China is likely to hold a 25-30 percent stake in the new Asian Infrastructure Investment Bank (AIIB) while India will be the second-biggest shareholder, delegates said on Friday after a three-day meeting of the bank's founding member-nations. AIIB said in a statement that it expected to be operational by the end of the year. It said the meeting in Singapore finalised the articles of agreement, which are expected to be ready for signing by the end of June, but did not give details. No details of the ownership structure were disclosed, but delegates told Reuters that China would likely take a 25-30 percent stake in the bank, and India was likely to be the second-largest shareholder. China's share in the $100 billion lender would be less than 30 percent, an Asian delegate told Reuters. A second delegate said India's share would be between 10 and 15 percent. Both spoke on condition of anonymity. In all, Asian countries are expected to own between 72 and 75 percent of the bank, while European and other nations will own the rest. Another delegate said each country representative would take the proposals back to their governments for a final decision. Some were sceptical of the timeline for the bank to start running, as each member will need to obtain cabinet and legislative approvals at home. "It is uncertain if we can start from early next year," said one of the delegates. "China hopes that members will get such approvals by year-end and the operations start from the next year. But I wonder if it is possible, given domestic political situations in each country." A total of 57 countries have joined AIIB as its prospective founding members, throwing together countries as diverse as Iran, Israel, Britain and Laos. The United States and Japan have stayed out of the institution, seen as a rival to the U.S.-dominated World Bank and Japan-led Asian Development Bank, citing concerns about transparency and governance, although Tokyo for one is keeping its options open. AIIB's launch is coming at a time when the space for infrastructure lending is already crowded due to the presence of major multilateral lenders and Japan's latest move to provide $110 billion for Asian infrastructure projects. The amount of Japanese funds, to be invested over five years, tops the expected $100 billion capitalisation of the AIIB. Jahangir Aziz, head of emerging market Asia economics at JPMorgan, said spending on infrastructure was a great idea on paper, but it was unclear how the AIIB or the New Development Bank, a lender promoted by China and other members of the BRICS group of nations, would be structured. "We will have to wait for the actual structure of governance before we can see how successful these (institutions) will turn out to be," he said. "The proof of the pudding will be in the eating." (Reuters)
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The government of Prime Minister Narendra Modi is completing the first year of its five-year term on May 26, 2015. It was the first government to win a single party majority in the Lok Sabha in three decades. People’s expectations have been very high due to Narendra Modi's own track record of growth and development in the state of Gujarat for over a decade, as well as the hope the entire country has placed on him as a leader who can get impossible things done. The election was fought and won in the backdrop of high inflation, high unemployment, growing inequality, impatience and anger of the youth with the entire political and administrative elite, high fiscal deficit and trade deficit as well as allegations of corruption against the previous government. A majority of the above problems are structural and cannot be solved within a short period of 12 months as they have been ingrained into the system over the last several decades due to a lack of planning, implementation and administrative control. The federal structure of India is also not amenable to faster decision and implementation. Additionally, several other structural issues were pending. These include the Goods and Services Tax (GST), direct benefit transfers to beneficiaries, Direct Tax Code, Financial Sector Legislative Council (FSLRC), and foreign investments in key sector like defence, insurance and retail. Inflation has come down from 11.16 per cent at its peak in November 2013 to 4.87 per cent in April this year – a singular achievement of the BJP government, which has allowed the Reserve Bank of India to bring down interest rates recently. Many experts have credited the reduction in inflation to the external forces such as reduction in oil, agricultural commodities and gold prices worldwide. However, there have been instances in the past in India where despite a favourable scenario worldwide the country witnessed high inflation. The government could also contain fiscal deficit substantially despite the huge reduction in revenue such as reduction in ad valorem duty on petroleum products. One would like to think that for a stable, growing society, low and stable inflation rate is a pre-condition. India is coming closer to that objective today. Fiscal deficit, revenue deficit and trade deficit have become manageable with the highest ever foreign exchange reserves of over $352 billion being achieved recently. Creating a conducive environment for massive job creation has to be an important priority for the new government. Infrastructure creation and industry regeneration has to be given adequate importance. Industry has to be attracted to set up plants as manufacturing has been identified to be a key success factor in this puzzle. The ease of doing