India’s exposure to US securities has increased by more than 10pc in the last 3 months

India’s exposure to US securities has increased by more than 10pc in the last 3 months

In the three months ending in June, India’s holdings of US government securities increased by more than USD 20 billion to USD 220.2 billion, owing to surging foreign exchange reserves. When compared to June of last year, when the coronavirus pandemic crippled most economic operations, India’s exposure to US Treasury securities increased by approximately USD 40 billion.

According to the most recent data from the US Treasury Department, India is the 11th largest holder of these assets, withholdings of USD 220.2 billion at the end of June this year, while Japan has the greatest exposure at just over USD 1.277 trillion.

Since March, when it was at USD 200 billion, India has steadily increased its government securities exposure. The stockpile increased to USD 208.7 billion in April, then to USD 215.8 billion by the end of May.

The country’s exposure in February was USD 204.4 billion, down from USD 211.6 billion in January. At the end of June 2020, the stake was valued at USD 182.7 billion.

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The rise in India’s exposure to US treasuries, according to Unmesh Kulkarni, Managing Director Senior Advisor at wealth management firm Julius Baer India, must be viewed in the context of the country’s continuing build-up of foreign reserves.

“US Treasury yields have been on the decline since May’21, after bottoming out in the middle of last year and rising steadily thereafter, while RBI has been gradually increasing its exposure since April’21,” he told PTI.

In the week ending August 13, India’s forex reserves were USD 619.365 billion, down from a record high of USD 621.464 billion the previous reporting week.

Domestic liquidity in the Indian money markets has been high, according to Kulkarni, and the RBI has been attempting to normalise the situation through variable-rate reverse repo auctions.

“Growing foreign exchange reserves boost to local rupee liquidity, thus it makes sense for RBI to buy foreign assets to drain some of the excess liquidity.”

 

“Among forex sovereign assets, the US dollar is generally the RBI’s preferred currency; contrary to market expectations, the US dollar has remained stable in the current calendar year so far, appreciating 4.1 per cent (Dollar Index) and 1.8 per cent against the INR,” he said, adding that Indian commercial banks have also begun deploying some.

India’s forex reserves have reached a new lifetime high of $621.5 billion.

Japan is the largest holder of US Treasury securities, followed by China, with a combined exposure of USD 1.061 trillion at the end of June.

According to the data, the UK came in third with USD 452.9 billion in holdings, followed by Ireland (USD 322.9 billion), Luxembourg (USD 301.8 billion), Switzerland (USD 270.1 billion), Brazil (USD 249 billion), Cayman Islands (USD 244.8 billion), Taiwan (USD 239.4 billion), and Belgium (USD 228.5 billion).

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GDP grows 1.6% in Q4, but contracts 7.3% in FY21

GDP grows 1.6% in Q4, but contracts 7.3% in FY21

India’s gross domestic product (GDP) increased by 1.6% in the January-March quarter of fiscal year 2020-21, but contracted by 7.3% for the entire fiscal year, according to government figures released on Monday.

Since 1979-80, when the Indian economy shrank by 5.2%, this is the first full-year contraction in the last four decades. This is also India’s second consecutive quarter of growth since emerging from a rare recession.

India’s GDP increased by 3% in the fourth quarter of FY20, bringing the overall growth rate to 4%, an 11-year low.

The manufacturing sector’s gross value added (GVA) growth surged to 6.9% in the fourth quarter of 2020-21, compared to a decrease of 4.2% a year ago, according to statistics from the National Statistical Office.

GVA growth in the agricultural industry was 3.1% in 2019-20, compared to 6.8% in the previous year.

GVA in the construction sector increased by 14.5 %, up from 0.7 % previously. The mining industry shrank by 5.7%, compared to 0.9% a year ago.

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In the fourth quarter, the electricity, gas, water supply, and other utility services segment expanded by 9.1%, compared to 2.6% growth a year ago.

