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As Adani prepares to bid for 5G, should Mukesh Ambani prepare for battle?

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Just the threat that Adani might eventually come after the $2-per-month customer could see capital-starved Vodafone Idea buckle, in which case he could swoop in on it later

Both tycoons are participating in the upcoming 5G spectrum auction in India

It was too quiet to last. A sustained and brutal destruction of capital in India’s  was only just starting to give way to a period of peace and calm. The three operators who survived out of the dozen on the scene in 2016 must have been grateful for the end to a debilitating price war. Stable market shares and decent per-user revenue would support the next round of investment.

So imagine the anxiety that bubbled up on the  that billionaire  — the port and airport owner who’s so far had nothing to do with telecom — will bid for 5G spectrum in this month’s auction.

Six years, ago it was another tycoon —  — who disrupted India’s wireless market with cheap data and free calls. He’s now the market leader with 410 million subscribers. To core telco revenue, add services like digital advertising, e-health and mobile education, where big rewards are still some years away. All told, Ambani’s Jio Platforms Ltd., in which Meta Platforms Inc. and Alphabet Inc. are investors, is a $95 billion enterprise, 17 per cent bigger than the hydrocarbons empire he inherited from his dad, according to Jefferies.

Also Read: How will 5G auction effect telcos and industry 4.0?

Should Ambani now prepare for an Adani assault? They’re rivals who have so far managed to move in separate orbits. Ambani built up scale in consumer businesses like telecom and retail to shed the group’s overdependence on refining and petrochemicals. Adani went after industrial and utility-scale customers in transportation, coal and power. But they now have overlapping ambitions, for instance in renewables and media. Analysts at Motilal Oswal in Mumbai are noticing a “consumer bent” within the Adani group, which could extend beyond owning the country’s No. 1 edible oil brand. Could telecom become a battlefield for two of the world’s richest people?

The Adani group is ruling out any such plans. Analysts, too, are skeptical if it’s worth fighting over the sector. Bank of America says there’s no viable business case for any non-4G telco in consumer mobility given low tariffs, limited room to differentiate, inadequate spectrum and lackluster returns on investment. Jio and Bharti Airtel Ltd., the No. 2 player, are on a strong wicket financially.  Ltd. has skirted bankruptcy or slump sale — the fate that befell several other players — thanks to a state-mounted rescue. If Adani does decide on a full-fledged telecom entry by buying the struggling No. 3 player, it will still require billions of dollars of capital expenditure to backfill the telco’s missing investment. And for what? Just $2 per month per subscriber, which is what Jio is making now? It doesn’t seem like an efficient use of the debt financing that propels the Adani juggernaut. The scope for a new telco is only in the enterprise space, the Bank of America analysts say.

There’s some support for that view. For one thing, 5G will be a good fit for Adani’s ambitious renewable-energy play. That $70 billion investment commitment has two sides to it: Producing clean power and investing in data centers — “the largest energy-consuming industry to ever exist,” he said at last year’s Bloomberg India Economic Forum. Pairing high-speed spectrum with a data center makes sense.

Also Read: Expect telcos to buy spectrum worth Rs 1 trn-Rs 1.1 trn in 5G auction: Icra

Other in-house businesses, such as a planned super-app, could also benefit. “We are participating in the  to provide private network solutions along with enhanced cybersecurity in the airport, ports and logistics, power generation, transmission, distribution, and various manufacturing operations,” the Adani group said in a press statement, adding that the airwaves it wins at the auction may also be deployed in education, health care and skill development. The founder and his family recently announced that they would donate Rs 60,000 crore ($7.7 billion) to Adani Foundation, the philanthropy that would spearhead the social investments.

