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August merchandise exports down 6.05%, imports fall over 13%



New Delhi, Sep 13 : Sluggish global demand pulled India’s merchandise exports lower by 6.05 per cent in August on a year-on-year basis.

As per the data furnished by the Ministry of Commerce & Industry, August exports went down to $26.13 billion from $27.81 billion reported for the corresponding period of the previous year.

However, on a sequential basis, exports during the month under review was marginally lower from $26.33 billion worth of merchandises that were shipped out in July 2019.

“Non-petroleum and non-gems and jewellery exports in August 2019 were $19.60 billion, as compared to $20.76 billion in August 2018, exhibiting a negative growth of 5.61 per cent,” the ministry said in a statement.

On the other hand, imports declined by 13.45 per cent to $39.58 billion in August from $45.73 billion reported for the corresponding month of 2018.

“Oil imports in August 2019 were $10.88 billion, which was 8.90 per cent lower in dollar terms, compared to $11.94 billion in August 2018,” the ministry said.

“Non-oil imports in August 2019 were estimated at $28.71 billion, which was 15.05 per cent lower in dollar terms, compared to $33.79 billion in August 2018,” it added.

According to the ministry data, non-oil and non-gold imports declined by 9.33 per cent to $27.34 billion in August 2019 from $30.15 billion in August 2018.

Consequently, the trade deficit in August narrowed to $13.45 billion as against the deficit of $17.92 billion in the corresponding period of 2018.

“A sharp contraction in gold as well as non-oil, non-gold merchandise imports led to considerable shrinking of merchandise trade deficit in August 2019. The de-growth in gold imports is unsurprising in the light of the recent spike in prices of the precious metal, which has contributed to the contraction in imports of stones and precious metals as well. Such imports may revive to some extent in the festive season,” said Aditi Nayar, Principal economist, ICRA.

“The decline in non-oil, non gold imports in August, led by sectors such as transport equipment, machinery, coal and chemicals, provides a cautionary signal regarding the strength of underlying economic activity,” Nayar added.

According to Sharad Kumar Saraf, President, FIEO, contraction in exports is a reflection of uncertainties, sluggish global demand and rising tariff war.

“The softening of crude, steel and other commodities prices also pulled down exports. Only 8 out of 30 major product groups were in positive territory during August 2019. Rest all major sectors of exports, including almost all labour-intensive sectors of exports besides petroleum, were in the negative showing such a decelerating trend,” Saraf was quoted as saying in a statement.

“The slowdown in chemical and plastics exports are particularly worrisome as we were growing in these sectors.”


Auto component industry’s turnover falls over 10% in H1




Auto sector slowdown

New Delhi, Dec 6 : The slump in vehicle sales adversely impacted the financial performance of India’s auto component manufacturing industry during the period between April and September 2019, industry data showed on Friday.

According to data furnished by the Automotive Component Manufacturers Association of India, the industry turnover during the period under review declined by 10.1 per cent to Rs 1.79 lakh crore ($26.2 billion) over the first half of the previous year.

The industry body cited factors such as subdued vehicle demand, recent investments made for transition from BSIV to BSVI emission norms, liquidity crunch, lack of clarity on policy for electrification of vehicles among others, that adversely impacted the expansion plans of the sector.

However, auto components’ exports grew by 2.7 per cent to Rs 51,397 crore ($7.5 billion) in H1 2019-20 from Rs 50,034 crore ($7.3 billion) in H1 2018-19.

“Europe accounted for 32 per cent of exports followed by North America and Asia, with 30 per cent and 26 per cent respectively,” the association said.

“The key export items included drive transmission and steering, engine components, body or chasis, suspension and braking etc.”

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Saudi oil giant Aramco announces world’s largest IPO



Saudi Aramco

Riyadh, Dec 6 : Saudi Arabian state oil giant Saudi Aramco on Thursday priced its initial public offering (IPO) at the high end of the targeted range, a level that will allow the company to raise a record total of at least $25.6 billion.

The company plans to sell 3 billion shares, or 1.5 per cent of its total shares, at a price of 32 Saudi riyals ($8.53) per share.

This IPO’s size gives Aramco a market valuation of $1.7 trillion, pushing it ahead of Apple ($1.17 trillion) as the world’s most valuable publicly traded company, Efe news reported.

