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Dark Diwali ahead

india Updated: Sep 16, 2011 23:14 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Your Diwali shopping bills may get heavier. The car or the television that you had on your shopping list for this festive season could come with a fatter bill as loans are set to become costlier after the Reserve Bank of India (RBI) raised interest rates on Friday, for the 12th time in 18 months to tame prices.

Recent data indicated that people are deferring planned purchases of consumer durables such as cars because of rising interest rates.

India's domestic car sales declined for the second month in a row in August in a sharp contrast to a year ago when it had emerged as the fastest growing car market in the world.

Car sales during the month slid 10.08% to under 150,000 units due to lower consumer demand on the back of rising interest rates and higher cost of fuel.

During the same month in 2010, car sales had surged by over 33% that was the highest across the world.18 months, 12 interest rate hikes and more to come

"High interest rates continued to be a big problem for the industry and it is impacting the cost of finance for both companies and customers," said Vishnu Mathur, director general, Society of Indian Automobile Manufacturers.

Consumer goods companies are keeping a close watch on interest rate movements ahead of peak sales season.

"The rate hikes per se does not make much difference but if they rub on to the consumer sentiment then it could adversely affect sales of the entire industry," said a spokeswoman for Samsung India.

"Generally, durable purchase during festive season is made through bonus money which one receives from their employers. If things turn so bad that companies refuse to give bonus to their employees then it could be a matter of concern. But as of today we are optimistic about our growth," said YV Verma, chief operating officer, LG Electronics India.

There are signs of demand moderating in the domestic economy. India’s factory output grew 3.3% in July, the slowest in 21 months.