Indian Economy: News and Discussion

Koovie · 01-06-12, 11:39 PM

Exports grow 3.2% in April; weak rupee to help in long term

India’s exports grew by a meagre 3.2 per cent year-on-year to $24.4 billion in April 2012, but are likely to gain momentum in the medium to long term on account of depreciating rupee.

Sharp deceleration in imports during the month resulted in trade deficit narrowing to $13.2 billion, the lowest in the last seven months. Imports during the first month of the current fiscal grew 3.8 per cent to $37.9 billion.

The drop in the balance of trade (BoT) deficit should reduce pressure on the rupee which has lost value by about 15 per cent against the U.S. dollar since September, 2011. It was ruling at 55.85 on Friday morning.

“The depreciation of rupee prima facie would help exporters in terms of higher realisation in terms of rupee...verall in the long term it would help the exporters,” Finance Secretary R. S. Gujral said.

Although the exporters’ community said that the rupee depreciation would help in the long term, buyers are pressuring for discounts.

“Buyers are asking for more and more discounts,” Federation of Indian Export Organisations (FIEO) President Rafeeq Ahmed said.

Mr. Ahmed also said that the rupee weakening would make imports expensive but would have a favourable impact in trade deficit.

In 2011-12, the country’s trade deficit jumped to $185 billion, the highest ever in history.

While the pace of export expansion dropped, the silver lining is that there was acceleration in the net value as opposed to deceleration in March when the shipments contracted by 5.7 per cent.

Commenting on the export growth for 2012-13, Commerce and Industry Minister Anand Sharma said, “I hope we will be able to achieve at least 20 per cent growth.”

In 2011-12, the country’s exports grew by 21 per cent to $303.7 billion.

http://www.thehindu.com/business/Eco...cle3480028.ece

sukhish · 02-06-12, 02:01 AM

cir,
agri growth was 1.7% last year, way less due to high base effect. if agri goes to 3.3 as is expected, we will see grow around 7% growth. also mining and manufacturing is going to pick some pace this year. so 5.5% is wishful thinking.

trackwhack · 02-06-12, 02:07 AM

sukhish, my friend, dont feed the troll

Mad Indian · 02-06-12, 02:37 AM

Err.. our growth was only 5.3% for the Jan-March was it not? So how will it jump to 7% all of a sudden?

I think 7% growth is a wishfull thinking. Come on, lets be objective shall we?

Daredevil · 01-07-12, 11:22 AM

Not possible to achieve 7.6 per cent growth target: Montek Singh Ahluwalia

Montek estimates that GDP growth will be around 6.5%. If I remember correctly, Nomura has estimate our GDP growth at 5.8% which is what I think is most likely.

ejazr · 02-07-12, 12:44 PM

Manufacturing picking up slightly after dismal quarters

India's June factory activity ticks up, hiring expands: survey | Reuters
Indian factories in June stepped up production and hired workers at the fastest rate in more than two years, but sagging demand abroad took a toll on growth in new export orders, a survey showed on Monday.

The HSBC manufacturing Purchasing Managers' Index (PMI) rose to 55.0 in June, a four-month high, from 54.8 in May. It has kept above the 50 mark that divides growth and contraction for more than three years.

Still, the survey raised some concerns. High prices continue to weigh on manufacturers, with both input and output costs rising sharply from May. That underscored expectations the central bank is unlikely to cut key interest rates soon.

Asia's third-largest economy is grappling with slowing economic growth but high inflation at a time when the health of the global economy is deteriorating. A slump in factory activity in China and Japan deepened in June [nL3E8I109O].

"Activity in the manufacturing sector kept up the pace in June with output and employment expanding at a faster pace," said Leif Eskesen, economist at HSBC.

The employment sub-index was at 52.4 in June, the highest level since May 2010.

While the PMI suggested domestic demand was holding up, signs from abroad looked more ominous.

New export orders grew at their slowest pace since November 2011, with demand weakening in top trading partners Europe and the United States.

"New order growth decelerated slightly led by export orders while stock levels rose, suggesting a slight moderation in output growth going ahead," HSBC's Eskesen said.

Meager first quarter growth and low consumer confidence in the United States, along with equally dismal sentiment data coming out of the euro zone in the past week, do not bode well for India's factories in the months ahead.

