Friday, June 29, 2012

Will Euro leaders stay divided?

The Euro moved above a 3 week low as the markets are braced for the EU summit and as speculation grows ahead of possible ECB action. The Dollar has weakened against its major peers and the Aussie has advanced.

Earlier today the Euro had bounced off of a three week low against the U.S. Dollar. This was as a result of short-covering ahead of the European Union summit starting later in the day and on heightened expectations of more monetary intervention from the European Central Bank (ECB).

Most analysts expect the European leaders to struggle to agree on necessary steps to solve the region's debt crisis during the two day summit, however there is an element, among some market players, that are looking at playing it safe by squaring their positions in the event of there being a surprise breakthrough.

The EU leaders appear more divided than at any time since 2010, when the debt crisis erupted in Greece and then  spread over the Euro zone. They are due to discuss a plan for closer European integration at the summit.

German Chancellor, Angela Merkel, has been especially reluctant to heed calls from Spain and Italy, who are advocating emergency action in order to lower their rapidly rising borrowing costs, and she has shunnedthe idea of joint Euro zone debt.

The Euro rose 0.35% to $1.2511, having recoveredfurther from the three-week low of $1.24413 hitearlier in the week.

Now economists have heightened expectations that theEuropean Central Bank will take some measures in theweek to come.

Market players are increasingly betting that the ECB will intervene either by cutting rates or by announcing large long-term fund injections, after its policymeeting to be held in the new week. This is especially so after data released yesterday had shown that German inflation has eased to an 18 month low.

Just a few hours before the summit is set to start today, Italy will hold an auction of up to 5.5 billion Euro bonds and its borrowing costs are expected to rise above 6%. The 185-day bills sold yesterday achieved arate of 2.957%, while the zero-coupon, two year notes offered on June 26th yielded 4.712%, both being thehighest this year.

In contrast to a gloomy outlook over the Euro,U.S. economic data released yesterday was more upbeatwith durable goods orders and pending home sales both beating market expectations. This helped to boost risksentiment in the broader financial markets.

As a result, the Australian Dollar was lifted around0.3% earlier today to a one-week high of $1.0121 anda four month high against the Euro at A$1.2331.

The U.S. Dollar weakened against most of its majorcounterparts and was down 0.4% to the Yen at79.40 Yen, mainly due to month end selling byJapanese exporters.

Since the end of March, the Euro has dropped 10% tothe Yen and 6.2% against the Dollar. So far the Dollar has climbed 3.6% in 2012 versus the Euro and 3.3%against the Yen

S. 271(1)(c) penalty not levaiable for breach of s. 50C

Chimanlal Manilal Patel vs. ACIT (ITAT Ahmedabad)

The assessee sold land of which he was the owner for Rs.36 lakhs and offered capital gains on that basis. The AO reopened the assessment u/s 147 on the ground that the assessee ought to have taken the consideration at the market value of the land as per s. 50C. The assessee accepted and offered capital gains as per s. 50C. The AO levied penalty u/s 271(1)(c) which was confirmed by the CIT (A) on the ground that the assessee’s action of offering capital gains u/s 50C was after the s. 148 notice and not voluntary. On appeal by the assessee to the tribunal, HELD allowing the appeal.

JPM whaling loss could jump to $9B.

 JPMorgan's (JPM) trading loss could reach $9B, the NYT reports, with red ink piling up as JPM moves faster than expected to exit its money-losing positions. Jamie Dimon was way off when he warned in May that the initial $2B loss could double in coming quarters. JPM will disclose more details in its July 13 earnings report. Shares were -5.4% premarket.
'PIIGS'. This was the name coined for Portugal, Italy, Ireland, Greece and Spain. These were the countries in the Euro zone that posed to be a serious threat to the existence of the zone itself. Greece has an unstable economy. Spain has insufficiently capitalized banks. Ireland has huge deficits. But Italy the other 'I' in the equation has none of this. Yet its borrowing costs are one of the highest. So one wonders as to why this is the case. The big reason behind this is its erratic political leadership of the past. The former leader of the country had pushed its finances and deficits in the same direction as that of the other three struggling countries. Fortunately for Italy, the leadership changed this year. But even now, Italy is close to the brink of a disaster. A lot rests on the new leader. If he is able to sort things out, the country would be able to come out of this relatively unharmed. But if he follows his predecessor's footsteps, then Italy is headed the Ireland, Greece and Spain way. Unfortunately considering Italy's size, it would be too big for the Eurozone to bail out. So as Peter Spiegel of Financial Times rightly suggests- 'The really big show in Europe is actually Italy.'

