Depreciating Rupee creating trouble for importers

With the rupee continuing to depreciate, importers are feeling the pinch and have started delaying payments. While bigger companies said they were still protected, smaller players said they are under severe pressure.
At 48-levels (to the dollar), importers are facing pressure for making payments for goods imported at 44. Most of them are delaying paym.ents by six months, availing buyers’ credit on the expectation that the rupee will be stronger next year.

It closed at 48.33, a 23-month low, after touching 48.35 during intra-day trade today.
The rupee has lost 8.9 per cent against the USDDollar since August on the back of global risk aversion. Following Italy’s downgrade by ratings agency Standard & Poor’s, the euro fell to a 10-year low against the yen on Tuesday. Italy has Europe’s second-largest debt burden.
The markets are now eagerly awaiting announcements from the Federal Open Market Committee (FOMC) meeting (of the US Federal Reserve), scheduled the coming Wednesday.

“With the weakening of the rupee, all importers will get hit. For oil marketing companies, the under-recovery in the (price) controlled products like diesel, PDS kerosene and domestic LPG will go up further. With every rupee depreciation, for BPCL alone, the under-recovery on these three products will be an additional Rs 2,000 crore per annum. For the entire industry, the under-recovery go up by Rs 9,500 crore per annum,” said a senior official from Bharat Petroleum Corporation.

IMF downs India's growth forecast to 7.8%

Expecting further monetary tightening measures to control inflation, the International Monetary Fund (IMF) has scaled down India’s economic growth to 7.8 per cent this year, against the earlier estimates of 8.2 per cent. The revision is attributed by the IMF partly to slower economic expansion in world output and to recent corporate governance issues.

Similarly, growth projections for India has been revised downwards to 7.5 per cent in 2012, against the earlier forecast of 7.8 per cent.

In its latest World Economic Outlook, IMF said India along with Argentina and Russia requires higher monetary tightening than other countries which are in a position to postpone such a move. This was so because consumer prices are estimated to rise at an elevated level of 10.6 per cent on an average in 2011 year-on-year, even though it is less than the 12 per cent a year ago. However, the rates were expected to rise at 8.6 per cent in 2012.

The Reserve Bank of India has tightened policy rates 12 times since early 2010 to cool down inflation.

IMF said activity in India is expected to be led by private consumption. “Investment is expected to remain sluggish, reflecting, in part, recent corporate sector governance issues and a drag from the renewed global uncertainty and less favourable external financing environment.”

Credit Policy: RBI hikes repo rate by 25 bps to 8.25%

The Reserve Bank of India (RBI) has raised the Repo and Reverse Rates by quarter of a percent point on Friday(16th sept 2011), while keeping cash reserve ratio (CRR) rate unchanged.
The decision comes as the authorities struggle to control near double-digit
inflation, which is uncomfortably high for more than two years. The repo rate now stands at 8.25%, while the reserve repo gets adjusted to 7.25%. The CRR remains unchanged at 6%.
This was 12th rate hike in the last 18 months by the country's central bank.

Petrol to be dearer by Rs 3.14/litre

State-owned oil companies are all set to hike petrol prices by around Rs 3 per litre which will be effective from midnight(15 sept 2011)
Indian Oil Corp (IOC), Bharat Petroleum Corp (BPCL) and Hindsutan Petroleum Corp (HPCL) now lose Rs 2.61 per litre due to high international crude oil prices and with rupee touching two-year low against the US dollar, the losses have increased the cost of importing crude oil.
Petrol price was freed from the government control in June last year but the retail rates have not moved in line with cost as high inflation rate forced the oil companies to seek 'advice' from parent oil ministry before revising rates.
IOC, BPCL and HPCL have lost Rs 2,450 crore this fiscal on selling petrol below the cost.
Rupee fell to 48 per dollar yesterday(14th sept) for the first time since September 2009. "Every rupee depreciation, the under-recovery (revenue loss) increases annually by around Rs 9,000 crore.

Inflation at 13-mth high adds to RBI dilemma

Inflation climbed to 9.78 per cent in August from 8.87 per cent in the corresponding month of last year and 9.22 per cent in July 2011 on the back of food prices heading northwards.

RBI has already hiked policy rates 11 times since early 2010 to tame inflation, but has in fact moderated economic growth.

India’s economic growth fell below 8 per cent for the second quarter in a row at 7.7 per cent during April-June, 2011 against 8.8 per cent in the first quarter of the last fiscal.

