สรุปข่าวเศรษฐกิจอินเดียประจำวันที่ 16 มกราคม 2557

Commerce Ministry taking legal view on Delhi's U-turn on FDI

The Commerce and Industry Ministry will seek views of the Law Ministry on the Delhi government's move to withdraw implementation of the FDI policy in multi-brand retail sector. In a major policy reversal, the AAP government wrote to the Centre to withdraw approval given by previous Congress government for FDI in multi-brand retailing in Delhi, saying the entry of global chains such as Walmart and Tesco in India would result in large-scale job losses. Commerce and Industry Minister Anand Sharma has termed the Delhi government's decision as "irresponsible" and "ill-considered". He has also raised the question that whether a minority government with outside support can reverse such decisions. The central government permitted 51 per cent FDI in multi-brand retailing in September 2012 and left its implementation to the states. As many as 12 states, mostly Congress-led, including Delhi and Rajasthan, agreed to allow global retailers to open supermarket chains. Other states include Maharashtra, Karnataka and Andhra Pradesh. Rajasthan, too, saw a change of government with the BJP coming to power after the November-December state assembly elections. It is still not clear what stand the BJP government in Rajasthan will take on the FDI policy. FDI in multi-brand retail had not evoked the expected response from global retailers. So far, only one proposal from UK-based Tesco has been approved by the central government.

(Source: Economic Times)

World Bank pegs FY14 growth at 4.8%, says FY15 to be better

The World Bank has pegged India’s economic growth at 4.8 per cent in the current financial year, a tad lower than Prime Minister Manmohan Singh’s projection of five per cent. The projected estimate was, however, a bit higher than the 4.7 per cent the multilateral agency had forecast in its October outlook. In its Global Economic Prospects  released on Tuesday, the  World Bank said weak growth in India has taken a toll on corporate and banks’ balance sheets.  It said gross non-performing and restructured loans rose to 10.2 per cent in September 2013, with India’s central bank warning of stress on asset quality in the iron & steel and infrastructure sectors. Further, strains from a sharp withdrawal of foreign capital could increase the risk of corporate debt distress, while one-off costs of bank recapitalisation could put pressure on fiscal positions, it said. India, with large current account and fiscal deficits and weaker growth, was hit particularly hard by a withdrawal of portfolio capital (resulting in steep currency depreciation) in the middle of the year, stemming from apprehensions of tapering of US quantitative easing, the bank said. India’s current account deficit (CAD) rose to a record 4.8 per cent of gross domestic product (GDP) in 2012-13. In absolute terms, it amounted to around $87 billion. Earlier this year, the government had expected it to decline to around $70 billion, but now, it is confident that the deficit will fall to $50 billion. According to the report, weaker growth in India following years of rising inflation and CAD, has opened a large negative output gap, which is projected to gradually close as the economy recovers. The multilateral agency expected the pace of India's economic growth to pick up and stand at 6.2 per cent in 2014-15 and at 7.1 per cent in the next financial year. Better Indian performance will be heavily reflected in South Asia's growth, which is expected to strengthen to 5.7 per cent in 2014 from 4.6 per cent in 2013 and 6.7 per cent in 2016, it said.    

(Source: Business Standard)

Economy will get back to high-growth path in 3 years: FM

Finance minister P Chidambaram reiterated on Wednesday that India’s current account deficit (CAD) will be contained below $50 billion for FY14, and stressed that the fiscal deficit will be held at 4.8% of gross domestic product for the year, inspite of it having reached 93.9% of the full-year target in the first eight months of the fiscal. “I have reiterated our commitment to contain fiscal deficit to 4.8% of the GDP in current year and I do so again today. We will then reduce it by 0.6% every year until we reach the target of 3% in FY17,” Chidambaram said. Speaking at Petrotech 2014 in Greater Noida, FM said he was confident that the economy will gradually get back to high-growth path in the next three years. “As global economy recovers and as new measures take effect, I am confident that Indian economy will also get back step by step to the high-growth path in three years.” India’s GDP growth slipped to 5% in FY13 and is expected to be at the same level in FY14, the lowest in a decade. Meanwhile, CAD, which soared to the all-time high of $88.2 billion in FY13, was forecast to be around $70 billion in early part of the current fiscal. However, the government took a number of steps, including heavy curbs on gold imports and increasing exports, to curb a bloated CAD. Economic affairs secretary Arvind Mayaram had said on January 9 said that the CAD would be contained at $50 billion. However, FM warned that oil imports were still high and India needed to work towards energy independence. He said of the total imports of $491 billion in 2012-13, oil imports accounted for $164 billion. “A country like India cannot afford such a huge import bill or such a high level of CAD. Therefore, we were constrained to take some hard measures and these measures have helped us contain CAD,” he added.

(Source: Financial Express)            

Easing prices may put a stop to RBI rate hikes: Economists

The easing of wholesale and consumer price pressures is yet to light the fire of interest rate reduction cycle hopes in India, but fears of a Paul Volcker-style era of tight monetary policy to fight inflation are beginning to fade. Almost all the 15 economists and traders polled by The Economic Times, except one, are sure there is little scope for further interest rate increases by governor Raghuram Rajan, but he may not yet be in a hurry to lower rates to avoid repeating the mistakes of his predecessor. The January 28 quarterly monetary policy may see Rajan holding the repo rate at 7.75%, but reiterating that he is determined to move to see savers realise positive returns on savings. For that to happen, prices have to ease substantially before the governor reduces interest rates. Rajan surprised economists and investors on December 18 when he paused interest rate increases despite both consumer and wholesale prices climbing to a record. He now stands validated. With food prices cooling over the past few weeks and easing further in January, economists believe this month's reading could be even lower, hastening an interest rate reduction by April, instead of after elections.

(Source: Economic Times)

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