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India may finance CAD with forex reserves: World Bank
Cheap imports from China, Nepal hit Ludhiana shawl industry
TCS to hire 5,000 people more than initial target
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Significant fall in banks’ loan offtake: Survey
Air India hedges 10,000 barrels of fuel for its aircraft US Senate clinches deal to end shutdown, avoid debt default
Fitch places US on Rating Watch Negative
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India may finance CAD with forex reserves: World Bank
New Delhi, October 16 "International reserves could decline somewhat in 2013-14 but would still amount to a comfortable import cover of approximately five months," the World Bank said in its latest India Development Update. Economic Affairs Secretary Arvind Mayaram had said earlier this month that India would finance its CAD this year without drawing down on its reserves. C Rangarajan, Chairman of the Prime Ministry's Economic Advisory Council, had said India may have to draw about $9 billion from its foreign exchange reserves to finance the CAD. The CAD for the first quarter of the current financial year was $21.8 billion, or 4.9 per cent of gross domestic product, driven by sluggish exports and high gold imports in April and May. Gold imports increased by $7.3 billion in the first quarter this fiscal. Inward shipments of the metal stood at about 335 tonnes in the April-June quarter. The government plans to narrow the CAD to $70 billion, or 3.7 per cent of GDP, in 2013-14 from $88.2 billion, or 4.8 per cent, in 2012-13. The World Bank estimates the country's CAD will narrow to 4.1 per cent of GDP this year and to 3.7 per cent in FY15. Noting that financing of the CAD is unlikely to present major challenges, the World Bank said, "In 2013-14, the financing mix is expected to be similar to the average performance of the last few years: FDI is expected to improve marginally from 2012-13 (a down year) while FII would come down somewhat from the highs of last fiscal." As long as NRI deposits remain similar to last year and under varying assumptions about the availability of trade credits, the remaining 2013-14 external financing requirements would range between $3-10 billion, which should be relatively comfortably financed via foreign borrowing, it said. — PTI
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Cheap imports from China, Nepal hit Ludhiana shawl industry
Ludhiana, October 16 These products reach India via road route and are usually priced at half the price of locally manufactured shawls. With easy availability of cheap imitations, the original Pashmina shawls are losing sheen. "It is very difficult to differentiate between a fake and an original one and that is why cheap imports are flooding the market. A local manufactured shawl is priced at Rs 5,000 while its imitation is available for Rs 2,000," said Gurmukh Singh, a shawl trader. Not only local manufacturers but even Kashmiris, known for their hand-woven shawls, are also affected by the cheap imports. "Punjab is a second home for us and we live for six months in Kashmir and six months in Punjab. With the availability of replicas of original shawls, this trade is no more lucrative. Cheap and machine-made shawls available are affecting the demand of original ones. “For centuries, the Pashmina shawls have been woven on handlooms from wool handspun from the shaggy coat of a goat, which lives in the heights of the Himalayas in the Ladakh region of Jammu and Kashmir. But now fake shawls, especially from China and Nepal, have put Pashmina trade into doldrums," said Mohd Sayed, a shawl trader from Jammu and Kashmir. Shahtoosh (a wool derived from the hair of an endangered Tibetan antelope) shawls made from Pashmina wool are considered the world's finest and are exported worldwide. Another problem faced by the shawl industry is lack of proper branding. The word ‘Pashmina’ is used indiscriminately by weavers, and can be found on cheap, synthetic fibre shawls as well as wraps made with a mix of wool and silk fibre.
