Demonetisation Be Damned! The Indian Rupee Is On A Tear

(THIS ARTICLE IS COURTESY OF QUARTZ INDIA)

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Demonetisation be damned! The Indian rupee is on a tear

March 17, 2017 Quartz India

It’s been a great week for the Indian rupee.

On March 16, at Rs65.41 per US dollar, the currency hit a one-year high against the greenback.

Much of the strengthening has to do with the ruling Bharatiya Janata Party’s (BJP) recent electoral wins in Uttar Pradesh and Uttarakhandand solid performances in two other states. The strong showing reflects just how well the party is positioned to sweep the next general elections in 2019 and hand Narendra Modi a second term as prime minister. Some of that magic is rubbing off on the markets.

“Since the start of the week, equity markets and the Indian rupee have rallied sharply in response to the strong performance of the main ruling party in recent state elections,” DBS Bank said in a March 16 report.

So far, the Indian currency has been the third-best performing in Asia in 2017. The rupee has gained 3.4% this year against the US dollar, only trailing the South Korean won and the Taiwanese Dollar.

Meanwhile, the US Federal Reserve’s interest rate hike on March 15—only the third since the economic crisis of 2008—hit the dollar. When the US dollar falls, capital outflows from emerging markets are restricted, thus strengthening local currencies like the Indian rupee.

The rupee’s strengthening comes after a free fall triggered by Modi’s move to demonetise 86% of the currency notes (by value) in November 2016. Initially it had been estimated that the currency ban would dent the GDP and take a toll on the economy.

In January, a Reuters poll of some 30 foreign exchange strategists had estimated that the Indian currency could see a record fall this year because of the currency ban. But India’s Central Statistical Office’s estimates show that the economy grew at 7% during the October-December 2016 quarter, and the rupee is holding strong.

One reason for the rupee’s surge is also that the macro-economic factors that influence a currency—inflation and current account deficit (CAD)—are looking good for India at the moment. While inflation is being restricted in its safe zone of sub 6%, India’s CAD (the excess of imports over exports) has also been falling.

What next

A strong rupee is good news for corporate India. Many firms hold debt in foreign currencies, so a fall in the exchange rate means their interest outgo will reduce. “Many Indian entities including short-term trade finance people remain unhedged for their offshore liability. They (companies) are likely to have gained from the rupee’s sharp rise in the last few days. At least, interest liability has reduced, adding to balance sheet gains,” Jayesh Mehta, country treasurer at Bank of America told the Economic Times.

However, the Reserve Bank of India (RBI) could soon step in to stabilise the rupee’s movement. Some reports suggest that the central bank already is buying dollars through public sector banks.

“The rupee appreciation, we feel is not sustainable and would revert to the range of Rs66-66.5 range, to begin with as the fundamentals do not warrant such unbridled enthusiasm,” a report by CARE Ratings said. “The outcome of the elections has been the main driving force. A strong rupee may not be good for our exports and the RBI is cognizant of the same.”

Note ban a single strike on terrorism, drug mafia, human trafficking: PM Modi

(THIS ARTICLE IS COURTESY OF THE HINDUSTAN TIMES NEWS PAPER)

Note ban a single strike on terrorism, drug mafia, human trafficking: PM Modi

INDIA Updated: Dec 28, 2016 01:08 IST

HT Correspondent
HT Correspondent
Dehradun, Hindustan Times

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Prime Minister Narendra Modi addresses a rally at Parade Ground in Dehradun, on December 27, 2016. (Vinay Santosh Kumar/HT Photo)

Prime Minister Narendra Modi dismissed on Tuesday the charge that big businesses were benefitting from the demonetisation drive, and said the poor are happy but some people are upset because his move has hit the “ringleader of thieves”.A single stroke has destroyed terrorism, drug mafia, human trafficking and counterfeiting, he said at a BJP rally in Uttarakhand.“Did you give me a full mandate in 2014 only to cut ribbons and light ceremonial lamps at inauguration ceremonies? Didn’t you elect me to combat and end corruption? Shouldn’t we fight the evil with all our might?” he asked.