Jet Airways forms air-rail code share with Thalys

Jet Airways Ltd, India’s largest carrier by market share, said on Sept15,2011 it has formed an agreement with high speed train operator Thalys for a rail service between Brussels and Paris, Jet’s first intermodal code share.

Under the code share, Jet Airways will place its marketing code on the Thalys-operated direct train service between the train station at Brussels Airport and Paris Nord, it said.

Infosys close to acquiring Thomson Reuters unit: Report

India's Infosys Technologies is close to acquiring Thomson Reuters' healthcare business for $700-$750 million, an Indian newspaper reported.
If the deal goes through, it would be the Indian company's biggest acquisition. Infosys shares ended 2.5 per cent higher on a strong day for software stocks on Thursday(15 sept 2011)

Infrastructure

The six infrastructure industries with a 26.68 per cent weightage in the Industrial Production Index cumulatively recorded a substantial 7.1 per cent year on year growth in August 2009, compared to a modest growth of 2.5% recorded in the previous month (July 2009) and an even lower 2.1 per cent a year earlier (August 2008). The August 2009 growth rate of 7.1 per cent is the highest monthly growth rate attained during the last one year.

Telecom Sector

Mobile phones accounted for 92.19 per cent of the total phone connections in the country as at the end of July 2009. Total telephone connections in the country numbered 497.07 million: 441.66 million mobile and 37.41 million landline

Agriculture Sector

Agricultural sector exports went up by 4.14 per cent during 2008-09, with plantation segment going up by 10.72 per cent and agri & allied products by 5.56 per cent but with marine exports falling by -10.77 per cent. Overall the sector accounted for a share of 9.26 per cent in India's total exports.

Indian Economy

India's external debt on March 31, 2009 amounted to Rs 11,69,575 crore. External debt to GDP ratio for 2008-2009 worked out to 22 per cent.

Indian Economy

India's industrial output rose 10.4 per cent in August from a year earlier, higher than estimates and the highest in 22 months

Indian Economy

CPI-UNME(Consumer Price Index-Urban Non-Manual Employees ) for August 2009 went up by seven points to 631 with the inflation rate for the month at 12.88 per cent down 0.16 percentage points from the July 2009 figure of 13.04 per cent.

Indian Economy

The PM's Economic Advisory Council has forecast the overall GDP growth during the current financial year at 6.5 per cent at factor cost in constant (1999-2000) price terms. The report projects the industrial and services sectors to grow by 8.2 per cent each. However, agricultural sector would see a -2.0 per cent decline. GDP for the year will amount to Rs. 38.8 trillion compared to Rs. 36.1 trillion of 2008-09.

Indian Economy

India's trade with USA declined by -6.64 per cent in dollar terms during 2008-09, with exports recording a growth of 0.46 per cent but imports recording a fall of -13.63 per cent

Indian Economy

India's trade with China during 2008-09 amounted to US$ 40.61 billion, up 7.01 per cent over the 2007-08 bilateral trade level of US$ 37.95 billion.

Appreciation of rupee

Appreciating Rupee means that now the Dollar is now cheaper than what it used to be earlier (from $1~50 Rs, now to 40 Rs.), in other words you can buy more from the international market spending the same amount of Rupees. There are very direct effects of the appreciating Rupee in both national and international scenarios.

To put it simply we must consider the whole situations through two points of view: Import and Export

Import: When you import (buy from foreign markets) goods, you have to pay in dollars. India's chief import is crude oil. Suppose a barrel of oil costs $100, as per earlier rates a company would have to pay aout 4800 rupees($1=48 Rs) to buy a barrel, now can buy the same for 4000 Rs ($1=40 Rs.). so oil companies are the biggest gainers from the appreciating rupee. They are now getting oil at reduced prices but selling them to the customers at old rates, hence increasing their profits.

Export: When you sell goods/services in foreign market you get payed in dollars. A lot of companies that have been asking the govt. and RBI for control of the appreciating rupee, are export driven companies like big IT cos. who export software solutions and provide out-sourcing services. There are many others too like garment exporters and even automotive companies. the scene here is that, supposing a BPO company charged $100 for its services, it would be getting payed an equavalent amount to Rs 4800 as per old exchange rates, but because of the appreciating rupee, it now gets payed Rs 4000, and as the market gets increasingly competative the company cannot increase the fee it charges the client to $120 to cover this loss, as it risks losing the client to some other company. Garment exporters are hit even stronger as they mostly survive on large dedicated orders and charging more to cover their losses can even result in cancellation of large orders and massive loss to a garment exporter.