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High commodity prices continue to weigh on trade deficit, estimate for FY23 at $90bn: Acuite

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The expectation of the expansion of the current account deficit is not just driven by elevated global commodity prices, but is also linked to the unlocking of the economy reviving pent-up demand and improved vaccination cover aiding an organic recovery in the economy, ratings and research firm Acuite Ratings & Research said in a report.

Nevertheless, there is considerable uncertainty in projecting trade and current account deficit due to high volatility in commodity prices, which in the current environment is taking cues from unpredictable geopolitical events.

“Given, the relentless rise in commodity prices particularly crude oil which has again risen to $120 per barrel, we project current account deficit (CAD) to widen to more than $90 billion (in FY23) from an estimated $47 billion in FY22,” the report said.

India’s merchandise trade deficit widened to a record high level of $23.3 billion in May 2022 from a deficit of $20.1 billion in April, the report said citing the Ministry of Commerce and Industry’s preliminary data.

On the other hand, imports increased slightly to $60.6 billion in May from $60.3 billion in the previous month, given the rising crude oil bill.

Notably, India’s share of oil imports from Russia has increased from 2 per cent to nearly 25 per cent since the onslaught of the geopolitical crisis, with India taking advantage of competitive pricing with an aim to fulfil its heavy oil needs, it said.

“On the exports front, the moderation was driven by non-oil exports while oil exports eased a tad in May-22. On a sectoral basis, commodities such as petroleum products, electronic goods, chemicals, and engineering goods remained strong in May-22.”

The report further said that the evolving global geopolitical dynamics, and policy support through targeted incentive structures like the production-linked incentive schemes and strategic trade partnerships (such as India-Australia trade agreement, and India-UAE trade pact) would also continue to support exports, besides the inorganic expansion via price effect.

That said, some normalisation in growth is likely in the coming quarters on deceleration in global demand, the report added.

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SpiceJet plane lands in Mumbai with cracked outer windshield

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A SpiceJet flight landed safely in Mumbai with its outer windshield of the cockpit cracked, an airline spokesperson said on Monday.

The incident took place on SpiceJet flight SG-3324 operating from Kandla (Gujarat) to Mumbai by a turboprop Q400 aircraft.

At around 23,000 feet height, the outer pane of the windshield on the co-pilot’s side cracked but the cabin pressurisation was observed to be normal.

The flight landed safely at Chhatrapati Shivaji Maharaj International Airport later, said the spokesperson, but the cause of the accident – the second on Monday for the low-cost carrier – is not clear yet.

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Nepal’s economy not like Sri Lanka’s, but can go that way: Former central bank Guv

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Dipendra Bahadur Chhetri, the former Governor of Nepal Rastra Bank (NRB), has said that the situation of Nepal’s economy is not like that of Sri Lanka.

However, if the political rights are given to the wrong persons like in Sri Lanka, there is a possibility of Nepal becoming the next Sri Lanka, he said, Republica reported.

Speaking at an interaction programme on the current economic situation in Nepal held in Kathmandu, Chhetri said the present situation in Sri Lanka is due to arbitrary tax rates imposed by the same family as the president, prime minister and finance minister.

He also mentioned that Nepal should not be associated with Sri Lanka as it has just held local elections and is now preparing to hold federal and provincial elections, Republica reported.

Similarly, the former central bank Governor said that Nepal’s foreign exchange reserves, SDRs and gold in foreign currency accounted for seven months of imports to meet the growing imports and consumption of petroleum products.

Likewise, he doubted that the forthcoming monetary policy to be introduced by the NRB would be as extensive as in the past. He said that the loans given by the banks to expand the capacity of the industry were used for import.

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Turkey increases minimum wage amid soaring inflation, currency volatility

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Turkish President Recep Tayyip Erdogan announced that the country’s minimum wage would be hiked up in the face of soaring inflation and volatile currency rates.

“The minimum wage will be 5,500 Turkish liras ($328) with an interim increase of 30 percent, effective immediately starting on July 1,” Erdogan said.

At the beginning of this year, the government increased the monthly minimum wage by 50 per cent to alleviate the financial burden on workers, reports Xinhua news agency.

Turkey has long been struggling against ever-increasing inflation.

In June, the total losses of the Turkish lira against the US dollar amounted to almost 100 per cent in one year.

Erdogan has long been focusing on a low-interest policy to increase exports and production for a stabilised lira, asking for patience from his voters.

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