Sat, 27th May 2017

Anirudh Sethi Report


Archives of “economic advisory council” Tag

Eurozone forecast to grow by 1.3% this year and 1.6% next year

In a marginally improved outlook for the region, the unemployment rate is expected to fall to 12% this year and 11.3% next year. The fiscal deficit for the region is projected to come in at -2.4% in 2014 and -1.6 next year. 

But there are still huge disparities in the region, with many member states in the south facing major challenges as they attempt to restore fiscal rectitude. 

The Euroframe indicator is put together by the ESRI and research institutes from nine other EU countries. 

The 2014 winter economic assessment of the eurozone noted hard data such as retail sales, industrial production, and new orders received, have until very recently, not embarked on a clear upward trend. 

However, industrial production accelerated sharply in November. 

The ECB’s outright monetary transaction programme — which pledges the unlimited purchases of short-term debt for any member state that gets into difficulty in return for implementing structural reforms — has helped stabilise financial markets across the region.  Read More 

C Rangarajan hits out at IMF, WB for slashing India’s GDP growth rate

Rejecting IMF and World Bank’s “unduly” pessimistic projections, Prime Minister’s key economic advisory council chairman C Rangarajan today exuded confidence that the GDP growth would be around 5.5 per cent in the current fiscal.

“These institutions are unduly pessimistic. We think the growth rate will be between 5 and 5.5 per cent. We have projected growth rate of 5 per cent earlier, which I think still holds,” Rangarajan said on the sidelines of Global Conference on Financial Inclusion & Payment System here.

Earlier this month, the World Bank slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent.

Meanwhile, International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 per cent, based on market prices, for India in 2013-14, that is expected to pick up to 5.1 per cent next fiscal. Read More 

Too early to celebrate on rupee, current account deficit

The kind of commentary that has greeted the arrival of Raghuram Rajan at the Reserve Bank of India (RBI) betrays the absence of serious thinking in the country. He might have warned of financial sector imbalances in the world but I do not think he would have predicted that India would greet his arrival with commentary that is blatantly sexist. Imagine the reaction that would have awaited male journalists writing about a good-looking lady governor at the central bank. There is far too much of escapism and denial on display. That is why most commentary has jumped from being despondent to euphoric on a fortnight of relief rally in Indian stocks and the currency. Market prices often overshoot on either side before settling down in the middle.

For example, the government reported that the Index of Industrial Production (IIP) rose in July by 2.6% year-on-year and the decline in June was revised down to -1.8% from the previously reported -2.2%. In terms of sectors, manufacturing and electricity output went up in July while mining output contracted. According to use-based classification, capital goods led the output improvement in July with a gain of 15.6%. This was due to a category called “Electrical Machinery and apparatus” that has a weight of about 2% in the overall IIP. It jumped to 573.9 from 312.5 in July last year! One of the products that made a specific contribution to this category is “Insulated Rubber Cables”. The production of this item jumped 336% year-on-year. Production of ayurvedic medicaments and vitamins jumped on an annual basis. Certainly, none of these are signs of sustainable turnaround in industrial production, in areas where they matter. Read More 

PM’s advisors differ with finance ministry

The Prime Minister’s Economic Advisory Council (PMEAC) on Friday differed with the finance ministry’s optimism that the current account deficit (CAD) would be fully financed in 2013-14 without drawing from the foreign exchange reserves.

It also said containing the Centre’s fiscal deficit at 4.8 per cent of gross domestic product (GDP) in 2013-14 would be a challenge.

Though agreeing with the ministry that the CAD would come down to $70 billion (3.8 per cent of GDP) in 2013-14 from $88 billion (4.8 per cent of GDP) in 2012-13, the council in its Economic Outlook for 2013-14 estimated net capital flows at just $61.4 billion this year, necessitating withdrawal of $8.6 billion from forex reserves to finance the deficit on the current account.

Council chairman C Rangarajan tried to play down the differences with the finance ministry on this front, saying the situation could improve. Read More 

‘India may have draw $ 9 bn from forex kitty to finance CAD’

India may have to draw about $ $ 9 billion from its foreign exchange reserves to finance current account deficit this year,PMEAC Chairman C Rangarajan said today, while pitching for promoting foreign investment and exports to deal with problem in the long run. 

The Prime Ministry’s Economic Advisory Council (PMEAC) Chairman also said fiscal deficit is a concern too and suggested raising domestic oil prices to restrict it to the budget target of 4.8 per cent of the GDP in this fiscal. 

“Controlling CAD remains the main concern at present… On the assumption that total CAD will be $ 70 billion and the net capital inflows that we have estimated (about $ 61 billion), there will be a drawdown on the reserves of about $ 9 billion,” Rangarajan said. 

