Showing posts with label indian economy. Show all posts
Showing posts with label indian economy. Show all posts

Friday, November 11, 2016

Rs 500, Rs 1000 Notes Abolished

Indian Currency abolished

Demonetization of Rs 500 & Rs 1000 Rupee Notes


In an important effect to check black money, the Prime Minister has announced demonetization of Rs 500 and 1000 rupee notes with effect from midnight of November 9 which makes these notes invalid on black money, corruption and fake currency.The decision of PM Narendra Modi to eliminate Rs. 500 and Rs. 1000 rupee notes with a view to control the flow of black money has been mentioned by almost all in Bollywood.

The decision had been effective abolishing Rs 500 and Rs 1000 rupee value notes as legitimate tender. To get to know on the implications on this financial decision, an interaction had been conducted with leading film exhibitor Akshaye Rathi who mentioned that the impact could be of two levels namely micro and macro.

With regards to film that would be coming in the future, it was essential to comprehend the pattern of audience which could be beyond the metros.In areas like Bengaluru, Delhi, Kolkata, Mumbai and Pune, individuals seem to be comfortable in utilising plastic money as well as online transactions.

However there is a massive population which is beyond the metros who do not approve of utilising plastic money. Then there is a still bigger crowd which goes to the bank and withdraw money, making their payment through cash.

Impact on Industry – Positive


People in places such as Kanpur and Satara tend to go to the bank on the first day of the month for withdrawal of cash for their monthly expenditure where the payment is done by cash. Hence, individuals would find it difficult in being unable to use the denominations of 500 and 1000 rupees when they go for a movie or intend to dine out with their family or friends.

Carrying a few five or hundred rupee notes tends to be much easier than carrying a good amount of hundred rupee notes in your wallet which could cause a bit of inconvenience to the individuals. With regards to Bollywood, Akshaye envisions the decision affecting the industry crowd in a positive manner and is of the belief that it would go a long way in eliminating bribes as well as corruption. He stated that the impact on the industry would be a very positive one.

A producer shooting is troubled by several entities such as organisations, political outfits and associations who tend to come and upset the shoot, by asking for bribe. The producer then provides them with the option of card or cheque payments. With this decision, all these bribes and loopholes have been stopped since one cannot pay a bribe with hundred rupee notes.

New Notes of Rs 2000 & Rs 500


Modi has mentioned that people having Rs 500 and Rs 1000 could deposit them in their bank and post office account from November 10 to December 30. He also mentioned that the notes would not be legal tender from midnight of November 9 and that they would be just useless piece of paper.

But he also added that all notes in the lower demolition of Rs 100, Rs 50, Rs 20, Rs 10, Rs 5, Rs 2 and Re 1 together with the coins would continue being valid.

He informed that new notes of Rs 2000 together with Rs 500 would be introduced and that there would be no modification of any kind of currency exchange be it DD. Cheque, payment through credit/debit card etc.

Tuesday, December 15, 2015

RBI Rejects Bids at Bond Sale for Second Consecutive Week

Bond sale

RBI Rejects Bids at Government Bond Sale


The Reserve Bank of India rejected all the bids at its 150 billion rupee government bond sale including the benchmark 10 year debt, recently, marking the second week consecutively when it did not accept some of the bids. The RBI had only accepted 49.4 billion rupees worth of bids for its sale of 70 billion rupee of 2025 bonds and had accepted only 22.9 billion rupees of the 30 billion rupees worth of 2034 bonds that were being sold.

 The balance three bonds had been totally allotted. RBI has the option of not accepting all bids at the debt auctions through a procedure known as a `devolvement’, which tends to lead underwriting dealers to purchase some of the shortfall in undersubscribed tenders at determined cut-off yield. According to a treasurer at HDFC, Ashish Parthasarthy, he comments that `the yield may not be acceptable and they would find it too high’.The devolvement has come up when the RBI is tied up in a complicated balancing act with domestic yields in order to keep the volatility away from its bond markets ahead of the policy decision of the Federal Reserve this month.

