One way lower interest rates will help is to buoy corporate earnings in the US, by making borrowing cheaper. This goes not only for US firms, but also for other companies who borrow in dollars. Unfortunately, spreads over the US treasuries have been high for corporate borrowers as a result of the knock banks have taken in emerging markets. These spreads have, however, recently come off their highs, and the Fed hopes that lower rates will mean flatter spreads.

But apart from ensuring a soft landing for the US economy, lower rates will also mean that funds will shift out of the US to other markets. This is one reason for the Asian stock markets' strength recently. In addition, this also results in the dollar's weakening, and that is also good for those with debt denominated in dollars, as is true for many Asian firms. For India, the rate cut will be beneficial, albeit indirectly. With pressure easing south-east Asian currencies, pressures for depreciating the rupee will also ease. This will stave off the specter of competitive devaluations in the region, in particular the worrying prospect of China being forced to devalue. China's exports have turned negative on a year-on-year basis, and pressures to devalue are strong, no matter what the Chinese leadership may say. The easing of pressure on the rupee should give the Reserve Bank some leeway to determine monetary policy without watching the rupee like a hawk. Exporters could also benefit marginally, owing to a morecompetitive rupee, compared to the south-east Asian currencies, but the contraction in demand will ensure that exports remain depressed. But the rate cut has at least improved the external environment.