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Exports rise 20.55% to $38.94 bn in May; trade deficit at record $24.29 bn

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India's merchandise exports in May rose by 20.55 per cent to $38.94 billion, while the trade deficit ballooned to a record $24.29 billion, according to the government data released


India's merchandise exports in May rose by 20.55 per cent to USD 38.94 billion, while the trade deficit ballooned to a record USD 24.29 billion, according to the government data released on Wednesday.

Imports during May 2022 grew by 62.83 per cent to USD 63.22 billion, the data showed.

The trade deficit stood at USD 6.53 billion in the same month last year.

Cumulative exports in April-May 2022-23 rose by about 25 per cent to USD 78.72 billion.

Imports in April-May 2022-23 increased 45.42 per cent to USD 123.41 billion.

The trade deficit during the first two months of this fiscal widened to USD 44.69 billion against USD 21.82 billion in the year-ago period.

Petroleum and crude oil imports during May 2022 surged 102.72 per cent to USD 19.2 billion.

Coal, coke and briquettes imports jumped to USD 5.5 billion against USD 2 billion in May 2021.

Gold imports increased to USD 6 billion during the month under review from USD 677 million in May 2021.

Engineering goods exports in May increased by 12.65 per cent to USD 9.7 billion, while petroleum products exports grew by 60.87 per cent to USD 8.54 billion.

Gems and jewellery exports stood at USD 3.22 billion in May compared to USD 2.96 billion in the same month last year.

Exports of chemicals rose 17.35 per cent to USD 2.5 billion in May.

Similarly, shipments of pharma and ready-made garments of all textiles grew by 10.28 per cent and 27.85 per cent to USD 2 billion and USD 1.41 billion, respectively.

Export sectors that recorded negative growth in May include iron ore, cashew, handicrafts, plastics, carpet and spices.

The commerce ministry said the estimated value of services import for May is USD 14.43 billion, exhibiting a positive growth of 45.01 per cent compared to USD 9.95 billion in the same month last year.

"The estimated value of services imports for April-May 2022 is USD 28.48 billion exhibiting a positive growth of 45.52 per cent vis-a-vis April-May 2021 (USD 19.57 billion)," it added.

Also Read:- Oil prices fall as expected U.S. interest rate hike looms

Oil prices fall as expected U.S. interest rate hike looms

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Oil prices dipped on Wednesday, owing to concerns about fuel demand and global economic growth ahead of the US Federal Reserve's scheduled rate hike.Oil prices fall as expected U.S. interest rate hike looms

Oil prices fell on Wednesday on concerns about fuel demand and global economic growth before an expected big hike in interest rates by the U.S. Federal Reserve.

Brent crude futures for August were down $1.27, or 1%, at $119.90 a barrel as of 1001 GMT, in volatile trading.

U.S. West Texas Intermediate crude for July fell $1.44, or 1.2%, to $117.49 a barrel.

"Oil markets are seeing uncertainty over what central banks do next and how that impacts oil demand," said UBS analyst Giovanni Staunovo.

Surging inflation has led investors and oil traders to brace for a big move by the Fed this week – a 75-basis-point increase, which would be the largest U.S. interest rate hike in 28 years.

Stronger monetary policy tightening could "pave the way for recession-induced demand destruction," PVM analyst Stephen Brennock said.

The European Central Bank said on Wednesday it would hold a rare, unscheduled meeting on Wednesday to discuss turmoil in the bond markets.

Adding to demand woes, China's latest COVID outbreak has raised fears of a new phase of lockdowns.

Higher oil prices and dimming economic forecasts would weigh on demand prospects, the International Energy Agency said.

But persistent concerns about tight supply meant oil prices were still holding near $120 a barrel.

The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, are struggling to reach their monthly crude production quotas, recently hit by a political crisis that has reduced Libya's output.

"Because OPEC production is still falling noticeably short of the announced level, this would result in a supply deficit of around 1.5 million barrels per day on the oil market in the second half of the year," said Carsten Fritsch, commodity analyst at Commerzbank in Frankfurt.

