Country's foreign exchange reserves rose by $920.6 million to $355.353 billion in the week to August 21, on account of higher foreign currency assets. In the previous reporting week, the reserves had increased by a healthy $1.086 billion to touch $354.433 billion. The reserves had touched an all-time high of $355.46 billion in the week to June 19. Foreign currency assets (FCAs), a major component of overall reserves, were up by $894.3 billion to $331.731 billion in the reporting week, according to the latest Reserve Bank data. FCAs, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and the yen, held in the reserves. The gold reserves stood unchanged at $18.250 billion. India's special drawing rights with the International Monetary Fund rose $19.9 million to touch $4.075 billion in the week under review, while the nation's reserve position with the Fund were up by $6.4 million to $1.297 billion, the apex bank said. (PTI)
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Given the current scenario, can the Narendra Modi-led National Democratic Alliance (NDA) government convince investors to come to India as the going is uncertain and choppy in most global economies? India did well in 1998 after the Southeast Asian crisis as it did in 2009 immediately after the Wall Street crisis led to a global recession. At present, the economy's fundamentals appear stable with declining current account and fiscal deficits. Domestic inflation is contained with the Reserve Bank of India keeping a hawk eye on price movements and liquidity flows. For years, growth in India has been fuelled more by domestic demand-not, as in China, by manufacturing goods for sale abroad. Now India's resilient consumer spending is an advantage as demand decelerates almost everywhere else. It is luring companies to produce in India and, the government hopes, can help spark a belated industrial revolution in the country of 1.2 billion, says the Wall Street Journal in a report on how India could benefit from the Chinese slowdown. "India hasn't been rattled as badly as Brazil, Russia or South Africa. Its international reserves are ample, and it isn't highly dependent on foreign capital to fund imports," the newspaper said."The Prime Minister was particularly of the opinion, since the economic fundamentals were sound, we need to take measures in order to further strengthen the economy," Finance Minister Arun Jaitley had said. "This would ensure that the global crisis could be converted into an opportunity." India is not as vulnerable to external shocks as many other Asian countries, as exports are a relatively lower share of total GDP than many east Asian countries such as South Korea, Thailand or Malaysia. While exports to China accounted for only 5.2 per cent of India's total last year, the figures for Singapore, Vietnam and Indonesia were more than twice as high. India's situation, however, is much better than emerging market peer Brazil, where the central bank has been jacking up interest rates to fight off high inflation even as the economy slips into a deepening recession. Also, the plummeting price of oil has key benefits for India, which depends on imports for more than 75 per cent of its consumption. Foreign exchange reserves increased 13 per cent during the past year, inflation more than halved since January of 2014 and the current account deficit narrowed by 93 per cent in about 24 months, according to a report in Bloomberg. On Wednesday, Moody's Investors Service gave a vote of confidence to the Indian economy, placing it higher relative to other countries it rates. The ratings agency said the Indian economy's scale, currently pegged at $2 trillion, insulates it to some degree against global or domestic trends that could otherwise hurt growth. It backed the government's reform agenda. Authorities are making efforts to address some of the institutional constraints faced by the country, it said, while also cautioning that such efforts may not immediately improve growth or governance. Experts say a slowdown in the Chinese economy is a big advantage for Narendra Modi who is trying to attract manufacturers with his Make in India programme. A substantial part of Narendra Modi's avowed strategy to kick-start the economy was by way of big-bang reforms. The Goods and Services Tax (GST) bill was seen as low-hanging fruit among free-market reforms as it has rare bipartisan support. But it fell victim to an impasse over allegations of impropriety against Modi's cabinet and party colleagues. The government has already backed down from making changes in the land law of 2013, considered a big hurdle for new projects. Economists are of the view that in present context China has very little room for further stimulus through public investment while India can absorb trillions of dollars in just infrastructure.
