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Centre hikes import duty on 15 items as Rupee, stocks fall

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New Delhi: On a day when the benchmark indices, BSE Sensex and NSE’s Nifty 50, closed over two per cent lower amid a sell-off in global markets, the government hiked import duty on around 15 items up to 20 per cent, effective Friday.
The latest step follows an earlier move to hike customs duty on 19 items, including air-conditioners and refrigerators, from 10 per cent to 20 per cent.
Earlier Thursday, two senior Finance Ministry officials told The Indian Express that more measures to curb imports and a possible issue of bonds to Non-Resident Indians are options that could be considered to contain the rising current account deficit (CAD). In April-June 2018, the CAD widened to $15.8 billion —2.4% of GDP — compared with $15 billion during the same period last year.
The latest hike mainly targeted communication items. Import duty on “populated, loaded or stuffed printed circuit boards” of eight goods, other than mobile phones, has been raised to 10 per cent. Duty has also been raised from 10 per cent to 20 per cent for base stations and for machines for reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus other than modems, voice frequency telegraphy, digital loop carrier systems and multiplexers.
The late evening decision came after a sharp fall in stock, bonds and rupee markets, with traders cautious ahead of retail inflation and Index of Industrial Production data due Friday.
Finance Ministry officials attributed the fall in markets to global factors. “Stock markets have their own way of going up and down. (But) our main worry is current account deficit, balance of payments gap and the rupee. These are the three things which we are watching and we will find ways for them. We have a strategy in place. If the need be, the government can intervene in different ways also to remove the balance of payments gap,” an official said.
For the first time in six quarters, the balance of payments turned negative in the April-June quarter – a deficit of $11.3 billion, compared to a surplus of $11.4 billion last year.
The rupee has lost more than 13 per cent since the beginning of 2018. On Thursday, the rupee hit yet another record low of 74.45 against the US dollar. The BSE Sensex crashed 1,030 points to slip below the key 34,000-mark in the opening trade, tracking a global sell-off as. The Sensex ended 759.74 points, or 2.19 per cent, lower at 34,001.15.
In the global markets, the biggest stock slide since February impacted indices from the US through Europe and Asia on Thursday, triggered, in part, by fresh fears over countries imposing controls on global trade. While China’s Shanghai Composite gauge tumbled more than 5 per cent intra-day, the losses in the European stock markets were far more subdued. Oil prices fell to a two-week low as global stock markets slipped.
”We do have pressure on CAD, we do admit it but the government is not oblivious to it. On CAD and capping our balance of payments, we have got quite good (forex) reserves now compared to 2013, so that way also we don’t need to worry…It is our attempt to take actions in time and we will take more actions if need be. The government is alert about the situation, we are always discussing, we are finding the strategy and we will do what it requires us to do at an appropriate time,” a senior official said.
Asked whether the government will launch NRI bond issue, the official said: “I can’t tell about future. It may happen tomorrow, it may happen after one month, it may not happen. All options are available with us and we will see what time we will get into the market.”
Attributing the fall in markets to global factors, the official said: “What happened in US yesterday had a ripple effect here today. IMF downgraded global growth rate, US growth rate for next year, both these had impact on markets…(But) India’s (growth) is impressive and stable. They have downgraded not only global GDP growth rate but they have also downgraded two specific countries, which will have a competitive effect vis-a-vis India, that is, US and China.”
India’s inflation is “under control” and growth is “picking up”, but rupee is and current account deficit are turning negative mainly due to rising global crude oil prices, the official said. The finance ministry does not expect the crude oil prices to rise above $85 to a barrel in the international markets, and oil marketing companies are unlikely to be asked to share further burden of subsidising prices.
“Oil prices are now coming down, so that is a reason for rupee to appreciate. It’s possible that some people might have taken positions in rupee, with some kind of different outlook, but now I think it is time for them to reconsider also. They may lose money if they…but we believe that rupee should only appreciate from this level. At least, it should start appreciating. That’s our estimate,” the official said.


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WPI inflation eases to near 2-year low at 2.02 per cent in June

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New Delhi: Wholesale price-based inflation declined for the second consecutive month to its 23-month low of 2.02 per cent in June, helped by decline in prices of vegetables as well as fuel and power items, according to official data released on Monday.

The Wholesale Price Index (WPI)-based inflation was at 2.45 per cent in May. It was 5.68 per cent in June 2018. Inflation in food articles basket eased marginally to 6.98 per cent in June, from 6.99 per cent in May.

Vegetable inflation softened to 24.76 per cent in June, down from 33.15 per cent in the previous month. Inflation in potato was (-) 24.27 per cent, against (-) 23.36 per cent in May.

 

However, onion prices continued the rising trend with inflation at 16.63 per cent during the month, as against 15.89 per cent in May. WPI inflation in June is the lowest in 23 months, since July 2017, when it was at 1.88 per cent.

Inflation in ‘fuel and power’ category cooled substantially to (-)2.20 per cent, from 0.98 per cent last month. Manufactured items too saw decline in prices with inflation at 0.94 per cent in June, against 1.28 per cent in May.

WPI inflation data for April has been revised upwards to 3.24 per cent from provisional 3.07 per cent. Data released earlier this week showed that retail inflation spiked to a six-month high of 3.18 pc in June, on costlier food items.

The Reserve Bank, which mainly factors in retail inflation for monetary policy decision, on June 6, lowered its benchmark lending rate to nearly a nine-year low of 5.75 per cent, even as it upped its inflation projection to 3-3.1 per cent for the first half of 2019-20.

Flagging uncertain monsoon, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario as risks to inflation, the RBI projected upward bias in food inflation in near term.

