India is making a last-minute push to close a nuclear deal in time for a meeting between U.S. President Barack Obama and Prime Minister Manmohan Singh, who has made atomic energy cooperation with Washington a hallmark of his tenure. Under the proposed deal, India would contract Toshiba's US nuclear unit Westinghouse for preliminary works, including information sharing, a senior Indian official said. The aim is to build nuclear plants in the state of Gujarat. "I think we're close," National Security Adviser Shivshankar Menon said on Friday. "I think they're hoping to do a pre-early works (agreement), which involves some transfer of proprietary information." Singh is due to meet Obama in Washington on Sept 27. Westinghouse were not immediately available for comment. After U.S. Secretary of State John Kerry raised the issue on a trip to India in June, the company said it expected the agreement to be finalised in September. The value of the preliminary contract has not been revealed. Indian officials say the proposed deal between Westinghouse and NPCIL would be the first time money is committed to a commercial U.S. nuclear supplier since Singh staked his career on a civil nuclear pact with U.S. President George W. Bush five years ago. A commercial contract, however small, could breathe life into Singh's flagship policy as he nears the end of a decade in office amid grumbling in Washington that ties with India have failed to deliver rewards for U.S. businesses. Many see the 2008 pact as Singh's crowning achievement, in one stroke ending years of isolation following atomic weapons tests in 1974 and 1998 and heralding a new era in the often fraught relations between the two democracies. But on the nuclear front, progress has been slow because laws governing liability in the case of accidents took several years to finalise and when they came, put the onus on the equipment suppliers. "Not just the U.S., ... Indian domestic suppliers, other foreign partners, all ask questions: how will this law work? How will it apply?" Menon said. "They need to know in order to do business. We're in the process of addressing those questions, with them individually and as a whole, so that we ourselves also have clarity." Rules drawn up in 2011 limit the liability of suppliers and were seen as softening the law. The preliminary deal with Westinghouse would not involve putting in place nuclear equipment, so would not immediately brush up against the liability issue, Indian officials said. Westinghouse has safety approval from U.S. nuclear authorities for the AP 1000 reactor it wants to sell India. The preliminary deal must be cleared by two Indian committees before Singh leaves for the United States on Wednesday, two Indian officials said, asking not to be named. "The two governments have resolved government to government permissions and understandings necessary to enable commercial negotiations between NPCIL and Westinghouse," Menon said. A third official said the Westinghouse deal would show foreign nuclear suppliers that India was committed to doing business with them. "They want an assurance that they have a foothold in the country," said the official, who asked not to be named. "This has to be cleared before we go to America." The last-minute dash for clearance has been criticized by Indian opposition parties, who accused the government of trying to bypass due process and water down the liability law. After a TV station reported on Thursday that a note from the prime minister's office suggested skipping the approval of one committee to get the deal ready in time, the opposition Bharatiya Janata Party said the government wanted to "give a gift" to U.S. companies. India's Department of Atomic Energy issued a statement denying any shortcuts were being considered. India aims to lift its nuclear capacity to 63,000 megawatts in the next 20 years by adding nearly 30 reactors. It currently operates 20 reactors at six sites with a capacity of 4,780 MW, or 2 percent of its total power capacity, according to NPCIL.(Reuters)
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Fitch Ratings cut India's growth forecast for the current financial year to 4.8 per cent, saying weak demand is a large drag on the economy.The new estimate compares with projections of 5.7 per cent made in June and 7 per cent in September 2012, underlining the "severity of the growth shock," the rating agency said in its 'Global Economic Outlook' report released on Thursday.Fitch said prospects of a swift economic turnaround have been further dented by a 20 per cent fall in the domestic currency since the end of May due to increased concerns over the country's large current account deficit.The sharp cut in the growth forecast comes when the country faces challenges such as slowing growth, exchange-rate woes and concerns about the current account deficit. India's economy expanded at a 4.4 per cent pace in the April-June quarter compared with 4.8 per cent in January-March."Demand is weak, both externally and domestically, which is a large drag on the economy," the agency saidFitch also cut India's growth rate projection for FY'15 to 5.8 per cent from the June forecast of 6.5 per cent. In September 2012, the company had projected a growth of 7.5 per cent for FY'15.Last week, the Prime Minister's Economic Advisory Council had revised its growth forecast for the current financial year to 5.3 per cent from 6.4 per cent projected earlier."The weaker exchange rate has not only weakened consumer and business confidence but has also complicated matters for India's policymakers," Fitch said. "Pressure on the exchange rate has hindered India's ability to provide either fiscal or monetary stimulus to support growth."The rating agency said the weaker exchange rate, coupled with high international crude oil prices, would raise the cost