Fourth Auction with Weak Bids/High Yields


This seems to be the fourth auction which has seen weak bids and demands at high yield levels from the market. The RBI may not have been relaxed giving a cut-off which did not reflect its accommodative monetary position, according to bond traders.

The government is scheduled to raise Rs 15,000 crore by allotting four bonds at the weekly auction. Presently the craving for bonds is quite low in the market and several investors have incurred losses after yields shot up sharply after the policy statement and are now being careful according to the managing director of ICICI Securities Primary Dealership, B. Prasanna. Government bond earnings have increased by at least 10 basis points over the last one week as an aggressive policy statement from RBI, the effects of global bond sell-off earlier in the month as well as anxieties over domestic inflation that kept several buyers at bay. The 10 year benchmark 7.72%, 2025 bond yield closed at 7.8%, up 10 bps from the earlier week. The bond has suffered losses for all investors who had bought it at the maiden auction in May.

Last Devolvement – June 12


In the policy of June, the RBI had reduced its repo rate by 25 bps, but had raised it inflation forecast to 6% for January and had commented that it has frontloaded its rate cuts. This however brought about expectations of the future rate cuts sharply down in the bond market. Moreover, the bond yields from US to Europe has also increased to multi-month highs since the investors deserted fixed income in the midst of rising oil prices as well as the forthcoming rate hike by the US Federal Reserve.

The last devolvement of RBI had been on June 12, when the sentiments seemed negative owing to high inflation reading. An official aware of the central bank’s decision in explaining the devolvement had informed that `the bids had come at much higher yields’. He had added that the central bank was also certain in not devolving in too big an amount to avoid destabilising the markets.

Wednesday, January 28, 2015

World Bank Forecasts India to Become World’s Fastest Growing Economy By 2017


India is on the verge of becoming the fastest growing big economy in the world in 2017. World Bank has released a forecast which shows India edging past the China at an estimated growth rate of 7% in its GDP whereas the rival neighbour China would growth grow at 6.9%. This report was published in the World Bank’s flagship publication called Global Economic Reports. This influential report even warns India that having any possible slackening in the reform momentum would result in slowing down in economy growth and its pace of recovery.

Deceleration in China’s Economy A Boon For Indian Economy

For several years in a row China has projected itself as one of the fastest growing economy but in coming years in expected to slow down to 7.1%. Last year it was growing at a robust pace of 7.4% and it is going decelerate further to 7% and by 2017 it will touch the 6.9% mark. The relative sizes of the two giant economies of Asia shows a wide gap. China’s economy was at $9.2 trillion whereas India’s $1.87 trillion which certainly means that India had a really long way to go. World Bank report has characterised the China’s eventual deceleration as a carefully managed slowdown

India Expected To Touch 7% Growth Rate Earlier Than Expected

The Bangkok based United Nations Economic and Social Commission for Asia and the Pacific commonly known as ESCAP have published separate report which projects the growth of Indian economy at the pace of 6.4% for the current year. International Investment bank Golsman Sachs shows another turn and expects that India would achieve the projected growth rate of 7% a year in advance and it nudges past China smoothly.

Indian economy would be helped by the steep falling in oil prices and other energy commodities as well as by the low interest rate in developing countries. India should employ this falling oil price window by ushering the fiscal and structural reforms and boosts it long-run growth as well as inclusive development. Both ESCAP and the World Bank have rightly pointed towards cutting fuel subsidies and diverting funds for the financial sustainable development.

Global Growth Rate To Rise

Global growth rate is expected to rise by 0.4% to register 3.0% in 2015 from 2.6 in 2014. Further reports suggest it will rise to 3.3% in 2017. Developing countries is expected show a growth rate of 2.2% this year from 1.8% in 2014 and by 2.3 % in 2017.

ESCAP report states that India is very genuinely identified the infrastructural development as the key element for economy growth but it does face shortage of government resources. ESCAP therefore recommends for giving importance to private sector in infrastructure development as well as collaborating with government. World Bank report states that reforms and regulations by the government in India should aim towards boosting foreign direct investment. Increase in investments would help the nation in achieving the growth rate of 7% by 2016.

