aci_feb2015_LR-1February 2015

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Diligent Business

The Reserve Bank of India (RBI) announced a surprise interest rate cut recently, which was not during the regular cycle for the monetary policy decisions and announcements. This is the first rate cut since May 2013, after about 20 months. Besides, the RBI promised that there are more to follow as it signalled a shift to an accommodative monetary policy stance citing lower inflation. In its statement accompanying the interest rate cut, RBI said, for it to move on lowering rates further, the Government will have to move on ‘sustained high quality fiscal consolidation as well as steps to overcome supply constraints and assure availability of key inputs such as land, power, minerals and infrastructure.’ The apex bank’s decision to cut its benchmark repo rate by 25 basis points to 7.75% from the current 8% was based on the easing pressure on prices, weak demand and lower inflation expectations of households. The announcement will certainly give the much needed fillip to investors and there will be more money in the hands of consumers. While the stock market has welcomed the move, the Union Finance Minister Arun Jaitley described the RBI’s decision as an ‘important turning point’ in addition to anticipating it as a catalyst for faster growth. However, the industry lobbies demand more as they viewed the 25 basis point cut as too little to aspire for. While many industry bodies ask for frequent interest rate cuts, the apex body of the real estate developers demands 200 basis points reduction in a short span of time, perhaps the worst of the affected lot. Few global banks have stepped up forecasts for further easing this year. While this is a delightfully diligent move on the part of RBI, it needs to capitalise on lower inflation faster by further curtailing the interest rate at a swift pace. The manufacturing industry as a whole and the auto industry in particular can leverage RBI’s decision and look for diligent business opportunities in the short and long term.

The Cover Story of this issue is: Growing Japanese Business in India. Though investments from India in Japan are nothing to write home about, the investment from Japan in India has been growing consistently. The story discusses how and why Japanese companies are evincing interest in investing in India despite the World Bank’s ‘Doing Business Report’ not favouring business in the country. Besides, the story talks about the role of Japan Export Trade Organisation in catalyzing Japanese investments into India.

For the first time, we have covered a railway workshop in the Shopfloor Sojourn section. The Locomotive Workshop in Parel, Mumbai that manufactures diesel locomotives in addition to refurbishing older coaches and engines, is covered in detail. It is really a diligent business for the workshop and the Indian Railways. In addition, we have Mahindra Gusto in the Technology & Innovation section with Datsun GO+ in Value Engineering.

Hope this issue is of very special interest to you.

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T Murrali


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