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Monsoon deficiency in the country aggravated further and reached to 12 per cent, with parts like Marathwada region in Maharashtra witnessing 50 per cent less rainfall. Overall 51 per cent of the country has received “normal” rainfall — a dip by 7 per cent since last week. Thirty-six per cent of the country received “deficient” rainfall, an increase of 7 per cent since last week. Of 36 sub-divisions, 18 have received normal rainfall while 15 witnessed deficient rainfall. According to the India Meteorological Department (IMD) data, of the four divisions, the southern peninsula and central India are the worst hit, witnessing deficiency of 20 and 15 per cent, respectively. Many sub-divisions like Mararthwada, Konkan and Goa and central Maharashtra witnessed 50, 38 amd 32 per cent deificinecy in rainfall. Coastal and south interior Karnataka, Telangana and Kerela witnessed deficiency of 44, 28, 25 and 31 per cent, respectively. The rainfall deficit in eastern UP stood at 36 per cent, western UP 30 per cent, and Punjab 31 per cent. Sub-regions like Assam, Meghalaya, Arunachal Pradesh, Sikkim, Jharkhand, Uttarakhand, Himachal Pradesh, Jammu and Kashmir and east Rajasthan, Odisha, Vidarbha, Chhattisgarh, Andaman and Nicobar Islands, coastal Andhra Pradesh, Tamil Nadu and Pondicherry, Lakshadweep and south interior Karnataka have received normal rainfall. The MeT department has forecast a “deficient” monsoon this season with the shortfall expected to be about 12 per cent across the country. Of the two months of the season, June has received excess rainfall of 16 per cent while July witnessed deficient rainfall of 17 per cent. August too is expected to bring in a 10 per cent deficiency in rainfall.(PTI)
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After a decade labouring on building sites around New Delhi Akhilesh Kumar lost his scaffolding job last month when his employer halted work on an array of 30 residential towers. He joins more than half a million workers let go from sites around India's capital in the last 18 months, in a stark sign that the ground reality in Asia's third-largest economy is far from as rosy as official data suggests. The deepening downturn in India's crucial building sector makes it easily understandable why Prime Minister Narendra Modi's image as the country's economic saviour has lost its lustre just over a year after his resounding election victory. "If I don't get another job, I have no other choice but to go back to my village and work as a farm labourer," said Kumar, who is in his twenties. The decade-long construction boom in burgeoning cities like Noida, where Kumar earned $165 a month, lured millions of labourers from India's rural hinterlands in search of a better life, creating one in every three new jobs. That process is now going into reverse, undermining Modi's promise to create more employment for the one million Indians who join the workforce every month. Indebted developers are cutting staff as they slow work on existing projects and postpone new buildings until they clear a backlog of 700,000 unsold homes. A law to clamp down on "black money" flows that fund as much as a third of real estate deals is further squeezing demand. Across India, housing starts fell 40 percent in the first half of the year, consultancy Knight Frank said. Cement output grew 0.9 percent between April and June, down from 9.6 percent a year earlier when Modi took office, government data show. "The slowdown in the construction sector is very, very depressing which will have a negative impact on the overall GDP growth numbers in the first quarter of the current fiscal year," said Samantak Das, chief economist at Knight Frank India. Rating agency Moody's last week cut India's growth forecast to 7 percent for this fiscal year, against the government's target of 8 to 8.5 percent. India releases its GDP figures for the April-June quarter on Monday. Heading HomeThe lack of jobs is already being felt in the poor northern state of Bihar, source of many of the labourers toiling near Delhi. In Patna, the state capital, eight out of 20 labourers contacted by Reuters had this year made the 1,000 kilometre (600 mile) trip back from Delhi because they could not find work - pressuring salaries in a region where wages are already low. According to brokerage Ambit Capital, rural wages may now be falling after growing 4 per cent in the year to March - a far cry from the double-digit annual rises between 2010 and 2014. "Labourers are starving and are ready to work even at lower wages as there are fewer or just no jobs in the construction markets," said Navendu Kumar Thakur, Patna chairman of the Builders Association of India. The squeeze comes at a bad time for Modi. Bihar heads to the polls this year, in an election his Hindu nationalist Bharatiya Janata Party (BJP) must win to gain seats in the upper house of parliament where he lacks a majority to pass economic reforms. Half-builtEconomists say that lower interest rates and a government splurge on infrastructure should eventually help revive construction, which contributes a tenth of Indian GDP. Modi's party also wants to regulate property markets and tie investor money to specific projects to stop developers diverting cash elsewhere. The slowdown around Delhi, where unsold inventory is highest, shows no sign of abating, however. Noida, a city of 640,000, has grown rapidly in the last decade, expanding to a point where its middle-class housing complexes now meld into Delhi's urban sprawl on one side and rustic villages on the other. Around the site where Kumar worked, half-built high-rises now dot the skyline. Cranes and diggers stand idle. His former employer, The 3C Company, has cut staff on the 3,000-unit "Lotus Boulevard" by more than half, employing some elsewhere. Sales staff at two nearby sites reported a 30 to 50 percent decline in bookings in the last year. Real estate association CREDAI's Rohit Raj Modi estimates construction in Noida employed more than a million labourers at its peak in 2013, at least double today's number. Even when the market recovers, a shift to mechanisation on larger sites would limit demand for new workers. "From a labour point of view, the peak is over," he said.(Reuters)
