India's current account deficit probably widened to as high as 5.4 per cent in the June quarter, but a dramatic slowdown in gold imports and a rebound in merchandise exports are expected to narrow the gap in coming quarters.The data is part of a slew of indicators this week which will offer clues on the health of Asia's third-largest economy, which is struggling to recover from the worst slowdown in a decade and running a wide current account gap that was partly to blame for a recent plunge in the rupee.The rupee has clawed back part of the losses which saw it slump to a record low of 68.85 to the dollar in late August, but few analysts believe Asia's second-worst performing currency is out of the woods just yet.Economists surveyed by Reuters last week expect the deficit to swell to $23-25 billion for the June quarter from $18.1 billion, or 3.6 per cent, in the March quarter.But they expect it will later improve to around $10-12 billion in the September quarter. The Reserve Bank of India will release the data on Monday around 1130 GMT.Also on Monday, India is expected to release data on infrastructure output for August. The sector, which includes coal, crude oil, oil refinery products, natural gas, steel, cement, electricity and fertilisers, had expanded an annual 3.1 percent in July.It accounts for about 38 percent of India's industrial output, which grew for the first time in three months in July. However, a contraction in factory activity last month, reflected in the Purchasing Managers' Index (PMI), does not bode well for industrial output in August.The HSBC Manufacturing PMI, sank to 48.5 in August from 50.1 in July, the lowest reading since March 2009. The reading for September is due on Tuesday at 0500 GMT.A narrowing current account deficit would reduce India's reliance on foreign money to fund the gap, bolstering the outlook for the troubled rupee."We expect the current account deficit to narrow in 2013/14, given our expectation for a continued improvement in the country's export cycle," Credit Suisse said in a Monday note.New Delhi has unveiled a range of measures including fiscal incentives for its exporters to improve the trade deficit. It has also raised import duty on gold shipments to a record 10 percent, and made airline passengers pay duty on imports of flat-screen televisions.The measures helped reduce the trade deficit in August to a five-month low of $10.9 billion.Meanwhile, slowing economic growth has dampened tax revenues, making it tougher for the government to hit its fiscal deficit target of 4.8 percent of GDP for the financial year that ends in March.During the first four months of this fiscal year the deficit had reached almost 63 per cent of the full-year target. Revenues were just about 16 percent of the target, while spending was 31.3 per cent of the target.Fiscal deficit data for April-August is expected on Monday around 1030 GMT.Despite economic weakness, expectations for Indian monetary policy have shifted towards further tightening after the Reserve Bank of India's surprise increase in the policy interest rate on September 20, a Reuters poll showed last week.Economists are now split over whether new RBI chief Raghuram Rajan will hike rates again at the central bank's next policy review on October 29. Many did not anticipate Rajan's focus on curbing inflationary pressures despite growth languishing at a decade-low.(Reuters)
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India's temples are resisting divulging their gold holdings - perhaps nearly half the amount held in Fort Knox - amid mistrust of the motives of authorities who are trying to cut a hefty import bill that is hurting the economy.The Reserve Bank of India (RBI), which has already taken steps that have slowed to a trickle the incoming supplies that have exacerbated India's current account deficit, has sent letters to some of the country's richest temples asking for details of their gold. It says the inquiries are simply data collection, but Hindu groups are up in arms."The gold stored in temples was contributed by devotees over thousands of years and we will not allow anyone to usurp it," said V Mohanan, secretary of the Hindu nationalist Vishwa Hindu Parishad organisation in Kerala, in a statement.Indians buy as much as 2.3 tonnes of gold, on average, every day - the weight of a small elephant - and what they don't give to the gods is mostly hoarded. Jewellery is handed down as heirlooms and stored away with bars and coins as a hedge against inflation or a source of quick funds in an emergency.That is costing the economy dear. Gold imports totalled $54 billion in the year ending 31 March 2013, the biggest non-essential item shipped in from overseas and a major factor in swelling the current account deficit to a record in 2012-13.Guruvayur temple, in Kerala, one of the most sacred in India and