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A high fiscal deficit and inflation are major challenges for India, Finance Minister Arun Jaitley said on Tuesday (1 July), adding that "mindless populism" in policymaking needed to be checked.His comments will add to expectations that Jaitley could unveil tough fiscal consolidation measures in his first annual budget on 10 July.An interim budget set a deficit target of 4.1 per cent of GDP for the financial year that began in April, but the fiscal gap has already risen to Rs 2,40837 crore ($40.05 bln), or 45.6 per cent of the full-year target."Fiscal deficit is a major challenge. The growth has slowed down," Jaitley told an event for national auditors in New Delhi."Now India needs certain amount of fiscal discipline ... there is hope that bold decisions will be taken now."He said that although inflation had moderated in the last few months, "it is still beyond the acceptable level".India's wholesale price inflation hit a five-month high of 6.01 percent in May, underscoring the challenges faced the new government, whose Prime Minister Narendra Modi has warned he will administer "bitter medicine" to revive the ailing economy.Food price inflation is near double-digits, with a late monsoon pushing up the cost of vegetables and dairy products. The government has also raised railway fares and fuel prices as crude oil prices have risen on international markets.Jaitley said populist policies and paralysis in policymaking had slowed growth, and that an improving current account deficit position in the last few months was the only "silver lining" for the Indian economy.Private economists expect the budget to shift the policy focus from consumption to investment, and address the issue of fiscal imbalances. Jaitley said Indians would have to pay higher prices for better services as any rise in taxation would hurt growth by taking money from the hands of consumers."If you indulge in mindless populism, you burden the exchequer. You expect the finance minister to impose higher taxes," he said. "It does not work."(Reuters)
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French Foreign Minister Laurent Fabius on Tuesday (01 July) called on Prime Minister Narendra Modi and discussed ways to strengthen cooperation in key areas such as defence, trade and investment with India expressing keenness on setting up industrial bases for it to boost ties.The visiting minister also extended his President Francois Hollande's invitation to Modi to visit France.Terming his meeting with Modi as "warm", Fabius said he had "positive" talks with the Prime Minister on issues of urban planning, tourism and low-cost defence manufacturing.Asked if he raised the multi-billion Rafale deal with Modi, the minister did not give a direct answer but said it was acknowledged that defence was a very important area of cooperation in the bilateral relationship."The next step is for the French firm Dassault and for the Indian government to discuss the details which have not yet been discussed and hopefully reach a conclusion.... For us the early the better...," the minister told a select group of news agency journalists.Yesterday, during his meetings with Defence Minister Arun Jaitley and his Indian counterpart Sushma Swaraj, Fabius had pushed for early purchase of the multi-billion dollar Rafale combat aircraft by India.The visiting minister said the two countries are keen on strengthening economic ties and technology sharing and during the meeting the Prime Minister was interested in setting up "industrial bases" in the country.Fabius said the biggest takeaway for him from this visit was the certainty that the new government was committed to further strengthen and expand the bilateral relationship.Among other issues, they discussed climate change, anti- terrorism and people-to-people exchanges. .Fabius said, "We discussed climate change and have been positively impressed by the approach of Prime minister Modi and his ministers. And we have decided to prepare for the Paris conference together and it is important because India is a major player in that conference....".Welcoming the Minister, Modi remarked that yesterday he had an opportunity to witness the launch of the French satellite, SPOT-7, which was placed in orbit by the Polar Satellite Launch Vehicle from Sriharikota, an official release said.Recalling the strategic and friendly ties between the two countries, the Prime Minister sought French cooperation in the field of urban planning and heritage conservation.Observing that France had provided technical support for the Ahmedabad Heritage Project, Modi said India plans to build heritage cities and 100 new smart cities. And in this regard he noted France's expertise in the area.Fabius expressed his country's keenness to expand the cooperation and the relationship, following the assumption of office by the new government here.The meeting was attended by External Affairs Minister Sushma Swaraj, National Security Advisor Ajit Doval and Foreign Secretary Sujatha Singh among others.(PTI)
