Foreign exchange reserves touched a record high of $381.96 billion as on June 16, compared $381.16 billion in the previous week, the Reserve Bank of India said in its weekly statistical supplement on Friday. Foreign currency assets (FCAs), the largest component of the foreign exchange reserves, increased to $358.08 billion from $357.28 billion in the previous week, central bank data showed. Expressed in US dollar terms, FCAs include the effects of appreciation/depreciation of non-US currencies, such as the euro, pound and the yen, held in the reserves. So far in 2017, foreign exchange reserves have grown 6% and have touched record levels five times since April, as the RBI has aggressively been buying dollars to prevent a sudden jump in the rupee.
The central bank has been buying dollars on a daily basis, both in the spot market as well as in the forward market, to limit the appreciation of the local currency, which has been gaining steadily, traders said. The rupee has gained about 5% since the beginning of the year. Among other factors, strong demand for the local currency from foreign portfolio investors (FPIs) looking to invest in Indian assets has caused the rupee to appreciate. FPIs have bought Indian shares and bonds worth around $22 billion so far in 2017. Given India’s low current account and fiscal deficits, and the advantage it offers in terms of interest rate differential, traders expect the inflows to continue in the near-term.
The central bank has always maintained that it does not want to influence the exchange rate for the rupee, but would take steps, including intervention in the spot market, to curb extreme volatility. According to the latest available data, the RBI’s outstanding net forward purchases in April stood at $13.55 billion, up from $10.84 billion in the previous month. On the other hand, net purchase in the spot market dropped to $0.57 billion in April from $3.54 billion in March. The RBI publishes data on the sale and purchase of dollar with a lag of two months.
A Universal Robots employee demonstrates how a model of their industrial robot arms works in Singapore March 3, 2017.
Foreign precision engineering firms are investing more in Singapore, drawn by strong semiconductor demand and government incentives aimed at re-tooling an economy short of skilled labor.
The city-state is running programs worth billions of dollars to support productivity, automation and research, attracting global chipmakers including U.S.-based Micron Technology Inc and Germany’s Infineon Technologies.
This investment rush into electronics helped the technology sector log 57 percent output growth on average in October-February from a year ago, and kept Singapore from recession late last year.
“I’ve lived in Europe, I’ve lived in Japan, I’ve spent a lot of time in Taiwan and other countries. From a proactive standpoint, Singapore is about as good as it gets,” said Wayne Allan, vice president of global manufacturing at Micron, adding the Singapore government’s long-term vision was key to Micron expanding its investment.
Taking advantage of government grants, Micron is investing $4 billion to make more flash-memory chips in Singapore. It increased output by a third in the second half of last year and expects similar growth in the first half of this year.
Linear Technology Corp, a maker of analog integrated circuits, has opened a third chip testing facility in Singapore, and will produce 90 percent of its global test equipment in the city-state.
All this has created something of a virtuous circle in the semiconductor supply chain, with chip testing equipment supplier Applied Materials reporting record shipments to Singapore last year, said its regional chief, Russell Tham.
It’s unclear how much of this revival in Singapore’s $40 billion chip industry is due to a so-called ultra-super-cycle in the global memory chip sector, and Singapore remains a smaller player than South Korea and Taiwan.
“It is vulnerable to a pull-back,” said Nomura economist Brian Tan. “If there’s a turnaround in the semiconductor industry … it becomes a lot more apparent that the underlying growth momentum is not great.”
MOVING UP
However, there are real signs that the targeted government incentives are helping firms move up the value chain.
One of the larger programs is the Productivity and Innovation Credit, where Singapore has budgeted S$3.6 billion ($2.6 billion) for 2016-18. Another S$400 million automation support package is aimed at small firms, and a S$500 million Future of Manufacturing plan encourages testing new technologies.
The Ministry of Trade and Industry says it encourages manufacturers to “embrace disruptive technologies” such as robotics. “These measures will help ensure the manufacturing sector in Singapore remains globally competitive,” it said, attributing the strong semiconductors performance partly to demand from China’s smartphone market and improved global semiconductor demand.
