Fighting for his reputation as the architect of India's economic reforms, a combative Manmohan Singh on Friday, 30 August, made a scathing attack on the BJP in the Rajya Sabha, accusing them of hurting investors' sentiment by repeatedly disrupting Parliament, triggering a war of words.Insisting that the current growth and currency crunch was no repeat of the 1991 balance of payments crisis that made him a household name, the Prime Minister asked the principal opposition party to recognise its responsibility of ensuring smooth functioning of Parliament asserting that it was not the responsibility of the government alone as contended by the BJP."Building of consensus is both the responsibility of government and the opposition. I wish the conduct of the opposition party was consistent while letting the ruling party govern," he said responding to clarifications on his statement on the sliding rupee. Read Also: Economic Growth Slips To Lowest In 4 YearsAs finance minister 22 years ago, he deftly ushered in reforms of a state-shackled economy that helped launch years of rapid growth, earning himself a place in history as the man behind India's emergence as a new economic power.Now 80 years old and heading into his last months as prime minister before elections, the growth bubble has burst. The latest GDP figures on Friday showed an economy growing at just 4.4 per cent, the weakest pace since the global financial crisis and a far cry from ambitions for growth of 8-9 per cent. The country is saddled with hefty fiscal and current account deficits, and the rupee has fallen like a stone in recent weeks to successive record lows.Industry body CII said the GDP figures for the first quarter clearly show that the economy continues to be in the throes of a slowdown. Expressing concern that there are no clear indications that the economy has bottomed out, CII said without getting panicky, the concern on the economy can hardly be overstated. "The economy needs undivided attention of policy makers,” said Chandrajit Banerjee, Director General, CII referring to the first quarter GDP figures released this evening. There are no visible signs of investment pick up as investor sentiments continue to be very low. A weak rupee, tight liquidity, high cost of funds, procedural delays, etc are all co in the way of an investment revival, said CII.Time For Difficult ReformsThe Prime Minister also said the government will now have to undertake more difficult reforms, including reduction of subsidy and implementing GST, to put economy back on the path of stable, sustainable growth. "The easy reforms of the past have been done. We have the more difficult reforms to do such as the reduction of subsidy, the insurance and pension sector reform, eliminating bureaucratic red tape and implementing Goods and Services Tax (GST)," Singh said while addressing Parliament.Read Also: The Bright Side Of Crashing RupeeSeeking to sooth the worries about the economy, Prime Minister Manmohan Singh told parliament that the crashing value of the rupee was part of a needed adjustment that would make Asia's third-largest economy more competitive.The speech was the veteran economist's first substantial comment to parliament since the rupee suffered its steepest ever monthly fall in recent weeks, bringing back memories of a 1991 balance of payments crisis that made Singh famous.Reading from a written statement, the Prime Minister promised his government would reduce the "unsustainably large" current account deficit undermining the currency."Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," he said.But he said that a weaker currency was the natural outcome of several years of high inflation, and although the rupee had overshot in the foreign exchange market its decline would bring some economic benefits. Read Also: PM Attacks BJPMiles To GoIn the insurance sector, the government proposes to increase the FDI cap to 49 per cent from 26 per cent, which the BJP opposes. The main opposition party is also not in favour of raising the FDI limit in the pension sector to 49 per cent. The Centre has been engaged with states to bring them on board for introduction of new indirect tax regime, GST. The Constitutional Amendment Bill was introduced in Parliament in 2010. In order to reduce subsidy outgo, the government has taken several initiatives, including partially deregulating diesel prices, allowing Oil companies to fix petrol prices and also capping domestic subsidised LPG cylinder at 9 per family a year. Besides, to attract foreign funds, it has also hiked FDI limits in various sectors including retail, aviation, telecom, power exchanges, petroleum and natural gas sectors. Pitching for more reforms, the Prime Minister said easy reforms of the past have been done but the difficult ones remain. "We have the more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing Goods and Services Tax," he said."These are not low hanging fruit and need political consensus... We need to forge consensus on such vital issues. I urge political parties to work towards this end and to join in the government's efforts to put the economy back on the path of stable and sustainable growth," Singh said. Blame It On The WorldThe Prime Minister attributed the sudden and sharp depreciation in rupee to various domestic and global factors like high current account deficit (CAD), US Federal Reserve