Trading of Aramco’s shares is expected to begin next week pending an announcement by Riyadh’s stock exchange.

Aramco had previously announced that its shares would not be offered in the United States, Australia, Canada or Japan.

Saudi Arabia has pursued a commitment from wealthy Saudi citizens and regional allies to purchase shares as a gesture of solidarity and goodwill as opposed to an investment decision.

Meanwhile, the kingdom’s banks were directed to double the leverage limit for loans to investors looking to buy Aramco’s shares. Compared to an average leverage-ratio limit for loans of 1 to 1, banks were allowed to lend to retail customers for this purpose at a 2-to-1 ratio.

The company will offer 33.3 percent of the available shares (0.5 percent of Aramco’s total shares) to retail investors, while the remaining 66.7 percent have been allocated for institutional investors.

The IPO was 4.65 times oversubscribed, with total bids of $119 billion, according to sources close to the process.

An additional 450 million Aramco shares could be sold under an over-allotment option for underwriters, which would bring the total amount raised to nearly $30 billion. The previous record IPO ($25 billion) was set in 2014 by Chinese online commerce company Alibaba Group Holding.

Trading of the shares is expected to commence after all relevant legal requirements and procedures have been completed.

The company plans to pay a base dividend of $75 billion in 2020. However, it has cautioned about investment risks that include fluctuating oil prices and the backlash faced by oil companies due to their role in climate change.

The sale has been bolstered by Saudi Arabia’s regional allies, whose participation was a relief to the kingdom after plans to market the IPO globally floundered.

Proceeds from the IPO are needed as the kingdom aims to diversify its economy away from oil and implement domestic socio-economic reforms.

Aramco’s IPO plans were put on hold last year in preparation for Saudi capital market reforms. No information currently exists on where the IPO will be listed abroad.

The IPO may encourage other Gulf Cooperation Council (GCC) state oil companies to carry out their own initial public offerings; however, Abu Dhabi-based ADNOC is expected to only list the shares of its subsidiaries.

Aramco reported net income of $111.1 billion in 2018 and $46.9 billion in the first half of 2019.

The company suffered a damaging drone and missile attack on some of its oil-processing facilities in September of this year.

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RBI holding repo rate bodes well for savings: Economists




Reserve Bank of India RBI

New Delhi, Dec 6 : Even as many see the RBI’s pause on repo rate as a setback for the growth, some economists argue that any further cut could have affected households savings which have already seen a decline in recent times.

“Reduction in interest rate will work negatively. The interest rate is like a double-edged sword. It will have an impact on savings and it will have an impact on investments. We know very clearly that it does not have much impact on investments. Now, what is it doing? It is basically hampering the savings,” said N.R. Bhanumurthy of the National Institute of Public Finance and Policy (NIPFP).

He also said that monetary policy is not just about interest rates.

“There are many things which monetary policy does. It can ensure that credit flow is better and the banking sector is in good shape. They can create money supply. So, it can do many things. They have to now see how savings could be improved,” the NIPFP professor said.

M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings, said that transmission of the reduction in the policy (repo rate) requires the lending rates to fall. Further, that would also require the deposit rates to fall, which could result in reduced saving by households.

“When the inflation rate is perking up, if the banks also reduce the deposit rates, the rate of return on savings will decline which could not only reduce the incentive to save but also can hurt the elderly who maintain themselves from the interest income,” he said.

As per Economic Survey of FY19, gross savings fell nearly 60 basis points as a share of GDP in two years to 30.5 per cent in 2017-18. Household savings led the decline as its share contracted from as high as 23.6 per cent of GDP in 2011-12 to 17.2 per cent of GDP in 2017-18.

“The household sector savings declined from 23.6 per cent of GDP in 2011-12 to 17.2 per cent in 2017-18 and its net financial savings and a ratio of GDP declined from 7.2 per cent to 6.5 per cent during the same period. Thus, besides inflationary expectations, ensuring adequate real rate of return on the savings could be an objective of keeping the repo rate constant,” Govinda Rao said.

As against market expectations of a rate cut, the RBI on Thursday maintained the policy repo rate at 5.15 per cent. With this, the reverse repo rate also stands unchanged at 4.9 per cent. The Monetary Policy Committee (MPC) was unanimous in its decision to maintain status quo on both rates and ‘accommodative’ stance.

(Nirbhay Kumar can be contacted at [email protected])

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