US government shutdown: How it will affect India

The White House ordered government agencies to begin shutting down after the Democratic-led Senate and Republican-controlled House refused to back down in a clash over scaling back President Barack Obama's landmark health care law as the price for essential federal funding.

The shutdown threatens to slow growth and spook investors worldwide. While, the shutdown will impact a lot of US citizens, economic affairs secretary Arvind Mayaram said that as of now, a shutdown of the US government is not likely to have a major impact on the Indian economy. Here's how the shutdown will affect Indians.


1) New visa issuance: Indian IT companies earn a big chunk of their revenues from the US so a prolonged shutdown may affect their business. TV Mohandas Pai of Manipal Global Education told NDTV that if the shutdown in the US goes beyond 15 days, it will impact issue of new visa. However, since the visas are user-funded, they may continue for now. Fresh year for US visas start on October 1, Mr Pai said, so a delay of 10-15 days is ok.

2) Rupee may come under pressure: The Indian rupee has recovered sharply in September, but it could come under pressure according to eminent economist Arvind Virmani. "While this uncertainty lasts in the US, there will be hesitation in giving new orders in investment and exports. This will weaken our exchange rate," Dr Virmani said.

3) Sensex could be volatile: Financial markets could become skittish, Dr Virmani said. Central banks of all countries are aware of it and they will try to not have disruptions including our central bank of India, Dr Virmani added.

4) Global markets: If there is volatility in global markets, it will also affect Indian stocks. The Dow Jones Average in the US fell for the seventh day in eight sessions overnight.

5) Global economy: Dr Virmani said it's unfortunate that every time global economy looks like it will recover, we have this unfortunate thing in the US. It's very sad for everybody, he added.

US government shutdown: What it means?

The White House ordered government agencies to begin shutting down late on Monday after Congress failed to find a compromise on a government spending bill before a midnight deadline.

The order was issued 10 minutes before the US government officially ran out of money after a day of angry brinkmanship between the Republican-controlled House of Representatives and the Senate, where Democrats have the majority.

Much of the impact or relative lack of disruption is determined by whether agencies are partly funded by industry user fees or deemed to be essential services.

Here is a roundup of some of the impact that would be felt:

Federal workers: As many as 1 million federal employees will face unpaid furloughs or missed paydays, according to the president of the American Federation of Government Employees, which represents 670,000 union members.

The White House: The Executive Office of the President will furlough about 1,265 staff and retain 436 as excepted workers. Among the staff retained will be 15 to provide "minimum maintenance and support" for the White House. Executive agencies will be reduced to skeleton staff, including four at the Council of Economic Advisors.

Economic data: The United States will stop publishing much of its economic data, including the closely watched monthly employment report.

U.S. Securities and Exchange Commission: The SEC would continue reviewing applications for initial public offerings (IPOs) and monitoring markets as normal in the early weeks of a government shutdown, and can continue operating fully for a few weeks, a spokesman said.

Department of Health and Human Services: Signup for the new U.S. health exchanges under the Affordable Care Act due to start on October 1 will proceed. Across the vast department and its sub-agencies, about 52 percent of staff will be furloughed - some 40,512 workers. Among the programs shuttered would be the Centers for Disease Control's annual seasonal flu influenza program. The National Institutes of Health would not admit new patients in most circumstances.

U.S. Food and Drug Administration: Some 55 per cent of the FDA's employees will be working. Of those reporting to work, 74 per cent will be funded with fees paid to the FDA by the industries it regulates. The FDA's expert advisory committee meetings, which recommend whether the agency should approve new products, will for the most part continue. The next scheduled panel is on October 8 to recommend whether to approve expanded use of certain pacemakers and defibrillators from Medtronic Inc.. The FDA will cease most of its food safety, nutrition and cosmetics activities, such as routine inspections of plants and facilities. It will also be unable to monitor imports, and will cease certain compliance and enforcement activities.

U.S. intelligence agencies: Substantial numbers of intelligence personnel could be placed on leave, but those assigned to vital national security missions, including supporting the president, and collecting data from informants or spy devices such as eavesdropping systems or satellites, will generally remain on the job.

Shawn Turner, chief spokesman for National Intelligence Director James Clapper, said: "The immediate and significant reduction in employees on the job means that we will assume greater risk and our ability to support emerging intelligence requirements will be curtailed."

National Parks: National parks would close, meaning a loss of 750,000 daily visitors and an economic loss to gateway communities of as much as $30 million for each day parks are shut, according to the non-profit National Parks Conservation Association.

Defense department: All military personnel would continue on normal duty status, but half of the Defense Department's 800,000 civilian employees would be placed on unpaid leave. Pentagon has said it will halt military activity not critical to national security.

Officials have said military personnel, who are paid twice a month, would receive their October 1 paychecks but might see their October 15 paychecks delayed if no funding deal is reached by October 7.