Still, it’s unclear why Adani wants to join the auction when his operation can — as a captive non-public network — ask to be assigned spectrum by the government for 10 years without having to pay any license or entry free. “Spectrum acquired through auctions is expensive because it is eligible for commercial services,” Jefferies researchers say. Since Adani is taking this route, it’s fair to ask if this isn’t a backdoor entry into consumer wireless. Ambani had followed the same playbook. In 2010, he acquired a tiny, obscure company that had surprised everyone by submitting the winning bid to offer broadband internet (but no phone calls) across India. In 2013, the government allowed voice services on the spectrum and Reliance got itself a pan-India license. That’s how Ambani entered telecom. There’s nothing to rule out a repeat — this time by his rival.

Speculation about Adani’s actual intentions in telecom won’t end even if he puts up a modest show at the auction. If the 60-year-old, first-generation industry magnate from Prime Minister Narendra Modi’s home state of Gujarat only wants to target enterprise-level customers, then he doesn’t need to spend $4 billion or more for buying 100 megahertz of spectrum across India. On the other hand, if he does want to get into consumer wireless, now’s too early to show his cards.

After getting hold of the spectrum in 2010, Ambani took six years to set up his network and yet caught his rivals napping. Could Adani’s ultimate goal be to exploit bankers’ and investors’ memory of the carnage that took place after Ambani’s 2016 entry? He could, in theory, raise the cost of capital for the entire industry — by keeping the market guessing about a possible clash of titans. Just the threat that Adani might eventually come after the $2-per-month customer could see capital-starved  buckle, in which case he could swoop in on it later. There’s nothing more disquieting for an industry than to know that the hard-won peace will probably not last long.

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Chart of the Day: When the inflation tables turn

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Crude oil prices have come off sharply from record highs which is likely to have a favourable effect on inflation.Chart of the Day: When the inflation tables turn

a figure normally attributed to inflation in capital-starved and growing emerging market economies. The commodity price whiplash triggered by the Russia-Ukraine war has resulted in a significant divergence of inflation between advanced economies and emerging economies. As the above chart shows, the pace of US inflation has outstripped that of India for the past ten months. At the heart of this divergence is the runaway rise in energy prices and the US is the third biggest importer of crude oil, behind India which is the second. Given the radically different position of the currencies of both countries, India faces an outsized impact on its external sector and domestic inflation from oil imports. However, the pass through of fuel prices to US pumps has driven inflation faster there as well. That said, prices pressures are broad based in the US as well as India. Post-pandemic demand surge has led to spikes in non-food and non-fuel inflation as well. Crude oil prices have come off sharply from record highs which is likely to have a favourable effect on inflation. It now remains to be seen whether prices fall faster in US or India.


Kerala set to gain from rupee’s fall against dollar; growth of NRI deposits may pick up

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Apart from the rupee’s depreciation, the increase in interest rates may help bring more NRI deposits to banks in the second half of the year

Kerala, with its diaspora all over the world, stands to gain from the continuing depreciation of the rupee against the dollar and West Asian currencies, which is expected to bolster remittances to the state and reverse a trend of slowing growth of such deposits, experts said.

A recent notification allowing non-resident Indians to send up to Rs 10 lakh to relatives in India without informing the government is another factor that may support this trend.

Kerala used to account for 19 percent of total remittances to India a few years ago. Though remittances to India grew to $87 billion last year from $83 billion in 2020, as per World Bank data, inflows to Kerala suffered after the outbreak of Covid-19 because of widespread job losses and the return of workers from the Gulf countries, which account for almost 90 percent of 3.4 million Keralites living abroad.

The World Bank report projected that remittances to India will grow 3 percent to $89.6 billion in 2022, with the slower pace reflecting the drop in overall migrant stock. But will the depreciating rupee change the trend?

Remittances to Kerala have started rising as the rupee drops to new lows. Although the increase is not much now, the inflows may pick up further. Additionally, growth of NRI deposits in Kerala’s banks has slowed, suggesting that people appear to be spending remittance money more instead of retaining them in banks. This trend may change as interest rates rise.

