WHAT'S NEW. International Developments

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Elwin Nichols
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1 International Developments Bank of Japan Governor Haruhiko Kuroda pledged to forge on with very accommodative monetary policy as he warned that the inflation target remains distant and the current pace of growth looks unsustainable. He added that the BOJ may be able to control rates while buying fewer Japanese government bonds and that the market is still "functioning quite well." The People's Bank of China said it will "enrich" the maturities of reverse repurchase agreements to ensure the stability and neutrality of funding in the financial system. The People's Bank of China said it will step up coordinated oversight of systemically important financial institutions. Bank of Japan board member Yukitoshi Funo said the central bank no longer has a binding time frame for meeting its ambitious inflation target. Bank of England left the Bank Rate at 0.25%and cut its forecasts for economic and wage growth stating its outlook for activity could be further trimmed should Brexit be anything but smooth. Reserve Bank of New Zealand left the official cash rate at 1.75% adding it will maintain its forecast for current rates until the third quarter of 2019, and lowering its projections for inflation. The European Central Bank's ultra-easy monetary policy may actually reduce income inequality in Europe, ECB Vice President Vitor Constancio said. Real GDP increased at an annual rate of 3.0% in the second quarter of 2017, as per the "second" estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.20%. Japan's GDP increased by an annualized 4.0% in the second quarter compared with a revised 1.50% in the previous quarter, extending the longest expansion in more than a decade, as a strong pick-up in demand at home compensated for softer exports. China's trade surplus widened to $46.70 billion in July. Japan recorded a current account surplus of $8.44 billion in June. The US CPI rose 1.70% in July. China's producer price index rose 5.50% in July from year earlier while the 32

2 International Developments consumer price index increased 1.40%, way below the government ceiling of 3%. Consumer price growth in the euro area remained steady at 1.30% in July. China's foreign-exchange reserves rose $23.90 billion to $3.081 trillion in July as the yuan strengthened and economic growth remained robust. Moody's kept its forecast for G20 GDP growth at just over 3% in 2017 & 2018, but warned of geopolitical risks, U.S. protectionism and spillovers from global monetary tightening and China's deleveraging measures. Indian Economy GDP at constant ( ) prices in Q1 of is estimated at `31.10 lakh crore, as against `29.42 lakh crore in Q1 of , showing a growth rate of 5.70% as against growth of 7.90% in Q1 of Quarterly GVA at basic price grew 5.60% as against growth of 7.60% in Q1 of India registered a fiscal deficit of `63,211 crore during July 2017, a decline of 6% over the fiscal deficit of `67,164 crore in July The fiscal deficit during July 2017 accounted for 92.40% of the budgeted estimates of `5,46,532 crore for India's exports grew 3.94% in July 2017 to $22.54 billion from $21.69 billion in July Imports rose 15.42% to $33.40 billion from $29.45 billion. The overall trade deficit for April-July 2017 is estimated at US$34.07 billion as compared to US$10.80 billion during April-July The Index of Industrial Production (IIP) contracted 0.10% in June 2017 against a growth of 8.0% in June The IIP registered a growth of 2.0% in April-June 2017 as against a growth of 7.10% in April-June The eight core industries with a combined weight of 37.90% in the Index of Industrial Production (IIP) grew 2.40% in July 2017 as against 3.10% in July Cumulative growth for April-July was 2.50%, as against 6.0% growth in April-July Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for July 2017 on point to point basis are 2.41%, 2.17% and 2.36% (6.66%, 5.39% and 6.07% in July 2016). Inflation rates (final) for Rural, Urban and Combined for June 2017 are 1.52%, 1.41% and 1.46% respectively. 33

