Tag: Economy

Amid decline in China's construction sector, India emerges as 'saviour' for global steel demand, says report

India has emerged as a saviour for the sagging global steel demand with China’s enormous construction sector still in a funk and the US and Europe probably heading into recessions.

India is experiencing a building boom and is on track to surpass China as the world’s most populated nation by the end of the year. In an effort to compete with China as a manufacturing hub, Prime Minister Narendra Modi is attempting to revamp the roadways, rail systems, and ports.

According to the World Steel Association, this will result in a 6.7% increase in steel demand, reaching over 120 million tonnes in 2023, the greatest growth rate among large nations. This year, India experienced similar growth and surpassed the US to overtake China as the world’s second-largest user of steel.

The biggest producer in the country, JSW Steel Ltd., stated that “the nation-building phase of any economy demands a lot of steel and commodities.” According to him, India is currently moving through that phase, which might increase its steel demand to more than 200 million tonnes by 2030.

What is 'Vostro' account, initiated by RBI to facilitate smoother trade.

Vostro accounts are accounts a bank holds on behalf of another, often foreign bank, and this forms a key part of correspondent banking.’

In July 2022, the Reserve Bank of India introduced a new mechanism for international trade settlements in rupees, aiming to promote exports and facilitate imports.

Rupee Vostro Accounts keep a foreign entity’s holdings in the Indian bank, in Indian rupees. When an Indian importer wants to make a payment to a foreign trader in rupees, the amount will be credited to this Vostro account, and when an Indian exporter needs to be paid for supplying goods or services, this Vostro account will be deducted, and the amount will be credited to the exporter’s account.

“The banks are acting in a fiduciary relationship and they share a principal-agent relationship. The correspondent foreign bank is a financial intermediary in the transactions that they are involved in. The foreign bank acts as an agent that provides services such as executing wire transfers, performing foreign exchange, enabling deposits, enabling withdrawals, expediting international trade on behalf of the domestic bank. It is most used in settlement of foreign exchanges or foreign trade. No interest will be paid on the vostro account maintained, as per the directives that have been issued by the RBI in India. An overdraft facility can only be availed if it is specifically sanctioned,” explained tax experts at Clear.

“In order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports / imports in INR,” the RBI had said in a statement.

Global Economy is headed for a recession in 2023, says researcher.

The world faces a recession in 2023 higher borrowing costs aimed at tackling inflation cause a number of economies to contract, according to the Centre for Economics and Business Research.

The global economy surpassed $100 trillion for the first time in 2022 but will stall in 2023 as policy makers continue their fight against soaring prices, the British consultancy said in its annual World Economic League Table.

The report added that, “The battle against inflation is not won yet. We expect central bankers to stick to their guns in 2023 despite the economic costs. The cost of bringing inflation down to more comfortable levels is a poorer growth outlook for a number of years to come.”

The findings are more pessimistic than the latest forecast from the International Monetary Fund. That institution warned in October that more than a third of the world economy will contract and there is a 25% chance of global GDP growing by less than 2% in 2023, which it defines as a global recession.

“The consequences of economic warfare between China and the West would be several times more severe than what we have seen following Russia’s attack on Ukraine. There would almost certainly be quite a sharp world recession and a resurgence of inflation,” CEBR said.

Central Government raised more than 4 lakh crore trough disinvestment since 2014.

The government raised over Rs4.04 lakh crore through disinvestment and strategic sale of public-sector enterprises (PSEs) since the Modi government came into power in 2014, the Finance Ministry said on 20 decm.

Of this, the largest amount totalling over Rs1.07 lakh crore through offer for sale in 59 cases. This was followed by a stake sale through Exchange-Traded Fund (ETF) in 10 tranches, aggregating to Rs98,949 crore. Strategic sales in 10 companies, including Air India, yielded Rs69,412 crore to the exchequer in the last 8 years. Share buyback in 45 cases fetched Rs45,104 crore.

