How cheaper gold will benefit India

ON INDIA

Falling commodity prices, especially oil, are proving positive for India in a variety of ways. Not only is India a major oil importer but the cost of oil for the consumer is heavily subsidised by the government.

As the cost of that subsidy decreases, so too does the current account deficit. In addition, the reduced oil price has a positive impact on inflation, thus giving further scope for rate cuts. Inflation is now at a 14-month low and although the rhetoric from the Reserve Bank of India remains hawkish, this belies its actions, which include two interest rate cuts to date this year, and, in our view, the potential for further rate cuts in both May and June. The 10-year bond yield is down to a three-year low and we feel that significant easing of monetary policy is on the cards. This ea...