plans to taper quantitative easing measures and tensions in Syria. "... the rupee has been especially hit because of our large CAD and some other domestic factors. We intend to act to reduce the CAD and improve the economy," Singh said. The deterioration in CAD, he said, has been mainly on account of huge import of gold, higher cost of crude oil imports and recently of coal. Moreover, Singh said that exports have been further hit by collapse in iron ore shipments making "our CAD unsustainably large". "Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," the Prime Minister said, adding the government will take all possible steps to bring down CAD below $70 billion this fiscal. The Prime Minister said the medium term objective of the government will be to reduce CAD to 2.5 per cent of GDP and the government will make all efforts to maintain "a macro economic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit." "... it is important to recognise that the fundamentals of the Indian economy continue to be strong," Singh said. (Agencies)
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India's economy grew at the slowest quarterly rate in at least four year as the growth slipped to 4.4 per cent in the April-June quarter of this fiscal, dragged down by a contraction in manufacturing and mining.Analysts polled by Reuters had forecast growth of 4.7 per cent. June's figure of 4.4 per cent was the slowest growth since the Jan-March quarter of 2009.The country's gross domestic product (GDP) had expanded by 5.4 per cent in the April-June quarter of the last fiscal.On a sequential basis, the growth rate declined from 4.8 per cent in the January-March period of 2012-13.Commenting on the data, Economic Affairs Secretary Arvind Mayaram said, "Growth in the second quarter will improve and growth in the third and fourth quarters would be better."Mining and quarrying contracted by 2.8 per cent in the April-June quarter against a 0.4 per cent growth in the same period of the last fiscal, according to data released today by the Central Statistical Organisation (CSO).The manufacturing sector posted a contraction of 1.2 per cent as against a decline of 1 per cent in output a year earlier.Other sectors, including construction, power generation, hotels and transport, showed a marked deceleration in growth.Farm sector output expanded by 2.7 per cent in April-June compared with 2.9 per cent in the corresponding period of the last fiscal. Agriculture's Share In GDP Down To 13.7% In 2012-13The share of agriculture and allied sectors in India's GDP has declined to 13.7 per cent in 2012-13 due to shift from traditional agrarian economy to industry and service sectors, Parliament was informed today."As per latest estimates released by Central Statistics Office (CSO) the share of agricultural products/Agriculture and Allied Sectors in Gross Domestic Product (GDP) of the country was 51.9 per cent in 1950-51, which has now come down to 13.7 per cent in 2012-13 at 2004-05 prices," Minister of State for Agriculture Tariq Anwar said in a written reply to the Rajya Sabha.The decrease in the share of Agricultural and Allied Sectors in GDP of the country in comparison to other sectors is on account of structural changes due to a shift from a traditional agrarian economy to industry and service dominated one, he added."This phenomenon is generally expected in the normal development of an economy," Anwar said.In a separate query, the minister said despite a decline in the sector's contribution to GDP, foodgrain production and productivity has risen."Despite this, the production of foodgrains has increased from 230.8 million tonnes in 2007-08 to 255.4 million tonnes in 2013-14 (fourth advance estimates)," Anwar added.Similarly, productivity of foodgrains has increased from 1,860 kg per hectare in 2007-08 to 2,125 kg a hectare in 2012-13 (fourth advance estimate), he said.(Agencies)
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A combative Prime Minister Manmohan Singh on Friday, 30 August, made a scathing attack on the BJP in the Rajya Sabha, accusing them of hurting investors' sentiment by repeatedly disrupting Parliament, triggering a war of words.He asked the principal opposition party to recognise its responsibility of ensuring smooth functioning of Parliament asserting that it was not the responsibility of the government alone as contended by the BJP."Building of consensus is both the responsibility of government and the opposition. I wish the conduct of the opposition party was consistent while letting the ruling party govern," he said responding to clarifications on his statement on the sliding rupee.Attacking BJP for continuously 'opposing and criticising' the government, he said, "If the record of the last nine years is looked at, the principle opposition has never reconciled to the fact that it was voted out of power nine years back."The Prime Minister also said the government will now have to undertake more difficult reforms, including reduction of subsidy and implementing GST, to put economy back on the path of stable, sustainable growth. "The easy reforms of the past have been done. We have the more difficult reforms to do such as the reduction of subsidy, the insurance and pension sector reform, eliminating bureaucratic red tape and implementing Goods and Services Tax (GST)," Singh said while addressing Parliament.Read Also: The Bright Side Of Crashing RupeeSeeking to sooth the worries about the economy, Prime Minister Manmohan Singh told parliament that the crashing value of the rupee was part of a needed adjustment that would make Asia's third-largest economy more competitive.The speech was the veteran economist's first substantial comment to parliament since the rupee suffered its steepest ever monthly fall in recent weeks, bringing back memories of a 1991 balance of payments crisis that made Singh famous.Reading from a written statement, the prime minister promised his government would reduce the "unsustainably large" current account deficit undermining the currency."Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," he said.But he said that a weaker currency was the natural outcome of several years of high inflation, and although the rupee had overshot in the foreign exchange market its decline would bring some economic benefits. The Tough Reforms RemainThe Congress-led United Progressive Alliance government has been pursuing the principal opposition party Bharatiya Janata Party to get through the hike in foreign direct investment (FDI) in the insurance sector, since 2008. Amid repeated disruptions and din due to clashes between the Treasury Benches and the BJP, the Prime Minister noted that Parliament is the supreme body of the country but if it is not allowed to function session after session, investors' confidence will be affected.Hurt over being targeted by BJP, Singh asked the Chair, "Have you heard of any country where the Prime Minister is not allowed to introduce his council of ministers..."...Have you heard of Parliament in any country where the opposition shouts 'Prime Minister chor hai'. The type of things that have been said here...."Reduce appetite for gold, it's time for difficult reforms: PMAt one point, Leader of the Opposition Arun Jaitley shot back saying, "have you heard of any country where the Prime Minister has won the vote of confidence by buying MPs?", triggering uproar.The reference was to the July 2008 Trust Vote sought by the Prime Minister in the wake of Left parties withdrawing support on the Indo-US nuclear deal issue.In the insurance sector, the government proposes to increase the FDI cap to 49 per cent from 26 per cent, which the BJP opposes. The main opposition party is also not in favour of raising the FDI limit in the pension sector to 49 per cent. The Centre has been engaged with states to bring them on board for introduction of new indirect tax regime, GST. The Constitutional Amendment Bill was introduced in Parliament in 2010. In order to reduce subsidy outgo, the government has taken several initiatives, including partially deregulating diesel prices, allowing Oil companies to fix petrol prices and also capping domestic subsidised LPG cylinder at 9 per family a year. Besides, to attract foreign funds, it has also hiked FDI limits in various sectors including retail, aviation, telecom, power exchanges, petroleum and natural gas sectors. Pitching for more reforms, the Prime Minister said easy reforms of the past have been done but the difficult ones remain. "We have the more difficult reforms to do such as reduction of subsidies, insurance and pension sector reforms, eliminating bureaucratic red tape and implementing Goods and Services Tax," he said. "These are not low hanging fruit and need political consensus... We need to forge consensus on such vital issues. I urge political parties to work towards this end and to join in the government's efforts to put the economy back on the path of stable and sustainable growth," Singh said. The Prime Minister attributed the sudden and sharp depreciation in rupee to various domestic and global factors like high current account deficit (CAD), US Federal Reserve plans to taper quantitative easing measures and tensions in Syria. "... the rupee has been especially hit because of our large CAD and some other domestic factors. We intend to act to reduce the CAD and improve the economy," Singh said. The deterioration in CAD, he said, has been mainly on account of huge import of gold, higher cost of crude oil imports and recently of coal. Moreover, Singh said that exports have been further hit by collapse in iron ore shipments making "our CAD unsustainably large". "Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," the Prime Minister said, adding the government will take all possible steps to bring down CAD below $70 billion this fiscal. The Prime Minister said the medium term objective of the government will be to reduce CAD to 2.5 per cent of GDP and the government will make all efforts to maintain "a macro economic framework friendly to foreign capital inflows to enable orderly financing of the current account deficit" "... it is important to recognise that the fundamentals of the Indian economy continue to be strong," Singh said. Emphasising that the country's overall public-debt to GDP ratio has been declining, he said India's external debt is only 21.2 per cent of GDP while short-term stands at 5.2 per cent. "Our forex reserves stand at USD 278 billion, and are more than sufficient to meet India's external financing requirements," he said. The rupee depreciation, he said, can be good for economy as it will help to increase the export competitiveness and discourage imports. The foreign exchange markets, he regretted, have a