Tuesday, June 26, 2012

“Education cess” is “additional surcharge” & is included in “tax” under DTAA. If DTAA caps the rate of “tax” payable, cess is not payable by foreign assessee

DIC Asia Pacific Pte Ltd vs. ADIT (ITAT Kolkata)
 The assessee, a Singapore company, offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12 of the India-Singapore DTAA respectively. The AO held that the assessee was also liable to pay surcharge and education cess in addition to the tax. The CIT (A) upheld the assessee’s claim that surcharge was not leviable though he rejected the claim with regard to cess. On further appeal by the assessee, HELD allowing the appeal:

Euro Hits 2-Week Low, Yen Bounces Back

The Euro went on the defensive after dropping close to a 2-week low against the US Dollar amidst fears that another European summit would be powerless in resolving the region's crippling debt crisis.
Meanwhile, the Japanese Yen bounced back from a 2-month low against the US Dollar but, the Yen could be hampered by political uncertainty due to a lack of support for the Japanese Prime Minister's tax hike plan.
Moody's has cut the long-term debt and deposit ratings of 28 Spanish banks by between one and four notches. The move follows this month's downgrade of the country's sovereign debt. The only banks rated above the sovereign are Banco Santander (SAN) and Santander Consumer Finance, due to their diversification and sufficient Tier 1 capital.

Consultancy fees, if not taxable as “fees for technical services”, is not taxable as “other income”

DCIT vs. Andaman Sea Food Pvt Ltd (ITAT Kolkata)
 The assessee paid consultancy fees to a Singapore company on which tax was not deducted at source. The AO held that the said consultancy fees were assessable as “fees for technical services” u/s 9(1)(vii) and that the failure to deduct TDS meant that the amount had to be disallowed u/s 40(a)(ia). This was reversed by the CIT (A). On appeal by the department to the Tribunal, HELD dismissing the appeal:

Monday, June 25, 2012

No s. 14A disallowance if there is no tax-free income

CIT vs. M/s.Delite Enterprises (Bombay High Court


The assessee, a partner in a firm, borrowed funds and advanced it to the firm on terms that the firm would pay interest if it made a profit. For one year, the firm paid interest which was offered as income by the assessee while for the second year it did not pay interest as it made a loss. The assessee claimed the interest paid on the borrowing as a deduction u/s 36(1)(iii). The AO disallowed the claim on the ground that as the borrowings had been invested in the firm and the income from the firm was exempt u/s 10(2A), the interest expenditure was not allowable u/s 14A. This was reversed by the CIT (A). On appeal, the Tribunal upheld the CIT (A) on the ground that as there was no exemption claimed u/s 10(2A) by the assessee and there was no tax-free income, s. 14A could not apply. The department filed an appeal in the High Court in which it argued that as the profits derived by the assessee from the firm was exempt u/s 10(2A), the interest on the borrowed funds used to invest in the firm was disallowable u/s 14A. HELD by the High Court dismissing the appeal:

In so far as Question (A) is concerned, on facts we find that there is no (tax-free) profit for the relevant assessment year. Hence the question as framed would not arise.

Euro & Yen Drop, Dollar Remains Buoyant

The markets got off to a slow start, with the US Dollar holding on to profits gained last week ahead of another Euro summit meeting that could see the troubled Euro Zone edge closer to containing its debt crisis.
Meanwhile, the Japanese Yen dipped against the US Dollar slipping to a 2-month low against the greenback.

Sunday, June 24, 2012

The Impact of Gold Imports on Growth.