business, Make in India, and several other initiatives have been initiated along with skill improvement programs. All of the foreign trips of Modi after becoming prime minister have focussed primarily on attracting foreign investment in the manufacturing sector. Norms for investments in defence, insurance and several other sectors have been relaxed to make India attractive for foreign companies. The defence production strategy which makes military procurement conditional to making the equipment in India will not only create a large number of jobs but also make India a hub for hi- tech defence manufacturing in the future. Single window framework and project management portal is creating an enabling environment for the Prime Minister’s Office to track progress of large important projects on real-time basis, irrespective of them belonging to the private or public sector – projects worth more than Rs 600,000 crore investments are now being monitored. Mechanisms have been devised to coordinate with states and cities to expedite the projects with periodic reviews taking place and hindrances to project implementation removed in real time. Concept of Team India consisting of Prime Minister, other Ministers and Chief Ministers of various states has also been well received. Giving out larger percentage of taxes and other revenues to states is well-intentioned and provides for more flexible implementation approach on the ground. Direct benefit transfer to beneficiaries required the government to continue the MNREGA scheme and build on the Aadhar Unique Identification project. Although they were initiated by the previous government, the new government built on them and also created a massive framework to open more than 150 million bank accounts to make direct benefit transfer a reality and at the same time bring large number of unbanked people in to financial mainstream. Creating social security schemes like accident cover linked to bank accounts, giving micro loans to bank account holders, launching pension scheme with more than 80 million registered users and giving them life insurance have been achievements unparalleled in India's history. But these are not highlighted much in the middle-class media. Giving small loans to entrepreneurs through Mudra bank is a brilliant initiative as today most small entrepreneurs do not get any funding from formal sources like banks, markets, etc., making vulnerable to the uncertainties of informal sources of finance. The Swacch Bharat initiative has also been well received and has created awareness about much needed cleanliness in India. India is the largest consumer of gold and gold imports account for nearly a third of the current account deficit. Announced first in the Union Budget for FY 2015-16, the government has released a draft paper for public comments on the Gold Monetisation Scheme, which allows for citizens to deposit their gold with any of the banks offering this service and earn returns in the form of gold. The minimum amount of gold that can be deposited under this scheme has been kept at 30 grams and the minimum tenure at one year, both welcome measures. Implementation and reach are crucial, but the Gold Monetisation Scheme, along with the Gold Sovereign bonds, also announced in the Union Budget, may help India’s gold demand substantially, which would significantly improve India’s current account balance. India has witnessed significant migration from rural parts to cities in the last few decades, with the urban population now accounting for 31 per cent of the total. The migration has also resulted in increased economic activity with the urban population now contributing over 60 per cent to the GDP. However, the infrastructure required to support such a big population has not kept pace as the cities grow to accommodate the growing population. The infrastructure, thus, has proved to be the bottleneck in economic development. Also, the quality of life in cities has deteriorated. The prime minister’s vision to create 100 smart cities with modern infrastructure to support the large-scale urbanisation without compromising the quality of life is a necessity if India wants to become the global leader in the next 20 years. The smart cities should be able to provide good infrastructure such as water, sanitation, reliable utility services and health care. They should attract investments and have transparent processes that make it easy to run commercial activities. There should be simple and online processes for obtaining approvals, and various citizen-centric services must be made available so that people can feel safe and happy. The International Finance Centre in GIFT City in Gujarat is one such welcome initiative. Setting up of IFC in GIFT City was a part of Modi’s vision, which was supported by the BSE by becoming the first stock exchange in the world to sign an MoU with GIFT. It would help in establishing an international finance centre in India that can compete on rules, regulations and ease of business with finance centres in places like Hong Kong, Singapore, Dubai and London. This would create high quality jobs in India and boost economic activity. The IFC would act as a gateway to attract investments to India. India’s role as a humanitarian country was reinforced with Operation Raahat, the evacuation operation from Yemen, of nearly 5,000 Indian nationals and 1,000 foreign nationals from 41 countries. Even the US State Department advised its nationals to contact the Indian embassy for evacuation out of Yemen. While India managed to evacuate all its citizens and one thousand foreign nationals, the US