For Feinmetall Singapore, whose products are used for testing semiconductor wafers, grants covered about two thirds of the $100,000 cost of a needle-bending machine it needed to help overcome an island-wide labor shortage.
“If we use the same methods as before … I don’t think we can expect any growth,” said Sam Chee Wah, the company’s general manager, noting Feinmetall Singapore struggled to retain some workers for much longer than a year, even after nine months of training.
GlobalFoundries Singapore, a wafer maker, has spent $50 million on 77 robots, each able to perform the tasks of 3-4 workers. This has helped the company move up the value chain into parts for self-driving cars and security-related chips for credit cards and mobile payments, says general manager KC Ang.
Singapore now has about 400 robots per 10,000 workers, the world’s second-highest density after South Korea. Most robots are used in electronics, according to the International Federation of Robots.
And further developments are in the pipeline.
AUTOS, IOT
At its Singapore manufacturing hub, Infineon is developing productivity tools such as robotics and automated guided vehicles which it hopes to deploy to other production sites. Dutch chipmaker NXP Semiconductors is also developing vehicle-to-everything technology, enabling vehicles to communicate with each other and roadside infrastructure.
Instead of trying to compete with high-volume producers such as China or Malaysia, Singapore has shifted to higher-end products, said Jagadish C.V., head of Systems on Silicon Manufacturing, another firm making semiconductor wafers.
“So you do the products which others can’t do so easily,” he said, adding his firm had shifted most of its output to specialized products, such as chips used in smartphones.
CK Tan, President of the Singapore Semiconductor Industry Association, noted the global chip industry is automating faster than other sectors because of cost pressure, a need to eliminate or reduce error, and have a consistent process control.
“In Singapore, it’s even more important for us to … look at how to speed up or increase the level of automation because of the lack of skilled resources,” he said. “The industry has recognized it has to move upscale. The government incentives play a part to allow the manufacturing side to be relevant, to be at least cost competitive.”
The Ministry of Trade and Industry said first-quarter growth in manufacturing – up 6.6 percent year-on-year, while overall GDP was up 2.5 percent – was due mainly to output expansion in electronics and precision engineering.
Integrated circuits were Singapore’s biggest export product among non-oil domestic exports in January-March, topping S$6 billion ($4.29 billion), according to trade agency IE Singapore.
Accounts for 70% of health services exports, finds survey
Medical tourism has been the largest contributor to India’s total health services exports, accounting for 70 per cent of the total revenues of $890 million earned in 2015-16, according to the first comprehensive government survey on the sector.
Asian countries, led by Bangladesh, Iraq, Pakistan and the Maldives, accounted for more than 60 per cent of the foreign exchange earnings of health services.
India’s major trade partners, the US and the EU, accounted for 14 per cent and 11 per cent, respectively, according to the survey compiled by the Directorate-General of Commercial Intelligence and Statistics under the Commerce Department.
■ 60% of the earnings come from Bangladesh, Iraq, Pakistan and the Maldives
■ 14% from the US
■ 11% from the EU
“The personalised services and care that patients in India get is much cheaper than the services offered in developed countries and even in countries in the ASEAN, Middle East and the CIS states,” Commerce Secretary Rita Teaotia noted in her comments.
“This, together with the support of the government in promoting India as a healthcare hub, research in healthcare and advances in information and communication technology have enhanced India’s export of health services,” Teaotia added.
Contract research was second-highest forex earner among health services, accounting for 27 per cent of export revenue. Clinical trials and telemedicine accounted for about 3 per cent of export earnings.
Orthopaedics, oncology, neurology and cardiology are the top four export revenue earners; strikingly, Ayurveda is a close fifth, much above other branches including urology, haematology, general medicine and nephrology.
The report is part of the Commerce Department’s efforts to develop a framework to collect statistics on services trade. The DGCI&S launched its pan-India survey on international trade in services in June 2016.
Along with information on medical and health value travel, the survey also captured information on telemedicine, clinical trials, contract research, distance health education and temporary overseas movement of personnel from the surveyed units.
The survey is likely to be undertaken on an annual basis by DGCI&S.
