Import Duty on Gold doubled .

Citing heavy gold imports as a major reason for the high current account deficit, the Finance Minister decided to double the import duty on gold from 2% to 4%. Increase in levy is likely to discourage imports and impact the jewellery demand in domestic markets. It may be noted that recently government had changed the duty structure on gold imports.  The levy was now linked to the value rather than the quantum of bullion that was being imported. This had already led to an implicit rise in the duty on gold imports. And within a span of one month, the government has further proposed to increase the duty to 4%. Considering that India is the biggest importer of gold this would significantly impact the demand and may also give rise to illegal trafficking.         

Last year, Finance Minister Pranab Mukherjee had set an optimistic fiscal deficit target of 4.6% of GDP (Gross Domestic Product). That target just remained on paper. As reality caught up, the country's fiscal deficit zoomed to 5.9% of GDP. But people seldom learn from history. For the financial year 2012-13 (FY13), the deficit target has been pegged at 5.1% of GDP. Now, there are two key ways to the achieve that. One is, of course, by increasing revenues. The other one is by cutting expenditure. Given that subsidies form a significant part of the government's expenditure, it is almost impossible to lower the fiscal deficit without reducing subsidies. For FY13, the FM has set a subsidy target of less than 1.75% of GDP.  That is significantly lower than FY12 numbers which stood 2.5%. It must be noted that for FY12, the government's subsidy bill overshot by a whopping Rs 730 bn.
Subsidy on petroleum products was the biggest culprit for the massive jump in subsidy. In the last year's Budget, the government had assumed an average crude price of US$ 90 per barrel. In actuality, the price averaged much higher at around US$ 115. The recent Budget seems to be assuming a price of US$ 100, whereas crude prices are already hovering around US$ 125 per barrel. With tensions escalating in the Middle East, it is highly unlikely that crude prices would match with government's assumptions. And that's not all. The Food Security Act will also lead to a high subsidy burden. Any fifth grader who knows simple arithmetic would point out that the subsidy target is highly ambitious. So either the government is plain stupid, or trying to fool all of us.

Vodafone Retro Law Change Is A Failure Of National Governance: Dinesh Vyas

Eminent Senior Advocate Shri. Dinesh Vyas expresses anguish at the covert manner in which the retrospective amendments to nullify the judgement of the Supreme Court in Vodafone International vs. UOI was introduced in the Finance Bill 2012 without any reference being made to it in the Finance Minister’s Budget speech. Given the size & significance of the issue, the lapse of the Finance Minister is deliberate and a failure of national governance standards, he says, and adds that the Government’s clumsy attempt to change the law has caused, amongst big-ticket foreign investors, a loss of faith & confidence in India as a reliable investment destination.

The world stock markets ended the week on a sour note

 The US stock markets were down 1.1% during the week due to disappointing housing data. New home sales fell for the second straight month in February by 1.6% to 313,000. Fall in volumes suggested that the recovery in the US housing market may take longer than expected. Further, the factory data from Europe and China was also disappointing leading to a broader fall in global markets.The Indian stock markets were down 0.6% during the week. The post-budget trading session was filled with high volatility as markets see-sawed during the week. This was the fifth consecutive weekly loss for the markets as uncertainties still linger as to when the central bank would cut interest rates. Higher borrowing plans for the next fiscal have also worried markets.
Amongst the other world markets, Singapore was down by 0.7% while Japan was down 1.2% during the week. France was the biggest loser registering losses of 3.3% during the week.

Euro troubles not over.

There seems to be no end to the woes for the Eurozone economies. This is particularly true for the PIIGS countries (Portugal, Italy, Ireland, Greece and Spain). Greece is still not out of the woods despite several rescue attempts made by European Central Bank. But what is more disturbing is the health of the Spanish economy. Earlier, most economists were predicting that Italy may be the next Greece. However, the recent rise in Spain's 10-year government bond yield suggests an altogether different story. It has surged to 5.4% at the end of February 2012, 0.4% higher than its Italian counterpart. The main reason for the same is widening fiscal deficit in the Spanish economy. First, Spain missed its 2011 budget deficit target. Then, it tried to revise its 2012 budget deficit estimate from 4.4% of GDP to 5.8%. This was enough for investors to start losing confidence in the Spanish economy.
Not only investors but other European economies, especially Italy are also concerned. Italy has been trying hard to come out of its bad economic phase. Any fallout from Spain would push back the whole region to the crisis situation. And it would hurt the corrective measures taken by the Italian government as well. But will Spain go Greece way?

Recession concerns could trigger sell-off

  German IFO survey due out today will give an indication  on Euro zone growth prospects. The Yen meanwhile is  lower against  the Dollar and Euro
Earlier today the Dollar was up against the Euro and the  Japanese Yen. The greenback was supported by a rise in  U.S. bond yields. Any further signs of weaker Euro  zone economic activity should assist the Dollar in  sustaining gains against the single currency.

Euro On The Rise, Yen Selling Continues

The Euro rose against the Japanese Yen on Wednesday but the Bullish trend may turn out to be short-lived, as many analysts believe it is being driven by short- term positioning.
Meanwhile, the Japanese Yen appeared weaker with traders favoring a Bearish outlook, prompting more selling of the Japanese currency