has still not been able to initiate any operation to evacuate its 55,000 citizens out of the war-ravaged Yemen. India’s efforts were again needed as Nepal got hit by a 7.8 Richter scale earthquake which killed thousands of people. Operation Maitri, India’s prompt response to the Nepal earthquake, included immediate delivery of over 500 tonnes of relief material, evacuation and transportation of thousands of people of different nationalities, sending its Air Force and soldiers for helping the Nepalese government with relief work, while Indian citizens volunteered for relief work and helped with donations. The prime minister is helping make the citizens take the onus of transforming India – be it the CSR Bill, the Swachh Bharat Abhiyan or his call to affluent Indians to give up their gas subsidy. The support garnered by the Swachh Bharat Abhiyan among the citizens and corporates has been overwhelming. It has been particularly heartening to see citizens respond to the call to fulfil Mahatma Gandhi’s vision of Clean India by his 150th birth anniversary in 2019. The BSE Group has also supported the PM’s initiative in its own humble way. India is witnessing its first mass movement for cleanliness and hygiene, since the days of Mahatma Gandhi. If India has to cement its place in the world as a developed nation, it has to make significant strides in the areas of public health and hygiene. The Swachh Bharat Abhiyan would have far reaching effect in public health and hygiene, welfare of the poor and national growth and development. The government has built upon the work of the previous regime on CSR for corporates with the Companies (Corporate Social Responsibility Policy) Rules, 2014. BSE, CII and IICA have collaborated to form a first-of-its-kind-in-the-world platform called Sammaan. This CSR platform enables companies to undertake effective CSR. As per recent analysis done by the BSE, there are 1294 companies listed on the BSE that are required to spend on CSR by the law. There are an estimated 20 lakh implementation agencies (IAs) registered in India. Corporates, especially the small and medium ones, will need assistance to identify an NGO that they can partner with for their CSR compliance. Sammaan aims to provide this assistance in the role of trusted intermediary between corporate and IAs. It will provide access to credible IAs from across India, working in all the sectors mentioned in Schedule VII, Section 135 of Companies Act 2013. IAs listed on Sammaan will provide clear and defined programs, objectives, expected outcomes and budgets. Sammaan will provide corporates with a program dashboard to monitor funding and progress of the CSR programs initiated by them. IAs will have the opportunity of listing their organization on Sammaan and gain visibility on one of the largest listing of corporate donors. The employment question is a tough one to crack. Infrastructure needs to be created for ports, airports, roads, factories, power, mining, etc. This will not only kick off employment generation instantaneously but also create conditions for job creation in the medium to long term, which would help India realise its goal of “Make in India”. SMEs are the engines of growth with some of them becoming large-cap companies at some point of time. We need to create an environment where India-based companies are able to grow and thus create more jobs, where small and medium enterprises (SMEs) find it easy to raise funds for their enterprises and where the youth is adequately trained to contribute and participate in the Indian growth story. On March 13, 2012, the BSE became the first exchange in the country to launch a dedicated SME platform for listings. In the same way, the BSE has been synonymous with capital markets over 140 years, the emerging BSE SME segment has become the largest market of its kind in India with more than 90 per cent market share. The BSE, in the last two and a half years, has been able to get 93 SMEs to get listed, four of which have grown and successfully migrated to the main board of the exchange, while an additional 20 companies are at various stages of getting listed. Listing of SMEs enables them to raise funds from the public, while giving the investors the opportunity to become part of the success story if these ventures succeed. The SME market cap breached the Rs 10,000 crore landmark in December 2014. The first year of Prime Minister Modi has seen tremendous energy and initiatives. Some of them have given results and some of them will give results over a period. If he continues with the same zeal and enthusiasm for result-oriented policies over the next four years of his first term, I am sure India will have progressed much further to fulfil our dream of a clean, equal and poverty free India. The author, Ashishkumar Chauhan, is managing director and CEO of BSE