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The Union government can spend an additional Rs 37,160 crore during FY16 on account of both lower oil subsidy and supplementary revenue generated under some budget heads, India Ratings and Research (Ind-Ra) said. The credit rating agency said that the extra revenue should be used judiciously for higher capital expenditure on infrastructure and on recapitalisation of public sector banks. If a part of the surplus, for instance Rs 10,000 crore, is allocated for the recapitalisation of PSU banks, then the multiplier effect of the credit, if well directed, could significantly support growth and strengthen bank balance sheet. Indi-Ra expects a fall in global crude prices lately and robust growth in the collection of indirect taxes have raised the hope that the government finances will be in a better shape in FY16 than in FY15. Due to multiple factors which among other things include the growth slowdown in China, nuclear deal with Iran and strengthening of US dollar, the price of Indian crude basket declined to $42.97/bbl on 24 August 2015. Given the geopolitical situation, it is likely to remain depressed in the near term. As a result, Ind-Ra's estimate shows a total savings of Rs 18,750 crore on oil subsidy for the government. The agency also expects significant upside to the budgeted amount with respect to excise duty collection in FY16. This is mainly because of the increase in the excise duty on petroleum products between November 2014 and January 2015 and withdrawal of excise duty exemption on auto and other consumer durables from January 2015. The excise duty collection grew by 81 per cent during 1QFY16 against the budgeted estimate of 21.7 per cent for FY16. Although such a high rate of growth in excise duty collection may not be possible throughout FY16, Ind-Ra's estimate shows that the government would be able to garner additional excise duty of Rs 53,300 crore in FY16. Similarly, a higher dividend paid by the Reserve Bank of India (RBI) has given the government additional revenue of Rs 9,090 crore under the head 'dividend/surplus of RBI, nationalised banks and financial institutions'. However, there are going to be few slippages as well. The most prominent one relates to disinvestment. The disinvestment target of the government has been budgeted at Rs 69,500 crore for FY16. The department of disinvestment, however, is hopeful of mobilising only Rs 30,000 crore this fiscal. Ind-Ra believes the food subsidy may again overshoot the budgeted amount by Rs 4,480 crore in FY16. Although fertiliser subsidy for FY16 will fall short of the budgeted amount, Ind-Ra believes like FY15, the remaining amount due in this fiscal will be rolled over to FY17 to meet the budgetary target.
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Moody's Investors Service on Tuesday (25 August) said it could upgrade India's rating if the government's reform agenda is implemented and key macroeconomic indicators like inflation remain under control over the next year. "India's rating could be upgraded if Moody's expectations of gradual but credit positive reforms are realised in actual policy implementation and if the recent improvement in inflation, fiscal and current account ratios is sustained," it said. Moody's has a 'Baa3' rating on India with a positive outlook. Since 2004, Moody's has rated India at 'Baa3', the lowest investment grade — just a notch above 'junk' status."The rating could be upgraded if the above expectations are reflected in policy progress and macroeconomic indicators over the next year, and if we view this progress as sustainable," it said in a report on the Indian Government. Moody's said the positive outlook is based on the expectation of implemented policies which are likely to lower sovereign credit risk by stabilising inflation, improving the regulatory environment, increasing infrastructure investment while maintaining the ongoing improvement in fiscal ratios. It, however, cautioned that the rating outlook would likely return to stable "if there is a slowdown in or reversal of the policy reform process; if banking system metrics continue to weaken, or, if there is a decline in foreign exchange reserves coverage of external debt and imports". Moody's said that lower oil prices as well as tighter fiscal and monetary policies have helped restore macro-economic balance. "As a commodity importer, India benefits from a low commodity price environment, and its reliance on domestic demand for GDP growth shields the economy somewhat from the subdued outlook for global growth," it said. Moody's has forecast India to expand at 7 per cent in the current year and is still likely to surpass the average for its peers, as it has over the last decade. It said the consequence of tighter policies is that GDP and investment growth are likely to remain at levels that are lower than their peaks of a decade ago. It said the government’s efforts to revive private investment, particularly in manufacturing, appear to be key to a sustainable growth recovery. "If successful, an acceleration in manufacturing investment will also alleviate the economy’s current vulnerability to fluctuations in agricultural output, which makes up 17 per cent of GDP, but a much higher proportion of employment," it said. Moody's said a deterioration in macro-economic balance between 2011 and 2013, coupled with