The rupee edged down on Monday, 28 October, a day before the Reserve Bank of India (RBI) policy review when it is widely expected to raise interest rates to fight inflationary pressures even as the economy grows at its slowest in a decade.The RBI's macroeconomic report released after the close of markets said upside risks to food inflation remain and that it expects the retail and wholesale price inflation to remain above comfort levels.Expectations for a rate hike have grown after data earlier this month showed that both retail and wholesale inflation accelerated, and markets are likely to scrutinise whether the central bank hints on Tuesday at more rate hikes.Meanwhile, the RBI is also expected to continue cutting short-term interest rates, removing measures put in place to support the rupee."The market will be very cautious until the policy outcome. I expect ranged trading between 61.25 to 61.75 to continue depending on the global situation," said Hari Chandramgethen, head of forex trading at South Indian Bank.Global factors will be a factor ahead of the U.S. Federal Reserve's policy meeting ending on Wednesday.The partially convertible rupee closed at 61.52/53 per dollar compared with 61.46/47 on Friday.Weakness in shares also hurt the rupee. The BSE index marked its lowest close in nearly 1-1/2 weeks, as lenders and other interest rate-sensitive shares declined a day before RBI's policy review.In the offshore non-deliverable forwards, the one-month contract was at 61.97, while the three-month was at 62.95.In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed around 61.51 with a total traded volume of $1.9 billion.(Reuters)
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US employers added far fewer workers than expected in September, suggesting a loss of momentum in the economy that will likely add to the Federal Reserve’s caution in deciding when to trim its monthly bond purchases. Non-farm payrolls increased by 148,000 workers in September, the Labour Department said. Its report suggested the economy lost steam even before the damaging 16-day partial shutdown of the government. “The numbers indicate that the economy is growing at a modest pace at best,” said an economist. After the shutdown, “tapering (of the Fed’s bond purchases) has been postponed until further notice”. But there was a silver lining too. The unemployment rate fell a tenth of a percentage point to 7.2 per cent, the lowest level since November 2008. Economists had expected the economy to add 180,000 jobs in September and the unemployment rate to hold at 7.3 per cent.Tax NegotiationsJPMorgan Chase’s preliminary $13-billion mortgage settlement with the US government could end up costing the bank closer to $9 billion after taxes, because the majority of the deal is expected to be tax deductible, sources said. The deduction also means the government is getting less than it appears in this deal. Banks can often deduct legal settlements from their taxes, but cannot get tax benefits on penalties for violating laws. The two parties have been negotiating the tax treatment of the settlement, and the deal is expected to include a $2-billion penalty.CredweetTwitter has obtained a $1 billion credit line ahead of its initial public offering (IPO), the company disclosed in an amended investor prospectus. Goldman Sachs, Morgan Stanley, JPMorgan, Bank of America Merrill Lynch and Deutsche Bank were reportedly involved in arranging the deal. The banks are also underwriters of Twitter’s IPO. No amounts have been drawn under the credit facility, Twitter said. The micro-blogging company, the most closely watched social media IPO prospect since Facebook went public last year, is expected to begin trading on the New York Stock Exchange by mid-November. Twitter also disclosed that MoPub, a digital advertising exchange it acquired in September, had lost $2.8 million in the first six months of the year on $6.5 million in revenues. Twitter paid $350 million in stock for MoPub, its largest acquisition to date. The deal is expected to close in November.Tax NegotiationsJPMorgan Chase’s preliminary $13-billion mortgage settlement with the US government could end up costing the bank closer to $9 billion after taxes, because the majority of the deal is expected to be tax deductible, sources said. The deduction also means the government is getting less than it appears in this deal. Banks can often deduct legal settlements from their taxes, but cannot get tax benefits on penalties for violating laws. The two parties have been negotiating the tax treatment of the settlement, and the deal is expected to include a $2-billion penalty.Free FlowStartups looking for backing will be able to solicit small investments over the Internet from the general public under a new proposal unveiled by the Securities and Exchange Commission (SEC). The “crowdfunding” plan is now a requirement in a 2012 law that relaxes regulations to help spur