Read | Mayawati says cash in BSP account legal, asks BJP to come clean on deposits

He targeted the Congress for opposing his government’s decision to demonetise 500- and 1,000-rupee notes, a move that he called a campaign to rid the country of black money and corruption.

“Corruption has destroyed the country, which was known as a bird of gold. In some, corruption is in the blood. They used the backdoor to convert their money and thought Modi cannot see,” he said.

He alleged that the Harish Rawat-led Congress government has taken Uttarakhand to “a bottomless pit of corruption” and the BJP alone could bring it out if voted to power.

Read | ‘India robbed in the name of achche din’: Rahul, Mamata attack Modi’s demonetisation move

Drawing a metaphor for misappropriation of relief funds in the hill state, which was hit by a catastrophic cloud burst in 2013, he said even a scooter with tank for five litres could drink 35 litres.

“It is, in fact, so badly afflicted that one engine alone won’t suffice to take it out of that hellhole,” Modi said. “You will need to rev up another engine to rid the state of corruption.”

He urged people to vote the BJP to power so that “two engines” — the Centre and state governments — can work in tandem for the state’s development.

Modi also referred to the OROP (One-Rank-One-Pension) scheme for ex-servicemen and saluted the defence personnel for understanding the financial constraints of the Union government and for agreeing to take the arrears in four instalments.

Read | Rs 5,500 cr paid for implementing OROP; fulfilled promise: PM Modi

The Congress and BJP have been at loggerheads in Uttarakhand ever since the Centre brought the state under President’s rule on March 27 after nine MLAs of the ruling party revolted against the Rawat government and sided with the opposition. Rawat was reinstated after he won a Supreme Court-monitored trust vote on May 10.

The PM targeted the Congress while offering the Rs 12,000-crore Chardham highway project ahead of the assembly polls.

Also read | Short-term pain of demonetisation will pave way for long-term gains: PM Modi

Demonetisation windfall: Civic agencies record 268% increase in tax collection

(THIS ARTICLE IS COURTESY OF THE HINDUSTAN TIMES NEWS)

Demonetisation windfall: Civic agencies record 268% increase in tax collection

    • Moushumi Das Gupta, Hindustan Times, New Delhi

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  • Updated: Nov 23, 2016 01:35 IST
Civic agencies are making a windfall as people are to clearing longstanding tax dues with abolished 500- and 1,000-rupee notes. (AFP Photo)

Civic agencies are recording a demonetisation windfall as people are taking advantage of schemes to clear longstanding tax dues with abolished 500- and 1,000-rupee notes.

But experts believe the returns don’t reflect improved efficiency in tax collection.

Figures provided by 47 urban local bodies to the Union urban development ministry show their tax collection increased by 268% in November 2016 compared to the same period last year.

These municipalities collected Rs 3,607 crore last November. But the corresponding figure till November 22 this year is Rs 13,192 crore already.

A majority of this tax has been collected after November 8, the day Prime Minister Narendra Modi announced scrapping of the high-value notes. The collection figures for the preceding months were far less.

Mumbai municipality’s tax collection has been Rs 11,913 crore this month, which way better than the Rs 3,185 crore it collected last November. Surat’s municipal revenue increased from a mere Rs 7.19 crore to Rs 100 crore.

The fantastic returns could be attributed state governments’ special schemes for taxpayers to pay their dues — some of which are said to have been unsettled for years — with the demonetised notes.

“This is the positive effect of demonetisation. People are clearing up their old dues, paying with Rs 500 and Rs 1,000 notes. For the urban local bodies, it has meant substantial mopping up of tax collection,” urban development minister M Venkaiah Naidu said.

But expert Srikanth Viswanathan, the CEO of advocacy group Janagraaha, called the increase in municipal revenue a reflection of people using up their defunct notes, rather than an indication of improved tax efficiency.

“The municipalities’ own revenues continue to be in the range of 1-1.5%, far less than in countries such as Brazil and South Africa. But the increase does reflect the huge potential from such revenues once the entire property tax administration is overhauled across urban local bodies,” he said.

Viswanathan said municipalities could transform the system by levying property tax on rational market-oriented base capital values, ensure a good tax assessment register and significantly improve their collection efficiency through spatial analytics and outsourcing.