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Sat, 25th February 2017

Anirudh Sethi Report

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Archives of “February 1, 2017” Day

Japan Denies It Is Devaluing The Yen, Accuses Trump Of Causing “Uncertainty”

In a shot across the trade war bow with both Japan and Germany, on Tuesday Trump and members of his administration took aim at both Japan and Germany, in addition to China, to accuse them of devaluing their respective currencies, an unexpected move which sent the dollar sliding to multi-month lows.  Specifically, on Tuesday morning Trump said: “You look at what China’s doing, you look at what Japan has done over the years. They play the money market, they play the devaluation market and we sit there like a bunch of dummies,” according to a transcript in Congressional Quarterly.

Prior to Trump’s statement, Trump’s top trade advisor, Peter Navarro spoke to the FT, taking aim at Germany, saying it was gaming foreign-exchange markets. His comment sent the EUR surging and precipitated a sharp drop in the dollar. Chancellor Angela Merkel rejected the accusation. At the same time, Donald Tusk, the EU’s president, placed the U.S. alongside Russia, China and terrorism as a source of instability.  “The change in Washington puts the European Union in a difficult situation, with the new administration seeming to put into question the last 70 years of American foreign policy,” Tusk said in a letter to European leaders on Tuesday ahead of an EU summit on Feb. 3.

Overnight, it was Japan’s turn, after Prime Minister Shinzo Abe, his main cabinet advisor, Suga, and Japan’s top foreign exchange official on Wednesday all pushed back against Trump’s assertion that Japan is keeping its currency devalued.

“Japan’s monetary policy is for the domestic purpose of beating deflation, and isn’t done with FX in mind, so I think that those remarks are a little bit wide of the mark,” said Masatsugu Asakawa, the Finance Ministry’s foreign exchange policy chief.

Masatsugu Asakawa

Iran Admits It Test Fired New Missile, Putting Nuclear Deal In Jeopardy

After yesterday US officials reported that Iran conducted a nuclear ballistic missile test on Sunday, which some claimed would be another violation of the UN resolution and Obama’s nuclear deal, on Wednesday Iran’s defense minister admitted that the Islamic Republic had indeed tested a new missile, but added the test did not breach Tehran’s nuclear accord with world powers or a U.N. Security Council resolution endorsing the pact.

Iran has test-fired several ballistic missiles since the nuclear deal in 2015, but this is the first during U.S. President Donald Trump’s administration. Trump said in his election campaign that he would stop Iran’s missile program. Furthermore, the confirmed launch comes at a precarious time, with president Trump seemingly looking for excuses to scrap the Iran deal, which could potentially lead to the reestablishment of Iran sanctions and the halt of Iranian oil exports to global markets, taking away as much as 1 million barrels of daily supply.

Budget 2017: Here’s why bank stocks rallied

A big infrastructure spending push, the boost to affordable housing and a fiscal deficit target of 3.2% of gross domestic product (GDP) announced in Union Budget 2017 came as a big boost to banks. A tax concession on provisions for bad loans also came as a relief for Indian banks which are struggling with gross non-performing assets of around Rs6.7 trillion.

Banking stocks rallied more than the broader market with the BSE Bankex gaining 2.7%, a full percentage point more than the Sensex.

In the budget speech, finance minister Arun Jaitley outlined his proposals to create more jobs and boost infrastructure spending, measures which will help increase credit offtake for banks. Government spending on this sector will touch Rs3.96 trillion in the next fiscal compared to a target of Rs2.21 trillion for the current year. As banks have been struggling with a large number of stressed cases in the infrastructure segment, fresh investments will get the ball rolling and hopefully turn around some of those companies that have been defaulting.

Other measures that will boost credit growth include affordable housing projects being given infrastructure status and the highest target for farm credit at Rs 10 trillion. After the government’s move to withdraw Rs500 and Rs1000 notes on 8 November, bank credit growth has fallen to around 5%, the lowest in a couple of decades.

Another positive announcement for the banking sector was the government’s comparatively tame net market borrowing figure of Rs3.48 trillion in 2017-18, as compared with Rs4.25 trillion in the current year. The net borrowing figure takes into account the securities that will be bought back, Jaitley said.

Union Budget 2017: From income tax relief to what’s dearer and cheaper; 10 things common man should know

Union Budget 2017: Finance Minister Arun Jaitley in Narendra Modi government’s fourth Budget gave a big relief to taxpayers up to Rs 5 lakh of income, but had little to offer to those earning above that bracket. Budget 2017 was a mixed bag from the perspective of the common man. Greater focus on railway safety, steps for affordable housing, and marginal tinkering with indirect taxes would bring cheer to many. Yet, Jaitley fell short of giving the common taxpayer a big-bang populist Budget, that was widely expected post demonetisation. We take a look at 10 key things common man – across genres – should know about Union Budget 2017.

