The rupee hit a record low on Tuesday, with the absence of RBI intervention prompting importers to rush to cover future dollar needs, while exporters refrained from selling dollars in expectation that the rupee could fall further. The rupee has plunged 2.8 percent so far this week, notching record lows for two consecutive days. The weakness in the rupee has prompted investors to exit their positions in the debt market while the domestic equity market is also under selling pressure.
(Source: The Economic Times)
Gold import clamps set to bite
The Reserve Bank of India’s various recent measures to check gold import are expected to bite on both, demand and import (and, perhaps, encourage the commodity’s smuggling). It has banned import on a consignment basis (where the importing bank doesn’t have to fund it till actual sale) and disallowed any credit facility for this. By imposing a 100 per cent cash margin, it has closed the arbitrage window, where exporters were importing gold under dollar credits at the international rate of around four per cent while utilising cash with them for domestic working capital use and saving nearly six per cent. Also, sme large exporters were importing gold and converting it to crude jewellery with minimal cost and re-exporting to take advantage of rate arbitrage. This ‘round tripping’ will now halt.
(Source: Business Standard)
Gold import may dip to a third thanks to RBI curbs, weak rupee
The weakening rupee, along with the efforts of the government and the Reserve Bank of India, could see the country’s monthly gold imports decline to 40-50 tonnes each during June and July, a sharp dip from 142 tonnes in April and 162 tonnes in May, the Bombay Bullion Association said Monday. The decline in imports is more a result of weak demand than the recent curbs by the government. The end of the festive season, coupled with the weakness in the rupee, which pushed up the domestic price of gold could be key factors behind the decline in gold imports this month and the next. The fall in gold imports could come as a huge relief to the government, battling a record high current account deficit of 6.7% of GDP, which in turn has pushed the rupee to a record low.
(Source: The Financial Express)
OECD finds Indian economic growth 'below global trend
India’s growth prospects continue to remain “below trend” even as most of the major economies are witnessing moderate improvements, Paris-based think tank Organisation for Economic Cooperation and Development (OECD) said today. According to OECD Deputy-Secretary General Richard Boucher, India needs another round of reforms for better GDP growth and rid itself of unnecessary regulations to reduce corruption. Asked as to what India could do to have improved economic growth, Boucher said, “India needs to do things to increase government efficiency, smoothing the way for projects, reduce regulatory burden on companies and open up some more to competition. So, we think that another round of reforms is necessary.”
(Source: Business Standard)
Foreign power companies like E.ON, GDF Suez pull the plug on India plans
Cash-rich global power utilities, which were looking at India to fuel their growth ambition, are losing patience and, in some instances, have even wrapped up their presence in the country due to uncertainties in the sector and the slow pace of reform. Lured by the demand-supply mismatch in electricity generation and the merger and acquisition opportunities in India, almost half a dozen foreign players, including giants like E.ON of Germany and France-based GDF Suez, had come scouting for opportunities in India around two-three years back.
(Source: The Economic Times)
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