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Current Economic Statistics and Review For the
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Theme
of the week:
Invisible In India’s Balance of Payments – IV
1.Introduction Invisibles
play an important role in Transfers
- both private and official - represent unrequitted transactions i.e.,
transactions which do not involve quid pro quo. They include grants,
gifts, donations, transfers for family maintenance, repatriation of savings
and migrant transfers. Migrant transfers represent value of resources
(financial and real) transferred due to migration from one country to
another. Receipts
under official transfers are grants and other assistance provided from
bilateral and multilateral loans to the Government of India, while payments
are grants extended by the Government of India to other developing
countries. Private
transfer receipts have been the mainstay of the invisibles account providing
precious support and bolstering the economy’s resilience to overcome
external shocks over years. It includes current remittances for family
maintenance as well as repatriation of savings by Indians’ working abroad
(except own-account bank deposits) and personal gifts and donations to
religious and charitable institutions in 2.
Invisibles – A Snapshot View
The rejuvenation of invisible surpluses in the 1990s, after a lull in the late 1980s, has a greater smothering effect on the current account deficit front. The invisible surpluses during the current decade have so far witnessed an accelerated and sustained rise resulting in further narrowing of the current account deficit It can be seen from Table 1 that merchandise deficit was averaging US $10.4 billion in the decade of 1990-2000 which was taken care to the extent of 57.8 per cent by invisible surpluses which averaged about US $ 6.0 billion .As against this in current decade so far (2000-2007) both merchandise deficit and invisible surpluses have galloped and touches about US $ 28 billion each and thus the later took care of 99.5 per cent of the former. At the same time, the current account deficit, which was about US $ 4.4 billion in the last decade, has dwindled to US $ 0.14 billion during the current decade ending 2006-07. A rare phenomena, perhaps even in the global economic scene, is that out of the seven years of the current decade, three years have witnessed current account surpluses during 2001-02 to 2003-04 mainly because of the rapid growth in the invisible receipts. The above observation is better explained by a pictorial depiction by plotting the 17-year data in Chart 1.
It
can be seen from Table 2 that during the ten-year period of the 1990s, while
the average annual growth in invisible receipts worked out to US $ 17.2
billion or at an annual average growth rate of 15.6 per cent as against an
annual average growth rate of 10.1 per cent in invisible payments. However,
there was rapid growth both in invisible receipts as well as payments. While
receipts have averaged about US $ 62.7 billion, payments have averaged about
US $ 34.6 billion in the current decade so far ending 2006-07. The annual
growth rate both in receipts and payments has been about 21 per cent.
The decomposition of invisible shows that there are positive developments in all the components with net services and net transfers as percent of GDP growing from 0.3 per cent and 0.8 per cent in 1990-91 to 3.5 per cent and 3.0 per cent, respectively, in 2006-07. It can be seen from Table 3 that between the two, net transfers are stable with about 3 per cent of GDP in all the years since 2000-01, while services have grown over the years. 3.
Transfers According
to the IMF’s Balance of Payments Manual, 5th Edition (1993).
‘Transfers’ represent
one-sided transactions, i.e., transactions that do not have any quid pro
quo. Transfesr as already explained above comprise official and private
transfers and as a whole they have stabilized at 3.0 per cent of GDP in the
recent years. Private transfers, which were the most volatile among all the
components of current account during 1987-88 to 1996-97, have
become the least volatile receipts among the different components in
the current decade ending 2006-07 as measured by coefficients of variations
(Table 4).
Some
recent studies have observed that the relative stability of workers’
remittances can be attributed to the low interest rate and exchange rate
sensitivity of such flows.
