23 september 2000

oil price hike a damper for the auto sector
new delhi:the fuel price hike, waiting to happen, has knocked the winds out of the automobile industry as any immediate recovery in its sales charts seems to have been kicked further into the future. the industry had pinned its hopes on october for a revival in its fortunes after sales failed to pick up --- thanks to sales tax rationalisation and the ongoing shraadh--- in august and september, traditionally volume robust months.

says jagdish khattar, managing director, maruti udyog ltd.,"fuel price hike will impact both, demand as well as vendor input costs, substantially."

agrees hyundai’s bvr subbu: "demand, in fact, may not be hurt in the long-term but initially operating and manufacturing cost would be impacted."
"the industry has been waiting for the signals from the petroleum ministry. the biggest damper will be on sentiment," said rajiv dube, general manager (commercial), passenger car division, telco.

22 september 2000

india gets housing loan assistance from adb
manila: the asian development bank on thursday approved a $300 million loan to india for a housing finance project which will benefit low income indians.
the funds will be used to provide loans to low-income households through intermediaries including non government organisations, public and private enterprises and state agencies.

slum improvement projects would also be included under the loan programme.

more than 1.3 million low income indians may be eligible for the financing, the adb said, adding that "the thrust of the project is to promote market-based lending without subsidies to low-income families who would otherwise have to go to unregulated money-lenders. india has a housing shortage that has left over 200 million people living in unacceptable conditions or on the streets. " adb said.

21 september 2000

much ado about the rupee's fall against dollar
mumbai: despite all the brouhaha over the rupee's fall to 46.40/41 levels on tuesday, the fact remains that rupee's fall is nothing in comparison to dips that pound sterling, euro, or the thai baht have had against the dollar. but that does not mean that the rupee will not ease in the days ahead.

the pound sterling dipped 3.65 per cent to 1.4092 on wednesday from 1.4606 to the dollar on september 1. the euro by 5.9 per cent to 0.8460 from 0.8997 and the thai baht by 3.96 per cent to 42.5850 from 40.8950.

the rupee, by comparison, during the period is down by 1.25 per cent to 46.29 from 46.70 or thereabouts. moreover during the period under reference, the rupee has gained against many currencies. thus it is up by 2.3 per cent against the pound sterling to 65.50 from 66.74, by 3.9 per cent against the euro to 39.14 from 40.72 and by 1.12 per cent against the baht to 1.09 from 1.12.

says abn amro bank's country-head (india) romesh sobti: "one has to see the larger picture to understand the rupee's fall. other international currencies have fallen against the dollar, and oil prices are at decade-high levels at $37 a barrel. a correction here was inevitable, but a 40-paise fall in a single day is not justified".

others like e-mecklai's forex consultant n subramananian feel that "the rupee's fall on tuesday is clearly a one-off event given the southward movement in other currencies vis-a-vis the dollar. it is a technical correction".

icra's economic advisor saumitra chaudhuri is of the view that short-term exchange rate movements are driven by stock market perceptions. says mr mitra: "the depreciation of rupee due to dollar buying by importers is not a serious problem for the currency but when the foreign institutional investors and non-resident indians start off-loading shares and buy dollars, it can lead to a serious mis match. the rupee movement has been significantly driven by international oil prices".

other economists also seem to concur. the federation of indian chambers of commerce and industry (ficci) secretary-general amit mitra feels that panic-stoking and speculative elements should be restrained.

``there is no worry as far as the indian economy's fundamentals are concerned. the steep rise in oil prices is a serious issue but does not warrant a panic. we have to take these things in stride and move on and avoid exaggeration,'' observes mr mitra.

a similar viewpoint is also held by indian council for research on international economic relations (icrier) senior economist renu kohli: "the country has a comfortable foreign exchange reserve position. despite this, the reserve bank is not directly intervening to shore up the rupee. this indicates that it may not be bothered too much as long as the the rupee's fall is a gradual one".

observes hsbc's country-treasurer tarun mahrotri: "there has been a bout of asset-selling in asia, and india cannot be an exception. then, oil inventories are at their lowest levels. figures by the american petroleum institute put inventories at decade-low levels at around 286 million barrels. and if oil prices were to fall, they will use that chance to replenish stocks, further affecting prices. i think the rupee's fall is in reaction to all these factors".

a dip in international gold prices by nearly $20 in the recent past to around $271 per troy ounce as of now, is cited in some quarters as boosting demand for gold ahead of the domestic festive season, but many senior bankers like mr sobti at abn amro bank do not see this as a factor affecting the spot-rupee market.

most experts feel the rupee is clearly headed southwards in the coming days. senior treasury officials say they expect the rupee to remain in the rs 46 to rs 46.50 range. most concur that ``a lot depends on the movement of the euro and pound sterling against the dollar in addition to the stock market behaviour and oil prices''.

"if you are to say that the other currencies have fallen steeper against the dollar, then it is clear that the rupee will slide further, but i do not think that you are going to have 35-40 paise falls every day. it will dip in a more controlled manner,'' says e-mekclai's mr subramanian.

so what about the fact that the rupee never seems to gain when other currencies do so against the dollar? the answer, dealers say on condition of anonymity, is that the reserve bank seldom allows the rupee to fall by the same margin that other currencies slip up against the dollar!

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