Marginal increase

There is a marginal increase in the volume of remittances, partly due to the holiday season in the Gulf countries and partly on account of weakness in the rupee, a senior executive of Lulu Financial Holdings said. The rupee closed at 79.60 to the dollar on July 12, a new low.

“Under the prevailing situation, the trend might continue for some more time. People are waiting for further depreciation of the rupee. This includes high net worth individuals whose transactions are of higher value and investors who might be waiting for the rupee to test the Rs 80 mark,” the executive said.

Non-resident Keralites in the US and Europe are also cashing in on the situation.

“They don’t usually remit money regularly, but occasionally send money to their families. They have also begun to remit money now. We have seen them pledging gold for money to send to India on earlier occasions,” said Bijimon, head of the money transfer division at Muthoot Finance.

The Kerala government said last year that about 1.5 million non-residents had returned to the state following the outbreak of the pandemic. Experts said many of them have since returned.

In their paper Kerala Return Emigrant Survey 2021: What Next for Return Migrants of Kerala?, S Irudaya Rajan, founder chairman of the International Institute of Migration and Development, and Balasubramanyam Pattath, a research fellow at the institute, said about 50 percent of distressed return emigrants to the state wanted to re-emigrate, while 32 percent decided to seek work in Kerala or retire, possibly due to the negative experience encountered during Covid-19.

Remittances are crucial to Kerala as they account for 36.3 percent of the state’s GDP, unlike other states, which may have more migrants overseas.

According to a survey in the paper, 75 percent of return emigrants sent remittances home, the most common reason being debt payments (30 percent), followed by household expenses (25 percent), periodic investments (21 percent), and maintenance (12 percent).

The survey found an overall increase in monthly remittances since Covid-19 started, indicating resilience among more than 70 percent of the sample. However, the number of distressed emigrants sending remittances waned at larger amounts pre- and post-Covid-19 lockdowns, indicating a cash crunch due to job losses, withholding of wages, and the use of savings towards repatriation.

Gulf situation better

However, the situation is improving in the Gulf countries. The Lulu Financial Holding executive said economic activities are picking up in the Gulf region.

“The stimulus of the UAE government has been a big support for businesses to make a comeback. Even the Expo 2020 and resulting tourism and business deals have played a vital role in the recovery and we can see great signs of steady growth and 2022 would be a remarkable year,” he said.

Remittance flows from the US and Europe have been affected more by the Russia-Ukraine conflict than the pandemic. In recent times, there has been a slight increase in euro remittance volumes. However, people may be waiting for the euro to weaken further before remitting money home, he said.

The executive reckoned the recent amendment to the Foreign Contribution Regulation Act (FCRA) that allows NRIs to send as much as Rs 10 lakh instead of Rs 1 lakh to relatives in India without informing the government will facilitate the free transfer of funds. If the amount exceeds the limit, individuals have three months to inform the government instead of 30 days earlier.

Earlier, a large chunk of remittances went to banks as NRI deposits. However, the growth of NRI deposits in Kerala slowed last year, probably because of economic distress.

Total NRI deposits in banks grew 3.7 percent year-on-year to Rs 2,38,408 crore in FY22, following a 10 percent increase to 2,29,636 crore in FY21.

“Moreover, the outflow from banks has increased. People are not keen to retain money in the banks. Maybe they are using it for business purposes,” said Ajayakumar, AGM, NRI, at State Bank of India.

He said the trend will likely reverse as banks have started revising interest rates upwards for both rupee and foreign currency non-resident accounts.

“The rupee depreciation and the hike in interest rates may bring more NRI deposits to banks in the second half of the year,” he said.

Rupee at record low as US dollar surges globally, domestic markets fall

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Fears of a global recession weigh on the unit despite RBI measures to boost dollar inflow.

The  weakened to a fresh low against the US  on Tuesday as the greenback surged to a 20-year high globally and domestic equities suffered losses, dealers said.

The  was Tuesday morning trading at 79.61 against the US  versus its close of 79.44 on Monday.

