Gold retains its luster with increased demand
By GOPAL SUTAR | ARAB NEWS
Published: Oct 23, 2010 23:42 Updated: Oct 23, 2010 23:42
BANGALORE: It is said that the gold has worked down from Alexander’s time and its significance has grown even more today as the precious metal is perceived as a shield against financial turmoil, weak currencies and inflation.
When it comes to India, the over all demand seems to be going in only one direction: Up. With mother of all festivals — Diwali — fast approaching households are geared to go for the precious yellow metal in the coming days. Despite high prices, there is no let up in the gold buying though some shopkeepers feel that for some customers the high prices remain a dampener.
According to the World Gold Council (WGC) gold jewelry demand in India remained robust in the first six months of 2010. The volume of growth increased 67 percent to 272.5 tons as compared to 163 tons in H1 2009. India’s total demand for gold rose by 94 percent to 365 tons in H1 2010 as compared to 188.4 tons in H1 2009. In value terms, the country’s gold demand grew from Rs. 273 billion in H1, 2010, to INR 605 billion in the corresponding period a year ago. It is quantum jump of 122 percent.
All eyes are now on the much awaited festival — Diwali — in the first week of November. In India, it is traditional and considered auspicious to buy gold during Diwali.
With marriage season to follow immediately, the year holds great promise to the gold merchants. Gold is not only given as gifts in marriages but more importantly as dowry to brides by her parents as a “goodwill” gesture and security although the tradition is frowned by some.
“We wish the prices had not touched this high”, feels an executive at Bangalore’s Shubh Jewelers who claim to be the world’s largest manufacturer of 22-carat gold jewelry. He is bit worried that anticipated crowd rush has not yet begun.
A bit alarmed, the gold business houses have started bombarding with the advertisement of all kinds and luring the customers with discounts and gift vouchers. For example, Reliance Money Infrastructure Ltd (RMIL), a part of the Reliance Capital, announced the launch of gold coins with India Post logo.
They have set an ambitious target of selling 300 kg during the Diwali eve. The special promotional offer — open till Diwali — ensures 0.5 gram of gold coin free on every purchase of 10 grams.
However, not everyone agrees that 2010 would be that great as made out to be.
“In 2008, the gold in the first six months sold over 700 tons and therefore I can’t comment on how it will grow this year. Nonetheless, 2010 will be certainly better than 2009,” says Suresh Huda, President of the Bombay Bullion Association Limited, established in 1940 and currently celebrating its golden jubilee.
He also points out that though gold articles sell well during the festive season quite a few consumers are going for the silver items as gift package since not every one can afford gold at these prices.
“Also, there is some diversion to gold exchange traded funds (ETFs) as investment tool”, he says as companies hand out customary festival bonuses in cash. Nonetheless, gold remains an attractive proposition for millions of Indians.
The year 2010 also added its own charm as India bagged 38 gold medals and stood second in the list after Australia’s 74 medals in the recently concluded Common Wealth Games in New Delhi making gold much talked about subject in the country more than in any other year.
http://arabnews.com/economy/article168390.ece
Sunday, October 24, 2010
Tuesday, October 19, 2010
Rising Rupee Hits Indian Exports, IT and NRIs
Rising Rupee Hits Indian Exports, IT and NRIs
Bangalore, October 18, 2010:
Indian Rupee that soared to 43.09 against dollar on October 15, notching its highest level since August 2008, has become cause for worry for exporters, the country’s much talked about IT industry in particular and Non-Resident Indians (NRIs) who send money to the home country on regular basis.
The concern is so explicit that India’s second largest software exporter Infosys Technologies, headquartered in the city, cited currency volatility as one of the factors for being “cautiously optimistic” about the IT company’s long term prospects despite beating its own and the market predictions by posting double digit revenue growth for Q2 2010. The spectacular results have been achieved by the company for the first time since Q2 FY 08. Most of the IT companies have been singing the same tune saying rampaging rupee could maim the exporters more if the Reserve Bank of India – India’s Central Bank - fails to check the soaring rupee. About 98% of Infosys’ earning for example is in foreign currency.
