s look at the freight volume carried by the Indian Railways.

Total originating freight loading for the railways in October 2023 touched 129.03 MT, marking an 8.47% increase from 118.95 MT in the same month the previous year. Concurrently, the freight revenue for October stood at Rs. 14231.05 crores, showing a 6.57% boost compared to Rs 13353.81 crore in October 2022.

Another major indicator is the automobile sales data.

Around 3.91 Lakh passenger cars were sold in the Indian market in October 2023. The sales increased by over 16% when compared to October last year and by 7.7% in comparison to September 2023. The Industry registered a record high in Oct’23 which was the fourth consecutive month where it crossed the 3.5 Lakh mark.

As the trend indicates, property sales are on a tear in 2023 compared to 2022. The year saw residential real estate worth ₹3.47 lakh crore sold in the top seven cities—48 percent higher than in the Financial Year 2022-23.

Consumer Confidence is on a High

Indian consumers are not worried about any economic problem at this time even if there are a few disturbing global events. They expect the Indian economy will sail through without any adverse impact.

India Consumer Confidence: Net Balance recorded a gain of 22.3 % Point in Sep 2023, compared with a gain of 16.6 % points in the previous month.

Additionally, there is comfortable retail credit growth in the property sector.

Some Causes of Worry

The recent developments in the Middle East, the war between Israel and Hamas, worried the markets as the crude oil prices spiked.

However, the markets took this in its stride and crude pieces cooled off to more reasonable levels.

While the war between Russia and Ukraine also rages on, there is no fear of crude prices spiking at this time.

Apart from the crude prices, most commodity prices have come down in the global markets. This, in turn, will help keep inflation in check and may even reduce it.

In fact, inflation is already moderating in most countries.

Inflation in India

Inflation in India is rather stable and is expected to moderate further as winter arrives. Food prices are already softening, and prices of other essential goods are moderate at this time.

Crude oil price is usually the joker in the pack in India as most of our requirement is imported. But it is expected that crude prices will remain stable now.

However, RBI cannot aggressively bring down the interest rates before the US Fed does so for fear of a Dollar flight from India.

Even if the US inflation is seemingly stable now, the US Fed is somewhat cautious and bracing up for a long period of elevated interest rates.

However, inflation is not rising and the scope for interest rate hikes is practically absent now.

In India, further interest rate hikes are not expected now and with time, they are expected to go down.

Home Loan Interest Rates in India

Inflation has risen in the past couple of years in India and consequently the interest rates. However, inflation is already moderating and interest rate hikes are not anticipated right now.

Home loans are usually long-term, and a stable rate environment is beneficial to the homebuyers. It is expected that home loan EMIs will remain stable for a considerable time. 

This offers a great opportunity for homebuyers, and homebuyers can now plan before taking a home loan. 

Moreover, as the elections are approaching in India, the government will take every step to keep the economy stable.

There is no need to postpone the decision to take a loan.

Go buy your dream home now.

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