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EXCLUSIVE
RBI MAY GO FOR 35-50 BPS RATE HIKE, 'CALIBRATED STANCE' ON AUGUST 5
Most economists expect the Reserve Bank of India to raise the repo rate by 35-50
basis points in its monetary policy meeting on August 3-5.
* ETBFSI
* August 02, 2022, 08:00 IST
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~ Anushka Sengupta
The Reserve Bank of India’s Monetary Policy Committee (MPC) is likely to
announce a repo rate hike of 35-50 basis points (bps) in its policy review on
August 5.
The MPC meeting scheduled on August 2-4 will now be held on August 3-5.
Given that the Consumer Price Index (CPI) inflation — the RBI’s monetary policy
anchor — remains well above the central bank’s target band of 2-6 per cent, a
fresh rate hike is a certainty, say economists and market participants.
The central bank will go for a 0.35 per cent hike in the key repo rate which
will be accompanied by a change in the policy stance to "calibrated tightening",
American brokerage Bofa Securities said.
ICICI Securities sees RBI raising the repo rate by another 60 basis points to
5.5%, with a heightened risk of front-loading the hikes (rather than gradual
increases until October 2022).
Kotak Mahindra Bank continues to expect an 85 basis points hike in repo rate to
5.75% by end 2022.
"We expect RBI to hike repo rate by 50 bps in the upcoming policy. While some of
the early signs of inflation moderation are visible we believe that the external
sector risks remain abound and to offset, at the margin, the increasing pressure
on INR, RBI should frontload the rate hikes even as the overall terminal rate
may not eventually be very high," said Upasna Bhardwaj, Chief Economist, Kotak
Mahindra Bank.
The frontloading of policy tightening will more likely result in a soft landing.
It is not just India where growth is slowing. The pace of planned US Fed rate
hikes was not seen in a generation and with multiple surprises bound to be
thrown up, RBI will have to calibrate, said an Axis Bank research report.
We do expect the RBI to go for a 25 bps hike in repo rate this time. This will
bring it to the pre-covid level of 5.15%. A 25 bps hike will indicate that
inflation has peaked and though high will not go up significantly. Any
aggressive move of say 50 bps will indicate that inflation peak has not yet been
achieved and hence that can send a different signal to the market, said Madan
Sabnavis, Chief Economist, Bank of Baroda.
According to Crisil, the rise in OIS rates since the beginning of the year was
prescient in that it revealed market expectations of the RBI hiking the repo
rate faster than communicated. The MPC effected its first repo rate hike of 40
bps in an off-cycle meeting in May, taking markets by surprise. This was
followed by a 50-bps hike in the June policy.
In a report, Radhika Rao, Executive Director and Senior Economist at DBS Group
Research, said the RBI monetary policy committee is expected to stay focused on
price stability over the next two quarters.
Factoring in peak inflation in the July-September quarter, "we now expect a 35
bps hike in August, followed by three 25 bps for the terminal rate to level off
at 6 per cent by end-FY23", she opined.
Inflation and liquidity
India's consumer price index slightly moderated to 7.01 per cent in June
compared to 7.04 per cent in May 2022. However, inflation remained above the
central bank's upper limit of 6 per cent for the sixth consecutive month.
Notably, CPI inflation peaked at 7.79 per cent in April.
Axis Bank highlighted that liquidity conditions have continued to tighten on
RBI's intervention in the forex market, limited government spending and monthly
GST payments.
Saugata Bhattacharya, EVP – business and economic research & chief economist,
Axis Bank, said the neutral level of liquidity, earlier expected in December,
seems to have kicked into the system much sooner.
"That will have implications for how the RBI manages liquidity in the system,
depending on how inflation and commodity prices pan out. That is something we’ll
have to watch,” he said.
Liquidity shrinkage and external benchmarking of loans continue to fuel the
faster and complete transmission of rate hikes. That should make the MPC’s job
easier, as it negates the need for a higher terminal rate, Rahul Bajoria, MD &
chief India economist, Barclays said.
Sabnavis expects some mention on steps to be taken to stabilise liquidity as
surpluses have come down. "VRR and OMOs could be the two prongs used by the RBI
to induce liquidity in the coming months", he said.
The ICICI Securities report highlighted that the combination of higher policy
rates, and an easing of global supply constraints on crude-oil and edible oils,
should allow CPI inflation to edge below 6% YoY as the Kharif harvest arrives in
November 2022.
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INDUSTRY
* 1 hr ago
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* 8 hrs ago
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EXCLUSIVE
INDIA INC SEES RATE HIKES CURBING INFLATION; SOME WARY OF IMPACT ON GROWTH
“If you look at the Indian economy, it is better placed on inflation than some
of the major economies like the United States and Europe. We have seen RBI
quickly raising rates, there have been curbs on exports; action taken to reduce
taxes on fuel. All these things will help rein in inflation,” said Anish Shah,
managing director of Mahindra & Mahindra.