Although euro zone leaders agreed to take emergency action to bring down Italy's and Spain's spiraling borrowing costs at a summit on Friday, it remains to be seen if investor relief can be sustained.

India's benchmark stock index, the BSE Sensex .BSESN jumped to a two-month high on Friday, reflecting a rally across Asian shares after the European Union summit.

Meanwhile, the Indian economy has to deal with its own woes.

Growth slumped to its lowest in nine years in the quarter to March due to a slowdown in manufacturing, inflation picked up in May after showing signs of cooling in April and the rupee recently tumbled to a record low versus the dollar.

The survey showed little sign of price pressures easing. Factory input and output price indexes hit their highest levels since August 2011 and March 2011, respectively.

"In light of these numbers, the Reserve Bank of India does not have a strong case for further rate cuts, which could add to lingering inflation risks," HSBC's Eskesen said.

At its June 18 meeting, the central bank defied widespread calls to cut interest rates and boost growth, instead choosing to leave rates on hold, and put the onus on the government to pull the economy out of its slump.

Only last Wednesday, India's biggest commercial vehicle maker, Tata Motors (TAMO.NS), said it would halt production at one of its factories for three days last week in yet another sign of slowing growth.

Sridhar · 04-07-12, 11:38 AM

FII investments rise in first six months of 2012
03 July 2012

Foreign institutional investors (FII) pumped in Rs62,854.6 crore into the Indian markets in the first six months (January to June) of the year, almost four times the amount invested during the same period a year ago, as the fall in rupee value made exits difficult for foreign investors.

FII inflows during the same period of the previous year were about Rs16,780.2 crore, with Rs14,109.8 crore invested in debt and the balance Rs2,670.4 crore in equity.

Of the total Rs62,854.6 crore invested this year, Rs41,993 crore was invested in equities and Rs20,861.5 crore in debt, according to data posted by the Securities and Exchange Board of India (SEBI).

FII inflows in the first five months of the current year were the highest since 2001.

However, inflows have fallen considerably after February, even treading negative territory in April. In February, net foreign investments were the highest at Rs35,227.90 crore against Rs26,328.90 crore in January.

In January, FIIs invested Rs10,357.70 crore in equity and Rs15,971.20 crore in debt, taking the total to Rs26,328.90 crore.

The highest investment of Rs35,227.90 crore came in February, with Rs25,212.10 crore in equity and Rs10,015.80 crore in debt.

However, April witnessed an outflow of Rs4,896.60 crore, while it was inflows again in May (Rs3,222 crore) and June (Rs1,180.50 crore).

domain-b.com : FII investments rise in first six months of 2012

Sridhar · 06-07-12, 10:35 AM

India 3rd-most preferred FDI destination
Posted: Friday, Jul 06, 2012 at 0956 hrs IST

New Delhi: The United Nations Conference on Trade and Development (UNCTAD) World Investment Report for 2012 has named India as the third most desirable destination for Foreign Direct Investment (FDI) by global industrial giants.

Addressing mediapersons after unveiling the report here on Thursday, United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) chief economist Nagesh Kumar said that the survey conducted in 179 companies ranked India behind China and the United States.

“They did a survey of 179 top global firms around the world and they asked their top destinations where they planned to invest between 2012 to 2014, and India ranked third in that survey. So after China and United States, India is the third most attractive destination as perceived by the global companies,” Kumar announced.

The report noted that FDI inflows rose by 33 percent in 2011 from 2010.

“In 2011, the FDI inflows to India went up to 32 billion dollar, which is 33 percent more than the FDI inflows coming to India in 2010. So this is a good news certainly, which shows the potential of the country,” Kumar added.

Overseas investment in the country rose for the first time in three years in 2011, as global investors put their faith in rising salaries, an expanding middle-class and a large and cheap labour force.

'India 3rd-most preferred FDI destination'

Oracle · 12-08-12, 05:04 PM

Chances of lowering India rating higher in 12-24 months: Fitch

parijataka · 15-08-12, 01:42 PM

States show healthy increase in revenues as central govt falters with negative revenue growth and fiscal deficit. Gujarat at 29%, Kar at 30%, TN at 28%, WB at 20% and Maha at 19% are the states with maximum increase in revenues. Good to see WB with some positive news other than Mamata's antics and as for Kar, despite media tarnishing the state Kar continues to be one of the top states consistently. Central govt OTOH has shouldered the burden of fiscal stimulus, broadening of tax base by the states and technology driven efficiency reaching states that had been implmented already by central govt helped.

