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Indo-US ties need stronger economic bond to realise potential: Subramanian

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Washington:The India-US relationship cannot realise its full potential without stronger economic bond, Chief Economic Adviser Arvind Subramanian has said.

The chief economic advisor is currently in Washington DC to attend the annual Spring Meeting of the International Monetary Fund and the World Bank.

Subramanian said that there were some aspects of the India-US relationship which were doing extremely well, especially on the strategic side and the defence side.

 

“But, I also do believe that in the long run, unless economic ties bind us more closely together, this will always be a kind of relationship that will have not realised its full potential,” he said.

“I was a great proponent of the US-India free trade agreement idea some time ago. Of course, we all have to recalibrate our notions and expectations and so on,” Subramanian said on the occasion of the launch of Washington-chapter of CUTS International, an Indian think-tank.

“However, I still continue to think that this is a terribly important relationship, the US-India relationship for all the reasons that all of you know about shared values, democracies and of course not to mention the critical role that the Indian diaspora plays in the US,” Subramanian said.

He said the two countries should start thinking creatively about how to sustain this relationship.

“At this stage it’s really hard for me to come up with really a kind of creative idea on this,” he said.

Noting that India had benefited from an open global trading system in the past and its economic fortunes in the long run depended on an open trading system, Subramanian said it was “terribly important” for India and the US to work towards sustaining this open relationship.

“So, I think we need to work much more closely together in all forms. I do think that, my own personal view is that, hopefully we’ll ride out the current problems of attitudes to the trading relationships. But in the medium run, it’s up to countries like India, many middle-income countries like India, medium-sized countries to sustain an open global trading environment,” he said.

Asserting that the Indo-Pacific is and is going to continue to be the world’s economic centre of gravity for a very long time, Subramanian said India had to be well-positioned in order to both contribute to and take advantage of this kind of opportunity.

“I think, India will also have to prepare itself at some stage to being a part of this whatever the trading relationships that emerged,” he said.

India was “not there yet” in terms of its own domestic preparedness to enter these relationships, he said.

“But I think at some stage we will have to be. We are trying. All that the government is doing is should go some way towards preparing us for this,” the chief economic adviser said.

Subramanian said there is now a real opportunity for India and the US to cooperate on coal.


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India to surpass China to become 2nd largest oil demand centre in 2019

Press Trust of India

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New Delhi: India will surpass China to become the second largest oil demand growth centre globally in 2019 on back of buoyant auto fuel and LPG consumption, research and consultancy group Wood Mackenzie said on Tuesday.

In a report, Wood Mackenzie said India’s oil demand growth recovered strongly in 2018, overcoming the aftermath of the implementation of Goods and Services Tax (GST) and demonetisation, and contributed 14 per cent of the global demand growth or 2,45,000 barrels per day.

“We forecast oil demand to grow at the same level in 2019. This will result in India becoming the second largest demand growth centre globally in 2019, behind the US but ahead of China. Transport fuels – gasoline and diesel – and residential LPG will continue to be the two main drivers of oil demand growth,” it said.

 

According to the US Energy Information Administration (EIA), India is currently ranked behind the United States and China as the world’s third-largest oil consumer. It consumed 206.2 million tonnes (over 4 million bpd) in the 2017-18 fiscal year.

During April-December, consumption of petroleum products has been 157.4 million tonnes, up 2.5 per cent over year-ago period.

Last August, oil cartel OPEC projected India’s oil demand to rise by 5.8 million barrels per day (bpd) by 2040, accounting for about 40 per cent of the overall increase in global demand during the period.

Mackenzie said diesel, the most consumed fuel in the country, is projected to grow by 6.4 per cent or 1,12,000 bpd year-on-year in 2019 compared with 93,000 bpd in 2018.

This was because of “buoyant commercial vehicle sales facilitated by sustained infrastructure growth, and increasing demand from the construction, logistics, e-commerce and consumer goods sectors,” it said.

Also, the push will come from a demand-based approach instead of a tax-based approach in the logistics sector, following the implementation of the GST, which has led to the removal of inter-state taxes. “This is a structural shift, resulting in increased demand for heavy and medium-duty trucks to achieve economies of scale and operational efficiency.”

More importantly, general elections in May will lead to increased travel activity for campaigning and implementation of infrastructure projects, which will bolster demand in the first half of 2019, Mackenzie said.

 

“Key risks ensue as crude price volatility is expected to persist. Historically, short-term gasoline demand has been relatively inelastic to retail prices in developing economies such as India. Even though higher retail prices affect consumer sentiment for new vehicle purchases, we believe this trend will continue with income effects driving the demand, subduing the price effects,” it said.

LPG demand growth will remain robust in 2019 at 5 per cent (40,000 bpd) although it is lower than the 56,000 bpd growth achieved in 2018. “The number of new household LPG customers continued to surge, driven by the Ujjwala scheme to promote clean cooking fuel in rural areas. That said, there is a largely untapped market, as around 50 million households remain deprived of LPG,” it said.

On the use of electric vehicles, it said only 2,60,000 EVs have hit Indian roads, majority being two-wheelers.

