Author
The after-glow of Narendra Modi's election victory nearly four months ago is expected to have helped India's lumbering economy register its fastest growth in more than two years for the quarter ending in June.India's new prime minister has promised to make it easier to do business through speedier clearances and stable tax policies, allowing investors in Asia's third-largest economy hope of a rosier future after years of low growth and high inflation.Economic growth is forecast to have picked up to 5.3 per cent between April and June, according to a Reuters poll of 40 economists, sharply higher than 4.6 per cent in the previous quarter. The GDP data is due at 5.30 p.m. (1200 GMT) on Friday.If the forecast proves correct, it would mark only the second quarter of above 5 percent growth since early 2012.Modi knows he must spur the economy to far higher rates of growth in order to provide jobs for the increasing numbers of young people joining the work force, and lift millions of Indians out of poverty.The improvement in the GDP figures is largely due to the steps taken by the previous government to kick-start capital investments and spur consumer demand.Those measures aided industrial production and vehicle sales.The year-on-year growth has been helped also by a favourable statistical base because of weak economic activity last year.But, there is little doubt that Modi's election - he won the first outright parliamentary majority in three decades - improved sentiment among consumers, investors and the business community.Months before Modi's victory, investors poured money into India confident that the business focused leader would win.Since taking office, Modi has initiated measures to minimise tax litigation, loosened caps on foreign investment in railway infrastructure and defence manufacturing, speeded up regulatory approvals and reduced bureaucratic discretion.Foreign capital inflows to India have risen markedly, making Indian shares the best performers in Asia this year.Waiting For Big Bang ReformsEven though the new Indian premier is yet to launch big-bang reforms needed to propel the economy back to a near double-digit annual growth, his three-month-old administration has received a big thumbs-up from Indian corporates.An overwhelming majority of CEOs in two polls, published by two national dailies on Thursday, credited the Hindu nationalist leader for reviving business confidence and said they were starting to draw up new investment plans."As returns on investment improve, the corporate sector will be incentivized to lift capex," wrote economists at Morgan Stanley, who expect the annual pace of economic expansion to hit 6.8 percent in the March quarter next year.A recovery in industrial production, along with improvements in exports has led to a raft of upward revisions in the growth forecasts for the fiscal year to March 2015. This week Nomura upgraded its estimate to 6 percent from 5 percent earlier.This augurs well for an economy stuck with sub-5 percent growth for last two years.However, it doesn't diminish what many economists say is a pressing need for structural reforms to create a broader and sustained economic revival.Structural reforms will also help tackle India's recurring food price shocks, which have prevented the central bank from lowering interest rates and supporting the economic recovery.Modi vows to build new roads, factories, power lines, high-speed trains and even 100 new cities.These gigantic tasks will require an overhaul of India's strained public finances, stringent land acquisition laws, chaotic tax regime and rigid labour rules.Modi has to expend political capital to push through those reforms, and he is still hampered by the lack of majority in India's upper house (Rajya Sabha), though upcoming state elections might put his party in a stronger position.(Reuters)
Read More
Japan and India will next week agree to jointly produce mixed rare earth, with Japan set to start importing from India in 2015 as it tries to wean itself of its reliance on China, the Nikkei business daily said on Thursday. Japanese Prime Minister Shinzo Abe and Indian counterpart Narendra Modi will agree on the joint production at their summit meeting in Tokyo on Monday, the report said, without citing sources. Indian Rare Earths, a wholly-owned subsidiary of the Department of Atomic Energy, and Japanese trading house Toyota Tsusho will sign a contract on joint production as early as September, it added. The Indian company will make mixed rare earth materials from uranium and thorium ores, which Toyota Tsusho will use to produce neodymium for electric and hybrid cars, as well as lanthanum, cerium and praseodymium, the report said. Annual production will be about 2,000 tonnes to 2,300 tonnes, equal to around 15 percent of Japan's demand, and roughly 2,000 tonnes a year could be exported to Japan starting as early as February, it added. A Toyota Tsusho spokesman said the firm was checking the report. China produces more than 90 percent of the world's rare earth metals. Despite Japan's attempts to diversify supplies after China's cuts in export quotas several years ago, Japan still relies on China for the majority of rare earths for making electronics, magnets and clean technology. China this month lost an appeal at the World Trade Organization in a case brought by the United States, the European Union and Japan to challenge China's restrictions on exports of rare earths, and is obliged to cancel its strict export quotas to abide by the ruling. India is hoping to win Japanese backing for a nuclear energy pact during a visit by Prime Minister Narendra Modi, and lure investment into its $85 billion market while addressing Japan's concern about doing business with a nuclear-armed country. (Reuters)
