Monday, November 17, 2014

Japan Falls Into Recession, Oil Falls to $78/bbl

As news came that Japan's economy has fallen into recession again, oil prices have dropped to $78/barrel:

http://in.reuters.com/article/2014/11/17/markets-global-idINKCN0J11BZ20141117

Obviously, the impact on oil prices is more than just because Japan is the world's No.4 oil importer, but also because there's a fear that a slide by the world's 3rd-largest economy could also tip the rest of the world toward recession.

Given the increasing downtrend in energy prices and its effect of lowering inflation, this gives all the more reason for India to go in for a rate cut. RBI needs to send Indian and global markets a positive signal by cutting rates and reducing Indian capital costs, which are out of line with the rest of the world. Also, helping Indian banks to restructure bad debt would increase the confidence of investors around the world.

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