boasting a 33.5-metre (110-ft) gold-plated flagstaff, has already told the RBI it won't divulge any details."The gold we have is mostly offered by the devotees. They would not like the details to be shared with anybody," said V M Gopala Menon, commissioner of the temple's administrative board.The World Gold Council estimates there are about 2,000 tonnes of gold locked away in temples - worth about $84 billion at current prices - which Indian devotees have offered in the form of jewellery, bars, coins and even replicas of body parts, in the hope of winning favours from the gods or in thanks for blessings received and health restored.Curbing gold imports and getting the gold squirreled away back into circulation has become a priority for the government and RBI this year. Import duty is at a record 10 per cent and the latest new rule - that 20 per cent of all imports must leave the country as jewellery exports - caused confusion that dried up buying for two months.The head of the main opposition Bharatiya Janata Party (BJP) in Kerala, V Muralidharan, said the RBI wanted to "take possession" of the gold and maybe sell it for dollars.Data Collecting?The RBI said there was "no proposal under its consideration to convert idle gold into bullion at this juncture".But its letters, sent to leading temple trusts in Kerala, were prompted by a report looking at "issues related to gold imports" and loans outside the banking system in February, which zeroed in on temples and domestic hoards for fresh supplies.Under the heading "supply-related measures", the report looks at recycling domestic gold and notes: "Temples in India hold large quantities of gold jewellery offered by devotees to the deities."Subha Unnikrishnan, a clothes shop owner worshipping at one of the temples in Kerala's capital Thiruvananthapuram, said whatever had been given to the temple should stay there. "We have given it to the god with a purpose," he said. "Nobody can take them away."Of the three major temple boards in Kerala, which administer more than 2,800 temples, Cochin board has also decided against providing details of its gold, while another has yet to decide and a third says it has not yet received a letter from the RBI.Some of them cite security reasons for their reticence - and the wealthiest temples do have tight controls and metal detectors at gates to keep their assets safe.There has been no inquiry from the RBI yet at the centuries-old Sree Padmanabhaswamy temple, where two years ago treasure then estimated to be worth over $20 billion - more than India's education budget - was discovered in secret subterranean vaults. But its hoard is already being checked by the Supreme Court to make sure it is adequately protected.There are some, for sure, who feel the temples should divulge their centuries of gold offerings."Everything the temple gets should be known to the devotees," said Shankaram Kutty, head of an advertising firm based in Cochin, who goes at least once a year to Guruvayur with an offering. "I feel every temple should declare their assets."Mumbai's Shree Siddhivinayak Ganpati temple, often visited by Bollywood celebrities, had already put 10 kg (22 lbs) of its gold into a bank deposit scheme. It still has 140 kg in its vault."The gold we have is the nation's property, we will be proud if the nation can benefit from it," said Subhash Vitthal Mayekar, chairman of the temple's administrative trust. He has not yet received an inquiry from the RBI.It is not alone. The Tirupati temple in Andhra Pradesh, considered one of India's richest, has lodged 2,250 kg of gold with the State Bank of India, which pays it interest.As the central bank ponders its options, it could take heart that the temples themselves are already doing their bit to circulate the gold."We use some of it for making gold lockets that we sell in our temple counter. For making the lockets, we send some gold to the Mumbai mint through the State Bank of India, which is one of our bankers," said a source at the Guruvayur temple's administration.(Reuters)
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Indian Prime Minister Manmohan Singh and his Pakistani counterpart, Nawaz Sharif, agreed on Sunday, 29 September, that better ties require an effort to restore a cross-border ceasefire after a spate of shootings, a senior Indian official said.Singh and Sharif met for more than an hour on the sidelines of the United Nations General Assembly, amid heightened tension between the nuclear-armed neighbors over Kashmir, sparked by series of fatal clashes on their de facto Himalayan border.They both expressed a desire to improve ties but agreed that "peace and tranquility across the LOC (Line of Control) is a precondition," Indian national security adviser Shivshankar Menon told reporters in New York."We need to address the issues that we face today and then we hope to