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.
RBI asks banks to grout ATMs to wall, floor for security by September-end
Mumbai: The Reserve Bank asked banks to ensure their ATMs are grouted to a wall, pillar, or floor by September-end, except those installed in high secured premises such as airports, to enhance security of the cash vending machines.
In 2016, the RBI had st up a Committee on Currency Movement (CCM) to review the entire gamut of security of treasure in transit.
Based on the recommendations of the panel, the central bank has now issued instructions aimed at mitigating risks in ATM operations and enhancing security.
As part of the security measures, all “ATMs shall be operated for cash replenishment only with digital One Time Combination (OTC) locks”.
Also, “All ATMs shall be grouted to a structure (wall, pillar, floor, etc.) by September 30, 2019, except for ATMs installed in highly secured premises such as airports, etc. which have adequate CCTV coverage and are guarded by state/central security personnel”.
Further, banks may also consider rolling out a comprehensive e-surveillance mechanism at the ATMs to ensure timely alerts and quick response, it said.
The new measures to be adopted by banks are in addition to the existing instructions, practices and guidance issued by the RBI and law enforcement agencies.
The RBI also warned the banks that non-adherence of timelines or non-observance of the instructions would attract regulatory action including levy of penalty.
SBI refuses to disclose communication from RBI, govt on electoral bonds
New Delhi: The State Bank of India has refused to disclose any communication it received from the government or the Reserve Bank of India on electoral bonds, terming it “personal information” and held in “fiduciary capacity”.
Responding to an RTI filed by Pune-based activist Vihar Durve who had demanded copies of all letters, correspondence, directions, notifications or e-mails received from the RBI or any government department between 2017 and 2019, the SBI said it cannot be provided by it.
The bank cited two exemption clauses under the RTI Act to deny information — Section 8(1)(e) which pertains to information held in fiduciary capacity and Section 8(1)(J) which pertains to personal information of a person which has no link to any public activity.
“Information sought by the applicant cannot be disclosed as it is in fiduciary capacity, disclosure of which is exempted under Section 8(1)(e) and 8(1)(j) of the RTI Act, 2005,” the Central Public Information Officer of the bank said in his reply.
The bank also refused to give any details of action taken by it on such communications from the RBI and the government.
The electoral bonds, for giving donations to political parties, are being sold through SBI only. The sale opens in SBI branches when the Finance Ministry issues a notification of their sale for a given period.
The scheme of electoral bonds notified by the Centre in 2018 has been challenged in the Supreme Court.
Only the political parties registered under Section 29A of the Representation of the People Act, 1951 (43 of 1951) and which secured not less than one per cent of the votes polled in the last general election to the House of the People or the Legislative Assembly of the State, shall be eligible to receive the bonds.
The bonds may be purchased by a person who is a citizen of India “or incorporated or established in India,” the government had said in a statement last year.
The bonds remain valid for 15 days and can be encashed by an eligible political party only through an account with the authorised bank within that period only.
A voluntary group working in the field of electoral reforms, Association for Democratic Reforms (ADR), has demanded a stay on the sale while the CPI(M) has challenged it before the Supreme Court in separate petitions.
ADR recently filed an application in the Supreme Court seeking a stay on the Electoral Bond Scheme, 2018 which was notified by the Centre in January last year.
Walmart’s Flipkart, Indian startup GOQii settle dispute over sharp discounting
New Delhi: Walmart unit Flipkart has settled a legal dispute with an Indian startup that alleged it suffered losses because its products were sharply discounted on the global retailer’s website.
GOQii, a seller of smartwatch-type health devices, sued Flipkart last month in a Mumbai court, alleging its devices were discounted by around 70 per cent to the retail price, much more than the two sides had agreed. The court had, as an interim measure, ordered device sales to be halted on Flipkart.
In a joint statement , the companies said the dispute had been resolved and GOQii health devices would again be available on Flipkart. They didn’t say how the settlement was reached.
Vishal Gondal, CEO of GOQii, told Reuters the company would withdraw the case against Flipkart. The e-commerce retailer’s “team worked on a resolution benefitting the brand and the customers”, Gondal said in the statement.
The legal spat was seen as a test case of the giant retailer’s operating strategy in the country.
Small traders and a right-wing group close to Prime Minister Narendra Modi’s ruling party have raised concerns about large e-commerce companies, saying they burn billions of dollars deeply discounting some products to lure customers onto their sites, in the expectation that they will also buy other goods.
GOQii said it signed an agreement last year with a Flipkart unit to sell two of its devices at a price not below 1,999 rupees (USD 28.63) and 1,499 rupees. It later found the devices were being sold for 999 rupees and 699 rupees, calling it “unauthorized” discounting.
In response, Flipkart said it reserved “the right to institute actions for defamation, both civil and criminal”, arguing it wasn’t responsible for any discounts which are determined by third-party firms which sell via its website.
The two companies struck a friendlier tone in their joint-statement on Friday as they brought the legal battle to an end.
“We have ensured constant engagement with GOQii to resolve any differences,” Flipkart said in the statement.
With a 19 per cent market share, GOQii was the second-biggest player in India’s so-called wearables market last year, data from industry tracker IDC showed. The market is dominated by China’s Xiaomi, with Samsung a small player.
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