notorious history of overshooting. "Unfortunately, this is what is happening not only in relation to the rupee but also other currencies," Singh said, stressing that the value of a currency is determined by fundamental of the economy and the government is taking steps to improve them. Referring to economic prospects, Singh said that even though growth has slowed down in recent quarters, it is expected to pick up. "I expect growth in the first quarter of 2013-14 to be relatively flat, but as the effects of the good monsoon kick in, I expect it to pick up," he said. "All in all, the macro-stabilisation process which should support the value of the rupee is under way. I expect that as the fruits of our efforts materialise, currency markets will recover," he said. Regarding fiscal deficit, the Prime Minister said the government will do whatever is necessary to contain the fiscal deficit to be 4.8 per cent this year. "The most growth friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end," he said. (Agencies)
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Prime Minister Manmohan Singh sought to soothe worries about the economy on Friday, 30 August, telling parliament that the crashing value of the rupee was part of a needed adjustment that would make Asia's third-largest economy more competitive.The speech was the veteran economist's first substantial comment to parliament since the rupee suffered its steepest ever monthly fall in recent weeks, bringing back memories of a 1991 balance of payments crisis that made Singh famous.Reading from a written statement, the prime minister promised his government would reduce the "unsustainably large" current account deficit undermining the currency."Clearly we need to reduce our appetite for gold, economise the use of petroleum products and take steps to increase our exports," he said.But he said that a weaker currency was the natural outcome of several years of high inflation, and although the rupee had overshot in the foreign exchange market its decline would bring some economic benefits."To some extent, depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports," he said.Singh's deft handling of the 1991 crisis helped launch 20 years of rapid economic growth and he has since been credited as the architect of India's emergence as a serious economic power.Now in his eighties, Singh seems to have lost some of that agility and is often pilloried for staying mostly out of the public eye while the country's economy goes from bad to worse.In response to his parliament speech, opposition leader Arun Jaitley said Singh's track record as prime minister was of populist policies, not reform."If you continue to follow the course, then the legacy that you leave behind will not be the legacy that you left behind as the finance minister. That legacy was different," Jaitley told the upper house.(Reuters)
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Ahead of GDP numbers to be released later in the day, Prime Minister Manmohan Singh said on Friday, 30 August, said the economic growth in the April-June quarter of the current fiscal will be relatively flat. "Growth has slowed in recent quarters. I expect growth in the first quarter of 2013-14 to be relatively flat, but as the effects of good monsoon kicks in, I expect it to pick up," he said while making a statement on the state of the economy in Parliament. The economic growth slowed to a decade low of 5 per cent in the 2012-13 fiscal. The government expects the economy to growth at around 6 per cent in the current fiscal. The GDP figures for first quarter are scheduled to be released at 1730 hrs (local time) Friday. The growth in the first quarter of last fiscal was at 5.5 per cent. In order to boost growth, the government has taken a number of initiatives including setting up of Cabinet Committee on Investments (CCI) for reviving stalled projects. Since January 1, the CCI has cleared projects worth over Rs three lakh crore this year. "The decisions of the CCI in reviving stalled projects will start bearing fruit in the second half of the year. "Exports are also starting to look up as the rest of the world is improving its growth. So I believe, growth will pick up in the second half of fiscal year barring extreme unforeseen eventualities," he said. Listing out the growth friendly measures -- fuel subsidy reform, liberalising FDI norms in various sectors, and resolution of some tax issues of concerns to industry-- taken by government in last six months, Singh said the effects of these will come into play over the year resulting in higher growth, particularly in manufacturing. After growing at over 8 per cent for two consecutive years, the growth slowed to 6.2 per cent in 2011-12 and further to 5 per cent last year on account of poor performance of farm, manufacturing and mining sectors.(Reuters)