There is not much good news on the export front, due largely to the global debt crisis. But things have improved on the import front. We are importing less, because imports are getting more expensive. In particular, our gold imports have dramatically declined. In part, this is due to increased taxes on gold imports, and in part it is due to higher gold prices. According to the latest reports, gold imports have fallen around 50% from a year ago. This means we are importing half as much gold as before.
How will this help growth? Consider the following: Last year, our gold imports represented approximately 3.5% of total GDP. As imports are a drag on growth, this effectively means that gold imports result in a 3.5% subtraction in GDP. Thus, if gold imports fell to 2.5% of GDP, then we'd see an increase in growth of 1% as a result.
Now it makes sense why having lower gold imports is good for GDP growth. If as projected our gold consumption declines by half, this could add between 1% and 2% to our GDP growth rate, as compared with the previous year. This is a very large number, considering that it is a single commodity.
When GDP growth comes out for April-June, we should see the positive impact of lower gold imports. Of course, this does not mean that growth will necessarily go up, simply because other factors also affect growth and they could be stronger than the impact of the reduction in gold imports.

Thursday, June 21, 2012

Euro On The Up, Dollar Remains Resilient


The US Dollar held firm close to its one-month low against a basket of major currencies in early trading on Thursday, after the Federal Reserve delivered another dash of monetary stimulus.

While the Fed did not launch an aggressive program of buying bonds outright, it did go on to state that it was ready to do more if necessary.

Meanwhile, in Asia, all eyes are on the latest China manufacturing data due out later.

Greenback outlook remains uncertain

The Fed expanded its Operation Twist and so has left its options open for future easing. Market focus for the Euro today is on Spanish bond auctions and services and manufacturing data.

Yesterday the Fed stopped short of implementing a more aggressive programme of buying bonds outright, or QE3, which had been expected by some traders.

The central bank had decided to expanded its "Operation Twist" by $267 billion and run through the year, not ending in June. What this means is, that it will sell that amount of short term securities in order to purchase longer term securities, with a view to keeping long term borrowing costs down.
In the opinion of many analysts, the outlook for the greenback remains uncertain as more market players are likely to position for fresh stimulus from the Fed, after the central bank downgraded its U.S. growth forecast.

The U.S unemployment rate remains far above its target and is unlikely to reduce until 2014. The economic recovery, such as it is, remains fragile.

The Dollar index remained above a one month low of 81.186 and earlier today stood at 81.579.
The Euro was down on the day, off from a one-month peak of $1.2748 set on Monday, at $1.2675.

Manufacturing woe continues from Europe to China.

 Factory activity in the eurozone and China continued to shrink in June, with the flash eurozone manufacturing PMI falling to 44.8 from 45.1 in May. Germany's print dropped to 44.7 from 45.2 while China's declined to 48.1 from 48.4, marking the 8th consecutive month of contraction.

Wednesday, June 20, 2012

Euro Dips Ahead Of Fed Meeting, Yen Shows Strength

The Euro eased against the Dollar but managed to hold on to gains achieved the previous day, with investors firmly focused on whether the US Federal Reserve will adopt further monetary stimulus to support the economy's recovery.
The Euro finished lower against the safe-haven Yen, while the US Dollar also slipped against the Japanese currency.

Japan records first ever deficit with the EU.

 Japan's trade deficit widened to ¥907.3B ($11.47B) in May from ¥520.3B in April and came in well above consensus. Exports rose 10% on year and imports 9.3%. Most notable was Japan's ¥11.1B deficit with the EU, the first since records began in 1979, highlighting the global impact of the recession in the region. Shipments to the bloc fell 0.9% but jumped 38% to the U.S.

Tuesday, June 19, 2012

Euro Focus Shifts To Spain, US Dollar Drops


The Euro recovered some of its losses after Spain's borrowing costs spiked on worries over its banks, ahead of a debt sale likely to see borrowing rates rise further.
While the Euro made modest gains, the US Dollar index dropped against a basket of currencies, including the Japanese Yen, after hitting a 1-month low yesterday.

Spanish yields hit 15-year record.

Yields soared in Spain's latest bond auction, in which it sold €3.04B in 12- and 18-month debt. The average rate on the 1-year paper spiked to 5.07% from 2.99% at the previous sale in May, while the yield on the 18-month jumped to 5.11% from 3.3%. The rate on the 12-month is the highest since 1997. The sale came amid a report that a second, more detailed audit of Spanish banks has been delayed until September from July.

Monday, June 18, 2012

S. 206AA PAN law read down to not apply to assessees without taxable income.

A Kowsalya Bai vs. UOI (Karnataka High Court)

The assessee, whose income was below taxable limit, filed Form 15G and requested that no TDS be deducted on the interest on fixed deposit. However, she was informed that in view of s. 206AA inserted by FA 2009, TDS would have to be deducted in the absence of PAN. The assessee filed a writ petition to challenge s. 206AA as being arbitrary and unconstitutional to the extent that it compelled persons with no taxable income to obtain a PAN. HELD upholding the challenge

Spanish bond yields surge past 7% on bad-loan data.