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TCS to hire 5,000 people more than initial target
Mumbai, October 16 "We said, at the beginning of the year, that we will be doing 45,000 gross for FY'14. Given the way we have been growing and looking at the demand, we are increasing that from 45,000 to 50,000 in this year," TCS Global Head for Human Resources Ajoy Mukherjee told reporters here. He said the company has hired 17,362 (gross) employees during the second quarter. It had hired 10,611 people in the first quarter. — PTI
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Significant fall in banks’ loan offtake: Survey
New Delhi, October 16 Individual borrowers are adopting an extremely conservative approach when it comes to taking loans from banks against fixed deposits or shares and bonds. According to the banking data, loans against fixed deposits have declined by 1.6 per cent in the current financial year as against a growth of 20 per cent between August 2012 and August 2013. Besides, credit card users are also avoiding taking loans as the interest rates charged on outstanding payments are prohibitively high. Those who have already taken loans are now more cautious and resorting to timely payments of their dues to avoid penalties. "There is a feeling that credit card outstanding payments result in debt traps for the card-holders," the survey said. A similar trend has been witnessed in individuals or entities seeking bank loans in return for mortgaging shares and bonds. The amount deployed so far in the current fiscal under this head has shown a decline of 6.6 per cent, as against a growth of 8.8 per cent in the previous year, the survey said. The reason cited for the cautious approach being adopted by borrowers as well as banks is the prevailing volatility in the share market. Besides, high interest rates offered by banks is also one of the main reasons for the trend, since deposit rates have been recently revised upwards in the wake of tight liquidity position.
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Air India hedges 10,000 barrels of fuel for its aircraft
New Delhi, October 16 Fuel hedging is a contractual tool large fuel-consuming companies like airlines use to reduce their exposure to volatile and potentially rising fuel costs. A fuel hedge contract allows such a company to establish a fixed or capped cost through a commodity swap or option. This was the first time hedging was undertaken by the national carrier in several years. In view of about Rs 100 crore being added to monthly expenses due to the volatile oil prices, Air India Board had last month cleared a proposal to enter into hedging of aviation turbine fuel (ATF) its airplanes lift overseas. — PTI
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US Senate clinches deal to end shutdown, avoid debt default Washington, October 16 The agreement was announced by the Senate Majority Leader, Harry Reid, on the Senate floor. "The compromise we reached will provide provide our economy with the stability it desperately needs," he said. The House of Representatives will vote on it soon. "The eyes of the world have been on Washington all this week. That is a gross understatement. While they witnessed a great deal of political discord, today they will also see Congress reach a historic bipartisan agreement to reopen the government and avert a default," he said. Reid said after weeks spent facing off across a partisan divide that often seemed too wide to cross, the country came to the brink of a disaster. "But in the end, political adversaries set aside their differences and disagreements to prevent that disaster," he said. The new compromise agreement, he said, will fund the government through January 15, 2014 and averts default through February 7, during which time they can work toward a long-term budget agreement that prevents these frequent crises. The Senate Minority Leader, Mitch McConnell, said the deal would reopen the government, avoid default and protect the historic cuts they achieved under the Budget Control Act. "This is far less than many of us had hoped for, frankly, but is far better than what some had sought," he said on the Senate floor. "This legislation is the largest spending reduction Bill of the last quarter-century and the largest deficit reduction Bill since 1981 that didn't include a tax hike. Preserving this law is critically important to the future of our country," McConnell said. With time running out, news reports said the legislation would first move through the House and then would breeze through the Senate so as to pass it in time before October 17 to avoid an unprecedented default on the debt. — PTI Compromise Formula
* The new compromise agreement would fund the government through January 15, 2014 and averts default through February 7 *
The deal would reopen the government, avoid default and protect the historic cuts they achieved under the Budget Control Act *
President Barack Obama says the US is close to the point where the Treasury Department cannot borrow new money to meet its debt obligations, which is why Congress needs to move fast |
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World Bank cuts India’s growth forecast to 4.7%