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The rupee and Indonesian rupiah led slides among emerging Asian currencies in August as capital flowed out of the region on expectations the U.S. Federal Reserve will soon begin to reduce monetary stimulus. While most regional units scratched out gains on Friday, 30 August, the damage for the month was extensive. The rupee has tumbled 10.4 per cent against the dollar so far this month, which would be its largest monthly depreciation ever if it ends around current levels, according to Thomson Reuters data. The rupiah has lost 5.9 per cent so far in August, which would be its biggest monthly fall since November 2008. The Philippine peso has slid 2.7 per cent, which would be the largest monthly fall since May last year. The Thai baht has fallen 2.4 per cent and the Malaysian ringgit has weakened 1.6 per cent. The Fed is expected to start scaling back its bond-buying programme next month. An upward revision to second-quarter US economic growth bolstered the views. "September will be a rough month for Asian FX, with the potential Fed taper and sustained nervousness towards emerging markets," said Emmanuel Ng, a foreign exchange strategist for OCBC Bank in Singapore. When asked which Asian currencies will be most vulnerable, Ng said: "they are going to be the usual suspects, such as the rupee, the rupiah and the ringgit, as markets sniff out the weakest links." Short positions in the rupee and some Southeast Asian currencies hit the highest levels since the global financial crisis in 2008 during the last two weeks as sentiment on regional currencies deteriorated, a Reuters poll showed on Thursday. The rupee and the rupiah are seen as especially vulnerable to an anticipated reduction in the Fed's quantitative easing. Both India and Indonesia are struggling with growing current account deficits, slowing economic growth and strong resistance to implementing much-needed reforms. Despite spreading gloom in South and Southeast Asian currencies, their Northeast Asian peers enjoyed monthly gains. The South Korean won has risen 1.3 percent on capital inflows and exporters' demand for settlements. The Taiwan dollar has risen 0.7 percent. Investors dedicated to emerging Asian markets are betting that Northeast Asian currencies will fare better than their Southeast Asian counterparts due to superior fiscal and current account positions. Their high-tech exports have proved more resilient to the global slowdown, especially China's more recent slowdown, than Southeast Asian economies which are heavily reliant on exports of commodities and raw materials. RINGGITThe ringgit rose as offshore funds covered short positions, but its upside was limited by dollar demand from custodian banks in Malaysia. Those custodian banks bought dollars below 3.3000 to the ringgit, traders said. The Malaysian currency is expected to stay weaker in September as investors are keeping an eye on if the Fed starts winding down quantitative easing. "There are so many uncertainties, such as Syria, U.S. tapering and fund exits from emerging Asia," said a senior Malaysian bank trader in Kuala Lumpur, adding the ringgit is likely to fall further. The ringgit saw some support at 3.3345 per dollar, the 50 percent Fibonacci retracement of its appreciation between 2009 and 2011. But the Malaysian unit may weaken to 3.3640, its weakest level in May 2010, once the retracement is broken, analysts said. PHILIPPINE PESOThe peso gained as overall strength in regional units caused investors to cover short positions. The Philippine currency, however, gave up some of initial gains on dollar demand from local companies, traders said. Despite improvement in sentiment, onshore players including lenders and corporates prefer dollars, they added. "We could see a bit more upside in dollar/peso as it has lagged the bigger rises in dollar/rupiah and dollar/rupee," said a senior Philippine bank trader in Manila. The peso may weaken to mid-45 per dollar in September. Another trader said the peso may find support around 45.50, given increasing remittance inflows in the next coming months. RUPIAHThe rupiah edged up 0.1 per cent to 10,910 per dollar in the interbank market as the central bank was spotted providing dollar liquidity and a day after Bank Indonesia announced further measures to shore up the currency, including rate hikes. Banks in the country, however, still bought dollars above 11,000 for their customers, traders said, indicating investors did not see the new steps as sufficient to halt the rupiah's slide. HSBC said Thursday's actions were constructive, but they may not be enough to support the rupiah. "In our view restoring price discovery is still critical and more policy support will be needed to stabilize the IDR," it said in a note. Forwards markets pointed further depreciation in the rupiah with one-month non-deliverable forwards to dollar weakening to 11,440. BAHTThe baht advanced on exporters' demand for month-end settlements and as some Japanese banks bought the currency. Ten- and 5-year government bond yields also slid. Still, investors hesitated to push the baht stronger than 32.00 per dollar, before July current account and trade data later in the day.(Reuters)
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Trade Minister Anand Sharma said on Thursday, 29 August, the Reserve Bank of India should look into suggestions that it monetise its gold reserves to reduce imports and dollar outflows that have hammered the rupee, but emphasised it was for the bank to decide.India has 557.7 tonnes of gold in its reserves, making it the eleventh biggest holder, according to the World Gold Council. India consumer's appetite for gold has been a drag on the rupee, the worst performing major currency since May."I have not said their should be any mortgaging of the gold, or auction of the gold, that is incorrect. I have just said the RBI should look into...how they can benefit the people, particularly with regard to the bonds or the monetisation," Anand Sharma told parliament."This is a suggestion which has been made by many economists," he said, adding that it a was up to the Reserve Bank of India to decide whether such a measure would bring down gold imports.(Reuters)