* ET Bureau
Click Here to Read This Story
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The Reserve Bank of India’s move to hike the repo rate by another 50 basis
points will cool stubbornly high inflation and support the rupee, top industry
executives said.
The move may, however, hit consumption, and thus growth, with demand already
under pressure, some executives cautioned.
“If you look at the Indian economy, it is better placed on inflation than some
of the major economies like the United States and Europe. We have seen RBI
quickly raising rates, there have been curbs on exports; action taken to reduce
taxes on fuel. All these things will help rein in inflation,” said Anish Shah,
managing director of Mahindra & Mahindra.
It is more important to keep inflation in check at this point, he added.
The central bank raised the repurchase rate, the rate at which it lends to
banks, to the pre-pandemic August 2019 level of 5.40%.
India’s retail inflation for June inched down in June to 7.01% from 7.04% in the
previous month, but it remained above the 7% mark for the third successive month
and above RBI’s 2-6% tolerance level for a sixth straight month.
“…50 bps (hike) has become the new normal and a large number of central banks
are now hiking by 75- to 100 bps…in RBI, we take a very calibrated and measured
view. We factor in the impact of the rate action on the aspect of growth and on
our consumer urban and rural demand,” RBI governor Shaktikanta Das said on
Friday.
The banking regulator retained its GDP growth projection at 7.2% for the ongoing
fiscal year ending March 31, 2023 and maintained the inflation outlook at 6.7%.
Dabur chief executive Mohit Malhotra said the rate hike will help tame inflation
and drive foreign direct investment (FDI) into India, strengthening the rupee
against the US dollar. But “it can negatively impact demand and consumption”.
Agencies like the World Bank have flagged rising inflation, supply chain
disruptions, and geopolitical tensions as among risks to India’s economic
recovery.
Snehdeep Bohra, director at Fitch Ratings, said the rate increase may hurt
demand for cement from the housing sector, which accounts for almost two-thirds
of the cement consumption in India.
“Urban housing is particularly sensitive to interest rate hikes,” he said. The
urban housing segment accounts for around 30% of total cement consumption in
India.
Major real estate players such as Puravankara Ltd and Brigade Enterprises Ltd,
however, downplayed the impact.
They said with pent-up demand for housing post-Covid-19 and a steady job market,
demand momentum is expected to continue in the residential housing segment,
especially in the top six cities, where office leasing and absorption has been
strong.
“Against the backdrop of rising income and employment levels and buoyant
customer sentiment, this spike in rates is unlikely to affect residential
sales,” said Abhishek Kapoor, chief executive of Puravankara.
Atul Goyal, the chief financial officer of Brigade Enterprises, added that the
increase in the repo rate was expected.
“We feel that it will have only a marginal effect on the real estate sector.
While this would mean an increase in interest rates for housing loans, the
demand that the sector is currently witnessing is expected to remain the same,”
he said.
Despite the current global macro challenges, industry executives said the
economic fundamentals of the country remained intact.
“Our country has the benefit of several systemic growth drivers like its
demographic dividend, rapid digitization and an increasing ease of manufacturing
and doing business…We believe that these themes will continue to play out
irrespective of time frame, and create a sustained growth momentum for the
economy,” said Vivek Gambhir, CEO, Imagine Marketing, which makes premium boAt
gadgets.
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EXCLUSIVE
PM MODI TELLS STATES TO REDUCE IMPORTS, STEP UP EXPORTS
Although goods and services (GST) collections have improved, there's potential
for this to be stepped up further, Modi said at the seventh meeting of the Niti
Aayog's governing council on Sunday. India's upcoming G20 presidency in 2023 is
a unique opportunity to show that the country is not just Delhi but every state
and UT as well, Modi said.
* ET Bureau
Click Here to Read This Story
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Prime Minister Narendra Modi urged states to focus on reducing imports and
increasing exports, asking them to identify opportunities and encourage people
to use locally made goods as much as possible. His reiteration of the 'vocal for
local' call has come amid a burgeoning trade deficit and concerns over the
widening current account deficit.
Although goods and services (GST) collections have improved, there's potential
for this to be stepped up further, Modi said at the seventh meeting of the Niti
Aayog's governing council on Sunday. India's upcoming G20 presidency in 2023 is
a unique opportunity to show that the country is not just Delhi but every state
and UT as well, Modi said. He called on states to set up dedicated G20 teams to
derive the maximum possible benefit from the presidency.
India's merchandise trade deficit hit a record high of $31 billion in July,
stretching the overall difference between exports and imports to over $100
billion in the first four months of the fiscal from $42 billion a year ago.
The PM said states must focus on reducing imports, increasing exports and
identifying opportunities for this, according to the statement isued by the Niti
Aayog.
"We should encourage people to use local goods wherever possible," he said.
Vocal for local is not the agenda of one political party but a common goal, the
PM told the states, according to the statement.