Inward
remittances have shown significant increase and become an important source
of financing the current account deficit in several developing economies. As
per the IMF, such inward remittances have surged from US $ 58 billion in
1995 to US $ 110 billion in 2004 for all LDCs together.. These receipts form
about 6.7 per cent of developing countries imports, and 7.5 per cent of
domestic investment. Remittances were larger than capital inflows in 36
developing countries in 2004 and they exceeded merchandise exports in a
number of countries. Government policies to improve banking access and
technology of money transfers have also helped increase the remittance flow
and promote their transfer through proper banking channels. They are found
to be counter cyclical and as such, they have provided some kind of
stability to the recipient countries. 3.1
Trends in Private Transfers Workers’
remittances are generally referred to as private transfers. Their receipts
have remained buoyant in recent years. Surge in workers’ remittances to
Remittance
inflows from overseas Indians have reached US $ 29 billion in 2006-07 from
US $ 2.1 billion in 1990-91. Workers’ remittances have been around 3 per
cent of 3.2
Global Trend in Inward Remittances Remittance
inflows have shown significant increase and become an important source of
financing of current account deficit in not only in
A
cross-country comparison of recent flow of remittances to developing
countries reveals that Remittances
as a share of GDP have amounted to 3.5 per cent in low-income countries in
2005 and 1.5 per cent in middle-income countries. They are the largest
source of external financing in many poor countries. Also, remittances have
been less volatile than other sources of foreign exchange earnings in
developing countries. 3.3
Composition of Remittances in The
details of private transfers comprising those of remittances for family
maintenance, local withdrawals from NRI deposits, gold and silver through
passenger baggage and gifts and donations are set out in Table 7.
3.3.1
Remittances for Family Maintenances
The
share of remittances repatriated by the overseas Indians for family
maintenance rose from US $ 7.4 billion in 1999-00 to US $ 13.6 billion in
2006-07, a stupendous growth of about 84 per cent about 7 years. However,
there has been a decline in their share to remittance flows to The
increasing importance of private transfers and in them, remittances for
family maintenance has attracted the attention of RBI, which, to understand
the nuances of such transfers they have conducted a survey of such
remittance receipts by giving special attention to the methods of
transmission, transmission cost, end use of such transfer and time taken for
such transfers. The result of this survey along with some important money
transfer methods will be discussed in our next note. 3.3.2
Local withdrawals from Non-Resident Rupee Deposit Schemes
The
Non-Resident (External) Rupee Account [NR(E)RA] and Non-Resident Ordinary (NRO)
Rupee Account deposits have facilities of domestic withdrawal either by the
NRI or his/her dependent family
members. When a part of the inflows to such deposits is subsequently
withdrawn, the withdrawal becomes a part of workers remittances. It is
observed that NRI deposits are held by two categories of NRIs. (i) Those who
want to come back to
The
funds credited to NR(E)RA and NRO deposits get withdrawn domestically by the
dependents for domestic investment. Since 2003,04, there has been relatively
rising significance of this route to remittance inflows to 3.3.3.
Gold and Silver Brought Through Passenger Baggage
Under
the liberalized policy for imports, Government of India has permitted
imports of gold by certain nominated agencies for sale to jewellery
manufactures, exporters, NRIs, holders of special import licences and
domestic users. Nominated agencies/banks were permitted to import gold under
different arrangements such as suppliers /buyers credit basis, consignment
basis and outright purchase. Thus after 1997-98 gold import through
passenger baggage by the returning Indians has lost its importance as a
conduit of remittance flows. 3.3.4.
Personal gifts and Donations The inflows under this channel have shown an increasing trend recently. The money sent is predominantly donations to charitable/religious institutions/NGOs. (* This note has been prepared by R Krishnaswamy) References 1.
RBI (2008), Invisibles in 2. IMF (1993), Manual on Balance of Payments Statistics, 5th Edition 3. World Bank (2007), Global Development Finance – The Globalisation of Corporate Finance in Developing Countries, May. 4. World Bank (2005), Global Economic Prospectus 2006
Highlights of Current Economic Scene AGRICULTURE According
to the latest report by Food and Agriculture Organisation (FAO) total
paddy output in 2008 is likely to rise by 2.3 per cent hitting new record
of 666 million tonnes. The productivity is expected to be around 4.19
tonnes per hectare as against 3.90 tonnes in 1999 and 4.11 tonnes per
hectare in 2007. The acreage under paddy would experience a marginal
increase to 159 million hectares in 2008 form 157 million hectares in
1999. This increase is projected on account of incentives provided by some
of the rice-growing countries to cultivate rice on a larger scale.