The US  index, which measures the unit against six major currencies, was at 108.42 this morning, as against 107.67 on Monday. The index was at levels last seen around August 2002, Bloomberg data showed.

At 10:40 am IST, the BSE Sensex and the NSE Nifty were trading 0.3 per cent and 0.4 per cent lower, respectively.

The dollar has been on a strengthening spree of late as worries over slowing global economic growth amid an energy crisis in Europe and aggressive rate hikes by the Federal Reserve have sent investors rushing to the safety of the US .

In 2022, the  index has gained 13 per cent. The  has depreciated 6.6 per cent versus the dollar over the same period.

The broad dollar strength comes at a time when record outflows of overseas investment and elevated crude oil prices have rendered the outlook on India’s current account deficit unfavourable.

The  (RBI) has announced a slew of measures to ease pressure on the rupee, but  traders predict an unfavourable near-term outlook for the domestic  amid global headwinds.

The RBI, on Monday, permitted the international trade settlement in rupees, a move that could be aimed at facilitating transactions with Russia, analysts said. Last week, the central bank announced relaxations in overseas investment in government securities as well as sums raised abroad through External Commercial Borrowings.

“In the recent past,  has taken steps that could ease the pressure on the rupee viz-a-viz country’s deficit. However, so far the positive impact of the same hasn’t yet been translated into the USDINR pair given by overpowering glooms and the risk-averse environment globally,” said Amit Pabari, managing director at CR Forex Advisors, in a note.

“The given fundamentals shall likely sustain its pressure on the rupee keeping the upside open well in place. As the pair breaks its crucial 79.50 levels, it’s a little far from the next big figure 80.00 levels that could be seen in the short run,” he said.

Japan set to expand energy transition support to India

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Japan's 'Asia Energy Transition Initiative' initially targeted supporting countries in the Association of South East Asian Nations (ASEAN) pushing towards net-zero carbon emissions, including $10 billion in finance for renewable energy, energy efficiency and liquefied natural gas (LNG) projects.Japan Set To Expand Energy Transition Support To India Amid Crisis

Japan plans to provide support to India to drive the transition to clean energy, expanding a programme it launched last year for Southeast Asian nations, Industry Minister Koichi Hagiuda said on Wednesday.

Japan's 'Asia Energy Transition Initiative' initially targeted supporting countries in the Association of South East Asian Nations (ASEAN) pushing towards net-zero carbon emissions, including $10 billion in finance for renewable energy, energy efficiency and liquefied natural gas (LNG) projects.

"Specific support includes support for ASEAN countries in the Asian roadmap towards carbon neutrality, which will be expanded to include India," Hagiuda said at the Sydney Energy Forum, co-hosted by the Australian government and the International Energy Agency.

Hagiuda said the region needs to work on diversifying where it gets its energy from, in light of the ongoing energy crunch due to loss of Russian energy supplies.

"Against that backdrop, considering the current energy crisis, stable energy supply and market stability are critical as the basis for promoting a transition towards carbon neutrality," Hagiuda said.

For that we must engage in improving our energy independence through things such as a further push for diversification of energy sources of supply."

Ahead of his trip to Sydney for talks with Quad partners Australia, India and the United States, Hagiuda said on Tuesday he would press the United States and Australia to boost LNG output and stable supply to Japan.

He made no comment in his speech about the outcome of those talks which took place earlier on Wednesday.

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RBI takes a major step towards internationalising rupee

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The policy does not imply that we will see an immediate transition from USD to INR-based invoicing. It will at best be a gradual process. Policymakers can start by encouraging INR payments with neighbouring South Asian countries and other trade partners RBI takes a major step towards internationalising rupee | Flipboard

On July 11, the Reserve Bank of India created a stir in the financial markets. Its press release titled ‘International Trade Settlement in Indian Rupees (INR)’ permitted Indian banks and the international trade community to invoice and settle transactions in Indian rupee. The policy is quite significant, and is a major step towards internationalisation of the INR.