of the government's fuel subsidy programme."This is likely to force the government to cut other budget expenditure if it is to meet its FY'14 fiscal deficit target of 4.8 per cent of GDP."Rising imported inflation pressures coupled with continued pressure on the exchange rate will limit the Reserve Bank of India's ability to cut policy rates further," the report said.The rating agency expects wholesale price and retail inflation, which jumped 5.8 per cent and 9.6 per cent respectively in July, to "accelerate in the coming months."However, Fitch said continued improvement in agricultural output could provide an important boost to the economy since about 70 per cent of the population lives in rural areas.On the back of a strong monsoon, agricultural output in the second quarter of 2013 rose 2.8 per cent from a year earlier."Improving global growth prospects should support India's manufacturing sector," it added.Regarding emerging markets, Fitch said the risk premium component would be the most relevant, presenting a monetary policy dilemma for those with liberalised capital markets, including Brazil and Russia, while the impact would be more subdued in China and India.(PTI)
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Gold was hovering near one-week highs on Friday and was on track for its biggest weekly climb in five weeks after the US Federal Reserve postponed the tapering of its bullion-friendly stimulus measures. But gains were likely to be capped during Asian hours as key buyer China was closed for the mid-autumn festival. "The market will take some time to digest the 'no-taper' surprise," said Victor Thianpiriya, an analyst at ANZ in Singapore, adding that economic data would take on more significance going forward. "We expect the U.S. dollar to trade on the weak side, and this should support gold in the near-term at an expected higher range of $1,350-$1,400." Fed Chairman Ben Bernanke on Wednesday refused to commit to begin reducing the central bank's bond purchases this year, and instead went out of his way to stress the programme was "not on a preset course". Many had expected a $10 billion cut to the $85 billion monthly bond purchases following strong economic data. Bullion, which has dropped nearly 20 percent this year in anticipation of a wind down of U.S. stimulus, has gained from short covering and technical buying since the Fed's statement on Wednesday. Spot gold had eased 0.02 percent to $1,364.11 an ounce by 0211 GMT, not far from a one-week high of $1,374.54 hit on Thursday. It has gained nearly 4 percent this week. The Fed is scheduled to hold its next policy meeting on October 29 and 30. A new Fed chairman is also expected to be announced by then. "The prospect of any tapering this October remains data-dependent, and speculative interest may remain soft as investors continue to play a wait-and-see game for incoming U.S.-centric economic data," OCBC Bank said in a note. If the Fed announced tapering in the October meeting, prices could fall to $1,250 by year-end, the analysts said. "However, should the Fed refrain from any moderation in its bond purchase programme for the rest of the year, gold is likely to rally pass $1,400 in 2013 before setting a downward course once again in 2014." Physical buying in key consumers India and China has been subdued and looks unlikely to offer much support to prices. While China is away on a holiday, India has called a meeting of top officials from the finance and trade ministries in New Delhi on Friday to break a two-month impasse on gold imports that has crimped supply and pushed up prices in the world's biggest consumer of the metal. (Reuters)
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Reserve Bank of India Governor Raghuram Rajan said on Friday that he was confident that the current account deficit could be financed this year without suffering a substantial drawdown in foreign exchange reserves. India needs to withdraw liquidity measures, introduced in July to stabilise the rupee, as soon as market conditions allow, Rajan told a press conference after conducting his first policy review since becoming governor. Rajan surprised markets by raising interest rates to ward off rising inflation while scaling back some emergency measures put in place to support the ailing rupee. India's foreign exchange reserves fell to $274.806 billion as of 6 September, compared with $275.49 billion in the earlier week. The country's record-high current account deficit has made it especially vulnerable to the flight of funds. More Freedom To Market Participants As Rupee StabilisesThe RBI also said it would allow more freedom to market participants engaged in foreign exchange trading as the rupee stabilises.Reuters had earlier reported that the Reserve Bank of India (RBI) had relaxed intraday foreign exchange trading position restrictions that it imposed on some banks back in June. Rajan, speaking to reporters after the RBI's mid-quarter policy review, said he does not anticipate a new set of rupee stabilising measures since the US Fed had decided to postpone tapering its bond buying programme. Rajan said capital flows into the country cannot be directly linked to the prevailing repo rate. (Reuters)
