Tag Archives: india
India’s rupee skids to new record low against dollar
India’s rupee skids to new record low against dollar (AFP) / 22 August 2013 India’s rupee tumbled to a new record low against the dollar on Thursday as uncertainty about the future of the US stimulus programme added to growing fears about the state of the Indian economy. Closely watched minutes from the US Federal Reserve were unable to shed any light on when the bank will begin winding down its bond-buying scheme, which has helped fuel an investment splurge in Asia’s emerging markets. The rupee sank to 65.04 against the dollar in early trade despite suspected interventions by the Reserve Bank of India (RBI) to try to halt the slide this week. The unit is the worst performing currency among key Asian nations this year, losing about a fifth of its value. The RBI and the government have been in crisis management mode for several months to try to stabilise the rupee by announcing measure such as a tightening of liquidity in the markets and hiking short-term interest rates. But the measures have failed to halt the plummet and this week the bank changed tack, announcing it would inject 80 billion rupees ($1.26 billion) into the banking system, by buying back long-term government bonds. The move aimed at making more credit available to boost slowing economic growth raised concern in the markets about a lack of clear policy direction and prompted accusations of policy flip flop. Expectations of an end to the stimulus have seen Western investors in recent months repatriate some of the vast sums that poured into emerging economies when it was unveiled last year, in turn hitting currencies and equities. But India has been especially hard hit because of concerns about its large current account deficit and a possible balance of payments crisis. Minutes from the Fed’s July policy meeting released Wednesday showed board members had differing opinions on when to wind down the $85 billion a month bond-buying. Some back a “taper” as soon as next month, while others said the bank needed to see more evidence the US economy was strong enough. Dealers said they feared the rupee could weaken further — with the 70 level not ruled out — on concerns over the US stimulus and worries that India’s central bank measures would not provide enough support. Continue reading
New duties rain on Indians’ TV party
New duties rain on Indians’ TV party Muaz Shabandri / 21 August 2013 Travelling to India with a television set will soon become a thing of the past as the Indian government announced plans to impose custom duties on ‘non-essential’ imports. Non-resident Indians (NRIs) and Indian tourists going back to India with TV sets would be asked to pay a 10 per cent customs duty and 12.5 per cent countervailing duty as part of the new rules. The move is expected to discourage Indians from spending on non-essential products outside India. Till now, most Indian expatriates would carry a 32” or 42” TV in their free-baggage allowance as the Indian government was allowing a duty-free import of TV sets up to the value of Rs35,000. However, the new rules, taking effect from August 26, would affect NRIs. Television sales across the UAE are expected to dip by more than 20 per cent over the next three to six months. The availability of cheap television sets in the UAE, Thailand and Singapore had created a huge market from India as tourists took advantage of the price difference due to the baggage allowance. “The Indian consumers looked at TV sets as a nice gift for friends or relatives. It was one of the most popular products which one would take back to their home country,” said Ashish Panjabi, chief operating officer for UAE’s Jacky’s Group, a major electronic retailer. The LCD and LED TV sets by major brands like Samsung, LG and Sony are priced almost 30 to 40 per cent cheaper in the UAE market. The new rules are aimed at reducing the cost-benefit for retail consumers who will end up paying as much as they would for a TV set in the Indian market. Neelesh Bhatnagar, CEO of Emax Electronics, also expressed concerns over the decision to impose customs duties on TV sets as he said, “With the devaluation of the Indian currency, major electronic manufacturers will also have to increase prices of products in the Indian market.” Every day, more than 3,000 flat-screen TV sets land at Indian airports. The number increases to almost 10,000 during the sale season and Dubai Shopping Festival (DSF) when special offers are provided to retail customers. The UAE is a popular tourist stop for Indian residents who look at Dubai as a shopping destination. Electronics and gold products are a hit with this consumer segment. “We have already seen a dip in the flow of Indian tourists coming to our stores. For any customer taking back an electronic product to their home country, they need to make a saving of at least 25 per cent. Warranty and installation issues also affect the buying sentiment sometimes,” added Bhatnagar. Sliding Indian rupee has forced economists and policy-makers to take corrective measures and reduce the current-account deficit (CAD). Taxes on gold imports were also raised for the third time in eight months, again targeting NRIs. The