Mr. M.D. Pai, Board Member of Infosys told The Arab News that soaring Indian rupee is hurting India's exports, as the strength is not based on fundamentals but on technicals due to strong flows of capital. “Surplus in the current account allow for space to manage but sudden flows are difficult to manage and that is why we need the regulator to play a balancing role. For us rupee appreciation hurts revenue in rupees and margins. The solution for this is sterilization of excess flows, and other means like a cap on borrowings overseas, cap on NRI deposits based on the absorption capacity of the economy”, he says.
Alarmed, RBI has intervened by buying dollars through public sector banks to stem the appreciation further but experts believe that rupee could trade from 44.15 to 43.25 against the dollar at least in the short term, come what may. Overseas investors are expected to pump in more dollars especially in the Coal India’ Limited Initial Public Offer – India’s largest IPO at Rs. 154 billion - that hit the market on October 18. The rupee would remain strong till the overall dollar flow slows down.
Exporters apart, for the NRIs, especially in the Gulf, it means clear dent in their earnings since most of them send the money back home regularly. “My son who works in Jeddah makes it a point to send about SR 1000 every month but in rupee terms the amount is getting lesser in last few months while everything in the market costs higher these days ”, rues Fatima who also works in a private company in Bangalore to support her family.
Moreover, the NRI interest rates on bank deposits have been low - less than 3% even for long term deposits in rupee - and so it is double whammy for those who park and send their money to families in India. In last few years rupee has swung from 39.61 (February 2008) to 50.56 (March 2009) against the dollar. The rupee has appreciated by 8% in the last seven months from 47.60 in March to 44.05 in the current month. “We must tax on the foreign fund flows to check the enormous volatility in the rupee value against the major global currencies”, feels one of the top IT honchos. If unchecked, the see-saw battle would remain part of the Indian export story and NRIs.
Gopal Sutar
Bangalore, October 18, 2010:
Indian Rupee that soared to 43.09 against dollar on October 15, notching its highest level since August 2008, has become cause for worry for exporters, the country’s much talked about IT industry in particular and Non-Resident Indians (NRIs) who send money to the home country on regular basis.
The concern is so explicit that India’s second largest software exporter Infosys Technologies, headquartered in the city, cited currency volatility as one of the factors for being “cautiously optimistic” about the IT company’s long term prospects despite beating its own and the market predictions by posting double digit revenue growth for Q2 2010. The spectacular results have been achieved by the company for the first time since Q2 FY 08. Most of the IT companies have been singing the same tune saying rampaging rupee could maim the exporters more if the Reserve Bank of India – India’s Central Bank - fails to check the soaring rupee. About 98% of Infosys’ earning for example is in foreign currency.
Mr. M.D. Pai, Board Member of Infosys told The Arab News that soaring Indian rupee is hurting India's exports, as the strength is not based on fundamentals but on technicals due to strong flows of capital. “Surplus in the current account allow for space to manage but sudden flows are difficult to manage and that is why we need the regulator to play a balancing role. For us rupee appreciation hurts revenue in rupees and margins. The solution for this is sterilization of excess flows, and other means like a cap on borrowings overseas, cap on NRI deposits based on the absorption capacity of the economy”, he says.
Alarmed, RBI has intervened by buying dollars through public sector banks to stem the appreciation further but experts believe that rupee could trade from 44.15 to 43.25 against the dollar at least in the short term, come what may. Overseas investors are expected to pump in more dollars especially in the Coal India’ Limited Initial Public Offer – India’s largest IPO at Rs. 154 billion - that hit the market on October 18. The rupee would remain strong till the overall dollar flow slows down.