He added that each state should focus on promoting the three Ts - trade,
tourism, technology - through Indian missions abroad.
Modi said India needs to focus on modernised agriculture, animal husbandry, and
food processing to become self-sufficient and a global leader in the agriculture
sector. He asked states to focus on making India self-sufficient in edible oil
production. India remains the world's largest importer of edible oil and is
heavily dependent on imports. This, along with petroleum crude and gold, is
among the country's biggest import items.
"The Centre is targeting to reduce its edible oil import by half in the next
five years," Niti Aayog member VK Paul said, briefing the media after the
meeting. The states demanded an increase in the minimum support price for pulses
and oil seeds to promote their cultivation at the meeting, he said.
Modi said GST can yield more after the monthly collection touched the second
highest ever at Rs 1.49 lakh crore in July.
"Increasing GST collection requires collective action by the Centre and states,"
he said. "It is crucial for strengthening our economic position and becoming a
$5 trillion economy."
The first physical meeting of the council since the onset of the pandemic was
attended by 23 chief ministers, three lieutenant governors, two administrators
and Union ministers. Bihar chief minister Nitish Kumar and Telangana chief
minister K Chandrashekar Rao did not attend.
Cooperative federalism
Modi heralded cooperative federalism as the force that helped India cope with
the Covid pandemic.
"Every state played a crucial role according to its strength and contributed to
India's fight against Covid," he said. "This led to India emerging as an example
for the developing nations to look up to as a global leader."
Rapid urbanisation can become India's strength instead of weakness by leveraging
technology to ensure ease of living, transparent service delivery, and
improvement in the quality of life for every citizen of urban India, he said,
according to the Niti Aayog statement.
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EXCLUSIVE
INDIA INC UPBEAT AS INFLATION PAIN STARTS TO EASE
Despite inflationary pressures, growth, though dented, has helped them stay the
course, companies said. The corporate sector has been tackling headwinds from
rising input and logistics costs impacting their earnings in the next few
quarters.
* Kala Vijayraghavan
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* Kiran Kabtta Somvanshi
* ET Bureau
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Inflationary pressures are showing signs of plateauing, companies have
indicated, adding that they are bracing for a positive impact, albeit with a lag
effect on margins and consumption in the next three to six months. Overall,
costs of certain commodities have reversed to June 2021 levels, they said. While
industrial growth has been upbeat because of capital expenditure by the
government, corporate houses are closely watching trends in consumer demand,
which has been showing signs of improvement since the beginning of this month as
the festive season kicks in early, they said.
Data compiled by ETIG shows that key commodity prices have come off their recent
peaks.
While cement prices have fallen 11% from their peak in May, steel prices are
down 20% from their highs in March.
International crude oil prices are down by a quarter from their peak levels
first hit in March. Refined palm oil prices are 22% lower from May highs, while
prices of ABS plastic have declined by a third from their peaks in November last
year. Natural gas prices have slipped by 10% from early June highs.
"Core commodities prices such as aluminium, copper or steel have dropped and a
reversal of 11 months of price hike in commodities is quite good," said Anuj
Poddar, executive Director, Bajaj Electricals.
However, crude prices will make an exponential difference and it is important
that the government keeps a check on that and use levers to help consumer
demand, he added.
"I feel that capex investments will take time to show recovery and a pickup in
consumer sentiment will help better as our economy is largely consumption-led,"
Poddar said.
Despite inflationary pressures, growth, though dented, has helped them stay the
course, companies said. The corporate sector has been tackling headwinds from
rising input and logistics costs impacting their earnings in the next few
quarters. Geopolitical tensions are, however, expected to impact energy prices
and input pressures, they said.
Corporates have, therefore, not changed their guidance on profitability for the
coming months until the carry-forward of the existing inventory. Upbeat growth
in one sector is compensating for the other, said Seshagiri Rao, joint managing
director, JSW Steel, and group chief financial officer. For instance, growth in
the industrial sector, led by infrastructure and real estate, has been strong.
The government's (both central and state) capex programmes are progressing well,
and India's services-led export has also been upbeat. Appliances and packaging
sectors are doing well, while the FMCG sector has reported stress in volumes.
With a good monsoon, agri-led businesses will pick up for the rural sector, he
said.
"I feel RBI intervention to contain money supply to stop further inflationary
pressures will also eventually help consumption-led growth. The geopolitical
effect on energy prices and supply chain challenges though will remain since all
global economies including India are interlinked and cannot be insulated beyond
a point," Rao added.
Consumption sentiment, companies said, have also improved since August. "I
expect Q3 to show improved trends and already August is showing improved growth
as the festive season started early this year," said Poddar of Bajaj
Electricals. Top executives said inventories and contracts signed ahead for
production means it will be another quarter before we see visible changes in
prices at the retail level.
The top brass at companies have also detailed the drop in commodity prices on
conference calls with analysts but have mentioned the lag impact which will
benefit margins and demand.