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The expectations from the new government when it came to power last year were "probably unrealistic" but it has taken steps to create an environment for investment and is "sensitive" to concerns of investors, RBI Governor Raghuram Rajan said. "This government came in with tremendous expectations and I think the kind of expectations were probably unrealistic for any government," Rajan said responding to questions after his address to the Economic Club of New York on Tuesday. He said in the minds of the people, Prime Minister Narendra Modi's image was that of "Ronald Reagan on a white horse" coming to slay anti-market forces and such comparison was "probably not appropriate." Rajan, however, said the government has "taken steps to create the environment for investment, which I think is important." The government is "sensitive" to the concerns of investors and is looking into addressing economic issues, he said. Rajan's remarks come as the Modi-led government completes one year in office this month, having received a commanding majority from an electorate that wanted jobs, economic development and respite from rising prices and corruption. The Reserve Bank of India governor said a "big part" of the business environment is taxes and the government has said it will not bring retrospective taxation again. "However once the tax authority levies a demand on you, there is a quasi-judicial nature of that proceeding and therefore it has to go through the courts before it is resolved. The government cannot intervene," Rajan said. "Legacy issues are winding their way through the courts, including issues based on laws that existed before they were changed," he said. The corporate tax rate will also come down one per cent every year going forward, he added. The former International Monetary Fund chief economist said "perhaps" India could have done a "better job" in handling these issues but "going forward the government says no more of this kind of stuff we will do." Rajan said there are several areas where the government has taken more "serious and significant" advances to improve investor confidence and propel growth. On the issue of subsidies, he said petrol and diesel subsidies have gone. "Going forward these subsidies will be transferred directly into bank accounts," he said, adding that already the cooking gas subsidy is being transferred directly to bank accounts. Rajan said there is a "broad consensus" for the Goods and Services Tax (GST) and while he had hoped for the GST Bill to have passed in the just concluded session of Parliament, he feels there is "enough momentum" that "it will be done well in time and roll out by March 31 or April 1 next year." "In fact (the government) is going ahead with the apparatus to ensure that it is actually done," Rajan said. Another key legislation that the government is focussing on is the Land Acquisition Bill, which is important from the perspective of certain public works, Rajan said. He said that since different states have their own land acquisition bills, some commentators have suggested the possibility that the states should decide for themselves as to how to implement their respective land acquisition provisions. There are tremendous plans for investment, particularly in the Mumbai-Delhi industrial corridor and freight corridors, the RBI governor said. "My sense is that things are happening," he said. Rajan also called the government's spending cuts "significant," and said "there has been some amount of fiscal consolidation over and above what the government is owning up to." With the current account deficit also projected to come down from more than four per cent to 1.5 per cent this year, Rajan said "the big deficit numbers have come down" and the focus is on growth. He, however, said while investment intention and investment is picking up, the pace can be faster. Playing With FireThe "spectre of deflation" is spurring the world's major central banks into a dangerous struggle for stronger domestic growth that imperils financial markets and ignores the needs of developing nations, the RBI chief said. Rajan, making a familiar argument for better global coordination on monetary policy, said central bankers in developed economies should take more seriously their international responsibilities. He called for better leadership from the IMF. The Fund, Rajan said, should examine each unconventional monetary policy that is proposed or in place around the world and decide whether it meets the greater good of the global economy. "The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector," Rajan told an audience of economists and investors in New York. "I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it," he added. "We are thereby also creating financial sector risks for when unconventional policies end." The US Federal Reserve, the European Central Bank and the Bank of Japan have purchased more than $10 trillion in bonds to fight deflation and help kick-start growth in their respective economies following the global recession. The mass monetary easing had sent a rush of funds into developing economies like India, sending currencies and stocks to records. More recently, the end of the Fed's bond-buying and the prospect of a US interest rate hike has had the opposite effect, stoking volatility in financial markets. Rajan said that since "the spectre of deflation haunts central bankers," it is no wonder that developed countries do not want to settle for low growth "even if that is indeed their economy's potential." Still they should not ignore their responsibilities to developing economies, he said, adding the IMF should be the arbiter of whether accommodative policies are "in- or out-of-bounds." The "IMF is perfectly capable of doing these things. But it needs leadership. Because the central banks won't do it themselves, (the IMF) needs the political leadership," Rajan said. "We have the organisation. It needs people to recognise that we are moving from crisis to crisis." American, European and Japanese central bankers often acknowledge the volatile effects their policies have on the rest of the world. But they argue that even developing economies benefit from their stronger domestic economies. IMF Managing Director Christine Lagarde has applauded the aggressive monetary easing by major central banks and has warned against a premature tightening in the United States. (Agencies)