What is internationalisation of a currency? It means that the currency is accepted across the world as a medium of exchange. The US Dollar (USD) is a currency which has remained international for more than a century now. In early 20th century, the USD replaced the Great Britain Pound (GBP) as the dominant international currency. Post- World War II, this position was cemented further as all currencies were pegged against the USD. Even after the breakdown of Bretton Woods in 1971, the USD has maintained its pole position.

The dominance of the USD caused many an irritation in global politics. In most transactions across the world, the USD is usually the de facto currency of payment which ensures that Washington always plays a crucial role in world affairs. French Minister of Finance Valéry Giscard d'Estaing termed this as “exorbitant privilege”. European leaders gave up their own currency and joined hands to establish the Euro, mainly to counter USD’s hegemony.

Typically, the rise of an economy at the global stage leads to rise in the share of its currency in global transactions. But this has not been the case with the US. Over the last five decades, the share of the US economy globally declined from 25 percent to 15 percent. The USD’s share in foreign exchange reserves and international debt also declined, but at 60 percent it still remains dominant.

The US’ economic decline has coincided with China’s rise. China’s share in global output has risen from 2 percent in the 1980s to 20 percent, which is higher than that of the US. Yet the share of the Chinese Renminbi in the global forex reserves remains a paltry 2 percent while share of Euro has remained stagnant at 18-20 percent since its inception.

Gita Gopinath, First Deputy Managing Director, IMF, along with other researchers has termed this dollar hegemony as ‘Dominant Currency Paradigm’, which poses macroeconomic risks. Mike Carney, former Governor of the Bank of England, argued that in a multipolar world, we need to have multi-polar currencies. He even advocated digital currencies to counter the supremacy of the USD.

Where does the RBI’s July 11 press release fit in this world order of international currencies? The global share of India’s economy has increased from 2 percent in 1980 to around 7 percent currently. It has also become a popular destination for global portfolio flows, and foreign direct investment. The potential growth of the Indian economy pegged at 6-7 percent, much higher than most other countries. The government and the RBI have also opened both current and capital accounts, allowing foreigners to own Indian assets and Indians to buy foreign assets. So there is clearly potential for the growing internationalisation of the Indian economy.

The July 11 note is another major step in this direction of internationalising the economy. The RBI press release notes that “in order to promote growth of global trade with emphasis on exports from India and to support the increasing interest of global trading community in INR, it has been decided to put in place an additional arrangement for invoicing, payment, and settlement of exports / imports in INR.” This implies that hereon, exporters and importers have a choice to invoice their transactions in the INR, which was mainly in the USD till now. The RBI has also permitted banks to tender advance loans to exporters against invoices in the INR.

The policy will also help position the INR as an international currency. Shyamala Gopinath, former Deputy Governor of RBI, in a 2009 speech pointed to three factors for currency internationalisation. First, payments for international transactions can be made in that currency. Second, both residents and non-residents can hold financial assets/liabilities denominated in the issuing currency. Third, freedom for non-residents to hold currency balances, even beyond the territory of the issuing country. The current policy is a step towards the first factor. The RBI and the government have been working on the second and third factors as part of capital account management.

The above policy does not imply that we will see an immediate transition from the USD-based invoicing to an INR-based invoicing. It will at best be slow and gradual. Indian policymakers can start in a small way by encouraging the INR payments with neighbouring South Asian countries and other trade partners. Currently, most South Asian countries are facing a crisis, and requesting India for financial and humanitarian support. Giving aid in the INR and encouraging future invoicing in it will also be a winning preposition for these crisis economies, as they will not require the USD for payments. Having said that, few South Asian economies such as Sri Lanka and Nepal do use INR for payments. The new arrangement should also help India pay Russia for the oil which has been debarred from USD payments.

While the USD has remained a dominant currency, there is early research that economies are moving away from it to other currencies, mainly Chinese Renminbi. The INR could be part of forex reserves too. Isteatndia also has an edge over China in terms of a more open capital account and liberalised financial markets, which should help strengthen the status of the INR.