Official data released on Tuesday showed that demonetisation hasn’t pushed the economy into a retreat as most feared, with its short-term adverse impact. (Source: Reuters)
Official data released on Tuesday showed that demonetisation hasn’t pushed the economy into a retreat as most feared, with its short-term adverse impact to a large extent restricted to construction and financial services. Real GDP growth in the December quarter, in the midst of which the note ban came into effect, came in at a respectable 7% (though lower than 7.4% in the previous quarter) and the gross value added (GVA) was 6.6%, with the difference explained by robust indirect taxes and reining in of subsidies.
Upward revision of GVA estimates for 2015-16 led to downward corrections in GVA for Q1 and Q2 of the current fiscal but despite this, there were marginal upward revisions in the rates of GDP expansion in these quarters, thanks to a surge in indirect taxes.
Solid performance by the “agriculture and allied sectors”, pump-priming by the government on the consumption side, better-than-expected performance by mining and manufacturing sectors and a seasonal — though larger-than-usual — pick-up in private consumption masked whatever negative effect the note swap exercise had on the economy, going by the Central Statistics Office’s data.
However, as the GDP was slowing even before demonetisation and the note swap has indeed had an incremental adverse effect on it, both GDP and GVA growth for 2016-17 have been projected to be much lower than in the previous year. In the second advance estimate, the CSO has kept the GDP growth estimate for the current financial year at 7.1%, the same as in the first advance estimate released in early January, and GVA growth at 6.7%. But given that 2015-16 GDP growth, which was seen at 7.6% at the time of the first advance estimate, was subsequently revised to 7.9%, the CSO’s latest take on 2016-17 growth is virtually more sanguine than its previous estimate.
While the CSO’s GDP estimate for 2016-17 is evidently higher than that of most others, many analysts said the growth assumed by it for the second half (6.8%) was optimistic. “Given the fact that the fall from H1 to Q3 is not much, I don’t think that we should then necessarily assume that the rebound in Q4 is going to be very sharp,” said Aditi Nayar, economist at Icra. Stating that the GDP number is better than expected, Saugata Bhattacharya, chief economist at Axis Bank, said, “Since growth slowdown (due to demonetisation) has been shallower than expected, and in line with the RBI’s projections, the probability of rate cuts going ahead has come down.”
The minutes of the monetary policy committee’s meeting released last week indicated that it changed its stance from “accommodative” to “neutral” because the growth drag from demonetisation is expected to fade soon. India Ratings reiterated its view that “much of the impact of demonetisation will be visible in Q4FY17 leading to an overall GDP growth of 6.8% in 2016-17”.
Economic affairs secretary Shaktikanta Das said: “This year’s GDP (growth) is around 7%, based on available numbers. Nothing can be deciphered on anecdotal evidence. Demonetisation only impacted consumption in some cities, since most purchases happened on credit or debit cards. The so-called negative impact, if relevant, was only temporary.”
The 7% GDP growth forecast for the third quarter helped India maintain the coveted tag of the world’s fastest-growing major economy despite demonetisation, better than China’s 6.8% in the December quarter.
While analysts pointed out the lack of congruity between the CSO’s estimate and other high-frequency data and corporate results, chief statistician TCA Anant said all available data have been made use of in the second advance estimate, including corporate performance up to the December quarter, sales of commercial vehicles, railway freight, etc, for the first “9/10 months of the financial year”.
According to the CSO, with production growth of foodgrains during 2016-17 kharif and rabi seasons being 9.9% and 6.3%, respectively, the farm sector grew a robust 6% in Q3 from 3.8% in the previous quarter and compared with a 2.2% contraction in the year-ago quarter. Despite the anecdotes of industrial clusters hit by the note ban during the period, manufacturing grew a healthy 8.3% in Q3 on a robust base of 12.8% in the year-ago quarter and compared with 6.9% in Q2 this fiscal. Mining also posted a smart recovery from a fall of 1.3% in Q2 to a robust expansion of 7.5% in Q3. The bad performers on the output side was “financial services, etc”, which posted a modest 3.1% growth in Q3 compared with 7.6% in the previous month, and construction which grew just 2.7% in the December quarter.
