Nuclear deal between India and Japan opens up new vistas of cooperation

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Prime Minister Shinzo Abe is visiting India nearly two months after operationalisation of the historic Indo-Japan civil nuclear deal, which has added a new dimension to bilateral ties that could scarcely be imagined in the wake of the 2011 Fukushima tragedy.

The journey traversed by the two nations over the past six years reflects growing confidence in each other and depth of the strategic partnership.

Japan and India signed a memorandum of understanding for civil nuclear cooperation in December 2015, when Abe was in Delhi for the annual bilateral summit, overcoming reservations over India’s status as a nation which has not signed the Non-Proliferation Treaty.

This was transformed into a deal in November last year when PM Narendra Modi was in Tokyo for the summit.

Subsequently the Japanese government got approval from the Diet (parliament) for the nuclear deal with India.The landmark deal came into force in July this year with the completion of necessary formalities in both countries. This will enable Japan to export nuclear power plant technology as well as provide finance for nuclear power plants in India.

Besides, Japan will assist India in nuclear waste management and may undertake joint manufacture of nuclear power plant components under Make in India initiative, people familiar with the development told ET. Growing civil nuclear ties will be highlighted during Abe’s trip as one of the key elements of Indo-Japan strategic partnership, they said.

Japanese conglomerate Toshiba, which owns US-based Westinghouse, will have a major role when the US nuclear firm supplies technology for the set of six reactors in Andhra Pradesh following its bankruptcy.

Westinghouse, which was to set up six nuclear reactors in Andhra Pradesh, will supply technology while construction will be undertaken by an Indian partner. This was discussed as a way out during Modi’s visit to Washington, D.C. for ensuring the presence of Westinghouse in India following the troubles the company faced over bankruptcy.

The finance for the project from the US Exim Bank remains intact and the initiative may kick-start only in 2018. Westinghouse, which was acquired by Japanese conglomerate Toshiba in 2006 for $5.4 billion, had filed for bankruptcy in March this year. HitachiBSE 2.80 %, another Japanese firm, has a stake in GE, which is also proposed to set up reactors in India.
ET View: Enhance areas of partnership

The partnership in space, like that on the African continent, will give a new dimension to the longstanding India-Japan ties. It makes sense for India to partner with Japan to focus such opportunities in areas where the two countries have complementary strengths. The space partnership will serve as another plank in the effort to present a counter to Beijing. For New Delhi, it is also a spring board for a bigger role in the global arena. India must seize this opportunity with a clear plan.

India, Japan Ink 15 Agreements Including Aviation, Trade and Science

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The pact in the area of disaster risk management, entered into between the Ministry of Home Affairs and the Cabinet Office of the Government of Japan, aims to cooperate and collaborate in the field of disaster risk reduction, an official statement said

India and Japan on Wednesday signed 15 deals in key areas, including civil aviation, trade, science and technology, and skill development.

The pact in the area of disaster risk management, entered into between the Ministry of Home Affairs and the Cabinet Office of the Government of Japan, aims to cooperate and collaborate in the field of disaster risk reduction, an official statement said.

It said the understanding in the field of skill development looks to further strengthen bilateral relations and cooperation in the field of Japanese language education in India.

The one titled ‘India-Japan Investment Promotion Road Map’ envisages enhanced Japanese investments in India while the ‘Japan-India special programme for Make In India’ is on bilateral cooperation towards infrastructure development in the Mandal Bechraj-Khoraj region in Gujarat.

There was exchange of RoD (Record of Discussions) on civil aviation under which Indian and Japanese carriers can now mount unlimited number of flights to selected cities in both countries.

There was an agreement to establish a joint exchange programme to identify and foster talented young scientists from both countries to collaborate in the field of theoretical biology.

The MoU (Memorandum of Understanding) between the Department of Biotechnology and Japan’s National Institute of Advanced Science & Technology (AIST) seeks to promote research collaboration between these institutions in the field of life sciences and biotech, the statement said.

The India Japan Act East Forum, among the agreements signed, seeks to enhance connectivity and promote developmental projects in India’s North Eastern region in an efficient and effective manner, it said.

There were four agreements in the field of sports, including one to facilitate and deepen international education cooperation and exchanges between both Sports Authority of India and Nippon Sport Science University, Japan.

Source: NDTV

FPI inflows: India’s forex reserves all set to hit whopping $400 bn mark; here is how long it took and why

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The reserves are hitting the psychological threshold also because benign current account deficits over the last few quarters had allowed RBI to use less of the reserves to finance it.
India’s foreign exchange reserves have climbed tantalizingly close to the $400-billion mark on September 1 on the back of strong foreign portfolio investments into the Indian market, especially the debt segment

The reserves are hitting the psychological threshold also because benign current account deficits over the last few quarters had allowed RBI to use less of the reserves to finance it.