Exporters apart, for the NRIs, especially in the Gulf, it means clear dent in their earnings since most of them send the money back home regularly. “My son who works in Jeddah makes it a point to send about SR 1000 every month but in rupee terms the amount is getting lesser in last few months while everything in the market costs higher these days ”, rues Fatima who also works in a private company in Bangalore to support her family.
Moreover, the NRI interest rates on bank deposits have been low - less than 3% even for long term deposits in rupee - and so it is double whammy for those who park and send their money to families in India. In last few years rupee has swung from 39.61 (February 2008) to 50.56 (March 2009) against the dollar. The rupee has appreciated by 8% in the last seven months from 47.60 in March to 44.05 in the current month. “We must tax on the foreign fund flows to check the enormous volatility in the rupee value against the major global currencies”, feels one of the top IT honchos. If unchecked, the see-saw battle would remain part of the Indian export story and NRIs.
Gopal Sutar
Monday, October 18, 2010
India’s New Tax Code “Fixes” NRIs
India’s New Tax Code “Fixes” NRIs
India’s New Direct Tax Code (DTC) described as generous to residents unfortunately seeks to extract a mouthful from millions of non-resident Indians (NRIs). It is good news that the Government is all set to replace the age-old Income Tax Act of 1961 and bring far reaching changes in the tax structure with an aim to tax those citizens in lower income bracket as little as possible, bring the growing number of rich people in the tax net and prevent tax evasion in the notoriously corrupt system.
With the possibility of archaic rules getting replaced with new ones from financial year 2011-2012, the emerging India seems to have welcomed the path-breaking initiative taken by the Central Government. However, scores of NRIs are disappointed and are sure to seek changes in the proposed laws that affect them negatively. For example, under the DTC, NRIs staying in India for more than 59 days in a year and 365 days or more over a period of four years prior to the financial year will be considered residents and are therefore liable to be taxed on their global income. Currently they can stay in India up to 181 days in a year and still have no tax liability on the income earned outside India. Such NRIs typically do not have citizenship of any other country and this is particularly true with those living in the Gulf countries where citizenship is extremely difficult to get. Most of the companies or employers send their employees on two to three month vacation period albeit once in two or three years. Some NRIs prolong their stay because of medical, social or business reasons.
Whatever the reasons, what the DTC implies is henceforth NRIs must count their days whenever they visit India. The proposed 59 day stay restriction to save their hard earned money from being taxed has put them in fix. The message is clear: “If you are an NRI, you need to think twice in case you wish to stay in your home country for too long!”
Gopal Sutar
India’s New Direct Tax Code (DTC) described as generous to residents unfortunately seeks to extract a mouthful from millions of non-resident Indians (NRIs). It is good news that the Government is all set to replace the age-old Income Tax Act of 1961 and bring far reaching changes in the tax structure with an aim to tax those citizens in lower income bracket as little as possible, bring the growing number of rich people in the tax net and prevent tax evasion in the notoriously corrupt system.
With the possibility of archaic rules getting replaced with new ones from financial year 2011-2012, the emerging India seems to have welcomed the path-breaking initiative taken by the Central Government. However, scores of NRIs are disappointed and are sure to seek changes in the proposed laws that affect them negatively. For example, under the DTC, NRIs staying in India for more than 59 days in a year and 365 days or more over a period of four years prior to the financial year will be considered residents and are therefore liable to be taxed on their global income. Currently they can stay in India up to 181 days in a year and still have no tax liability on the income earned outside India. Such NRIs typically do not have citizenship of any other country and this is particularly true with those living in the Gulf countries where citizenship is extremely difficult to get. Most of the companies or employers send their employees on two to three month vacation period albeit once in two or three years. Some NRIs prolong their stay because of medical, social or business reasons.
Whatever the reasons, what the DTC implies is henceforth NRIs must count their days whenever they visit India. The proposed 59 day stay restriction to save their hard earned money from being taxed has put them in fix. The message is clear: “If you are an NRI, you need to think twice in case you wish to stay in your home country for too long!”
Gopal Sutar
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