[In this section, we will discuss important news related to Indian Economy & World Economy. It will be updated every Saturday.]
China reduces import duties on medicines, India to benefit
- China has removed import duties on over 28 medicines, including all cancer drugs, effective from May.
- Chinese Ambassador to India Luo Zhaohui tweeted. “Good news for India’s pharmaceutical industry and medicine export to China. I believe this will help reduce trade imbalance between China and India in the future,”
- During the period April-October 2017-18, trade deficit with China was a whopping $ 36.73 billion.
Foreign investors pulled out Rs.15500 crore from the Indian capital market in April
- Foreign investors have pulled out over Rs.15500 crore from the Indian capital market in April, making it the steepest outflow in 16 months.
- The foreign capital outflow is due to surge in global crude prices and rise in yields on Government securities.
Walmart takes control of Flipkart by acquiring 77 % stake
- Walmart has taken control of Flipkart by acquiring 77 % stake in the company.
- Walmart will pay $16 billion. (valuing Flipkart at $21 billion)
- It is the largest acquisition yet by Walmart.
- Walmart Takes control of Flipkart.
- Walmart takes its battle in the US with arch-rival Amazon to the world’s fastest-growing major economy.
- It will give a massive boost to entrepreneurship and the start-up ecosystem in India, which has struggled to provide exits.
- Flipkart co-founder and chairman Sachin Bansal will leave the company and sell his 5.5-6 percent stake in the company. Flipkart’s other founder Binny Bansal will continue as Flipkart group CEO and Kalyan Krishnamurthy will retain his position as Flipkart CEO.
Bank Credit Growth at Its Highest Since July 2014
- Bank credit grew at its fastest pace in almost four years, as per the data released by the Reserve Bank of India
- Bank credit from scheduled commercial banks rose by 12.6 percent during the fortnight ended 27 April 2018.
Oil Prices Hit Highest in 4 Years due to imminent sanctions on Iran
- Oil prices hit $77.76 per barrel on Thursday, highest since November 2014.
- This is because of the plan of the US to impose new sanctions against a major oil exporter Iran
India’s industrial Growth slows to a 5-month low in March
- Growth in output from factories was only 4.4 % in March, the statistics ministry said.
- The economists surveyed by Reuters had forecast 5.9 % growth in output
GST collection in April crossed Rs.1 lakh crore mark for the first time
- GST collection in the month of April crossed the Rs 1 lakh crore mark for the first time since the new tax regime was rolled out on July 1 last year.
- It is due to seasonal strength in March industrial activity.
- March industrial production is typically 12 percent higher than the July-February average.
- Historically the government’s indirect tax collections have always nearly doubled in March,
Indian economy lost nearly $3 billion due to internet shutdowns.
- The Indian economy lost nearly $3 billion owing to more than 16000 hours of internet shutdowns in the past 5 years, as per a report by the Indian Council for Research on International Economic Relations.
The current year has been the worst for Indian stock market in terms of FPI
- The current calendar year has been the worst, till date, for Indian stock market in 7 years in terms of Foreign Portfolio Investment (FPI).
- Foreign investors invested Rs.8460 crore this year in equities.
- It is the lowest in the Jan-April period since 2011.
- It is the cumulative impact of higher oil prices, India’s banking system’s struggle and the upcoming elections
Meeting for negotiating the Regional Comprehensive Economic Partnership (RCEP)
- In the first week of May, countries engaged in the negotiations for the Regional Comprehensive Economic Partnership. (RCEP)
- RCEP is a multilateral trade agreement involving 16 countries. (10 countries in the Association of South-East Nations or ASEAN and India, China, Australia, New Zealand, Japan and South Korea)
- It was the 22nd round of negotiations and was held in Singapore.
- India is a reluctant participant.
- India’s trade deficit with China widened to whopping $62.8 billion in 2017-18. Any more liberalisation will worsen the balance.
GST return filing process to become simpler
- The Goods and Services Tax Council (GST Council) on Friday, 4 May approved a simpler tax return filing system under the new indirect tax regime and also approved the conversion of the GST Network into a government holding.