Read More
Blaming the UPA regime for agreeing on an "imperfect agreement" at WTO meet in Bali, Finance Minister Arun Jaitley on Thursday (28 August) said Western countries find the stand taken by India as reasonable privately, but tend to complain publicly."Privately when we tell the visiting dignitaries that this is our stand, they find it very reasonable but I find statements in the press that they issue later on, that 'India can be more reasonable'," Jaitley said here late this evening, at an event hosted by the Indian Express group.All the major powers of the world, including the US have criticised India for the hard stance which has resulted in the WTO's Trade Facilitation Agreement not getting passed by the July 31 deadline.Jaitley criticised the previous UPA regime for agreeing to go ahead with the agreement at the trade minister's meet at Bali in December last year."What were we doing at Bali when this was being done? And we came back home and tom-tomed Bali as a great victory. I had written a blog saying if Bali is accepted, the farce we have enacted by the Food Security Act stands repealed because you won't have food to distribute," he said.He reiterated that the country's basic concerns stand around protecting the Indian farmer, impacted because of the West's agri subsidies, and feeding the poor.Jaitley said: "All we have done is because Bali was an imperfect agreement, all that we are doing is, please go ahead with trade facilitation. The Bali accord says there will be a peace clause for 5 years, and we will come to a final settlement on the food stock holding agreement."The peace clause should continue till the disputes are settled, and that's a clear stance we have taken."He added however that India is not averse to the trade facilitation agreement.Meanwhile, Jaitely said that the high food inflation will always be a challenge and called it as a top priority for the government to tackle.He pointed out however that there is a lot of seasonal element and good policies alone can't help reduce inflation.On growth, Jaitley said he is not excessively worried as it will be certainly better in FY'15 than in the previous two years, and the rate of growth will climb up gradually."I think we can get back to higher growth rates," he said, adding that the government is committed to playing the role of facilitator.The government wants to erase the notions of 'policy paralysis' and 'tax terrorism' first so that investors find the country a safer bet.He also said there is a need for amending the Land Acquisition Act and expanding the 'exemption list' under it to include the defence sector and affordable housing.Jaitley said the government is all for rationalisation of subsidies, but maintained that the interests of the marginal people continue being the focus for the government and Government will not abandon the subsidies.On taxation, he said a higher economic growth can result in a reduction in the taxes, because of the broadening of the base.Speaking about the contentious GAAR (General Anti Avoidance Rules), Jaitley hinted at a relook at the whole policy, saying that "there is no sanctity" of the date of kickstarting implementation (set for April 1 2015 by UPA regime), and also the subject matter.Jaitley, who is also the Defence Minister, said India has been cornered in a catch-22 situation between public probity which arises due to alleged corruption in the deals and the nation's security interests.The country has been "ultra slow" in weapons acquisition due to the prevalence of the middlemen and corruption in the system, he said, adding that his administration will try to fasten the process without compromising on other factors. (PTI)
Read More
