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Exports up 0.8 percent in November; trade deficit widens to usd 16.6 billion

India’s exports grew by a meagre 0.80 per cent to USD 26.5 billion in November, mainly due to a high base effect, even as the trade deficit widened to USD 16.67 billion, according to commerce ministry data. Imports rose by 4.31 per cent to USD 43.17 billion during the month. The trade deficit stood at USD 15.1 billion in November 2017. It was USD 17.13 billion in October this year.

The growth rate of imports in November, however, was the lowest since December 2016, when the inbound shipments grew by only 0.46 per cent. The deficit widened despite a decline of 15.6 per cent in gold imports at USD 2.75 billion during the month under review.

Sectors like engineering, gems and jewellery, cotton/ yarn/fabrics, man-made yarn/fabrics, leather, iron ore, marine products, cashew and rice recorded negative export growth in November.

On the other hand, pharmaceuticals, electronics, textiles, carpet, petroleum and plastic showed positive growth. Exporters attributed the marginal export growth in November to high base effect, as the foreign shipments in the comparable month of the previous fiscal were quite high at USD 26.29 billion.

Federation of India Export Organisations (FIEO) President Ganesh Gupta demanded “urgent and immediate support” to boost exports. He asked the government to augment the flow of credit and interest subsidy for exports sector.

Oil imports in November jumped by 41.31 per cent to USD 13.49 billion. However, the non-oil imports dipped by 6.79 per cent to USD 29.68 billion.

During April-November this fiscal, exports rose by 11.58 per cent to USD 217.52 billion, while imports recorded a growth of 14.71 per cent to USD 345.64 billion.

Trade deficit during the period widened to USD 128.13 billion as against USD 106.37 billion during April-November 2017-18. Oil imports during April-November this fiscal increased by 49.14 per cent to USD 97.43 billion. Non-oil imports grew by 5.18 per cent to USD 248.21 billion during the period.

Meanwhile, RBI data showed that India’s services exports rose by 19 per cent to USD 16.82 billion in October. The services imports also went up to USD 10.10 billion as against USD 8.7 billion in October 2017.

You think PSU bank privatisation a solution? Raghuram Rajan does not; here’s what he says

Pointing out that privatisation of public sector banks is not panacea for all ills, former RBI Governor Raghuram Rajan Friday made a case for reduction of uncompensated mandates like lending targets and pushing government schemes through branches of state-owned lenders. He also said there is a need to reduce the Statutory Liquidity Ratio and substituting this with the liquidity coverage ratios and net stable funding ratios set by Basel. Last week, the RBI decided to reduce SLR, the portion of deposits required to be mandatorily invested in government bonds, by 0.25 per cent every quarter beginning January 2018. The calibrated reduction in SLR will continue till it reaches 18 per cent from the existing 19.5 per cent.

The banking system is overburdened with non-performing loans and there is a need to adequately professionalise boards of PSBs, Rajan said adding the government should do away with board appointments to avoid unnecessary politicisation. “Much of the problem lies in PSBs but private sector banks like ICICI and Axis Bank, as well as some of the old private banks, have not been immune. Some of the malaise comes from a general need to improve governance, transparency and incentives in the system. However, the difficulties in even some private banks suggest that ‘simple’ solutions like privatising all public sector banks may be no panacea,” he said.

The former RBI governor also expressed concerns over uncompensated government mandates being imposed on PSBs for a long time. “This is lazy government – if an action is worth doing, it should be paid for out of budgetary resources. It also is against the interests of minority shareholders in PSBs. Finally, it does not draw the private sector in to compete for such activities,” he said. The government should incentivise all banks to take up activities it thinks desirable, not impose it on a few, especially as the privileges associated with a banking license diminish, Rajan added.

National electronics policy almost finalised, Modi government pushing India towards $1 trillion digital economy, says Ravi Shankar Prasad

The government has almost finalised the National Policy on Electronics to boost electronics manufacturing in India on a big scale, Electronics and IT Minister Ravi Shankar Prasad said Friday. Prasad further said that the Modi government is pushing India’s case for USD 1 trillion digital economy.

“We are working on electronics policy, we have almost finalised that. We had widest consultation possible,” he said at an event organised by industry body CII. The minister also asked the electronics industry to focus on producing medical devices, defence and automobile items. “We are pushing India’s case for USD 1 trillion digital economy and that report is almost finalised and the prime minister soon going to launch it,” Prasad announced.

He pointed out that 240 companies in India are making mobile phones and its components. Noida and Greater Noida are emerging as mobile phone manufacturing hub, Prasad said, adding that this will employ 5 lakhs people.

Speaking at the same event, Niti Aayog Vice Chairman Rajiv Kumar said that he sees electronics industry as sunrise industry. Kumar also said India’s electronics industry should scale up and aspire to become USD 150 billion industry in the next five years.The first National Policy on Electronics was rolled out in 2012, which offered incentives to companies setting up manufacturing units in the country.

Raghuram Rajan says political parties should not promise farm loan waiver in elections

Former RBI Governor Raghuram Rajan Friday said farm loan waiver should not form part of poll promises and he has written to Election Commission that such issues should be taken off the table. It not only inhibits investment in the farm sector but put pressure on the fiscal of states which undertake farm loan waiver, he said. In every state election during the last five years, loan waiver promise made by one political party or other. The recently concluded assembly election in five states, agriculture loan waiver and increasing minimum support price (MSP) of cereals was again part of manifesto of some of the political parties.

