BackTrade deficit drop, odd-even’s return and Ecuador quake
India's trade deficit at five-year low of $5 billion; Delhi reintroduces odd-even traffic scheme; Ecuador raises taxes, seeks aid
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1. March trade deficit contracts to five-year low
India’s monthly trade deficit shrunk to $5 billion, the lowest in five years in March, as imports fell even faster than exports. Imports contracted by around 22% year-over-year in March, dragged down by an 80% reduction in gold imports. On the other hand, exports, which fell 5.5% over a year ago, contracted for the 16th consecutive month amid a slowdown in the global economy. The current trend appears more worrisome than the 2008-09 financial crisis, when the decline in exports was only for twelve months in a row.
2. WPI falls for 17th straight month
Wholesale Price Index (WPI)-based inflation fell to -0.85% in March, remaining in negative territory for the 17th month in a row. The bulk of the decline in inflation is attributable to fuel and power prices, which fell by 8.3% in March compared to a year earlier. Meanwhile, the gap between India’s two measures of inflation—WPI and the Consumer Price Index (CPI)—narrowed somewhat as commodity prices, with a large weightage in WPI, recovered a bit while food prices, which have a large weightage in CPI, showed some moderation.
3. IndusInd Bank Q4 profit rises 25.25%
IndusInd Bank Ltd on Thursday reported a rise of 25.25% in its net profit for the quarter ended 31 March on account of higher net interest income (NII) and other income. Net profit stood at Rs620.35 crore, as against Rs495.27 crore a year earlier. A Bloomberg poll of 27 analysts had forecast a net profit of Rs.618.30 crore. NII—the difference between interest earned and interest paid—rose 37.08% to Rs1,268.21 crore from Rs925.14 crore last year. Gross non-performing assets (NPAs) for the quarter rose 38% to Rs776.82 crore from Rs562.92 crore a year ago.
4. Odd-even scheme returns to Delhi
After initially testing the model in the first fifteen days of January, Delhi reintroduced the odd-even scheme on 15 April, slated to run till 30 April. However, the efficacy of the scheme to reduce pollution remains questionable. The Energy and Resources Institute (TERI) says that the January run only resulted in “limited reductions" in air pollutant concentrations. Preliminary air quality data from select monitoring centres in Delhi does not indicate any improvement during the latest odd-even phase. Obviously, pollution data needs to be analysed with much caution, as many factors, apart from vehicular traffic, are liable to affect it.
5. India appeals against WTO solar ruling
India on Wednesday appealed to the World Trade Organization (WTO) to overturn its earlier ruling against India’s local content requirements for solar cells and modules. Previously, the WTO had ruled in favour of the US, when it challenged India’s “localization" rules, which were deemed to be discriminating against imported solar cells and modules. India as yet does not have a meaningful presence in the global manufacturing of solar cells and modules, despite fast emerging as an important photovoltaics market; India’s 6.7 gigawatts of solar power capacity amounts to around 3% of the estimated global solar power capacity of 228 gigawatts.
6. Wipro net profit dips 1.6% in March quarter
Wipro Ltd, India’s third largest software services exporter, reported a 1.6% decline in net profit for the March quarter, in rupee terms, compared to a year ago. The decline in net profit stands in contrast to its peers TCS and Infosys, which recently announced results that were largely better than expectations. Wipro’s 2015-16 revenue, in dollar terms, rose by only 3.7% in 2015-16, marking the slowest pace of growth since 2009-10. Meanwhile, the company said that the board approved a plan to buy back shares worth Rs2,500 crores.
7. Ecuador rattled by earthquake, aftershocks
Ecuador announced that it would tax the rich, raise the sales tax rate and seek international aid to combat the devastation caused by a 7.8-magnitude earthquake that had struck the South American nation last weekend. The quake left close to 600 people dead and caused damages estimated to be around $3 billion, or 3% of the country’s GDP. President Rafael Correa announced that a one-time wealth tax of 0.9% will be levied on those worth more than $1 million while workers earning over $1,000 a month must contribute a day’s wages, with mandatary contribution rising up to five days’ pay for the top earners. Ecuadoran authorities said more than 500 aftershocks have struck since Saturday’s earthquake, the worst to hit Latin America and the Caribbean since the 2010 quake in Haiti, AFP reported.
8. ECB remains committed to easy money policy
The European Central Bank (ECB) on Thursday maintained the status quo, after having cut rates and expanded its quantitative easing programme in its last meeting in March. The interest rate on the ECB deposit facility remains negative at -0.4%—i.e., banks are penalized for keeping excess cash. Meanwhile, deflation in the euro zone remains entrenched, meaning that expectations run deep that the ECB will continue to maintain low (and negative) interest rates for a long time to come, which is evident in the negative interbank interest rates and swap rates. However, such negative interest rates pose their own risks and can potentially hamper the smooth functioning of markets.
9. Hillary Clinton and Donald Trump extend their leads
Democratic hopeful and former US secretary of state Hillary Clinton cemented her lead over rival Bernie Sanders by winning the New York primary on Tuesday. Clinton now reportedly needs to win only 438 more delegates out of the more than 1,600 remaining delegates in order to clinch the Democratic Party nomination to run for US president in November. On the other hand, Republican front-runner billionaire Donald Trump also inched closer towards securing his party’s nomination by winning in his home state New York.
10. Oil producers fail to agree on output curb
Major oil producing countries, including members of Opec (Organization of the Petroleum Exporting Countries) and non-Opec countries like Russia met last weekend to tackle the situation of low oil prices. However, the countries could not agree on production curbs, reportedly owing to lack of agreement between Opec rivals—Saudi Arabia and Iran. Subsequently, the Paris-based International Energy Agency (IEA) said on Thursday that oil production outside the Opec, i.e., in countries such as the US, Canada and Russia, is likely to fall sharply this year, owing to continued low prices. It remains to be seen which oil producers blink first in surrendering market share in the face of low prices.
Graphics by Prajakta Patil.
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