The rupee rose above 60 to the dollar on Friday (28 March), marking its strongest in eight months, as hopes for continued foreign investor inflows send domestic shares to a string of record highs.The partially convertible rupee was trading at 60.04/05 per dollar at 9.27 a.m., after earlier hitting 59.99, its strongest since July 30. The rupee closed at 60.31/32 on Thursday (27 March).The BSE Sensex rose 0.4 per cent, hitting its fifth consecutive record high earlier in the morning after overseas investors bought domestic shares worth $364 million on Thursday, taking total inflows so far in 2014 to more than $3.5 billion.However, further gains in the rupee on Friday could be capped given traders expect good dollar demand from importers to meet month-end commitments, while the Reserve Bank of India could continue to buy the US currency to build up its foreign exchange reserves.(Reuters)
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Signalling improving economic activity. India's annual infrastructure sector growth hit a nine-month high of 7.3 per cent in June, government data showed on Thursday, led by a surge in cement and electricity output.The output recorded an annual 2.3 per cent expansion in May.The sector, which comprises coal, crude oil, oil refining, natural gas, steel, cement, electricity and fertilisers, accounts for 37.9 per cent of India's industrial output.Activity in the eight core sectors -- coal, crude oil, natural gas, petroleum refinery products, fertilizers, steel, cement and electricity – are considered as vital cog in economic growth and a higher growth number should reflect in heightened industrial activity and GDP growth numbers for the quarter, economists said. The April-June quarter core sector growth stood at 4.6 per cent versus 3.7 per cent in the same quarter last year, data showed. The eight core sector industries carry a 37.9 per cent weightage in the index of industrial production.The April-June quarter core sector growth stood at 4.6 per cent versus 3.7 per cent in the same quarter last year, data showed. The eight core sector industries carry a 37.9 per cent weightage in the index of industrial production. GDP growth in the most recent quarter grew at 4.6 per cent, capping two years of below 5 percent growth.
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The United States raised the issue of a stalled trade agreement during talks with India's finance minister on Thursday (31 July), a source at the meeting said, hours before a deadline passes for New Delhi to sign a deal backers say would boost the global economy.US Secretary of State John Kerry, accompanied by Commerce Secretary Penny Pritzker, met Arun Jaitley as part of a strategic dialogue that has been overshadowed by India's refusal to sign the trade facilitation deal.New Delhi has insisted that, in exchange for signing up to the World Trade Organisation agreement, it wants to see more progress on a parallel pact giving it more freedom to subsidise and stockpile food grains than is allowed under WTO rules.According to the source, who declined to be identified, Jaitley repeated his country's position. The source added that neither side put forward any suggestions on how to break the deadlock.The deal must be signed in Geneva on Thursday, and India's ultimatum has revived doubts about the future of the WTO as a negotiating body.Several diplomats said New Delhi's stance could derail the whole process of world trade liberalisation, leading some WTO nations to discuss informally a last-resort idea of excluding India from the agreement."If India does end up blocking (on Thursday) there is already a group of members who are interested in pursuing that path," a source involved in the discussions said."A dozen or so" of the WTO's 160 members had informally discussed pushing ahead with the trade facilitation agreement with less than 100 percent participation, the source said.US And EU InvolvedThe WTO says a successful deal could add $1 trillion to the global economy and create 21 million jobs.An Australian trade official with knowledge of the talks said a group of countries including the United States, European Union, Australia, Japan, Canada and Norway began discussing the possibility in Geneva on Wednesday afternoon.A Japanese official familiar with the negotiations said Japan was still working on reaching a consensus, while a State Department official travelling with Kerry in India said the United States continued to talk with India on the deal.A WTO spokesman said the group's director-general would hold meetings throughout the day to "avert a crisis."Delegations are showing real commitment to finding a solution and the director-general remains hopeful that a solution can be found," he said.US trade officials in Washington were not available for comment, given the late hour, while EU, Canadian and Norwegian officials could not immediately be reached for comment."Active Discussion"Technical details would still have to be ironed out, but there was a "credible core group" that would be ready to start talking about a deal without India when WTO diplomats return from their summer break, the Australian official said.To what extent the alternative proposal, and India's hardline position, were part of political brinkmanship was unclear. New Delhi's absence from any agreement would be a setback given its size and importance in global trade."What began as a murmur has become a much more active discussion in Geneva