States go full throttle on tax as Centre’s fiscal gap widens

New Delhi: States routinely complain of diminishing revenue-raising freedom, but data from at least the last couple of years show they have little to cavil on this front. A cursory look at revenue collections by five among India’s economically largest states shows all of them have outpaced the Centre by considerable margins.
The states are in the lead in garnering tax resources even as the Centre gets a foretaste of another year of fiscal slippage and wants a panel headed by Vijay Kelkar to chart a new fiscal consolidation path.

The Centre, which shouldered the fiscal stimulus burden, saw its indirect tax growth turning negative in 2008-09 (-3.43%) and 2009-10 (-9.16%), followed by a seemingly high growth (28%) in 2010-11 on the low base created. It faltered again in 2011-12 (13.8%) under the impact of GDP growth slowing to 6.5%.

In contrast, the five states — Maharashtra, Tamil Nadu, Gujarat, Karnataka and West Bengal — have not seen negative growth in revenues from VAT and sales tax (on petroleum products) in the crisis years but only a 20% or so deceleration in growth in most cases. To their credit, these states have still reported much higher rates of revenue growth in 2010-11 and 2011-12 (see table). Gujarat and Karnataka reported over 30% revenue growth in 2010-11 and 2011-12; Gujarat's growth was close to 40% in 2010-11, including sales tax and CST, Tamil Nadu's revenue jumped 35% in 2010-11 and excluding sales tax, 28% in 2011-12 (the table gives only VAT revenue of the state).

Unlike the Centre, states have more than restored revenues to pre-crisis levels. Except West Bengal, GDPs of these states have grown higher than the national average, but the (wide) differential in their rates of revenue growth with the Centre implies their higher revenue buoyancy (ratio of revenue increase to the nominal GDP growth).

Not that the Centre has tuned complacent. Apart from the huge revenues foregone to spur investment, the Centre has been rather proactive in realising arrears and going after tax evaders and those who underpay in recent years. In this regard, no particular let-up was seen in indirect taxes at least in the last two-three years, even as pepping up the economy was a priority during the period and tax rates were cut to stimulate growth. Evidencing this would be the sharp increase in the amount under dispute (as percentage of tax arrears) shown in budget documents.

As for the excise tax, the disputed amounts have grown from 70.6% of the arrears in 2007-08 to 79.3% in 2010-11 and the amounts of service tax claims under dispute were 90.7% and 82.9% of the arrears in 2009-10 and 2010-11 respectively as against 74.2% in 2007-08. This reflects the central tax authorities' aggressive stance, as much as the resistance put up by the industry hit by slowdown and high inflation.

What explains the relatively higher growth in states' tax revenues? One obvious reason is that while the Centre was calibrating the withdrawal of fiscal stimulus, the states, keen to ward off any potential adverse impact on revenue from the proposed goods and services tax (GST) took preemptive measures, starting 2009. They have hiked VAT rates from 4% and 12.5% by one to two percentage points. A 25% increase in the rate was inevitably to lead to incremental growth in revenue for the initial years.

In the last two years, states have also broadened the tax base by removing exemptions and exclusions, in line with a similar central effort started earlier. Further, benefits of technology-enabled curbing of revenue leakage have finally reached the states, while the Centre has benefitted from them over the last seven-eight years.

It would be interesting to assess the impact of high inflation of the last couple of years on the tax revenues of Centre and states. It is clear that high inflation – which averaged 9% in 2011-12 – has affected corporate tax revenues for the Centre as companies hit by costlier inputs and falling consumption demand saw their profit margins decline.

But inflation (including the external component of it reflected as spike in import bill) would push up the excise and customs revenues and to an extent, service tax collection for the Centre in absolute terms. To the extent of the inflation impact, revenue growth cannot be construed as real, let alone reflective of improved buoyancy. Note that despite a 32% rise in imports in 2011-12 and a 13% rise in customs revenue enabled by it, the buoyancy of customs revenue was just 0.8 in the year as against 1.3 in 2007-08. The excise tax buoyancy was even lower at 0.6 in 2011-12. This was not surprising because this tax head has been experiencing reduced buoyancy for the last several years, because of a host of factors including a rise in utilisation of Cenvat credit, particularly after service tax was made part of the chain. Service tax which grew 37% in 2011-12 also showed a high buoyancy of 2.1, thanks to the expansion of the tax base and the fact that service sector was the least affected in the economic slowdown (the buoyancy might be retained at roughly the same level in 2012-13 due to the addition of some 20-odd services the list thanks to adoption of the negative list policy).