It is expected that most of the coverage under paddy would increase
in developing countries foremost in Asia, Africa, Latin America and The
state government of As
per the data compiled by Solvent Extractor Association of India (SEA),
despite high prices and growing demand of vegetables oils during the
period between November-April 2007-08 imports of vegetables oils have
soared by 31 per cent to 26,11,829 tonnes as compared to 19,99,114 tonnes
during the corresponding period of the last year. Imports of edible oil
grew by 31 per cent, contrary to it arrivals of non-edible oil surged by
26 per cent. Imports of vegetable oil in November 2007 to March 2008 have
risen by 33 per cent, while demand has began to slump from the beginning
of April indicating arrival of lean period. The
central government has planned to canalise exports of maize through state
run agencies. This move is expected to control exports and domestic
prices. Despite bumper crop, prices of maize in the domestic economy have
risen by 10 per cent with in the last one month on high export demand. It
is estimated that this year rabi maize output would be at 3.72 million
tonnes.
Food
Corporation of India (FCI) and state agencies, as on April 16, 2008, have
procured 195.58 lakh tonnes of wheat in the ongoing rabi marketing season
(April-March) 2008-09. It is projected that procurement undertaken this
year would surpass an all-time record of 206.30 lakh tonnes achieved in
2001-02. This turnaround is witnessed due to conscious
efforts made by both central as well as the state governments to make
purchases from states other than Punjab (97.02 lakh tonnes) and Haryana
(51.23 lakh tonnes) which have resulted in state procurement agencies
mopping up unprecedented levels of wheat from Uttar Pradesh (18.32 lakh
tonnes), Madhya Pradesh (16.04 lakh tonnes), Rajasthan (8.14 lakh tonnes),
Gujarat (2.56 lakh tonnes) and Bihar (1.23 lakh tonnes).
In the current season, procurement by multinationals and corporate
companies has dipped by 86 per cent to a mere 3.37 lakh tonnes, including
0.69 lakh tonnes from Gujarat, 0.21 lakh tonnes from Madhya Pradesh, 0.16
lakh tonnes from Rajasthan and 0.15 lakh tonnes from West Bengal.
Meanwhile procurement of rice in the current kharif marketing season
(October-September) 2007-08 has touched 240.14 lakh tonnes, which is more
than 220.94 lakh tonnes for the corresponding period of 2006-07.
However, the stock of wheat in the central pool, as per the media reports,
as on April 1 2008, haS stood at 5.8 million tonnes, against the minimum
buffer norm of 4 million tonnes. The corresponding numbers for rice have
been 13.8 million tonnes and 12.2 million tonnes, respectively. The
Supreme Court has made an interim arrangement in the dispute over
sugarcane prices in Uttar Pradesh by ordering sugar mills to pay Rs 110
per quintal for cane farmers after adjusting the dues already paid and
there would be no claims for refund of 2006-07. Supplies
of sugarcane to sugar mills would suffer badly during the ensuing crushing
season (October-September) 2008-09 as area under cane has shrunk in two
leading sugar producing states namely Uttar Pradesh and According
to Cotton Advisory Board (CAB) The
South India Small Spinners Association (Sisspa) has stated that small
scale spinning industry has opposed exports of raw cotton at the cost of
the reducing the raw cotton available for domestic spinning sector
impairing its raw material sourcing. Raw cotton exports are expected to
touch 100 lakh bales during current year as against 30 lakh bales in
2006-07. Sisspa apprehended that most of the raw cotton is exported to
competitors in the international market and in the domestic economy, the
incentives offered by the government on exports of cotton did not reach
the growers but were cornered by middlemen and cotton trader.