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The rupee is trading at 60.83/84 versus Tuesday's (19 August) close of 60.6750/6850.The USD/INR pair is likely to see some resistance in the 60.86-94 zone while there is good support at 60.58-60 levels, says a trader.Dollar's gained versus other Asian units and majors aiding the pair.Index of the dollar versus six majors up 0.08 per cent.The rupee is seen in a broad 60.50-61.00 range during the session.Local shares to be watched for cues on fund flows. Nifty down 0.11 per cent as of 9:37 a.m.(Reuters)
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Climate change will cut South Asia's growth almost 9 per cent by the end of the century unless world governments try harder to counter global warming, the Asian Development Bank (ADB) said on Tuesday (19 August).The region is home to a fifth of the world's population and is already vulnerable to climate extremes: seasonal floods, cyclones and droughts that ravage vast swathes of agricultural land and displace hundreds of thousands of people every year.The costs of countering climate change in South Asia will also increase over time and will be prohibitively high in the long term, the ADB's "Assessing the Costs of Climate Change and Adaptation in South Asia" report said.Gross domestic product (GDP) losses are projected at 12.6 per cent for the Maldives, 9.9 per cent for Nepal, 9.4 per cent for Bangladesh and 8.7 per cent for India by 2100."Without global deviation from a fossil-fuel-intensive path, South Asia could lose an equivalent of 1.8 per cent of annual GDP by 2050, which will progressively increase to 8.8 per cent by 2100 on the average under the business-as-usual scenario," it said.The Maldives will also be hardest hit in the next few decades, with a loss of 2.3 per cent of GDP. Bangladesh, Bhutan, India, Nepal and Sri Lanka will lose 2 per cent, 1.4 per cent, 1.8 per cent, 2.2 per cent, and 1.2 per cent, respectively, by 2050.Those countries, excluding Sri Lanka, will see more frequent severe weather, damaging property, infrastructure, agriculture and human health, the ADB said. Between 1990 and 2008, more than 750 million people in South Asia were affected by at least one natural disaster, resulting in almost 230,000 deaths, it said.Coastal areas of Bangladesh, India, the Maldives, and Sri Lanka will see sea level rises that are likely to displace people and adversely affect the tourism and fisheries sectors.The cost of shielding the region against climate change could be lowered if the world's governments significantly cut greenhouse gas emissions and, if the rise in global temperatures was kept below 2.5 degrees Celsius, that cost could be nearly halved to about $40.6 billion, or 0.48 per cent of GDP, it said.South Asia also needs to introduce flood- and saline-resistant crop varieties, better coastal zone management, improved disease surveillance, protection of groundwater and greater use of recycled water.India, one of the world's largest agrarian economies, is badly at risk, the report said, and may see GDP losses of up to 8.7 per cent by 2100."Agriculture provides employment and livelihood opportunities to most of India’s rural population and changes in temperature and rainfall, and an increase in floods and droughts linked to climate change, would have a devastating impact on people’s food security, incomes, and lives," ADB Vice-President Bindu Lohani said in a statement.(Reuters)
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Indian factory activity expanded in June at its quickest pace since February while output prices rose at the fastest rate in eight months, signalling a further rise in inflation that is bound to vex the Reserve Bank of India (RBI), a business survey showed on Tuesday (01 July).The HSBC Manufacturing Purchasing Managers' Index (PMI), compiled by Markit, advanced to 51.5 in June from 51.4 in May. A figure above 50 indicates expansion.A jump in new export orders pushed the output sub-index to 52.4 from 51.7 in the previous two months."Things are gradually improving in India's manufacturing sector. Output picked up in June, supported by growing order flows, especially from overseas," said Frederic Neumann, co-head of Asian economic research at HSBC.But domestic demand remained weak, hurting jobs growth."The muted pace will suit the RBI: since input and output prices are rising as well, faster growth would only stoke inflation and require tightening," added Neumann.The survey showed firms passed on a greater cost burden to consumers. Prices charged rose at their fastest pace since October.After May wholesale price inflation hit a five-month high any further move up would put pressure on the RBI to leave interest rates on hold for longer or even to raise them.(Reuters)
