Economist Dr Subramanian Swamy, whose Janata Party merged with the Bharatiya Janata Party in August, has issued the following press statement on the Indian economy and demanded the implementation of a four-point agenda to save it.
India's current account deficit is expected to deteriorate in the current fiscal on account of costlier imports and tepid merchandise exports, according to the Finance Ministry's monthly economic review. The review released on Thursday by the ministry also said that global headwinds would continue to pose a downside risk to growth as crude oil and edibles, which have driven inflation in India, remain major imported components in the consumption basket. For the present, it said, "their global prices have softened, as fears of recession have dampened prices somewhat. This would weaken inflationary pressures in India and rein in inflation."
India's economy could prove to be the "most resilient" in the subregion of South and South-West Asia over the long term, according to a report by the UN, which says a positive but lower economic growth post COVID-19 pandemic and the country's large market will continue to attract investments. The report titled 'Foreign Direct Investment Trends And Outlook In Asia And The Pacific 2020/2021', and compiled by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), stated that inward FDI flows to South and South-West Asia slightly decreased by 2 per cent in 2019, from $67 billion in 2018 to $66 billion in 2019. The growth, however, was mainly driven by India, which accounted for 77 per cent of the total inflows to the subregion and received $51 billion in 2019, up 20 per cent from the previous year.
The new norms provide an operational framework for FPIs, a new class of overseas investors that club all existing class of investors like foreign institutional investors and Qualified Foreign Investors.
The broader Nifty too fell for the second straight session and closed with a loss of over 62 points, or 0.54 per cent, at 11,520.30, after hovering between 11,496.85 and 11,602.55.
Benchmark stock indices Sensex and Nifty tumbled nearly 1 per cent on Wednesday due to profit booking in banking, financial and IT stocks after a recent rally. The 30-share BSE Sensex plunged 537.22 points or 0.94 per cent to end at 56,819.39 as 24 of its stocks declined. During the day, it tanked 772.57 points or 1.34 per cent to touch a low of 56,584.04. The broader NSE Nifty declined by 162.40 points or 0.94 per cent to 17,038.40 with 39 of its constituents ending in the red. Bajaj Finance was the biggest loser among Sensex stocks, dropping by 7.24 per cent.
As the central bank continues to increase forex reserves by running down the forward book which totalled $42 billion as of end-July, signalling its strong resolve to build a bigger reserve cushion to aid its expansionary, unorthodox monetary policy, the reserves are set to top the $655-billion-mark by March, according to a report. The forex kitty declined by $2.10 billion to $619.36 billion for the week to August 13 due to a fall in the core currency assets and gold, showed the latest RBI data. The reserves had risen to a lifetime high of $621.46 billion in the previous reporting week ending August 6.
In the longest losing streak of 2017, the BSE Sensex has lost 1,270 points, or 3.91 per cent. It fell to a three-month low of 31,154.03 on Wednesday.
Finance Minister P Chidambaram on Monday said the currency will find its level as steps being taken by the government to contain fiscal and current account deficits will improve investor sentiments.
Despite the 3 per cent gain in September 2019, the FPI sell-off during the quarter has seen the benchmark indices - the S&P BSE Sensex and the Nifty 50 register negative returns in Q3CY19.
The ballooning of crude prices has significantly increased the country's oil import bill and it can also lead to a worsening of the current account deficit and fiscal deficit for the domestic economy.
In line with rally in stocks, the Indian rupee on Monday appreciated for the second straight session and closed with a eight paise gain at a one-week high of 61.36 against the Greenback.
The battered rupee gained 225 paise to 66.55 against the dollar today, the most in at least 15 years, after the Reserve Bank of India eased pressure in the currency market by starting a facility for state-run oil refiners to buy foreign exchange.
Sustained foreign funds outflows and the rupee depreciating 68 paise to hit a three-month low of 64.88 (intra-day) against the dollar affected investor sentiment
Forex traders said a stronger dollar also dragged the rupee down.
The Reserve Bank of India (RBI) is expected to hold its policy interest rate at 6.75 per cent next week to stifle inflation.
After turning net buyers for the fifth straight month till June, foreign portfolio investors (FPIs) withdrew a net of Rs 11,743 crore ($1.7 billion) in July. This was their highest outflow since October 2018.