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China second-quarter GDP growth slows to 27-year low

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Beijing: China`s economic growth slowed to 6.2% in the second quarter, its weakest pace in at least 27 years, as demand at home and abroad faltered in the face of mounting U.S. trade pressure.

While more upbeat June factory output and retail sales offered signs of improvement, some analysts cautioned the gains may not be sustainable, and expect Beijing will continue to roll out more support measures in coming months.

Chinas trading partners and financial markets are closely watching the health of the worlds second-largest economy as the Sino-U.S. trade war gets longer and costlier, fuelling worries of a global recession.

 

Mondays growth data marked a loss of momentum for the economy from the first quarters 6.4%, amid expectations that Beijing needs to do more to boost consumption and investment and restore business confidence.

The April-June pace was in line with analysts` expectations for the slowest since the first quarter of 1992, the earliest quarterly data on record.

“Chinas growth could slow to 6% to 6.1% in the second half," said Nie Wen, an economist at Hwabao Trust. That would test the lower end of Beijings 2019 target range of 6-6.5%.

Cutting banks` reserve requirement ratios (RRR) “is still very likely as the authorities want to support the real economy in a long run,” he said, predicting the economy would continue to slow before stabilising around mid-2020.

China has already slashed RRR six times already since early 2018 to free up more funds for lending and analysts polled by Reuters forecast two more cuts this quarter and next.[ECILT/CN]

Beijing has leaned largely on fiscal stimulus to underpin growth this year, announcing massive tax cuts worth nearly 2 trillion yuan ($291 billion) and a quota of 2.15 trillion yuan for special bond issuance by local governments aimed at boosting infrastructure construction.

The economy has been slow to respond, however, and business sentiment remains cautious.

Trade pressures have intensified since Washington sharply hiked tariffs on Chinese goods in May. While the two sides have since agreed to resume trade talks and hold off on further punitive action, they remain at odds over significant issues needed for an agreement.

Data on Friday showed China`s exports fell in June and its imports shrank more than expected, while an official survey showed factories were shedding jobs at the fastest pace since the global crisis..

Premier Li Keqiang said this month that China will make timely use of cuts in banks` reserve ratios and other financing tools to support smaller firms, while repeating a vow not to use “flood-like” stimulus.

A steady string of weak economic data in recent months and the sudden escalation in the U.S.-China trade war had sparked questions over whether more forceful easing may be needed to get the Chinese economy back on steadier footing, including some form of interest rate cuts.

But June activity data showed industrial production, retail sales and fixed-asset investment all beat analystsforecasts, suggesting that Beijings earlier growth-boosting efforts may be starting to have an effect.

Analysts also say room for more aggressive policy easing is also being limited by fears of adding to high debt levels and structural risks.

Industrial output climbed 6.3% from a year earlier, data from the National Bureau of Statistics showed, picking up from May`s 17-year low and handily bearing a forecast for 5.2% growth.

Daily output for crude steel and aluminium both rose to record levels.

Retail sales jumped 9.8% – the fastest clip since March 2018 – and confounding expectations for a slight pullback to 8.3%. Gains were led by a 17.2% surge in car sales.

Some analysts, however, questioned the apparent recovery in both output and sales.

Capital Economics said its in-house model suggested slower industrial growth, while the jump in car sales may have been partly due to a one-off factor.

Car dealers in China are offering big discounts to customers to reduce high inventories that have built up due to changing emission standards. Motor vehicle production actually fell 15.2%, the 11th monthly decline in a row, suggesting automakers don`t expect a sustained bounce in demand any time soon.

“The monthly data were better than expected… (But) we are sceptical of this apparent recovery given broader evidence of weakness in factory activity,” said Julian Evans-Pritchard, Senior China Economist at

“Looking ahead, we doubt that the data for June will mark the start of a turnaround.”

Fixed-asset investment for the first half of the year rose 5.8% from a year earlier, compared with a 5.5% forecast and 5.6% in the first five months of the year.

Real estate investment, a major growth driver for the world`s second-largest economy, quickened in June. It rose 10.1% from a year earlier, accelerating from a 9.5% gain in May but still slower than in April, Reuters calculated.

Still, the economy remains in a complex situation, with external uncertainties on the rise, the statistics bureau said, adding China will work to ensure steady growth.

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RBI to come out with mobile app for currency notes identification

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New Delhi: The Reserve Bank of India will come out with a mobile application to help visually challenged people in identifying currency notes as cash still remains a dominant mode of transaction.

At present, banknotes in the denominations of Rs 10, 20, 50, 100, 200, 500 and 2,000 are in circulation, besides Re 1 notes issued by the Centre.

The RBI said that identification of banknote denomination is key to successful completion of cash-based transactions by visually impaired persons.

 

Intaglio printing based identification marks for helping the visually challenged in identification of banknotes denomination are present in the notes of Rs 100 and above.

After demonetisation of old Rs 500/1,000 notes in November 2016, new banknotes in design and sizes have been put in circulation.

“The Reserve Bank of India has been sensitive to the challenges faced by the visually challenged in conducting their day to day business with Indian banknotes,” said the central bank while scouting for a vendor to develop the mobile application.

The proposed mobile app would be able to identify the denomination of notes of Mahatma Gandhi Series and Mahatma Gandhi (New) series by capturing the image of the notes placed in front of mobile camera, the RBI said while inviting bids from tech firms to develop the app.

The RBI had come out with a similar ‘request for proposal’ from vendors but later cancelled it.

The app will also generate “audio notification” intimating the currency note denomination to the user if image is captured correctly, else intimating the user to try again in case of image is not readable.

There are about 80 lakh blind or visually impaired people in the country, who are likely to benefit from the initiative of the central bank.

In June, 2018 the central bank had declared that it would explore the feasibility of developing a suitable device or mechanism for aiding the visually impaired in the identification of Indian banknotes.

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