 

Arun Jaitley agrees with Raghuram Rajan; says Indian economy needs to grow above 7-8%

Finance Minister Arun Jaitley on Friday said that there is a need to push India’s Gross Domestic Product (GDP) growth above 7-8%, which would be a difficult task unless something spectacular happens. There are several unreformed sections of the economy that need attention, Arun Jaitley said at the FICCI AGM event.

The finance minister’s comments are in agreement with former Reserve Bank of India (RBI) governor Raghuram Rajan, who also, time and again, said that India needed higher growth than 7% to meet the needs of the increasing workforce.

Arun Jaitley also said that the view of the world is that 7-8% is a spectacular growth rate but it is still modest. He also said that not addressing the liquidity crisis at the moment will create a challenge for the economy.

Temporary setback to CIC over wilful defaulters list; HC interim stay on orders to RBI to disclose names

The Bombay High Court Friday granted interim stay on orders passed by the Central Information Commission (CIC) directing the Reserve Bank of India to submit a list of wilful loan defaulters. A division bench of Justices B P Dharmadhikari and S V Kotwal also stayed a show cause notice issued on November 2 this year by the CIC to former RBI governor Urjit Patel for non-disclosure of the information sought and for defiance of its orders.

The RBI had petitioned the high court last month challenging orders passed by the CIC directing it to disclose the bad debt details of defaulters worth more than Rs 1,000 crore at the beginning and those worth Rs 500 crore or less at a later stage. On November 2 this year, the CIC had issued a show cause notice to Patel for “dishonouring” a Supreme Court judgement on disclosure of wilful defaulters’ list. The notice was issued after the RBI failed to give the list.

The CIC had in its notice said it considers the RBI governor as deemed Public Information Officer (PIO) responsible for non-disclosure and defiance of CIC orders. The commission asked Patel to explain why maximum penalty should not be imposed on him.

On November 16, the CIC once again asked the RBI to submit the list and also the previous RBI Governor Raghuram Rajan’s letter on bad loans. The CIC was hearing the plea of one Sandeep Singh who had sought details of bank loan defaulters.

Senior counsel Venkatesh Dhond, appearing for RBI, told the high court Friday that the CIC order has been passed without giving a hearing to RBI.

“Information of such nature if disclosed could harm the national economy. In such situation, the CIC order and the impugned notice issued on November 2 are ex facie illegal, arbitrary and unsustainable,” RBI said in its petition.

The bench, after hearing brief arguments in the case, issued notice to CIC and posted the matter for further hearing on April 10.

“Ad-interim relief sought in the petition for staying the operation, effect, finishings and other conclusions of the respondent (CIC) is granted,” the court said.

RBI not wrong on PCA norms! ball is in govt’s court to rescue weaker PSU banks; here’s why

It was the second day of new Reserve Bank of India (RBI) governor Shaktikanta Das. He called a meeting with heads of Public Sector Banks (PSBs) to discuss issues related to the banking sector. The PSU heads requested the new central bank boss to relax Prompt Corrective Action (PCA) calling it too stringent.

However, the MD and CEO of Punjab National Bank (PNB) Sunil Mehta had a different opinion. At an ET Now event he said that the RBI has the right to take PCA for banks and that none of the 11 PSU banks under PCA have been restricted from lending to Micro, Small and Medium Enterprises (MSMEs).

The PCA became a bone of contention between the government and the RBI after the central bank under Urjit Patel refused to relax the rules. PCA was introduced by Raghuram Rajan but rules were revised in April 2017. Since July 2017, 11 PSU banks have come under its ambit.

The government is of the opinion that the restrictions under PCA are curbing credit extension to MSMEs, while the central bank, so far, has maintained that it is necessary to improve the financial health of weaker banks. What is PCA? Prompt Corrective Action is a quick corrective measure taken in case a bank is found to be having financial difficulties. For this, banks are assessed on three grounds– asset quality, profitability and capital ratios. RBI keeps a close watch on the activities of banks put under PCA and imposes restrictions if financial situation worsens. Under the PCA, the RBI can impose several restrictions on extending fresh loans and dividend distribution. Interestingly, restrictions have been imposed on a case-to-case basis. What gives? FE Online spoke to rating agency ICRA’s Vice President Anil Gupta on the issues and what it means. Gupta, who has been following the matter closely, said PCA does not restrict banks from lending unless there are specific directions from the RBI.

For example, Dena Bank, which will soon merge with Bank of Baroda and Vijaya Bank, was asked not to give fresh loans, while Allahabad Bank was asked not to increase their risk-weighted assets.

So what’s the problem? Gupta said some banks may not be lending to MSMEs, either due to the high risk weight of any specific MSME borrower or driven by their targets to reduce risk-weighted assets and meet the regulatory capital ratios.

Ball is in government’s court: What has happened is that due to these restrictions, a fresh generation of NPAs has reduced, but gross NPAs continue to be high, which means they need to be kept under PCA for some more time. And the ball is in government’s court to rescue them by infusing more capital.

“Almost all the PCA banks continue to remain weak on asset quality, capital ratios with high losses during the current year. Hence they need to be recapitalised before any decision to take them out of PCA,” Gupta said.

Government’s recapitalisation plan: Last year in October, the government announced an unprecedented Rs 2.11 lakh crore bank recapitalisation plan, of which 1.35 lakh crore is supposed to come through recapitalisation bond and the rest from the government capital infusion and market raising. So far, the government has infused about Rs 43,000 crore into banks under PCA.

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