small business growth. Private firms are now only allowed to solicit investors deemed to be ‘accredited’, meaning they have a net worth of $1 million. The rule would let small businesses raise more than $1 million a year by tapping unaccredited investors.Trade TalksThe European Union (EU) finally agreed to start talks with China to remove restrictions on foreign investment and set clearer rules for doing business after months of trade disputes over Chinese solar panels and EU wines. The decision by trade ministers from the bloc’s 28 member states has been made with the aim of sealing an investment agreement in the next few years. The EU wants greater access to China and the removal of restrictions on investment in certain sectors, notably in services such as banking, or the requirement to work with a Chinese joint venture partner.Glass WorksCorning Inc said it would buy out Samsung Display’s stake in their LCD glass joint venture in a deal that could see the Samsung Electronics subsidiary taking a 7.4 per cent share in the Gorilla Glass maker. The deal includes a new 10-year LCD display glass supply agreement that will add about $2 billion to Corning’s sales. Samsung will receive convertible preferred shares with a face value of $1.9 billion and will make an additional $400 million investment in Corning.On HoldHTC Corp has halted at least one of its four main manufacturing lines, accounting for at least a fifth of total capacity, and is outsourcing production as a sales slump puts pressure on its cash flow, according to sources. HTC launched its latest version of the flagship One series this year but has struggled to gain traction in a market dominated by Apple and Samsung. The firm reported its first ever quarterly loss in October.Getting CompetitiveApple recently offered free upgrades for life on its operating system (OS) and business software, and unveiled a 1-pound iPad Air and a MacBook Pro with sharper ‘retina’ display ahead of the holiday shopping season. This repeats a pattern of recent launches with improvements rather than totally new products. Apple said upgrades to its Mac OS and iWork software suite, which compete with Microsoft’s Excel, Word, etc., will now be offered for all MacBooks and Mac computers. That brings Apple’s model of free system software upgrades on phones and tablets to the PC market, where it’s still the underdog to MS’s Windows.LawspeakGermany retained key veto power at carmaker Volkswagen (VW) after the EU Court of Justice (ECJ) turned down the European Commission’s bid to abolish its “VW law”. This leaves the state of Lower Saxony, where Volkswagen is based, with the power to block takeovers and other key decisions such as factory closures. According to a 1960 law, Lower Saxony has a de facto golden share in VW. Under German rules, shareholders need at least 25 per cent to hold a blocking minority, but the VW law gave Lower Saxony, with just 20 per cent in VW, this right. Sports car maker Porsche found the VW law a barrier when it sought to take over VW in 2008. Porsche’s bid floundered and it was soon bought by VW last year.Tough TestThe European Central Bank (ECB) recently vowed to submit the euro zone’s top banks to a comprehensive batch of tests next year, staking its credibility on a review that aims to build confidence in the sector. It wants to unearth potential risks hidden in balance sheets before supervision is centralised under its roof from November 2014. This will form part of a European banking union drawn up in response to a debt crisis exacerbated by massive bad property loans in countries like Ireland and Spain. Setting out its plans to scrutinise the 128 top lenders, ECB said it would use tougher new measures set out by Europe’s top regulator — the European Banking Authority — in the asset quality review it will conduct next year.(This story was published in BW | Businessworld Issue Dated 18-11-2013)
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We’ve really got to up our game”George Osborne, Britain’s chancellor of the exchequer, after his China visit. The country’s progress ‘staggered’ him“If it’s growing like a weed, it’s a good chance that it’s weed”Mark Zandi, chief economist at Moody’s Analytics, on growth in highly leveraged loans“I do not want to comment on statements made by Sheikh Chilli (daydreamer)”Sriprakash Jaiswal, coal minister, responding to P.C. Parakh’s statement“There is K.M. Birla who made the representation, he is one conspirator. I, who examined the case and made a recommendation, I can be another conspirator and the Prime Minister, who as the coal minister, took the final decision, is the third conspirator”P.C. Parakh, former coal secretary, on the coal block allocation controversy Veerappa Moily“Our competition is different... they’re confused”Tim Cook, Apple CEO, taking a dig at Microsoft’s hybrid devices, at an Apple event“India and China’s is the most important bilateral friendship in the world”Li Keqiang, Chinese premier, during the visit by Prime Minister Manmohan Singh“There are more people who go hungry in Madhya Pradesh than in Africa” Rahul Gandhi, Congress vice-president, at a rally“India cannot become just like Russia, where investors are not prepared to go and billionaires are put behind bars”Veerappa Moily, oil minister, on the FIR against industrialist K.M. Birla in the coal scam, just before the Prime Minister’s Russia visit(This story was published in BW | Businessworld Issue Dated 18-11-2013)