- The new return filing form will reduce the compliance burden for taxpayers as they would have to file only one monthly return and invoices have to be uploaded only by sellers.
- It will be put in place within six months and the transition will be done in a phased manner.
RBI Allows FPIs to Invest in Treasury Bills
- The Reserve Bank of India (RBI) on Tuesday, 1 May said Foreign Portfolio Investors (FPIs) will be allowed to invest in treasury bills issued by the government.
- This move could lead to more foreign portfolio investment in India.
- The RBI announcement came two days after it allowed foreign investors to invest in government and corporate bonds with tenures below one year.
Core Sector growth slows marginally in March
- Growth in the eight core sectors of industry slowed to a 3-month low of 4.1 percent in March due to weak year-on-year performance in as many as six sectors including coal, crude oil and natural gas.
- The other sectors which showed slower growth rate were refinery products, steel and electricity.
- Core sector growth has an impact on the Index of Industrial Production (IIP) data as these eight segments account for about 41 percent of the total factory output.
Petrol prices hit Rs.74.40 a litre; diesel touched record high of Rs.65.65
- Petrol price hit Rs 74.40 a litre last Sunday – the highest level under the BJP-led government
- Diesel rates touched a record high of Rs 65.65,
- The hike was necessitated due to increasing international oil prices.
The fiscal position of states deteriorated in 2017-18
- The fiscal position of states deteriorated in 2017-18 over 2016-17.
- The revenue deficit for most states widened whereas states with revenue surplus witnessed a decline in their surplus, according to Care Ratings report.
TCS becomes the first Indian Company to achieve $100 billion market cap
- Information Technology (IT) firm Tata Consultancy Services (TCS) on Monday, 23 April became the first Indian-listed company to cross the $100 billion mark in terms of market capitalisation (m-cap).
- Around 11 am on 23rd April, the Market cap of the company stood at Rs 675,934.95 crore or $101.60 billion on the Bombay Stock Exchange (BSE).
Multiple states experiencing cash crunch
- Multiple Indian states are experiencing cash crunch as ATMs have been out of cash
- The states experiencing cash crunch are Karnataka, Telangana, Andhra Pradesh. Madhya Pradesh, Biharr Maharashtra and Delhi.
- The finance ministry and the RBI failed to offer a credible explanation.
- The RBI has promised to replensih the ATMs quickly.
India set to get its first integrated industrial city within next 5 years
- India is set to get its first integrated industrial city within the next five years. It is Aurangabad Industrial City (AURIC)
- The Delhi-Mumbai Industrial Corridor (DMIC) is one of India’s largest infrastructural programs. The DMIC aims to develop several smart cities that will have the corridor passing through, with AURIC being one of them.
- The AURIC will be built on the Shendra Bidkin belt in Aurangabad.
- As per the city’s official website, “AURIC will offer high-value, sustainable infrastructure that will support long-term economic vitality, a high quality of life, and a knowledge-based ecosystem with breakthrough innovation and efficiency.”
Global credit rating agency Fitch retains India’s sovereign rating at BBB-
- Global credit rating agency Fitch retains India’s sovereign rating at ‘BBB-‘ with ‘stable’ outlook.
- Fitch had last upgraded the rating from ‘BB+’ to ‘BBB-‘ with ‘stable’ outlook on 1 August. 2006.
- Later, it was changed to ‘negative’ outlook in 2012 and then again to ‘stable’ in the following year
RBI eases rules for foreign investor participation in Indian debt
- The Reserve Bank of India on 28 April announced a slew of measures to raise exposure of foreign portfolio investors in government securities.
- The cap on aggregate FPI investments in any central government security, currently at 20 percent, stands revised to 30 percent of the outstanding stock of that security.
- FPIs were required to invest in corporate bonds with a minimum residual maturity of three years. Henceforth, FPIs are permitted to invest in corporate bonds with minimum residual maturity of above one year,
- The minimum residual maturity requirement for central government securities (G-secs) and State Development Loans (SDLs) stands withdrawn, subject to the condition that investment in securities with residual maturity below 1 year by an FPI under either category should not exceed, at any point of time, 20 percent of the total investment of that FPI in that category.
