Yet another cut..!

RBI today cut the CRR and other prime lending rates. The CRR stood at 5% after a 50 basis point cut while short term lending (repo) rate by 100 basis points to 5.5% with immediate effect and short-term borrowing (reverse repo) rate by similar percentage points at 4%. This would mean infusing another 20,000 crores into the economy. Banks are expected to slash interest rates further after the RBI's decision.

After the Indian trade data was released yesterday which pointed out that the economy is more seriously effected than previously estimated, these steps by the apex bank were obvious. This could be seen in the decline of exports and imports.

Exports contracted by 9.9% in November, after declining by 12.1% in October. In the eight months ended November, exports grew by 19.4% to $119.30 billion (Rs5.81 trillion); imports by 33% to $203.64 billion. The trade deficit, exports less imports, for the same period was $84.34 billion, compared with $53.19 billion a year earlier. The RBI is required to do more than just cut these rates. The stock market also reacted to this by closing a mere 54 points up to 9,958 and Nifty ended 13 points up at 3,047.

Meanwhile another news that made headlines was the slash of fares by Kingfisher which were between 21-65%. This is after Jet successfully took advantage of a reluctant Kingfisher which did not reduce the rates at first even after being into an alliance wit Jet. Kingfisher would also offer discounts to its traditional corporate customer base which itself tells how its struggling.