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The Supreme Court on Monday, 28 October, refused to entertain a PIL seeking CBI probe into licences granted to several real estate developers, including the one with which Robert Vadra is associated, for developing colonies in Haryana.The apex court pulled up the petitioner for targeting only Vadra while the names of other persons who were also granted licences were not mentioned in the petition, saying it was done for "cheap publicity"."Why you chose only one person? Let us clarify that in the name of PIL we are not going to sully the name of a particular person. Merely because he is related to a political family, you cannot call him a sinner," a bench of justices H L Dattu and Ranjan Gogoi said.The bench also questioned advocate M L Sharma, who filed the petition, on other prayers of his plea in which he pleaded to quash a decision of the state government.The bench while appreciating Sharma's work in recent past on various issues said that he should focus on good work instead of indulging in publicity."Don't spoil the name of a person for cheap publicity.You should channelise you energy for people in need instead of cheap publicity," the bench said.Sharma submitted that the plea was not targeting any person but was only pointing out Vadra's name as one of the cases.The petition had also sought quashing of the reported order for stopping audit inquiry against colony licence issued to Skylight Hospitality Pvt Ltd with which Vadra is said to be associated.The petitioner had claimed that the Department of Town and Country Planning (DTCP) issued hundreds of licences for over 21,000 acres land spread over Gurgaon and other parts of the state during 2005 to 2012.(PTI)
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Making headway in the Patna blasts case, police have arrested two suspected terrorists, including one possibly the mastermind, and detained several others, even as the toll in the serial explosions rose to six.A search operation by NIA and Patna Police is on in Gandhi Maidan, the area which witnessed six of the seven serial bomb blasts on Sunday, 27 October, that left 83 people injured, to locate explosives, if any, a senior police officer said on Monday, 28 October.The suspected terrorists have been identified as Tausim and Imtiyaz, official sources said.SSP Patna Manu Maharaj earlier said that "One of the accused, who is being considered as the mastermind, has been arrested. He has confessed how the planning took place".Three-four suspects have been detained, he said, adding, "We are in the process of interrogation so things will be clear very soon".Maharaj said there were six-seven persons accompanying the alleged mastermind."Based on that information, we conducted raids.Information was given to Ranchi and subsequently our teams have gone there," he said.Six persons were killed in the seven low intensity serial blasts of which six bombs went off in and around the venue of BJP Prime Ministerial nominee Narendra Modi's mega rally at Gandhi Maidan shortly before his address before a huge gathering yesterday.Patna city SP said investigation is going on "so we can't divulge a lot of details. The accused has confessed about the crime, how it happened. He told us that six-seven teams came to Gandhi Maidan and surroundings of Patna and how they planted the bombs".Meanwhile, the toll in the serial blasts rose to six after an injured person died at the Patna Medical College and Hospital (PMCH) last night.Currently, 37 injured persons, many of them in critical condition, are being treated in the hospital. Raids were being conducted in several areas of neighbouring Jharkhand today in connection with the blasts.Three persons detained after the blasts yesterday were released after interrogation last night, a senior police officer said in Ranchi.Police recovered black powder, materials used to make IEDs, pressure cooker and extremist literature during the raids, he said.In the wake of the multiple blasts in Patna, the Centre has asked all states to maintain high alert and tighten security during the festival season.The Home Ministry also asked five poll-bound states to beef up security in election rallies, especially those being attended by top leaders.The Home Ministry asked the states and Union Territories to keep strict vigil on sensitive places, markets, religious sites, railway stations, bus terminus and in other vital installations besides deploying adequate forces for their security.(PTI)
