Raghuram Rajan meets Chidambaram; discusses economic situation

Rajan discusses economic situation with Chidambaram

Ahead of the RBI's central board meet, the central bank chief Raghuram Rajan on Thursday met Finance Minister P Chidambaram and is understood to have discussed economic issues. "Our meeting was part of regular interaction that takes place between RBI and Finance Ministry," Rajan said after his hour long meeting with the Minister and Economic Affairs Secretary Arvind Mayaram. The Central Board of Reserve Bank will meet in Raipur on Friday to discuss key economic and financial developments. The RBI board meets at least once every quarter. The meeting would be chaired by Rajan. The four deputy governors are the official directors on the board, while Mayaram and Financial Services Secretary Rajiv Takru are the government nominees. There are also 11 non-official directors on RBI board. The meeting assumes significance in the wake of economic growth falling to a four year low of 4.4 per cent and current account deficit (CAD) at an elevated level of 4.9 per cent in the April-June quarter. While the government has been emphasising on measures for incentivising growth, the RBI in its policy review last month had hiked interest rates by 0.25 per cent. The RBI is scheduled to announce its second quarter policy review on October 29. Although Prime Minister Manmohan Singh and other government functionaries are expecting the growth to improve in the second half of this fiscal, Asian Development Bank in its recent report lowered India's growth projection for 2013-14 to 4.7 per cent. The economic growth rate slipped to a decade's low level of 5 per cent in 2012-13.

Remittances to developing world to reach $414 bn this year: World Bank

Developing world to get $410 bn in remittances

India and China would account for nearly a third of total remittances of $414 billion to the developing world this year, according to the World Bank. The total remittances to the developing world this year would be 6.3 per cent higher compared to 2012. "Remittance volumes to developing countries are projected to continue growing strongly over the medium term, averaging an annual growth rate of 9 per cent to reach $540 billion in 2016," the World Bank report also said. Global remittances, including those to high-income countries, are estimated to touch $550 billion this year, and reach a record $707 billion by 2016, the report added. World Bank Senior Vice President and Chief Economist Kaushik Basu said: "Remittances act as a major counter-balance when capital flows weaken as happened in the wake of the US Fed announcing its intention to rein in its liquidity injection programme. "Also, when a nation's currency weakens, inward remittances rise and, as such, they act as an automatic stabiliser." The estimates reflect recent changes to The World Bank Group's country classifications, with several large remittance recipient countries, such as Russia, Latvia, Lithuania and Uruguay no longer considered developing countries. The top recipients of officially recorded remittances for 2013 are India (with an estimated $71 billion), China ($60 billion), the Philippines ($26 billion), Mexico ($22 billion), Nigeria ($21 billion), and Egypt ($20 billion), World Bank said. Other large recipients include Pakistan, Bangladesh, Vietnam, and Ukraine. Growth of remittances has been robust in all regions of the world, except for Latin America and the Caribbean, where growth decelerated due to economic weakness in the US. The high cost of sending money through official channels continues to be an obstacle to the utilisation of remittances for development purposes, as people seek out informal channels as their preferred means for sending money home, World Bank said. The global average cost for sending remittances is 9 per cent, broadly unchanged from 2012, it added.

EOW likely to defreeze NSEL escrow account on Thursday

The economic offence wing (EOW) of Mumbai Police is likely to defreeze an escrow account of National Spot Exchange Ltd (NSEL) by Thursday morning. NSEL's escrow account was among those 58 bank accounts which was frozen by EOW on Tuesday, to investigate Rs.5,500 crore NSEL payout crisis.

Crisis-ridden NSEL had opened an escrow account after direction by the government to ensure payouts on priority to about 8,000 small investors stuck after the exchange halted trading. But on Tuesday, NSEL failed its payout seventh time in a row - giving a reason that EOW had frozen its settlement and escrow accounts, both.

In an email statement, NSEL had said, "Due to freezing of bank accounts, NSEL is unable to make any payouts on Tuesday. NSEL has informed the FMC of this development. NSEL is taking legal advices to defreeze the settlement bank accounts. Investors and members will be notified in due course."