“Electric car sales, for instance, declined by 40 per cent to a mere 1,200 units in the financial year 2018 over the financial year 2017, while electric two-wheeler sales rose 138 per cent to 54,800 units during the same period. In contrast, China had a stock of 1.8 million EVs and 258 million e-bikes at the end of 2018,” it said.

This year, it said, will be an important year as the final version of the National Auto Policy and the second phase of the FAME scheme will be released.

“The question is the timing – will it be before or after the elections? Will the Modi government change tack if it is not re-elected? Will this ambiguity continues to deter wider adoption? Automakers seem to have realised that EV adoption is not a question of ‘if’. For instance, Maruti Suzuki, the largest automaker in India, will launch an electric version of one of its best-selling entry-segment cars – the Wagon R – in Q1 2019,” Mackenzie said.

Another key challenge will be stakeholder management and coordination across the different ministries, government bodies and industry participants while the policy is formalised.

Stating that two-wheelers will dominate the electric mobility landscape in the personal transport sector, it said India offers huge potential for automakers as car ownership levels are very low (23 per 1,000 capita).

Rising income levels will increase car ownership and most global automakers are closely watching this lucrative market. At the same time, two-wheelers should not be ignored – with current ownership six times larger than four-wheelers.

“We believe that two-wheelers are the more effective option given their utility in intra-city travel, less need for public charging infrastructure and availability of battery technology. Two-wheelers will eventually leapfrog four-wheelers towards the goal of a greener and sustainable mobility future,” it added.

 

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Sensex snaps 5-day winning streak on weak global cues, profit-booking

Press Trust of India

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Mumbai: The domestic equity market took a breather on Tuesday after a five-day rising spree as investors booked profits in metal, financials and auto counters, amid weak cues from international markets after IMF lowered its global growth projections for 2019 and 2020.

The 30-share BSE Sensex dropped 134.32 points to end at 36,444.64, while the broader NSE Nifty finished 39.10 points lower at 10,922.75.

Participants were seen taking money off the table after the recent rally, even as the wider sentiment remained positive, underpinned by better-than-expected Q3 earnings by several bluechips.

 

The BSE Sensex, after resuming higher at 36,649.92, advanced to 36,650.47 on buying by domestic institutional investors (DIIs) as well as retail participants. However, market quickly slipped into the negative zone as investors chose lock in gains in recent outperformers, dragging down the key benchmark to a low of 36,282.93 before ending at 36,444.64 down 134.32 points, or 0.37 per cent.

The gauge had rallied over 725 points in the previous five sessions. Likewise, the 50-stock NSE barometer Nifty finished 39.10 points, or 0.36 per cent, down at 10,922.75 after hitting the day’s high of 10,949.80 and a low of 10,864.15.

Brokers said investors turned cautious and preferred to log profits in recent gainers, dragging down key indices.

“The market tracked other Asian markets following IMF’s weak forecasts of global growth prospects,” said Paras Bothra, President, Equity Research, Ashika Group.

“While India’s economic forecasts were retained, concerns were raised over the difficulties in containing the fiscal deficit. Continued weakness in the rupee favoured IT and Pharma stocks while majority of other sectors were under pressure,” he added.

The IMF lowered its global growth projections for 2019 and 2020 to 3.5 per cent and 3.6 per cent respectively, citing slowdown in several advanced economies around the world more rapidly than previously anticipated.

Meanwhile, India is projected to grow at 7.5 per cent in 2019 and 7.7 per cent in 2020, an impressive over one percentage point ahead of China’s estimated growth of 6.2 per cent in these two years, the IMF said Monday, attributing the pick up to the lower oil prices and a slower pace of monetary tightening.

The International Monetary Fund in its January World Economy Outlook update on Monday said India would remain the fastest growing major economies of the world.

 

Foreign portfolio investors (FPIs) continued their selling activity on domestic bourses here. They sold shares worth a net Rs 299.79 crore, while domestic institutional investors (DIIs) made purchases to the tune of Rs 520.80 crore on Monday, provisional data showed.

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Gold extends gains on jewellers’ buying

Press Trust of India

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New Delhi: Gold firmed up by Rs 125 to Rs 33,325 per 10 grams on Tuesday, largely on the back of sustained wedding season buying by jewellers even as it weakened to near three-week lows overseas.

Silver, however, turned weak due to reduced offtake by coin makers and consuming industries and lost Rs 250 to Rs 39,850 per kg.

Persistent buying by local jewellers, triggered by the ongoing wedding season, kept gold prices higher, bullion traders said.

 

Globally, gold fell 0.13 per cent to USD 1,278.90 an ounce in New York as a firmer dollar made bullion more expensive for buyers using other currencies. Silver also eased by 0.46 per cent to USD 15.26 an ounce.

In the national capital, gold of 99.9 per cent and 99.5 per cent purity advanced by Rs 125 each to Rs 33,325 and Rs 32,175 per 10 grams, respectively.

The yellow metal had gained Rs 40 on Monday. Sovereign, however, remained unaltered at Rs 25,500 per piece of eight grams on scattered enquiries.

In contrast, silver ready prices dropped by Rs 250 to Rs 39,850 per kg and weekly-based delivery slipped by Rs 264 to Rs 38,876 per kg.

Silver coins, however, were unchanged at Rs 77,000 for buying and Rs 78,000 for selling of 100 pieces.

 

 

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