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TRADE DEFICIT IN THE RANGE OF $100-110B

MUMBAI: The country’s trade deficit which improved by 25 per cent in the first nine months of financial year 2016-17 compared to last year, is likely to be in the range of US dollar 100-110 billion by March-end, says a report. During April-December period of the fiscal 2016-17 the trade deficit was at US dollar 76.37 billion as against US dollar 100.08 billion in the same period last year.

“The trade deficit has improved sharply by almost 25 per cent in the first nine months and with the present trend, the overall trade deficit would be in the region of US dollar 100-110 billion for the year (fiscal 2016-17),” Care Ratings said in a report.

Exports were marginally in the positive territory in the first 9 months of the fiscal 2016-17 while imports continue to decline by around 7 per cent.

The report said with the US economy showing signs of accelerating and the Federal Reserve announcing its intentions to increase interest rates in a phased manner, debt investments in emerging markets would become less attractive.

For the year so far, FPI flows into equity has been positive at US dollar 2.5 billion as against outflow of US dollar 2.7 billion last year same period, the report said adding that since October there have been outflows. “Investors have moved out of IT and pharmaceuticals in the 9-month period which could be attributed to the Donald Trump effect, while they have continued to invest well in the oil and gas sector,” it said.

In case of debt the picture was negative with overall outflows being US dollar 5.3 billion in these three quarters as against a net inflow of USD 2.1 billion last year, it said. Outflows in the last three months were as high as US dollar 6.8 billion and the major withdrawals were from the government securities market which could be due to the capital gains made from a declining interest rate regime.

Also the non-banks financial segment witnessed high outflows.

The report said FPIs may continue to be less bullish about emerging markets with rates moving up in the USA and could continue to be in a withdrawal mode. “The fact that interest rates are expected to only come down in the country on account of stable interest rate conditions would be another factor that would broaden the interest rates differential,” it said.

It further said going forward, global factors including commodity price movements, economic policies of the new government in the US and monetary policy stance of global central banks could have a bearing on capital flows in the country. FDI inflows in the first half of the fiscal 2016-17 has increased by US dollar 5 billion to US dollar 21.3 billion from US dollar 16.6 billion in the April-September period last fiscal.

The report said FDI has been doing better than FPI flows in the last couple of years as the factors driving them are policy environment and opportunities and not linked with profit motivation unlike FPI. “Also, improving fiscal situation, inflation rate and exports growth augured well to improve sentiments for the investors,” it said.

In the April-December period of the fiscal 2016-17, the rupee has witnessed varying trends in the last 9 months- it declined in May and June before strengthening in the next four months. The rupee declined in November and December which was also the time when the FCNR (B)outflows took place and the dollar simultaneously strengthened rapidly after Donald Trump was elected as President of USA.

SUGAR PRODUCTION ESTATES CUT IN DROUGHT STATES

Chennai: With drought hitting the crop in key growing states of Maharashtra and Karnataka, the Indian Sugar Mills’ Association (ISMA) has revised downwards its estimates for sugar production during the 2016-17 season (October-September) to 213 lakh tonnes. ISMA projected sugar production at 234 lakh tonnes for 2016-17 during its first advance estimates of the crop in September last year

“Considering that some sugar mills have closed their operations in the drought affected areas mostly in Maharashtra and Karnataka and field reports that sugarcane availability in these two states is lower than earlier expectations, ISMA decided to revise its estimates of sugar production for 2016-17 sugar season,” the association said.

MARUTI SUZUKI HIKES PRICES ; FOREIGN EXCHANGE IMPACT

NEW DELHI: Country’s largest carmaker Maruti Suzuki India on Friday hiked prices of its entire product range by up to Rs 8,014 with immediate effect.

The price hike is in the range of Rs 1,500 to Rs 8,014 (ex-showroom Delhi) across models, Maruti Suzuki said in a statement. “The hike in car prices is because of increase in commodity, transportation and administrative costs,” it added.