3 Indian Economy The annual rate of inflation, based on monthly WPI, stood at 1.88% (provisional) for the month of July 2017 as compared to 0.90% (provisional) for June 2017 and 0.63% during July The annual rate of inflation based on final index stood at 2.26% for May 2017 as against 2.17% reported earlier. The y-o-y inflation measured by monthly CPI-IW stood at 1.79% for July 2017 as compared to 1.08% for June 2017 and 6.46% during July Point to point rate of inflation based on the CPI-AL and CPI-RL decreased from 0.92% and1.14% in June 2017 to 0.80% and 1.02% respectively in July India's holding of US Treasury Securities at the end of June 2017 stood at $ billion vis-à-vis $ billion at the end of May FDI into India grew by 37% to $10.40 billion during the first quarter of FY18 as compared to $7.59 billion FDI during the first quarter of FY17. Direct Tax collection during April-July , net of refunds, stood at `1.90 lakh crore (19.50% of the total Budget Estimates) which is 19.10% higher than the net collections for April-July The Union Cabinet approved setting up of an alternative mechanism for merger of public sector banks. The government tabled the Medium-term Expenditure Framework Statement setting forth a three-year rolling target for the expenditure indicators with specification of underlying assumptions and risks involved. India's tax-to-gdp ratio is expected to rise close to 12% by FY20. India will benefit from demonetisation in the medium and long-term, even if overall growth takes a hit in two or three quarters, Finance minister Arun Jaitley said. Indian companies raised more than `49,000 crore through private placement of bonds in July, taking the total to `2.20 lakh crore in FY18. Merging India's public sector banks will improve their ratings because of efficiencies of scale and improved corporate governance, Moody's stated adding that its outlook for the Indian banking system is stable on improved prospects for asset quality. 34

4 Reserve Bank of India: (Source: The Central Government re-appointed Dr. Nachiket Madhusudan Mor as a Member of the Eastern Area Local Board of RBI and also nominated him to be a Director of the Central Board of Directors of RBI. RBI notified the distribution of portfolios amongst the Deputy Governors. RBI transferred surplus to the Government of India amounting to ` billion for the year ended June 30, RBI notified The Reserve Bank Commercial Paper Directions, RBI notified Tri-Party Repo (Reserve Bank) Directions, RBI clarified on quality control measures in currency note printing. RBI introduced `200 denomination banknotes. Sovereign Gold Bonds issued on July 28, 2017 became eligible for trading with effect from August 8, RBI placed on its website the report of the Household Finance Committee. RBI notified on issue of Letters of Credit and Bank Guarantees on behalf of government. RBI notified on Core Banking Solution (CBS) requirements for Urban Cooperative Banks (UCBs). NBFCs can also use the ratings of Infomerics Valuation and Rating Private Limited for the purpose of rating their fixed deposit portfolios with IVR BBB as the minimum investment grade credit rating. RBI launched the September 2017 round of inflation expectations survey of households. RBI launched the September 2017 round of consumer confidence survey. RBI launched survey on Computer Software and Information Technology Enabled Services Exports: RBI launched survey on International Trade in Banking Services (ITBS): round. RBI launched the 79th round of the quarterly Industrial Outlook Survey for Q2: RBI released its Annual Report for

5 Reserve Bank of India: (Source: RBI released the minutes of the Monetary Policy Committee meeting August 1-2, RBI released Lending Rates of Scheduled Commercial Banks based on data received during the month of July RBI released data on India's international trade in services for June RBI released the data on sectoral deployment of bank credit for July RBI released 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: June 2017'. RBI released the results of forward looking Surveys. RBI released data on sectoral deployment of bank credit for June RBI released the data on overseas direct investment for July RBI released the data on ECB/ FCCB/RDB for July RBI released the data on performance of private corporate business sector during RBI announced a new series on its website called 'Mint Street Memos' in the form of brief reports and analysis on contemporary topics. RBI placed on its website the third release under the series 'Mint Street Memos' titled Market Reaction to the Banking Regulation (Amendment) Ordinance, CCIL RBI organized a seminar on 'Agricultural Debt Waiver - Efficacy and Limitations'. The FBIL T-Bills Curve and the FBIL CD Curve was launched, with CCIL as the Calculation Agent on August 23, CCIL's CLS segment registered the highest number of deals settled for a day of 7420 deals on September 5,

WHAT'S NEW. International Developments. The Bank of Canada raised its key interest rate by 25 basis points to 1.25%.

WHAT'S NEW. International Developments. The Bank of Canada raised its key interest rate by 25 basis points to 1.25%. International Developments The Bank of Canada raised its key interest rate by 25 basis points to 1.25%. The Bank of Japan boosted its bond buying plan and reassured markets that monetary policy will remain