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Riding an unprecedented buying frenzy, precious gold reclaimed the psychological Rs 32,000 per 10/gm mark at the domestic bullion market here amid swelling festive and wedding-related off-take.Demand for the shiny metal has been witnessing a massive surge ever since the festive season began outstripping supply due to shortage of gold following restrictions on consignment imports, leading to a sharp spurt in domestic prices, bullion traders commented.The industrial metal silver rebounded sharply on back of aggressive speculation buying coupled with firm industrial buying support. Standard gold of 99.5 per cent purity rose by Rs 175 to conclude at Rs 32,015 per 10 grams from Friday's closing level of Rs 31,840.Pure gold of 99.9 per cent purity also climbed by a similar margin to end at Rs 32,165 per 10 grams as against Rs 31,990. Silver ready (.999 fineness) jumped by Rs 360 to finish at Rs 50,540 per kilo from Rs 50,180 yesterday.On the global front, gold maintained its upbeat momentum to reclaim one-month high supported by safe haven demand on growing expectations that the Federal Reserve will delay tapering its stimulus program and lacklustre US macro data.Gold December delivery settled high at $1.352.50 an ounce on the Comex division of the NYMEX, while silver December contract closed lower at $22.64 an ounce.(PTI)
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Narendra Modi, BJP's prime ministerial candidate, cannot hope to lead India effectively if he inspires "fear" and "antipathy" among many of its people, the New York Times has commented in an unusual move."Mr Modi has shown no ability to work with opposition parties or tolerate dissent," the Editorial Board of the New York Times said in a stinging editorial on the 63-year-old BJP leader.The editorial said that Modi has already "alienated" BJP's political partners when Janata Dal (United), an important regional party broke off its 17-year alliance with the "party because it found Mr Modi unacceptable."India was a country with multiple religions and "Mr Modi cannot hope to lead it effectively if he inspires fear and antipathy among many of its people," it said while recalling that nearly 1,000 people died in the 2002 riots in Gujarat.The editorial, published yesterday, also questioned Modi's economic track record in Gujarat. The "economic record in Gujarat is not entirely admirable, either," it said."Muslims in Gujarat, for instance, are much more likely to be poor than Muslims in India as a whole, even though the state has a lower poverty rate than the country," the editorial said."His rise to power is deeply troubling to many Indians, especially the country's 138 million Muslims and its many other minorities," said the 19-member Editorial Board, headed by India-born Andrew Rosenthal, the editorial page editor of The New York Times.(PTI)
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Foreign Direct Investment (FDI) into India declined to 8-month low of $1.4 billion in August, down 38 per cent year-on-year.FDI had touched a low of $1.10 billion in December last year.In August 2012, the country had attracted foreign investment worth $2.26 billion.During the April-August period of 2013-14 fiscal, FDI has grown by a meagre 4 per cent to $8.46 billion, from $8.16 billion in the first five months of 2012-13, a senior official in the Department of Industrial Policy and Promotion (DIPP) told PTI.According to industry experts there is a need to improve business environment in the country."There is a need to further improve the business environment. Reforms in the recent past are welcome, but more needs to be done in order to build foreign investors confidence," Head of Tax and expert on FDI with corporate law firm Amarchand & Mangaldas Krishan Malhotra said.The sectors that helped in registering the hike during the five months include services ($1.19 billion), pharma ($1.07 billion), automobile ($661 million) and construction ($592 million).The maximum FDI during the period came from Singapore ($2.37 billion), followed by Mauritius ($2.13 billion), the Netherlands ($980 million), Germany ($529 million), and the US ($475 million).FDI inflows in 2012-13 aggregated $22.42 billion, a decline from $36.50 billion in 2011-12.India is projected to require around $1 trillion between 2012-13 and 2016-17, the 12th Five Year Plan period, to fund infrastructure growth covering sectors such as ports, airports and highways.A decline in FDI would hurt the rupee, which had depreciated to a record low of 68.85 against the US dollar on August 28. It has strengthened since then to about 61 level.The DIPP official said the recent steps announced by the government will help improve the investment climate in the country and push up FDI inflows."The government has also started exercise in allowing FDI in railways sector besides liberalising FDI norms for construction and housing sector. The aim is to boost FDI inflows," the official added.It has already relaxed FDI policy in 12 sectors, including telecom, tea and petroleum & natural gas.(PTI)
