Singaporean lender DBS today said it “suspects” that there has been a change in the stance by the authorities to let the rupee appreciate more, but warned that it can hurt manufacturing and exports. The competitiveness-related worries can be mitigated by other factors, it added. “As the rupee strengthens, one question is whether the authorities’ stance towards the currency has changed. We suspect it has,” the note, which comes amid a 6.8 per cent rise in the rupee this year, said. It said that both domestic and global factors are resulting in the rupee rise, but pointed out the differences in the official response this time around. In the past, a strong appreciation in the rupee used to result in a “talk-down” to contain the gains, which is absent now, with officials saying this reflects the economy’s improving prospects and positive reforms. “Gains are being perceived as a sign of strength rather than a challenge to competitiveness,” it said, adding that chief economic advisor Arvind Subramanian is in a minority, which has been flagging risks of currency appreciation.“A competitive currency would have added to the country’s allure as a manufacturing destination. This is particularly crucial under the ‘Make in India’ umbrella,” the report added. The RBI, the note said, has been “more tolerant” of the rupee strength and has focused its interventions to minimise volatility, rather than defending a particular level. The rupee strength on real/nominal effective exchange basis is not seen as a constraining factor, it said. Flagging the risks of the appreciation, it said a strong currency is a “threat” and it may hurt manufacturing and exports. “Service exports are more vulnerable, given the limited scope of imports-dependency. A strong rupee is negative for exports and poses a threat to IT exports, eating into profit margins.”
China’s exports and imports grew more slowly more than expected in July, raising concerns over whether global demand is starting to cool even as major Western central banks consider scaling back their massive stimulus programmes. China and Europe have been driving an increasing share of global growth this year as political conflict stymies stimulus policies being pushed by U.S. President Donald Trump. But China’s export growth slowed to 7.2 percent in July from a year earlier, the weakest pace since February and cooling from an 11.3 percent rise in June, official data showed on Tuesday. Analysts had expected a 10.9 percent gain. Imports rose 11.0 percent, the slowest growth since December and down from a 17.2 percent rise in the previous month. That also missed expectations of 16.6 percent growth. That left the country with a trade surplus of $46.74 billion for the month, the highest since January, compared with forecasts for $46.08 billion and above June’s $42.77 billion. The July trade figures are preliminary, with revised data due on July 23. Asian stock markets went flat after the disappointing China data, which came a day after ratings agency Fitch upgraded its outlook for the world economy for this year and next, citing recoveries in China and other emerging markets.
The government on Monday credited demonetisation and Operation Clean Money for 24.7% increase in the income tax returns (ITRs) filed till August 5, compared with the same period last fiscal. The growth in ITR filed in FY17 was much lower at 9.9%. “The number of returns filed as on 05.08.2017 stands at 2.82 crore as against 2.26 crore filed during the corresponding period of FY17,” the central board of direct taxes (CBDT) said in a statement. It added that growth in returns filed by individuals was 25.3%, with 2.79 crore returns having been received up to August 5, the last date for filing ITRs. Additionally, advance tax collections from personal income tax showed a growth of about 42% over the corresponding period in FY17. Personal income tax under self-assessment tax (SAT) grew at 34% over the corresponding period a year ago, CBDT said. “This clearly shows that substantial number of new tax payers have been brought into the tax net subsequent to demonetisation,” CBDT said. The direct tax collection had jumped by over 21% to Rs 1.80 lakh crore till July 15 compared to the same period last fiscal. This growth rate was higher than the target rate of 15.32% required to achieve the budget estimate. The government aims to collect Rs 9.8 lakh crore through direct taxes in the current fiscal.