political and policy uncertainty ahead of 2014 national elections could have contributed to the decline in India’s competitiveness scores. "Over the last year, India’s performance on inflation and the balance of payments have improved, reflecting policy efforts. "However, a sustained improvement in its relative ranking on competitiveness indicators will depend on the extent to which the government’s stated commitment to improving the operating environment is reflected in infrastructure and regulatory conditions," it said. It said an improvement in India's institutional strength holds the key to improved economic strength. "We rank India’s institutional strength as moderate (-) relative to all other countries in the Moody’s-rated universe." Institutional strengths are apparent in India’s robust democratic apparatus, including freedom of the press, and an entrenched system of checks and balances among government branches. "Offsetting weaknesses include an uncertain regulatory environment, a slow-moving judicial system, a series of corruption scandals, and inefficiencies in delivery of government services.. We also use price stability as a gauge for policy effectiveness, and India's high and recurrent inflation—partly a result of regulatory and infrastructure constraints—reflects institutional challenges," it said. Moody's said the positive outlook on India's rating incorporates the view that authorities are making efforts to address some of these institutional constraints. "However, we do not expect these efforts to result in a shift in governance or growth indicators in the near term. If these efforts are successful, however, stronger institutions are likely to also result in an improved operating environment for investment and growth, over a three to five year period," it said.(PTI)
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The Muslim community has registered a moderate 0.8 per cent growth to touch 17.22 crore in the 10 year period between 2001 and 2011, up from 13.8 crore, while Hindus population showed a decline by 0.7 per cent at 96.63 crore during the period, according to the latest census data on religion. While the census figure on religion was released on Tuesday, more than four years after compilation of the data, the caste data is yet to be made public. RJD, JD(U), SP, DMK and some other parties have been asking the government to release the caste census figure. The data on socio economic status of the population was released on 3 July. As per the religious census data of 2011, released by the Registrar General and Census Commissioner today, the total population in the country in 2011 was 121.09 crore. Hindu population is 96.63 crores (79.8 per cent); Muslim 17.22 crores (14.2 per cent); Christian 2.78 crores (2.3 per cent); Sikh 2.08 crores (1.7 per cent); Buddhist 0.84 crores (0.7 per cent); Jain 0.45 crores (0.4 per cent), Other religions and persuasions (ORP) 0.79 crores (0.7 per cent) and religion not stated 0.29 crores (0.2 per cent). The proportion of Muslim population to total population has increased by 0.8 percentage point (PP) in 2011, the census data said. The proportion of Hindu population to total population in 2011 has declined by 0.7 PP; the proportion of Sikh population has declined by 0.2 PP and the Buddhist population has declined by 0.1 PP during the decade 2001-2011. There has been no significant change in the proportion of Christians and Jains. As per 2001 census, India's total population was 102 crores of which Hindu population comprised of 82.75 crore (80.45 per cent) and Muslims were 13.8 crore (13.4 per cent). The growth rate of population in the decade 2001-2011 was 17.7 per cent. The growth rate of population of the different religious communities in the same period was as Hindus: 16.8 per cent; Muslim: 24.6 per cent; Christian: 15.5 per cent; Sikh: 8.4 per cent; Buddhist: 6.1 per cent and Jain: 5.4 per cent. The distribution is total population by six major religious communities namely, Hindu, Muslim, Christian, Sikh, Buddhist, Jain besides 'Other Religions and Persuasions' and 'Religion not stated'.(PTI)
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As the rupee fell past 66.5/USD on Monday (24 August), the concerns on the impact of currency depreciation have resurfaced as was the case in first half of 2013. However, India Ratings and Research (Ind-Ra) says the negative impact will be limited to highly leveraged net importers, some of whom because of their cost-structure exhibit a high sensitivity to ‘INR depreciation’. According to Ind-Ra’s report Dollarisation of Top 500 Listed Borrowers published on 16 July 2015, a 1 per cent depreciation in the rupee value is expected to reduce the absolute EBIDTA of net importers by 0.19 per cent (median). The negative sensitivity of the majority of Indian corporates to INR depreciation has shown a decreasing trend, since FY13. From the date of publication of the report (63.51/USD), the rupee has depreciated by about 4.5 per cent . But even if depreciates by around 10 per cent over the 16 July level to 70/USD, the median reduction in the absolute EBITDA for these largest net importers will be only 1.9 per cent. The agency remains cautious on the credit profile of corporates which are highly leveraged (net debt/EBITDA: 5.0x or more) and are highly sensitive to ‘INR depreciation’. These corporates are net importers and a 1 per cent rupee depreciation on a sustained basis may reduce their absolute EBITDA by 1 per cent to well over 5 per cent . Particularly affected would be highly leveraged corporates in the sectors fertiliser, consumer durable, chemicals, metals & mining and airlines. An INR rate of 68/USD to 70/USD on a sustained basis may reduce their absolute EBITDA by 10 per cent to 30 per cent over their FY15 levels. The current pressure in the rupee may be attributable