Exports
of grapes from Nashik in terms of volume have jumped by 45.5 per cent
during December-April 2008 to 27,650 tonnes as compared with the last
year. Earnings from grape exports during the same period have been Rs
174.20 crore. In the last six years grape exports from the district has
risen over seven fold from 3775.37 metric tonnes in 2002 to 27,650 million
tonnes in 2008. Nashik accounts for 55 per cent of total exports of the
commodity from the country and 75 per cent of the According
to Marine Products Export Development Authority (MPEDA), India has
exported 5,29,357 tonnes of seafood valued at Rs 7,476.37 crore during
fiscal year 2007-08 as against 6,12,641 tonnes valued at Rs 8,363.53 crore
in 2006-07. Export revenue from seafood during the period between 2007-08
has dropped by 10 per cent and volume by 13 per cent. In case of dollar,
revenue has increased fractionally to US $ 1.86 billion from US $ 1.85
billion in the previous fiscal. The dip in exports can be attributed to
competition from cheaper vannamei shrimps from overseas, lower
availability of cuttle fish and appreciating Indian rupee. In 2006-07,
exports had increased by 19.62 per cent in quantity and 15.43 per cent in
rupee values when compared to 2005-06. Hatsun Agro Product Ltd
has planned to double the production of milk powder and its ingredients
capacity with an investment of over Rs 90 crore. This is expected to
enhance milk procurement capacity significantly. Industry A
fall in the rate of growth in IIP had seen during March 2008. The growth
in the index of industrial production during March 2008 at 3.0 is only
about one-fifth of that in March
2007 (14.8 per cent). All the three major groups contributed for this
performance. As a result during the fiscal year 2007-08 IIP index rose by
8.1 per cent as compared to 11.6 per cent last year. Mining sector and
electricity sector grew by 3.8 per cent and 3.7 per cent during the month.
The growth of manufacturing sector is at 2.96 per cent during March 2008
has been way below to that of 16.0 per cent recorded last March. Out of
the 17 industries, five industries declined and four industries registered
double digit growth.. As per use-based classification, the sect oral
growth rates in March 2008 over March 2007 are 3.1 per cent in basic goods
industries, 8.6 per cent in capital goods and 3.5 per cent in intermediate
goods. Consumer goods recorded a decline of 0.1 per cent. Infrastructure Riding
on the back of good performance of coal, steel and cement the index of six
core infrastructure industries having a combined weight of 26.7 per cent
in the index of industrial production with base 1993-94 registered a
growth of 9.6 per cent during March 2008 as compared to 10.5 per cent in
March 2007. This impressive performance exhibited by
the core industries in
MArch 2008 resulting the core index registering a growth of 5.6 per cent
during the fiscal so far as against 9.2 last year. Steel and cement
witnessed better performance during March 2008 compared to January
2008 and also March 2007. Inflation The
annual rate of inflation calculated on a point-to-point basis, rose by
7.83 per cent for the week ended May 3,2008 as compared 7.61 per cent as
on May 5,2007. Index
of Primary Articles group rose by 0.3 per cent to 239.3 from 238.6 for the
previous week. Food articles group rose by 0.5 per cent. Index of non-food
articles rose by 0.1 per cent The
index for the major group Fuel, Power, Light and Lubricants rose by 0.8
per cent due to acceleration in the price index of lignite, naptha,furnace
oil and bitumen and light diesel oil. Price
index of Manufactured products rose by 0.3 per cent mainly due to higher
price of khandasari, oil cakes, coconut oil and atta. The
final WPI for all commodities had been revised upward from 221.8 to 225.7
for the week ended March 08,28. As a result the rate of inflation
calculated on a point-to-point basis stood at 7.78 per cent as compared to
5.92 percent provisional. Banking The
RBI has called for data from most of the foreign banks, which are active
in the structured product market. At least eight banks are facing the
scrutiny over exposure to exotic derivative products. The bank had earlier
collected data on NBFCs but did not find much exposure to the derivative
segment. The
HSBC bank has acquired a 73.2 per cent stake in IL&FS Investsmart, a
leading brokerage house for a consideration of Rs 1,110 crore. The bank
will also make an open offer to acquire up to 20 per cent of the remaining
shares in the entity. Bank
of India has posted net consolidated profit of Rs 1,960 crore for the year
ended March 31, 2008, up 76.8 per cent compared to last year. Total income
of the bank increased at 38 per cent to Rs. 14,528 crore for the year
ended March 31, 2008. The
Supreme Court has assailed the practice of banks employing muscle power
for recovery of loans from the public. It dismissed an appeal filed by
ICICI bank in this regard. The court, in its judgement, referred to the
RBI guidelines on engagement of recovery agents by banks and the related
provisions of ban and other supervisory action that can be taken by the
regulatory bodies. The
RBI has set a risk weight of 50 per cent on housing loans up to Rs 30 lakh.