"If a commodity like palm oil remains at the lower end as we have seen it coming
off and if at all we do see that across many other commodities, then we do
expect that from the December-quarter onwards, inflation may come off to some
extent. And that should help sequential margin being built from December quarter
onwards," said Ritesh Tiwari, chief financial officer, HUL.
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EXCLUSIVE
UP WORKING TO ACHIEVE USD 1 TRILLION ECONOMY GOAL IN PLANNED MANNER: CM YOGI
ADITYANATH
He said that the government was in the process of strengthening the digital
agricultural framework to ensure that the benefits of the government’s schemes
reach the farmers of the state.
* Pravin Kumar
* TNN
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LUCKNOW: Reiterating his resolve to make Uttar Pradesh a $1 trillion (Rs 80 lakh
crore) economy in the next five years, chief minister Yogi Adityanath on Sunday
affirmed that the state government was working in a planned manner while
focusing on augmentation of infrastructure.
Speaking at the seventh meeting of NITI Aayog held under the chairmanship of
prime minister Narendra Modi, the CM presented the outline of his plans that
included good and effective governance, skill development, rapid decision-making
process, targeted policies and rules that prove useful in this direction.
He said that the government was in the process of strengthening the digital
agricultural framework to ensure that the benefits of the government’s schemes
reach the farmers of the state.
He said as many as three crore farmers are registered under the Digitized
Farmers Database and they have received Rs 3.5 lakh crore in the past five years
under various schemes.
"UP is the leading state in the country in terms of distribution of grants
through direct benefit transfer (DBT) by developing a digitized database for
farmers," he said.
The CM said that ‘centres of excellence’ had been established in the state for
specific agricultural products. “The state government has also started extensive
preparations to celebrate the ‘International Year of Millets’ by the United
Nations in 2023. Besides, intercropping with jawar, bajra and sugarcane is being
promoted to enhance income of farmers," Yogi said.
He said that his government was taking phase-wise action to promote natural
farming that included cow-based farming in 500 hectares of every development
block of seven districts of Bundelkhand region. “Under the Namami Gange scheme,
cow-based farming is proposed in 105 development blocks falling on the banks of
Ganga,” he added.
Yogi also underscored the need of turning cities into growth engines by
attracting investments and increasing employment generation. “We also need to
address the challenges of housing/slum, water supply and solid waste management,
air quality/pollution, livelihood and public transport,” he said, maintaining
that UP was doing effective work in the field of municipal finance, town
planning and administrative structure and citizen-centered administration.
He said that the work of GIS survey in 16 municipal corporations was in progress
to improve the financial condition of municipal bodies. "This will help double
the house tax by the end of the current financial year. Work is also underway to
rationalize different types of user charges," Yogi said.
The CM said that municipal bonds worth Rs 200 crore were issued in Lucknow and
Rs 150 crore in Ghaziabad. “This amount is being used for the construction of
residential complexes and STPs, which will also generate revenue in future. The
goal is to have partnership with international finance agencies and the
formation of Urban Infrastructure Development Finance Corporation, which will
also generate employment and encourage investment in small local bodies,” he
added.
The National Education Policy-2020, as envisioned by Prime Minister Narendra
Modi, is the biggest campaign for comprehensive reforms in the field of
education after Independence, he said, adding that the policy emphasized on
improving the talent of children and making them efficient and confident.
“The government has started transfer of Rs 1,200 each to the bank accounts of
parents of 1.91 crore students studying in classes 1-8 in council schools for
the purchase of uniform, sweaters, schoolbags, shoes and socks, and stationery,”
he said.
The CM pointed out that 5,000 model schools were being developed in the state
under ‘Operation Kayakalp Phase-II’ and 2,500 smart classes were being set up in
government secondary schools.
“E-mails of 1 crore secondary students have been made and wi-fi facility has
been made available in 2,273 schools,” he said.
Yogi said his government selected 100 aspirational development blocks and got
them developed as per the prescribed standards. “In all, 100 researchers will be
selected for aspirational development blocks through the Chief Minister’s
Fellowship Programme. With the implementation of this scheme, youth will get the
opportunity to participate in policy making, management and implementation,
while the blocks will benefit from new, innovative approaches of the youth,” he
said.
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EXCLUSIVE
CHINA IPO MARKET TROUNCES WORLD WITH $58 BILLION BOOM
China's IPO market has defied headwinds such as rising interest rates and fears
of a US recession, which have brought major equity fundraising elsewhere to a
virtual standstill. Offerings in the Asian economy - whose monetary policy is
diverging from the Federal Reserve - are largely geared toward local investors.
* Bloomberg
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From London to Hong Kong, large initial share sales have all but dried up across
the world's major financial centers this year. But the market in China is
bustling with activity.
Initial public offerings on mainland exchanges have climbed to $57.8 billion so
far in 2022, the largest ever for such a period, according to data compiled by
Bloomberg. There have been five IPOs of above $1 billion since January, and one
more is on the way. That's versus just one such sale each in New York and Hong
Kong, and none in London.