Internal revenue service: Most of the federal tax agency's 90,000 employees would be furloughed. Taxpayers who requested an extension beyond the April 15 deadline to file their 2012 taxes must do so by October 15 and will be able to file these returns even if the IRS is still shut down then.

Federal Reserve and other financial agencies: Bank regulators, including the Federal Reserve and the Consumer Financial Protection Bureau, would stay open because they do not rely on Congress for funding. The Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency pay for themselves and would remain open. Loans guaranteed by Fannie Mae and Freddie Mac will still be available during the government shutdown. Both firms, which were seized by the U.S. government in 2008 as rising mortgage losses threatened them with insolvency, will continue normal operations. The Federal Housing Administration, which offers mortgage lenders guarantees against homeowner defaults, will have limited operations.

Justice department: Fewer than 18,000 of the department's 114,486 employees would be furloughed, and if the furlough is prolonged, some of those could be brought back to work. Criminal litigation would continue under a government shutdown, while civil litigation would be curtailed or postponed as much as possible "without compromising to a significant degree the safety of human life or the protection of property," the department said in its contingency plan.

Courts: The U.S. Supreme Court would probably operate normally, as it has during previous shutdowns, but a spokesman declined to share the high court's plans. Federal courts would remain open for about 10 business days if the government closes on October 1, and their status would be reassessed on or about October 15.

U.S. trade representative's office: Already squeezed by automatic spending cuts imposed by the so-called sequester, the USTR office has reduced travel to the 41 countries where there are concerns about intellectual property, Trade Representative Michael Froman said.

Environmental protection agency: The agency would be one of the hardest hit, with less than 7 percent of its employees exempt from furlough. The broad-based shutdown of all but emergency services would delay rule-making, potentially including finalization of renewable fuel volume requirements for 2014.

Agriculture department: USDA meat inspectors would stay on the job. Statistical reports would not be published, and the important October 11 U.S. crop report could be delayed depending on how long a shutdown lasts. USDA has said its website, USDA.gov, "will go dark and be linked to a 'splash' page," denying access to historical data and other information.

Travel: Air and rail travelers in the United States should not feel a big impact, since passport inspectors, security officers and air traffic controllers will all continue to work as usual.

Washington sights: Most popular tourist spots in the nation's capital would close, including the Lincoln Memorial, the Library of Congress, the National Archives, the National Zoo and all Smithsonian Museums. The zoo's live animal webcams would be disabled. All animals will continue to be fed and cared for.

US government shuts down, Obama blames Republicans

WASHINGTON: For the first time in nearly two decades, the US government staggered into a partial shutdown on Monday at midnight after congressional Republicans stubbornly demanded changes in the nation's healthcare law as the price for essential federal funding and President Barack Obama and Democrats adamantly refused.

As Congress gridlocked, Obama said a "shutdown will have a very real economic impact on real people, right away", with hundreds of thousands of federal workers furloughed and veterans' centres, national parks, most of the space agency and other government operations shuttered.

He laid the blame at the feet of House Republicans, whom he accused of seeking to tie government funding to ideological demands, "all to save face after making some impossible promises to the extreme right wing of their party".

House Speaker John Boehner responded a short while later on the House floor. "The American people don't want a shutdown and neither do I," he said. Yet, he added, the new healthcare law "is having a devastating impact. ... Something has to be done."

There are few issues Republicans feel as passionately about as the healthcare reform, which they have dubbed "Obamacare". They see the plan — intended to provide coverage for the millions of Americans now uninsured — as wasteful and restricting freedom by requiring most Americans to have health insurance.

The US stock market dropped on fears that political gridlock between the White House and a Republican Party influenced by hardcore conservative tea party lawmakers would prevail, though analysts suggested significant damage to the national economy was unlikely unless a shutdown lasted more than a few days.

A few minutes before midnight, White House budget director Sylvia Burwell issued a directive to federal agencies to "execute plans for an orderly shutdown". While an estimated 800,000 federal workers faced furloughs, some critical parts of the government — from the military to air traffic controllers — would remain open.

Still, a shutdown would inconvenience millions of people who rely on federal services or are drawn to the nation's parks and other attractions.

Many low-to-moderate-income borrowers and first-time homebuyers seeking government-backed mortgages could face delays, and Obama said veterans' centres would be closed.

Some critical services such as patrolling the borders and inspecting meat would continue. Social security benefits would be sent, and the government healthcare programmes for the elderly and poor would continue to pay doctors and hospitals.

US troops were shielded from any damage to their wallets when Obama signed legislation assuring the military would be paid in the in the event of a shutdown.

The state department would continue processing foreign applications for visas, and embassies and consulates overseas would continue to provide services to American citizens.

