The Economic Times 5 April 2018

RBI's ‘Goldilocks’ scenario puts India's economy in pole position

By Anirban NagIndia’s central bank is optimistic the economy would outpace China to become the world’s fastest growing major market this year and help lure investors seeking opportunities as a global trade war brews.Reserve Bank of India Governor Urjit Patel and his monetary policy committee lowered inflation projections, raising expectations that interest rates will be on hold for some time now. That may boost flagging investments and demand, both of which were hit by a cash ban imposed in late 2016 and the chaotic implementation of a consumption tax last year.Slowing inflation, accelerating growth and an economy that relies on domestic consumption may help India remain relatively immune from the escalating trade war between the U.S. and China. The Reserve Bank forecasts the $2.3 trillion economy will expand 7.4 percent in the financial year to March 2019. That’s faster than a 6.5 percent expansion projected for China in 2018 in a Bloomberg survey.“The Goldilocks scenario that RBI has outlined for the new fiscal year -- with higher growth expectations and lower inflationary forecasts -- could very well indicate rates on hold for the whole year,” said Rajni Thakur, economist at RBL Bank Ltd. in Mumbai. “It will boost the general market sentiments and bond markets in particular.” 63630851 Bonds RallyEarlier Thursday, the MPC retained the benchmark repurchase rate at 6 percent, as predicted by all 42 economists in a Bloomberg survey. Five of the six-member committee voted for the decision, while one sought a hike. It also kept its neutral policy stance.The decision helped extend a rally in the bond market, triggered last week by the government’s decision to cut its first-half borrowing plans. It was further fueled after the RBI on Monday allowed lenders to spread their debt market losses over four quarters. Indian shares also rebounded.Nevertheless, Patel said fiscal slippages from the federal as well as state governments and any chances of a below-normal monsoon meant that risks to inflation were on the upside. Companies polled by the RBI said input and output prices were rising and this could be passed on to consumers.Factors such as food prices, trend in crude oil, other commodity prices and outlook for southwest monsoon will remain key in determining the policy trajectory, said Garima Kapoor, Mumbai-based economist at Elara Securities India Pvt who has penciled in one rate hike in the second half of the financial year.Recovery“Growth has been recovering and the output gap is closing,” the RBI said in a statement in Mumbai. That is reflected in a pick-up in credit off-take in recent months, and the large mobilization of resources from the primary capital market should support investment activity further.Investment banks such as Goldman Sachs Group Inc. expect India to grow at 7.6 percent in the year started April 1. While that is still above the Bloomberg consensus of 7.4 percent, the pace is probably insufficient for Prime Minister Narendra Modi to create enough jobs in time for the national elections due early next year. India’s economic growth is forecast to slump to a four-year low of 6.6 percent in the fiscal year 2018 that ended March 31.Still, the central bank is upbeat on growth following the recent run of positive economic activity data.Earlier in the day, data showed India’s dominant services sector bounced back into expansionary territory in March. The Nikkei India Services Purchasing Managers’ Index rose to 50.3 in March from 47.8 in February. The rise came amid greater inflows of new work orders, an improvement in business sentiment. A number below 50 indicates a contraction.A similar survey, on April 3, showed the manufacturing sector growing, albeit at a slower pace.“There are now clearer signs of revival in investment activity,” the central bank said. “Global demand has been improving, which should encourage exports and boost fresh investment.”

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GVA model discarded, as GDP is once again preferred as a measure of economic activity

The Reserve Bank today switched back to the gross domestic product (GDP)-based measure to offer its growth estimates from the gross value added (GVA) methodology, citing global best practices.Government had started analysing growth estimates using GVA methodology from January 2015 and had also changed the base year to 2018 from January.While GVA gives a picture of the state of economic activity from the producers' side or supply side, the GDP model gives the picture from the consumers' side or demand perspective.Deputy governor Viral Acharya today said the switch to GDP is mainly to conform to international standards."Globally, the performance of most economies is gauged in terms of gross domestic product (GDP). This is also the approach followed by multilateral institutions, international analysts and investors, and primarily they all stick to this norms because it facilitates easy cross-country comparisons," Acharya told reporters at the customary post-policy presser.Even the Central Statistical Office (CSO) has started using GDP as the main measure of economic activities since January 15 this year, he added."So, even though there are good economic reasons to employ GVA as the supply side measure of economic activity, we have decided to switch to GDP-based model," Acharya said.In the first bi-monthly policy of the new fiscal year 2018-19 wherein it left the key rates unchanged at 6 per cent citing rising inflation worries in the first half, RBI said GDP is projected to strengthen from 6.6 per cent in FY18 to 7.4 per cent in FY19-- with the economy clipping at 7.3-7.4 per cent in H1 and at 7.3-7.6 per cent in H2 with risks evenly balanced. 58905721