The automaker sells a range of models starting from hatchback Alto 800 to premium crossover S-Cross, priced between Rs 2.45 lakh and Rs 12.03 lakh

In August last year, Maruti had hiked the prices of its compact SUV Vitara Brezza by Rs 20,000 and that of premium hatchback Baleno by Rs 10,000. On a select range of models, the price hike was between Rs 1,500 and Rs 5,000.

Last year, various car makers like Hyundai Motor India, Mahindra & Mahindra, Nissan, Toyota, Renault, Mercedes-Benz India and Tata Motorshad announced hikes in prices of their vehicles from January citing rise in input costs and adverse foreign exchange impact.

 

EXPENSIVE BUDGET DESPITE REVENUE WORRIES

NEW DELHI: Finance minister Arun Jaitley is likely to borrow more than originally planned when he presents the budget on February 1, senior aides and officials said, despite counting on revenues from a national sales tax whose launch date is still unknown.

Arun Jaitley is looking at how to fund giveaways to taxpayers and higher public investment to help nurse Asia’s third-largest economy back to health after the government’s shock decision in November to abolish currency notes of Rs 500 and Rs 1,000.

That is raising concern among some economists and investors that the government will take too many fiscal risks. Yet officials say that, given the choice, they would choose growth sustained by state investment over a fiscal straitjacket.

“Some degree of flexibility on fiscal discipline should not be seen as irresponsible fiscal management,” one senior government official said, requesting anonymity due to the sensitivity of the matter. A fiscal advisory panel, which includes RBI chief Urjit Patel, has advocated widening the budget deficit to “slightly over” 3 percent of gross domestic product to free up funds for road, railway and irrigation projects.

“It is not possible to keep up the pace of capital expenditure without increasing the fiscal deficit beyond 3 percent of GDP,” another official, briefed on the committee’s findings, added. New Delhi earlier aimed to cut the federal deficit to 3 percent of GDP over the next two fiscal years, compared with 3.5 percent in the year now drawing to a close.

Independent economists are also pencilling in a higher federal deficit in the coming fiscal year, at 3.3-3.4 percent of GDP, creating room for the government to invest an extra $6 billion. That has drawn a warning from ratings agency Standard & Poor’s, which says that slowing the pace of fiscal consolidation could delay India’s chances of an upgrade due to its high and rising debt levels.

FEE FOR PRIVATE JET FLYING LINCENCE TO GO UP

New Delhi: Private jet operators may soon have to shell out more for flying licence with the government proposing five-fold increase in the existing fee.

The Civil Aviation Ministry has suggested a steep hike in fee to Rs 5 lakh for granting licence for non-scheduled operators.

Besides, the fee for submitting application as well as for renewal of licence is proposed to be increased. In this regard, the Ministry has proposed amendments to the Aircraft Rules, 1937. The fee fornon-scheduled operator’s permit is proposed to be Rs 5 lakh from existing quantum of Rs 1 lakh. While the application fee is to beraised to Rs 50,000 from current Rs 25,000, the renewal fee is proposed to be hiked to Rs 2,50,000 from just Rs 50,000 now, as per the draft norms.

Along with the higher fee, the Ministry would increase the validity of such permits to five years. At present, the licence is valid for two years and the same can be renewed for two more years at a time. Stakeholders would have time till mid February to submit their comments and suggestions on the proposed amendments to the Ministry. Non scheduled operator permit is given to entities such as those operating or owning private jets for personal or commercial use.

GOVT. MULLS TO REVIVE GOLDMINES CLOSED FOR 15 YEARS

NEW DELHI: The government is planning to revive a cluster of colonial-era gold mines – shut for 15 years but with an estimated $2.1 billion worth of deposits left – as the world’s second-largest importer of the metal looks for ways to cut its trade deficit, officials said.

State-run Mineral Exploration Corp Ltd has started exploring the reserves at Kolar Gold Fields in Karnataka to get a better estimate of the deposits, according to three government officials and a briefing document prepared by the federal mines ministry that was seen by Reuters.

