India Trade deficit remains in double digits
In June, India’s trade deficit eased a tad to USD 10.5 bn from USD 11.3 bn in May 2010, although higher than the average of ~USD 9 bn over the past 12 months. Thus, Q1FY11 trade deficit has reached ~USD 32 bn, highest on record, excepting the quarter ending September 2008, when it was at ~USD 43 bn on the back of exceptionally high oil prices. Relatively slower growth in exports compared to imports (particularly oil imports) in the first three months of the current fiscal led to widening of the trade deficit. Sharp Read more
Deficit Watch – fiscal improvement + red flag on the current account
India’s current account balance has been subject historically to pronounced seasonality – improving sharply in the second half of each fiscal year (October- March). For FY09/10, however, we were surprised that the seasonal impact did not apply – instead, the current-account deficit actually widened for October 2009-March 2010 (to 3.4% of GDP, from 2.2% of GDP for April-September 2009). There were two main factors responsible; the trade balance was broadly unchanged between the two halves of the fiscal year Read more
Current Fitch Sovereign Rating of India
Here is what Fitch the international rating agency thinks of India. It said,
The Negative Outlook on the Local?Currency IDR reflects the agency’s judgement that the fiscal deterioration in the year to end?March 2009 (FY09) and FY10 has been partly structural in nature, and that India’s public finances are set to stress comparisons with ‘BBB’ peers beyond breaking point. The agency looks for meaningful fiscal consolidation measures to get India’s public finances onto a path consistent with the current ratings. Read more
Indian Rice Export Scam of Rs 2,500 Cr – Courtesy Pranab Mukherjee + KamalNath
If you read the Outlook magazine dated Dec-21st, you will notice that despite objections raised by then Finance Minister Mr. P. Chidambaram and Agriculture, Food and Civil Supplies Minister – Mr. Sharad Pawar, empowered group of ministers headed by Mr. Pranab Mukherjee under the controversial leadership of then Commerce Minister Mr. Kamal Nath pushed for Rs 2,500 cr Rice Export Scam when India itself was facing food inflation and rice shortage. So now you know why prices of food and essential commodities rise 
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Exports may continue to fall through H1 FY10
India’s exports may continue to fall through the first half of FY10, according to the trade secretary on Monday. He also said that exports in March may have fallen by 31%, sixth straight decline in exports.
Exports during the full fiscal 2008-09 would probably reach the downwardly revised figure of $170 billion. However, the next fiscal will bring more pain and the declining trend may not turnaround before the second half of FY10. As a result, there will be flat growth at the best in FY10.
Most of the developing countries have witnessed sharp decline in exports due to deepening recession in Europe and US and resulting decline in consumer spending in these regions.
However, some support for India’s exports has been coming from areas like Latin America and South-east Asia which has prevented even the worst kind of nightmare for most of the export industries.
RBI Forex reference rate for the dollar at Rs 50.52 on Monday
The Reserve Bank of India on Monday fixed the reference rate for the dollar at Rs 50.52, as compared to the previous rate of 50.14 on Friday.
The corresponding exchange rate for the euro was Rs 69.11 (Rs 68.39) and that for the UK pound was 73.5647 (Rs 72.4222).
The reference rate for the Japanese currency was fixed at Rs 52.50 (Rs 52.95) per 100 yen.
Traffic at Major Ports Declined by 4.2% in February
According to the latest data released by the IPA, traffic at major government-owned/regulated ports in India fell by 4.2% YoY in February. Traffic has fallen in 9 out of 12 ports in February 2009. Tuticorin port has had the sharpest decline at 32% YoY. Traffic
at ports like JNPT and Kandla have fallen by 19% and 13% respectively.
Overall traffic for the period April 2008-February 2009 has grown by 2.24%YoY. However, most of the growth has been front-ended – while traffic grew by ~5.3% in the 7 months of Apr-Oct08, it has fallen by 2.6% in the last 4 months.
Container volumes have fallen off sharply, with volumes down 26.2% in February. Bulk cargo trends remain mixed, fertilizer and coking coal volumes are down 40% and 49%, respectively, whereas POL, iron ore and thermal coal volumes continue to grow. MICT terminal at Mundra, container throughput for the month of February was ~44325, down 34% YoY.
Week rupee helping out battered exporters
Indian rupee has once again lost significant ground against dollar over last few days. The development reflects that de-leveraging continues in international markets as the global economic crisis deepens further. Changing fortune of rupee however has come as a rescue to the exporters.
Marred by the global demand slowdown amidst languishing recession in west, the exporters will certainly take relief in the fact that rupee has touched Rs 50 mark against dollar. However, significant gains will only accrue of the currency remains weak for some time, at least over next few months.
Another problem is that many exporters had hedged the currency at higher levels fearing further appreciation in rupee. These will certainly be unable to take the advantage of fresh weakness in the rupee, at least in short term.
Most currency watchers believe that rupee will continue trading range bound, but with lower side risk, against the dollar in near term. The news does cheer exporters, though they contend that volatile currency was no good for their already shrinking realisations and will wait to see rupee staying low for few months before celebrating.
Indian exports have fallen substantially over last few months as the consumer spending and hence demand went down in key destinations like Europe and US. During the quarter ended December, India’s exports fell by about 10% while the same are apprehended to have gone down by more than 20% in January.
Govt amends SEZ rules to benefit developers
The government has amended rules for suppliers of goods to special economic zones (SEZ) to claim export incentives like duty draw backs in the domestic currency and simultaneously asked the developers to provide housing to staff and workers within the tax-free enclaves. And the tax benefits and concessions have been extended to the sub contractors as well.
The amendment concedes gems and jewellery units in the SEZs would be allowed to re-import the goods exported if their buyers default on payments. The government has urged the developers and co-developers to strive for housing facilities for their workers in the SEZ.
MMTC likely to pick out iron importers
State-run mining giant MMTC has floated bids for selecting pig iron importers and bids are to be submitted by February 12, The company would be eligible if its average gross sales stand at $100 million and gross profit of $5 million in the last three years.
It also noted that the companies should either be the actual user of pig iron or trading companies dealing in steel products for at least three years.
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