and I think that there are a lot of members in town right now that have reached the reluctant conclusion that that may be the only way to go," the official said.Trade diplomats had previously said they were reluctant to consider the idea of the all-but-India option for the customs pact, partly because it would be hard to exclude one free rider in practical terms and partly because the agreement in its current state requires an amendment to the existing WTO treaty, which appears to make India’s cooperation vital.Others pointed out that many countries, including China and Brazil, have already notified the WTO of steps they plan to take to implement the customs accord immediately. Other nations have begun bringing the rules into domestic law, and the WTO has already set up a funding mechanism to assist.One trade diplomat in Geneva described two worlds moving in parallel, with a few WTO members wrangling with India, and others moving ahead as if oblivious to India’s objections.(Reuters)
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Ukraine won a $27-billion international financial lifeline on Thursday (27 March), rushed through in the wake of Russia's annexation of Crimea, as Moscow's economy minister spoke of the cost of military action in its former Soviet neighbour. The International Monetary Fund announced agreement on a $14-18 billion standby credit for Kiev in return for tough economic reforms that will unlock further aid from the European Union, the United States and other lenders over two years. The IMF deal, to be approved by the global agency's board next month, was a political boost for the pro-Western government that replaced ousted Russian-backed President Viktor Yanukovich last month, prompting Moscow to seize the Black Sea peninsula. "The financial support from the broader international community that the programme will unlock amounts to $27 billion over the next two years," an IMF statement said. The Ukraine crisis has triggered the most serious East-West confrontation since the end of the Cold War a quarter-century ago, deepening the slump in Ukraine's battered economy, centred on coal and steel production, gas transit and grain exports. Without IMF-mandated austerity measures, the economy could contract by up to 10 percent this year, Prime Minister Arseny Yatseniuk told parliament, explaining why his government had bowed to the Fund's conditions. "Ukraine is on the edge of economic and financial bankruptcy," he said. Kiev opened the way for the IMF deal by announcing on Wednesday a radical 50-percent hike in the price of domestic gas from May 1 and promising to phase out remaining energy subsidies by 2016, an unpopular step Yanukovich had refused to take. It also accepted a flexible exchange rate that is fuelling inflation, set to hit 12-14 percent this year, according to Yatseniuk, and a central bank monetary policy based on inflation targeting. The prime minister, who took on the job a month ago saying his government was on a "kamikaze" mission to take painful decisions, said the price of Russian gas on which the nation depends may rise 79 percent - a recipe for popular discontent. The IMF statement said a key element of the programme would focus on cleaning up Ukraine's opaque energy giant Naftogaz, which imports gas from Russia's Gazprom <GAZP.MM>. Naftogaz's chief executive was arrested last week in a corruption probe. "The programme will focus on improving the transparency of Naftogaz's accounts and restructuring of the company to reduce its costs and raise efficiency," it said. Ukraine Aided, Russia IsolatedThe international rescue for Ukraine was in sharp contrast to Western measures to isolate Russia diplomatically and charge it an economic price for the annexation of Crimea, home to Moscow's Black Sea fleet and a majority of ethnic Russians. Targeted U.S. and EU visa bans and asset freezes against senior Russian and Crimean officials, with the threat of tougher economic sanctions to come if President Vladimir Putin goes any further, have accelerated capital flight. Russian Economy Minister Alexei Ulyukayev said on Thursday capital outflow could be around $100 billion this year, and would slow economic growth to about 0.6 percent. "If we assume in the first quarter capital outflow was $60 billion ... then (it) will reach around $100 billion for the whole year," Ulyukayev told an investment conference. "Under this scenario, we estimate that economic growth will slow down to 0.6 percent." The Economy Ministry forecast in January that GDP growth this year would be about 2.5 percent. The World Bank gave a gloomier forecast for the Russian economy, saying that in a high-risk scenario of persistent tension over Ukraine, Moscow's economy could shrink by up to 1.8 percent, even without Western trade sanctions. Ukraine's dollar bonds jumped on news of the IMF bailout while Russian stocks were down about 1.5 per cent on economic pessimism there. U.S. President Barack Obama, in the main policy speech of his European tour, warned Russia on Wednesday that it faced growing isolation, incremental sanctions and more severe economic consequences unless it changed course. In a statement after Ukraine's IMF deal, the White House said: "This represents a powerful sign of support from the international community for the Ukrainian government. "The IMF programme will be a central component of a package of assistance to support Ukraine as it implements reforms and conducts free and fair elections that will allow all the Ukrainian people to determine the future of their country." Russian leaders have already said that Ukraine's discount from Gazprom will come to an end next week. Yatseniuk said he expected Moscow to charge Kiev as much as $480 per 1,000 cubic metres of gas from April 1 instead of the current $268.50. That could exacerbate the country's economic woes and cause political instability in the run-up to a May 25 presidential election. The European Union signed a political association agreement with Ukraine last week but is holding off from signing a far-reaching trade and economic cooperation pact until a new elected government is in place. (Reuters)
