In case of oil and gas, it is neither possible nor desirable to completely stop imports as we have long term supply agreements on hand. But, what can be done that needs to be put into immediate effect? Some measures that the government can take.
According to various financial experts, the efforts taken by Reserve Bank of
India, however laudable, have not produced the desired impact and the rupee continues its slide downward, to go beyond Rs65 to a US dollar!
Obviously, the government is trying to tackle the issue as the rupee battled and closed at Rs64.63 against the US dollar. The US plans to taper down its bond buying programme in September are in the minds of the operators, but in the meantime, it is imperative that some more steps are taken in the country to stem this rot. The assurances from RBI are encouraging but fear lurks in the minds of one and all. Will it go beyond Rs65 today, the last working day of the week?
As we have said before, one school of thought strongly recommends the disposal of gold in the international market to meet the current account deficit challenge. And yet taking into account the fact that festival and wedding seasons are close at hand, the government may not decide on this option, though it would ease the situation a bit.
The other major contributor for the crisis is our continuing dependence on the import of energy/ fuel requirements. In case of oil and gas, it is neither possible nor desirable to completely stop imports as we have long term supply agreements on hand. But, what steps can be put into immediate effect are:
a) Permit Cairn India to increase its production capacity by waiving any clearance obstacles that are preventing the output to 250,000 bpd and beyond.
b) Authorize them (Cairn) to repossess the surrendered areas for them to intensify exploration, instead of going through the mill.
c) Remove the pin-pricks associated with the 11 km pipeline that has so far prevented Gujarat State Petroleum awaiting environmental clearance for more than 5 years now.
d) Direct Reliance to expeditiously handle the issues relating to increasing the production of both oil and gas.
e) If ONGC has any pending clearance issues, then, these should be handled also on a war footing.
f) Like Iran has agreed to a barter in supply of oil, why not try to secure similar opportunities elsewhere?
g) In the case of Coal India's imports, it has been reported in the press, that the offtake of production by power generators has been lower and in the case of NTPC, they have also stated that they have no takers (poor consumption!) - and here again, we have long standing coal contracts to import coal - all these need to be seriously audited and immediate steps need to be taken to rectify the situation.
h) Domestic output of edible oils and pulses has increased, thanks to heavy monsoon. Besides, international prices have begun to drop. This will help India save some $4 billion in imports by relying on indigenous production. It is to be noted that international prices of pulses have also come down by 20% so far, coming from Canada, Myanmar and Australia. Since palm oil supplies have began to increase, edible oil prices will also fall. We reiterate that foodgrain exports must now get a further push and efforts be made to stop wastage and damage to stocks lying in the FCI godowns.
All these measures, if attempted seriously, can definitely bring in some much needed relief from the troubles that CAD has caused. Efforts to woo the NRIs to remit more funds back home needs by assuring them a guaranteed rupee exchange rate may also bring in favourable response, as most of them now may be holding up their regular remittances in the hope of a further fall and the uncertainty associated with it. No one wants to accept a lower exchange value for his hard earned foreign currency today, if he thinks that he can have a better return a few days from now!
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)
While banks argue that customers must pay for the convenience of modern banking, there is a...
A close above 5,425 on the Nifty may signal more strength
The indices back home had a slightly lower opening today and throughout the morning session it moved around yesterday’s closing. However from the beginning of the noon session they begun moving higher and continued till the end of the session when it closed almost near the day’s high. If the Nifty closes above 5,425, it may continue to rally subject to intraday dips.
Today the Sensex opened at 17,897 while the Nifty opened at 5,283. Soon they hit their respective low of 17,760 and 5,254. By the end of the session they hit a high of 18,350 and 5,419 and closed almost near it. Sensex closed at 18,313 (407 points up, 2.27%) while the Nifty closed at 5,408 (106 points up, 2%). The Sensex covered up all the losses of past two trading days while the Nifty covered almost all the losses of previous two trading days. The Sensex made the highest closing percentage gain since 28 June 2013 while the Nifty made the highest percentage gain since 11 July 2013. The National Stock Exchange (NSE) recorded a volume of 71.44 crore shares.
Among the major indices, Nifty Midcap 50 shot up 2.85%, CNX 100 leapt 1.86%, CNX 200 was up 1.75% and CNX 500 rose 1.64%.
Among the other indices, the losers were Media (1.19%); Realty (0.53%) and Finance (0.38%) while the top gainers were Metal (7.54%), Commodities (4.01%), PSE (3.38%), Energy (3.21%) and Pharma (2.76%).
Of the 50 stocks on the Nifty, 44 ended in the in the green. The major gainers were Ranbaxy (16.02%); Sesa Goa (13.09%); Hindalco (11.04%); Reliance Infrastructure (10.15%) and Tata Steel (10.01%). The main losers were DLF (4.06%); HDFC (1.45%); HDFC Bank (0.73%); Axis Bank (0.66%) and ACC (0.63%). Today the rupee made a record low again when it hit 65.56 to the dollar.
The indices abroad pulled back since Asian indices opened lower, following a fall in the US indices yesterday, after the minutes of the Federal Reserve's last meeting showed that the central bank was on course to pare bond purchases this year. However, with Germany’s manufacturing purchasing managers’ index rising faster than expected in August and the preliminary reading for a purchasing managers' index unexpectedly showing an expansion in China brought the indices recording a gain after losses for four consecutive trading days.
The pressure on Indian currencies and asset prices is not a trigger for rating action at this point, Fitch ratings said in note on Thursday. Fitch has a stable outlook on the 'BBB-' sovereign credit ratings for India.
Most of the Asian indices ended in the red with only Hang Seng closing in the green (0.36%) while KLSE Composite was major loser, (1.40%).
A Chinese manufacturing index rose in August from the lowest level in 11 months, adding to signs the world's second-biggest economy is strengthening after a two-quarter slowdown. The preliminary reading of 50.1 for a Purchasing Managers' Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 47.7 in July.
Manufacturing activity in Germany expanded at the fastest pace in more than two years in August, easing concerns over the impact of the euro zone’s debt crisis on the region’s largest economy, preliminary data showed on Thursday. The preliminary German manufacturing purchasing managers’ index rose to a seasonally adjusted 52.0 in August from a final reading of 50.7 in July. The report showed that service sector activity in Germany improved more-than-expected in August, hitting a six-month high. The preliminary services purchasing managers’ index rose to a seasonally adjusted 52.4 this month from a reading of 51.3 in July.
European indices were trading higher; US Futures too were in the trading green.
Dr Reddy's Laboratories, in pursuance of notification issued by United States Food and Drug Administration, has initiated recalling of total five lots of Ranitidine Hydrochloride tablets, USP, used in gastric problems, and 150 mg bottles from the US market due to microbial contamination of non-sterile products. Ranitidine Hydrochloride is indicated in gastro- oesophageal reflux disease, treatment of peptic ulcers, treatment of benign gastric ulceration, Zollinger-Ellison syndrome and treatment of duodenal ulceration. The stock rose 3.58% to close at Rs2119.90 on the NSE.