Washington: The Indian rupee has ‘effectively’ depreciated only 6-7 per cent this year after adjusting it to inflation, almost half of the actual drop in the value of the currency this year, the International Monetary Fund (IMF) said.
The IMF, however, warned that the rupee depreciation would jack up the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation.
IMF spokesperson Gerry Rice said the currencies of many of India’s trading partners, including those in the emerging markets, too have depreciated against the dollar.
“As a result, so far this year the real effective depreciation of the Indian rupee compared to December 2017, by our estimates, is between six and seven per cent,” Rice said.
The real effective exchange rate (REER) is the weighted average of a country’s currency in relation to an index or basket of other major currencies, adjusted for the effects of inflation.
The Indian currency has since the beginning of the year lost almost 13 per cent in value vis a vis the US dollar. He was responding to a question on the fall of the Indian currency in the last few months.
Observing that India is a relatively closed economy, he said the contribution of the net exports to growth in April to June quarter was again stronger than expected and the real depreciation of the rupee can be expected to reinforce this trend.
“On the other hand, the depreciation will obviously raise the prices of imported goods such as oil and petroleum products, potentially putting an upward pressure on inflation,” he said.
The Reserve Bank of India has taken the rising oil import prices into the account when it raised the policy rates in its last two meetings, he noted. Referring to a recent report of the IMF on India, Rice said the Indian economy is recovering strongly from the two transitory disruptions in recent years – the Goods and Services Tax (GST) and demonetisation.
India announced the demonetisation of all Rs 500 and 1000 banknotes in November 2016 to crack down on the use of illicit and counterfeit cash. The GST was launched in July 2017.
“Growth has been gradually accelerating in recent quarters, with strength in both consumption and investment, which have helped the economy,” he said.
Noting that the first quarter growth figures were somewhat stronger than the IMF had anticipated, Rice said the world body will be reviewing its forecast for India, taking account of it and the recent global developments.
Rice said the IMF continues to assess the impact of demonetisation on an ongoing basis. As with most things, there have been pluses and there have been minuses of demonetisation, he said.
“The demonetisation did hinder the money supply, creating cash shortages, which also somewhat dampened consumer and business sentiment,” he said, adding, it resulted in relative slowdown in growth.
“On the other hand, its positive effects, I think, included enhanced digitalisation and higher formalisation of the economy, which would help raise, amongst other things, the revenue and tax compliance,” he said.
According to the IMF spokesperson, there are already some signs of its positive effects.
“The growth in the number of new taxpayers, as documented by the Ministry of Finance, has been substantial in recent years,” he said, adding it is being monitored on an ongoing basis.
Clearing backlog of defence purchases to be priorities for future: Jaitley
New Delhi: Finance Minister Arun Jaitley said the government’s priority for the future would be infrastructure development and clearing backlog of defence procurement, among others.
Development of rural India and improvement of healthcare and education would be the other priority areas, he said at the Hindu Business Line award function here.
“In future may be four priorities– rural India, backlog of defence procurement, healthcare and education and of course infrastructure,” he aid.
“I foresee a better quality of life in urban slums, rural India and the policies must be aimed at allowing these people to aspire and get into at least neo middle class. Two areas where we seriously need to concentrate is healthcare and education,” he said.
There are some areas which are growing and some require support from the government for improving capacity like rural sector, he said, adding higher resources would help the government to spend more on infrastructure development.
The effort of the government has been to maximise resources with lowering of the tax rate by following the theory of lower taxation higher compliance, he said. In the last five years, there has not been a single incidence of increase in tax rate and rates in both direct and indirect taxes have been lowered, he said.
Talking about Ayushman Bharat programme, he said 16 lakh people have benefited from this cashless insurance scheme of the government in the first four months of its launch. With this scheme suddenly 78 per cent of the population came under the health insurance cover, he said.
The ambitious scheme launched in September 2018 aims at providing coverage of Rs 5 lakh per family annually, benefiting more than 10 crore poor families. Eligible people can avail the benefits in the government and listed private hospitals.
The scheme targets poor deprived rural families and identified occupational category of urban workers’ families, 8.03 crore in rural and 2.33 crore in urban areas, as per the latest Socio-Economic Caste Census (SECC) data. It has provided cover of around 50 crore people.
Pak owes China USD 10 million for Gwadar port: US
Washington: Pakistan owes its “all weather friend” China at least USD 10 billion for the construction of the Gwadar port and other projects, a top US general said as he underlined Beijing’s “predatory economics” to expand its global influence.
The strategic Gwadar Port in Balochistan province is being built by China under the multi-billion China-Pakistan Economic Corridor (CPEC) and is considered to be a link between Beijing’s ambitious One Belt, One Road (OBOR) and Maritime Silk Road projects.
“Let us look at just a few examples. Saddled with predatory Chinese loans, Sri Lanka granted China a 99-year lease and 70 per cent stake in its deep-water port,” General Joseph Dunford, Chairman of US Joint Chiefs of Staff, told a Senate Armed Services Committee on Thursday.
The Maldives owes China roughly USD 1.5 billion–about 30 per cent of its GDP – for construction costs, he said.
“China is diligently building an international network of coercion through predatory economics to expand its sphere of influence,” he said, adding that nations around the globe are discovering the hard way that China’s economic “friendship” via OBOR can come at “a steep cost” when promises of investment go unfulfilled and international standards and safeguards are ignored.
General Dunford warned that if China’s predatory debt tactics are left unaddressed, it will have serious implications on the US military.
Alleging that China is extending its reach by increasing its overt military and coercive activities through its neighbours, Dunford said China’s increasingly provocative behaviour in the Indo-Pacific, particularly the South China Sea (SCS), should concern all.
Between 2013 and 2018, China increased its air and sea incursions into the SCS twelve-fold. Within those five years, it also increased deployments of offensive and defensive weapons systems to the SCS by the same order of magnitude, he said.
Jet Airways pilots seek Centre’s help to recover unpaid salaries
New Delhi: Cash-strapped carrier Jet Airways’ pilots union has for the first time sought the government’s help to recover pending salaries and dues from the airline after their pleas to the management have fallen on “deaf ears.”
In a letter to Labour Minister Santosh Gangwar, National Aviators Guild, which represents the majority of Jet’s pilots, has asked that the airline immediately pay their outstanding salaries and allowances till date with interest.
“This situation is leading to extreme tension and frustration amongst our members, hardly an ideal situation for pilots in cockpit,” captain Karan Arora, president of the union, said in the letter dated March 6, seen by news agency Reuters.
Jet has delayed payments to its pilots, suppliers and lessors for months and defaulted on loans after racking up over USD 1 billion in debt. The airline is in talks with state-backed banks for a rescue deal and emergency funds.
The pilots in August were given a staggered schedule of payments for salaries but Jet has not kept up, the union said, adding the airline still owes the pilots most of the salary for December, and all of January and February.
Jet did not immediately respond to a request for comment.