India becomes the world 6th largest economy as per the IMF
- India recorded a Gross Domestic Product (GDP) of $2.6 trillion for 2017 as per the database of the International Monetary Fund’s World Economic Outlook released in April 2018.
- India displaced France to become the world’s sixth largest economy
- The first five in the list are United States, China, Japan, Germany and United Kingdom.
- The IMF has kept its growth forecast unchanged to 7.4 % for 2018.
- The World Bank has projected a growth of 7.3 % for 2018, 7.5 % in 2019 and 2020.
India’s merchandise exports fall 0.7 % year on year in March 2018.
This led to the widening of the trade deficit.
Rainfall is likely to be normal during monsoon
- Rainfall is likely to be normal during the June-to-September southwest monsoon season, the government’s weather office said on Monday, 16 April.“
- If the forecast pans out, then it will have a salutary impact on the macroeconomic framework — especially with respect to food inflation —and mitigate some of the farm distress
The US treasury added India to currency manipulator watch list
- The US Treasury has added India to the currency practices and macroeconomic policies monitoring list,
- It is because India increased its purchase of foreign exchange over the first three quarters of 2017.
- To put a country on the watchlist, the Treasury considers the following: 1)The country has to run a trade surplus of over $20 billion with the USA. 2) The additional foreign reserves purchases over a year should be more than 2 % of GDP 3) The country should have a large current account surplus with rest of the world.
- India does not have a large current account surplus with rest of the world.
- The other countries in the watchlist are China, Germany, Japan, Korea and Switzerland.
Shikha Sharma, MD & CEO of Axis Bank, cuts short her tenure by 2 years
- The Managing Director & CEO of Axis Bank has cut short her tenure by more than 2 years.
- She was appointed the CEO in 2009.
- As per reports, the RBI was not satisfied with her performance and had asked the bank to review its decision to extend Sharma’s term
- The Axis Bank was pulled up twice by the RBI for huge differences in the Non-Performing Assets (NPAs) assessed by the RBI and the bank. It implies that the bank had under-reported NPAs.
India’s mega defence exhibition – the Defexpo – began on 11th Apr at Chennai
- India’s mega defence exhibition- the Defexpo was held at Chennai, Tamil Nadu from 11th to 14th April.
- It is held every alternate year and Defexpo 2018 is the 10th in the series
- It provides an opportunity to major global and domestic military firms to showcase their latest weaponry and platforms.
- The NDA government is trying to project the 10th edition of the biennial event as first serious attempt to transform India into a hub of military manufacturing.
RBI raised the limit for Foreign investors to buy Indian bonds
- The Reserve Bank of India (RBI) on Friday announced an increase in limits for foreign portfolio investors (FPIs) to buy Indian government and corporate bonds.
- The limit for FPIs to buy government securities will be increased to 5.5% of the outstanding stock of securities in 2018-19 and 6% of the outstanding stock in 2019-20.
- Accordingly, for buying government bonds under the general category, the revised limit stands at Rs2.07 trillion for the first half of fiscal 2019 and at Rs2.23 trillion for the second half. The current limit is Rs1.91 trillion.
- The central bank set 9 % as the limit for foreign investors to own in corporate bonds.
- The total limit for FPIs to buy bonds—central government, state development loans and corporate bonds—has been revised to Rs5.95 trillion for April-September from Rs5.46 trillion currently. The limit would be Rs6.5 trillion for the second half of 2018-19.
- The decision could lure $16 billion of additional funds into Government as well as Corporate bonds.
Credit rating Agency Brickwork ratings downgraded ratings of 6 Indian banks
- The credit rating agency Brickwork has downgraded ratings of 6 banks due to drastic reductions in non-interest incomes.
- The six banks downgraded by the agency are Bank of India, Union Bank of India, Allahabad Bank, Central Bank of India, Corporation Bank and United Bank of India.
- Brickworks also added, that there has been an increase in the percentage of NPAs and they expect no sigh of relief for the last quarter of the financial year.
