| Falling commodity prices, especially of metals and crude oil, are good for the Indian economy as they cool prices, lower the import bill and help reduce government spending on subsidies. They also lower costs for companies that use commodities, especially those who produce consumer goods. The positive effects are indeed many, but one serious side effect could present itself.
Falling prices for metals mean lower realizations for producers. Their costs do not decline in kind, which means profitability gets squeezed. Lower profitability affects cash flows, while falling share values make it difficult to raise capital. It is normal for companies to seek to postpone capital expenditure (capex) plans in such a scenario, especially if they expect the situation to be a prolonged one...............................................Full Article: Source
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