Any interruption in federal funding would send divided government into territory unexplored in nearly two decades. Then, Republicans suffered grievous political damage and President Bill Clinton benefited from twin shutdowns in 1995 and 1996. Now, some Republicans said they feared a similar outcome.

If nothing else, some Republicans also conceded it was impossible to use funding legislation to squeeze concessions from the White House on health care. "We can't win," said Senator John McCain, the 2008 Republican presidential candidate.

On a long day and night in the Capitol, the Senate torpedoed one Republican attempt to tie government financing to changes in the health care law. House Republicans countered with a second despite unmistakable signs their unity was fraying — and Senate Democrats promptly rejected it, as well.

Defiant still, House Republicans decided to re-pass their earlier measure and simultaneously request negotiations with the Senate on a compromise. Some aides conceded the move was largely designed to make sure that the formal paperwork was on the Senate's doorstep as the day ended.

Whatever its intent, Senate Majority Leader Harry Reid rejected it. "That closes government. They want to close government," he said of House Republicans.

As lawmakers squabbled, Obama spoke bluntly about House Republicans. "You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway, or just because there's a law there that you don't like," he said. Speaking of the health care law that undergoes a major expansion on Tuesday, he said emphatically, "That funding is already in place. You can't shut it down."

There were some signs of fraying within Republican ranks. For the first time since the showdown began more than a week ago, there was public dissent from the Republican strategy that has been carried out at the insistence of tea party-supported Republican House members working in tandem with Republican Senator Ted Cruz of Texas.

Republican Representative Charles Dent said he was willing to vote for stand-alone legislation that would keep the government running and contained no healthcare-related provisions. "I would be supportive of it, and I believe the votes are there in the House to pass it at that point," the fifth-term congressman said.

Other Republicans sought to blame Democrats for any shutdown, but Dent conceded that Republicans would bear the blame, whether or not they deserved it.

Hours before the midnight deadline, the Senate voted 54-46 to reject a proposal by House Republicans for a temporary funding bill that would have kept the government open but would have delayed implementation of the health care law for a year and permanently repeal a tax on medical devices that helps finance it.

House Republicans countered by scaling back their demands and seeking different concessions in exchange for allowing the government to remain open. They called for a one-year delay in a requirement in the healthcare law for individuals to purchase coverage or face financial penalties.

The same measure also would require members of Congress and their aides as well as the president, vice president and the administration's political appointees to bear the full cost of their own health care coverage by barring the government from making the customary employer contribution.

The vote was 228-201, with a dozen Republicans opposed and nine Democrats in favour.

Unimpressed, Senate Democrats rejected the House measure on another 54-46 party line vote about an hour later.

Obama followed up his public remarks with phone calls to Boehner and the three other top leaders of Congress, telling Republicans he would continue to oppose attempts to delay or cut federal financing of the health care law.

The prospect of a shutdown led US stocks to sink as Wall Street worried the budget fight could lead to something much worse for the economy — a failure to raise the nation's borrowing limit.

Republicans are likely to take up the healthcare fight again when Congress must pass a measure to increase the borrowing cap, which is expected to hit its $16.7 trillion ceiling in mid-October.

Obama has vowed not to negotiate over the debt ceiling, noting that a default would be worse for the economy than a partial government shutdown.

The US risks a market-rattling, first-ever default on its obligations if Congress fails to raise that limit.

Both a shutdown and a default would be politically risky ahead of next year's congressional elections.

Some Republican leaders fear the public will blame their party for the shutdown. But individual House members may face a greater risk by embracing a compromise. Many represent heavily partisan congressional districts, and voters in Republican primaries have ousted lawmakers they see as too moderate.

Despite the government shutdown, a crucial part of the health care plan takes effect: enrolment in new healthcare exchanges that will enable millions of uninsured Americans to purchase plans from private insurers, many of whom are eligible for federal subsidies to reduce premiums. That's because most of the program is paid from funds not subject to congressional appropriations.

US shutdown will not hit visa sections

A threatened partial shutdown of the US government will not hit foreign nationals lining up for visas to visit the United States, a US official said on Monday.

"Activities carried out by the Bureau of Consular Affairs will continue domestically and abroad, so that means they will continue visa issuance as well as our passport operations," State Department spokeswoman Jen Psaki said.

US lawmakers have until midnight to prevent the first US government shutdown in 17 years by agreeing on budget legislation, but a deal appeared remote Monday.

Psaki also predicted there would be little immediate effect on the State Department's operations if the shutdown goes into force, and most staff would also not be given mandatory furloughs.

"If a government shuts down, initially, Department of State and USAID activities can be sustained on a limited basis for a short period of time," she told reporters.

She would not detail how long she was talking about, whether days or weeks, saying it was something "our budget wonks are still punching through."

And Psaki added that a trip by US secretary of state John Kerry to Tokyo and Indonesia would go ahead as planned later this week.