 Yields on Spain's 10-year bonds rose 24 basis points to an unsustainable 7.11% following data showing that non-performing loans held by the country's banks hit an 18-year high of 8.72% in April. Italian yields were +10.6 bps at 6.03% at midday in Europe, while a rally in EU shares and U.S. futures - inspired by the Greek election results.

Sunday, June 17, 2012

Rendering of services is not “supply of knowledge or information” to be “royalty”

KPMG India Pvt Ltd vs. DCIT (ITAT Mumbai)

The assessee was engaged as a consultant by Essar Oil Ltd to provide consultancy services in connection with sale of its energy business. As the consultancy required high level technical and industry knowledge, the assessee engaged KPMG LLP, USA & KPMG Consulting LP, Canada for rendering professional services and paid Rs. 20 lakhs & Rs. 13 lakhs respectively. The AO held that the said fees constituted “royalty” u/s 9(1)(vi) & Article 12 and as there was no TDS, the amount was to be disallowed u/s 40(a)(i). This was reversed by the CIT(A). On appeal by the department, HELD dismissing the appeal:
The professional services rendered does not fall in the definition of “royalty” in Article 12 of the DTAA. It was purely a professional service for consultancy which were rendered outside India and not for supply of scientific, technical, industrial or commercial knowledge or information. Thus, there was no liability to deduct TDS and consequently no disallowance u/s 40(ia) can be made.

Euro Edges Higher But Outlook Remains Negative.

The Euro edged higher against the US Dollar amidst worries about debt turmoil in Spain and Italy. Also ahead are elections in Greece which keeps the single currency under pressure.
Against the Japanese Yen, the Euro held firm close to overnight highs but the outlook remains negative as Italy prepares for a 4.5 billion Euro bond sale later today.

The Euro had been rising the past couple of days, ahead of crucial Greek elections this Sunday and following disappointing U.S. retail sales data which weighed on the Dollar.

Nevertheless, the Euro remains under strong pressure. A sharp rise in German bunds in the past few days has heightened concerns that Germany, the Euro Zone's largest economy, cannot itself bear the rising costs of the debt crisis should Italy need assistance. Signs are there that investors may be cutting exposure to the entire Euro area.

On Wednesday, Moody's declared a three-notch downgrade of Spain's ratings. Analysts expect that this may augment the recent stress in the European bond markets and most likely put the Italian bond auctions due today under even greater scrutiny.

Italy is today due to sell up to 4.5 billion Euros of three, seven and eight year bonds, and its borrowing costs are predicted to rise sharply.

The sale follows the yield on its one year notes having hit a six month high of 3.97% at a debt auction yesterday. The Italian government is seeking to convince investors that the country won't be the next to need a bailout.

Italy remains a concern as reforms undertaken by its unelected government have stalled and to date, there is no clear strategy having emerged in Europe to stop the broader debt crisis.

Wednesday, June 13, 2012

Eurozone industrial output falls again.

The contraction in the eurozone's industrial production accelerated in April vs. March, falling 0.8% on month and 2.3% on year. It's all very depressing .The largest decreases were in Portugal, Italy and, notably, Germany (-2% on month).

Tuesday, June 12, 2012

Spanish Worries Re-Surface, Yen The New Safe-Haven

The Euro struggled to cover ground on Tuesday as more worries over Spain's hasty bank bailout added to fears about elections that may determine Greece's future in the Euro Zone.
The Euro was down against the Japanese Yen, with the major players exiting long positions on the pair. The US Dollar also inched down against the safe-haven Yen, coming off the previous day's high.
Is Italy Next?
While Spain's banking bailout poses more questions than answers, the market's focus shifts now also to upcoming Greek elections and to Italy as the next potential risk. The Yen moves down as the IMF declares it to be moderately overvalued.
Now, market players are already looking beyond Spain, the Euro zone's fourth largest economy, and focusing on debt ridden Italy as being potentially next in line for a bailout.
Many analysts are of the opinion that should Italy need saving, then the whole Euro project would be in grave danger and that Euro zone countries would then look to Berlin to save Italy.
Italy faces a test on Thursday, when it will put up as much as 4.5 billion Euros of fixed rate bonds at its mid month auction.
All these factors saw the Euro trade below its Monday high of $1.2672, at $1.2499 earlier today. This though was still a safe distance from the two year low of $1.2288 hit earlier this month.