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Onion prices continued to reign at as much as Rs 100 a kg in major cities, with the government indicating that rates may start falling after Diwali and some states taking their own initiatives to ease the situation.Blaming hoarding for the price rise, Food and Consumer Affairs Minister K.V. Thomas asked traders not to "loot" consumers. He also said there was no need to be "alarmed" about the crisis as prices would cool down in the next 10 days with improved arrivals from the domestic and overseas markets."Onion prices will come down in next 10 days. Traders should take legitimate margin and not loot consumers. Farmers should get reasonable price and consumers should also get onions at affordable rates," Thomas said at an event here.The Cabinet Secretary reviewed the onion price situation, but sources said no major decisions were taken. The Agriculture Ministry took stock of the crop situation in producing states via video conferencing.A team from poll-bound Delhi reached Maharashtra to procure cheaper onions, while the West Bengal government has made arrangements to sell onions at lower rates.As per reports from centres, retail prices continued at Rs 60-90 per kg in major cities, depending on location and quality. In Delhi, prices were at Rs 80-100 per kg.However, official data showed the average retail price in 57 major cities stood at Rs 75 per kg on 25 October.State governments have been asked to take strong action against hoarders and a few states have already acted, he said.Prithviraj Chavan, Chief Minister of Maharashtra, the country's largest onion producer, ruled out any hoarding in the state and said the situation would improve from next month with higher arrivals of fresh crops.Thomas said he discussed the supply situation with the Maharashtra, Rajasthan and Karnataka governments and onion arrivals are improving."Nafed has floated a tender (to import onion) and the decision will be taken on Oct 29. After the decision, onions will arrive in 3-4 days," the minister said."Our analysis is that production is as good and even better than last year but the prices have remained higher," he said.Chavan informed Delhi Chief Minister Sheila Dikshit about the availability of onions in the state. The visiting Delhi government team will purchase onions from Nashik."I have suggested to Dikshit to directly involve the government machinery to make the purchases. After accounting for the transport cost, the Delhi administration may be able to sell onions to people at a price of Rs 50/55 per kg."If a truck carrying onions travels non-stop from here to Delhi, it will take only 24 hours to land the consignment in the national capital," said Chavan, who spoke to reporters on the sidelines of a function.Concerned over high prices, the West Bengal government has made arrangements to sell onions at Rs 36 per kg through 40 stores.In Punjab, traders have imported onions via the Attari Wagah land route, although the quality is inferior and the vegetable is being consumed in the state itself."There is not much onion crop available in Afghanistan.Therefore the arrivals into India are as low as 60-80 tonnes per day," Amritsar-based vegetable trader Anil Mehra told PTI.The Union Food Minister emphasised the need to balance the supply situation in the case of onions, potatoes and tomatoes with the help of cold storage facilities."In vegetables like onion, tomato and potato, there is period of plenty and there is situation of scarcity. We need to balance with more use of cold storage and warehousing facilities," Thomas said.The Warehousing Development Regulatory Authority (WDRA) has been asked to explore the possibility of storing onions grown in the rabi (winter crop) season to avert any such crisis next year.Nafed is prepared to procure onions during the season of plenty and supply to states during the lean season, the minister said."Unfortunately, that has not worked. Nafed has very good cold-storage facilities," he said.(PTI)