He also expressed the hope that CAD will even fall below $ 70 billion if the capital inflows picks up.  Read More 

PMEAC lowers GDP estimate to 5.3 per cent for FY14 (Highlights )


* Prime Minister’s Economic Advisory Council projects 5.3 per cent growth in 2013-14

* Inflation will be around 5.5 per cent by March 2014: PMEAC

* Current Account Deficit (CAD) to moderate to 3.8 per cent of GDP in 2013-14 from 4.8 per cent a year ago: PMEAC.

* Tight monetary policy should continue till rupee stabilises: PMEAC Read More 

RBI’s status quo influenced by external factors: Rangarajan

Reserve Bank’s decision to maintain a status quo on interest rates has been influenced by external sector considerations, specially widening current account deficit, Chairman of Prime Minister’s Economic Advisory Council, C Rangarajan, said.

 “Yes, I think it is a difficult choice. The RBI has taken a cautious stand…the decision has been largely influenced by the external sector consideration. The current account deficit (CAD) is high and more recently the rupee has been under pressure. This appears to have been a major factor influencing the RBI to pass this stand,” Rangarajan said post-RBI policy announcement.

The Reserve Bank in its first mid-quarter policy review today kept the key interest rates unchanged because of elevated food inflation, rupee depreciation and uncertainty over foreign fund inflows.

He said going forward the price situation seems to be continuing and there have been some administered prices that needs revision.

“But even the depreciation of the rupee will have some impact on the price situation,” he added. Read More 

Early exit from economic stress?-Shankar Acharya

INDIA FLAGAs the government staggers from one corruption-related scandal to another, I am reminded of the title of an article I read some years ago, which characterised India as “a flailing state”. The epithet seems increasingly appropriate. It certainly applies to the economic policies of recent years which have ensured the collapse of economic growth from 9.3 per cent in 2010-11 to five per cent in 2012-13, the yawning external imbalance with the current account deficit (CAD) officially expected to exceed five per cent of GDP in 2012-13 and consumer price inflation in double digits for the fourth successive year.

Faced by such ugly official data, the government’s response – from the prime minister down – has been to speak soothingly about the worst being behind us and predict a return to eight per cent economic growth in three years and a reduction of the CAD to 2.5 per cent of GDP in a similar period. For this year, 2013-14, the finance ministry projects (via the Economic Survey, 2012-13) a growth revival to 6.1-6.7 per cent, a prediction dutifully reflected by last fortnight’s ‘Review of the Economy, 2012-13’ by the Prime Minister’s Economic Advisory Council (PMEAC) which foresees GDP growth of 6.4 per cent. The Reserve Bank (RBI), perhaps the most professional of extant official economic agencies, offered a more bearish forecast of 5.7 per cent in its Monetary Policy Statement, 2013-14 last week. Read More 

India Lowers Foreign Investor Outlook

India has officially lowered its expectations of investment from foreign stock investors, which could translate into a tepid year for Indian stocks.

A few days after Indian Finance Minister P. Chidambaram returned over the weekend from a trip to the U.S. and Canada to woo investors, the government said Tuesday that it expects fewer dollars coming into Indian stocks this year.

C. Rangarajan, chairman of the Indian Prime Minister’s Economic Advisory Council told reporters on Tuesday that India expects foreign institutional investors to invest around $18 billion in the country for the financial year that started April 1. This would be 25% lower than their investments in the previous year that ended March 31.

Foreign institutional investors are a key driver of the Indian stock market.

Last year, overseas investors poured $24 billion into Indian stocks, sending the benchmark Sensex 26% higher and making Indian stocks one of the top five performers globally.

The Prime Minister’s Economic Advisory Council didn’t specify why it expects foreign inflows to cool, but we can make an educated guess.

India’s economy is growing at its slowest pace in nearly a decade – an expected 5% for the year through to March 31. The government hopes growth to accelerate to 6.4% for the year ending March 31, 2014.

Meanwhile, there is political uncertainty given the national elections which must happen before May 2014. This makes investors wary.

In addition, global investors have lately been finding better investment options elsewhere. Japan, for example, has become an investor favorite because a recent devaluation of its currency is expected to help boost the country’s export-driven economy, according to a  Deutsche Bank report earlier this week.

India is aware that it has its task cut out even to meet its target of getting $18 billion from foreign stock investors. “Maintaining this level will be mostly dependent on domestic policy stance and growth conditions,” the Prime Minister’s Economic Council said in its report Tuesday.

Oil block bids this year under revised rules

The government plans to hold the next round of oil and gas block auctions later in 2013 after it puts in place a revenue-sharing regime.

About 68 oil and gas blocks are likely to be up for bidding in the 10th round of the New Exploration Licensing Policy (Nelp).

Petroleum ministry officials said the Cabinet note on replacing the existing cost-recovery mechanism with revenue sharing would be discussed soon. Read More