Saturday, August 31, 2013

U.S. monetary policy brings down the Indian rupee?



The Indian currency has again reached a record low on Tuesday. Like other developing countries, it suffers including expectations of investors who expect a shift from the Fed. The Indian giant shuddered. With the collapse of its currency, returns the specter of a crisis it had known early in 1991. Prime Minister Manmohan Singh had himself risen, claiming that this new crisis was not of the same order. Moreover, the crisis of the rupee displays India is experiencing a slowdown - albeit relative - its growth. In this context, the question of advancing the general elections before the month of May 2014 was again discussed among the members of the Indian political class. How to explain this monetary crisis going to translate into political crisis? The Indian currency Monday reached its lowest level. On Tuesday, the dollar traded as against Rs 64.11 earlier in the day. The day before, she had gone through the floor dropping to 63.22 rupees to the dollar. More broadly, in two years, the country's currency has lost more than 40% of its value since July 2013. Main reasons given by most analysts: the fear of expected monetary tightening of U.S.

 The impact of a possible end of the buyback of bonds by the Fed is already being felt in the last two months. Capital hesitates between the United States and emerging countries. When the shift in U.S. monetary policy was announced, the capital flows are rerouted to the dollar. The Indian stock market actually costs, “there is still a month; the SENSEX index exceeded 20,000 points," points out the researcher. He thus lost 7% in three days, falling below 18,000 points before rising slightly at the close on Tuesday. In India the deficit of current account is the source of all problems. The deficit amounted to about 4.5 % of gross domestic product, according to a note from the Bureau of Economic Analysis of BNP Paribas. To this must be added a context of relatively slow growth. For the 2012-2013 year, India's central bank has lowered its growth estimate from 5.8% to 5.5%. Well below the 9 % increase in GDP experienced by the country during the previous years.


 In addition, “even in the field of foreign direct investment, we feel a hesitation. Whenever the election is tight, investors may worry about a shift," says economist Center Future Studies and International Information. Faced with this situation, the Reserve Bank of India (RBI) would have little leeway. This is “very embarrassed because political control of the money supply can have a negative impact on growth and investment. It is therefore obliged to act in short strokes. The RBI has, for example tried to halt the decline of the rupee e.g. preventing imports of gold, limiting to $ 75,000 per year instead of 200,000 the amount that can leave the Indians in the country but also in controlling purchases estates abroad. India is not alone in feeling the effects of investor expectations about the U.S. monetary policy. Other emerging market currencies were also affected, such as the Brazil and Indonesia. Finally, more broadly, the crisis itself could amplify these phenomena. India has no role in driving the region since this has the effect of weakening the economy, there is however a risk of indirect contagion in other emerging countries, especially China.

Friday, August 30, 2013

Record low for the Rupee, The Stock Market Collapses!



The IMF said Thursday that economic "vulnerability" of India had recently worsened, while refusing to "speculate" on the possibility of an application for financial assistance in the country. "The combination of large budget deficits and current account balance, the persistence of high inflation and dependence namely capital inflows are the old vulnerabilities that have increased" recently said Gerry Rice, spokesman for the international Monetary Fund. Faced with the prospect of a tightening of U.S. monetary policy, India has seen foreign capital flowing back, plunging the value of its currency against the dollar. On Wednesday, the rupee fell to a record low before recovering Thursday. According to Rice, the deterioration of the Indian economy "clearly affected market confidence" and is a "challenge" to the authorities. "This is also an opportunity for the Government to continue its political efforts on a number of fronts," he said at a press conference in Washington, without giving further details. Wednesday evening, the Reserve Bank of India (RBI) has announced it will provide dollars directly to oil companies, via a separate establishment, to calm the volatility in the foreign exchange market. Asked about a possible Indian request for financial assistance, IMF spokesman, however, declined "to speculate." India had appealed to the Fund in 1991 to deal with a crisis in its balance of payments, which measures including the influx of foreign capital.