Economy
India’s external debt stock stood at US$390 billion at end-March 2013
The rise in external debt of 12.9% is mainly due to increase in short-term debt, commercial borrowings and non-resident Indian deposits, says a status report from the Finance Ministry
 
The level of India’s external debt (at US$390 billion) is on a rising trend with the elevated level of current account deficit and hence overall external financing requirements. With rising debt flows, deceleration in GDP  growth  and  depreciating  rupee,  key  external  debt  indicators  witnessed  some  deterioration as  at  end-March  2013  as  compared  to  end-March  2012. This is according to a status report on India’s external debt published by the department of Economic Affairs, Ministry of Finance.
 
However,  debt  service  ratio,  measured by the proportion of total debt service payments to current receipts (minus official transfers) of balance  of  payments,  at  end-March  2013  showed  some  improvement  over  end-March  2012, coming down from 6.0 to 5.9 and India’s external debt has remained within manageable limits as indicated by  external  debt-GDP  ratio  of  21.2%  during  2012-13, the report added.
 
India’s external debt position in recent years is given below:
 
 
At end-March 2013, India’s external debt stock stood at US$390.0 billion, increasing by 12.9% over the end-March 2012 level of US$ 345.5 billion. The rise is mainly due to increase in short-term debt, commercial borrowings and non-resident Indian deposits, the status report stated.
 
The  share  of  commercial  borrowings  in  total  external  debt  stock  stood  at  31.0%  at  end-March  2013,  followed  by  short-term  debt  (24.8%),  NRI  deposits  (18.2%)  and multilateral debt (13.2%). Government  (sovereign)  external  debt  stood  at  US$  81.7  billion  at  end-March  2013  vis-à-vis US$ 81.9 billion at end-March 2012.  The share of government external debt in total external debt was lower at 20.9% at end-March 2013 as compared to 23.7% at end-March 2012.
 
The International Debt Statistics 2013 of the World Bank, which contains external debt numbers for 2011,  shows  that  India’s position was  fourth,  in  terms  of  absolute  debt  stock  amongst  the  top twenty  developing  debtor  countries, the report concluded.

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No sustainable turnaround in BoP for 6 months
Weak growth and poor flows, both equity and overseas borrowing by corporates, will keep up the pressure on balance of payments
 
India’s trade deficit narrowed to US$10.9bn in August (Nomura: US$8.5bn) from US$12.3bn in July due to strong exports. Exports rose 13% y-o-y (year-on-year) in August, following 11.6% growth in July, led by improving global demand. Even as global demand improved, weak domestic demand and the clampdown on gold imports kept imports under check, contracting by 0.7% y-o-y in August compared with a decline of 6.2% in July. Within imports, gold imports moderated sharply to US$0.65bn from US$2.2bn in July; non-oil imports contracted 10.4% y-o-y versus a decline of 5.3% in July; while oil imports rose sharply to 17.9% y-o-y from - 8%. Hence, higher oil imports (due to high oil prices) largely offset the benefit of lower gold imports and slowing domestic demand.
 
Even as the macro backdrop appears to be stabilizing, it is not expected that there will be a sustainable turnaround in trade deficit and balance of payments. Continuing concerns over the growth outlook, rising credit risks, deteriorating bank asset quality and worsening fiscal pressures suggest that risks remain skewed to the downside over the next six months. This is according to a research note by Nomura Financial Advisory.
 
According to Craig Chan, Nomura’s head of Asian FX strategy, the recent measures announced (on FCNR(B) deposits and the dollar swap window for oil companies) provide a near-term respite. But Nomura remains cautious on a sustained rally in the Indian rupee because of the continued negative fundamentals, mainly from weak growth.
 
Nomura’s research note adds that it would expect weak growth to result in a slowdown in growth-sensitive flows, both equity and overseas borrowing by corporates, which can offset inflows through other routes. Hence, it expects the balance-of-payment pressure to persist.

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Sensex, Nifty may correct and then resume its upmove: Tuesday closing report
The current upmove may have more steam left. Nifty likely to hit 6,000 
 
The Sensex and the Nifty on Tuesday recorded the highest percentage gain since 27 May 2009 on massive short covering after the rupee sharply dipped again. The Reserve Bank of India (RBI) measures in the past week and the US jobs data falling short of estimates have helped too. The indices ended positive for the fourth consecutive session. The BSE 30-share Sensex, which opened higher at 19,448 hit an intra-day low of 19,445. By the end of the session, Sensex breached the 20,000 level to hit an intra-day high of 20,013 and closed at 19,997 (up 727 points or 3.77%). The NSE Nifty, which opened at 5,739 hit a low almost at the same level, but went to hit an intra-day high of 5,905 before closing at 5,897 (up 216 points or 3.81%). The National Stock Exchange (NSE) recorded a marginally higher volume of 70.79 crore shares.
 
All indices on the NSE closed in the positive. The top five gainers were Auto (5.98%); FMCG (5.38%); Infra (4.91%); Consumption (4.74%) and MNC (4.55%). Of the 50 stocks on the Nifty, 41 ended in the green. 
 
The top five gainers on Nifty were Tata Motors (9.82%); Bharti Airtel (8.37%); Ambuja Cements (7.66%); Hero MotoCorp (7.19%) and ACC (7.02%). The top five losers were NMDC (2.27%); BPCL (1.50%); Bank of Baroda (1.35%); Cairn (1.28%) and Dr Reddy (0.86%).
 
RBI on Friday said that it would allow non-residents to buy stocks of listed domestic companies through the foreign direct investment (FDI) route. The new rule would make it easier for foreign promoters, who were earlier able to raise their stakes only through separate processes such as open market offers, to buy shares in listed companies.
 
The government is also set to announce more steps over the next few days to curb non-essential imports, with expectations growing for a hike in subsidized diesel prices that would ease concerns about the government's finances.
 
India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", Trade Secretary SR Rao said on Monday. As a result, the trade deficit fell to $10.91 billion in August from $12.27 billion in the previous month.
 
India’s rupee rose as much as 5.6% in the past four days, the biggest gain since at least 1973 according to the biggest gain in data compiled by Bloomberg.
 
The US indices closed in the green on Monday. Non-farm payrolls in the US climbed 169,000 in August, official data showed on Friday 6 September, less than the 180,000 median estimate of a Bloomberg survey.
 
Russia on Monday proposed to work with Damascus to put its chemical weapons under international control, a move that President Barack Obama said could be "potentially positive". Asian indices ended in the positive. Jakarta Composite, the top gainer, was up 3.98%.
 
China's industrial output grew at the fastest pace in 17 months in August, adding to signs of a rebound this quarter that include a pickup in export gains. Factory production rose 10.4% from a year earlier, the National Bureau of Statistics said in a statement in Beijing today. Retail sales rose 13.4% in August higher than 13.2% gain in the previous month.
 
In France, factory output slid for a third month in July, underscoring the government’s struggle to revive growth. Oil fell on speculation Russia’s plan to get Syria to surrender its chemical weapons will help avert a US strike.
 
European indices were trading in the green. The US Futures too were trading higher.
 

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