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Showing posts with label Forex. Show all posts
Showing posts with label Forex. Show all posts
Notwithstanding a sharp cut in the government's growth forecast at the fag end, 2015 will go down as the year when India emerged as the fastest-growing large economy, despite setbacks such as 12 months of negative export growth, another bad monsoon and roadblocks to the far-reaching goods and services tax regime.

In addition to growth, the economy also saw some positives. Global crude oil prices fell to the lowest levels in over a decade, checking the balance of payments from going awry, inflation rate remained more-or-less under control, despite spikes in food prices, and economic reforms got a big push, notably in the form of further opening up of a host of industries to foreign equity.

India's real GDP in the first half of the current fiscal grew at 7.2 percent as per official data, which was slightly lower in comparison to the GDP growth of 7.5 percent in the previous fiscal.

India's external position improved at the same time. Forex reserves are a little above $350 billion in November 2015 as compared to a little over $270 billion in July 2013. Net foreign direct investment (FDI) inflows have increased to $17 billion in the first half of 2015-16 in comparison to $15.8 in the same period last year. The second quarter's current account deficit logged at a level of 1.6 percent of GDP.

However, the global slowdown continued to weigh on exports, which have declined for 12 straight months. The government said this was also pulling down growth but felt the situation would improve in the coming months.

On the fall in the value of the Indian rupee, the finance ministry's mid-term economic review attributed it considerably to the major devaluation of the Chinese Yuan.

The year also began with India's changing the way it calculated its gross do-mestic product under a new series, though the controversy over the changed methodology employed refuses to die down with economists even terming it obscure.

Changing the base year to 2011-12 from 2004-05 in January, the Central Statistics Office said India's real GDP, that is adjusted for inflation, grew by seven percent in the first quarter of this fiscal, slower than the 7.5 percent expansion in the quarter before - but much higher than 6.7 percent registered in the first quarter of the last fiscal.

Mr. Arun Kumar, till recently a professor at Jawaharlal Nehru University here, told IANS that in view of negligible industrial growth, drought-like conditions in past years and no substantial increase in profits and wages, the new numbers fall flat from the point of credibility.

"Even input costs, that are now low with falling oil prices, were not low in the period 2011-12. Let the statistics office show the growth figures for up to 10 years prior to the base year for us to consider the new series seriously," Mr. Kumar said.

The midyear review released this month lowered the economic growth forecast for the current fiscal to the 7-7.5 percent range, from the previously projected 8.1-8.5 percent, mainly because of lower agricultural output due to deficit rainfall.

It also said there may be a need to reconsider next year's fiscal deficit target of 3.5 percent.

"GDP growth has been powered only by private consumption and public investment is a concern. The proposed wage hike for government workers may impact plan for next fiscal." The economy continues to send "mixed signals" over growth, while all economic indicators were not yet aligned in pointing to a higher trajectory of growth, it said.

India's eight core industries, representing major infrastructure sectors, grew at 2.3 percent in the April-September period of the current fiscal, compared to a rate of 5.3 percent in the same period of the previous fiscal - the fall in growth rate caused by lower expansion in electricity, coal and cement sectors and negative growth in steel and natural gas sectors.

Mr. Jaitley's first full union budget also announced an agreement earlier in the year with the Reserve Bank of India (RBI) that it constitute a Monetary Policy Committee to determine by majority vote on the pol-icy rate required to achieve the inflation target.

Meanwhile, RBI Governor Mr. Raghuram Rajan cut the interest rate in January for the first time in nearly two years and followed up with two other reductions to bring down the central bank lending rate to 6.75 percent.