The central bank said that housing loans with 50 per cent risk weight
would have a loan to value ratio of less than 75 per cent. SBI
has roped in Insurance Australia group (IAG) to enter the general
insurance business in NABARD
is planning to seek RBI’s assistance into tracking the financial health
and governance standards of the rural co-operative banks. It has set up
task forces called State Level Implementing Monitoring Committee (SLIC) to
revive rural credit institutions. SLIC would gain from the experience of
the RBI’s task force for urban co-operative banks in reforming
co-operative banks. ICICI
bank has lowered the EMIs for a large number of its borrowers by enhancing
the tenure of their home loans. The ICICI bank accounts for nearly
one-third of the home loan market segment. The bank had earlier raised the
prime lending rate (PLR) for floating rate borrowers in February and March
2007, following which the borrowers were asked to pay higher EMIs. Leading
Indian public sector banks SBI, Bank of Baroda and Syndicate Bank would
part-fund the $3 billion loan that Tata Motors has to raise to finance the
acquisition of Jaguar and Land Rover from Ford.
Financial
Sector Capital
Markets Primary
Market The
capital market regulator Securities and Exchange Board of India’s (SEBI)
has approved, in principle, the idea of making lien on bank account as an
alternative mode of payment. The cost of investment in stock market
through initial public offerings (IPOs) and rights issues is expected to
become cheaper for retail investors and it is considered revolutionary in The IPO of the
Hyderabad-based Anu’s Laboratories has been oversubscribed by 8.43
times. The issue received bids for 3.22-crore equity shares as against the
38.2-lakh equity shares on offer, and the portion reserved for the
qualified institutional buyers (QIB) has been oversubscribed by 2.83
times, the retail portion has been subscribed 9.64 times and the
non-institutional portion has been subscribed 26.97 times. Anu’s
Laboratories has given investors the option to withdraw their bids from
the public issue within 10 days from May 16, which closed on May 15, 2008.
This follows the market regulator SEBI advice as the company failed to
disclose a pending case in its offer document. The company had received a
letter on May 14,2008 from Sunmoon Chemicals Pvt. Ltd informing that it
has filed a suit. Anu’s Laboratories had received a legal notice earlier
on November 2, 2007 from Sunmoon Chemicals for a demand of Rs 46.8 lakh
plus interest at 24 per cent towards three per cent commission on supplies
made to a customer introduced by Sunmoon to Anu’s Labs. The
IPO of Gokul Refoils and Solvent Ltd has been oversubscribed 4.27 times.
The issue received bids for 2.97 crore shares as against the 71.58 lakh
shares on offer, according to the latest data available on the NSE. Till
May 12, 2008, the portion reserved for the qualified institutional buyers
has been subscribed 0.37 times. The portion for the retail investors
received bids for 0.49 times, while the non-institutional investors
segment has been oversubscribed with bids for 1.18 times of the total
shares reserved for them. SEBI
has approved the IPO of Reliance Infratel, the telecom infrastructure
division of Reliance Communications Ltd. Reliance Infratel would offer 10
per cent equity to the public, valued at Rs 5,000-6,000 crore. The company
proposes to raise Rs 5,000 crore - Rs 6,000 crore through the offer with
an issue of 8.91 crore shares, representing about 10.05 per cent equity in
Reliance Infratel. On
May 13, 2008, SEBI decided to tighten the net worth criteria for portfolio
managers and approved the draft SEBI (Issues and Listing of Debt
Securities) Regulations 2008. The concept of creating lien on bank
accounts will enable the application money for the rights and the IPOs to
remain in the bank account of the investor till the allotment is
finalized. This will eliminate the refund process.