Oil prices gained some support from tight gasoline supply. U.S. President Joe Biden told oil companies to explain why they were not putting more gasoline on the market.

U.S. crude and distillate inventories rose last week, while gasoline stockpiles fell, according to market sources citing American Petroleum Institute figures on Tuesday.

U.S. Department of Energy stock data is due on Wednesday.

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Difference between developed, emerging and frontier economies?

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Investors looking for an international exposure need to understand various categories of economies and the risks involved. Find out the country categories and the things to note before investing thereDifference between developed, emerging and frontier economies? | Business  Standard News

A diverse portfolio helps investors hedge concentration risks. And while portfolio or investment diversification is important, locations or economies where you put your money is equally crucial.

And when you turn towards international markets, you have the options of investing in developed markets, emerging markets, and frontier markets.

.Let us understand what each of these markets are, and how can one invest in them?
While there’s no one standard definition of each of these markets, experts point out that there are a number of characteristics that are hallmarks of each.

For instance,  usually have more advanced economies, better-developed infrastructure, and higher per capita income.

.Western economists consider $15,000 to $20,000 per capita GDP to be a sufficient range for developed status.
That apart, developed economies are also characterised with highly developed capital markets, regulatory bodies and high household incomes.

However, a high per capita GDP alone does not confer developed economy status without other non-economic factors such as the infant mortality rate and life expectancy.

.For example, the United Nations still considers Qatar, which had one of the world's highest per-capita GDP in 2021 at around $62,000, a developing economy.

This is because the nation has extreme income inequality, lack of infrastructure, and limited educational opportunities for non-affluent citizens.

Overall, various organisations including World Bank, the United Nations, MSCI, FTSE, and Standard & Poor’s consider about 25 nations as developed economies.

Australia, Austria, Belgium, Denmark, Canada, France, Germany, Hong Kong, Italy, Japan, New Zealand, Norway, Portugal, Singapore, Spain, Switzerland, the US, and the UK

These include Australia, Austria, Belgium, Denmark, Canada, France, Germany, Hong Kong, Italy, Japan, New Zealand, Norway, Portugal, Singapore, Spain, Switzerland, the US and the UK.

According to the World Bank, countries with low, middle, and upper-middle incomes per capita, relative to incomes in other countries around the globe, are labeled as developing, or emerging.

Developing countries or economies are those which do not enjoy the same level of economic security, industrialization, and growth like the developed countries.

It includes the nations that do not have the economic strength of developed nations, but are in the process of becoming developed economies.

It pegs per capital income for emerging markets between at $4,095 or less.

But for investors, the emerging markets offer a greater amount of liquidity as well as stability. Emerging market countries include BRICS countries -- Brazil, Russia, India, China, and South Africa.

Besides, Mexico, Pakistan, and Saudi Arabia are other developing economies.

The third one is frontier market. They are somewhat less advanced capital markets in the developing world.

These markets are in a country that is more established than the least . It is still less established than the emerging markets because it is too small, carries too much inherent risk, or is too illiquid to be considered an emerging market.

That’s why they are sometimes called as pre-emerging markets. So, based on these criteria, frontier markets include the likes of Colombia, Indonesia, Vietnam, Egypt, Turkey and Nigeria.

One of the easiest ways to incorporate stocks from various markets is to purchase shares in managed funds. Secondly, bear in mind the risks, liquidity, and growth potential of a given country before investing.

That apart, investors must balance the strengths, weaknesses, opportunities, and threats before investing in a particular country.

They should also make tradeoffs and place bets among debt, equity, domestic, international, growth and safer options.

Viral Acharya calls on central bankers not to compromise, embrace risk of losing job

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Acharya, who served as a deputy governor of the Reserve Bank of India for two-and-a-half years, also said public sector banks were causing a huge loss to the Indian taxpayer.Viral Acharya calls on central bankers not to compromise, embrace risk of losing  job

Former Reserve Bank of India (RBI) deputy governor Viral Acharya has called on central bankers to not compromise while performing their duties and raise issues with the government even if it comes at the cost of losing their job.