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The depreciation of the rupee is due in part to the US dollar's strength and it has fallen less, and in a less volatile fashion, than other currencies, Reserve Bank of India (RBI) Governor Raghuram Rajan said. While the rupee has slid against the strengthening dollar, he told a New York audience on Tuesday, "it has actually strengthened against other countries." "The Indian press is all about rupee depreciation ... But if you look at the rupee's volatility relative to other currencies, you'd have to argue that the rupee has been one of the most stable currencies (against) the dollar," Rajan said. "It's been much stronger than other currencies." After long outperforming other emerging market currencies, the rupee has started to sag in part due to perceptions of delays in reforms under Indian Prime Minister Narendra Modi, who was elected a year ago. The central bank has so far done little to halt the rupee's slide to 20-month lows against the dollar, a sign that Rajan wants to save ammunition in case a pending US interest-rate hike worsens volatility. Rajan called the government's spending cuts "significant," adding that "there has been some amount of fiscal consolidation over and above what the government is owning up to." Inflation, he said, "has come down tremendously in India." The rupee depreciated by 11 paise to 63.78 against the US dollar in early trade on Wednesday at the Interbank Foreign Exchange due to appreciation of the American currency overseas riding on strong economic data. Forex dealers said increased demand for the dollar from importers also weighed on the local currency, but a higher opening in the domestic equity market limited rupee's fall. The rupee had recovered by five paise to close at 63.67 against the US currency in the previous session due to fag-end selling of dollars by banks and exporters. (Agencies)
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Founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) will hold a three-day meeting in Singapore this week to discuss operational policies for the establishment of the institution. The gathering, called the 5th chief negotiators' meeting, will also discuss the draft articles of agreement for the AIIB in Singapore from Wednesday to Friday, a Singapore Ministry of Finance statement said on Tuesday. The meeting will be co-chaired by Shi Yaobin, vice minister of China's Ministry of Finance, and Yee Ping Yi, deputy secretary of Singapore's Ministry of Finance. A total of 57 countries have joined AIIB as its founding members, China has said, throwing together countries as diverse as Iran, Israel, Britain and Laos. Among the Group of Seven (G7) industrialized countries, the United States, Japan and Canada remain absentees. Washington had cautioned nations about joining the bank, seen as a rival to the U.S.-dominated World Bank, citing what it called a lack of transparency, doubts about lending and environmental safeguards, and concerns over Beijing's influence. Beijing says it will not hold veto power inside the AIIB, unlike the World Bank where Washington has a limited veto. Founder members will initially pay up to one-fifth of the AIIB'S $50 billion authorised capital, which will eventually be raised to $100 billion. (Reuters)
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The cabinet on Wednesday approved plans to sell a 10 per cent stake in state-run oil refiner Indian Oil Corp and a 5 per cent stake in power producer NTPC. The Indian government has set an ambitious target of raising 695 billion rupees ($10.83 billion) through stake sale in state-run companies in 2015/16 fiscal year that ends in March 2016. "The Cabinet has approved 5 per cent disinvestment in NTPC and 10 per cent in Indian Oil Corporation (IOC)," a source said after the cabinet meeting. According to BSE data, the market capitalisation of NTPC stood at Rs 1,11,313.77 crore while that of IOC was Rs 79,321.21 crore as of May 13. The proposed share sale of 5 per cent in NTPC would fetch the government Rs 5,565 crore while that of 10 per cent in IOC would bring in Rs 7,932 crore. Thus, the stake sale in both companies would help the government mop up over Rs 13,000 crore. The government holds 74.96 per cent in NTPC and 68.57 per cent in IOC, according to the BSE data. The government has budgeted to raise Rs 41,000 crore through PSU stake sale in the current fiscal and another Rs 28,500 crore through strategic stake sales. NTPC was trading down 4.28 per cent at Rs 135.45 and IOC fell 1.79 per cent to Rs 326.85 at noon. (Agencies)
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German development bank KFW could lend India $1.1 billion for rooftop solar projects, on top of another loan it has extended to help the country fund its ambitious green energy plans, India's top renewable energy bureaucrat said. Prime Minister Narendra Modi wants to quintuple India's renewable energy capacity to 175 gigawatts by 2022, making clean energy part of his fight against climate change without necessarily committing to a timeline for emission cuts. KFW has already offered India a loan of about 1.38 billion euros ($1.55 billion) to help build a "green corridor" of power lines through nine states, and Modi's visit last month to Germany helped advance talks on the rooftop plans, said Upendra Tripathy, secretary in the Ministry of New and Renewable Energy. "The prime minister discussed this and KFW in principle agreed to examine our request," Tripathy said on Tuesday. "We are looking