Friday, 27 April 2012

"Finance World" International Monetary Fund lowered India’s Growth Projection for 2012 to 6.9 Per Cent

The International Monetary Fund (IMF) on 27 April 2012 lowered India’s growth projection to 6.9 per cent for 2012. The multilateral agency in January projected Indian economy to grow to by 7 per cent for 2012. The slashed growth projection is broadly attributed to the country’s poor performance on the front of economic reforms and slowing investment. The IMF, however, maintained India’s growth estimate for 2013 at 7.3 per cent. As per the IMF, the national economy grew by 7.1 per cent last year.


 The IMF’s growth projection is an indication for the government to expedite the process of economic reforms which has long been victim of the country’s internal political clutter. Many of the important reforms are still in the pipeline which needed to be approved as soon as possible.


Government should make sure that it is taking adequate majors to boost up the sentiment of investors, who are increasingly getting disenchanted of the future prospects of Indian Economy.

Wednesday, 25 April 2012

"Finance world" Retrospective amendment to fetch Rs 35,000-40,000 crore

According to estimates, the proposed retrospective amendment would result in an additional tax income for the government of between Rs 35,000 and 40,000 crore.

 Minister of state for finance S S Palanimanickam said that the income tax department have estimated the total tax implication of the proposed amemdment would be about Rs 40,000 crore. He was speaking to the Rajya Sabha members on Tuesday when he announced the massive figure.

 "The total tax implication in consequence of retrospective amendments introduced in the Finance Bill may be to the tune of Rs 35,000-40,000 crore", Palanimanickam said in a reply.

 Finance Minister Pranab Mukherjee is backing the proposed changes to the Income Tax Act with retrospective effect, which could once again open the Vodafone tax case making company liable to pay about Rs 11,000 crore as tax for an acquisition deal.

 Global business chambers including Confederation of British Industry, U. S. Council for International Business and Japan Foreign Trade Council have written a letter to the Indian PM with their concerns over the proposed changes to the law.

 Vodafone Group is planning its move over the tax claims as the government moves to change laws that will make the company liable to pay more than $2 billion in taxes.

Saturday, 7 April 2012

"Finance World" RBI asks states with weaker finances to raise cheaper funds

India’s central bank the Reserve Bank of India (RBI) has said the state governments with weaker financial position are able to borrow from the market due to the market perception that these borrowings are backed by the sovereign.

 Deputy Governor Subir Gokarn of the RBI said that there is a need to bring formal institutional fiscal discipline in the country to address the problem.”State government debt is apparently implicitly guaranteed by the sovereign. So, with or without a formal guarantee the market perceives that state debt has been fully backed,” said Gokarn.

 He pointed out that the states with a weaker financial position are not able to pay as much premium as compared to the states with higher premium. He was speaking at the 14th Annual Money and Finance Conference organised by the Indira Gandhi Institute of Development Research.

 He said that after clarity on separation and a no-bailout rule, the market will automatically start exerting pressure on the state governments to set their finances right in order or pay more to borrow. He added that this pressure acts as a discipline enforcer for the states.
Source:topnews..in

Friday, 6 April 2012

"Finance World" How India can beat the oil crisis

India's crude oil production rose barely 1% in 2011-12 over the previous year to 7,63,000 barrels per day. Meanwhile, India's energy needs are exploding. The mismatch between domestic crude production and imports has had three disastrous consequences.

 One, our import bill for 2011-12 has shot up to $475 billion. Of this, nearly a third, or $150 billion, comprises crude oil imports. Two, the trade deficit has bloated to $175 billion. Oil imports now comprise a gargantuan 85% of the country's total trade deficit.

 Three, for the first time since the Lehman crisis in September 2008, India's balance of payments in 2011-12 has turned negative. This is despite robust FII inflows: a record $9.50 billion-plus in the January-March 2012 quarter, the highest since 1993 when FIIs were allowed to invest in the Indian stock market.

