The Daily Brief Why Businesses react to every Rate Hike
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Jul 21, 2025 Discover the significance of the Reserve Bank of India's repo rate and its influence on business borrowing and investment trends. Explore how air pollution not only affects health but also hinders economic growth, especially in key sectors like agriculture and transport. Learn about strategic business maneuvers, including Reliance's brand acquisition and the impact of Chinese trade restrictions on India's smartphone sector. Finally, get insights on the rising demand for iron ore in the steel industry, which signals shifting market dynamics.
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RBI Repo Rate's Dual Impact
- The RBI repo rate influences both loan costs and the perceived financial health of companies.
- Higher repo rates shrink company asset values, making borrowing riskier and more expensive.
Cash Flow's Role in Tight Policy
- Indian companies invest more from internal cash during tight monetary policy due to harder access to loans.
- Smaller companies are disproportionately affected, relying heavily on their cash flows under tight credit.
Air Pollution's Economic Toll
- Air pollution severely reduces health and productivity, becoming a major economic risk globally.
- Economic growth initially worsens pollution but later enables investment in cleaner technologies, improving air quality.