Are you hedged against recent hikes in Petrol, Home Loan EMI's?

September 16, 2011   ·   0 Comments

Hike in Home, Car Loan rates

The Reserve Bank of India (RBI) raised repo rates by 25 bps on Friday to 8.25% and reverse repo rates by 25 bps to 7.25%, to arrest rising inflation in Asia’s third largest economy. CRR was unchanged at 6%.

www.stockssavvy.comThe RBI raised key lending rates for the 12th consecutive time in 18 months to 8.25 per cent. Post the hike, most analysts expect the RBI to pause the rate hike cycle.  Annual inflation surged 9.78 per cent for the month of August, its highest in over a year, driven by rising prices of food and manufactured products.

The move will trigger the banks to increase the home & car loan EMI’s.

State oil companies will raise petrol prices by 3.14 a litre from Friday, delivering another blow to households that are already reeling under near double-digit inflation and provoking strong condemnation from the opposition parties. The price of ATF was also hiked by 2.5%.  Oil companies have raised petrol rates for the 12th time since the fuel was decontrolled in June last year. They explained the latest rise saying international prices had risen and the rupee had depreciated.

Oil companies are facing criticism for this argument as they had not cut petrol prices when rupee soared to a 34-month high in July or when Brent crude, currently at $115 a barrel, had dropped from $127 a barrel in April to about $98 last month.

Petrol price have hiked from 50 to 70 Rs. in last 2 years which is whooping 40% hike. Also, this move will fuel up the inflation.

Hike in LPG cylinders

A Group of Ministers (GoM) meet this morning was to debate whether households should be entitled to between four to six subsidized LPG cylinders, and pay market rates for refills after that.  Subsidized cooking gas cylinders currently cost Rs. 395.35 each; if the new proposal is passed, households would pay over Rs. 650 per cylinder after exhausting their quota.

The last minute update is that the meeting has been postponed but it is matter of time that hike will be passed.

Commodities Prices are uncontrollable specially for basic commodities such as onion, potato which are sky rocketing.

There is couple of inference to be taken from these hikes:

 For the Government: Government needs to analyze the reason for the high inflation. Is it supply side problem? Most of the food grains are getting wasted. Recently anomaly is Nasik onion market where onion is getting foil because of the lack of proper distribution system. FDI inflows in retail sector will vastly improve the distribution channel but it is going to take time especially if one check out the speed of the India government to pass policies.

For Common man: Recent hikes for the common man emphasize how much it is important for him to hedge himself against Inflation. No matter what the hikes are going to continue & he needs to live with this fact. Today, he is finding it difficult to make both ends meet. How will he survive tomorrow when the prices of the things are going to sky rocket?  The best hedge is to start systematically with small savings & get a financial plan to plan ahead of inflation.

Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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