Bollywood actor Shahrukh Khan has become the first Indian actor to be roped in as an Ambassador of Interpol's 'Turn Back Crime' campaign, aimed at promoting greater awareness on how to prevent crime."It's a very special honour to be a part of Interpol's 'Turn Back Crime' campaign as an Ambassador. As Mahatma Gandhi once said, 'I shall not fear anyone on Earth. I shall fear only God. I shall not bear ill will toward anyone. I shall not submit to injustice from anyone. I shall conquer untruth by truth. And in resisting untruth, I shall put up with all suffering, if I have to'."We all should believe in this maxim and in whatever way possible resolve not to let unjust people who might threaten us with criminal activity make us fear them. Because I believe we can, we should, and we must stand together against the few who commit crimes against any human being, in whatever form or guise these crimes might take," Khan was quoted in an official release from Interpol Headquarters in Lyon in France.The multi-award winning actor, the first Indian to be made an Ambassador for the global campaign, is lending his voice to help spread the message that all of society benefits when citizens respect the law and fight crime, it said.Khan joins actor Jackie Chan as an Ambassador for the campaign, which has already garnered support from public figures including footballer Lionel Messi, Formula 1 racing drivers Fernando Alonso and Kimi Raikkonen in addition to law enforcement agencies around the world.The 'Turn Back Crime' campaign is aimed at raising public awareness that organised crime is often involved in seemingly unrelated crimes.Drugs trafficking, people smuggling, counterfeiting, cybercrime, kidnapping, crimes against children and corruption in sport are in fact often interconnected, with profits from one crime area used to fund another.Interpol Secretary General Ronald K Noble said "Shah Rukh Khan has dedicated his life to making films which reflect the highest level of professionalism and commitment to bringing joy into the lives of hundreds of millions of film goers in India and around the world"."We are honoured to have him as an Ambassador for Interpol's global Turn Back Crime campaign and we look forward to seeing how he puts his artistic talents behind this campaign," Noble said.The campaign is aimed at helping the public better understand these issues and empowering them not to be duped by criminals when buying products or using the Internet besides reaching out to companies and policy-makers in a bid to form a united front against contemporary crime challenges, and to support the ongoing activities of the global law enforcement community.(PTI)
Read More
Finance Minister Arun Jaitley said the country will stick to the fiscal deficit target of 4.1 per cent of gross domestic product (GDP) set by the previous government for the year ending March 2015.Jaitley added the fiscal deficit would narrow to 3.6 per cent of GDP by fiscal 2015-16 and to 3 per cent by 2016-17.Below are analyst comments on the budget.NIRAKAR PRADHAN, CHIEF INVESTMENT OFFICER, FUTURE GENERALI INDIA LIFE INSURANCE, MUMBAII think everything is better than expectations. FDI in defence and insurance have come which shows government is focused on restarting the investment cycle. Fiscal deficit target at 4.1 percent is also a positive surprise. The finance minister has a comprehensive package for all the issues and economic challenges that India is facing. I will look at increasing exposure to shares now. Equity is falling just on event-based profit-taking but will catch up in the near term.SHUBHADA RAO, CHIEF ECONOMIST, YES BANK, MUMBAI"Fiscal consolidation is a strong takeaway. The FDI in insurance and defence and the plethora of schemes for improving the rural economy with all round focus on development programmes, are a key thrust. It's a good beginning.For the 4.1 percent target of the fiscal deficit, the heavy lifting may be done by PSU disinvestment and non-tax revenue streams."SHAKTI SATAPATHY, FIXED INCOME STRATEGIST, AK CAPITAL"It seems to be a neutral budget with positive light on key economic variables to tackle the current stagflation. Though targeting the earlier fiscal deficit of 4.1 percent is a surprise favour to the market, the conviction of fiscal management in revenue and expenditure sides is being awaited."(Agencies)
Read More
India's sovereign ratings are constrained by persistently high inflation that is weighing on an otherwise promising economic recovery, Moody's Investors Service said in a release on Thursday."Recurrent inflationary pressures ... keep domestic capital costs high, erode domestic purchasing power as well as savings and lower international competitiveness," the rating agency said.Moody's also said the supply response to inflation has been weak and the government-directed food distribution system has made worse the food supply constraints.Without a significant increase in food output, the risk from continued inflation could limit India's growth prospects, Moody's said.(Reuters)
Read More
