May trade deficit widens on high gold imports

New Delhi: Trade deficit in May widened to $20.1 billion from $17.8 billion a month ago, a trade ministry official said, on high imports of cheaper gold, increasing pressure on the current account balance.

India has been struggling to control the current account deficit that hit an all-time high of 6.7 per cent of the gross domestic product (GDP) in the December quarter. The deficit has exacerbated the fall of the Indian rupee against the dollar in the recent sell-off in emerging currencies.

Gold and silver imports rose nearly 90 per cent year-on-year to $8.4 billion last month, slower than an annual 138 per cent surge in April, as retail consumers in the world's biggest gold importer tried to take advantage of a sharp fall in global prices.

Overall, merchandise imports rose about 7 per cent to $44.65 billion, the trade ministry said. Exports fell 1.1 per cent from a year earlier to $24.51 billion, the first annual fall in five months.

Roaming charges get cheaper effective July 1

New Delhi: Roaming charges are set to fall from July 1 after Telecom Regulatory Authority of India (TRAI) announced new tariff structures for voice calls and SMSes.

Outgoing local call charges, while on roaming, will be capped at Rs.1.00 per minute from Rs. 1.40 earlier, while outgoing STD charges, while on national roaming, have been capped to Rs. 1.50 from Rs.2.40 per minute earlier.

The ceiling tariffs for incoming calls while on national roaming have been reduced from Rs. 1.75 per minute to 75 paise per minute, TRAI said. Outgoing local SMS-es will cost Rs. 1.00, while outgoing STD SMS will cost Rs. 1.50 from July 1. Incoming SMS will remain free of charge.

The telecom regulator also said that it would allow carriers to offer free nationwide mobile roaming to subscribers for a fixed fee from July 1, in a partial relief to operators, some of whom had opposed a proposal to completely abolish roaming charges.

Currently, subscribers pay an additional fee for making and receiving calls when they are outside their home zone. India is divided into 22 telecoms zones.

The government had earlier proposed to completely abolish roaming charges, but the regulator said on Monday that would not be "practicable at this juncture", because telecom companies would not be able to recover their costs.

RBI leaves rates unchanged, warns of inflationary risks

The Reserve Bank of India kept interest rates unchanged on Monday after cutting them in each of its previous three policy reviews. The central bank's action means there will be no change in lending rates for auto, home and other consumer loans.

The RBI also warned of upward risks to inflation posed by a falling rupee and increases in food prices. The RBI also called for vigilance over global economic uncertainty, citing the risks of a reversal of capital flows from emerging markets. (Also read: Why rupee's fall is bad news for home loan EMIs)

Such outflows, fueled by investor worries that the U.S. Fed will soon wind down its quantitative easing, have hit the Indian currency especially hard and complicated policymaking for RBI Governor Duvvuri Subbarao.

As expected, the RBI left its policy repo rate unchanged at 7.25 percent and kept the cash reserve ratio (CRR), or the share of deposits banks must keep with the RBI, steady at 4 percent, despite falling inflation in recent months.

"It is only a durable receding of inflation that will open up the space for monetary policy to continue to address risks to growth," the RBI said in a statement.

Markets were little affected by the policy decision. The 10-year bond yield briefly fell, while the Sensex extended losses marginally to trade down 0.4 percent. The rupee was trading largely unchanged from pre-statement levels, at around 57.80/81 per dollar.

"The RBI continues to remain very hawkish. It has clearly said external sector imbalance has been weighing on its decision," said Rupa Rege Nitsure, chief economist at Bank of Baroda in Mumbai.

The rupee touched a record low of 58.98 to the dollar last week and has been among the worst performers amid a global selloff from emerging markets as investors worry about India's record-high current account deficit and were unimpressed by government efforts to boost investment.

Last week, Indonesia responded to outflows and market volatility by unexpectedly raising interest rates - the first Asian central bank to do so since 2011 - in a bid to support its currency, while Brazil said it would scrap a tax on foreign exchange derivatives as the real weakened.

A Reuters poll released on Thursday showed 28 of 38 analysts expected the RBI to hold the repo rate steady and 30 of 34 saw the CRR unchanged.

The RBI left rates on hold despite headline wholesale price index inflation that fell to 4.7 percent in May, within its comfort zone, as well as an economy that grew at just 5 percent in the fiscal year that ended in March, its weakest in a decade.

While noting that inflation had fallen, the central bank warned of looming price pressures.

"Upside pressures on the way forward from the pass-through of rupee depreciation, recent increases in administered prices and persisting imbalances, especially relating to food, pose risks of second-round effects," the RBI said.