Domestic mutual funds (MFs) and foreign portfolio investors (FPIs) have been net buyers of stocks in August. Domestic fund houses have continued to invest in stocks, propelled by the success of various new fund offers (NFOs) and strong flows into equity funds. MFs had purchased stocks worth more than Rs 8,300 crore until August 23, according to the data provided on the Securities and Exchange Board of India (Sebi) website. Jimmy Patel, MD and CEO at Quantum AMC, says: "The surge in equity investments by MFs is because of two key reasons. One, equity NFOs are getting a strong response from investors, and fund houses need to deploy that money in the markets.
Reacting to market specific developments, the domestic unit touched a low of 66.74 in intra-day trade before concluding at 66.65.
We are much better placed than in 2013 with our overall fundamentals much stronger - higher foreign exchange reserves, a more favourable growth-inflation mix and an institutional framework for targeting inflation, says B Prasanna.
Foreign institutional investors were the major sellers on the Indian bourses in the last six months, accounting for total outflows of Rs 62,000 crore (Rs 620 billion).
Equity indices gave up early gains to close in the red for the third session on the trot on Wednesday, weighed by selling in banking and finance counters amid inflationary pressures and persistent foreign fund outflows. A weak rupee and lacklustre global cues also kept buying sentiment in check, traders said. The 30-share BSE Sensex opened on a firm footing but failed to hold on the momentum, finishing 237.44 points or 0.41 per cent lower at 58,338.93. On similar lines, the broader NSE Nifty dipped 54.65 points or 0.31 per cent to close at 17,475.65.
The US Federal Reserve on Wednesday surprised the markets by saying it will continue with its monthly $85-billion bond buying programme and wait for more evidence of growth recovery.
The V-shaped rebound has been aided by a gush of liquidity flooding the global financial system, thanks to balance sheet expansion.
ED and Directorate of Revenue Intelligence have detected a significant increase in the outflow of Indian money, specifically into four countries --Thailand, Dubai, Singapore and Hong Kong.
Saudi Arabia is insisting on 'In Kingdom' total value-addition requirements
In the entire 2017, FPIs put in a collective amount of Rs 2 trillion in equity and debt markets
'Recent underperformance notwithstanding, equities should constitute a major part of investors' financial portfolio.'
On the Sensex chart, Axis Bank, Titan, IndusInd Bank, HDFC Bank, Dr Reddy's, HDFC and Asian Paint were major losers.
The UN Conference on Trade and Development (UNCTAD) said in a report on Monday that a lower but positive economic growth in India in the post-Covid-19 pandemic period and India's large market will continue to attract market-seeking investments to the country. The World Investment Report 2020 by UNCTAD said that India was the 9th largest recipient of FDI in 2019, with 51 billion dollars of inflows during the year, an increase from the 42 billion dollars of FDI received in 2018, when India ranked 12 among the top 20 host economies in the world.
A declining rupee, elevated crude oil prices and sustained foreign fund outflows added to the gloom
RBI should monitor export credit offtake and how well banks implement its instruction.
The surge is a stark turnaround from 2013 when the country's current account gap hit a record high due to outflows on expectations the US Fed would rein in its stimulus programme
The sudden movement of the rupee - post the monetary policy - is not a reason to panic, said currency dealers. According to them, a correction was overdue for the rupee that remained the best performing currency in the region for well over a month. The rupee closed at 74.72 a dollar on Friday from its previous close of 74.60. It had dropped 1.52 per cent against the dollar on April 7 after the Reserve Bank of India (RBI) announced its monetary policy, committing to buy Rs 1 trillion of bonds in the June quarter. A weak rupee goes well with the export narrative of the government, and is consistent with the RBI's intervention strategy that prevented an appreciation.
According to the QNB Group report, the growth in emerging markets -- from Brazil to Indonesia, Russia and South Africa -- is slowing down, partly reflecting the tightening of domestic policies by these countries last year to stabilise foreign exchange rates.
Participants are keeping an eye on the Winter Session of Parliament, which started today, and US fiscal policies to be followed by President-elect Donald Trump
Possible slowdown of FII money into debt and equity markets could add pressure on currency.
'The prospects for both India and the global economy is that we are headed towards a very difficult time.' 'I see very uncertain at least 8-10 months for both India and the rest of the world.'
Thus far in FY21, BSE, NSE have rallied 70 per cent and 71 per cent, respectively.
The immediate concern for the rupee is the sharp spike in oil prices