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Why the court turned down Salman Khan's plea for leniency in the blackbuck case

63630124 63624741 63627573 63626073 Salman Khan shot dead two endangered Black Bucks knowing well that he is a major film star and common people could emulate his act, the Jodhpur court has ruled in its judgement sending the filmstar behind bars with a 5-year sentence. The court said that though Salman Khan has been acquitted in all other cases by the High Court, the rising incidents of hunting of endangered animals makes it imperative that strict punishment be given given the evidences and circumstances of the said case and no leniency be shown to him. The prosecution told the court that Khan had killed the black bucks "for fun". Pleading for leniency, Khan had told the court that he has been suffering the case for 20 long years and that if he was sent to jail, it could affect the livelihood of many families associated with the film industry since he is a major film star. The prosecution however argued that Khan had been convicted in two earlier cases too by lower court though he was acquitted later in the High Court but appeals had been filed against these acquittals in the Supreme Court where they were pending. "He faced another case of a hit-and-run in Mumbai," the prosecution told the court. The court judgement says the prosecution was "able to prove beyond doubt" that Khan had shot dead the two black bucks between 1 am and 2 am on October 2, 1998 but was not able to prove that Saif Ali Khan, Tabu, Neelam or Sonali Bendre were present at the spot or instructed Salman to fire at the black bucks. The court judgement says that though one witness said Saif Ali Khan was seated on front seat of a gypsy , the witness did not say that Saif Ali Khan had asked Salman to fire at the black bucks after spotting them. The court said the presence of the others at the spot was not conclusively proved and anyways common intention on their part to kill the black bucks did not stand proved. Hence, the others were given benefit of doubt.

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Your bank will not allow you to buy bitcoins anymore

You will not be able to buy cryptocurrency via banks or e-wallets etc. in India anymore as Reserve Bank of India (RBI) has banned them with immediate effect from "dealing with or providing services to any individuals or business entities dealing with or settling virtual currencies".RBI it its first bi-monthly monetary policy has announced that any entity regulated by them such as banks, wallets etc. shall not deal with or provide services to any individual or business entities for buying or selling of cryptocurrency such as bitcoins. If banks, e-wallets and any other entities regulated by RBI are not allowed to facilitate sale or purchase of cryptocurrencies, obviously individuals will not be able to transfer money from their bank accounts to their crypto-trading wallets. 63629506 "A person will not be able to transfer money from his savings account to his cryptowallet" says, Abizer Diwanji, Head, Financial Services, EY India.The central bank has repeatedly cautioned users, holders and traders of virtual currencies, including Bitcoins, regarding various risks associated in dealing with such virtual currencies. In its statement RBI said that technological innovations, including those underlying virtual currencies, have the potential to improve the efficiency and inclusiveness of the financial system. However, Virtual Currencies (VCs), also variously referred to as crypto currencies and crypto assets, raise concerns of consumer protection, market integrity and money laundering, among others.In view of the associated risks, it has been decided that, with immediate effect, entities regulated by RBI shall not deal with or provide services to any individual or business entities dealing with or settling VCs. Regulated entities which already provide such services shall exit the relationship within a specified time. RBI will be issuing circular in this regard for further details.Recently, several banks have banned their customers for buying and selling of cryptocurrencies. Citi Bank in email to its customers has said that credit and debit cards cannot be used to purchase cryptocurrencies. It has been reported that RBI has warned banks about cryptocurrencies in January, telling them to step up scrutiny of financial transactions by companies and exchanges involved in the trade of bitcoins and similar digital tender.RBI has also issued a press release earlier in this regard stating "As such, any user, holder, investor, trader, etc. dealing with virtual currencies will be doing so at their own risk."