According to SEBI statement, it decided to enhance the minimum
networth requirement for registration as portfolio manager from the
existing Rs 50 lakh to Rs 2 crore. It has been decided to give effect to
the requirement of maintaining continuous networth separately for
portfolio management activities. SEBI has also taken a decision that, the
portfolio managers should not float a scheme or pool the resources of the
client in a way, which is akin to mutual fund (MF) activity. Secondary
Market The
key benchmark indices soared during the week, shrugging off weak
industrial production data indicated by a sharp dip in index of industrial
production at 3 per cent, high inflation rate at 7.83 per cent and rising
global crude oil prices. Depreciating domestic currency against the dollar
boosted export driven IT stocks. The BSE Sensex rose by 698 points or 4.17
per cent to 17,435, while the NSE Nifty rose 3.51 per cent or 175 points
to close at 5158 points. The Defty gained only 0.8 per cent as the rupee
slid to 42.5 per dollar. The Midcaps
rose by 5 per cent while the BSE 500 was up 3.65 per cent. The CNXIT index
was an outperformer, up 5.03 per cent while the Bank Nifty saw
short-covering that pushed it up 4.73 per cent. According to Grant
Thornton data, the total number of private equity deals in The Supreme Court on May
15,2008, held that membership of a stock exchange cannot be inheritable as
it is a privilege and not a matter of right. The court accepted the market
regulator's contentions that there was no provision in the SEBI Act and
its rules and regulations, which recognised the registration of
stockbrokers by inheritance and transmission for the purpose of granting
fee continuity benefit. While upholding a Securities Appellate Tribunal
order dated May 12, 2006, the court said, in order to operate in the stock
exchange, they had to obtain a fresh registration from SEBI. For the first
five years, the appellant would be required to pay the quantum of fee
linked to the turnover and thereafter at the flat rate of Rs 5,000 in
order to keep the registration in force. According to SEBI, transmission
can be registered only as a new stockbroker with SEBI in accordance with
the Act, Regulations and the SEBI (stock-brokers and sub-brokers) Rules,
1992 and subject to payment of registration fee for a new stockbroker as
per the schedule fixed in the Regulations. Mutual Fund (MF) houses
were planing to enter commodity segment through commodity-oriented stocks
and mutual funds abroad. Mirae Asset recently filed its application with
the market regulator to set up a global commodity stocks fund that will
invest 65 per cent of its corpus in stocks or mutual funds operating in
the Asia-Pacific region and emerging markets. Similarly, Tata Mutual Fund
is proposing to launch a gold and precious metals fund that will invest in
mining companies. Even ING has filed for a Derivatives The
Institute of Chartered Accountants of India (ICAI) on Friday approved a
new accounting standard, known as AS-32, that will allow shareholders to
evaluate the degree of financial risk a company has taken on with
financial instruments like derivatives. AS-32 follows the two standards
the institute prescribed last December, AS-30 and AS-31, which established
the principles for recognising such instruments. The institute asked
Companies to provide for mark-to-market losses and profits made in
derivative transactions from April 2009. AS-32 will become mandatory from
April 1, 2011. It
was a low volatility week when trading patterns ran contrary to
macro-economic trends. Although inflation continued to soar, stock prices
also rose and the action in the derivatives market reflected some of the
optimism. The market has traded in the range of between 4900-5300 during
the fortnight. Volumes remained average in the F&O market but there
was healthy carryover and open interest (OI) build up. In
the Nifty options market, a long 5200 call (60) versus short 5300 call
(26.95) costs 33 and offers a maximum return of 67. A bearspread with long
5100 put (63.35) versus short 5000 call (38.15) costs about 25 and offers
a maximum return of 75. Both are very decent risk: return ratios.
A long strangle of long 5300 call and long 5000 put costs 65. Government
Securities Market Primary
Market On
May 14, 2008, RBI auctioned 91-day and 182-day T-bills for the notified
amounts of Rs.3,500 crore (out of which Rs 500 under MSS) and Rs.2,000
crore (out of which Rs 1,000 under MSS), respectively. The cut-off yields
for 91-day and 182-day T-bills were 7.39 per cent and 7.58 per cent,
respectively. RBI
has been set rate of interest for floating rate bonds maturing in 2014 at
7.66 per cent per annum on May 16,2008. The rate of interest is applicable
from May 20,2008 to May 19, 2009. Secondary
Market Call
rates ruled around 5.80-7.18 per cent during the week, as refineries’
credit lines were reworked. Consequently, some foreign banks took
advantage of the firm overnight call rates swapping cash dollar for spot.