17 CPSEs were listed since 2014-15, which yielded Rs50,386 crore. Of this, the initial public offering (IPO) of LIC alone fetched the government Rs20,516 crore. The additional market capitalisation of Rs7.31 lakh crore was achieved through new listings, the ministry said. Besides, the government has sold its residual stake in Paradeep Phosphate Ltd, IPCL, and Tata Communication for Rs472 crore, Rs219 crore and Rs8,847 crore, respectively. 

After Russia, Sri Lanka to use Indian rupee(INR) for internation trade.

India’s rupee trade settlement mechanism, which was set up by the Reserve Bank of India in July 2022, is attracting interest from more countries apart from Russia.

The mechanism is a means of using rupees instead of dollars and other big currencies for international transactions in order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in the rupee.

Dollar-strapped Sri Lanka and sanctions-hit Russia will be the first countries to use the Indian rupee trade settlement mechanism.

Sri Lanka has agreed to use Indian rupee (INR) for international trade. It comes days after the Government of India said it is looking at ways to bring countries that are particularly short of dollars into the ambit of Indian rupee trade settlement mechanism. Central Bank of Sri Lanka (CBSL) said it is waiting for RBI’s (Reserve Bank of India) approval to designate Indian rupee as foreign currency of Sri Lanka.

Tajikistan, Cuba, Luxembourg and Sudan have begun talking to India about using the mechanism, reported Reuters, quoting two sources and an official document. It has already been used by Russia following the imposition of sanctions on Moscow over the Ukraine war.

Russia remains India's top oil supplier for the month of november too.

Russia has for the first time emerged as top oil supplier to India replacing Iraq as refiners last month snapped up oil from Moscow fearing a price cap from Dec. 5 could hit supplies and choke payment avenues, data obtained from trade sources showed.

India’s oil imports from Russia rose for the fifth straight month, totaling 908,000 barrels per day (bpd) in November, up 4% from October, the data showed.

The Group of Seven nations, Australia, and the 27 European Union countries have imposed a price cap of $60 a barrel on Russian seaborne oil from Dec. 5 as the West tries to limit Moscow’s ability to finance its war in Ukraine.

India, which rarely used to buy Russian oil because of costly logistics, has emerged as Russia’s second biggest oil client after China as refiners snap up discounted crude shunned by Western nations since the February invasion of Ukraine.

Higher purchases of Russian oil dragged down Indian imports from the Middle East and member nations of Organization of Petroleum Exporting Countries (OPEC) declined to the lowest ever in November, the data showed.

India climbs to 5th spot in top global 500 list released by Hurun.

India, with 20 of the most valuable companies in the world, has moved into the fifth position among countries that are home to the world’s top 500 firms. Last year, it ranked ninth with eight companies. The US continued to top the charts, according to the 2022 Hurun Global 500 list.

Of the 20 Indian companies featuring on the list this year, 11 are based in Mumbai, four in Ahmedabad and one each in Noida, New Delhi, Bengaluru and Kolkata. The list, released by the Hurun Research Institute, is a compilation of the 500 most valuable non-state-controlled companies in the world. Companies were ranked according to their market capitalisation (for listed companies) and valuations for non-listed companies.

Led by energy giant Reliance Industries with market capitalisation of $202 billion, the list includes Tata Consultancy ($139 billion) and HDFC Bank ($97 billion).

Billionaire Gautam Adani controlled Adani Group has debuted in the global top 500 companies list with four companies — Adani Enterprises ($63 billion), Adani Transmission ($44 billion), Adani Total Gas ($43 billion) and Adani Green Energy ($40 billion). The other new entrants in the list from India include ITC ($52 billion), Avenue Supermarts ($33 billion), Axis Bank ($33 billion), Bajaj Finserv ($32 billion) and Larson & Toubro ($32 billion)

Top 5 fastest growing states by GSDP.

After witnessing unprecedented challenges due to the covid-19 pandemic, India’s states are well on their way to recovery, according to the Reserve Bank of India’s Handbook of Statistics on Indian States released last week. Almost every state economy has already surpassed its pre-pandemic size and state finances are looking up even as concerns over elevated fiscal deficit remain. Rural wage growth, however, has failed to keep pace with average retail inflation, which may become a cause of decline in spending. 

