The rise is due to a seasonal rise in imports, a surge in gold imports and sluggish exports, the brokerage firm said
India is scheduled to release its May trade data this week. Brokerage firm Nomura expects a record-high trade deficit of $21 billion in May from $17.8 billion in April. Nomura has cited three reasons for this:
First, the trade deficit has historically worsened sharply in May from higher chemical and fertilizer imports. Second, gold demand was elevated in May, as about 162 tonnes of gold were imported in response to falling gold prices. Lastly, external demand has been sluggish.
Nomura expects the trade deficit to improve in June, but the steep rise in April and May suggests that the current account deficit will widen to 5.5%-6% of GDP in Q2 2013 from 4%.-4.5% in Q1. Financing the current account deficit, therefore, remains a concern, and it is also one of the main reasons why the brokerage expects no repo rate cut in June.
Mr Murthy and his protégé Nandan Nilekani have always been clever about managing their image. Consider this anecdote of 2005, just two years after the Narayana Murthy Committee had submitted its report to the Securities & Exchange Board of India
NR Narayana Murthy’s return as executive chairman is seen as so positive for Infosys that any talk about the serious breach of good governance norms in the manner of his return, or the appointment of his son, is seen as needless criticism. Well, Mr Murthy and his protégé Nandan Nilekani have always been clever about managing their image. Consider this anecdote of 2005, just two years after the Narayana Murthy committee had submitted its report to the Securities & Exchange Board of India (SEBI). Janardhan Kothari of Kolkata, wrote to me expressing his ‘shock’ and ‘surprise’ that NRN Murthy, as an independent director of NDTV Limited had not attended a single board meeting in his first year. I forwarded the email to Mr Murthy asking if it were true. His response: “That is right. I am guilty. I had told them that my diary gets full a year in advance. I do not cancel appointments once made. That is why I could not attend the meetings. This year, I have attended all the meetings.”
This candour hides the fact that this is a complete violation of the corporate governance code, which places enormous responsibility on independent directors. Couldn’t Mr Murthy have joined the NDTV board a year later? Well, because NDTV was going public and having Mr Murthy on the board before its initial public offering (IPO) would help it extract a good premium from investors. NDTV repaid this debt in full when Mr Murthy was under serious attack from a vengeful HD Deve Gowda (during his son HD Kumarswamy's regime in Karnataka).
“We have taken number of measures to curb the import of gold. The government will never say its end of it,” Chief Economic Advisor Raghuram Rajan said
Within days of hiking import duty on gold, Chief Economic Advisor Raghuram Rajan today said government could take more steps to curb demand for the precious metal amidst widening current account deficit (CAD).
“We have taken number of measures to curb the import of gold. The government will never say its end of it,” he told reporters in New Delhi.
Last week the government increased import duty on gold to 8%, the second such hike within six months.
The monthly gold imports have averaged 152 tonnes in first two months of the fiscal as compared to an average of 70 tonnes seen in the 2012-13 financial year.
High gold imports is one of main reasons behind high CAD, which touched a record high of 6.7% of GDP in December quarter of last fiscal. The CAD is likely to be in the range of 5% for the 2012-13 fiscal. As per experts a CAD of 2.5% is sustainable.
The high CAD in turn affects rupee value. In early trade, the rupee hit life-time low of 57.54 against the US dollar today.
Rajan further said India has a large CAD, and currencies of emerging markets with large CAD have depreciated more.
“We are undergoing period of volatility (in rupee)... Obviously in the government, we don’t like to see volatility... This could be temporary phenomenon,” he said.
He, however, said government does not have in mind any specific level at which the rupee should be.
The chief economic advisor in the finance ministry also said the medium term measures taken by the government in past will continue and help rupee to find a level consistent with the sustainable growth.