As a result, four-day forward premia hardened to a little over 6 per cent.
The tight liquidity situation manifested at the weekend liquidity
adjustment facility (LAF) auction. At the weekend auctions recourse to the
repurchase window (liquidity support for the banking system) was Rs 20,345
crore. Average
daily trade volume during the week reduced to about Rs 6,000 crore
implying a weak undertone. In the previous week, the traded volume was
about Rs 7,000 crore. According to traders, the insurance companies
abstained from making purchases, anticipating a further hardening of the
ten-year yields. The one-year negative real yield, widened to 0.2 per cent
slightly up over the previous week’s 0.16 per cent.
MSS outstanding are currently about Rs 1.75 lakh crore. During the
week, Government borrowings of Rs 10,000 crore are expected through two
securities: 8.24 per cent 2018 and the 8.28 percent 2032 securities. Bond
Market Indian Oil Corporation
tapped the market by issuing oil bonds to mobilise Rs 590 crore by
offering 8.01 per cent for 15 years. The
finance ministry will issue around Rs 35,000 crore worth of oil bonds to
partially cover the total under-recoveries of the oil marketing companies
on domestic sales of petroleum products (petrol, diesel, LPG and kerosene)
during 2007-08. The compensation works out to be 50 per cent, as against
petroleum ministry’s demand of 57.1 per cent, of the total
under-recoveries of the oil marketing firms for 2007-08, pegged at Rs 77,
303 crore. As of now, oil bonds of the face value of Rs.20,333 crore,
covering the period April-December 2007, have been issued to the oil
Companies. The decision has been taken by finance minister P Chidambaram
and petroleum minister Murli Deora on May 13,2008. Foreign
Exchange Market The
rupee-dollar exchange rate deprecaited to Rs 42.64, that is, over the year
by 3.5 per cent and from the beginning of this financial year by 6.6 per
cent. Forward premium remained softened at the short end on covering by
exporters and inward remittances. However, in the case of three months,
there was a distinct firming trend, in view of covering by corporates with
foreign currency liabilities. Premia for one month, three, six and 12
months were 1.83 per cent (2.32 percent), 1.97 per cent (1.84 per cent)
1.45 per cent (1.55per cent) and 1.15 per cent (1.38 per cent)
respectively. After
nearly 27 months, the central bank sold about $1.5 billion in March 2008.
The last time RBI sold the dollar was in December 2005. It had sold $6.54
billion to State Bank of Commodities
Futures derivatives In
a proposal to curb spiralling prices and check stocking of essential
commodities, the state governments are planning to put restrictions on the
stocks of edible oil, oilseeds and foodgrains. A notification regarding
the stock control is likely to be issued in the coming days, which would
have numerous steps to stop stocking of commodities. With
the suspension of rubber futures trade affecting its bottom-line, the
Ahmedabad based National Multi Commodity Exchange (NMCE) is looking at
domestic market specific commodities to shore up its volume. The exchange
is looking to open trade in a new coffee variety called 'Robusta Cherry
EP', which the exchange believes can bring in more participation compared
to the Robusta Cherry AB variety which is currently traded in the
commodity exchanges. NMCE is planning to bring in more NMCE
has been launching new series for futures contract in 11 commodities, and
three ‘spread series’ in pepper from Friday, May 16,2008. The new
series for the August-2008 contracts in six commodities–cardamom, copra,
cumin seed, guar gum, gold and silver – will expire on August 14. The
news series for September-2008 contract in rape/mustard seed and sack will
expire on September 15. The November 2008 contract in coffee Arabica and
Robusta, besides pepper, will expire on November 15. The new ‘spread
series’ in pepper will be available for futures trading, spread over
from May 16 to June 14, July 15 and August 14, 2008 respectively. Even as the finance
ministry has dismissed any prospect of a rollback of the commodities
transaction tax (CTT) introduced in this year’s Union Budget, it is not
averse to delaying its notification. The tax was discussed earlier this
week at a high-level meeting between Prime Minister Manmohan Singh,
finance minister P Chidambaram and agriculture minister Sharad Pawar. The