China's IPO market has defied headwinds such as rising interest rates and fears
of a US recession, which have brought major equity fundraising elsewhere to a
virtual standstill. Offerings in the Asian economy - whose monetary policy is
diverging from the Federal Reserve - are largely geared toward local investors.
The surge in listings, according to some market watchers, is also driven by
concern that economic conditions could worsen later in the year as flareups in
virus cases cause Beijing to stick to Covid Zero strategy. Top leaders have
signaled a softening on this year's official growth target of around 5.5%,
denting optimism of a rebound.
"Companies have a stronger willingness for IPO because they see first half as a
better time window to get listed than the time ahead," said Shen Meng, a
director at investment bank Chanson & Co. "They have a weaker outlook for the
market and worry that factors including earnings uncertainty could make listing
in future harder."
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EXCLUSIVE
PMI OUTPUT INDEX SLOWS IN JULY AS SALES GROWTH LOSES MOMENTUM
Despite decelerating, input prices remained elevated and firms could pass some
of the additional costs to customers. Corporate results for the first quarter
suggest pressure on earnings after four consecutive quarters of expansion. A
broad majority of firms in both manufacturing and services expect payroll
numbers to be static with a poor outlook on hiring amid uncertainty in the
business outlook.
* ET Bureau
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The S&P Global India Composite Purchasing Managers' Index (PMI) Output Index
grew at its slowest pace in July during this fiscal year as sales growth tapered
off. The constituent indices were in contrast with manufacturing activity
accelerating to its highest in eight months and the momentum for services
slowing to a four-month low.
The two indices moved in opposite directions, with services coming off a 11-year
high in June and manufacturing speeding up from the previous month's nine-month
trough. New manufacturing orders recovered in July with exports chipping in to
improve order books and cost of raw materials rose at their slowest rate in
almost a year. In services, weakening sales growth, including international
sales, and inflationary pressures affected recovery.
Despite decelerating, input prices remained elevated and firms could pass some
of the additional costs to customers. Corporate results for the first quarter
suggest pressure on earnings after four consecutive quarters of expansion. A
broad majority of firms in both manufacturing and services expect payroll
numbers to be static with a poor outlook on hiring amid uncertainty in the
business outlook. The recovery in services is expected to be uneven as more
contact-intensive sectors regain their pre-lockdown tempo. As for manufacturing,
it continues to face weak rural demand that should improve with the monsoon.
The broad trends for July emerging from the survey of purchasing managers are
corroborated by high frequency indicators such as power demand, fuel sales, rail
freight and e-way bills. Goods and services tax (GST) collection also spurted
during the month. Capacity utilisation in manufacturing is above its long-term
average and bank credit growth is robust.
Policy normalisation after the pandemic has been extra cautious about nursing a
fragile recovery. Policymakers are holding on to GDP growth projections for this
year. Downside risks to these are principally external, and that is clouding the
outlook despite consistently expanding business activity.
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EXCLUSIVE
FACTORY PRODUCTION WEAKENS ON LINGERING SUPPLY CHAIN CONSTRAINTS
The standoff between the US and China over Taiwan has thrown a spotlight on
growing risks to one of the world’s busiest shipping lanes -- even a minor
disruption could ripple through supply chains.
* Bloomberg
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(Bloomberg) -- The strongest US job growth in five months and
firmer-than-expected worker pay assuaged recession concerns, while also helping
clear the path for the Federal Reserve to continue large interest-rate hikes.
In Europe and Asia, factory production weakened on lingering supply-chain
constraints that are contributing to persistent price pressures. The Bank of
England stepped up its inflation fight with the biggest rate increase in more
than a quarter century, while also cautioning that the UK is headed for more
than a year of recession.
Here are some of the charts that appeared on Bloomberg this week on the latest
developments in the global economy:
World
Central banks around the world continued raising interest rates this week.
Australia, Brazil, India and the UK were among those hiking by 50 basis points,
while Romania went for 75 basis points and Madagascar for 90 basis points.
The standoff between the US and China over Taiwan has thrown a spotlight on
growing risks to one of the world’s busiest shipping lanes -- even a minor
disruption could ripple through supply chains. Almost half of the global
container fleet and a whopping 88% of the world’s largest ships by tonnage
passed through the Taiwan Strait this year, according to data compiled by
Bloomberg.
European factory activity plunged and Asian manufacturing output continued to
weaken in July amid lingering supply-chain complications and a slowing global
economy. Purchasing managers’ indexes for the euro area’s four largest members
all indicated contraction, while China, South Korea and Taiwan took the biggest
hit in Asia.
US
Employers added more than double the number of jobs forecast, illustrating
rock-solid labor demand that tempers recession worries and suggests the Federal
Reserve will press on with steep interest-rate hikes to thwart inflation.