move it forward," he said.A series of fatal clashes along the so-called Line of Control dividing Kashmir between India and Pakistan have killed at least eight soldiers from both countries in less than two months. The South Asia Terrorism Portal, a website that tracks the violence, says this year's toll is 44 members of the security forces, up from 17 for all of last year.In their speeches to the U.N. General Assembly, both leaders said they wanted to improve relations between their countries, which have fought three wars since becoming independent from Britain in 1947, two of them over Kashmir.But Singh told the assembly on Saturday that neighboring Pakistan is the "epicenter of terrorism in our region," and in talks with Sharif he urged Pakistan to address Indian complaints that Pakistan is the source of cross-border attacks, Menon said.India has long accused Pakistan of supporting the militants fighting Indian rule in an insurgency in its part of Muslim-majority Kashmir since 1989. Pakistan denies this."Both sides wish to see a better India-Pakistan relationship than we have today," said Menon.Asked whether he thought Pakistan can bring calm to the frontier in Kashmir, he said: "The only proof will be in the months to come."The two leaders accepted invitations to visit each other's countries, but no dates were set, Menon added.(Reuters)
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Snapping two-day losing trend, gold prices climbed to nearly three-week high by surging Rs 1,000 per ten grams in the national capital today on brisk buying by stockists, driven by strong global cues. While gold shot up Rs 1,000 to Rs 31,200, a level last seen on September 11, silver jumped up by Rs 1,225 to Rs 49,680 per kg on increased offtake by industrial units and coin makers. Bullion merchants said sentiment bolstered as stockists indulged in enlarging their positions to meet the upcoming festival and marriage season demand next week. Demand is likely to pick up on beginning of 'Navratras,' an auspicious week in Hindu mythology for making fresh purchases. They said a firm global trend on concerns the US Federal Reserve might trim economic stimulus, triggered buying of precious metals as an alternate investment. Gold in New York, which normally set price trend on the domestic front rose by 1.1 per cent to USD 1,339.20 an ounce and silver by 0.3 per cent to USD 21.83 an ounce. On the domestic front, gold of 99.9 and 99.5 per cent purity surged by Rs 1,000 each to Rs 31,200 and Rs 31,000 per ten grams, respectively. The yellow metal had lost Rs 345 in last two trading sessions. Sovereign also rose by Rs 100 to Rs 25,100 per piece of eight gram. Silver ready zoomed up by Rs 1,225 to Rs 49,680 per kg and weekly-based delivery by Rs 1,245 to Rs 49,600 per kg. It had lost Rs 875 in the previous two sessions. Silver coins spurted by Rs 2,000 to Rs 86,000 for buying and Rs 87,000 for selling of 100 pieces. (PTI)
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India and the US have reached the first commercial agreement on civilian nuclear power, five years after a landmark deal between the two countries was clinched. Addressing a joint media interaction after talks with Prime Minister Manmohan Singh, President Barack Obama disclosed that the two countries have sealed the agreement. "We've made enormous progress on the issue of civilian nuclear power, and in fact, have been able to achieve just in the last few days an agreement on the first commercial agreement between a US company and India on civilian nuclear power," Obama said. India's nuclear operator NPCIL (Nuclear Power Corporation of India Limited) and US firm Westinghouse have signed an agreement that will pave the way for setting up an atomic plant in India. However, there was no word on the tough nuclear liability clause in the Indian laws over which the US firms had strong objections. There was a major uproar in India last week over the agreement because of apprehensions that it entailed bypassing the Civil Nuclear Liability Law in place in the country by waiving the operator's right to recourse with the supplier. Reiterating his commitment for strong ties, Obama said India is not just a regional, but also a global power. Prime Minister Singh reciprocated the feelings, saying US is as an indispensable partner for India. "India, as a significant not just regional power but world power, has worked closely with us on a whole range of issues from climate change to how we can help feed the world, alleviate poverty and deal with disease," Obama told reporters in his Oval Office following their hour-long meeting. Praising the Prime Minister for his leadership in strengthening India-US ties, Obama said Singh has been a great friend and partner to the United States and to him personally. "Across the board, Prime Minister Singh has been an outstanding