Consumers are biggest loser in India

Today Reserve bank of India (RBI) Governor Raghuram Rajan delivered a third interest rate cut this year as inflation eased. However that is unlikely to bring any major benefits to consumers.

• Indian corporate sector remain heavily indebted and some which may not be recoverable without structuring. This has led to large Non-performing assets (NPA) accumulation in banks' balance sheet, which are not very eager to pass on the benefits to consumers. Moreover Bank's need to boost their capital base in the face of more stringent Basel standards.

Consumers are the single largest loser as easing from RBI fails to reach to them.

• According to data inflation have eased in India, led by lower oil prices. Since India is a net oil importing nation is set to benefit a lot from lower oil price.

However consumers are loser once more as Government of India, improving its fiscal balance by imposing higher taxes and reducing subsidies which kept the oil price high for Indian consumers. While global oil price dropped about 50%, Indian consumers had less than 20% reduction in prices.

Consumer demand might drop sharply as the government now introduces higher tax on value added services.

While Indian benchmark nifty drops sharply in spite of easing from RBI, expect domestic goods companies to underperform over the coming quarters.