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The patriotism of wealthy overseas Indians has helped the country avert economic crises in the past and it is little surprise that embattled policymakers are turning to them again to plug a record trade gap that is battering the rupee.This time, though, big investors among the more than 25-million overseas Indian community - the world's second-largest diaspora - are staying away as the economic outlook darkens and political instability looms ahead of national elections.Shoring up inflows from the overseas Indians is a key weapon in Finance Minister P. Chidambaram's arsenal to prop up the rupee that has lost 20 percent against the dollar so far this year and which dropped to a record low on Wednesday.The rupee's crash has boosted remittances, mainly from blue-collar workers overseas - particularly in the Gulf - who can get more rupees for hard currency. However, it has not triggered a surge in high-value investments in real estate, private equity funds and stock markets, bankers and wealth managers said.Underlining the hesitancy, flows from non-resident Indians (NRIs) into bank deposits in the April-June quarter dropped to $5.5 billion from $6.6 billion a year earlier, Reserve Bank of India (RBI) data shows.Investments in real estate by overseas Indians dropped about 30 percent in the fiscal year that ended in March, according to the Confederation of Real Estate Developers' Associations of India (CREDAI), an umbrella group of local property developers."People feel like there are too many unknowns. The most recent government has been ghastly, and nobody quite knows what comes after it. I haven't been optimistic about India for quite a while," said Vasant Prabhu, chief financial officer of Starwood Hotels & Resorts Worldwide Inc <HOT.N> in New York."What makes it hard, you don't know what the bottom of the rupee is," he said in comments underscored by a rupee that stumbled from 63 per dollar on Friday to almost 69 per dollar on Wednesday - a sharp move over such a short period of time for a currency.His comments were echoed by wealth managers and bankers in Britain, the United States and India who said non-resident Indian clients saw too many uncertainties despite the tantalising prospect of buying assets with a record-low rupee.Economic growth is at its weakest in a decade and seen slowing further, New Delhi is struggling to close a record deficit in the current account - the broadest measure of a country's international trade - and a national election that must be held by May could tempt the government to spend to win over voters and so undermine its fiscal discipline.In addition, emerging markets are losing favour with investors generally as the prospect of the United States reining in its economic stimulus draws cash into U.S. assets.In a bid to attract funds, India liberalised bank deposit schemes and some banks raised rates for overseas Indians this month. They could secure interest rates of more than 8.5 percent on one-year rupee deposits and as much as 10 percent on three-year accounts, a relatively high return compared with many other countries where rates remain near historic lows."All these folks always had this strong belief that India is the safest country to invest and four, five years back when the rest of the world was collapsing India was still growing," said Anil Behl, head of wealth and strategy at lender IndusInd Bank <INBK.NS>, referring to the global financial crisis."That mood has changed now," he said. "I can certainly feel that some NRIs are looking at dollar-based products from international stables ... they are very wary of pure rupee products."Large HitThe government goes out of its way to tug at the heartstrings of white-collar expatriates, such as those in Silicon Valley and at top investment banks in London, to raise funds and cushion the impact of slowing institutional inflows. There is even a ministry for Overseas Indian Affairs which has NRI investment as a core goal.New Delhi has managed to lure them in the past with attractive deposit schemes and bonds. It issued a five-year Resurgent India Bond in 1998, raising more than $4 billion, and in 2000 it raised $5.5 billion through a deposit scheme.India, Asia's third-largest economy, was the top recipient of remittances from diaspora in 2012 with about $70 billion, followed by China at $66 billion, World Bank figures show. India received about $63 billion in remittances in 2011.Banks, including RBS, Barclays and Morgan Stanley, beefed up their teams in cities such as New York, Singapore, Dubai and Hong Kong in recent years to advise overseas Indians on investment opportunities back home.But many investors are now staring at losses as the rupee's plunge since May has wiped out gains they made on investments in private equity funds and mutual funds in the last few years."For people who are dollar-invested, that's a large hit," said Ajay Kaisth, principal of New Jersey-based Kai Advisors, which has $30 million under management, of which more than 60 