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High oil prices, trade deficit widen India’s current account deficit

According to the RBI data, the CAD for last fiscal widened to 1.9 per cent of the GDP (Gross Domestic Product) from 0.6 per cent in 2016-17.

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Reserve Bank of India RBI

Mumbai, June 13 (IANS) A rise in trade deficit due to higher crude oil prices widened India’s current account deficit (CAD) for 2017-18, Reserve Bank of India’s (RBI) data showed on Wednesday.

According to the RBI data, the CAD for last fiscal widened to 1.9 per cent of the GDP (Gross Domestic Product) from 0.6 per cent in 2016-17.

The current account is the net difference between inflows and outflows of foreign currencies.

Accordingly, the country’s trade deficit increased to $160 billion in 2017-18 from $112.4 billion in 2016-17.

“Net invisible receipts were higher in 2017-18 mainly due to increase in net services earnings and private transfer receipts,” the RBI said in a statement on “Developments in India’s Balance of Payments”.

In terms of inflows, gross FDI (Foreign Direct Investment) into India increased to $61 billion in 2017-18 from $60.2 billion in 2016-17.

However, net FDI inflows in 2017-18 fell to $30.3 billion from $35.6 billion in 2016-17.

As per the RBI data, portfolio investment recorded a net inflow of $22.1 billion in 2017-18 as compared with $7.6 billion a year ago.

“In 2017-18, there was an accretion of US$ 43.6 billion to the foreign exchange reserves (on a BoP basis),” RBI said.

On the quarterly basis, the data showed that the country’s CAD rose to $13 billion during the fourth quarter (January-March) of 2017-18 from $2.6 billion in the like quarter of 2016-17.

“The widening of the CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit ($41.6 billion) brought about by a larger increase in merchandise imports relative to exports,” the statement said.

The Q4 CAD accounted for 1.9 per cent of the GDP as against 0.4 per cent of the GDP in the like quarter of 2016-17.

“Net services receipts increased by 8.8 per cent on a y-o-y basis mainly on the back of a rise in net earnings from software services and other business services,” the statement said.

“Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.1 billion, increasing by 15.1 per cent from their level a year ago.”

In the financial account, net FDI stood at $6.4 billion in Q4 of 2017-18 higher than $5 billion in Q4 of 2016-17.

The data disclosed that net inflow of portfolio investment was just $2.3 billion as against net inflow of $10.8 billion during Q4 2016-17; on account of moderation in net purchases in both the debt and equity markets.

“Net receipts on account of non-resident deposits amounted to US$ 4.6 billion in Q4 of 2017-18 as compared with US$ 2.7 billion a year ago,” the statement said.

In Q4 of 2016-17, foreign exchange reserves (on BoP basis) increased by $13.2 billion as against an accretion of $7.3 billion during the like period of 2016-17.

ICRA’s Principal Economist Aditi Nayar said: “The deterioration in India’s current account deficit to $13.0 billion in Q4 FY2018, is in line with our forecast of around $12-14 billion.”

“The size of the current account deficit in Q4 FY2018 nearly rivalled the full year deficit recorded in FY2017, underscoring the impact that rising commodity prices have on the external balances of net importers such as India.”

Nayar pointed out that despite the contraction in gold imports, the merchandise trade deficit worsened in Q4 FY2018.

“Around half of the magnitude of this deterioration is attributable to the larger oil import bill, following the rise in crude oil prices,” Nayar said.

India Ratings Chief Economist Devendra Kumar Pant said: “Nearly 46 per cent deterioration in trade deficit in FY18 was due to oil. However, higher services exports and remittances in FY18 reduced ballooning of CAD. Despite widening of CAD, strong capital and financial account flows resulted in US$43.6 billion increase in foreign exchange reserves, which provided strength to currency.”

“Going forward current account situation in FY19 is likely to worsen and this coupled with weak capital flows will exert pressure on currency. Deteriorating current account and fiscal slippage does not augur well for macro fundamentals.”

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World becoming fan of our local products: PM Modi

He added that previously there were massive fairs (melas) on the occasion of Dussehra…but in present times, they took on a different form.

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Narendra Modi

New Delhi, Oct 25 : Prime Minister Narendra Modi on Sunday said that since India is opting for ‘vocal for local’, many of the local Indian products have the potential of becoming globally popular and are attracting a lot of attention.

“World is becoming a fan of our local products. One such example is Khadi. Our Khadi is being known as nature friendly fabric plus its becoming a fashion statement,” said Prime Minister Narendra Modi while addressing the Mann Ki Baat programme.

The Prime Minister also said that Khadi has since a long time been a statement of “simplicity”. He added that the fabric has health benefits as its body-friendly and is also an all-weather fabric.

He said that on Gandhi Jayanti, the Khadi store in National capital’s Connaught Place witnessed a massive sale of Rs 1 crore.

The Prime Minister also asked the citizens to opt for local products while going out for shopping during the festive times. “When you go out to buy something during these festive times, remember the vocal for local,” he said.

