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India’s Forex reserves increase by $1.25 billion

According to the Reserve Bank of India’s weekly statistical supplement, India’s foreign exchange (Forex) reserves have increased by $1.25 billion to reach $371.13 billion from $369.88 billion as on April 21, 2017. The current reserves are just short of a lifetime high of USD 371.99 billion reached in the week to September 30, 2016.

Components

The components of India’s Foreign Exchange Reserves include:

  • Foreign currency assets (FCAs)
  • Gold
  • Special Drawing Rights (SDRs)
  • RBI’s Reserve position with International Monetary Fund (IMF)

FCAs constitute the largest component of the Forex Reserves. It was augmented by $1.23 billion to $347.48 billion as on April 21, 2017. FCAs consist of US dollar and other major non-US global currencies. It also comprises of investments in US Treasury bonds, bonds of other selected governments, deposits with foreign central and commercial banks.

The gold reserves stand at $19.86 billion.

SDRs’ value has increased $5 million to $1.45 billion.

RBI’s reserve position with the IMF stands to $2.33 billion.

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NALCO Disinvestment: Government raises Rs 1200 crore

The Central Government has raised Rs. 1,200 crore by divesting 9.2% of paid-up capital in National Aluminum Company Ltd. (NALCO). With this disinvestment, Government’s shareholding in NALCO has become 65.37%.

Disinvestment involves the sale of Government’s share in the Public Sector Undertakings. In disinvestment, the government sells only a part of the equity which is essentially less than 51% so that ownership and management rights can be possessed by the Government itself.

Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, has set a record target of Rs. 72,500 crore to be realized through disinvestment in this fiscal. This target follows the 2016-17 all-time high achievement of Rs. 46,247 crore.

For the fourth time in a row, retail investors out-performed institutional investors. It shows that retail investor backs disinvestments of CPSEs. In fact it satisfies one of the objectives of disinvestment policy of the government which aims to make PSU shareholding as broad-based as possible so that nation’s wealth is shared by its citizens. In this disinvestment exercise, the government for the first time has used the green shoe option (over-subscription option) since the modified OFS procedure has been put in place by SEBI in 2016. DIPAM exercised the green shoe option owing to the overwhelming response from the market.

Greenshoe option is a special provision in an IPO prospectus. Green shoe option permits the underwriters to sell more share to the investors than originally planned by the issuer. This option is exercised if the demand for a security issue is higher than the expected.

DIPAM

The Department of Disinvestment was set up as a separate Department on 10th December 1999 and functions as one of the Departments under the Ministry of Finance since 2004. In 2016, the Department of Disinvestment was renamed as Department of Investment and Public Asset Management (DIPAM). DIPAM advises the Union Government in the matters of the financial restructuring of PSUs and also for attracting investment through capital markets. It deals with all matters relating to the sale of Union Government’s equity through private placement or offer for sale or any other mode in the erstwhile Central PSUs.

NALCO

National Aluminium Company Limited (NALCO) is a Navratna CPSE functioning under Ministry of Mines. It was established on 7th January 1981. It has integrated and diversified operations in mining, metal and power.

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Global economy to grow 3.5% in 2017: IMF

The IMF has predicted that the global economy would grow at 3.5% in 2017, up from 3.1 % last year, and 3.6% in 2018. This year’s projection of IMF is marginally higher than what was stated in their last update. The improvement in this year’s projection springs up from good economic news in Europe and Asia, notably from China and Japan. As per IMF, momentum in the global economy has been building up since the middle of the last year making it reaffirm its previous forecasts of higher growth for this year and next year.

However, it has warned that despite these signs of strength, many countries are likely to continue to struggle this year as well. IMF has warned that weather conditions and civil unrest would threaten the low-income countries with mass starvation. Particularly, in Sub-Saharan Africa, IMF expects the income levels to fall slightly. Further, commodity exporters in the Middle East, Africa, and Latin America are likely to struggle with low levels of commodity prices since early 2016.

Way forward

IMF has suggested that policy interventions must address these disparities to ensure the stability of an open, collaborative trading system that benefits all countries. It has called for the need of credible strategies in many countries to place public debt on a sustainable path. It has asked the World to make a renewed multilateral effort to tackle common challenges in an integrated global economy.

IMF

IMF came into existence on December 27, 1945. The IMF works to improve the economies of its member countries. IMF was established to promote international economic cooperation, international trade, employment, and exchange rate stability. It also makes its resources available to member countries to meet the balance of payments needs. Its headquarters is in Washington, D.C.

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