for low-cost loans." KFW, which said in December it would extend a 1 billion euro loan for the power transmission project, could not be reached for comment on Tuesday. Tripathy said the government had also sought $750 million from the World Bank and $500 million from the Asian Development Bank to help keep up the momentum in expanding its clean energy programmes. India's renewable energy investments rose to $4 billion last fiscal year to March 31 from $3.4 billion a year earlier. Capacity addition was 12 percent higher than a year earlier, helping India cut its carbon emission by a similar margin to 8.78 million tonnes, Tripathy said. India reckons its renewable energy industry could generate business opportunities worth $160 billion in the next five years, making it a lucrative market that has already attracted big global players such as Sun Edison and First Solar. Money has also started to flow in from China, and more deals are likely when Modi goes there on Thursday in his first visit to the bigger neighbour since taking office a year ago. (Agencies)
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China cut interest rates for the third time in six months on Sunday in a bid to lower companies' borrowing costs and stoke a sputtering economy that is headed for its worst year in a quarter of a century. Analysts welcomed the widely-expected move, but predicted policymakers would relax reserve requirements and cut rates again in the coming months to counter the headwinds facing the world's second-largest economy. The People's Bank of China (PBOC) said on its website it was lowering its benchmark, one-year lending rate by 25 basis points to 5.1 percent from May 11. It cut the benchmark deposit rate by the same amount to 2.25 percent. "China's economy is still facing relatively big downward pressure," the PBOC said. "At the same time, the overall level of domestic prices remains low, and real interest rates are still higher than the historical average," it said. Sunday's rate cut came just days after weaker-than-expected April trade and inflation data, highlighting that China's economy is under persistent pressure from soft demand at home and abroad. While the PBOC acknowledged the difficulties facing China's economy, it said in its statement accompanying the announcement that it wants to strike a balance between supporting growth and deepening structural reforms. As part of these reforms, it lifted the ceiling for deposit rates on Sunday to 1.5 times the benchmark level, the biggest increase in the ceiling since it began to liberalise the interest rate system in 2012. More Easing AheadEconomists had said it was a matter of when, not if, China eased policy again after economic growth in the first quarter cooled to 7 percent, a level not seen since the depths of the 2008/09 global financial crisis. Indeed, some analysts have even said recently that the PBOC had fallen behind the curve by not responding aggressively enough to deteriorating conditions. With China set to publish more key economic data on Wednesday, including industrial output and investment, the timing of the rate cut could add to worries that figures may disappoint across the board again, as they did in March. For now, however, some were confident that policymakers can arrest the slide. "Intensified policy loosening will help effectively halt the economic slowdown," said Xu Hongcai, a senior economist at China Centre for International Economic Exchanges, a well-connected think-tank in Beijing. A cooling property market and slackening growth in manufacturing and investment have weighed on the Chinese economy. Annual growth is widely forecast to sag to 7 percent this year, down from 7.4 percent in 2014. In an attempt to energise activity, the PBOC has now lowered interest rates and relaxed the reserve requirement ratio (RRR) five times in six months, and many economists believe more policy loosening is in store. This is partly because despite the steady drum roll of policy easing, there are indications it has not benefited the real economy. Some data suggests banks are not passing on lower interest rates to borrowers, and credit is still not flowing to the sectors in most need of the funds. "The effectiveness of the rate cut won't be very big," said Li Qilin, an economist at Minsheng Securities. "The PBOC has already cut benchmark interest rate by a total of 65 basis points, but borrowing costs have only fallen marginally." Struggling BanksBanks are also struggling as the economy founders. Lending has slowed, bad loans are piling up, and profits margins are getting squeezed as China liberalises its interest rate market. Banks' earnings reports last month showed profit growth hit a six-year low in the first quarter. Given these challenges, the PBOC said it does not expect banks to pay savers the maximum deposit rate allowed by authorities. And with the prospect that borrowing costs may stay stubbornly elevated, government economists told Reuters earlier this month authorities may ramp up state spending to shore up growth, in the hope that fiscal policy would work where monetary policy hasn't. But Li Huiyong, an economist at Shenwan Hongyuan Securities, cautioned against thinking that lower borrowing costs would not trickle down to businesses and consumers at some point. "Don't underestimate the cumulative effect of the cuts in interest rates and RRR," Li said. "This won't be the last cut. "The rate could be lowered to 2 percent at least, and we expect the economy to gradually stabilise in the coming two quarters." (Reuters)
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