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The rupee was trading at 60.13/14 marginally below above previous close of 60.17/18.However, the rupee is expected to continue to remain in a tight range ahead of the budget on July 10 with the geo-political situation in Iraq and Reserve Bank of India intervention being closely monitored.Traders will monitor the domestic share market for clues on the direction of foreign fund flows. The BSE Sensex is trading up 0.34 per cent.The dollar languished at seven-week lows against a basket of major currencies on Tuesday, having extended a month-long decline after a recent batch of mixed data cast doubts on the strength of the U.S. economic recovery.(Reuters)
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Brent crude futures steadied near 14-month lows above $101 a barrel on Wednesday (20 August), with ample supplies putting prices at risk of further losses as worries over geopolitical tensions ease.The oil benchmark has fallen more than 12 per cent from this year's peak of $115.71 reached in June due to the turmoil in Iraq. While the conflict there continues, there has been no significant disruption to oil supply from the No. 2 OPEC producer, giving space for a sustained retreat in prices.Brent crude for delivery in October was little changed at $101.51 a barrel by 0325 GMT. The contract fell to $101.07 on Tuesday, its lowest since June 26, 2013.Lukoil, Russia's second biggest oil producer, said on Tuesday (19 August) it had shipped 1 million barrels of oil produced from southern Iraq's giant West Qurna-2 oilfield, its first shipment from the field, despite a surge of violence in the country.In Libya, a spokesman for National Oil Corp said the country's total oil production had risen to 562,000 barrels per day (bpd) from 535,000 bpd at the weekend."That's very much what the market is focusing on, the abundance of supply and the decreasing risk in terms of the geopolitical tensions," said Ben Le Brun, market analyst at OptionsXpress in Sydney."It appears the traders are thinking that there's still risk to the downside when it comes to oil prices."Delegates from three members of the Organisation of the Petroleum Exporting Countries (OPEC) said the group was not worried about a slide in oil prices towards $100 a barrel.Current levels were seen as acceptable while higher seasonal demand in the coming weeks was expected to support the market, the delegates said.But September US crude edged higher after falling sharply on Tuesday ahead of the contract's expiry on Wednesday.US oil rose 49 cents to $94.97 per barrel after falling as much as $2.15 overnight to hit $94.26, its lowest since January.Brent's premium over the U.S. contract, or West Texas Intermediate, widened to $8.82 on Friday, the biggest since June, following a spike in Brent that proved to be short-lived. The gap returned to similar levels on Tuesday after WTI's slide.'Shorters'A decline in U.S. crude stockpiles last week also aided WTI. Crude inventories fell by 1.4 million barrels in the week to Aug. 15 to 362.8 million barrels, slightly more than analysts' expectations for a decrease of 1.2 million barrels. [API/S]While geopolitical worries have eased, they are far from getting resolved and Le Brun at OptionsXpress said any escalation of tensions in the Middle East "will definitely see risk premiums reapplied to oil prices fairly quickly".Islamic State insurgents posted a video on Tuesday purportedly showing the beheading of U.S. journalist James Foley and images of another US journalist whose life they said depended on how the United States acts in Iraq.The posting of the video followed nearly two weeks of US air strikes that have pounded militant positions and halted the advance of Islamic State."But at this stage, the shorters have a lot more interest in this market than the traders on the long side," said Le Brun.Investors are also eyeing the annual meeting of central bankers in Jackson Hole, Wyoming, that kicks off on Thursday. Federal Reserve chief Janet Yellen speaks on Friday in an address that could give clues on the timing of a U.S. interest rate increase.Keeping US rates lower for longer in aid of the economy should spur appetite for risky assets including oil.(Reuters)