finance ministry is of the view that there is not enough justification to
either rework the tax structure or its rate as commodity exchanges have
sufficient business to justify it. Though the notification was initially
to be issued by June, the Central Board of Direct Taxes (CBDT) is now
expected to notify details of the tax at a much later date. The tax can
only be levied after the notification comes into effect. The CTT would be
levied on all transactions on commodity exchanges, at rates ranging from
0.017per cent to 0.125per cent. Pepper prices that
declined during the past two months is expected to revive in the coming
weeks on weakening rupee and rising international demand for the
commodity. According to a report from the commodity research firm Motilal
Oswal, Indian rupee has currently depreciated to 41.70, forcing exporters
to buy at spot markets to book more profits. This sudden buying created
demand in the spot market, and the prices are expected to touch Rs
14,500-14,650 per quintal in the coming weeks from the current level of Rs
14,000. Due to sluggish demand from the US and Europe during the past
one-and-half month, prices declined to $3,550 (f.o.b) from $4,000 per
tonne for premium ASTA grade pepper that was predominately produced in
India. The Multi Commodity
Exchange (MCX), which launched the gold futures contract for the small
retail investors on May 8, 2008, reported a first day volume of Rs 21.5
crore. The contracts worth of 181 kg of gold have been traded for the July
delivery on the launch day. According to a MCX official, the gold guinea
contracts would ensure greater participation of small investors in the
gold futures market. This is for the first time a commodity exchange in
the country has launched a contract that caters to smallest of retailers. Corporate
Sector Lafarge,
the French cement major, has acquired engineering giant Larsen &
Toubro’s concrete business. The deal values L&T contract at $349
million and give Lafarge a 25 per cent market share and leadership in the
fast growing readymade concrete market. Private
infrastructure major Lanco Infratech consortium had won bid for the Rs
8,000 crore Vizhinjam International Container Port project in Kerala. Hero
Electric, a 100 per cent subsidiary of the Hero Group has announced an
investment of Rs 80 crore to boost its electronic vehicles manufacturing
plant in The
Chennai-based Alliance Minerals Pvt Ltd, the natural stone business arm of
the Rs 500 crore industrial minerals processing and exporting major,
Gimpex Group, is setting up a marble process plant in Germany-based
MAN Group, players in segment vehicles, diesel engines and providers of
industrial services will enter the business of manufacturing premium
wheels for high-speed trains in External
Sector Exports
during the fiscal year 2007-08 was US $ 155512.49 million as against US $
126413.99 million registering a growth of 23.02 per cent. As against this
Imports was valued at US $ 235910.73 million as against US$ 185735.17
million recording a growth of 27.01 per cent. In
rupee terms, while export increased by 9.39 per cent , import flared up by
12.92 per cent. As
a result trade deficit was estimated at US $ 80398.24 million higher than
the deficit at US $ 59321.18 million during April-March 2007-08. Oil
imports were estimated during the year at US$ 77033.57 million during
2007-08 and non-oil imports at US $ 158877.15 million Information Technology Reliance business process
outsourcing (BPO) unit of the Reliance ADAG group will set up three
centres in Kolkata, TelcomTRAI
has favoured Mobile Virtual Network Operators (MVNO) to be allowed in the
country, however, only on the basis of various models suggested in this
regard in its consultation paper. MVNO are the companies who offer their
brands, value added services and infrastructure to mobile companies that
have operating licences and spectrum. Recently, Tata Telecom Services Ltd
(TTSL) has signed a joint venture with Virgin mobiles.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Both
invisible receipts and payments have grown rather rapidly, particularly
since 2002-03. Invisible receipts growth has been led by a strong momentum
in service exports coupled with remittances from overseas Indians. Invisible
payments have been mainly led by interest payments relating to external
debt, dividends/profits paid on foreign investment and technology and
business services related payments.