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China should set an economic growth target of 6.5-7 per cent for 2015, below its goal for 2014, and refrain from stimulus measures unless the economy threatens to slow sharply from that level, the International Monetary Fund said on Thursday (31 July).Most of its directors hold that view, though some feel that an even-lower growth target is appropriate, the IMF said.In the conclusion of its annual Article IV economic consultation with China, the IMF repeated its projection that the economic growth would dip to 7.4 per cent this year, and decelerate further to 7.1 per cent next year.The IMF cut its 2014 and 2015 economic growth forecasts for China last week. It had projected in April that the world's second-largest economy would grow 7.5 per cent this year, and 7.3 per cent next year.Weakness in China's real estate sector posed near-term risks for China's economy despite signs of steadying, Markus Rodlauer, deputy director of the IMF's Asia Pacific Department and the fund's mission chief for China, told reporters."A key uncertainty remains in the real estate sector, some further weakness could be building and because of the very large direct and indirect importance of this sector, this still poses a risk to the near-term outlook," he said.Near-term risks in China's economy remained manageable due to the government's policy buffers, but Beijing must push reforms as the current path of growth is unsustainable, he added.Beijing is not expected to announce its 2015 target until early next year, though some government economists have suggested a level of around 7 per cent to help create more room to pursue structural changes."Regarding the growth target for 2015, while most directors concurred that a range of 6.5-7 per cent would be consistent with the goal of transitioning to a safer and more sustainable growth path, a few other directors considered a lower target more appropriate," the IMF said.China fixed its annual economic growth target for this year at around 7.5 per cent, suggesting for the first time in years that there is room for growth to come in slightly under the desired level.But after a weak start to the year, the government announced a flurry of stimulus measures to offset the drag from weak exports and a cooling property market. The economy grew 7.7 per cent in 2013, above the target of 7.5 per cent and again underpinned by government stimulus early in the year.Some analysts have criticised the 2014 target as one that is still too high to give China enough room to overhaul its economy to produce slower but better-quality growth.To that end, the IMF repeated an earlier recommendation that China should not deploy any economic stimulus unless GDP growth is in danger of falling "significantly" below the target level.This is because risks in China in the form of off-budget spending and quick growth in credit and investment have "risen to the point that containing them is a priority", it said.Any stimulus that was dispensed should be carried out through fiscal policy and accounted for in government budgets, the IMF added."Consumption and the labour market are holding up well, and the global recovery is expected to support activity going forward." In line with the modest cooldown, the IMF estimated that annual inflation in China may ease to 2 per cent this year, a good way under the government's 3.5 per cent target.Price pressures are expected to pick up slightly next year to boost inflation to 2.5 per cent.The fund also repeated its assessment that the yuan is "moderately undervalued", and said it supported China's attempt to move towards a more flexible exchange rate that is not subjected to "sustained, large and asymmetric intervention".The IMF stuck with its assessment that the yuan is between 5 and 10 per cent undervalued, based on China's current account surplus relative to gross domestic product, Rodlauer said."But again this is not an assessment that the exchange rate should be revalued or appreciated in the next few months by 5 per cent to 10 per cent," he said.The central bank is widely suspected of engineering a sharp drop in the currency earlier this year to punish speculators, though most economists expect it will eventually allow the yuan to resume a trend of gradual appreciation.At the same time, the IMF noted that previous appreciation in the yuan's real effective exchange rate had helped to narrow China's external imbalances - its current account surplus dropped to 1.9 per cent of GDP last year.Turning to China's endeavours to implement the most ambitious reforms in three decades, the fund again urged authorities to free up bank deposit interest rates, remove implicit guarantees in the financial and corporate sectors, and open more industries up for competition.It said China also needed to boost consumption, reorder local government finances, and improve pension and health benefits.(Reuters)