partner," Obama said, adding that India continues to grow at an amazing rate, but obviously there are a lot of people in India that are still trapped in poverty. He said US is a strong partner to help India realise that vision because if there is a strong India, that is good for the world and it's ultimately good for the US. In his remarks, Singh said Obama has imparted a powerful impetus to that process of the two countries being on the same page. "I have always believed that India and America are indispensable partners. During the time that I have been Prime Minister, and particularly during the time that President Obama and I have worked together, I think President Obama has made an outstanding contribution to strengthening, widening and deepening of our cooperation in diverse ways," he said. Singh said India and America are working together to build on the cooperation and widening, and deepening it in diverse directions. "We are cooperating in expanding the frontiers of trade investment in technology. Our bilateral trade today is USD 100 billion. Investments in India are $80 billion. And they are growing, despite the slowdown in the global economy," Singh said, referring to the increasing trade between the two sides. "Outside the area of trade technology and investment, we are exploring avenues of cooperation in new areas like energy cooperation, clean coal technology, energy-efficient technology, cooperation in the field of environment, cooperation in the field of defense and security-related, cooperation with regard to the intelligence gathering and counterterrorism. In all these areas, India needs the United States to be standing by our side," Singh said. (PTI)
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The finance ministry is in talks with the Reserve Bank of India (RBI) to make bank loans cheaper for exporters, Finance Minister P Chidambaram said on Friday, a move that could help reduce wide current account deficit by boosting export income.Exporters have been lobbying to be included in a category of priority lending that guarantees easier access to bank credit and lower interest rates, a privilege usually reserved for agriculture and small businesses.India's has the world's third largest current account deficit, a major factor in a recent rout of the rupee currency. Exports account for some 25 per cent of GDP.(Reuters)
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The controversial GAAR provision in India, which seeks to check tax avoidance by investors routing their funds through tax havens, will come into effect from 1 April 2016, a government notification said.The provision of General Anti Avoidance Rules (GAAR) will apply to entities availing tax benefit of at least Rs 3 crore, according to the notification dated 23 September.It will apply to foreign institutional investors (FIIs) that have claimed benefits under any Double Tax Avoidance Agreement (DTAA).Investments made by a non-resident by way of offshore derivative instruments or P-Notes through FIIs, will not be covered by the GAAR provisions.Investments made before 30 August 2010, will not be scrutinised under GAAR, it said, adding the provisions will apply to assessees that obtain tax benefits on or after 1 April 2015."Stockmarkets will have a lot to cheer as FIIs which do not seek to avail of treaty benefits will not be subjected to GAAR. Investment in Participatory Notes will not be subject to GAAR," Deloitte Haskins & Sells Partner N.C. Hegde said.The GAAR provisions were introduced in the 2012-13 Budget by then Finance Minister Pranab Mukherjee to check tax avoidance and were to have come into effect from April 1, 2014. The proposal generated controversy, with investors getting apprehensive about harassment by tax authorities.To soothe the nerves of jittery investors, Finance Minister P. Chidambaram in January announced the postponement of the implementation of Chapter X-A of the I-T Act (dealing with GAAR) by two years to 1 April 2016. A business arrangement can be termed 'impermissible' if its main purpose is to obtain tax benefit. Under the original GAAR proposals, the anti-tax avoidance provisions could be invoked "if one of the purposes" was to obtain tax benefit."Where a part of an arrangement is declared to be an impermissible avoidance arrangement, the consequences in relation to tax shall be determined with reference to such part only," the notification said.The assessing officer has to issue a show-cause notice, with reasons, to invoke GAAR provisions and also has to give an opportunity to an assessee to explain whether an arrangement was 'impermissible.' The government's decision to amend the provisions was in response to fears by investors that the tax department, armed with discretionary powers, would crack the whip even in cases where tax avoidance was not the intent.The notification is broadly in line with recommendations of the Parthasarathi Shome Committee, which was set up by Prime Minister Manmohan Singh in July last year to address the concerns of investors."From the notification, it is apparent that many recommendations of the Shome Committee have been accepted.However, the benefit of grandfathering has been limited - firstly, to investments made before 1 August 2010, and secondly, only for benefit up to March 31, 2015," said Rahul Garg, Direct Tax Leader at PwC India.(PTI)