Politics intervened during the year to prevent the enactment of India's most important reform of its indirect tax regime by way of the pan-India Goods and Services Tax ( GST) that the government has targeted for implementing from April next year, because the ruling NDA does not have the numbers to pass the constitution amendment bill in the upper house.
Highlights
  • Real GDP in first half of fiscal grew at 7.2 percent
  • India emerges as fastest-growing large economy
  • Forex reserves of over $352 billion as on the first week of December.
  • FDI inflows increased to $17 billion in the first half of 2015-16
  • Indian basket of crude oils fell below $40 a barrel
  • Foreign investment limits raised in defense, real estate and insurance, foreign equity in railways
  • Retail and wholesale inflation rates rose in November to 5.41 percent and (-)1.9 percent respectively, largely due to an increase in food prices
  • Infrastructure sectors grew at 2.3 percent in the first half of fiscal
  • Government lowers GDP growth estimate for fiscal by one percent to 7-7.5 percent
(Source – The Economic Times, 24-December-2015)
The Indian economy could register an over two fold growth if the current growth rate is sustained, Minister of State for Finance Mr. Jayant Sinha said in New Delhi last week.


"If we grow at 7 percent, we will double our economy in a decade. We are going to go from $2 trillion economy to $4 trillion economy, if the rupee strengthens, to may be $5 trillion economy. That's going to happen, we just have to keep doing what we are doing," Mr. Sinha said at the FICCI’s AGM.

"About $4 trillion GDP per capita will roughly double to $3,500 from about $1,600 per capita today. At $3,500, we are solidly middle income," he added.

On fiscal deficit, he said the government will meet the target for current as well as for the next fiscal.

"We will achieve 3.9 percent fiscal deficit target for the current fiscal and 3.5 percent for the next fiscal," he said, adding that next year will be challenging because of implementation of the 7th Pay Commission and One Rank One Pension (OROP).

"It's going to be a challenging year because we have the headwinds of two major factors that are slowing us down... agriculture and exports slowdown. Those two factors are dragging us down," he said.

In addition to that, the government has to deal with OROP and 7th Pay Commission liability which is going to be Rs. 1 lakh crores.

With regard to key legislation's, Mr. Sinha said "on our side we are ready and prepared to introduce the bankruptcy legislation. If indeed we are able to bring in the bankruptcy legislation, it will be the second best relative to getting GST."

The government has three working days to introduce the Bill as the winter session of Parliament ends on Wednesday.

"We have said all along that our two top priorities are GST and the bankruptcy legislation. We are continuing to discuss GST legislation for which we have not got support from our colleagues, from principal opposition party," he said.

(Source – Assorted with the inputs from PTI)
“Healthy 7.5 percent GDP growth for India for the fiscal year ending March 2017 (FY2017) and a pick-up in manufacturing activity will be broadly supportive of business growth,” said Mr. Vikas Halan, a Moody’s vice-president and senior credit officer.

Most non-financial corporates Moody rates in India (Baa3 positive) will benefit from strong domestic growth and accommodative monetary policy, although weak global growth and a potential U.S. rate hike will weigh on businesses, said Moody’s 2016 outlook presentation for Indian non-financial corporates.

However, according to Mr. Halan, the corporations will also remain vulnerable to the volatile Indian rupee as against the U.S. dollar and to low commodity prices, which has in turn led to a sharp decline in external trade.

“The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified goods and services tax and the Land Acquisition Bill. It seems highly unlikely that the major reforms will get enacted by the upper house of the Indian parliament where the ruling coalition is in minority. A failure to implement these reforms could hamper investment amid weak global growth,” said the report.

The fall in commodity prices has benefited many Indian corporates given the country’s status as a net importer of raw materials and its recent history of high inflation.

The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds, says Moody’s.

By sector, Moody’s expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability. Refining and marketing companies, meanwhile, should benefit from healthy margins as demand growth outpaces expected capacity additions.

Moody’s negative outlook for the steel industry reflects elevated leverage and an extended period of low prices due to continuing steel imports, while the negative outlook for metals and mining companies reflects bleak global commodity prices.

In the real estate sector, Moody’s expects demand to improve in 2016 on the back of lower interests rates, although approval delays could push back project launches for property developers.

In the auto sector, Moody’s expects retail sales volumes to grow 6 percent in 2016 on the back of sus-tained growth in passenger vehicles sales and a recovery in commercial vehicle sales.