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Manufacturing activity in Asia's industrial powerhouses China and Japan gained pace in June, fuelled mainly by improving demand at home, but a long-awaited bounce in exports remained slow in coming.Manufacturing surveys on Tuesday (01 July) confirmed preliminary readings last month that showed factory output expanding across Asia following months of decline in its two biggest economies.But the surveys' new export indexes, which gauge the strength of overseas demand, showed only tepid growth in a sign that the region has yet to capitalise on an uneven recovery in the euro zone and delayed upturn in the US economy.China's final HSBC/Markit purchasing managers' index (PMI) rose to 50.7, slightly below its preliminary reading, but confirming its first expansion in six months, from 49.4 in May.China's official gauge, which is geared more towards bigger state-owned firms, hit a six-month high of 51.0."The economy continues to show more signs of recovery, and this momentum will likely continue over the next few months, supported by stronger infrastructure investments," said Qu Hongbin, chief economist for China at HSBC.Asian shares firmed slightly after the surveys, which reinforced market views that the world's second-largest economy was steadying thanks to stimulus steps taken by Beijing after growth dipped to an 18-month low of 7.4 per cent in the first quarter.Such measures have included targeted reserve requirement cuts for some banks to encourage more lending, quicker fiscal disbursements and hastening construction of railways and public housing projects.However, a downturn in the property sector is clouding the outlook and economists expect Beijing to stand ready to ease fiscal and monetary policy further to counter any major spillover into the broader economy.The surveys showed export orders growing only marginally, and policymakers in Beijing and the rest of Asia will be looking ahead to US data to confirm that the world's biggest economy and Asia's major export market has finally put its weather-beaten start to the year firmly behind it.In Japan, central bank and purchasing managers surveys painted a similar picture of improving manufacturing activity combined with still disappointing export performance.With an April 1 sales tax increase still acting as a drag, the Bank of Japan's business optimism gauge dipped in the second quarter, but companies expressed optimism about the outlook, declaring readiness to boost capital investment and output.Economists expect a recovery in coming months in both exports and consumer demand, which is being supported by continued hefty central bank money injections and government spending.The Markit/JMMA purchasing managers' index for June showed factories were already cranking up activity, with its main gauge coming in at 51.5, above the preliminary reading of 51.1 and topping the 50-point mark for the first time in three months.Yet, as in China, an anticipated rebound in exports remained elusive, with the new export orders index still contracting marginally.In Indonesia, Southeast Asia's largest economy, manufacturing activity rose to a record solely on the back of the strength of domestic demand that offset a dip in export orders.The impact of disappointing exports was on full display in South Korea, Asia's fourth-largest economy, which unlike China or Japan cannot rely on domestic demand to take up the slack with high household debt weighing on consumer demand and the government cutting back on its spending.The HSBC/Markit purchasing managers' index slid to a seasonally adjusted 48.4 in June from 49.5 in May, its worst in 10 months. Separate government data showed exports in June up 2.5 percent from a year earlier, well below a median 5.1 percent forecast in a Reuters poll.India, the continent's third-largest economy, bucked the trend, owing the rise in its manufacturing gauge to a four-month high primarily to improved overseas demand."Things are gradually improving in India's manufacturing sector. Output picked up in June, supported by growing order flows, especially from overseas," said Frederic Neumann, co-head of Asian economic research at HSBC.(Reuters)
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France has proposed giving India a 1 billion euro ($1.4 billion) credit line to fund sustainable development projects, Foreign Minister Laurent Fabius said on Tuesday (01 July).Fabius, who is visiting New Delhi, told reporters the credit line would be available over a three-year period.(Reuters)
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International Business Machines (IBM) unveiled a ‘brain-like’ computer chip that is the size of a postage stamp and capable of processing massive amounts of data while handling inputs from different sources. Unlike normal chips that work on pre-written paths, it is capable of processing data in real time, helping it perform human-like functions such as assisting people during natural disasters via a robot. Built on Samsung Electro-Mechanics’s 28nm process technology, the chip consumes 70 milliwatts of energy. The chip aims to bridge the divide between computers and the brain’s high cognitive power and low energy use.Hitting A BumpGeneral Motors (GM) failed to convince a Georgia judge to dismiss a lawsuit over the death of a 29-year-old woman that helped trigger the recall of 2.59 million cars over faulty ignition switches. Cobb County state court judge Kathryn J. Tanksley rejected GM’smotion to dismiss the revived suit