Gujarat is the fastest-growing state for the last nine years (from FY12 to FY21), according to the latest data released by RBI. Gujarat’s Gross State Domestic Product (GSDP) at the constant price has increased at compounded annual growth rate (CAGR) of 8.2 per cent.

Karnataka is the second fastest-growing major state economy, with a CAGR of 7.3 per cent. At the third spot is Haryana. With a CAGR of 6.7 per cent, Madhya Pradesh is ranked fourth in the list of fastest-growing states. Madhya Pradesh is followed by Andhra Pradesh which has registered an annual GSDP growth rate of 6.5 per cent.

Report for most inclusive nation for religious minorities, India tops the list.

The Centre for Policy Analysis (CPA), in its first global minority report, has listed India at the top of the list of countries for its treatment of religious minorities. India has topped the list on counts of inclusiveness towards religious minorities.

Released by former Vice President of India Venkaiah Naidu, the report is based on conceptual issues relating to human rights, minorities, concept of religious freedom and culture dilemma of religious minorities, cause of religious differences and more.

While India has been ranked one in the global minority report, the United State of America (USA) bagged fourth spot. Nepal is ranked at 39, whereas Russia is ranked 52. China and Bangladesh were ranked at 90 and 99, respectively. Pakistan is ranked at 104 in the report, whereas Taliban-led Afghanistan secured 109th position.

This is for the first time that an Indian body has rated other nations on the basis of their treatment of religious minorities.

Japan was the target of Russia, before invading Ukraine.

Months before President Vladimir Putin launched a full-scale invasion of Ukraine, he was planning to attack Japan, according to an alleged letter from a whistleblower at Russia’s Federal Security Service (FSB). 

In March, an FSB agent, dubbed the ‘Wind of Change’ reportedly wrote a letter to Vladimir Osechkin, a Russian human-rights activist who runs the anti-corruption website Gulagu.net and now lives in exile in France after he was placed on a wanted list by the Russian government.

He is accused of leaking an enormous trove of documents, photos, and videos with hundreds of cases of rape and torture of inmates in Russian prisons directed by prison officials.

World population hits 8 billion.

The world population surged past 8 billion people on Tuesday, the United Nations said, warning that more hardship is in store for regions already facing resource scarcity due to climate change.

Whether its food or water, batteries or gasoline, there will be less to go around as the global population adds another 2.4 billion people by the 2080s, according to U.N. projections.

Resource pressure will be especially daunting in African nations, where populations are expected to boom, experts say. These are also among the countries most vulnerable to climate impacts, and most in need of climate finance.

In sub-Saharan Africa, where some 738 million people already live without adequate food supplies, the population is projected to jump by 95% by mid-century, according to the Institute for Economics and Peace. The think tank warned in an October report that much of sub-Saharan Africa will be unsustainable by mid-century.

Globally, the 8 billion population milestone represents 1 billion people added to the planet in just the last 11 years.

Reaching 8 billion people is“a sign of human success, but it’s also a great risk for our future,” said John Wilmoth, director of the U.N.’s population division.

Middle-income countries, mostly in Asia, accounted for most of that growth, gaining some 700 million people since 2011. India added about 180 million people, and is set to surpass China as the world’s most populous nation next year.

However, births have been steadily declining in the United States, Europe, and Japan. China, too, has struggled with the legacy of its One Child Policy program and last year urged families to have a second and even third child as it also limited access to non-medical abortions.

USA removes India from its currency monitoring list.

The United States Department of Treasury has taken off India’s name from the from its Currency Monitoring List of major trading partners. In its biannual report to Congress, the US’ Treasury Department conveyed that along with India, it had also removed Mexico, Thailand, Italy and Vietnam from the list. With this, seven economies that are now on the current monitoring list include Japan, China, Korea, Singapore, Germany, Malaysia and Taiwan.

The Currency Monitoring List closely follows the currency policies of some of the US’ major trade partners. If a country appears on the list, it is regarded as a “currency manipulator”. A ‘currency manipulator’ is a designation that the US government authorities give to countries that according to the US, engage in “unfair currency practices” for trade benefits. Thus, inclusion in the list simply means that the country is artificially lowering the value of its currency to get an advantage over others. This is because a lower currency value leads to reduced export costs from that country. 