The ministry has also appointed investment bank SBI Capital to assess the finances of the defunct state-run Bharat Gold Mines Ltd, which controls the mines, and the dues the company owes to workers and the authorities, said the officials, who are involved in the process.

India, the world’s biggest gold importer behind China, spends more than $30 billion a year buying gold from abroad, making the metal its second-biggest import item after crude oil.

Initial Mineral Exploration Corp estimates show reserves worth $1.17 billion in the mines, according to the briefing document. Another $880.28 million in gold-bearing deposits is estimated left over in residual dumps from previous mining operations. “These mines have huge potential,” Kumar said, adding that the initial estimates were conservative. “We feel there is more. The whole belt has a lot of potential in terms of untapped gold.”

DESI FUEL FOR HIGH END VEHICLES

BENGALURU: Beginning Friday, the domestic oil market in India will boast of a high-performance fuel with an octane rating of 99 – the highest in India so far – targeting high end vehicles like BMW, Porsche and Lamborghini.

State-run Hindustan Petroleum Corporation will launch ‘power 99’ fuel in Bengaluru on a pilot basis. This will be extended to other metros and rest of the country in the coming weeks. Experts saidhigher-octane fuels have higher activation energy requirements, which means they are less likely to lead to uncontrolled ignition, also called auto-ignition or detonation.

Stating that the market for high-end cars is growing in India, HPCL officials said cities like Delhi, Bengaluru, Chandigarh and Gurugram have a high number of high end bikes and cars. The upgraded fuel can withstand a greater rise in temperature during the compression stroke of an internal combustion engine without auto-igniting. This allows more power to be extracted, useful for high-end cars and bikes which need high-octane green petrol for optimum performance,” a senior HPCL official said.

Toyota Kirloskar Motors vice-chairman Vikram Kirloskar said: “There is certainly a market for such vehicles, and it is growing. There is a need for such fuels. So long as they come in with local specifications, they are good for the market and the environment.” The first petrol pump to vend this fuel in India will be HPCL’s outlet in Murugeshpalya, on Old Airport Road. HPCL regional manager (South) Subhankar Dutta said: “Bengaluru has about 300 high-end cars. There is a demand for superbikes like Duke and Harleys. We will launch the product here, and in other metros later. Until now, India has hadan octane rate of 97, offered by BPCL, and Shell’s octane rating is a tad less.”

CRUDE PRICE RECOVERY BOOSTS OMC SCRIPS

Shares of oil marketing companies (OMCs) are soaring on the bourses. With crude oil prices making a strong recovery, shares of all the three state-run OMCs hit a 52-week high on Wednesday. While Hindustan Petroleum Corporation (HPCL) surged 5% during the day, the most among the three firms, Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) jumped 4% and 3.9% respectively on the BSE.

The HPCL scrip saw the highest increase so far in January-jumping 23.2% on the BSE-and was followed by IOC that zoomed 17% and BPCL that went up by 11.8%. The benchmark Sensex and the broader Nifty indices advanced by 2.8% and 3.5% respectively during the timeframe.

The counters at all three OMCs witnessed brisk activity with the total traded shares far exceeding the average quantity traded in the past two weeks. About 6.28 lakh IOC shares changed hands on Wednesday on the BSE, which is more than two times the average of the preceding two weeks.

Despite the rise in crude oil prices, the OMCs have been able to take price hikes to maintain gross marketing margin of about Rs. 2.7 per litre (including freight) on diesel and petrol during the third quarter (Q3) of the current financial year.

The gross marketing margins are higher than Rs. 2.3 per liter when oil prices were regulated. “We expect marketing margins to remain higher than regulated era margins,” analysts at brokerage firm Motile Oswald Securities said. “Against the backdrop of a lower oil price regime, auto fuel pricing freedom and stable marketing margins, we retain OMCs (IOC, HPCL and BPCL) as our top picks,” they said.

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