Govt criticises Goldman Sachs for forecasting Narendra Modi’s victory in 2014 elections

Zee Media Bureau

New Delhi: American multinational investment banking firm Goldman Sachs’ recent note on optimism over political change in India has irked Commerce and Industry Minister Anand Sharma.

The Commerce Minister in an interview to a business daily said that the investment banking firm should concentrate upon “doing what they claim to specialise in”.

Goldman is parading its ignorance about the basic facts of Indian economy; and it also exposes its eagerness to mess around with India's domestic politics,” said Sharma.

Goldman Sachs had noted expectations that the opposition Bharatiya Janata Party, led by prime minister candidate Narendra Modi, could prevail in parliamentary elections due by May 2014.

The firm had also upgraded its view on India to "marketweight", with a target for the Nifty of 6,900 points.

Goldman noted that external capital account pressures have moderated for now, and cites signs of a cyclical pick-up and structural improvements in the economy.

Rupee to stabilise in a day or two: FinMin

New Delhi: The Finance Ministry Thursday said the rupee will stabilise within a couple of days as inflows of NRI deposits and export proceeds are likely to be strong.

"Strong FCNR (B) inflows, export realisation will strengthen rupee... Rupee will stabilise in 1 or 2 days," Economic Affairs Secretary Arvind Mayaram said.

The rupee weakened to 62.58 against the US dollar in the early trade today.

Mayaram said the weakness in rupee was due to shifting part of dollar purchases by oil companies to open market.

In August, the Reserve Bank had opened a special window to help the three state-owned oil marketing companies -- IOC, HPCL and BPCL -- to meet daily foreign exchange requirements and buy dollars directly from RBI.

"Rupee weakness is due to OMC forex demand being moved to market. 30-40 percent of OMC demand has moved to market," Mayaram said.

The PSU oil companies are the biggest buyers of dollars, requiring USD 8-8.5 billion every month for the import of an average 7.5 million tonne of crude oil.

The rupee has recovered over 10 percent since August 28, when it fell to a record low of 68.85 to the dollar. The gain in rupee followed optimism that the US Federal Reserve would delay the tapering of its bond buying programme.

To attract dollars, RBI in September had opened a special concessional window for swapping foreign currency non-resident (banks) (FCNR-B) deposits and overseas foreign currency borrowings for banks. So far USD 15.2 billion has come from this window.

The window will remain open till the end of this month, and many analysts have pegged the inflows from these instruments to be in the range of USD 20-25 billion.

The plight of the rupee started after the US Fed in its May 24 meeting hinted at shutting the easy money tap- repurchase of USD 85 billion worth of T-bills every month.

This had led to a spike in US interest rates, enticing FIIs to plumb for better returns back home by exiting emerging markets.

FIIs had sold domestic debt worth more than USD 52 billion so far in 2013

US economy clocks 2.8% growth in third quarter

 
New York: The US economy grew at an annual rate of 2.8 percent in the third quarter, the government said Thursday in a report that revealed weakness in key consumer spending.

The world`s largest economy accelerated from a 2.5 percent pace in the second quarter, surprising analysts who had expected the Commerce Department`s first read on third-quarter gross domestic product would show expansion at a weaker 1.9 percent pace.

It was the strongest pace of growth in a year. But analysts forecast a weaker fourth quarter this year, after a Washington budget battle forced a 16-day government shutdown in October that shaved an estimated USD 24 billion from the economy.

Scott Hoyt of Moody`s Analytics noted that growth in the third quarter came amid widespread expectations that Congress would find a compromise in time to avoid the government shutdown.

The Commerce Department said the July-September pick-up was mainly due to a sharper decline in imports from the second quarter and accelerating rises in private inventory investment and state and local government spending.

Federal government spending, hit by "sequester" budget cuts that began in March, fell 1.7 percent following a fall of 1.6 percent in the second quarter.

Inflation heated up, led by price jumps in energy goods and services, but remained well below the two percent target of the Federal Reserve for price stability.

The price index rose 1.8 percent in the third quarter, following a 0.2 percent rise in the second. Excluding food and energy prices, the price index increased 1.5 percent, compared with a 0.8 percent rise in the prior quarter.

Growth in consumer spending, which accounts for roughly two-thirds of US activity, slowed to 1.5 percent from an increase of 1.8 percent in the second quarter

Disposable personal income rose 2.5 percent in the third quarter, down from a 3.5 percent increase in the prior quarter under pressure from rising consumer prices.

"The US economy had somewhat more pep in the previous quarter than expected amid solid gains in construction," Sal Guatieri of BMO Capital Markets said in a research note.