at a hearing, and set a trial date for April 2016. The suit, brought by the parents of Brooke Melton, who died in a 2010 crash of a Chevy Cobalt, was settled in September 2013. But the Meltons filed a fresh complaint in May, claiming defects had been concealed.Big SnubFour Silicon Valley companies — Apple, Google, Intel and Adobe — have failed to persuade a US judge to sign off on a $324.5 million settlement to resolve a lawsuit by tech workers, who accused the firms of conspiring to avoid poaching each other’s employees. In a ruling, US district judge Lucy Koh in San Jose, California, said the class action settlement was too low, given the strength of the case against the companies. There is “substantial and compelling evidence” that late Apple co-founder Steve Jobs “was a central figure in the alleged conspiracy”, Koh said. The judge provided details, including anecdotes involving Jobs and other Valley executives, to show why she thought the workers deserved more.Takeover BattlePrivate equity giant TPG Capital Management made a $3.1 billion approach for Australia’s Treasury Wine Estates, a source said, setting the scene for a possible bidding war for the world’s No. 2 winemaker with rival KKR. A week after KKR and Rhone Capital proposed an A$5.20-a-share offer for Treasury, the owner of the Penfolds, Lindemans and Wolf Blass brands said it received a second identical unsolicited approach from a global private equity firm, which requested anonymity.Joint EffortFrench drugmaker Sanofi and MannKind have agreed to a worldwide licensing deal to develop and market inhaled insulin drug Afrezza for adults with diabetes. The companies plan to launch Afrezza in the US in the first quarter of 2015. Under the terms of the agreement, MannKind will receive an upfront payment of $150 million and potential milestone payments of up to $775 million. Sanofi and MannKind will share profits and losses on a global basis, with Sanofi retaining 65 per cent and MannKind the rest.Speed BrakerVolkswagen’s $6.68 billion cost-savings plan hit a major setback after labour leaders forced the management to axe detailed proposals drawn up by consultants at McKinsey, sources with knowledge of the matter said. The move underlines the extent to which relations between the management and workers have soured at Europe’s biggest carmaker, which is struggling to raise profits amid stagnating emerging markets and low growth at home. However, the cost-cutting target still stands, the sources said.New Flight PathSaddled with twin crash investigations, growing competion from Middle East carriers, losses and debt, Malaysia Airlines will delist from the Kuala Lumpur stock exchange as part of a government bid to rescue the embattled flag carrier. State investment firm Khazanah Nasional Berhad, which owns 70 per cent of the airline, is planning to buy out small shareholders as a first step to overhauling the airline. “The proposed restructuring will require all parties to work closely to undertake what will be a complete overhaul,” it said in a statement. Shareholders will vote on the plan at an extraordinary general meeting. Meanwhile, Malaysia Airlines will continue to operate all current flights.Fresh TroubleGlaxoSmithKline (GSK) faces new allegations that it bribed Syrian doctors and officials to boost sales of its medicines. GSK said it would investigate the new claims involving its staff and local distributors. This, at a time when a court in Shanghai sentenced a British corporate investigator, Peter Humphrey and his American wife and business partner Yu Yingzeng, to two and a half years in prison for illegally obtaining private records of Chinese citizens and selling the information to clients, including GSK.Report CardChina’s buoyant exports pushed its trade surplus to a record in July, fuelling optimism that global demand will help counter pressure on the domestic economy from a weakening property sector. While manufacturing appears to have picked up in the world’s second-largest economy, unexpected weakness in the services sector has renewed concerns about the growth outlook. The weak housing market remains China’s biggest risk, posing a drag on the broader economy and investor confidence.Call DisconnectedChina has excluded Apple from a list of products that can be bought with public money because of security concerns, a report said. Apple products like iPad and MacBook were omitted from the government procurement list distributed in July. The Apple exclusion makes it the fourth major foreign company to face hurdles in the Chinese market. China has recently told government departments to stop buying antivirus software from US firm Symantec and Russian firm Kaspersky Lab. Microsoft Windows 8 was also excluded from government purchases in May this year.(This story was published in BW | Businessworld Issue Dated 08-09-2014)
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