 The minister for petroleum and natural gas, S Jaipal Reddy, who took charge in January 2011, has a lot of policy debris of the past to clear up. India's domestic oil production slowed on the watch of Murli Deora who held the portfolio between 2006 and 2011. Reddy has begun shaking up the old order. Domestic crude production is slated to rise by 11% in 2012-13 and a further 8% in 2013-14 to reach just under one million barrels per day (bbd).

 India's total crude oil requirement in 2013-14 is expected to rise to well over four million bbd. Crude imports, however, should fall from the current level of 80% of total consumption to 75% if new oilfields prospected by Cairn and ONGC deliver on their promise by 2014.

 The long-term target must be to bring the ratio of imported crude to total consumption down to the historical level, last seen in the 1980s and early-1990s, of around 65%.

 This requires three policy changes. First, reduce bureaucratic delays. Cairn, for example, has been waiting for nearly two years to ramp up production in its Mangala oilfield. Second, encourage more joint ventures in exploring foreign oil and gasfields. ONGC Videsh's Russian investments in Sakhalin-I and Videocon's fields in Mozambique, Brazil, East Timor and Australia should encourage Reliance Industries (RIL), Essar, Adani and other private sector exploration companies to expand their global footprint.

 Third, pursue the new shale gas strategy that the Prime Minister outlined last month. By end-2013, shale gas exploration bids in six Indian regions (Cambay, Assam-Arakan, Gondawana, KG onshore, Cauvery onshore and Indo-Gangetic basins) could reveal long-term potential.

 Despite environmental concerns over deep-rock fracking and the cost of technology, shale gas is already boosting America's domestic energy production and reducing its historical reliance on oil imports.

 RIL's discoveries in the Krishna Godavari (KG) basin at the turn of the century promised much but that promise, a decade later, remains unfulfilled. Natural gas production from the KG-D6 fieldwas estimated to yield 80 million standard cu m per day (mmscmd). It is currentlyproducing less than 28 mmscmd, causing a huge crisis for sponge iron plants across the country. Also hit are power projects whose gas-fired plants are working at less than 50% capacity.

 The government is locked in a dispute with RIL over a host of issues relating to gas pricing and approval of new investment in infrastructure to drill more wells in the contiguity of KG-D6. RIL last month finally secured government approval to explore four satellite fields in KG-D6 at an investment of $1.53 billion. This could provide an additional 10 mmscmd of natural gas. British Petroleum ( BP), which last year invested $7.2 billion to acquire a 30% stake from RIL in 21 oil and gas blocks, has best-in-class expertise in new deep-sea drilling technology.

 This will play an increasingly-important role in KG-D6's future development. It is significant, however, that BP's statutory filings in London indicate that proven reserves in the KG-D6 field are 1.4 trillion cu ft - a mere tenth of RIL's own estimates.

 The issue though is bigger than one or two private companies. India's oil and gas exploration policy has been caught in red tape for over a decade. With Reddy at the helm of the petroleum and natural gas ministry, will things really change? The minister must set ambitious targets. Indian crude oil demand, despite the growth of renewable and alternative energy sources, will rise at least 60% from the current 3.7 million bbd to around six million bbd in 2021-22.

 Assuming domestic crude production doubles in the eight years between 2013-14 and 2021-22 to two million bbd at a CAGR of 9%, India will still need to import four million bbd. However, the dependence on foreign crude would fall from 80% currently to around 67% - a realistic target that will constitute a significant advance in combating our long-term trade and current account deficits.

 If the price of crude roughly doubles in a decade to around $230 per barrel, a reasonable estimate based on both economic and geopolitical factors, the annual cost of India's targeted crude oil imports of four million bbd would rise from $150 billion today to $335 billion in 2021-22. Indian exports, currently $300 billion, are expected to grow at a CAGR of 12-15% a year. Taking the lower growth figure in that range (12%), our exports should be $800 billion by 2021-22, bringing the oil import-to-total exports ratio ($335 billion/$800 billion) down from today's inflationary level of over 50% to a more sustainable 41%. The positive spin-offs on the rest of India's economy will be significant.
Source:The Economic Times

"Finance World" FM asks IRDA to address ‘suicidal competition' among insurers

India union Finance Minister Pranab Mukherjee has asked the Insurance Regulatory and Development Authority (IRDA) to address the problem of ‘suicidal competition' among insurers as they increasingly offer policies on lower premium eyeing a bigger market share and suffer on financial position.