As for the states, inflation must have pushed up revenues even more strongly than in the case of the Centre. Deceleration in the industrial production growth would have less impact on state revenues. This is partly because imports of finished goods – which don't escape state VAT – would partly offset the slump in domestic manufacturing. Also, while excise bills (ad valorem) would also be inflated by price rise in the economy, the inflation-induced wage price spiral too would impact VAT bills. Furthermore, most states have refused to cut taxes on petroleum goods despite cajoling by the Centre. They have taken the full benefit of the oil price spike.

With stimulus being largely withdrawn in the 2012-13 Budget, the Centre has budgeted the buoyancy of excise and customs this year to exceed the pre-crisis levels at 2.1 and 1.6 respectively These are clearly over-ambitious targets based on the assumption that real GDP growth in 2012-13 would be 7.5% and import growth comparable to last year's.

With the GDP expansion in 2012-13 being estimated by various agencies at 5.5-6% and the slump in industrial production (index of industrial production contracted 1.8% in June), the budget estimate of a net revenue gain of Rs 46,000 crore from indirect tax changes (excise and service tax rates were restored to 12% and the customs duty rates were rejigged) seems unachievable. So too is the overall indirect tax collection target of Rs 5.05 lakh crore or 28.5% growth estimated over last year's revenues. (Corporation tax and personal income tax buoyancy is estimated at 1 which means revenue growth would be equal to nominal GDP growth rate).

A recent Morgan Stanley Research report said slower indirect tax collection growth combined with continued high growth in government spending will push the Centre's fiscal deficit higher than the budget estimate. “We expect the Centre’s fiscal deficit to be 5.6% of GDP in FY13 against the budget estimate of 5.1%,” the report said.

According to an RBI article assessing the Union Budget 2012-13, “the implied (overall) tax buoyancy for 2012-13 is 1.39, which is significantly higher than the long-term average tax buoyancy for the period 2003-04 to 2011-12 (1.11) as well as the average for the recent period 2010-11 to 2011-12 (1.14).” As compared to this, at least the fast-growing states could have revenue buoyancy of 1.3 or thereabouts in 2012-13, close to the level last year. Of course, a prolonged period of low economic growth would make it difficult for even these states to sustain the current level of revenue buoyancy. The states ought also to be concerned that the slippage witnessed in the centre's resource transfer to them in 2011-12 might recur this year.

(With inputs from Indronil Roychowdhury in Kolkatta, Ajay Sukumaran in Bangalore, Jyotsna Bhatnagar in Ahmedabad and Saroj Kumar in Chennai)

Daredevil · 24-08-12, 07:51 PM

India approves Walt Disney's 1,000 crore investment

New Delhi,Business/Economy, Thu, 23 Aug 2012IANS

New Delhi, Aug 23 (IANS) The Indian government Thursday said it has approved US-based Walt Disney's 1,000 crore investment proposal in broadcasting business in India.

Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the government approved the Walt Disney's investment proposal at a meeting held July 27, 2012, finance ministry said in a statement.

The American firm's proposal is for "induction of foreign equity for inter alia expansion of the business and making downstream investment in other companies and subsidiaries of the company, including broadcasting companies."

The government has also approved nine other investment proposals. The total approved foreign direct investment (FDI) in the 10 proposals are to the tune of 1,259.92 crore.

Meanwhile, the government has deferred 16 proposals and rejected four proposals of overseas investments.

Oracle · 27-08-12, 12:20 PM

More bad news.

Investments dipped 46% in FY12: RBI

blank_quest · 28-08-12, 02:16 AM

blank_quest · 28-08-12, 02:45 AM

Click here to view or download the file directly.

blank_quest · 28-08-12, 09:30 PM

Click here to view or download the file directly.

Indian Economy: News and Discussion

Koovie

sukhish

trackwhack

Mad Indian

Daredevil

ejazr

Sridhar

Sridhar

Oracle

parijataka

Daredevil

Oracle

blank_quest

blank_quest

blank_quest

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