Similarly, after growing by 5.7% in the previous quarter, trade, hotel, transportation, communication, and broadcasting services shrank by 2.3% in the fourth quarter.

Financial, real estate, and professional services expanded by 5.4 percent in the fourth quarter of FY21, up from 4.9 percent in the previous quarter.

Growth in public administration, defence, and other services fell to 2.3 percent in the current quarter, down from 9.6 percent a year ago.

“Real GDP, or Gross Domestic Product (GDP) at Constant (2011-12) Prices, is now expected to reach 135.13 trillion in 2020-21, compared to 145.69 trillion in the First Revised Estimate of GDP for 2019-20, announced on January 29, 2021. GDP growth in 2020-21 is expected to be -7.3 percent, down from 4.0 percent in 2019-20 “In a statement, the Ministry of Statistics and Programme Implementation said.

gdp

“GDP at constant (2011-12) prices is anticipated to be Rs 38.96 trillion in Q4 2020-21, up from Rs 38.33 trillion in Q4 2019-20, indicating a 1.6 percent increase.”

The government’s efforts to stem the pandemic’s spread, according to the statement, have had an impact on economic activity as well as data collection procedures.
The economy will need to grow by 10-11 percent in the current fiscal year 2021-22 to regain its Rs 145 trillion size, but the outbreak of the second wave of COVID infections last month has disrupted economic activity, and many analysts believe the GDP will not reach double digits despite the low base.

GDP is calculated as the sum of gross value added (GVA) at basic prices plus all product taxes minus all product subsidies. Non-GST and GST revenue are included in the overall tax revenue used to calculate GDP.

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

As of Monday, India had registered 28 million COVID-19 infections, second only to the United States, and 329,100 deaths, albeit the rate of increase, has slowed.

Manufacturing, construction and finance, real estate, and other sectors showed signs of improvement in Q4FY21, indicating that the economy is on the mend for FY22. However, growth may be stifled if the second wave results in the closure of the services sector in particular.

New telecom policy?

Why is the govt preparing a new telecom policy?

Why do we need a new communications policy?

The country now has the world’s second-largest subscriber base and is experiencing technical changes in digital communications. With the advent of 5G, artificial intelligence, and Internet things, India needs a close vision on how to use these digital tools for the growth and development of the country and what laws should be drafted or modified. Moreover, given the nature of the capital-intensive sector, the ease of doing business needs to be improved to attract investment.

govt preparing a new telecom policy

What are the policy objectives?

On 1 May, DoT launched a policy project to attract $ 100 billion in digital communications. DoT plans to send it to the Council of Ministers within four weeks. The policy objectives include broadband for all, focusing on fiber-to-home connections, creating 4 million digital communications jobs and increasing the share of digital communications in India’s GDP to 8% from less than 6% in 2017.

The government also aims to enable the convergence of architecture Infrastructure for the ICT and broadcasting sectors.

How will it affect the economy?

The consumption of mobile data in India is already the highest in the world. According to the current pace of digitization, India’s digital economy is estimated to reach $ 1 trillion by 2025. It is also estimated that a 10% increase in broadband penetration can lead to an increase in GDP by more than 1%. Currently, India has approximately 1.5 million kilometers of fiber optic cable, and less than a quarter of towers are connected to fiber.

The Government plans to grant fiber optic cables the state of public utilities and promote models of cooperation that include government and local authorities and the private sector.

What are the main challenges?

The industry believes that raising $ 100 billion is not easy because local banks do not lend to telecoms companies, and industry revenues have been hit after Reliance Jio entered into a tariff cut. The government is aware of the psychological pressure.

The sector needs huge investments but investor confidence is low. It remains to be seen whether the government can reduce the fees imposed on this sector.

What can telecom operators expect?

The draft policy stipulates that the government will review fees and fees, including license fees, universal service tax rates and the concept of revenue in line with the principles of the input line credit, with the exception of rationalization of spectrum usage fees.

The government also aims to establish a comprehensive digital data protection system that ensures privacy, independence, and individual choice.

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