Household debt increased by 2% to $16.2 trillion in the second quarter, with
mortgages, auto loans and credit-card balances all seeing sizable jumps,
according to a report by the Federal Reserve Bank of New York.
With almost two openings for every person looking for work, US companies are
increasingly tapping high school students for skilled jobs. As a result,
apprenticeships are seeing a renaissance after failing to gain a foothold over
the past few decades.
Europe
The Bank of England unleashed its biggest interest-rate hike in 27 years as it
warned the UK is heading for more than a year of recession under the weight of
soaring inflation. The half-point increase to 1.75% was backed by eight of the
bank’s nine policy makers, who also kept up a pledge to act forcefully again in
the future if needed.
German factory orders sank for a fifth month in June as rampant inflation and
global supply disruptions continued to weigh on the outlook in Europe’s largest
economy.
Germany’s presidential palace in Berlin is no longer lit at night, the city of
Hanover is turning off warm water in the showers of its pools and gyms, and
municipalities across the country are preparing heating havens to keep people
safe from the cold. And that’s just the beginning of a crisis that will ripple
across Europe.
Asia
It’s 2025 in Beijing, five years since the start of the pandemic, and Chinese
President Xi Jinping’s Covid Zero policy is still an inescapable part of daily
life. As omicron sub-variants become ever-more infectious, Xi’s resolve to avert
virus fatalities is growing stronger – leading many experts to warn that Covid
Zero could continue well beyond 2022.
Major South Korean firms are agreeing to the biggest pay rises in 19 years,
according to a government survey, fueling concerns that a wage-price spiral is
taking hold in the economy. Salary agreements at companies with 100 workers or
more climbed 5.3% in the first half of the year, exceeding every increase since
2003, a labor ministry poll showed.
Emerging Markets
Turkish inflation accelerated again and may be months away from peaking, soaring
to levels unseen since 1998 as the central bank sticks with its ultra-loose
monetary course.
Brazil’s central bank raised its key interest rate by half a percentage point
and left the door open for a smaller boost in September as it shifts its focus
to the outlook for inflation more than a year ahead.
--With assistance from Beril Akman, Maria Eloisa Capurro, Libby Cherry, Enda
Curran, Arne Delfs, Vanessa Dezem, Bruce Einhorn, David Goodman, Sam Kim,
Carolynn Look, James Mayger, Nic Querolo, Zoe Schneeweiss, Alex Tanzi, Kevin
Varley and William Wilkes.
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EXCLUSIVE
DBS GROUP BULLISH ABOUT INDIA, TO GROW THROUGH 'PHYGITAL' MODEL IN COUNTRY: SAYS
CEO PIYUSH GUPTA
"Our digital capabilities have helped us serve our customers seamlessly even
during the pandemic in all our markets, including India. Our suite of digital
offerings helped MSMEs (Micro, Small and Medium-sized Enterprises) in India meet
working capital needs and operational liabilities," underlined the tech-savvy
banking veteran. DBS also helped MSMEs in India to navigate the challenging
business environment by disbursing loans to the segment during the lockdown
months.
* ET Online
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DBS Group CEO Piyush Gupta is bullish on commercial potential in India and has
utilised a "phygital" strategy to grow in the country, giving best-in-class
digital capabilities to consumers complemented by a robust physical network.
The organisation sees an opportunity to broaden its business profile, which is
dominated by major corporations, to include retail and SME clients, Gupta added.
"We are bullish about India as it is not just one of the fastest-growing markets
in the world, but also accelerating very quickly digitally," the Meerut-born
banker told PTI in an interview on Saturday.
"Our strategy in India remains to grow through a "phygital" model, offering
best-in-class digital capabilities to our customers, supported by a strong
physical network to help with last-mile servicing," he said.
DBS Bank India Limited (DBIL) is merging Lakshmi Vilas Bank (LVB), which was
merged with DBS on November 27, 2020 under section 45 of the Banking Regulation
Act, 1949.
"Our primary focus is on integrating it with our business and in growing
organically," said Gupta.
The very recent Euromoney award for DBS as the top SME/MSME supporting bank
means doing more for the Indian market.
"We are happy to have been named 'World's Best SME Bank' by Euromoney for the
second time. Since its inception, DBS has been supporting local businesses and
broadening credit access to this segment," Gupta said.
"Our digital capabilities have helped us serve our customers seamlessly even
during the pandemic in all our markets, including India. Our suite of digital
offerings helped MSMEs (Micro, Small and Medium-sized Enterprises) in India meet
working capital needs and operational liabilities," underlined the tech-savvy
banking veteran.
DBS also helped MSMEs in India to navigate the challenging business environment
by disbursing loans to the segment during the lockdown months.
"We continue to see a tremendous opportunity in India's SME and MME segments,"
Gupta said.
"With an expanded footprint, we are further accelerating our efforts in this
segment, including making banking seamless by working with industry-level
digital platforms," he said,
The RBI's recent attempt to settle international transactions in rupees could be
a step toward internationalising the currency, he said. Higher demand for Indian
Rupee (INR) settlements means reduced demand for FX for current account
transactions, he noted.