However, he added, weakness in consumer spending and business investment, alongside the large gains in inventories and the government shutdown, "will weigh on growth in the current quarter."

Veerappa Moily asks FinMin to cut duties on branded petrol, diesel

 
Oil Minister M Veerappa Moily has asked the Finance Ministry to cut duties on branded petrol and diesel that offer better mileage and help cut fuel consumption.

Currently, the finance ministry levies higher excise duty on premium or branded petrol and diesel, making them costlier than normal or unbranded auto fuel.

Ever since their introduction in 2002, sale of premium or branded fuels have dwindled from a peak of 5.9 million kilolitres of diesel and 3.4 million kl of petrol in 2007-08 to a mere 0.45 kl of diesel and 0.09 kl of petrol in 2012-13.

"To enhance the fuel efficiency of new generation vehicles, specialised products (branded petrol and diesel) were launched by oil marketing companies in line with global trends and in keeping with the technological advancement in the automobile industry," the Oil Ministry said in a statement issued on completion of one-month of fuel conservation drive.

Moily has "requested the Ministry of Finance to review the duties levied on branded fuels to bring down the price differential so that consumers opt for branded fuel and this will help improve the fuel efficiency (by about 2 per cent) resulting in reduction in overall demand for petroleum products," the statement added.

The Finance Ministry had in 2009 Budget introduced new duties on branded fuels, which raised the differential between regular and branded fuel. "Due to this, sales of branded fuels have started sliding," the oil ministry's statement said.

Currently, the government levies an excise duty of Rs 1.20 per litre on normal or unbranded petrol while the same on branded petrol is Rs 7.50. Similarly, unbranded diesel attracts an excise duty of Rs 1.46 per litre while Rs 3.75 duty is levied on branded diesel.

While a litre of regular/normal or unbranded petrol costs Rs 72.45 in Delhi, branded petrol is priced at Rs 81.88. Similarly, normal diesel in Delhi costs Rs 52.54 a litre while branded diesel is priced at Rs 67.93.

Also, in September 2012, the government stopped providing subsidy on branded fuel, resulting in further dip in sales.

The current unbranded or normal diesel price of Rs 52.54 a litre includes a subsidy of Rs 9.20.

Moily says the reduction in excise duty by Rs 6.30 per litre on petrol and Rs 2.29 on diesel would not impact government revenues as current sale of branded fuels was "meager". But it would help in conservation as these fuels provide improved engine performance to yield 2 per cent savings in consumption.

Branded petrol and diesel is priced at a premium to regular fuel as additives put in them remove harmful deposits from engines, prevent corrosion, reduce emissions and lower maintenance costs.

Global central banks unlikely to fight dollar: Poll

London: Global central banks are unlikely to take steps to make their currencies more competitive against the US dollar whose current weakness should prove to be temporary, a Reuters poll found.

The monthly survey of more than 60 foreign exchange analysts and economists showed the euro - which soared above USD 1.38 before shock low inflation data last week - will ease gradually over the next 12 months from here.

That view reflects expectations the US Federal Reserve will start cutting its monthly bond purchase stimulus early next year, probably by March.

After the Fed surprised markets by refraining from doing that this September, major global currencies have strengthened against the dollar. That has caused problems for export-reliant countries, both in Europe and emerging markets.

Still, 28 out of 35 analysts who answered an extra question said the dollar`s weakness would not push world central banks to ease policy to help regain a competitive edge against the greenback.

"(That`s) unlikely, because Fed tapering is inevitable and thus most emerging market currencies will be vulnerable over the medium term," said Barclays analyst Mike Keenan.

But the dollar probably won`t rally soon. The poll showed the dollar index relative to a basket of major currencies closing the year at 81, compared with 80.5 on Wednesday.

Into next year, that should change.

For one thing, the euro`s strength will gradually dissipate next year. That will be at least some relief for the European Central Bank, which meets on Thursday to set policy and is under pressure to act against very weak inflation and boost fragile growth.

The poll`s median outlook showed the euro - which was trading around USD 1.35 on Wednesday - holding around that level in a month`s time, before slipping to USD 1.33 in three months, USD 1.30 in six and USD 1.27 in a year from now.

"We expect a near-term euro appreciation against the dollar given the likely continued U.S. fiscal uncertainties, followed by retrenchment in 2014 as the focus returns to growth and interest rate differentials," said Ric Deverell, head of global foreign exchange at Credit Suisse.

Against sterling, the euro looks set to keep its value for the most part, holding at 84 pence on Wednesday and forecast at 83 pence in a year`s time.