The telecom companies that Moody rates in India have reported improved revenue per user (ARPU) and EBITDA margins. However, competition remains intense and the regulatory framework continues to evolve.

(Source – The Hindu, 26-November-2015)
India has moved up one position to become the world’s seventh most valued ‘nation brand’, with an increase of 32 percent in its brand value to USD 2.1 billion.

The US remains on the top with a valuation of USD 19.7 billion, followed by China and Germany at the second and the third positions respectively, as per the annual report on world’s most valuable nation brands compiled by Brand Finance.

The UK is ranked 4th, Japan is at fifth position and France is sixth on the list. While India and France have moved up one position each since last year, all the top-five countries have retained their respective places. However, the surge of 32 percent in India’s ‘nation brand value’ is the highest among all the top-20 countries on the list.

China has retained its second position despite a decline of one percent in its brand value to USD 6.3 billion. Brand Finance said it measures the strength and value of the nation brands of 100 leading countries using a method based on the royalty relief mechanism employed to value the world’s largest companies.

The nation brand valuation is based on five year forecasts of sales of all brands in each nation and follows a complex process. The Gross domestic product (GDP) is used as a proxy for total revenues.
The report also said that India’s ‘Incredible India’ slogan has worked well, while Germany suffered due to the Volkswagen crisis. About the US, the report said it remains a powerful brand with an inviting business climate.

“However its value comes in large part from the country’s sheer economic scale… The US’ world-leading higher education system and the soft power arising from its dominance of the music and entertainment industries are significant contributors too. This soft power will help the US to retain the most valuable nation brand for some time after China’s seemingly imminent rise to become the world’s biggest economy,” it added.

The study further said that China’s recent stock market turbulence and slowing growth will also extend the US’ tenure of the top spot. Among the BRICS nations, India is the only country to have witnessed an increase in its brand value with all others – Brazil, Russia, China and South Africa – seeing a dip in their respective brand valuations.

India is the second most valued among these emerging economies after China, followed by Brazil, Russia and South Africa.

(Source – Assorted with the Inputs from PTI)

for more live update you can visit www.VIRGINIAMR.com
Rating agency Moody’s said India is less exposed to global risks among emerging market economies because of its more resilient economic growth and the impact of positive policy reform momentum.

A Moody’s report says trends in global capital flows have caused Brazil and Turkey to register the sharpest exchange rate depreciation and loss of reserves in the first half of 2015, while India proved comparatively resilient to these market developments.

Emerging market (EM) sovereigns have diverging shock-absorption capabilities to withstand the risks that will continue to impact global credit quality in 2015-16, the report said.

Moody’s said the main external risk facing EMs is the potential for a prolonged risk aversion, prompted by hopes of normalization of the US monetary policy and possibility of a sharper-than-expected slowdown in China’s growth.

The report focuses on five Baa-rated sovereigns — Turkey, Brazil, South Africa, India and Indonesia.

“India is less exposed to external shocks than the other sovereigns discussed here. The positive outlook on its Baa3 rating reflects our view that the relatively resilient growth and the policy reform momentum will slowly stabilize inflation, improve the regulatory environment, increase infrastructure investment and lower government debt ratios,” it said.

“In contrast, we forecast strong growth in India of around 7-7.5 percent per year in 2015-16, the highest among the G20 economies, which is supported by lower oil prices that will reinforce gradual growth enhancing reforms,” it said.

Moody’s said although India, South Africa and Brazil had weaker fiscal positions than Turkey and Indonesia, these governments were less reliant on foreign currency and non-resident funding (government external debt).

The rating agency made a special mention of India’s significant monetary tightening in 2013, coupled with some fiscal consolidation, which is “an example of effective macroeconomic management that restored macroeconomic stability, albeit at the expense of near-term growth”.