"In the short term, the weakening of the Indian Rupee has caused some concern.
However, from various lenses, the currency's fall is more contained this time
around and backed by better fundamentals," Gupta, the naturalised Singaporean
since 2009, pointed out.
"From a policy perspective, with the dollar appreciating in an environment of
weak risk appetite and impending domestic balance of payment deficit, the
evolving equilibrium will be to keep the currency on a gradually depreciating
path as an adjustment mechanism without creating sharp inflationary spikes," he
said.
The 62-year-old Gupta shared his insight into the current currency outlook.
"Looking further out, the currency is expected to reflect the economy's
improving fundamentals, as the shift to widen the country's manufacturing base
gathers momentum; incremental reforms improve the ease of doing business; and
effort to hasten investments into infrastructure is demonstrated via programmes
such as National Infra Pipeline, Gati Shakti, and Asset Monetisation scheme,
besides higher budgetary allocations towards capital expenditure," he said.
The RBI and the Monetary Authority of Singapore (MAS have announced a project to
link their respective fast payment systems namely Unified Payments Interface
(UPI) and PayNow.
DBS is closely involved in supporting the efforts of the two central banks.
Gupta said that the PayNow-UPI linkage will enable users to make instant,
low-cost fund transfers directly from one bank account to another between
Singapore and India.
"When implemented, fund transfers can be made from India to Singapore using
mobile phone numbers, and from Singapore to India using UPI virtual payment
addresses (VPA)," he said.
India is indeed a startup hotbed, Gupta said.
"We strongly believe that technological solutions and innovation play a key role
in empowering the growth of startups and SMEs. It is thus important for banking
partners to offer embedded solutions across ecosystems to these entities.
"At DBS, we not only work with startups but also collaborate with startup
incubators in India to look at ways to support startups. Also, the bank's
ability to provide API-based integration capabilities has been one of the
critical success criteria in our partnership with start-ups," Gupta said.
"DBS continues to seek to better integrate our banking solutions in the existing
startup ecosystem and provide enabling solutions to this segment," said the
Indian Institute of Management, Ahmedabad, alumnus.
DBS created Evolution X to provide debt finance to growth-stage tech start-ups.
This increases their fundraising runway with minimal dilution. DBS supports the
RBI's decision to issue Payment Aggregator Licenses to Fintechs.
"As a bank operating in India, we see this as a positive move by the RBI. We
continue to be closely engaged with payment companies, both to enhance and
extend our capabilities as well as to provide settlement services to
aggregators, leveraging our open architecture platform," he points out.
Asked if DBS and other private sector banks would participate in the
multi-billion-dollar infrastructure financing in India, especially in the
public-private partnership (PPP) model and or build-operate-transfer (BOT)
model, he responded, "While I do not want to comment on other banks, we are
generally sector agnostic in our approach and look at all aspects and the
economic environment before doing so."
"As a bank, we are committed to financing the transition to a lower-carbon
future and want to work alongside like-minded partners to transition industries
from brown to light brown and gradually to green," he said.
"Our aim is to become net zero in the coming decades. In October 2021, DBS
became the first Singapore bank to become a signatory on the United
Nations-convened, industry-led Net-Zero Banking Alliance (NZBA)," he added.
As a signatory, DBS commits to transition the operational and attributable
greenhouse gas (GHG) emissions from its lending and investment portfolios to
align with pathways to net zero by 2050 or sooner, he said.
DBS, he said, seeks to provide sustainable financing to corporates to support
their transformation towards a lower carbon future.
DBS has committed a total of 20.5 billion Singapore dollars in sustainable
financing transactions in 2021, taking the bank's cumulative efforts to 39.4
billion Singapore dollars. With this, the bank has achieved almost 80 per cent
of the bank's 50 billion Singapore dollars sustainability financing target by
2024.
In addition, DBS India continues to execute the bank's strategy to transform
into a more diversified franchise in India across the large-corporate, medium
and small-enterprise segments as well as the growing consumer opportunity.
"We recently launched a co-branded credit card and have plans to offer the
entire DBS suite of products and services to our expanded footprint as
integration with LVB progresses."
"We continue to invest in the growth of the India franchise. All profits from
India are ploughed back into the Indian subsidiary. Moreover, in FY22, DBS
Singapore invested an additional INR 1,040 crore of capital in DBS Bank India to
support growth plans in the country."
DBS has established a banking network of 500+ branches across 19 states in
India, covering over 200 key centres across the country. The bank has been in
India for 28 years.
[With PTI inputs]
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EXCLUSIVE
VIKRAM SAHNEY DISCUSSES PUNJAB’S FISCAL HEALTH WITH NIRMALA SITHARAMAN
While thanking the finance minister Nirmala Sitharaman on settling the issue
relating to GST on the Gurdwara Sarais, Rajya Sabha MP Vikramjit Singh Sahney
discussed various steps to improve the fiscal health of Punjab with her.