New Delhi, October 16 In April, the World Bank had projected that India's GDP would grow at 6.1% in the current financial year and at 6.7% the following year. Last week, the International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75% in market prices for India in 2013-14, which is expected to pick up to 5.1% next year. India's GDP growth slowed to 5% in the year ended March from an average of 8% over the past decade. The World Bank said the pace of economic activity in 2013-14 will be hampered by a weak output during the first quarter. In addition, two consecutive months (July-August) of negative business sentiment and higher interest rates may curb the potential for recovery in the second quarter of 2013-14 even after manufacturing output rebounded in July. "Although output growth in the first quarter of the current fiscal year fell to 4.4%, growth is expected to rebound strongly in the second half of 2013-2014 with core inflation trending down, a bumper crop expected in agriculture, and exports likely to benefit substantially from the rupee's depreciation," Rama said. A 5% increase in the area sown is expected to raise agricultural growth to 3.4% from 1.9% a year ago, he added. Rama said growth is expected to improve further in the medium term as strengthening exports support a recovery in industrial activity and new investment projects come on stream. "India's growth potential remains high but its macroeconomic vulnerabilities - high headline inflation, an elevated current account deficit, and rising pressure on fiscal balances from the depreciation of the rupee - could impact the speed of economic recovery," said Denis Medvedev, senior country economist for the World Bank, India. While market sentiment has improved in the past few weeks, challenges remain, highlighting the importance of prudent macroeconomic policies and continued reforms to set strong foundations for accelerated growth, he said. — PTI The projections
* In April, the World Bank had projected that India's GDP would grow at 6.1% in the current financial year and at 6.7% the following year *
Last week, the IMF projected an average growth rate of about 3.75% for India in 2013-14, which is expected to pick up to 5.1% next year *
The World Bank said the pace of economic activity in 2013-14 will be hampered by a weak output during the first quarter |
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Fitch places US on Rating Watch Negative
Washington, October 16 Fitch yesterday said it has placed the United States of America's 'AAA' Long-term foreign and local currency Issuer Default Ratings (IDRs) on Rating Watch Negative (RWN), citing the possibility the Treasury could default on its obligations after October 17 if the ceiling is not raised. The ratings of all outstanding US sovereign debt securities have also been placed on RWN, as has the US Short-term foreign currency rating of 'F1+'. The Outlook on the Long-term ratings was previously Negative, it said. The US Ceiling has been affirmed at 'AAA' but US Treasury bonds on Rating Watch Negative, which is sometimes but not always a first step before a downgrade, it said. Fitch said the US authorities have not raised the federal debt ceiling in a timely manner before the Treasury exhausts extraordinary measures. The US Treasury Secretary has said extraordinary measures will be exhausted by October 17, leaving cash reserves of just $30 billion. "Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a US default," it said. Fitch said the Treasury may be unable to prioritise debt service, and it is unclear whether it even has the legal authority to do so. The US risks being forced to incur widespread delays of payments to suppliers and employees, as well as social security payments to citizens - all of which would damage the perception of US sovereign creditworthiness and the economy, it said. Although the Treasury would still have limited capacity to make payments after October 17, it would be exposed to volatile revenue and expenditure flows, it added. According to the rating agency, the prolonged negotiations over raising the debt ceiling risk undermining confidence in the role of the US dollar as the preeminent global reserve currency, by casting doubt over the full faith and credit of the US. — PTI Gloomy picture
* The rating agency has placed the US’ 'AAA' long-term foreign and local currency Issuer Default Ratings on Rating Watch Negative, citing the possibility the Treasury could default on its obligations after October 17 if the ceiling is not raised *
The ratings of all outstanding US sovereign debt securities have also been placed on RWN, as has the US short-term foreign currency rating of 'F1+' *
US Treasury Secretary has said extraordinary measures will be exhausted by Oct 17, leaving cash reserves of just $30bn |
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Top Senate leaders today said they had reached an agreement to end the over two-week US government shutdown and increase the debt ceiling so as to avoid a first-ever default hours before the deadline expired.
The agreement was announced by the Senate Majority Leader, Harry Reid, on the Senate floor. "The compromise we reached will provide provide our economy with the stability it desperately needs," he said.
"The report (India Development Update) expects real GDP to expand by 4.7% (at factor cost) this fiscal year before accelerating to 6.2% in FY2015," said Martin Rama, the World Bank's chief economist for South Asia.