Government final consumption expenditure (GFCE) posted a 19.9% growth in Q3 against 15.2% in the previous quarter, the CSO said. Given that 17% growth in GFCE is estimated for the whole of 2016-17, it needs to grow at 17.4% in Q4. Considering that the Centre, as is seen from the April-January fiscal data separately released by the Controller General of Accounts, has slowed down spending in the later months of the year, the spending boost must come from PSUs.
Although both Dussehra and Diwali fell in the December quarter, the 10.1% growth reported by CSO in the private consumption expenditure looked puzzling to most analysts (but some said use of old notes for consumption might have contributed to the rise). So was the 3.5% growth in gross fixed capital formation, which was declining for the previous three quarters.
Given that nominal GDP growth has been projected at 11.5% for 2016-17, compared with 10% in the last fiscal, it may offer more leeway to the government to improve spending in the next fiscal and yet contain fiscal deficit, which is expressed as a ratio of the nominal GDP, at the targeted 3.2%.
Discrepancies — the difference between the supply and demand side of GDP — turned negative after a gap of four quarters (-Rs 6,767 crore) in the December quarter, compared with Rs 45,378 crore in the second quarter and Rs 30,645 crore in the first quarter. In the last quarter of 2015-16, discrepancies touched a massive Rs 1,43,210 crore, causing a flutter then and raising doubts about the credibility of the country’s data collection mechanism. When private final consumption expenditure, gross fixed capital formation, government final consumption expenditure, change in stocks, valuables, and net exports exceed the overall GDP (based on the supply side data), discrepancies turn negative.
Analysts expect the exports sector to contribute more to GDP growth in the coming quarters, despite the demonetisation blues, thanks primarily to a favourable base. In real terms, the export growth for 2016-17 has been projected at 2.3%, compared with -5.4% in the last fiscal. Despite demonetisation, merchandise exports rose 2.3% in November, 5.7% in December and 4.3% in January.
Government has disbursed Rs 1,433 crore up to March under the interest subsidy scheme to exporters, the Commerce Ministry today said.
The Centre’s interest equalisation scheme, announced last December, reduces cost of capital by allowing 3 per cent interest subsidy on pre and post-shipment rupee export credit to eligible exporters.
“Indian exporters pay high rate of interest on the capital borrowed… all products manufactured and exported by SMEs (are) eligible. Up to March 2016, benefit to the tune of Rs 1,432.90 crore has been passed on to eligible borrowers,” the ministry said in a statement.
Enlisting steps to improve ease of doing business and boost exports, it said the ministry has taken several steps.
Number of mandatory documents required for exports and imports have been reduced to three for each segment. Earlier 7 documents were required for exports and 10 for imports.
“Exporter can now file online applications for IEC (import export code), Advance License, MEIS (merchandise exports from India scheme), SEIS (services exports from India scheme), pay application fee online and check status of their applications,” it said.
To spread awareness about benefits of free trade agreements, it said an ambitious outreach programme has been launched to reach out to exporters located in the 34 major export clusters/cities.
“The programmes focus on training exporters to utilise the FTAs, taking inputs from exporters on FTAs under negotiations for example Regional comprehensive economic policy (RCEP),” it added.
It said the efficacy of these initiatives is reflected in the fact the annual trade data indicates the share of manufacturing sector in India’s total exports has increased from 64 per cent in 2014-15 to more than 69 per cent in 2015-16.
In terms of trading across borders, India is ranked at 133rd out of 189 economies, according to the World Bank’s report on ease of doing business.
The Centre has asked private firms to slash retail prices of non-urea fertilisers by up to Rs 5,000 per tonne, in line with public-sector firms, or else it will cut down the subsidy provided to them.
Retail prices of non-urea fertilisers such as Di-ammonium Phosphate (DAP), Muriate of Potash (MoP) and NPK are decontrolled and are determined by the manufacturers, while the Centre gives them fixed subsidy each year.