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A day after the US Fed decided to maintain status quo on its stimulus programme, the Finance Ministry said it is business as usual for India and asserted that the government would continue with reforms. "We should not overly put emphasis on the decisions of the Fed in the manner in which the economy will unfold...It is business as usual for us, as far as we are concerned," Economic Affairs Secretary Arvind Mayaram told reporters here. The US Federal Reserve yesterday (18 SeptembeR) surprised the markets by saying it will continue with its monthly $85 billion bond buying programme and wait for more evidence of growth recovery. Expectations that the stimulus programme would be tapered had led to fears of capital outflows, causing the rupee to depreciate against the dollar and stocks to fall. "I think we will need to continue to deepen our own reform process so that we continue to strengthen the economy. We believe with the steps that the government has taken, the economy will continue to show signs of growth and that is what is going to strengthen the rupee and strengthen the markets," Mayaram said. The government has taken steps to revive investments and promote exports and manufacturing as it battles slowing economic growth and seeks to contain the fiscal and current account deficits. To attract dollars and stem the rupee's decline, the RBI opened a currency swap window for oil refiners and a special concessional window to swap foreign currency non-resident (FCNR) deposits. Stocks and the rupee shot up after the US Fed decision. The S&P BSE Sensex rose as much as 605 points, or 3.03 per cent, to 20,567.61, while the rupee jumped 158 paise to a one-month high of 61.80 against the dollar. (PTI)
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The rupee and bonds surged to more than one-month highs on Thursday morning (19 Sep) as the US Fed refrained from withdrawing monetary stimulus as had been widely expected by global markets. Emerging Asian currencies rallied with most Southeast Asian units up around 2 per cent after the US Federal Reserve surprised investors by postponing the start of reductions to its stimulus programme. The partially convertible rupee was at 61.88/89 per dollar by 0908 India time (0338 GMT) compared to its close of 63.38/39 on Wednesday, 18 September. The unit rose as high as 61.65, its strongest since August 16. The benchmark 10-year bond yield trading at 8.18 per cent, after dropping to 8.14 per cent, its lowest since 8 August. India's 1-year OIS rate trading down 32 bps at 8.80 per cent while the benchmark 5-year OIS down 28 bps at 8.02 per cent, dealers said. (Reuters)
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India, the world's biggest buyer of bullion, will stop futures trading in precious, base metals and energy futures on Saturdays with immediate effect, in line with global practices, a move that could hurt already sagging volumes at the Multi Commodity Exchange.However, trading in futures of agricultural commodities will continue on Saturdays for now and will be reviewed after three months, the Forward Markets Commission, which regulates commodity futures exchanges, said in a statement.The move could further dent volumes, which are already down due to the imposition of the commodity transaction tax from July, and higher margins."Already volumes had been falling from July on MCX. With today's announcement we might see a further fall. Retail traders may opt to close their positions on Friday itself," said Sumit Mukherjee, an analyst with Karvy Comtrade in Hyderabad.MCX recorded an average volume of Rs 2015 crore on Saturdays from July to September, about 7 per cent of the daily weekday volume of 269.72 billion rupees, data from the exchange showed.(Reuters)
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Concerned over the unwillingness of developed economies to push IMF quota reforms, Finance Minister P Chidambaram Wednesday, 18 September, said the decisions of the G-20 meeting should be implemented expeditiously to ensure credibility of the organisation."Most advanced countries have now clearly indicated their unwillingness to move ahead on International Financial Institutions (IMF, World Bank) governance and capital reform. This has hampered the credibility of G20 and makes it difficult to progress on other issues as well," he said at an Icrier event in New Delhi.The Minister said to be able to play a meaningful role in the global governance, the G-20 agenda should be sharper and focused only on those issues on which it can make a distinctive contribution, particularly, on economic and financial matters."Finally it is important to ensure that the decisions taken in G20 meetings are carried forward expeditiously," he said."In the backdrop of the upcoming WTO ministerial in Bali in December 2013, G20 leaders have called on all WTO members to show flexibility so as to achieve a successful conclusion in Bali," he said.In the recent G-20 Summit, Prime Minister Manmohan Singh had emphasised the need for early completion of the International Monetary Fund (IMF) quota reforms to increase representation of the developing countries in the multi-lateral body.Aimed at improving the voting share of developing countries and achieving a better representation on the IMF Board, the reform of the international financial institutions has been a key part of G-20 agenda. G-20 is a club of developed and emerging economies.Chidambaram said the membership of G-20 represents a different balance of power where both advanced and emerging countries come together as equal partners allowing for more inclusive deliberation and effective response to today's complex global challenges and opportunities."There is a clear recognition that the dimension of development challenge vary from country to country. Therefore, any policy that is recommended at the international forum has to be tailored to national circumstances," he said.Noting that the agenda setting of G-20 has an advanced country perspective, he said, this is highlighted by the emphasis given on the financial regulation and on transparency."As the crisis originated in the advanced country, it is natural that higher capital requirements and asset quality have been stressed in the Basel norms for the banking sector," Chidambaram said.Emerging markets have accepted these norms in the spirit of multilateralism, he said."However, in the context of a weak global recovery we should be careful that the pro-cyclical bias should not be a stumbling block in developing countries," he said."Since, growth in the emerging market is crucial to the strength of the global economy, it is critical the G-20 finds ways to develop strong links of coordination and cooperation and take up issues of emerging economies as otherwise G-20 may evolve as a loose forum instead of a powerful steering wheel of global governance," he added.(PTI)