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When Prime Minister Manmohan Singh last visited the White House in 2009 he was feted at US President Barack Obama's first state dinner, a star-studded affair that reflected the excitement about blooming ties between the two big democracies.Back then, optimists in Washington saw India as a counterbalance to a rising China and a new engine for the US economy. In a dinner toast, Obama talked of his "duty" to bring the two countries closer.That duty has only been partly fulfilled. As the two leaders prepare to meet again at the White House on Friday for a working bilateral meeting, Obama is under pressure from lobby groups and lawmakers seething at what they see as India's protectionism and lax enforcement of intellectual property rights.India's $60 billion trade with the United States is widely seen as less than it could be and is just an eighth of U.S. trade with China. Even India's national security adviser accepts there is a perception the relationship is drifting off course."It arises from the macro-economic situation. US friends mention concerns about economic reforms and specific policy issues in India. These concerns are not unique to the U.S. They are, first and foremost, of concern to Indians," National Security Adviser Shivshankar Menon said on Friday.India has still not shaken off memories of foreign domination through trade and it is increasingly hard for the government, ahead of elections next year, to push ahead with economic reforms and deals seen as favouring U.S. companies.In turn, Indian IT firms which operate in the United States are angered by restrictions on travel visas for skilled workers.In June, fourteen US business groups took the unusual step of forming a coalition specifically to pressure Obama over India's perceived protectionist measures, piracy and patent laws.Indian sourcing rules for retail, IT, medicine and clean energy technology are contentious and U.S. companies gripe about "unfair" imports from India of everything from shrimp to steel pipes. In July, more than 170 U.S. lawmakers signed a letter to Obama about Indian policies they said threatened U.S. jobs.Even U.S. Vice-President Joe Biden grumbled about India's reluctance to open up to U.S. companies, or align with the United States on the world stage, during a visit to Mumbai in July.Traditionally, India has been reluctant to get too close to any one big power and Singh is heading to Russia and China over the next two months on trips his staff have described as "economic diplomacy".Full SpectrumTo be sure, India and US ties are closer now than they have ever been, thanks in part to a 2008 civil-nuclear pact forged by Singh and then President George W. Bush that ended India's isolation after nuclear weapons tests and cleared the way for closer defence ties.Menon last week described a "full spectrum" relationship of defence, economic and commercial ties with the United States, a far cry from the wariness during the Cold War when India had warm ties with the Soviet Union.The United States still sees India as a counterbalance to China and in a sign of the level of trust, revelations in the Indian media about spying by the U.S. National Security Agency on Indian institutions, including its embassy in Washington. have not led to a spike in tension, at least in public.From almost zero in 2008, India is now buying billions of dollars of defence equipment from U.S. suppliers, including a $640 million deal to buy six C-130J Super Hercules from Lockheed Martin <LMT.N> that might be signed during Singh's visit.The Indian cabinet on Wednesday approved a preliminary contract with Toshiba's <6502.T> U.S. nuclear unit Westinghouse relating to a major nuclear power plant project - the first such deal under the 2008 agreement and likely to be signed in Washington.But the fact that it took five years to reach even a preliminary deal to work on reactors, because of worries about Indian liability laws for nuclear suppliers, underscores the problems U.S. companies face doing business in India."The Americans want to know what Singh and Sonia are ready to do to get the Indian economy back on track, and the Indians want to know what the Americans intend to do in Afghanistan and Pakistan after 2014," said Bruce Riedel, who advised four U.S. presidents on South Asian affairs, referring to Sonia Gandhi, the president of the ruling Congress party.India fears that the withdrawal by U.S. and other Western forces from Afghanistan next year will expose it to more Islamist violence, including attacks by Pakistan-based groups.(Reuters)
