Last month saw most banks raise their benchmark prime lending rates (PLRs) by 50 basis points following a surprise and similar quantum of hike in the Cash Reserve Ratio (CRR) by the Reserve Bank of India (RBI). And as the cost of funds for banks rose, so did the cost of loans for the banks' customers.

As a result of this hike, housing, auto and personal loans became costlier by 50 basis points, taking the total impact of the rising interest rates over the past 18-24 months to nearly 250 basis points or 2.5 per cent.

However, hardening rates do not seem to have affected demand for credit. According to RBI, even as the economy grew at 9.1 percent in the first half of the current financial year, non-food bank credit up to November 24, rose a blockbuster 30 per cent on top of an equally impressive 31 per cent expansion in the previous financial year.

Bankers do not see demand slowing down anytime soon. Their contention is that China has continued to grow at a similar frenzied pace for almost 10 years. "Incomes are rising; more people are getting jobs and the economy as a whole is growing. The demand is end-user driven, and so, is likely to remain strong," says Rajiv Sabharwal, Head (Retail Assets), ICICI Bank.

To fund this rocking credit growth, deposit growth (currently at under 20 per cent) also needs to be perked up; the implication: deposit rates are going to rise. The market expects Finance Minister P. Chidambaram to lend a helping hand with tax breaks on bank deposits in his forthcoming Budget. So, it may once more bring the sheen back to that old favourite, bank fixed deposits.

-Shalini S. Dagar

Q&A
"We Plan To Expand In India"

Elsevier, a division of the $9.8-billion (Rs 44,100 crore) Reed Elsevier, the world's second largest publishing company, is increasing its focus on India. The $2.7-billion (Rs 12,150 crore) Elsevier, which is Reed Elsevier's Science and Medical Publishing Division, is looking at this country as a market, as a source of high-quality content for its journals and as a possible "regional publishing centre". Its CEO Eric Engstrom, who was in India recently, met BT's Arnab Mitra and discussed his plans for the country. Excerpts:

What brings you to India?

India is the world's second fastest growing economy and has a huge pool of trained scientific personnel. So, the Indian market is an obvious attraction. Globally, we publish 1,800 journals and more than 2,000 books every year. We are also keen to tap into India's scientific and medical communities to generate India-centric content that will be relevant to our subscribers here. It's a two way process-we will benefit from the knowledge we will gain access to, and the Indian scientific community will benefit by getting a platform from which they can reach out to the wider scientific and medical community worldwide.

Do you have any plans of outsourcing and offshoring work to India?

We are already doing that. And we plan to increase this as we go along. At present, we have about 83 employees in India in Delhi, Mumbai, Kolkata and Chennai, but that figure is misleading. Our partners here employ more than 3,000 people-who are, technically speaking, not our employees-who work exclusively on Elsevier projects, under the supervision of Elsevier personnel. And as we increase our involvement in India, we, and our partners, will take on more such people. We see tremendous scope here for editorial and knowledge processing services.

How important is India to your global plans? And how does it compare with other Asian markets?

Right now, China and Japan are bigger markets, but that is likely to change over the next few years. In fact, we may set up a Regional Publishing Centre in India. We are looking to shift some of our pre-press work (commissioning, editing, designing, writing code, e-loading, etc.) to India and are discussing ways of going about it with our colleagues and partners here.

Please tell us something about Elsevier's business model.

We are the world's largest publisher of scientific and medical journals. Globally, we generate about 75 per cent of our revenues from the electronic media and the rest from print. Thousands of writers, editors and reviewers work for us both in full-time jobs and in part-time capacities. Incidentally, we don't own assets like printing presses and the like. Elsevier creates the intellectual property and our partners create the physical product that reaches subscribers and readers.

What are the latest innovations in your field?

In the field of education, we have come out with a "live book". When we sell a book, we also give you the option of updating it yourself (via the internet) on any new innovations that we come across in that field for a given number of years. This way, you don't have to keep buying newer editions of the book to keep abreast of the latest developments.

How can Indian authors, who wish to access the Elsevier platform to publish a paper or a book, do so?

We have commissioning editors who proactively scout for such material. Our website also has an author gateway that interested writers can access. It leads you through the entire process of submitting your manuscript and even has a template that advices you on how to structure the written material. It's very simple and easy to use. Incidentally, we have published papers by President A.P.J. Abdul Kalam; so you see, we already have a relationship with and feel of the Indian market.