  Mr. Mukherjee said: “To ensure prudent underwriting and curbing unhealthy and suicidal competition among the companies through undercutting premiums is something that the regulator will need to address suitably.”

 The finance minister was speaking at the 72nd meeting of the IRDA board. He said that there is unhealthy competition between the insurance companies in the industry for grabbing bigger market share. He said this cut throat competition is already beginning to affect the balance sheets of the companies in the industry.

 He said that as the insurance companies are now free to fix premiums for their policies, the companies have significantly lowered the premiums and this is affecting their financial position.

 Mr, Mukherjee observed that despite the competition for a bigger market share the penetration level of insurance in the country remains low. He said India is an underinsured market with financial vulnerability among most income groups.

Wednesday, 4 April 2012

"Finance World" RBI tightens reporting norms to monitor gold import

The Reserve Bank of India on 3 April 2012 tightened the reporting requirements of the banks. As per the directions issued, banks will have to submit a monthly statement informing the central bank about the quantity of gold imported and mode of payment adopted. The statement is to be filed with the foreign exchange department of the RBI and has to be submitted at the end of March and September.


 The directive was issued amidst concerns of huge outflow of foreign exchange on import of gold which is believed to be putting pressure on the India's current account deficit (CAD).


 Banks were directed to file a half yearly statement on quantity and value of gold imported by nominated banks, agencies, export-oriented units (EOUs) and special economic zone (SEZs) in gem & jewellery sector, as well as mode of payment. Banks were also directed to file monthly statement on the quantity and value of gold imports by the nominated agencies (other than the nominated banks), EOUs, SEZs as well as the cumulative position at the end of the reporting month.


 Earlier, banks were only required to submit a monthly statement on the number of transactions and value of gold imported by EOUs, units in SEZ\export processing zone and nominated agencies/banks.


 As per the World Gold Council, the total gold imported in India in 2011 was 969 tonnes. India is the world's largest importer and consumer of the precious metal. India's gold import bill was USD 46 billion in April- November 2011, next only to USD 71-72 billion of crude oil. Hence to discourage gold imports, the government doubled the customs duty on it to four percent.
 Source:jagran josh

Tuesday, 3 April 2012

"Finance World" SEBI decided to Enforce Broad Guidelines for Algorithmic Trading in the Securities Market

The Securities and Exchange Board of India (SEBI) on 31 March 2012 issued broad guidelines on Algorithmic Trading. Based on recommendations of technical advisory committee (TAC) and secondary market advisory committee (SMAC), SEBI decided to enforce broad guidelines for algorithmic trading in the securities market.


 The market regulator directed stock exchanges to undertake system upgradation, including periodic upgradation of its surveillance system so as to keep pace with the speed of trade and volume of data that may arise through algorithmic trading. Also, the stock exchanges were asked to put in place monitoring systems to identify and initiate measures to impede any possible instances of order flooding through this system.


 It is for the stock exchanges to ensure that all algorithmic orders are necessarily routed through broker servers located in India. The stock exchange has appropriate risk controls mechanism to address the risk emanating from algorithmic orders and trades.


 SEBI highlighted that the minimum order-level risk controls include: • Price check - the price quoted by the order is not to violate the price bands defined by the exchange for the security. • Quantity limit check — the quantity quoted in the order shall not violate the maximum permissible quantity per order as defined by the exchange for the security.

 Stock exchanges are to seek details of strategies used by algo traders for inquiry, surveillance, investigation and the like. The stock exchange is to also include a report on algorithmic trading on the stock exchange in the monthly development report.


 SEBI further mentioned that stock exchanges shall subject the systems of the stock broker to initial conformance tests to ensure that the checks mentioned are in place and that the stock broker’s system facilitate orderly trading and integrity of the securities market.
Source:jagran josh