(Source – Assorted with the Inputs from PTI)

for more live update visit Virginia Media and Research

Are you too caught up with latest happenings in Greece? Worried about its financial repercussions on Indian markets and economy? Its time you shift your focus! A bigger threat is playing out right next door, in China. After rising to historic highs, Chinese stock markets are witnessing an unabated free-fall since last month. This has raised fears of a stock market bubble. Some analysts have described the situation as the biggest stock market bubble since the dot-com boom of the 1990s.
Virginia Media and Research
We give you a lowdown of the situation in China and its possible effects on other countries, including India:
What is going on: Chinese markets were the best performing emerging market in the world last year. The country’s main index Shanghai Composite more than doubled and was up over 40% this year. This was until June 12. Since then, China stocks have plunged 30% in three weeks and to four-month lows. On June 8, in an unprecedented move, around 1300 companies—half of China’s listed companies, suspended their trades in the stock market. The move was taken to insulate themselves from the massive declines in the equity market.
Why markets crashed: Three main reasons are being cited for the dramatic fall:
Chinese stock prices were highly overvalued. The market continued to rise because of herd mentality—investors see others buying them, and so they buy those stocks too—and not its inherent fundamentals. There were fears that stock prices have reached unsustainable levels at a time the economy is not doing too well
A country’s stock market performance is directly correlated to its economic performance. However, there has been a worrying disconnect between the two in the case of China.  Chinese economy is losing steam .Its GDP growth rate halved from 14% in 2007 to 7.4% last year. Investment and retail sales have also declined. This indicates that the markets were driven purely due to momentum and not the country’s inherent fundamentals.
Another reason for the sharp fall is the rise in margin trading. There has been a 5-fold rise in margin debt. In margin trading, an investor borrows money from his broker to purchase stocks.  If the stock price falls below a certain level, then he will have to sell of some shares to pare the fall.
Wealth eroded: The rout in Chinese shares has erased at least $3.2 trillion in value, or twice the size of India’s entire stock market, according to Bloomberg. The wealth alone is equal to 10 times the size of Greece economy!
China government intervenes: The Chinese government has intervened to stem the fall. The stock market regulator has suspended initial public offerings (IPOs) for the time being. The country’s central bank cut deposit and lending rates , its fourth rate cut since November. The steps were taken as a response to the weak economic data and to inject more liquidity in the markets. However the move has proven counter-productive till date. Investors seem to be losing faith on the Chinese government.
Effect on India: India could feel the heat of the turmoil in China.  The Sensex slumped 1.7% on Wednesday. However, analysts view the fall as a temporary shock. They are of the opinion that the fall in China is good news for India. With, the turmoil in Chinese markets, India could be the next best favourable investment destination. A flight of capital from China to India is a possibility in the future.
However, if the turbulence in Chinese markets spills over to its economy, India could be in trouble. This is because China is India largest trading partner. A turmoil in the Chinese economy and markets would mean businesses could pull back from investments till the situation stabilizes.
Contra view: Some analysts are of the opinion that the market crash is temporary and there is no bubble as such. The valuations are not too high as projected. The Chinese economy has clocked in remarkable growth for years. While its markets slumped after the Lehman crisis of 2008, it is reaching its correct valuations now.

(Source: Simplus Information Services – Fri 10 Jul, 2015)
Keeping its projections for India and China unchanged, the International Monetary Fund on Thursday forecast that India will grow a clip faster at 7.5 percent in 2015 and 2016, overtaking a slowing down China.

While India's GDP growth would go up from 6.9 percent in 2013 and 7.3 percent in 2014 to 7.5 percent over the next two years, China would slow down from 7.7 percent in 2013 and 7.4 percent in 2014 to 6.8 percent in 2015 and 6.3 percent next year, IMF said.

The July update of the April 2015 World Economic Outlook (WEO) predicting a slower growth in emerging markets and a gradual pickup in advanced econo-mies projected global growth at 3.3 percent in 2015, marginally lower than in 2014.

In 2016, growth is expected to strengthen to 3.8 percent, the report said attributing the small onward revision to global growth for 2015 to a setback to activity in the first quarter of 2015, mostly in North America.