"The State Department and USAID are national security agencies and will take steps to continue working to advance the national interest, even in the event of a shutdown and reduced staff," Psaki said.

Part of the reason why the department would be able to keep going was that its funding for the fiscal year 2013, which began on October 1, 2012, was only received in March.

So "we will have residual funds available beyond today as a result," Psaki said.

Most of its aid and assistance programs were also funded over several years, while some like visa services were financed through the fees charged, she said.

"Because we're able to sustain our operations on a limited basis, the vast majority of normal functions and operations will continue," Psaki stressed.

US government agencies begin shutting down for first time in 17 years

Washington: The United States lurched into a dreaded government shutdown early Tuesday for the first time in 17 years, triggering agency closures and hundreds of thousands of furloughs as Congress missed a deadline to pass a budget.

Ten minutes before midnight bells rang throughout a deeply divided Washington, and after a day of furious brinkmanship President Barack Obama's Democrats and rival Republicans, the White House ordered federal agencies to initiate their shutdown procedures.

"We urge Congress to act quickly to pass a Continuing Resolution to provide a short-term bridge that ensures sufficient time to pass a budget for the remainder of the fiscal year," Management and Budget director Sylvia Mathews Burwell said in a memo to agencies.

Lawmakers had hardly haggled over budgetary matters in the final frantic hours before the deadline -- the end of the fiscal year. Instead, they argued over whether to link the budget pact with efforts to delay Obama's health care law.

"This is an unnecessary blow to America," Senate Majority Leader Harry Reid said on the Senate floor two minutes after the witching hour.

As a mood of crisis enveloped Washington no compromise emerged to head off the first such disaster since 1996.

Instead, the Democratic-led Senate and Republican House of Representatives played a futile game, sending funding bills between them that were doomed to fail.

Obama accused Republicans of holding America at ransom with their "extreme" political demands, while his opponents struck back at his party's supposed arrogance.

Around 800,000 government workers are expected to be sent home, government services are to be slashed and monuments such as the Statue of Liberty and national parks will close.

The crisis is rooted in an attempt by "Tea Party" Republicans in the House to make passage of a new government budget conditional on thwarting Obama's signature health reform law.

The Democratic-led Senate and the president have repeatedly rejected this strategy and urged Republicans to pass an extension to government funding to temporarily stave off the shutdown.

In a deeper sense, the shutdown is the most serious crisis yet in a series of rolling ideological skirmishes between Democrat Obama and House Republicans over the size of the US government and its role in national life.

"One faction of one party in one house of Congress in one branch of government doesn't get to shut down the entire government just to re-fight the results of an election," Obama said, referring to his own re-election.

"You don't get to extract a ransom for doing your job, for doing what you're supposed to be doing anyway," he said, in a stern televised statement at the White House.

But on a day of accelerating brinkmanship, Republicans doubled down on their bid to gut Obamacare, as the health care law, the most sweeping social legislation in decades, is known.

With just three hours to go, House lawmakers passed a bill that would delay the individual mandate, which forces all Americans to buy health insurance under the new law, for a year.

"It's a matter of fairness for all Americans," said Republican House speaker John Boehner, who has struggled to control the riotous anti-government Tea Party faction of his caucus.

But the Senate, which must also sign off on budget measures, immediately rejected the bill.

That led House leaders, less than an hour before midnight, to move to go to conference, meaning the two chambers would appoint formal negotiators to thrash out a budget deal.

That process was already showing signs that it would take hours to coordinate, and Reid sent the Senate into recess until 9:30 am Tuesday.

"We said we'd go to conference if they wouldn't shut the government down, but they're shutting the government down," number two Senate Democrat Dick Durbin told AFP.

Obama warned that a government shutdown could badly damage an economy which has endured a sluggish recovery from the worst recession in decades.

"A shutdown will have a very real economic impact on real people, right away. Past shutdowns have disrupted the economy significantly," Obama said.

Consultants Macroeconomic Advisors said it would slow growth, recorded at a 2.5 percent annual pace in the second quarter.

A two-week shutdown would cut 0.3 percentage point off of gross domestic production.

It would also have a painful personal impact on workers affected -- leaving them to dip into savings or delay mortgage payments, monthly car loan bills and other spending.

Stocks on Monday retreated as traders braced for the shutdown. The Dow Jones Industrial Average was down 128.57 points (0.84 percent) to 15,129.67.

Markets are likely to be even more traumatized if there is no quick solution to the next fast approaching crisis.

Republicans are also demanding Obama make concessions in the health care law to secure a lifting of the current $16.7 trillion debt ceiling, without which the United States would begin to default on its debts for the first time in history by the middle of October.

Polls show more Americans would blame Republicans for the shutdown than Democrats, leaving Boehner torn between his party's wider political interests and a vocal section of his own party.