India’s IIP grew at 7.1 % in Feb and inflation eased to 4.28 % in March
- India’s Index of Industrial Production (IIP) grew at a robust 7.1 % in February while CPI inflation decelerated for the fourth consecutive month to 4.28 % in March.
- The IIP grew due to robust growth in manufacturing sector.
- The inflation eased due to softening food prices.
The benchmark Brent crude prices hit $73.09 a barrel.
- The Brent Crude Oil prices hit the highest level since December 2014.
- It is a cause of concern as India’s macro economic indicators- inflation, fiscal deficit & current account deficit are sensitive to oil prices.
India’s foreign exchange reserves touched a life-time high of $424.864 billion
- India’s foreign exchange reserves rose by $503.6 million to touch a life-time high of $424.864 billion
- It was due to increase in foreign currency assets.
- It had crossed the $400-billion mark for the first time in the September 2017.
RBI’s Monetary Policy: Repo rates kept unchanged
- The RBI on Thursday kept the key policy rate (Repo) unchanged at 6 %.
- It also kept cash reserve ratio unchanged at 4%; Reverse Repo at 5.75 %, and Bank rate at 6.25 %.
- The monetary policy’s stance has been neutral.
- It also revised downwards the inflation projections and upwards the GDP growth numbers
The number of income-tax filers increased by 26 % in 2017-18
- The number of new income tax filers increased by 26 % to 6,84 crores in 2017-18
- The amount of Direct tax collection increased to 9.95 lakh crore. It exceeded the revised budgetary target of Rs 9.8 lakh crore.
Indian companies announced new projects worth Rs.1,95 trillion in Jan-Mar
- Indian companies announced new projects worth Rs.1.95 trillion in the Jan-March quarter, according to the data released by the project-tracking database of the Centre for Monitoring Indian Economy (CMIE).
- It is up from Rs.1.20 trillion in the previous quarter
- The rate of stalled projects also declined
The employment rate in India contracted by 0.1% in 2015-16
According to the latest KLEMS India database (which is a research project supported by the Reserve Bank of India), the employment rate of the country actually contracted by 0.1 percent in the fiscal year 2015-16 and by 0.2 percent in the financial year 2014-15.
China imposes tariffs on US products in retaliation
- China imposes tariffs across 128 US products.
- China is imposing a 15 % tariff on 120 products and 25 % on eight products.
- This could lead to an escalation of the trade war
ICICI Bank Ltd.’s shareholders’ wealth eroded by 12 %
- ICICI Bank Ltd.’s shareholders’ wealth eroded by nearly 12 % since the middle of March.
- This is due to the allegations on the Bank’s CEO Chanda Kocchar of nepotism surrounding loans worth Rs.3250 crore.
- The loan was given to the Videocon group in 2012 and has been classified as Non-Performing Asset.
- The Videocon Group had invested the money in NuPower Renewables Pvt., a company founded by Deepak Kochar. (husband of Chanda Kocchar)
- The bank has denied the allegations
India has permitted cross-border mergers, acquisitions, and amalgamations.
- After much ado, India has finally permitted cross-border mergers, acquisitions, and amalgamations.
- The Reserve Bank of India released the structural framework for mergers and acquisitions between Indian and foreign companies.
- It notified the Foreign Exchange Management (Cross-Border Merger) Regulations 2018 regarding the same.
- Earlier, according to the Companies Act, business organisations were required to seek prior approval from the Indian central bank for cross-border mergers, but after the implementation of such regulations, the provision of deemed approval from the RBI applies.
- This implies that a company on following the new regulations would have gotten an approval of the RBI.
Paytm launches a new app called Paytm money
- Mobile wallet service Paytm launches a new app called Paytm money.
- This may shake up India’s mutual fund industry.
- The app will enable potential investors to choose products and plans from 12 major asset management companies (AMCs), gradually increasing the options to 25 companies by August.
- It will facilitate easy purchase and sale of direct plans without the distributor’s mediation
India & China agreed to draw a road-map to reduce trade deficit
- India has a trade deficit of $51 billion with China
- India & China have agreed to draw a road-map to address the deficit but failed to give any concrete plan.