1) Railways: One relief for the common man would be that no increase fares was announced. Apart from this, greater focus on rail safety would bring cheer. For passenger safety, a Rashtriya Rail Sanraksha Kosh will be created with a corpus of Rs 1 lakh crore over a period of 5 years. ‘Coach Mitra’, a single window interface, to register all coach related complaints and requirements will be launched. FM Jaitley has also announced that the service charges on buying tickets from IRCTC will be removed.

Apart from that Railway lines of 3,500 kms will be commissioned in 2017-18. During 2017-18, at least 25 stations are expected to be awarded for station redevelopment. 500 stations will be made differently abled friendly by providing lifts and escalators.

2) Cost of borrowing to come down, remonetisation to gather pace. Pace of remonetisation has picked up and will soon reach comfortable levels, FM Jaitley said. The surplus liquidity in the banking system will lower borrowing costs and increase the access to credit.

3) Digital push: 125 lakh people have adopted the BHIM app so far, the FM claimed. The government will launch two new schemes to promote the usage of BHIM; these are, Referral Bonus Scheme for individuals and a Cashback Scheme for merchants.

4) Defence: A comprehensive web based interactive Pension Disbursement System for Defence Pensioners will be established. This system will receive pension proposals and make payments centrally. This will reduce the grievances of defence pensioners.

Saudi oil minister welcomes Donald Trump election

Saudi Arabia’s oil minister has said President Donald Trump’s election will be good for the oil industry, playing down concerns over the impact of his “America First” policies for the export-reliant kingdom.

Khalid al-Falih said Saudi Arabia is considering increasing its investment in the US encouraged by the new White House administration’s pro-industry and pro-oil and gas stance.

The minister, a former head of Saudi’s state oil company Aramco, said in an interview with BBC, the Trump administration looked like adopting policies “which are good for the oil industry” while steering “away from excessively anti fossil fuel, unrealistic policies by some well intentioned environment proponents”.

But Mr al-Falih said what the US wanted was a “mixed energy portfolio that includes oil, gas, renewables and make sure that the American economy is competitive. We want the same in Saudi Arabia”.

Key takeaways from FM Arun Jaitley’s speech

“International Monetary Fund estimates that the world GDP will grow by 3.1% in 2016 and 3.4% in 2017. The advanced economies are expected to increase their growth from 1.6%-1.9% and emerging economies from 4.1%-4.5%.”

 “The focus of the budget are in these areas: Farmers, rural population, youth, poor and underprivileged, infrastructure, financial sector, digital economy, public service, fiscal management and tax administration.”

Tax proposals:

“We are largely a tax non-compliance society when too many people evade taxes burden falls on those who are honest.”

“We are committed to making our taxation rate reasonable more fair & expand the tax base of the country.”

“Tax-to-GDP ratio very low in India.”

“Tax rate if income of Rs 2.5 to 5 lakh will be reduced to 5%.”

“50 percent saving in income tax on earning upto Rs 5 lakh.”

“Total FY18 disinvestment target seen at Rs 72,500 Crore Vs Rs 56,500 Crore (YoY).”

“Total Tax revenue seen at Rs 12.27 Lakh Crore.”

“Gross Market borrowing seen at Rs 6.05 Lakh Crore.”

Union Budget 2017: Big cheer for taxpayers with income below Rs 5 lakh! Tax rate slashed to 5%

Union Budget 2017: Finance Minister Arun Jaitley in his speech announced that he will reduce the tax rate of individuals earning between Rs 2.5 lakh to Rs 5 lakh to 5% from the current 10%. This would also translate into an additional benefit of Rs 12,500 for tax payers even beyond Rs 5 lakh.

To part finance the additional burden on the government for this tax relief, FM Jaitley announced a surcharge of 10% for those earning between Rs 50 lakh and Rs 1 crore.

FM Jaitley also announced some changes that would encourage affordable housing. The holding period for immovable property for LTCG has been reduced to 2 years. FM Jaitley said that his tax proposals are directed at providing relief to the middle class and to stimulate growth. Jaitley cited a series of figures to show that India is largely a tax non-compliant economy.

Tax and industry experts were already expecting that to assuage the demonetisation pains of the common man and alleviate their sufferings, some tax reliefs may be provided in the budget. Even Finance Minister Arun Jaitley had hinted in his speeches earlier that the tax burden on taxpayers may be lowered due to higher tax revenues being collected on account of cashless systems.

Macau gaming revenue growth weakens in January

Growth in Macau’s gaming revenues slowed further in January, continuing a decline from November’s peak of double-digit growth.

Gross revenues from games of fortune last month grew 3.1 per cent year on year to 19.3bn patacas ($2.4bn), decelerating from a rise of 8 per cent in December.

That was the slowest annualised growth in gaming revenues since they exited contraction in August and appeared to bode ill for the gambling enclave’s nascent recovery at the year’s outset – even if it marked a major improvement from the 21.4 per cent fall seen in January 2015.

One potential reason for the back-to-back months of slowing growth might be that gamblers are on high alert following reports in December that Macau was about to halve the daily money withdrawal limit from ATMs in the gambling haven. Although this was revealed to not be the case, some players could have taken it as a sign Beijing was still concerned about capital flight and decided to steer clear for the time being.