Talking exclusively to Headlines Today, senior EOW official admitted, "It was our mistake to freeze escrow account on Tuesday. At that point of time, when all 58 bank accounts were getting freezed, we were unaware which are escrow account and which are settlement accounts." But he assured,"

For the benefit of investors, we would defreeze the escrow account at the earliest. Wednesday is public holiday, therefore, on Thursday we would communicate to the bank and will ensure NSEL's escrow account gets defreezed soon."

Interestingly, as of now, NSEL's escrow account has only Rs.18 crore. That means - payout failure was quite imminent. NSEL was supposed to make a scheduled payment of Rs.174.72 crore to investors on Tuesday.

According to settlement plan, NSEL would pay Rs.3,494.4 crore this year in installments of Rs.174.72 crore every Tuesday. The exchange has defaulted on payouts for the past six weeks and has settled about Rs.150 crore so far.

EOW has frozen total 58 bank accounts of promoters of FTIL and NSEL - which also includes personal accounts of Jignesh Shah, Anjani Sinha, Joseph Massey, Shantilal Guru, B D Pawar, Amit Mukherjee, M C Pandey, Shrikant Jawalgekar, Neerav Pandey, NSEL's auditor Mukesh Shah and others.

Read more at: http://indiatoday.intoday.in/story/eow-likely-to-defreeze-nsel-escrow-account-on-thursday/1/312804.html

Onion prices down over past fortnight

Retail onion prices in the capital have declined by about 20 per cent to Rs.60-65 per kg over the past two weeks.

Onion arrivals in Delhi and in the major markets of Maharashtra, the biggest producer of onions, have been going up in last few days.

In Delhi, the average arrival price for wholesale onion dipped from Rs.5,555 per quintal on September 17 to Rs.3,639 on September 30, a drop of over 34 per cent. The declining trend at the wholesale level is expected to reflect at the retail level with a further drop in prices this month, said a wholesaler at Delhi's Azadpur market.

The harvest of the onion kharif crop has been good in Karnataka and Andhra Pradesh. In October, arrivals will pick up in Maharashtra and Rajasthan. The two states account for one-third of country's output. October's nine day long Navratri celebrations - when people avoid eating onions - are also likely to lead to a drop in consumption and prices. With a 244 per cent rise in prices in August, onions were instrumental in driving up the August wholesale price inflation to  a six month high of 6.1 per cent. India produces about 16 million tonnes of onion but consumes only 10-11 million tonnes. Higher domestic prices had led to a resumption in imports of onion after a gap of two years and onions from countries like Egypt, China and Pakistan have found a market in India.

Remunerative domestic prices and the imposition of a higher minimum export price have slowed onion exports. In August, onion exports fell sharply to 29,247 tonnes compared to 156,165 tonnes in July and 150,512 tonnes in June. India exported 1.82 million tonnes of onion in 2012/13, valued at Rs.2,295 crore. In the first five months of current fiscal year, exports have only been 697,028 tonnes.

Read more at: http://indiatoday.intoday.in/story/onion-prices-down-retail-wholesale-delhi-maharashtra/1/312710.html

ADB clears $700 mn loan for infrastructure development

The Asian Development Bank (ADB) has approved $700 million in loans to support the Indian government's efforts to accelerate investment in infrastructure which the country requires to ensure strong economic growth.

"Poor infrastructure is one of the biggest drags on growth and development in India and there is a large investment funding gap of about $113 billion during the 12th Five-Year Plan for 2012-2017," ADB said in a statement.

This assistance to India's Infrastructure Finance Company Ltd (IIFCL) will allow it to lead the market evolution for infrastructure financing and will spur greater involvement from the private sector, said Cheolsu Kim, Lead Finance Specialist in ADB's South Asia Department.

The government estimates that $1 trillion is needed in infrastructure investment to achieve economic growth of 8.4 per cent under its current five-year development plan, and expects nearly half of that to be financed by the private sector.

However, banks which have been the key source of infrastructure finance, are increasingly unable to provide funds as they are fast approaching exposure limits to key infrastructure companies, the Manila-based multi-lateral funding agency said.

ADB's funds - provided through two loans under a multi tranche financing facility - will be used to provide direct loans for project developers and to replace bank loans, freeing up banks to provide credit in other greenfield projects, it added.

Currently, 31 road, railway, airport, urban infrastructure and energy projects, including in renewable energy, are in the pipeline to receive support from ADB.

Established in 2006, IIFCL is wholly owned by the government and its borrowing programme is fully backed by a government guarantee.