Removal of India from the list by the US’ Treasury Department can be seen as a positive news both in terms of market aspect and India’s monetary policy-making. If Indian market experts are to be believed, the development means that the Reserve Bank of India (RBI) can now take robust measures to manage the exchange rates effectively, without being tagged as a currency manipulator. This may also be a big win from a markets standpoint and also signifies the growing role of India in global growth.

Status of India's Forex reserve.

Until the beginning of this year, the country had saved enough for the rainy day, because of strong capital flows in the past. However, those reserves are depleting fast. India lost nearly $85 billion of its forex reserves in the first half of the fiscal year, the second biggest depletion among major emerging market (EM) peers during the period.

India’s forex reserves were $528.4 billion as of 14 October, the lowest since July 2020, and sharply down from the record $642.4 billion last year. The rupee has crashed more than 10% against the US dollar this year and slipped below 83 for the first time in past few weeks.

To help arrest rupee’s record fall, the Reserve Bank of India has also burned $114 billion from its forex coffer, triggering concerns on this front as well. The central bank has however attributed about two-thirds of the decline to valuation effects. The decline of the forex reserves cannot be solely attributed to a central bank’s intervention to defend the currency against the dollar.

There has been a sharp depletion of forex reserves in the last few months, but what is comforting is India’s high level of reserves that has enabled it to withstand the sharp depletion without any major panic so far. Another comforting factor is the country’s low external debt (20% of gross domestic product) and the short-term debt as a share of total external debt is around 20%.

How US is exporting Inflation to rest of the world.

The Federal Reserve is laser-focused on stemming price increases in the United States, but countries thousands of miles away are reeling from its hardball campaign to strangle inflation, as their central banks are forced to hike interest rates faster and higher and a runaway dollar pushes down the value of their currencies, reported CNN this month.

The Fed’s decision to raise rates by three-quarters of a percentage point at three consecutive meetings, while signalling more large hikes are on the way, has pushed its counterparts around the world to get tougher, too, according to the report.

The dollar is up 18% this year and last month hit a 20-year high, according to the benchmark ICE U.S. Dollar Index, which measures the dollar against a basket of key currencies.

The reasons for the dollar’s rise are no mystery. To combat soaring U.S. inflation, the Federal Reserve has raised its benchmark short-term interest rate five times this year and is signalling more hikes are likely. That has led to higher rates on a wide range of U.S. government and corporate bonds, luring investors and driving up the U.S. currency.

In effect, the US has been exporting inflation during its pandemic rebound. That underscores a profound change in the global economy. In the pre-Covid world, goods were abundant and the challenge was finding buyers.  

In the new age of scarcity, that story has been flipped on its head.  

Now there are signs that American consumers are dialing it back as the Federal Reserve ratchets up interest rates to cool the economy and combat inflation.  

For the rest of the world, that may just create a different headache as the US switches to exporting inflation through another channel: the super-strong dollar.  

With rates in the US rising much faster than in the euro zone and Japan, the dollar is soaring.   

To be sure, consumer demand is just one cause of the worldwide spike in inflation—arguably not the main one even in the US, where Covid stimulus was largest.

Inflation not yet in control.

In twin blows to Indian economic revival, higher food prices drove retail inflation to a five-month high of 7.4 per cent while factory output fell for the first time in 18 months. This relates to data of september month.

The second consecutive month of rise in consumer price index (CPI)-based inflation will add to the pressure on the Reserve Bank of India (RBI) to again raise interest rates to tame high prices.

Inflation has been above the targeted zone for the ninth month in a row and as per statute, the RBI will now have to explain to the government in writing why it failed to keep prices below 6 per cent.

This is the ninth consecutive month where the inflation print has remained above the upper band of 6 per cent and the second successive quarter where the average is higher than 7 per cent.

Irregular rainfall is said to be the primary reason behind higher inflation in vegetable and fruits. While inflation in cereals has also inched up, the steps taken by the government and a reasonably healthy Kharif output are expected to address the concerns behind the further hike in prices.