* Vibhor Mohan
* TNN
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CHANDIGARH: While thanking the finance minister Nirmala Sitharaman on settling
the issue relating to GST on the Gurdwara Sarais, Rajya Sabha MP Vikramjit Singh
Sahney discussed various steps to improve the fiscal health of Punjab with her.
Sahney stated that Punjab was the biggest contributor to the national buffer
stocks and contributes about 250 lakh MT of food grains into it every year. To
achieve this objective the state has, now been availing Cash Credit Limits
(CCLs) from a consortium of banks after due approval of the RBI and the
Ministry of Finance.
Sahney said that FCI is able to avail Short Term Loans (STLs) at rates much
lower than that charged by the Bank consortium due to the sovereign guarantee
being offered by the Union government. He requested the Finance Minister to
facilitate CCL and short term loans at lower rates of interest for Punjab.
Sahney also took up the issue that the Central government should contribute Rs
1,500 per acre for discontinuation of stubble burning which is causing havoc in
northern India in winter. Punjab and Delhi have already agreed to pay Rs 500 per
acre.
Sahney also discussed the issue of burgeoning debt of Rs. 2.63 lakh crore which
is 45.88% of GSDP “whereas Punjab govt. is strengthening public finance and
World Bank assisted building fiscal and institutional resilience (BFAIR)
project. Centre should immediately consider interest waiver on the said loan.”
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EXCLUSIVE
SRI LANKA'S HARD ECONOMIC TIMES WOULD LAST ANOTHER YEAR: PRESIDENT
WICKREMESINGHE
President Ranil Wickremesinghe has said that Sri Lanka's economic woes would
last for another year and it will have to think outside the box and look at new
sectors like logistics and nuclear energy to revive the bankrupt economy.
Speaking at a two-day conference titled “Let's reset Sri Lanka” held on Friday,
Wickremesinghe said that reforms in the country also would need higher taxation.
* PTI
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COLOMBO: President Ranil Wickremesinghe has said that Sri Lanka's economic woes
would last for another year and it will have to think outside the box and look
at new sectors like logistics and nuclear energy to revive the bankrupt economy.
Speaking at a two-day conference titled “Let's reset Sri Lanka” held on Friday,
Wickremesinghe said that reforms in the country also would need higher taxation.
“The next six months to one year I think till about July next year, we will have
to go through a hard time,” he said, adding that for recovery Sri Lanka would
have to look at new sectors such as logistics and nuclear energy.
“One I believe in very much is logistics, if you see the growth of the Indian,
Bangladeshi and Pakistani economies, logistics can have a big role to play here
in Colombo, in Hambantota and Trincomalee. This is how we use our strategic
position,” he said, referring to the two major ports of the island nation.
Sri Lanka is going through its worst economic crisis since independence in 1948.
The export industry is badly hit by the fuel scarcity caused by the forex
crisis.
Tourism industry, which was the backbone of the Sri Lankan economy, also got
dented initially due to the COVID-19 pandemic and later owing to the economic
turmoil.
Wickremesinghe, who was elected the president last month by Parliament, will
serve the remaining term of Gotabaya Rajapaksa, who fled the country and
resigned amidst the massive anti-government protests.
Wickremesinghe, who has previously described Sri Lanka's economy as bankrupt,
said that economic reforms would require higher taxation.
“Even taxation on wealth, we have to resort to those measures, first for
economic recovery and second for social stability,” he said.
The president also said the country will have to consider getting into the
nuclear energy sector.
“More you have more energy you can sell to India, at the same time keep more
renewable energy available. We have to think outside the box,” he said.
Having declared an international debt default in April, Sri Lanka is currently
negotiating with the International Monetary Fund for a possible bailout package.
However, the IMF programme has hit a snag in the form of restructuring of debt.
Even the World Bank has refused to provide any aid until a detailed
macroeconomic policy is in place.
Referring to the ongoing IMF bailout attempt, Wickremesinghe said the legal and
technical advisers on debt restructuring are moving ahead with the task.
“First the foreign debt….and when you look at the official debt are we getting
caught into the geopolitics of the region of Asia?,” he said.
“It will be a period which we have not seen before, we have to look at both
foreign debt and local debt, it is certainly going to be a difficult time. The
first six months will be difficult,” he said.
Wickremesinghe said that over 6 million of the 21 million population of the
country are being malnourished.
More and more are unemployed, he said, adding that additional funds are being
set aside to support them.
Wickremesinghe said political stability was important to set in motion the
required reforms.
“So we have to look at the political, social and economic dimensions of the
reform, the restructuring that we are going to implement. We've already seen the
economic impact as a shortage of oil and inflation in this country. In fact, it
came onto the political scene as a social scene”, Wickremesinghe said, referring
to the months-long street protests which culminated in the ouster of former
President Rajapaksa.
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