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IndiGo opts out of race to buy Air India

NEW DELHI: IndiGo, which was the first airline to express interest in buying stake in Air India, today said that they have opted out of it, as they are interested only in the national carrier’s international operations. “From day one, IndiGo has expressed its interest primarily in the acquisition of Air India’s international operations and Air India Express. However, that option is not available under the Government’s current divestiture plans for Air India,” Aditya Ghosh, President and Whole Time Director, said in a statement. Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turnaround all of Air India’s airline operations, the statement added. The response from IndiGo came within a week after the government issued an Expression of Interest (EOI) document on Air India. According to the document, the government has decided to sell Air India, Air India Express and AISATS as one entity.

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Domestic non-ferrous metal consumption grows 7%-10% in Apr-Dec 2017

Domestic consumption of key non-ferrous metals like aluminium, copper and zinc registered a 7%-10% growth in the first nine months of fiscal 2017-18 (FY18). Despite healthy growth rates, domestic non-ferrous metal production remains in excess of consumption and the excess supply situation in aluminium and zinc is likely to persist going forward as well, according to ICRA Ltd.Explaining the reason the latest report on non ferrous metals sector by the ratings agency said given high domestic capacity manufacturers are expected to operate the plants at a high asset utilisation level. This in turn would lead to large export volumes. Off-take risks in the international market, however, would remain low, given the deficits in the global market and the cost competitiveness of the domestic manufacturers. A high proportion of export sales, however, would have an impact on margins, as typically export realisations are lower compared to domestic prices because of duty protections available on domestic sales.The ICRA report said if domestic demand for copper grows at the current rate of 7-8%, the market is likely to turn into a deficit in the next couple of years. The scope of increasing copper production in India is limited as the refiners are already running their plants at high capacity utilization levels. Hence, with demand increasing at a healthy rate, India may turn into a net importer of copper by FY2020 if no new plant is commissioned in this period.Global non-ferrous metal prices are likely to remain range bound in the coming quarter with improvements in supplies globally. Commenting on the situation, Jayanta Roy, senior vice-president ICRA said: “The end of the restrictions on production in China during the winter months, would temporarily improve supply of aluminium in the global market. On the other hand, higher production from copper and zinc mines would result in balanced copper and zinc markets globally in the coming months.”Supply bottlenecks in the previous calendar year had resulted in a sharp increase in international non-ferrous metal prices, which strengthened by 24-35% during the year. As for global output of non-ferrous metals, while aluminium production witnessed a de-growth as a result of the regulatory steps taken in China to control production from “illegal” and polluting sources, copper and zinc outputs suffered from issues in mine production and degradation in quality of ore.

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"RBI has gone overboard in its comfort with inflation"