To be sure, the latest $100 billion addition to the reserves has taken close to 10s years. The $300 billion mark was reached in February 2008, while the previous $100 billion was accumulated in a span of just eleven months.

While the rupee remains strong against the dollar at levels of 64 having appreciated 6% so far in 2017, few would have anticipated this strength, especially after the free fall of the currency in mid-2013 when it slipped all the way to 68.85 against the greenback (the forex reserves had plunged by more than $17 billion during this period).

The other critical period for the reserves and currency was in 2008, during the financial crisis when the currency lost almost 25% of its value between May and November. In this period, the reserves fell by a little over $70 billion to $245.8 billion.

Currently, the reserves take care of approximately 12 months of imports; in the past the reserves have typically covered seven to eight months of imports. Interestingly, India has seen the third-highest reserves accretion globally after Switzerland and China, so far in 2017.

According to Indranil Sengupta, chief economist at Bank of India Merrill Lynch, RBI has been intervening fairly aggressively in the forex market and might continue to do so if the dollar weakens but perhaps less so if the greenback was to strengthen.

After a brief overnight pause, the rupee was again caught in a downward spiral and slipped by 12 paise to 64.12 against the US dollar on Thursday on fresh demand for the American currency from banks and importers amid persistent foreign capital outflows. Foreign portfolio investors sold shares worth a net Rs 827 crore on the day.

Meanwhile, India’s CAD, which stood at 0.7% in the fourth quarter of last fiscal is expected to widen sharply to 3% in Q1FY18 due to a sharp deterioration in the merchandise trade deficit. According to Sonal Varma, chief economist at Nomura, the low commodity prices in the last two years have resulted in the CAD narrowing to about 1% of GDP. “With commodity prices marginally higher and a cyclical recovery expected in coming quarters, we expect the current account deficit to widen to a steady state of around 1.5-2.0% of GDP (for FY18),” Varma said.

Currently, as the central bank continues to shore up the reserves, it appears to be depending more on forward purchases than the spot market. This is due to the abundant liquidity in the system which prevents excessive action in the spot market.

MV Srinivasan, vice-president, Mecklai Financial Services believes the RBI is attempting to prevent any appreciation of the rupee beyond 63.80 levels. “The central bank is trying to rein in the excess liquidity in the system through OMO sales and dollar purchases in the spot will counter these measures,” he says.

Srinivasan believes that if the US Federal Reserve begins to reduce its balance sheet size, there could be forex outflows following which the RBI might intervene to stabilise the markets. Net portfolio inflows to the India’s bond and stock markets have been to the tune of $26.7 billion so far in 2017.

Source: Financial Express

World Bank accepts many of Modi govt’s reform claims, big thumbs-up likely next month

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The government expects a double-digit improvement in India’s rank in the global index on ease of doing business, likely to be announced by the World Bank next month.

A senior official told ET that the World Bank had shared its feedback, stating that it had accepted many of the reforms claimed by the government. Last year, India’s rank had improved by just one spot to 130 among 190 countries.

“The World Bank has acknowledged around 20 reforms among many more mentioned by us in response to their study … The overall ranking will depend on how other countries have performed, but we should come close to the 100 mark,” the official said.

The World Bank had recently finished gathering feedback from users for its Doing Business Report. The cut-off date for implementing reforms for the study was June 1. Reforms implemented thereafter will not be counted for this year’s ranking.

Reforms such as GST have not been taken into account as the impact is yet to be felt by users. But India is expecting these to reflect in next year’s report and significantly boost the country’s position.

India had showed one of its poorest performances on the parameter of ‘Paying Taxes’ last time, ranking 172 among the countries surveyed for the report. That, along with an equally lower position in ‘Enforcing Contracts’, landed India at the 130th spot, falling behind countries such as Mexico (38), Russia (51) and Pakistan (138). The ranking considers business environment in Delhi and Mumbai.

Over the past few months, the government has taken up concerns about not getting due credit for its reform drive with the World Bank. While responding to the survey this year, the government flagged such issues citing examples of reforms undertaken for enforcing contracts, starting business and issuing construction permits, among other things.

The government also cited provisions in the existing legal framework that deal effectively with the issue of enforcing contracts.

ET View: Push legal reforms
The way ahead is to push reforms. India fares poorly, for example, in enforcing contracts. We need judicial reforms to drastically reduce legal delays. So, even if states improve lower courts, disputes could end up in the higher judiciary and the reform lies with the Centre. The Department of Justice should drive the reforms. The need is also to enhance transparency in funding of political parties. It will weed out corruption that will automatically improve ease of doing business.