"Sometimes, the tendency of technocrats in central banks is to think, 'Oh, I have to do my regular day job, I have to do a part of my legal mandate well. So, let me just not confront these issues in my day-to-day dealings with the government. Let me just strike compromises or turn a blind eye,'" Acharya said during a webinar hosted by the International Monetary Fund (IMF) on June 14 on the regulation, supervision, and handling of distress in public sector banks (PSBs).

"Of course, there are many technocrats who don't necessarily follow this approach. But I think that a string of technocrats each doing their job in a narrow space and making these compromises, actually leave their countries with a fairly bad outcome stitched together over periods of time."

"I see compromises by central bankers in India over long stretches of time as having given fairly compromised and terrible banking sector outcomes over the last five decades. Of course, if you raise a voice, if you push for advocacy or reform of public sector banks, if you push openly for legal reforms, that is going to be difficult. It can lead sometimes to (chuckles) you not having the right relationships with the finance ministry. In extreme cases it can lead to a loss of job. But my sense is technocrats should embrace these risks," Acharya said.

Acharya took charge as a deputy governor of the RBI in January 2017. However, he resigned in July 2019, around six months before the end of his three-year term, citing "unavoidable personal circumstances".

Acharya, who is the CV Starr Professor of Economics at New York University's Stern School of Business, enjoyed a fraught relationship with the government during his time at the RBI. In an October 2018 speech (external link), Acharya said governments that "do not respect central bank independence will sooner or later incur the wrath of financial markets". The speech, which came amid a tussle between the government and the RBI over the latter's reserves, created a furore.

Acharya’s resignation from the RBI was preceded by similar high-level exits.

Raghuram Rajan, who served a three-year term as the governor starting September 2013, faced repeated political attacks for his speeches regarding tolerance and central bank independence. In a letter to RBI staff in June 2016, Rajan wrote he would be returning to academia after his term ended.

Meanwhile, Urjit Patel — Rajan's successor as governor — resigned on December 10, 2018, two years and three months into the job. Patel, who cited "personal reasons" in a statement announcing his resignation, also had a turbulent relationship with the government.

In his book 'Overdraft', released in July 2020, Patel wrote that India's fledgling bankruptcy law was deliberately weakened in mid-2018 after the RBI released its famous February 12, 2018 circular that spelt out an amended framework for the resolution of banks' stressed assets. According to Patel, he and the then finance minister, the late Arun Jaitley, were "until then, for the most part...on the same page". However, the aforementioned circular led to a "legal onslaught" on the RBI, Patel wrote.

Patel was succeeded by Shaktikanta Das on December 12, 2018. Das, a former economic affairs secretary, has been widely credited with repairing the relationship between North Block and Mint Street.

Cost of PSU banks

In his comments at the IMF webinar on June 14, Acharya said the Indian banking sector and the taxpayer were suffering from government ownership of banks.

"…certain rules and regulations of the banking sector have to be uniform. For example, you can't have an accounting standard for banks which is different between public sector banks and private banks. Why has India not adopted the IFRS (International Financial Reporting Standards) accounting system? Why has India not adopted expected credit loss provisioning? Why has India not adopted accelerated provisioning standards, which don't backload provisions after defaults and NPAs (non-performing assets) have been recognised?"

Acharya said the source of these problems was the government's refusal to loosen its purse strings further to infuse more capital into PSBs. The non-implementation of these standards and PSBs' ability to "get away with certain kinds of extraordinarily delayed provisioning standards", according to Acharya, was resulting in a “race to the bottom for the entire banking sector”.

Calling the presence of PSBs in India a “historic accident”, Acharya said data and economic forces at play in India’s financial sector showed they were causing a huge loss to the taxpayer.

"Taxpayers in India are running a huge negative account because of the presence of public sector banks. And I think any gains that can be brought to the table, such as creation of bank accounts for financial inclusion…I am never able to attribute that success squarely at the doorstep of public sector banks," the former central banker said.

"I constantly pushed for the reform of these banks — improve their governance, and then as a last step, hand over their ownership to the private sector. It seems it's possible to have banking crises even with private banks, so why take on the additional burden of running this through a massive taxpayer loss?"

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