Talking to ET Now, Abheek Barua, HDFC Bank, says offhand, he can’t see any vague fundamental reason for the shift in RBI stance.Edited excerpts What is your take on RBI lowering inflation target? Perhaps the thinking is that some amount of macroeconomic stability is returning? Also, the growth forecast is much higher from 6.6% in fiscal year 2018 to 7.4% in fiscal year 2019? Technically, the inflation targets needed to be lowered given the fact that we had a sort of a downside surprise last month on inflation. But having said that, I think the RBI is going a little overboard in its comfort with inflation. If it is indeed 4.7-5.1% over the first half or over the year, we might see some upside shocks there because given our numbers, we are looking at 5.5% minimum in June. So, I really do not know where the MPC’s change of heart or its epiphany has come from. What has fundamentally changed from the last policy when they sounded reasonably hawkish to this time was just one number which came down; one inflation number which produced a surprise on the downside, largely because of food prices and everything else -- both in terms of the composition of core inflation as well as the upside inflation risks. Oil, MSPs, you name it -- everything makes a case for certain degree of caution against inflation. I have to read the policy. Also, this is the press statement but I do not see there is any fundamental reason for the kind of shift in stance that you seem to be describing.Do you still stick by that come second half and we will see a rate hike by the RBI or is there a likelihood that they would continue their neutral stance for some more time? I am honestly a little confused and the devil might lie in the detail. While at first glance, the policy might seem dovish. But there could be a rider thrown in. So perhaps we need to spend a little more time looking at the minutiae of this policy statement to figure out what exactly the RBI is saying.But prima facie, given what you have described, the likelihood of a rate hike down the year has certainly diminished and perhaps we are in for a long holding period when the RBI does nothing and plays around with liquidity in order to either facilitate growth or curb some of the pressures that it might construe developing on the price front. But on rates it might not. What we are seeing is not just global volatility. I am frankly a little puzzled after hearing the press conference and the governor’s response to questions raised. He listed out a number of reasons all of which would at least have warranted a change in stance or a change in the tone but on the contrary the RBI opted to maintain status quo and retain the same neutral stance! Does the action quite fit the words? I am very puzzled too. While I welcome this softening of stance, all the uncertainties and all the risk factors that were discussed both in the policy and the press conference could not just as well make the case for a hawkish stand. In terms of internal logic or rationale that was provided, it was very confusing. The way that communication came through in the press conference, it appeared as a dramatic change in their world view if you like -- from being hyper cautious inflation fighters to people who are willing to live with a degree of inflation risk and allow growth to gain momentum. It seems almost like a change in the sort of broad philosophy of monetary management which earlier would be over the 4% target. Use any upside risk to justify cautiousness on the rate front and on the liquidity front but this time, the way the various bundle of underlying factors in risks have been woven together into a narrative, is very different from the kind of weaving that we have seen in the past. There seems to be a departure from the trend as it were over the last few policies and that certainly puzzles me, I do not know whether that is a sort of a permanent or a transient change.

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Cryptojacking is trending. But for how long?

If numbers from cybersecurity firm Symantec's Internet Security Threat Report are anything to go by, cryptojacking has become the favoured tool for black-hat hackers, thanks to the surge in the price of Bitcoin and a host of other cryptocurrencies and the relative ease of deploying cryptomining software. Detections of coin-mining software, according to the study, zoomed by 8,500% in 2017. For those who came in late, cryptojacking is the use of malware to take over a system's resources without the owner's knowledge to solve complicated cryptographic equations that are at the heart of cryptocurrency mining. India ranks second in the Asia-Pacific-Japan region and ninth globally in terms of cryptomining activities. But the question to ask is, how long will the pesky business of cryptojacking last? Will it end up as anything more than a short-term irritant?Improving surveillanceThe spike in coin mining has been a direct response to the sharp increase in the prices of cryptocurrencies. According to Symantec, its software blocked more than 8 million coin-mining events in December 2017 alone. But as the company says, "This explosion in activity may be short lived. Coin-mining activity is strongly linked to the increase in value of many cryptocurrencies; a sustained drop in their value may lead to this activity going down just as quickly as it went up."Cybersecurity companies are becoming increasingly skilled at weeding out the scripts used in cryptojacking. Michal Salat, director of threat intelligence at Prague-based cybersecurity software firm Avast, says that earlier in February, hackers had hijacked a browser plugin used by national services like the United Kingdom's National Health Service. "It was reported that the hackers made only USD24 [Rs1,517], mining 5,000 computers, because the malicious script was detected by all antivirus companies. Thanks to the quick reaction of the infected sites' owners, the script was taken down after just a few hours." 63628299 Diminishing returnsThen there's the economics. According to Salat, while cryptojacking is an easy way to cast a net, what with coin-mining code coming on the cheap, it might not end up generating enough to make it lucrative. Meaning: It may remain only a side gig for black hats. Considering the increasing complexity of the mathematical equations to be solved for mining cryptocurrencies and the need to hugely increase processing capacity, cryptojacking could be a tough con to sustain. Adding computing power when white hats are pushing back strongly will likely make it increasingly difficult to run the same, off-the-shelf scripts.One sticky vulnerability could be the rise of devices connected to the Internet, where security standards are still evolving. According to Symantec, the future of malware could be intertwined with Internet of Things (IoT) devices. The firm says there was a 600% increase in IoT attacks in 2017, which "means that cybercriminals could exploit the connected nature of these devices to mine en masse".

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