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Upping the ante against Switzerland for not sharing information on Indians stashing money in its banks, Finance Minister P Chidambaram has threatened to drag the European nation to multilateral foras like G20 for continuing to block its requests. Chidambaram, in a terse two-page letter to his Swiss counterpart Eveline Widmer Schlumpf, reminded her of the April 2009 declaration adopted by G20 leaders stating the "era of bank secrecy is over." In a strongly worded letter, he said India might examine further steps like declaring Switzerland a non-cooperative jurisdiction if non-cooperation continues. Chidambaram said Switzerland has not honoured the terms of the Double Taxation Avoidance Agreement (DTAA) between the two nations, under which information about Indians with accounts in Swiss banks has been sought by the tax authorities. "Switzerland's refusal to provide information to India and other countries on the grounds that the source of the information requested is based on 'stolen data' means that, in practice, Switzerland still believes in bank secrecy and is therefore not in tune with the modern era," he said in the letter dated March 13. Recalling the G20 stand that sanctions may be deployed to protect their public finances and financial systems, he said: "If information continues to be denied to India under DTAC (Double Taxation Avoidance Convention), the Government of India will be constrained to take a position in the global forum." He said India would not hesitate to tell global forums that Switzerland still does not comply with the standards of transparency and that the required legal and regulatory framework is still not in place in Switzerland. "Further, the Government of India may also have to raise this issue in other multilateral fora such as the G20," he added. Chidambaram said India was "seriously concerned" that some Indian taxpayers may have parked substantial unaccounted income and assets in offshore jurisdictions, and "it expects cooperation from those jurisdictions to deal with them effectively." "In the event of continued denial of access to vital information, which Switzerland is obliged to provide under the DTAC, India may be constrained to actively consider the options available under our domestic laws," Chidambaram said. Though he did not spell out the options, these may include making unavailable to investors from Switzerland the benefits under the double-taxation avoidance agreement between the two countries. "In view of your assurance that the Swiss government is keen to cooperate with India and find possible ways of complying with our requests for information under DT AC, a bilateral discussion at the official level was held in New Delhi on February 4 and 5, 2014. "However, no progress was made during the discussions and the Swiss delegation merely reiterated their previously stated positions and refused to consider any options or alternate approaches," Chidambaram said in the letter to the Swiss Finance Minister. He said Swiss authorities through a letter dated February 20, 2014 suggested that they are "closing" the requests made by India in 562 cases. "You would appreciate that, such a situation, where there is no effective exchange of information between India and Switzerland despite a clear legal obligation of Switzerland under Article 26 of the DTAC, is a matter of grave concern for India," he said. Chidambaram said the Swiss government had proposed revision of its domestic laws for providing information under the tax treaties, which would have enabled the European nation to provide information to India in the HSBC cases even in respect of the so-called stolen data. In 2011, the Indian government received the names of 782 Indians who had accounts with HSBC. "However, it is learnt that the proposed revision did not take place due to strong political opposition in Switzerland," he said. "It should be noted that Switzerland's refusal to provide information in serious cases of tax evasion in India is a sensitive matter in India too."(Agencies)
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The rupee fell to 60.28 in early trading, its highest since July 22. It was last trading at 60.21 versus previous close of 60.06/07.Dollar is still near six-month peak after upbeat US GDP data, but mixed views from the Federal Reserve tempers rally.The Nifty was down 0.16 per cent; will be watched for clues on foreign fund flows.The Indian unit is seen in 60.10 to 60.50 range.(Reuters)
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The Indian rupee declined by 11 paise to 60.25 against the US dollar in early trade on Thursday due to appreciation of the American unit against other currencies overseas.Besides, fresh demand for the US dollar from importers also put pressure on the rupee.The local unit had gained 34 paise to close at eight-month high of 60.14 per dollar in yesterday's trade on sustained capital inflows.Dealers attributed the fall in rupee on Thursday to dollar's gains against other currencies overseas but a higher opening in the domestic equity market capped the fall.Meanwhile, the benchmark Bombay Stock Exchange (BSE) Sensex rose by 62.65 points, or 0.28 per cent, to 22,157.95 in early trade on Thursday (27 March).(PTI)
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