BoP surplus unlikely to continue in H2: Citi

“Despite our estimate on capital inflows remaining broadly unchanged at $62 billion in FY11-12 and $73 billion in FY12-13, our forecast of a widening current account deficit would likely result in a marginal drawdown in reserves to the tune of $2 billion against an accretion of $4 billion expected earlier,” a Citi report said

Mumbai: Balance of payment surplus (BoP) reported in the first half of the current financial year is unlikely to be sustained in the second half due to a marginal drawdown on the reserves, reports PTI quoting a Citi report.

“Despite our estimate on capital inflows remaining broadly unchanged at $62 billion in FY11-12 and $73 billion in FY12-13, our forecast of a widening current account deficit would likely result in a marginal drawdown in reserves to the tune of $2 billion against an accretion of $4 billion expected earlier,” the Citi report titled ‘India macro flash’ said.

Balance of payment is a statistical statement that summarizes, for a specific period, transactions between residents of a country and the rest of the world and the account classifies transactions under two heads—capital account and current account.

The report also notes that external funding requirement will remain the key focus in the next financial year.

In the second quarter, the BoP showed a marginal surplus of $276 million compared to $3.29 billion a year-ago.

During the first quarter, BoP surplus was at $5.44 billion, taking the total account showing an overflow of $5.7 billion for the first half.

However, the report notes that higher forecast of crude oil prices of around $110 a barrel from $95 earlier, coupled with slowdown in exports will result in higher current account deficit (CAD), which in turn will affect the BoP situation.

As per the report, current account deficit will widen to 3.5% of gross domestic product (GDP) in FY11-12.

“Looking ahead, we now expect... the higher trade deficit is likely to result in a slightly wider CAD of $64 billion or 3.5% of GDP in FY11-12 and $74 billion or 3.6% in FY12-13 against 2.9% and 3% earlier,” the report said.

Current account deficit occurs when a country’s total imports of goods, services and transfers are greater than its total export of goods, services and transfers.

However, the report notes the Reserve Bank of India (RBI) will use all its leverages to attract inflows.

“Over the last few months, to attract inflows, the RBI has been relaxing its restrictions on pricing and the quantum of inflows,” the report said, adding the central bank may take further measures like opening of FDI to more sectors, possibility of a commercial dollar bond issue, and opening of dollar swap lines among others.

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Direct tax collection up 14.54% at Rs3.97 lakh crore in Apr-Dec

As per the data released by the Central Board of Direct Taxes, gross collection of corporate tax was up 12.49% at Rs2,69,850 crore in April-December against Rs2,39,883 crore in the same period of the previous fiscal

New Delhi: Direct tax collections during April-December this fiscal were up by 14.54% at Rs3,96,529 crore over the corresponding period last fiscal, mainly due to an increase in corporate tax mop-up, reports PTI.

The gross direct tax collection in the first three quarters of 2010-11 was Rs3,46,182 crore.

As per the data released by the Central Board of Direct Taxes (CBDT), gross collection of corporate tax was up 12.49% at Rs2,69,850 crore in April-December against Rs2,39,883 crore in the same period of the previous fiscal.

The personal income tax collection in the three quarters of the current fiscal was up by 19.06% at Rs1,25,998 crore.

CBDT said the net direct tax collections (minus refunds issued to the assessess) stood at Rs3,23,955 crore in April- December. This was up by 8.36% from Rs2,98,957 crore collected in the same period last fiscal.

The growth in wealth tax was 54.18% at Rs646 crore against Rs419 crore collected last year.

Amid volatility in the stock market, the securities transaction tax (STT) declined by 26.48% at Rs3,763 crore. The STT mop-up was Rs5,118 crore in the first three quarters of the last fiscal.

In the Budget 2011-12, the government had envisaged to collect Rs5.32 lakh crore from direct taxes this fiscal.

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IRDA issues uniform norms to ensure solvency of insurance companies

The guidelines, which would come into effect from 1 April 2012, make it mandatory for insurance companies to prepare an ALM policy and have it approved by IRDA by March-end

New Delhi: The Insurance Regulatory and Development Authority of India (IRDA) on Wednesday introduced uniform asset-liability management norms for market players to ensure their solvency and asked firms to undertake stress tests to ascertain their ability to meet financial obligations in the event of a crisis, reports PTI.

The Asset-Liability Management (ALM) norms, IRDA said, are “critical for the sound management of the finances of the insurers that invest to meet their future cash flow needs and capital requirements.”

The guidelines, which would come into effect from 1 April 2012, make it mandatory for insurance companies to prepare an ALM policy and have it approved by IRDA by March-end.

With regard to stress-testing, IRDA has asked insurance companies to determine their ability to meet financial liabilities after taking into account factors like a 30% fall in equity values and a one percentage point decline in yields on fixed investments, among others.

IRDA has issued these guidelines to bring about uniformity in the ALM norms being followed by both life and non-life insurance companies.

Upon examination of the extant norms being followed by insurance companies, IRDA found they were “incomplete and inconsistent. As the mandate by the authority was very broad, each insurer had adopted their own measures in reporting such details”.

The insurers, it said, would have to put in place effective procedures for monitoring and managing their asset-liability positions to ensure that their investment activities and asset positions are appropriate to their liability, risk profiles and solvency positions.

The ALM policy should enable the insurers to understand the risks they are exposed to and develop ALM policies to manage them effectively, IRDA said.

In addition, the ALM can be used to measure the interest rate risk faced by insurers, it added.

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