- The announcement was made a day after the 11th Joint Economic Group
- The 11th India-China Joint Economic Group took place on 26th March 2018 in New Delhi.
- It was headed by the Commerce Minister, Suresh Prabhu and his Chinese counterpart Zhong Shan.
- The Joint Economic Group was established in 1988 by Rajiv Gandhi
India’s Fiscal Deficit reached 120 % of the revised full-year target in Feb 2018
- India’s fiscal deficit soared to Rs.7.15 lakh crore at the end of February.
- It exceeded the revised target of Rs.5.94 lakh crore for the entire 2017-18 fiscal. It is 120 % of the revised full year target.
- The Government’s revenues were low due to the implementation of GST.
- The Fiscal deficit target as the percentage of GDP for 2017-18 is 3.5 %.
- The Economic Affairs Secretory said that India is on course to meet 3.5 % target for 2018
The Government will borrow Rs. 2.88 lakh crore in April-Sept 2018
- The Government will borrow Rs. 2.88 lakh crore in the April-September period of the next fiscal year 2018-19
- It is 47.56 % of the budgeted gross borrowing which is 6.05 lakh crore
- The Government had borrowed 3.72 lakh crore in the April-September period of current fiscal 2017-18
- Next fiscal, the borrowing will be 22 % lower & the markets reacted positively
- The rupee was up 0,13 percent at 64,775 per dollar.
- The yield on benchmark 10-year Government bond also fell by over 25 basis points
India asks US to exempt it from tariffs on steel and aluminium
- The US imposed higher tariffs on steel and aluminium.
- It granted an exemption to its allies like Brazil and European Union.
- India has also asked for an exemption on the grounds that Indian exports did not pose a security threat.
- Read: What is the trade war between US and China? – Explained
India allows import of used goods for repair
- India attracts Big tech firms like Apple by allowing imports of used goods for repair.
- The condition is that the imported goods have to be exported.
- China is currently among the top destinations for repair of devices
IDBI Bank discloses fraudulent loans of Rs.772 crores
- IDBI bank discloses fraudulent loans of Rs.772 crores from five of its branches in Andhra Pradesh and Telangana.
- The loan was issued during 2009-13 for fish farming.
- The borrowers had submitted fake lease documents of non-existent fish ponds. They also inflated the value of the collateral.
- Two bank officials were involved in the fraud.
An infrastructure company defrauded Union Bank of India
- On March 22, the CBI registered a case against Totem Infrastructure Ltd. for defrauding eight banks of ₹1,394.43 crore, of which Union Bank faced a loss of ₹313.84 crore.
- According to Union Bank’s complaint, “the company had diverted funds by opening accounts outside the consortium and through payments of wages by showing excess expenditure and inflated stocks. The entire sale proceeds were not allegedly routed through the dealing branches of consortium banks”.
WPI inflation at 2.48 % in February 2018
- WPI inflation cools down to 2.48 % in February 2018
- It was 2.84 % in January 2018 and 5.51 % in February 2017
- The cooling down of inflation was primarily due to food prices
Current Account Deficit widened in Dec quarter to 2 % of GDP
- Current Account Deficit widened in Oct-Dec 2017 quarter to 2 %
- It was 1.4 % in Oct-Dec 2016 quarter
- Despite a rise in the current account deficit by $5.5 billion in October-December 2017, the overall balance of payments ended in a surplus of $9.4 billion on account of a capital account surplus of $22.4 billion.
UBS report says India’s external economic position vulnerable
- According to a recent report by UBS Investment Bank, the external economic position of India remains vulnerable
- Its external debts increased during the financial years (FY) 2012-13 and 2017-18.
- Despite this, the report assures macro level stability due to India’s high foreign exchange reserves.
- External debt refers to money borrowed from a source outside the country, such as a foreign country or international institutions like the World Bank or the International Monetary Fund.
The US increased key policy interest rates by 25 basis points
- The chairman of the Federal Reserve Bank, Jerome Powell, chaired the Federal Open Market Committee for the first time since taking charge.
