India rupee falls for second day on hopes of US debt deal

Rupee ends at 61.8350/8450 per dlr vs 61.55/56 on Monday
* High domestic inflation further hurts rupee sentiment
* Choppy domestic shares; broad dlr rally weighs on local unit
By Swati Bhat
MUMBAI, Oct 15 (Reuters) - The Indian rupee weakened for a second session on Tuesday as the dollar rallied broadly on hopes U.S. lawmakers would agree on a deal to raise the country's debt limit, averting an immediate default.
The plan being negotiated by U.S. Senate leaders would end a partial government shutdown and raise the debt ceiling by enough to cover the nation's borrowing needs at least through mid-February 2014, a source familiar with the negotiations told Reuters.
The index of the dollar against six major currencies rose to a one-month high of 80.678, pushing the rupee to session lows in the last hour of trade.
"The market is not positioned big yet for the 17th of October. It is not ready for a repeat of the 2008 mayhem with more intensity," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.
"The deal will likely go through last minute but either way the rupee will weaken further. If the deal doesn't go through, the fall would be much more," he added.
The partially convertible rupee closed at 61.8350/8450 per dollar compared to 61.55/56 on Monday. It moved in a wide band of 61.25 to 61.94 range during the session.
Financial markets will remain closed on Wednesday for a religious holiday.
Traders said choppy domestic shares also provided little comfort to the rupee, while expectations the Reserve Bank of India would raise interest rates late this month also weighed after data late on Monday showed annual consumer price inflation quickened more than expected to 9.84 percent in September.
Data on Monday had showed wholesale price inflation also accelerated more than expected.
In the offshore non-deliverable forwards, the one-month contract was at 62.30 while the three-month was at 63.32.
In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 61.98 with a total traded volume of $2.36 billion. (Editing by Sunil Nair)

India's BSE index falls from nearly 3-year high; US debt deal key

BSE index falls 0.29 pct; NSE ends 0.39 pct lower * Indian shares snap 5-day winning streak * HDFC Bank posts slowest quarterly profit growth in a decade * Investors turn 'equal-weight' on India - Morgan Stanley survey By Abhishek Vishnoi MUMBAI, Oct 15 - India's benchmark index fell on Tuesday, retreating from a nearly three-year high hit earlier in the session, as blue chips declined ahead of the Oct. 17 deadline to lift the U.S. debt ceiling. Lenders also

Land Acquisition Act to come into force from Jan 1, 2014

Rural Development Minister Jairam Ramesh

The historic Land Acquisition Act, to provide just and fair compensation to farmers, will come into force from January 1, 2014.

The new law received the assent of the President on September 27.

Rural Development Minister Jairam Ramesh took the decision after consideration of another view, particularly from state governments, that the Act replacing a 119-year-old legislation should be notified from April 1, 2014.

"Sooner we notify the Act, lesser the uncertainty," Ramesh said on Tuesday, and announced the decision to implement The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 on New Year day.

Some state governments were of the view that if the law is notified during the beginning of the new financial year, they would get "some time" to establish necessary infrastructure for its implementation.

With the Centre deciding to implement the Act early, state governments will have to soon set up at least six bodies, including the state-level Land Acquisition Rehabilitation and Resettlement Authority, in each state to hear disputes arising out of projects where land acquisition has been initiated by the state or its agencies.

According to the draft rules released by the Ministry on Monday, the state governments should take immediate steps to create and establish the State Social Impact Assessment Unit, the office of the Commissioner Rehabilitation and Resettlement and the State Level Monitoring Committee.

The bill was brought as the archaic Act of 1894 suffered from various shortcomings, including silence on the issue of resettlement and rehabilitation of those displaced by acquisition of land.

India can't afford fiscal slippages: Fitch

 
New Delhi: Global rating agency Fitch on Thursday cautioned that fiscal slippage could have negative bearing on India's sovereign rating, which is at the lowest investment grade in view of weakening CAD and persistent inflationary pressure.

"In India and Indonesia, both BBB- (lowest investment credit rating) with stable outlook, their relatively weak starting positions with high inflation and recent rises in current account deficits (CAD) suggest that their credit profiles have limited tolerance for policy slippage that saw their current account deficits and-or inflation rates stay high or rise further," it said.

Countries experiencing the greatest pressure on their currencies and reserve levels are those where weakening current-account positions and persistent inflationary pressure have raised doubts over the credibility of policy management - India and Indonesia in particular, it said.

In a report titled 'Emerging Asia: Slowing Growth Amid Market Pressures', Fitch sees limited scope for policy slippage for either sovereign at the current rating levels of 'BBB-' with stable outlook.

The government is taking all steps to contain fiscal deficit to 4.8 percent of the GDP in the current fiscal.

The fiscal deficit during 2012-13 came down to 4.9 percent of the GDP from 5.8 percent a year earlier.

"The government will do whatever is necessary to contain the fiscal deficit to 4.8 percent of GDP this year. The most growth-friendly way to contain the deficit is to spend carefully, especially on subsidies that do not reach the poor, and we will take effective steps to that end," Prime Minister Manmohan Singh had said.

Finance Minister P Chidambaram at many occasions has reiterated that red line has been drawn for the fiscal deficit and they will not be breached.

With aim to stick to fiscal deficit target, the government had announced slew of austerity measures including reduction in non-plan expenditure, ban on holding seminars in five-star hotels and creation of new jobs.

As for the Current Account Deficit (CAD), it was expected to be less than USD 70 billion or 3.7 percent of GDP for the full fiscal.

The CAD, which is the difference between inflow and outflow of foreign funds, was at 4.9 percent of GDP in the April-June quarter.

India's service sector activity suffers worst slump in over 4 years in Sept

Bangalore: Activity at Indian services companies shrank at the fastest pace in more than four years last month, suggesting the slowdown in Asia's third-largest economy still has some way to run, a survey showed on Friday.

The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, slipped from 47.6 in August to 44.6 in September, its weakest since April 2009.

That marked its straight third reading below 50, the threshold between growth and contraction.

It showed firms were less optimistic about the future and were cutting staff as new business dries up.

The PMI also capped the worst quarter for the Indian services sector - which accounts for nearly 60 percent of the economy - in more than four years, stoking fears that growth in the three months to September will be weaker than April through June.

India's economy grew just 4.4 percent in the quarter to June, its weakest quarterly pace since the first three months of 2009.

"Service sector activity contracted further in September ... as tighter financial conditions and heightened macroeconomic uncertainty weighed on growth," said Leif Eskesen, chief economist for India at survey sponsor HSBC.

The PMI's new business index fell to 45.0 in September from 46.6 in August, the weakest reading since February 2009 and the third month running that demand has declined.

Such weak demand augurs poorly for coming months, too.

An HSBC Markit manufacturing survey released on Tuesday showed factory activity shrank for a second month in September.

Adding to economic woes, a ballooning current account deficit has driven funds out of the country, hurting the Indian rupee and pushing the Reserve Bank of India (RBI) to adopt measures which effectively drained cash from the market.

Those moves raised funding costs for banks and companies, creating a ripple effect that has crimped investment.

The weaker currency also pushed wholesale inflation to a six-month high in August, prompting RBI Governor Raghuram Rajan's surprise repo rate hike of 25 basis points to 7.50 percent on September 20.

"Despite the weak growth backdrop, inflation readings held broadly steady. This, in turn, supports RBI's stepped up efforts to better anchor inflation expectations," said Eskesen.

However, economists in a Reuters poll taken last week were split over whether Rajan will hike rates again at the central bank's next policy review on October 29.