among other things to selling pressure on emerging market equities, in part triggered by the sell-off of Chinese equity by global investors. As such over the last 12 months, the correlation between incremental foreign institutional investor (FII) equity investment and equity returns of major Indian indices has been strong and is over 0.5. Likewise, the correlation between total FII investment (debt and equity) and INR strength has been even stronger and is above 0.7. Of course, arguably, both the currency strength and market returns may be attributable in part to the incremental improvement in the economy as perceived by market. However, it may also imply that in the event some FIIs sell-off Indian equities the rupee may come under pressure, even temporarily. While given the commodity down-cycle and low level of capex activity, thereby reducing capital goods imports, India’s current deficit is firmly in check. In addition, India has a solid real interest rate (defined by World Bank as lending interest rate adjusted for inflation as measured by the GDP deflator). In FY14, India’s real interest was 6.2 per cent (FY13: 3.8 per cent ), according to World Bank. Given that lending rates have fallen by 30bp-70bp, while the measures of inflation have fallen at a much higher rate over the last one year, the agency estimates that the real interest rate have possibly increased further from 6.2%. Given some of the fundamental strengths of Indian currency, the agency does not expect the depreciation to be sustained even if the rupee depreciates further due to the purely tactical reason of an equity market sell-off. The impact of currency depreciation on corporate margins, as indicated above, is purely due to rupee depreciation. The agency believes that currency volatility has a significant, negative impact on all corporates with foreign currency exposure which is difficult to quantify. To reproduce a paragraph from Ind-Ra’s report The Dollarisation of BSE 500 Corporates, 15 May 2014 “Heightened two-way currency volatility for a sustained period makes it difficult for corporates to take appropriate pricing or hedging decisions. Empirical observations tend to suggest asymmetric impact under such situations. Exporters make very limited gains (if any) while importers incur heavy losses. Hedging related losses often add to operation losses, worsening the impact”.
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Finance Minister Arun Jaitley on Saturday (22 August) said most of the challenges faced by the Indian economy have been created by external factors, even as he expressed confidence in the country's strong fundamentals to withstand such transient global trends. "I have no doubt that our ability to withstand the transient global trend, created predominately by external factors is very strong," he said here. He emphasised that macroeconomic indicators like inflation, forex reserve, capital investment in infrastructure and revenue collection are all positive. Referring to the global turmoil, he said world is passing through some very challenging trends and prospect of the US Fed rate hike is creating uncertainty. "US is a big economy, anything that happens there has big impact across the globe," he said adding "China is another major global economy, and if their manufacturing data throws up adverse indication, because a global slowdown is going to impact them, that itself has an impact and shakes the entire (scenario). But these are only transient trend." If an economy exists on its own solid foundation and its own fundamentals are strong, then it is not a very challenging task' to withstand these transient trends, he added. "Our approach in India today is that our own fundamentals today become stronger and stronger so that our ability in globally integrated economy to withstand these transient trends increase... (and) we acquire certain kind of immunity that beyond a few days we are able to withstand those trends," he said. Referring to the challenges faced by steel sector, the Finance Minister said, this sector is also impacted by the external factors. (PTI)
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At the pace at which India's GDP is growing, the country can double the same over the next three-to-three-and-a-half years propelled by the efforts being made by the Narendra Modi government, Railway Minister Suresh Prabhu said on Friday (August 21). "To reach one trillion (USD) GDP mark, it took India 20 years, but it added the next trillion in just seven years. With investors having tremendous respect for the efforts of Prime Minister Narendra Modi, Indian economy can double its size in the next three-to-three-and-a-half years," he said. Prabhu was optimistic about India's long-term growth to the tune of a USD 20 trillion economy in the next 20 years. An International Monetary Fund study in 2014 had said that India's GDP would cross USD 3 trillion after five years in 2019. The minister said that what with the inflation staying down and a conducive environment being created, the economy was looking up and foreign direct investments were increasing. "There is a tremendous respect among investors for the efforts of the prime minister (and they) are eager to invest in India," Prabhu said. Addressing a regional meet of Chartered Accountants, he said that, despite alternative views in a democracy, "we should pursue growth to eradicate poverty". "In a democracy, alternatives should be discussed but, at the end, a final decision has to be arrived at," he said. "We cannot be ambiguous about our goals. It is essential that concerted efforts are made and we have a comprehensive strategy to reach our goal, which is achieving inclusive growth coupled with elimination of poverty and corruption," the minister added.(PTI)
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