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Finance Minister P. Chidambaram is finding it harder and harder to meet the government's budget promises and may sweep as much as $15 billion in subsidy costs into next year's accounts to ensure he hits fiscal targets ahead of national elections, ministry officials say.Chidambaram insists that the fiscal deficit target of 4.8 per cent of GDP for the year to 31 March 2014, is a red line that will not be breached. The worst economic downturn since 1991 and a fall in the rupee to a record low have undermined budget assumptions for some months.But finance ministry officials said the window to raise domestic fuel prices sharply, which would cut subsidies, is closing with state and national elections drawing closer, so shifting some costs into the 2014/15 budget is inevitable. "It's a given," said one official, who declined to be identified.The worst-case scenario as of now is that $15 billion in costs will have to be rolled over into next year's budget, the ministry officials said. This assumes that there will be no substantial increase in domestic fuel prices to offset the ballooning subsidies.By rolling over some costs, Chidambaram can tell voters in the run up to the elections, which must be held by May, that the government met its deficit target. But equally, he will be shackling the next government with costs that could blunt its ability to stimulate an economic recovery."Whatever we need to do, we will do. But the fiscal deficit target will be met," said a finance ministry official. "No one should be in doubt about that."Meeting the target is important also to stave off the ire of ratings agencies as India's credit status sits just one notch above junk. A loss of its investment grade rating would probably increase the government's borrowing costs.Last year, Chidambaram narrowed the budget deficit by 1 percentage point to 4.9 per cent of GDP by pushing nearly $15 billion in subsidy costs into this year's budget and cutting more than $16 billion in planned spending, two ministry officials said.This year, he could rollover a similar amount in subsidies, the officials said. This will be in addition to spending cuts of $3.2 billion or more that officials are already predicting for the year.The amount will be partly determined by the success of an auction of telecom spectrum, expected in January. The budget had pencilled in $2 billion for the sale.But the most critical factor will be whether Chidambaram can gather government support to raise domestic fuel prices to offset ballooning subsidy costs. Some policymakers see that as politically unpalatable ahead of state elections in December, leaving a small window after those votes before the country moves into national elections.A finance ministry spokesman, D.S. Malik, said it was "too early to say anything at this stage" on how much the rollover would be.Chidambaram had planned to cap the subsidies for the likes of fuel and food at 2 per cent of GDP, or about $38 billion. But finance ministry officials said it could cost as much as 2.9 per cent of GDP, or $55 billion, this fiscal year.Chidambaram had said earlier this month that the jump in subsidy spending must be tackled sooner rather than later to help stabilise an economy shaken this year by the rupee's slump and a record current account deficit. India imports nearly 80 per cent of its oil needs and the rupee drop made government fuel subsidies more costly.Soaring Subsidy Bill Finance ministry officials in September called for an increase in diesel prices of close to 10 per cent to offset the pressure on the subsidy bill.But Prime Minister Manmohan Singh has shied away from raising fuel prices for fear it could upset voters and cost his Congress party the elections.At the same time, international oil prices have remained stubbornly high and although the rupee has climbed up from its record low, it remains historically weak.A new law to provide cheap grains to millions of people has increased procurement and storage costs, inflating food subsidies by around 10 per cent. Adding to Chidambaram's headache, the fertiliser ministry has asked for a 50 per cent hike in its budgeted subsidy."The budget will simply collapse, if we continue to provide subsidies on this scale," said a finance ministry official. "There is no alternative to a 3-5 rupees increase in diesel prices."AssumptionsIt is not unusual for the government to rollover some costs into the following year's budget, although they are not publicly revealed. However, subsidy spending has massively overshot budgeted estimates for the last three fiscal years forcing up the amount of cost that the government rolls over.If the economy was booming, Chidambaram would have easily absorbed higher subsidy costs. But GDP rose 5 per cent in 2012-13, the weakest pace in a decade. Most analysts expect growth to weaken further this fiscal year, although the budget assumed a rebound to around 6.5 per cent.Ministry officials say the rollover is the result of India's cash-basis accounting, in which income is recorded when cash is received and expenses are recorded when cash is paid out. Many advanced economies follow accrual accounting, in which income and expenses are recorded as they occur regardless of whether cash has actually changed hands.India's accounting method "never gives you the real picture of your finances," said Devendra Kumar Pant, chief economist at India Ratings & Research. "You start the year on the back foot as you have so much backlog to clear." (Reuters)
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