“During the lockdown, we closely came to know about those members of society, without whom our lives would be miserable. Sanitation workers, brothers and sisters working as domestic helps, local vegetable vendors, milkmen, security guards….we have now felt the significance of their roles in our lives in a better way,” the PM said.

The PM said that during this crisis, these people were with us, now during the festivities, we shall make these people a part of our celebrations.

“I earnestly urge you to ensure, in whatever way, in making them a part of your celebrations. Treat them as members of your own family…you will see for yourself how your joy rises by leaps and bounds,” PM Modi said.

The Prime Minister also wished the nation on the occasion of Vijay Dashmi or Dusshera. “On this auspicious occasion, heartiest greetings to all of you. The festival of Dussehra is one of the triumph of truth over untruth. But, simultaneously, it is also the festival of victory of patience over crises,” he said.

“Today, all of you are carrying on with immense patience, celebrating the festival with restraint…and hence, in our ongoing fight, our victory too is assured, he said.

He added that previously there were massive fairs (melas) on the occasion of Dussehra…but in present times, they took on a different form.

The festival of Ramleela too was one of its major attractions….but now, that too has been restricted to some extent. Earlier during Navratra, the notes of Garba of Gujarat would reverberate all over….this time all grand events have been curtailed. Many more festivals are on the way in the days to come, he said.

The Prime Minister also asked the Indian citizens to think of the braveheart soldiers who are firmly stationed on our borders in line of duty. “Even during these festive time, all in service, security of Mother India. We have to light a lamp at home in honour of these brave sons, daughters of Mother India,” he said.

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Tata Motors reaches 4 mn passenger vehicle production milestone

As of today, its ‘New Forever BS6’ range consists of the Tiago, Tigor, Nexon, Harrier and the Altroz.

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Ratan Tata

Mumbai: Automobile major Tata Motors has achieved the production milestone of 4 million passenger vehicles in India since its inception.

“Over the years, Tata Motors has produced legendary vehicles like the Indica, Sierra, Sumo, Safari and the Nano that have played a pivotal role in the shaping the country in its post-economic liberalisation era,” the company said in a statement on Saturday.

“These iconic vehicles have broken barriers across categories in the Indian automobile sector. With the launch of the Tata Safari, the company pioneered the concept of a ‘lifestyle SUV’ to the industry, thereby creating the most aspirational four-wheeler for its customers.”

The company had also introduced the first ever MPV in Tata Sumo.

In the more recent past, Tata Motors launched the entry level car and the compact SUV segment with the rollout of the Tiago and the Nexon, respectively.

“Tata Motors is also India’s largest EV manufacturer with 67 per cent market share and leading the way on electric vehicle adoption in India,” the statement said.

“The company had achieved the 1 million production mark for passenger vehicles in 2005-06, 3 million in 2015 and the 4 million production milestone was achieved this month.”

As of today, its ‘New Forever BS6’ range consists of the Tiago, Tigor, Nexon, Harrier and the Altroz.

Besides, Tata Motors has been India’s first car manufacturer to have received a 5-star Global NCAP rating for its model, the Nexon.

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Hotel industry’s recovery to pre-Covid levels profits 3 yrs away: ICRA

“This will keep revenues moderated, resulting in operating losses and stretched debt metrics during FY2021 and FY2022.”

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Park Hotel Delhi

New Delhi, Oct 24 : The Indian hotel industry’s recovery to pre-Covid levels profits is at least three years away, ratings agency ICRA has said.

The ratings agency said that road ahead for the industry is rough as revenues and margins are expected to post record decline in FY21 with losses mounting over the next two years.

The hotel industry has witnessed one of the worst revenue declines, in Q1FY21, with revenues for the industry sample declining by 85 per cent.

“Given the high operating and financial leverage in the industry, the revenue decline led to huge operating and net losses in Q1 FY2021 despite the extensive cost-cutting measures adopted by most entities in the industry,” ICRA said in a statement.

“Despite sharp weakening in interest coverage, recourse to the RBI provided moratorium on debt servicing as part of its Covid relief package announced in March 2020 supported the industry.”

As per the statement, about 66 per cent of ICRA’s hospitality portfolio applied for moratorium under this scheme and several of these will apply for restructuring under the K.V. Kamath committee too.

“Although hotels have been gradually allowed to reopen, occupancies have remained subdued in H1FY2021,” the statement said.

“This will keep revenues moderated, resulting in operating losses and stretched debt metrics during FY2021 and FY2022.”

The industry has reported a 2.7 per cent de-growth in topline with flat operating margins at 22 per cent in FY2020.

“With an 85 per cent YoY decline witnessed in revenues in Q1 FY2021 and subdued occupancies witnessed in Q2 FY2021 as well, industry wide revenues are expected to witness sharp de-growth of 60-65 per cent for FY2021,” ICRA said.

“Despite several measures taken by the companies to variabilise the fixed costs, the industry is likely to report massive operating and net losses in FY2021.”

–IANS

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