India is hoping to win Japanese backing for a nuclear energy pact during a visit by Prime Minister Narendra Modi, and lure investment into its $85 billion market while addressing Japan's concern about doing business with a nuclear-armed country. India has been pushing for an agreement with Japan on the lines of a 2008 deal with the United States under which India was allowed to import U.S. nuclear fuel and technology without giving up its military nuclear programme. But Japan wants explicit Indian guarantees not to conduct nuclear tests and more intrusive inspections of its nuclear facilities to ensure that spent fuel is not diverted to make bombs. India, which sees its weapons as a deterrent against nuclear-armed neighbours China and Pakistan, has sought to meet Japan's concerns and over the past month the two sides have speeded up negotiations ahead of Modi's visit. "Serious efforts are being made to resolve any special concerns that Japan has. Whether it will be fully resolved and ready for signing before the end of the PM's trip is unclear," said a former member of India's top atomic energy commission who has been consulted in the drafting of the energy pact. "I would give it a little better-than-even chance at this point," he said, asking not to be identified because of the sensitivity of the negotiations. Modi travels to Japan on Saturday for a five-day visit, his first major bilateral trip since taking over in May. The visit is being billed as an attempt by the two democracies to balance the rising weight of China across Asia. Modi and host Prime Minister Shinzo Abe are also expected to boost defence ties, speeding up talks on the sale of an amphibious aircraft to the Indian navy. Another focus is infrastructure, with the Indian leader seeking Japanese backing for the high-speed 'bullet' trains he promised to voters in his election campaign. But it is the nuclear pact that can transform ties in a way the deal with the United States did by establishing India as a strategic partner, although nuclear commerce with the United States has since foundered because of concern over India's liability laws. Officials in Japan were tight-lipped about prospects for a nuclear deal. A civil nuclear energy pact with India would give Japanese nuclear technology firms such as Toshiba Corp and Hitachi Ltd access to India's fast-growing market as they seek opportunities overseas to offset an anti-nuclear backlash at home in response to the 2011 Fukushima nuclear accident. India operates 20 mostly small reactors at six sites with a capacity of 4,780 MW, or 2 percent of its total power capacity, according to the Nuclear Power Corporation of India Limited. The government hopes to increase its nuclear capacity to 63,000 MW by 2032 by adding nearly 30 reactors. India is considering a Japanese proposal for a separate commitment not to test nuclear weapons over and above a self-imposed moratorium it declared after testing in 1998. Another possibility is that Modi gives a personal assurance to Abe on India's nuclear weapons programme to help allay concern in Japan, the only country to have suffered a nuclear attack and which has since been a champion of non-proliferation and disarmament. "India and Japan are laying the foundations of a bigger deal," said former vice chief of Indian army Lieutenant General A.S. Lamba, an expert on ties with Japan. "It's no use rushing into something that fails to get off the ground, which is what happened to the India-U.S. agreement. This is being constructed slowly, this is a defining moment." (Reuters)
Read More
If you failed to find a concrete logic behind the signature decision of Narendra Modi government to integrate ministries by entwining the roles of ministers and giving them multiple portfolios such as finance and commerce, Economic Survey 2013-14 might offer you an answer.The Economic Survey, which was, for all practical purposes ready by the time the previous government presented its interim-budget in February 2014, has seen minor tweaks to reflect, and wherever possible endorse some of the initial decisions taken by the Modi government.For instance, the section that talks about the major issues plaguing India’s merchandise trade sector, attempts to highlight the government’s ministry integration policy as a move in the right direction to reduce delays and high costs of merchandise trade. The survey quotes the World Bank and International Finance Corporation (IFC) publication Doing Business 2014 to point out that the delays and high costs on account of procedural and documentation factors, besides infrastructure bottlenecks are hurting the interests of trade facilitation.“India ranks 134 in ease of doing business with Singapore at first place and China at 96. In trading across borders India ranks 132, Singapore 1, and China 74. India needs 9 export documents compared to 3 in Singapore and 8 in China. Time to export is 16 days in India and 6 in Singapore”, the survey points out.It also quotes the Doing Business 2014 to highlight that while the number of import documents needed is 20 for India, it is just 4 for Singapore. It says that the cost of exports per container is US$ 1170 in India, US$ 460 in Singapore, and US$ 620 in China and cost of imports per container is US$ 1250 in India, US$ 440 in Singapore, and US$ 615 in China.“There are also inter-ministerial delays. The present move towards integration of related ministries is a step in the right direction, though a lot more needs to be done”, the document says adding that the solution lies in the simultaneous notification or implementation of enabling policy announcements.