Nevertheless, the underlying drivers for a gradual acceleration in economic activity in advanced economies "easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labor market conditions" remain intact, the report said.

In emerging market economies, the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors, it said.

Growth in advanced economies is projected to increase from 1.8 percent in 2014 to 2.1 percent in 2015 and 2.4 percent in 2016, a more gradual pickup than was forecast in the April 2015 WEO.

The IMF also maintained its forecasts for a pickup in growth in the euro zone, despite Greece moving ever closer to the edge of default and an exit from the currency bloc as it races to find a last-minute third bailout. "Developments in Greece have, so far, not resulted in any significant contagion," the IMF said. "Timely policy action should help manage such risks if they were to materialize."

The unexpected weakness in North America, which accounts for the lion's share of the growth forecast revision in advanced economies, is likely to prove a temporary setback, the update said.

Growth in emerging market and developing economies is projected to slow from 4.6 percent in 2014 to 4.2 percent in 2015, broadly as expected. In 2016, growth in emerging market and developing
economies is expected to pick up to 4.7 percent, largely on account of the projected improvement in
economic conditions in a number of distressed economies, including Russia and some economies in
the Middle East and North Africa.

The projected pickup in global growth, while still expected, has not yet firmly materialized, according to the WEO update.

Raising actual and potential output through a combination of demand support and structural reforms
continues to be the economic policy priority, the report said.

Efforts at implementing structural reforms remain urgent across advanced economies, both to tackle
crisis legacies and to raise potential output.

In emerging market and developing economies, macro-economic policy space to support demand is generally more limited but should be used to the extent possible, the report said.

Structural reforms to raise productivity and remove bottlenecks to production are urgently needed in
many economies, the update suggested.

(Source – IANS, 09-July-2015)
India will contribute $18 billion to the 100 billion dollar foreign-exchange re-serves pool that is currently being established by the BRICS group in order to help member nations "in case of any problems with dollar liquidity."

Brazil, Russia, India, China and South Africa have signed an agreement to set up the USD 100 billion pool, with maximum USD 41 billion coming from China. India's contribution of USD 18 billion to the Pool will be same as that of Brazil and Russia. South Africa would chip in USD 5 billion.

"The central banks of Brazil, Russia, India, China and South Africa have signed Operational Agreement on July 7, 2015 in Moscow. The Agreement outlines the terms of mutual support for member states in the framework of the Agreement on BRICS Pool of Conventional Currency Reserves," the Russian Central Bank said in a statement.

The fund will be an "insurance instrument" that members nations could draw on if they experience problems with their balance of payments. The Pool will go into force on July 30.

The Operational Agreement details the working procedures of the Pool to be observed by BRICS central banks, and defines their rights and obligations.

"The Pool is tasked to ensure mutual provision of US dollars by the central banks of BRICS members in case of any problems with dollar liquidity. Thus, this new insurance network is designed to maintain financial stability of its member states," the statement said.

The Agreement on setting BRICS Pool of Conventional Currency Reserves was signed on July 15, 2014 at the summit in Fortaleza (Brazil).The agreement was signed in Moscow after a meeting of the Finance Ministers and heads of the central banks of the BRICS countries. The Pool would help BRICS members to maintain financial stability in case of volatility in dollar ex-change rate. India's foreign exchange reserves dipped by a mar-ginal USD 237.5 million, to USD 355.221 billion, in the
week to June 26 on account of slight decline in a key component, the Reserve Bank of India data showed.

The agreement on the insurance pool comes ahead of the two-day Summit of the BRICS leaders in the Russian city of Ufa. The Summit could look at the possibility of starting credit facility in local currency by the BRICS Bank.

The first head of the Bank is noted Indian banker Mr. K.V. Kamath. The BRICS nations account for nearly USD 16 trillion in GDP and 40 percent of the world's population.

(Source – Assorted with Inputs from PTI)
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