The international monetary order usually follows the international political order, with a lag. This time around, the duration of the lag has been high, as despite the decline of the US economy, the USD remains dominant. While the USD will still remain dominant in near future, it is fair to expect that its share will gradually decline. The question is which currency will dominate the world monetary order?

Govt to release data on June retail inflation today

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The retail inflation has remained above 6 per cent since January this year forcing the central bank to go for two back-to-back hikes in policy rates (repo).Govt to release data on June retail inflation today

The government on Tuesday will release the key data on June retail inflation which will be factored by the Reserve Bank in its next bi-monthly monetary policy to be announced in early August.

The retail inflation has remained above 6 per cent since January this year forcing the central bank to go for two back-to-back hikes in policy rates (repo).

The Consumer Price Index (CPI) based retail inflation, which was at 7.04 per cent in May, is unlikely to reach the RBI's comfort zone of below 6 per cent soon amid high commodity prices due the ongoing Russia-Ukraine war.

The data on CPI is scheduled to be released at 5.30 in the evening by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI).

Last month, the Reserve Bank in its bi-monthly monetary policy review raised the benchmark repo rate -- at which it lends short-term money to banks -- by a sharp 0.50 per cent to 4.90 per cent to rein in spiralling prices. It followed an off-cycle meeting on May 4, when the central bank hiked the repo rate by 0.40 per cent.

RBI Governor Shaktikanta Das, while speaking at Kautilya Economic Conclave on Saturday, had exuded confidence that the price situation will gradually improve in the second half of the current fiscal.

He also said the central bank would continue to take monetary measures to anchor inflation with a view to achieving strong and sustainable growth.

The Governor said that price stability is key to maintaining macroeconomic and financial stability and the central bank will undertake measures for preserving and fostering macroeconomic stability.

The Reserve Bank, which factors in the CPI in its monetary policy, had in June raised the inflation forecast for the current financial year to 6.7 per cent from its previous estimate of 5.7 per cent.

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CBIC to issue SOP for GST summons to stop harassment of businesses

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The new SOP will make officials more accountable and will also make the entire process transparent

cbic

To protect  from harassment, the Central Board of Indirect  and  (CBIC) will soon come out with an elaborate standard operating procedure (SOP) for serving summons and notices under the Goods and Services Tax (GST) regime, according to a report by The Economic Times.

The new SOP will permit the board to closely monitor the  probe, the line of investigation adopted, and its progress. The officials will be more accountable and the entire process will become more transparent. The move comes after a significant increase in the number of complaints against the use of force and coercion by tax authorities for making recovery during the probe has been reported.

"We don't have any SOP under the  for summons and notices, and these are two troublesome things," said one official, who did not wish to be identified. "Once there is an SOP in place, we can question any breach."

In the past few months, there has been a surge in the number of tax notices, which were served by the  officials, summoning finance chiefs, CXOs, and even chief executives to be physically present. Several  also end up getting repeated summons.

The draft for SOP is almost final, the official said, adding that there have been elaborate discussions with field formations and stakeholders, including .

The proposed SOP will also aim to ensure that there is no overlapping of notices between the central and state jurisdiction. Many businesses had complained that they received multiple notices for the same issue, thereby making compliance difficult for them.

In May, the board directed its field formulations that tax authorities would face action if a  is forced to make a voluntary payment of tax during a search and that recovery of dues should follow the due legal process after issuance of adjudication order, and not during searches.

Economist Pronab Sen's prescription for the uncertain state of economy

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The forex reserve has shrunk and the country might be staring at a twin deficit. To get a better understanding, Business Standard's Bhaswar Kumar spoke to economist Pronab Sen. Let us listen in

Illustration: Binay Sinha

Q1. The RBI is taking a series of steps to attract foreign flows and protect the rupee amid depleting . It is acting across three channels – the banking deposit, the FPI debt, and the ECB. Will these measures be enough?