Read More
As the new government battles stubbornly high food inflation, the pre-budget economic survey today predicted that the headline inflation would ease by year end, providing room to the RBI to cut interest rates."Headline WPI (wholesale price index) inflation is expected to moderate by the end of 2014. However, risks to the outlook stems from possible sub-normal monsoon and higher crude oil prices (on account of the crisis in Iraq)," the Economic Survey 2013-14 tabled in Parliament by Finance Minister Arun Jaitley said.As inflation eases, it is expected that the RBI would adopt a more accommodative stance and bring down interest rate."The monetary management challenge will also be helped by fiscal consolidation and addressing of supply side constraints that exacerbate food inflation. All these factors, in tandem, are expected to create room for monetary easing later this fiscal year," it said.However, WPI inflation rose to a five-month high of 6.01 per cent in May from 5.20 per cent in the previous month mainly driven by higher prices of food items.Talking about the challenges, the Survey said, the Meteorological Department has predicted below-normal rainfall at 93 per cent of the long period average with 70 per cent probability of an El Nino occurring.The odds of a drought are 60 per cent now, compared with 25 per cent in April, Skymet, a private forecaster said.Besides, the other most prominent risk (to price rise) is the impact on oil prices on account of the crisis in Iraq.Crude oil prices are hovering around USD 110 per barrel.Two-thirds of India's oil needs are met through imports. Iraq is the second-largest oil supplier after Saudi Arabia.The survey said inflation showed signs of receding with average wholesale price index (WPI) inflation falling to a three-year low of 5.98 per cent during 2013-14 compared to 7 and 9 per cent over the previous two years. Consumer price inflation, though higher than the WPI, has also exhibited signs of moderation with CPI (new-series) inflation declining from 10.21 per cent during 2013-14 to about 9.49 per cent in 2013-14, the survey said.Food inflation, however, remained stubbornly high during 2013-14, reaching a peak of 11.95 per cent in third quarter.Highlighting reasons, the survey said, high inflation, particularly food inflation, was the result of structural as well as seasonal factors.Contribution of the commodity sub-groups, fruits and vegetables, as well as egg, meat and fish to the food inflation has been very high, it said.However, inflation in Non Food Manufactured Product (WPI core) has remained benign throughout the year, with average inflation moderated to four year low of 2.9 per cent in 2013-14, which indicates that underlying pressures of broad-based inflation have somewhat eased, it said.IMF has projected that most global commodity prices are expected to remain flat during 2014-15, which augurs well for inflation in emerging market, including India.The survey noted that the course of gradual monetary easing that had started alongside some moderation of inflationary pressures at the beginning of the financial year 2013-14 was disrupted in May 2013, following indications of possible tapering of the US Fed's quantitative easing.Following the ebbing of volatility in the foreign exchange market, it said, RBI initiated normalisation of the exceptional measures in a calibrated manner since its mid-quarter review (MQR) of September 20, 2013.The interest rate corridor was realigned to normal monetary policy operations with the MSF rate being reduced in three steps to 8.75 per cent between September 20, 2013 and October 29, 2013, it said.RBI in its Third Quarter Review of Monetary Policy on January 28, 2014, hiked the repo rate by 25 basis points to 8 per cent on account of upside risks to inflation, to anchor inflation expectations and to contain second round effects, it said.The move was intended to set the economy securely on the disinflationary path, it added.
Read More
India's fiscal situation is worse than it appears, Prime Minister Narendra Modi's government said in an economic report on Wednesday (9 July) that called for tough measures to shore up public finances and reduce inflation.The tone of the report is bound to increase speculation that Finance Minister Arun Jaitley will announce a higher fiscal deficit target in his maiden budget, which he presents to parliament on Thursday."The Economic Survey 2013-14 conveys a sense of urgency about the course the economy needs to undertake," Arvind Mayaram, the finance ministry's top bureaucrat, wrote in a foreword of the report.Jaitley's predecessor set a target of keeping the fiscal deficit to 4.1 percent of gross domestic product in an interim budget before the new government took office.Many economists say that goal is unrealistic, because the outgoing government left a stack of unpaid bills to state oil companies that have eaten into this year's finances.A Reuters poll of economists this week predicted the government would set a new deficit target of 4.4 percent.Wednesday's report recommended tackling food and fertiliser subsidies to lower spending, while broadening the tax base. Tax collection is less than 9 percent of gross domestic product, about a quarter of the average in the OECD group of developed nations.The Economic Survey, presented the day before the federal budget, forecast GDP growth of between 5.4 and 5.9 percent in 2014/15. It warned that weak monsoon rains which are essential for farming could keep growth closer to 5.4 percent.In June, the RBI forecast growth of 5.5 percent in the financial year that ends in March 2015.Asia's third-largest economy has been stuck in its longest rut in a quarter of a century - with growth below 5 percent - while Modi's government has been dogged by a food-price spike in its early weeks.Modi, 63, won a landslide general election victory in May with a pledge to boost growth and create jobs for the 1 million people who enter India's workforce every month.The budget for the current fiscal year was delayed by the election, which handed Modi's Bharatiya Janata Party (BJP) the strongest electoral mandate in India in three decades.(Reuters)
Read More