Sunday, June 10, 2012

A subsidiary created for Indian business is a PE of the foreign parent

In Re Aramex International Logistics Pvt Ltd (AAR)
The applicant, a Singapore company, entered into an agreement with an Indian group subsidiary company for the performance of shipment transport services within & outside India. The agreement was on a principal to principal basis. The applicant claimed that as it had no office, equipment, employee or agent in India and did not carry out operations in India, it did not have a PE in India and no part of the receipts from outbound and inbound consignments was taxable in India. HELD by the AAR:

(i) A “permanent establishment” is something which enables a non-resident to carry on a part of its whole business in a particular country. The Aramex group could not have done business in India without a presence in India. This presence in India can be achieved through an independent entity or through a subsidiary. If the entity is an independent & uncontrolled entity, then there is no PE if the requirements in Article 5(2) of the DTAC are not satisfied. However, if a 100% subsidiary is created for the purpose of attending to the business of the group, the subsidiary must be taken to be a PE of the group in India applying common sense.

(ii) As the subsidiary has a fixed place of business in India and the business of the applicant is carried on through it, the definition in Article 5(1) is satisfied. The subsidiary is also a PE under Article 5(8) because it habitually secures orders in India wholly for the Aramex group and concludes contracts for the group. The exception in Article 5(10) that the fact that a subsidiary carries on business shall not of itself constitute that company a PE of the foreign company does not apply because it is not a case of the subsidiary carrying on “its business” in India but it is a case of the entire group carrying on business in India through the subsidiary. Also, the fact that the agreement refers to the subsidiary as “independent” and “non-exclusive” is not relevant because it is a mere camouflage to screen the fact that the subsidiary is really a PE of the applicant’s group in India.

The debt crisis in Europe is getting worse by the day.

And now it seems it is the turn of the big boys to ask for help. Spain which is struggling to prop up its ailing banks without asking for external bailout is planning to ask Europe for help with recapitalizing its banks. Spain will be the fourth country to seek assistance since the Euro zone's debt crisis began. The move comes after rating agency Fitch downgraded the long-term debt of Spain by 3 notches to BBB from A, with negative outlook. Spain is forecasted to remain in recession throughout the rest of 2012 and 2013 against a mild recovery in 2013 previously estimated. According to Fitch, the cost to the Spanish state of recapitalizing banks stricken by the bursting of a real estate bubble, recession and mass unemployment could be between US$ 75-US$ 125 bn or 6 to 9% of Spain's Gross Domestic Product. The higher figure would be in a stress scenario equivalent to Ireland's bank crash.

the Fed chief has decided to 'wait and watch' and has put QE3 on the backburner.

Will he announce QE3? Or won't he? This was the question foremost in the minds of most global investors before the US Fed  Ben Bernanke's testimony yesterday. For the time being, the Fed chief has decided to 'wait and watch' and has put QE3 on the backburner.  Especially since the Fed is of the view that the US economy was picking up at a 'moderate' pace. We are not sure if that is really the case. With massive debt and high unemployment, the sustainability of a recovery seems doubtful. However, we believe that introducing third round of quantitative easing is not really going to help matters either. The Fed introduced 2 rounds of quantitative easing (QE) after the financial crisis. While there was some sort of growth reported as a result of these measures, it proved to be more of a short term nature. Some basic and big issues continue to haunt the US. So a third round also would probably not have achieved much either other than signal the downfall of the dollar going forward.

U.S. banks face $60B gap under Basel III.