Ans:

>RBI signalling that world economic turmoil to last longer than expected

>RBI and govt ensuring that private debt repayments don’t go against India

>Creating framework for compensatory inflows

Q2. Of the 621 billion dollars of external debt, over 40 per cent is due for repayment in the next nine months. This will be equivalent to about 44 per cent of the country’s . First, is this bunching up of repayments par for the course? And if not, how will this play out going forward?

Ans:

>The present situation is unusual

>Huge external commercial borrowings by India Inc after 2008 crisis

>Economy presently facing forex and inflation pressure

>RBI’s inflation targeting will address some of these pressures

>Pressure will emerge on growth front, instead of inflation or forex

Q3. Current account deficit is seen doubling to 3 per cent of GDP this year and the rupee hitting 82 a dollar by the third quarter before recovering. Given these, how has the RBI fared in managing the rupee’s fall and are its CAD measures adequate?

Ans:

>Rupee hasn’t depreciated against basket of currencies due to strong exports

>Global monetary tightening and likely recession in importing countries could change scenario

>People worried about rupee’s fall could be in for a shock in the near future

Q4. Do you get the sense that authorities like the RBI are behind the curve in tackling economic headwinds and are playing catch up?

Ans:

>RBI waited too long to express concerns on inflation

>Sudden off-cycle rate hike made it look like RBI was taken by surprise

>Worried about RBI’s image

Q5. I will have to press you on the current account deficit...

Ans:

>3% CAD not that alarming by Indian standards

>Domestic inflation is of greater concern

>Controlling inflation will also correct CAD problem


India inflation likely held steady just above 7% in June - Reuters poll

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The July 4-8 Reuters poll of 42 economists showed inflation as measured by the consumer price index (CPI) was steady at an annual 7.03 per cent in June, versus 7.04 per cent in May.India inflation likely held steady just above 7% in June - Reuters poll |  Reuters

India's retail inflation likely held steady in June, but well above the Reserve Bank of India's tolerance limit for a sixth month as lower fuel and cooking oil prices offset higher services and food costs, a Reuters poll found.

Despite a substantial recent increase in food prices, rising at the fastest pace in nearly two years, overall inflation was partly contained after the government cut taxes on petrol and diesel and imposed restrictions on food exports.

But most economists warned the near-term outlook was highly uncertain as a heatwave last month pushed up vegetable prices. The government has also cut estimates of wheat production because of dry spells in northern India.

The July 4-8 Reuters poll of 42 economists showed inflation as measured by the consumer price index (CPI) was steady at an annual 7.03 per cent in June, versus 7.04 per cent in May.

Forecasts for the data, due at 1200 GMT on Thursday, July 7, were in a 6.45 per cent-7.70 per cent range.

If realised, inflation would be above 7 per cent for the third consecutive month and above the RBI's 6 per cent upper tolerance target for a sixth month.

"While several goods and services categories are likely to report higher inflation in June, fiscal measures undertaken by the government…will help to cap the upside in domestic prices across food and other segments," noted Rahul Bajoria, chief India economist at Barclays.

"Still, services costs are trending higher, and a passthrough from higher commodity prices is evident across several sectors."

The Reserve Bank of India (RBI) has raised interest rates by 90 basis points so far this year to 4.9 per cent and is set to add more in coming months. RBI Governor Shaktikanta Das said recently inflation was unlikely to fall within the top end of its mandated target band until December.

Wholesale price inflation was seen only moderating slightly from May's three-decade high of 15.88 per cent to 15.50 per cent, the poll showed.

Although consumer price inflation seems to be stabilising, widening trade and current account deficits due to high global crude oil prices pushed the rupee to a recent record low of $79.375, raising concerns over higher imported inflation.

A separate question in a recent Reuters poll asking what the rupee's lowest point against the dollar would likely be over the course of the next three months gave a median of 80, with a range of 79.50-85.00/$.[INR/POLL]

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