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India's summer-sown grains output could rise only a little due to patchy rains but overall an above average monsoon will help boost output of other crops, helping curb food price inflation.Monsoon rains covered all of India almost a month ahead of schedule, but were below average in rice growing areas of eastern states Bihar, Jharkhand, West Bengal and Odisha.The output of summer-sown grains is expected to rise 0.9 per cent to 129.32 million tonnes in the crop year that began in July, government sources said.A marginal increase was due to better production estimates for pulses and oilseeds though there would a small fall in the rice harvest, said the sources, who did not wish to be named as Farm Minister Sharad Pawar is scheduled to release this year's official farm output numbers on Tuesday.Farmers in India plant rice, corn, cane, cotton, soybean in the rainy months of June and July. Harvests start from October.The output of summer-planted rice in the 2013/14 season is seen marginally lower at 92.32 million tonnes against 92.76 million tonnes in the previous year."Rainfall was patchy in key rice growing eastern states like West Bengal and Odisha at the start of the season. It affected transplanting. Heavy rainfall in some areas in August also dampened yields," said Nalini Rao, an analyst with India Infoline, a brokerage.Monsoon rains irrigate 55 per cent of farmland in India, one of the world's biggest producers and consumers of rice, sugar, soybean, edible oils and cotton.Analysts said a marginal fall in rice output is not a matter for concern as the government is sitting on huge stocks of the grain."A slight fall is rather good news for the government which has been grappling with storage problems. In terms of availability, India has more than ample stocks," said Tejinder Narang, advisor of Emmsons India Ltd, a trading company.On September 1, India's rice stocks at government warehouses were 21 million tonnes against a target of 9.8 million tonnes.Bumper harvests since 2007 have led to massive stocks of rice and wheat, forcing the government to store food in open fields where stocks are exposed to rains and rodents.Massive stocks have made it easier for the government to implement a $20 billion plan to give ultra cheap rice and wheat to 67 per cent of India's 1.2 billion people.Patches of heavy rains in the second half of the rainy season prompted some fears of vegetable crop damage in south, central and western India and stalled planting of onions, pushing food inflation to a three year high level in August.Conservative EstimateThe government updates its forecast as it gathers information about crop planting."It is the first estimate for the 2013-14 crop year and it is a conservative estimate which should be revised upwards as harvests progress," said another government official who did not wish to be named as he is not authorised to talk to the media.Any fall in rice output could be compensated in the winter season which begins from October, Narang said.Growers plant summer-sown rice from June, while the winter-planted variety is transplanted from October.(Reuters)
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Chidambaram's statement was in response to Modi's reported claim of economic growth rate during Vajpayee government being 8.4 per cent.Finance Minister P Chidambaram charged Gujarat Chief Minister Narendra Modi with staging a "fake encounter with facts" regarding his claims of economic growth during BJP-led NDA being 8.4 per cent and said nothing can be further from truth."The average for the six year period (under Atal Bihari Vajpayee government from 1998-99 to 2003-04) was 6.0 per cent and the average for the last five years (1999-2000 to 2003-04) was 5.9 per cent," he said in a statement here.In contrast, the average growth rate during Congress-led UPA's first term was 8.4 per cent and 7.3 per cent during the first four years of UPA-II, he said."The two worst years since the turn of the century were 2000-01 (4.3 per cent) and 2002-03 (4 per cent)," he said giving out yearly GDP growth rate during the six years of NDA rule under Vajpayee.Chidambaram's statement was in response to Modi's reported claim of economic growth rate during Vajpayee government being 8.4 per cent."Nothing can be further from the truth... I wonder why Shri Narendra Modi should stage a fake encounter with facts.Ultimately, facts will prevail," the Finance Minister said."If there was a golden period of growth, it was the five year period under UPA-1," he added.(PTI)
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