 America's 19 biggest banks are at least $50B short of meeting Basel III requirements under new rules that the Fed approved yesterday, with smaller lenders about $10B short. The Fed surprised the sector by voting in favor of applying the complex regulations to all 7,307 U.S. banks, including even the smallest lenders

Composite contract cannot be split to exempt profits from offshore supply of goods. A joint contract constitutes an AOP despite separate responsibility of parties

Alstom Transport SA vs. DIT (AAR)

The Applicant, a foreign company, entered into a consortium agreement with three other cpmpanies for the submission of a joint bid in response to the Bangalore Metro Rail Corporation Ltd’s (BMRC) tender for “design, manufacture, supply, installation, testing & commissioning of signaling/ train control and communication systems”. The consortium parties agreed to be jointly and severally liable to BMRC for the performance of all obligations under the contract. However, the respective obligations of the parties was split up & each was separately responsible for its own profit/loss. The bid was accepted by BMRC and a contract between BMRC and the Consortium was entered into. The applicant filed an applicant for advance ruling and claimed, relying on Ishikawajima–Harima 288 ITR 408 (SC), Hyundai Heavy Industries 291 ITR 482 (SC) & Hyosung Corp 341 ITR 18 (AAR), that the income derived by it from offshore supply of plant and materials was not taxable in India as the title to the goods had passed, and payment was received, outside India. It was also claimed that as each consortium member had separate responsibility and was accountable for its own profit/ loss, the fact that the contract with BMRC was joint, did not make the consortium an “AOP”. HELD by the AAR rejecting the plea:

Wednesday, June 6, 2012

Germany industrial output sinks.

 Industrial output in Germany and Spain fell faster than expected in April, underscoring how the economies in the eurozone's core and periphery are suffering. Germany's output fell 2.2% on month vs. consensus of -1% and Spain's slumped 8.3% on year vs. -6.5% expected. Meanwhile, eurozone Q1 GDP was flat on quarter, confirming the initial estimate, but fell 0.1% on year vs. unchanged initially

The declining rupee will have a 'limited' impact on India's sovereign rating.

The  Indian rupee has been falling, recording new lows. This has had an adverse impact on corporate profitability as well as government finances. However, as per ratings agency Moody's Investor Service, the declining rupee will have a 'limited' impact on India's sovereign rating. The reason for this is that only 7% of total government debt is from overseas. As a percentage of GDP (Gross Domestic Product), this comes to about 5%. Comparatively, the private sector is set to be more hurt. The rupee depreciation has significantly increased the cost of repaying their foreign currency borrowings. Indian corporates have about US$ 96.6 bn in external debt.However, only 40-60% of this is estimated to have been hedged. Even then, the exposure of the private sector to external debt is "relatively low" at 16% of GDP. This means that the impact on the sovereign ratings due to this would not be too substantial. Fortunately, India's exposure to external debt is not too high. If that had been the case, India would have witnessed its own debt crisis akin to the troubled Eurozone economies.

Tuesday, June 5, 2012

Information cannot be disclosed u/A 28 of DTAA in absence of strong connection between requested information & India’s tax laws.

Comptroller of Income Tax v AZP (Singapore High Court)

 
The Indian tax authority seized documents from an Indian national which were believed to indicate the existence of undeclared income deposited in a company’s bank accounts in Singapore. Pursuant to Article 28 (1) of the India-Singapore DTAA, the Indian tax authority sent a request for information to its Singapore counterpart (the Comptroller of Income-tax). In support of the request, the Indian tax authority relied on unsigned transfer instructions allegedly issued by the Indian national as evidence that the Indian national remitted monies to the Singapore Company’s bank accounts. The Comptroller filed an application in the High Court u/s 105J of the Singapore Income-tax Act for an order requiring the bank to produce the company’s bank records. HELD dismissing the application:

Economy is slowing down with no sign of relief.

If we were to exclude flat index in the last week, markets closed negative for 5th consecutive week.  This has been accompanied by INR hitting an all time low if 56.46.
4QFY12 GDP growth at 5.3% came well below expectations; this was the lowest growth in nine years taking it below the Lehman low of 5.6%. This was led by significant upward revision in the base quarter leading to higher base. Al the sub sectors of GDP witnessed slowdown with services sector slowing down by 1% to 7.9%. The only good news is Brent is trading below $100.

Monday, June 4, 2012

India fares poorly compared to Asian peers

Over last several months, the inherent weaknesses of the Indian economy have come to the fore. The government been has putting the blame of India's deteriorating economic condition on the eurozone crisis. But several indicators hint that the India's current predicament is majorly the result of its own doing. Today's chart of the day compares the current account deficit of India with some Asian peers. It is evident from the chart that India has the highest current account deficit among major Asian economies. India's current account deficit has been adversely affected mainly due to high dependence on fuel imports, high subsidies and a falling rupee.