- It increased policy interest rates by 25 basis points.
- It is the third interest rate hike in the fiscal year 2017-18.
FICCI report says Travel & Tourism sectors largest employment generators
- A report by Indian industry body Federation of Indian Chamber of Commerce and Industry (FICCI) and services firm KPMG said that the travel and tourism sectors together generated 25.9 million jobs in 2017.
- It is among the largest employment generators in India
The Ministries of Agriculture and Skill Development signed an agreement
- On 20th March 2018, the Ministries of Agriculture and Skill Development signed an agreement to conduct training programmes in farm and allied sectors at 690 Krishi Vigyan Kendras (KVKs) across the country.
- It is a step to intensify the pace of skill development in the country by training the agricultural workforce.
Paytm Money Ltd. got approval to become an investment advisor
- Paytm Money Ltd., a wholly owned subsidiary of e-wallet and payments bank Paytm, has received approval from Securities and Exchanges Board of India to become a registered investment adviser,
IIP grows 7.5 % in January 2018
The Index of Industrial Production rebounds to 7.5 percent in January, led by robust expansion in the manufacturing sector.
But, Nikkei manufacturing Purchasing Managers’ Index (PMI) fell in Jan and Feb. There is a divergence in IIP and PMI.
Retail inflation eases to 4.4 % in February 2018
Retail inflation eases to 4.4 % in February from 5.07 % in January. This is because of softening of food prices.
30000 farmers and tribals marched from Nashik to Mumbai in protest
The farmers are demanding the implementation of a complete waiver of farm loans, remunerative prices for crops, pensions for agricultural labour, recommendations by the M.S. Swamination Commission on minimum support price and the Forest Right Act, besides relief from economic losses sustained due to the implementation of demonetisation in late 2016.
The State government accepted most of their major demands
The RBI barred banks from issuing LoU to foreign banks or branches.
This decision was taken in the wake of the PNB fraud. It is likely to hit foreign trade.
India hosted the first summit of the International Solar Alliance on 11th March.
The founding ceremony of the International Solar Alliance was held at Delhi followed by the first summit of the Alliance.
The International Solar Alliance (ISA) was unveiled by Prime Minister Narendra Modi and then French President Francois Hollande at the U.N. Climate Change Conference in Paris on November 30, 2015.
BSE scraps transaction fee on SENSEX stocks from March 12
It is intended to encourage retail participation in large capitalisation stocks.
As of now, BSE charges transaction charges between Re. 0.50 and Rs. 1.50 per trade depending on the number of transactions on a monthly basis.
India’s GDP grew at 7.2 % for the quarter Oct-Dec 2017
The data released by Central Statistics Organisation (CSO) last week showed that India’s GDP grew 7.2% in the quarter ending December 2017.
It was primarily sparked by a revival in investment demand.
Due to the increased growth rate in the last quarter, the economy would grow at 6.6 % in the current fiscal ending March 31 compared to 7.1 % in 2016-17. (as per Central Statistics Office’s second advance estimate.)
Nikkei India’s services sector PMI declined in February
The Nikkei India purchasing managers’ index (PMI) slid to 47.8 in February from 51.7 in January.
India improved in Financial Inclusion as per CRISIL report
India records significant improvement in Crisil’s report on financial inclusion.
CRISIL had developed an index called CRISIL Inclusix to measure financial inclusion.
The all-India CRISIL Inclusix score surged to 58.0 in 2016, compared to 50.1 in 2013.
RBI to infuse 1 Lakh crores into the banks
The central bank will inject Rs. 1 Lakh crore through long-term repo operations.
This will provide adequate liquidity to banks for lending in March.
The bank will conduct four variable rate term repo auctions in March 2018 for longer tenors up to 31 days every Tuesday this month for Rs 25,000 crore.
The US imposed tariffs on steel and aluminium imports.
The US imposed 25 % tariffs on steel and 10 % tariffs on aluminium imports last week.
The Indian Steel Association is concerned that it will impact domestic steel industry.
India will become a dumping ground for steel surplus countries. It will affect the domestic steel industry