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Business sentiment among Asia's top companies deteriorated in the third quarter, led by businesses in export engines such as China and South Korea, ending three consecutive quarters of improving sentiment, the latest Thomson Reuters/Insead Asia Business Sentiment survey showed. The Thomson Reuters/Insead Asia Business Sentiment Index fell to 66 in the third quarter from 71 in the second quarter when it reached the highest level in more than a year. An index reading above 50 indicates an overall positive outlook. Some of the weakest readings came from north Asia's economies of China, South Korea and Taiwan, and regional trading hub Singapore, all of which turned in readings of 50 - highlighting the impact of a stuttering global economy. Optimism returned to India, lifting its sentiment index moderately higher at 67 after a drop last quarter. "Asian companies are still maintaining a relatively cautious outlook regarding their earnings growth prospects," said Fan Cheuk Wan, chief investment officer for the Asia-Pacific region at Credit Suisse's private banking and wealth management unit. "It could be partly related to the recent volatility across the emerging economies over the past three months." Asian equities, currencies and bonds have taken a beating over the last few months after the US Federal Reserve hinted it would halt its nearly five-year policy of flooding markets with cheap cash. "This market volatility also inevitably has an impact on the perception and business sentiment of Asian corporates as they are still assessing the global growth outlook," Fan said. The survey showed that shipping and financial sectors were the most negative with a third-quarter score of 50, a sharp drop from the shipping industry's reading of 80 and financials' reading of 78 in the second quarter. The poll conducted by Thomson Reuters News in association with Insead, a global business and management school, surveyed more than 100 executives in 11 Asia-Pacific countries across sectors including autos, financials, resources, food and retail. Of the 90 companies that replied to the poll, held between September 2-13, two-thirds reported a neutral outlook, just less than one-third were positive on their prospects and about 1 per cent reported a negative outlook. China showed no signs of improvement, with business sentiment staying flat for a third consecutive quarter as all eight companies surveyed said their business outlook remained neutral. However, markets have been comforted by the latest batch of economic data, adding to evidence that China may have avoided a sharp slowdown. "We do know that Europe continues to struggle and there was a soft patch a few months ago in China," said Craig James, chief economist at Commonwealth Securities in Sydney. "There's also the fact that while there's a recovery underway in the US, it's somewhat patchy. "So I think the export-orientated economies are basically suffering as a result of that," James said. "The good news is more recent data seems to suggest a little bit more momentum returning to some of the major economies and regions but there is a lag in effect." As recently as a month ago, investors were worried that China's economy was slipping into a deeper-than-expected downturn. But policymakers have stepped in with measures to steady the economy, from quicker railway investment and public housing construction to introducing policies to help smaller companies with financing needs. The survey showed that business confidence was steady in Japan at 63, its highest point since June 2010 among the 20 companies surveyed, which included Canon and pharmaceutical firm Daiichi Sankyo. "If we look at forward-looking indicators, we do see quite solid evidence showing that the global growth recovery should be providing support for an improved growth outlook for Asia," said Fan from Credit Suisse. Companies in Indonesia were the most negative with a reading of 25, a sharp drop from its second-quarter reading of 100 when it was one of the most positive. Indonesian companies are seeing an increase in their borrowing costs, with the central bank's surprise hike in interest rates last week. Wallowing near a 4-1/2-year-low, the Indonesian rupiah is the worst performer in Asia this year among currencies tracked by Reuters, having lost around 16 per cent against the dollar. However, there are some bright spots in Southeast Asia. The Philippines was the most positive economy with a reading of 100 - the only economy with a top score - compared to its reading of 94 in the second quarter. Australia was the second-most positive with a reading of 79, up from 75. (Reuters)
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Foreign direct investment inflows into India rose an annual 12.9 per cent in July to $1.66 billion, the government said in statement released late on Tuesday, the highest monthly inflow for three months. FDI inflows were $1.47 billion in July last year. For the first four months of the current fiscal year, FDI inflows were up 20 per cent from a year earlier to $7.05 billion, the Ministry of Commerce and Industry said in the statement. FDI inflows had declined to $22.42 billion in the fiscal year ended March 2013, from $35.12 billion in the previous year. (Reuters)
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