government increased the customs duty by 10 per cent from 8 per cent per 300 grams of the precious metal. P.K. Abdul Salam, executive director of Malabar Gold & Diamonds, said gold retailers in the UAE would definitely be affected as sales were expected to slump. “It will definitely affect gold sales in the UAE. The margin of difference when importing gold is very obvious now. Also, some states in India have local taxes which add to the end retail cost,” he said. Gold is hugely popular in India, especially during religious festivals and wedding seasons, as middle-income families look at gold as a safe investment. “People are now willing to send money rather than invest in gold because of the falling Indian rupee. It is a dull season and we are hoping sales would pick up during the festive seasons of Eid and Diwali,” added Abdul Salam. In January 2012, the duty on gold stood at 2 per cent. It has been steadily increasing since then, causing fears of an increase in gold smuggling. muaz@khaleejtimes.com Continue reading
Indian expats cashing in on falling rupee
Indian expats cashing in on falling rupee Staff Reporter / 21 August 2013 Concerns mounted over the state of the Indian economy as the country’s currency plummeted to another record low against the dollar and shares continued their slide on Tuesday. The Indian rupee, Asia’s worst-performing currency this year slid to 64.13 rupees to the dollar in morning trading, past its previous low of 63.22 on Monday, and some Indian expats are cashing in on the record low the currency has hit by sending more money home. The Reserve Bank of India is believed to have intervened twice in the foreign exchange market to sell dollars for rupees. The move lifted the Indian unit slightly but it still ended the day at a new lifetime closing low of 63.25 rupees to the dollar. Troubles besetting the rupee, which has fallen nearly 17 per cent against the dollar this year, has spilt over to the stock and bond markets. Indian shares — which have lost seven per cent in the past three trading days — slid as much as 1.83 per cent in early trade to a low of 17,970.98 points before recovering to close down 0.34 per cent at 18,246.04. The yield on the 10-year benchmark bond hit 9.23 per cent intraday, the highest for over five years, reflecting eroding investor appetite for Indian debt as worries about the economy and potential default mounted, AFP reported. Finance Minister P. Chidambaram told parliament a number of government steps had been taken to stem the rupee’s decline including reducing imports of non-essential items such as gold. The falling rupee stokes inflation by raising the cost of everything India imports from crude oil to chemicals and pulses. There are also growing fears that India will find it tough to fund its gaping current account deficit, which hit a record high last year. India’s weak trading sentiment was mirrored across key Asian stock markets, with investors jittery before Wednesday’s publication of the minutes of July’s US Federal Open Market Committee meeting. These were expected to give indications about a possible rollback of the Fed’s massive stimulus programme. Most emerging market currencies have been hit by expectations the Fed will scale back its stimulus sooner than expected, causing funds to flow back to the United States as its economy recovers. “This is a crisis, the sentiment is extremely frail,” said Param Sarma, chief executive of NSP Forex, a forex consultancy, according to AFP news agency. In the UAE, many Indian expats view the record decline of their currency as an opportunity to invest and send more cash home. However, Vasudev, assistant manager of UAE Exchange, Bur Dubai branch, said it’s been business as usual. “Even though we opened at Rs17.3 to the dirham on Tuesday morning, fluctuations in the rupee don’t influence people. The people who have to remit do so on a monthly basis — end of the month and first week of the month, around the time salaries get credited.” At a branch of Al Fardan Exchange located in a mall, the manager (not authorised to speak to the media), said he had noticed a disturbing trend in the past few weeks of Indians taking personal loans from banks and sending the money home. The manager’s own belief is: “Send what you have, never take a liability, it’s best to take it slow and send monthly.” “Yesterday, a man sent five million in Indian currency home to three different accounts.” There is a huge risk, though, in taking loans and sending that money home. According to K. V. Shamsudheen, who runs a charitable trust and looks into the welfare of NRIs and also conducts classes in Dubai on financial awareness: “More than 36 per cent Indians are taking loans from credit card companies that say they are charging 2-3 per cent interest” when, in fact, that 2-3 per cent was not annual interest, but monthly. Shamsudheen advises expats on key matters: “Never take loans from individual money lenders. Never take loans from credit card companies. And if you are remitting money home, make sure the investment back home is not in real estate, not in buying houses, but in a liquid investment such as fixed deposit, mutual funds and stocks.” news@khaleejtimes.com Continue reading