Earlier this month, the Fertiliser Ministry asked both public and private fertiliser companies to pass on falling global prices of raw materials by reducing the retail price of non-urea soil nutrients.
Accordingly, state-run Rashtriya Chemicals and Fertilizers (RCF) and National Fertilizers Ltd (NFL) reduced the retail price of DAP by Rs 2,500 to Rs 22,000/tonne, MoP by Rs 5,000 to Rs 11,000/tonne, while complex fertilisers rates were brought down by Rs 1,000/tonne.
Private players, however, did not cut the rates.
“Even private companies will be reducing the prices. International prices have come down, they have to reduce the retail price. If they do not reduce the price, we will cut down the subsidy. This has been told to them very clearly,” a senior Fertiliser Ministry official told PTI.
Global prices of raw material used in making of complex fertilisers have come down by USD 50-70 a tonne. “They have been told very clearly this has to be passed on to farmers. If private companies do not fall in line, then the subsidy will be cut further,” the official added.
In March, the government had reduced the fixed subsidy on phosphatic and potassic (P&K) fertilisers factoring falling global prices.
When asked that private firms are concerned about their margin, the official said: “The issue is that some of them have old stock of about 50 lakh tonnes lying in the field. They have sold that to dealers at higher price. They cannot ask the dealers now to sell at lower price.”
The private companies want old stock to be cleared as their entire working capital is blocked, the official said, adding that the government is monitoring the situation and will ensure farmers get non-urea fertilisers at lower rates.
Total subsidy outgo is estimated to be Rs 21,274 crore for complex fertilisers for this fiscal.
The share of complex fertilisers by PSUs is less than 10 per cent. The cooperative major IFFCO and private companies Coromandel International, Deepak Fertilisers, Gujarat State Fertilisers and Chemicals Ltd, and Tata Chemicals have major share in these soil nutrients.
The Cabinet on Tuesday approved the setting up of a major port at Enayam near Colachel in Tamil Nadu. This would be the country’s 13th major port.
Colachel is about 50 km north-west of Kanyakumari.
India has 12 major ports — Kandla, Mumbai, JNPT, Marmugao, New Mangalore, Cochin, Chennai, Ennore, V O Chidambaranar, Visakhapatnam, Paradip and Kolkata (including Haldia). These handle approximately 61 per cent of the country’s cargo.
A special purpose vehicle (SPV) would be formed for the development of Colachel port, with an initial equity investment from the three existing major ports in Tamil Nadu — V O Chidambaranar Port Trust, Chennai Port Trust, and Kamarajar Port. The SPV would develop the port infrastructure, including dredging and reclamation, construction of breakwater and ensuring connectivity links, a statement said.
Fishermen in the coastal villages of Tamil Nadu have been opposing construction of this port, fearing sea erosion and loss of livelihood.
India has few ports with sufficient draft to match global cargo handling efficiencies. All of India’s trans-shipment (transfer of shipment from one carrier to another during transit) traffic is handled in Colombo, Singapore and other international ports. Indian port industry loses up to Rs 1,500 crore of revenues each year, the official statement said.
This major port at Enayam will act as a major gateway container port for Indian cargo now trans-shipped outside the country. It would also reduce the logistics cost for exporters and importers in south India, who depend on trans-shipment in Colombo or other ports, incurring additional port handling charges.
Minister of Shipping Nitin Gadkari had in April said the government had plans to add eight major ports in the country — including at Wadhawan in Maharashtra, Sagar in West Bengal and Colachel in Tamil Nadu.
Foreign exchange reserves touched a record high of $381.96 billion as on June 16, compared $381.16 billion in the previous week, the Reserve Bank of India said in its weekly statistical supplement on Friday. Foreign currency assets (FCAs), the largest component of the foreign exchange reserves, increased to $358.08 billion from $357.28 billion in the previous week, central bank data showed. Expressed in US dollar terms, FCAs include the effects of appreciation/depreciation of non-US currencies, such as the euro, pound and the yen, held in the reserves. So far in 2017, foreign exchange reserves have grown 6% and have touched record levels five times since April, as the RBI has aggressively been buying dollars to prevent a sudden jump in the rupee.