percent is from Indian clients.After trading broadly around 45 per dollar in 2010 and 2011, the rupee has dropped more than 30 percent.Losing FaithThe economy is likely to grow even more slowly in fiscal 2013/14 (April-March) than the decade-low of 5 percent struck the previous year, as investment will stay weak due to a dearth of reforms and uncertainty ahead of the election, a Reuters poll showed.The rupee has become the worst performer by far among Asian emerging-market currencies tracked by Reuters, despite frantic attempts by the government and central bank to support it.Lalit Kumar Jain, chairman of CREDAI said property purchases by Indian expatriates were now needs-based rather than speculative, reducing what has been in the past a key type of demand.As a portfolio investment destination, India also faces daunting competition as developed markets, including the United States, show signs of finally emerging from the global financial crisis, said Bundeep Singh Rangar, who advises individuals as well as companies on India investments as chairman of London-based IndusView Advisors."And that's a cause of concern because the biggest champion of India is its diaspora, and if they are losing faith you can imagine how much the non-Indian investor would be losing faith."(Reuters)
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The rupee trimmed its initial gains against the US currency, but was still quoted higher by 120 paise to 67.60 per dollar in the late morning trade on selling of dollars by banks and exporters in view of steps taken by Reserve bank of India yesterday (28 August) . The battered rupee recovered after the Reserve Bank of India (RBI) yesterday said it has started a facility to meet the daily dollar requirement of the country's three state-run refiners. The rupee resumed higher at 66.90 per dollar as against the previous closing level of 68.80 per dollar at the Interbank Foeign Exchange (Foerx) Market and firmed up further to a high of 66.85 per dollar. However, it trimmed its initial gains and was quoted at 67.60 per dollar at 1040 hrs. It moved in a range of 66.85 per dollar and 67.71 per dollar during the morning deals. Banks and exporters preferred to reduce their dollar position in view of recovery in the equity market. The benchmark Sensex rose by 201 points or 1.12 per cent to 18,197.33 at 1050 hrs. However, in New York market, the dollar yesterday (28 Aug) rose against major currencies, including the pound, as investors continued to worry about a possible military strike in Syria. Sensex Gains More Than 200 Points The BSE Sensex and the Nifty are up around 1 per cent, tracking a rebound in the rupee from a record low after the Reserve Bank of India's move to provide dollars directly to oil companies. The BSE Sensex fell 3 per cent while the Nifty slumped 3.5 per cent over the previous two sessions. Traders say continued foreign selling and expiry of August equity derivative contracts later in the day may increase volatility in the second half of trade on Thursday, 29 August. Foreign institutional investors sold about $1.12 billion worth of shares in the previous nine sessions through Wednesday, 28 August. State-owned oil companies gain after the central bank's move on Wednesday to provide dollars directly to these companies. Indian Oil Corp, Hindustan Petroleum, and Bharat Petroleum each gain more than 1 per cent. Financial shares gain after steep losses in the previous two sessions are seen as overdone. Housing Development Finance Corporation up 6 per cent. (Reuters)
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RBI on Wednesday, 28 August, opened a special window to help the three state-owned oil marketing companies needing about $8.5 billion every month meet their daily foreign exchange requirement in a bid to check the rupee's free fall. "On the basis of assessment of current market conditions, RBI has decided to open a forex swap window to meet the entire daily dollar requirements of three public sector oil marketing companies (IOC, HPCL and BPCL)," the central bank said in a statement. The PSU oil companies are the biggest buyers of dollars, requiring $8-8.5 billion every month for the import of an average 7.5 million tonnes of crude oil. The RBI decision is aimed at curbing volatility in the forex market. Under the swap facility, the RBI said, it will "sell/buy USD-INR forex swaps for fixed tenor with the oil marketing companies through a designated bank." The swap facility gets operationalised with immediate effect and will remain in place until further notice, the RBI said. The rupee today (28 Aug) collapsed to a lifetime low of 68.85 against the dollar and closed at 68.80, registering its biggest single-day loss of 256 paise, as global oil prices jumped, deepening concerns about the current account deficit and capital outflows. According to analysts, consistent dollar demand from banks and importers, mainly oil refiners, following higher crude oil prices, kept the rupee under pressure. India's oil imports during July were valued at $12.7 billion, which was 8 per cent lower than $13.8 billion of oil imports in the corresponding period a year earlier. During April-July, oil imports were valued at about $54.6 billion, which was 2.65 per cent higher than $53.2 billion in the corresponding period last year. (PTI)
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