Trade deficit for the month of February 2018 dipped to a 5-month low of $12 billion against a trade deficit of $16.3 billion in January this year. While the exports grew by 4.5% for the month, the imports were up by 10.4% at $37.8 billion. However, there are concerns that if the US import duties result in a trade war then Indian exports could be badly impacted in the coming months. India is likely to close the fiscal year with total imports of over $450 billion which means the forex reserves will be sufficient to cover just about 11 months of imports. The US has also challenged India’s export subsidies at WTO.
Even as Lakshmi Mittal has been moving close to buying out Essar Steel, there has been an expression of interest from VTB Bank of Russia, which is also willing to buy out the stake of the Ruias. It may be recollected that Essar Oil was actually sold to Rosneft of Russia. Essar is one of the high profile cases in the NCLT list and will go a long way in addressing the $210 billion NPA overhang of the Indian banking system. The deadline for finalizing the resolution of the Essar Steel case is April 29th and the resolution professionals and the banks are keen to close out the Essar issue before that.
In an interesting move the YSR Congress led by YSR Jaganmohan Reddy has moved a no-confidence motion against the Modi government which will be taken up tomorrow. The intent of the no-confidence motion is to hold the Modi government responsible for reneging on its promise of granting special status to the state of Andhra Pradesh. However, it needs to be remembered that the motion has been well timed to come exactly after the BJP lost 3 key by-elections in UP and Bihar bringing them perilously close to the half-way mark. The motion can be taken up only if it has the support of 50 members.
After 31 top defaulters have fled the country in the last few years, the government finds itself in an embarrassing situation. It has now moved to prepare a list of 91 borrowers who have defaulted with a move to prevent them from leaving the country. Cases like Vijay Mallya, Lalit Modi, Nirav Modi, and Mehul Choksi are among the more high profile cases of businessmen skipping town and moving abroad after major defaults. The RBI has also initiated the process of collecting passport details of promoters where the loan amount or the guarantee exceeds an amount of Rs.50 crore.
Former finance minister, Yashwant Sinha, has put the blame for the PNB mess squarely on the shoulders of the RBI. He has specifically underlined that the RBI cannot escape responsibility in these cases. Earlier, Urjit Patel had argued that the government’s dual rule as the owner of banks and the super regulator had clipped the wings of the RBI making regulation of banks difficult. Sinha has stated that the government and the RBI had collaborated in the past to resolve such problems and that must be the model even now. Sinha also added that the RBI nominees on the board of banks like PNB could have highlighted these issues, which was not done. Sinha also added that the current system had stood the test of time and had worked satisfactorily well over the years.
Sanjeev Prasad of Kotak Institutional Equities has opined that Indian market valuations may still be a tax expensive. While Indian markets had delivered returns of around 20% in the last 12-15 months in dollar terms, the Chinese markets had actually delivered returns of over 50% during the same period. Prasad also pointed out that the correction in India had essentially happened in sectors where the investor interest was anyways quite limited. According to Prasad, even assuming profit growth of 25% in FY-19 P/E valuations are at around 17.5 times forwards, which is not cheap!