Read more at: The Economic Times

Forex kitty swells by $3.57 billion, closes in on $400 bn-mark

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In the previous week, the reserves had increased by USD 1.148 billion to USD 394.55 billion.

The forex reserves surged by a massive USD 3.572 billion to touch a record high of USD 398.122 billion for the week ended September 1, on account of rise in foreign currency assets, RBI data showed on Friday.

In the previous week, the reserves had increased by USD 1.148 billion to USD 394.55 billion.

Last month, American brokerage Morgan Stanley had forecast that the reserves might touch the USD 400 billion mark in the week to September 8. And if the rise in the kitty continues with the same speed, it may cross that magic numbers next week.

The foreign currency assets (FCAs), a major component of the overall reserves, increased by USD 2.808 billion to USD 373.641 billion for the reporting week, according to the data.

Expressed in US dollar terms, FCAs include the effect of appreciation or depreciation of non-US dollar currencies, such as the euro, the pound and the yen held in the reserves.

After remaining unchanged for many weeks, gold reserves also rose by USD 748.3 million to USD 20.691 billion.

The special drawing rights with the International Monetary Fund (IMF) increased by USD 6.5 million to USD 1.506 billion, the apex bank said.

The country’s reserve position with the IMF also increased by USD 9.8 million to USD 2.283 billion, it said.

Source: Zee News

SEBI warns of rising external debt risks as masala bonds surge

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The rupee-denominated bonds, popularly known as masala bonds, are likely to add to the nation’s external liabilities even if they don’t hold any risks to currency movement, a top SEBI official said.

The rupee-denominated bonds, popularly known as masala bonds, are likely to add to the nation’s external liabilities even if they don’t hold any risks to currency movement, a top Sebi official said on Wednesday.

“When money flows into the country from foreign investments, we are attracting some risks and it is not currency risk alone. Masala bonds don’t hold any currency risks but at the same time, the external liability of the country goes up. This needs to be kept in mind,” Sebi whole- time member G Mahalingam said here.

“And a huge amount of foreign inflows at a time when the currency has been substantially appreciating is something the regulators must be concerned about,” he said, addressing a capital markets summit organised by industry lobby Ficci.

The masala bonds are debt instruments through which designated domestic entities can raise funds by accessing overseas capital markets, while the bond investors hold the currency risk. In fact, the World Bank arm IFC thus far has raised the largest amount through this instrument.

According to some estimates, the masala bonds accounted for 39 per cent of the total ECBs of USD 7.39 billion reported by the Reserve Bank in the fourth quarter of FY17, while the approvals for the same rose to USD 2.9 billion over USD 0.8 billion in the third quarter.

For the full fiscal of 2017, the aggregate stood at USD 4.6 billion, according to a recent Icra data.

Of the total masala bonds of USD 4.59 billion approved during FY17, 55 per cent were for onward lending in domestic markets, 24 per cent for refinancing of the rupee loans and 14 per cent were for general corporate purposes.

Mahalingam said the Sebi is in advanced stage of talks with other regulators on allowing participation of FPIs in commodity derivatives market.

On the mutual fund industry, he said the sector should try to bring down its total expense ratio which is far higher than the comfort level. “It is time for mutual funds to shrink its margins attract more retail investors.”

He said benchmarking of returns will be healthy step for the overall industry.

Source: MoneyControl.com

CBDT signs 4 more APAs with taxpayers in August

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The Central Board of Direct Taxes (CBDT) signed four more advance pricing agreements (APAs) in August with Indian taxpayers as it looks to reduce litigation by providing certainty in transfer pricing.

The four APAs entered into during August, 2017 pertain to various sectors of the economy like telecom, banking, manufacturing and education, an official statement said today.

“Out of these four agreements, three are unilateral and one is a bilateral,” it said.

According to the statement, the bilateral APA is for international transactions between an Indian company and a UK-based company and this is the eighth bilateral APA with the United Kingdom and 13th overall (the other five being with Japan).

With the signing of these four agreements, the total number of APAs entered into by CBDT has reached 175, the statement said, adding, “this includes 162 unilateral APAs and 13 bilateral APAs.”

Besides, in the current financial year, a total of 23 APAs (2 bilateral and 21 unilateral) have been signed till date, the statement noted.

The APA provisions were introduced in the Income-tax Act in 2012 and the “rollback” provisions were introduced in 2014.

The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance.

The statement pointed out that since its inception, the APA scheme has been well-accepted by taxpayers and that has resulted in more than 800 applications (both unilateral and bilateral) being filed so far in five years.

Noting that the progress of the APA scheme strengthens the government’s resolve of fostering a non-adversarial tax regime, the statement said the Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

 

Source: Times of India