Tag: Inflation

Sensex Macro-Economic Conditions

Sensex Hits Record High On Overall Firm Macro-Economic Conditions

By LokMarg

Indian stock indices, which have been buoyant over the past several sessions, touched their all-time highs during Wednesday’s trade. The rise in domestic stocks is in tune with the global market rally and firm domestic macro fundamentals.

Sensex touched its record high of 63,588 points to later settle at 63,523 points, up 0.31 per cent.
Strong fundamentals including a firm GDP outlook, moderate inflation and strong purchases by foreign investors saw the markets trading in the green.

“Sensex rallying to an all-time-high is in tune with the global rally in stock markets. Most markets are at 52-week highs. Last year, global markets had corrected discounting a US recession early this year and its impact on global growth and corporate earnings,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

Vijayakumar, however, cautioned a sustained rally beyond the record highs is difficult since current valuations of stocks in India are rich.

Sensex, so far, accumulated 4 per cent returns this year, rising about 23 per cent over the past 12 months.

“Benchmark Indices touched new highs today on the back of a sustained increase in capital expenditure by the government coupled with rising manufacturing PMI (index). Despite the increase in interest rates we are witnessing rising credit demand and India Inc today can boast of much better Balance Sheets than ever before,” said S Ranganathan, head of Research at LKP Securities.

Going ahead, the slow progress of the southwest monsoon may remain a concern for the financial markets. Monsoon, typically, has a bearing on the country’s economic outlook.

Southwest Monsoon hit India on June 8, arriving in Kerala a week after the scheduled onset of June 1.

The monsoon normally hits Kerala on June 1, with a standard deviation of about seven days. It is crucial, especially for the kharif crops. The country has three cropping seasons — summer, kharif and rabi.

Amid the markets posting record trading numbers, Prime Minister Narendra Modi’s ongoing US visit and possible defence deals between the two countries have brought the focus back on the Indian defence stocks. Defence stocks have performed quite well, with many accumulating manifold returns, over the past few years owing largely to the government’s aggressive indigenous defence manufacturing push.

PM Modi is currently in the US on his maiden state visit to the country at the invitation of President Joe Biden and First Lady Jill Biden. After attending Yoga Day celebrations at the UN headquarters later on Wednesday, PM Modi will travel to Washington DC where he will be accorded a ceremonial welcome at the White House on June 22. (ANI)

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RBI Repo Rate Hike

RBI Likely To Announce Another Repo Rate Hike Tomorrow

By LokMarg

The Reserve Bank of India is likely to announce the hike in benchmark interest rate — repo rate — on Thursday after a three-day meeting of its Monetary Policy Committee.

Governor Shaktikanta Das will announce the outcome of the meetings at 10 in the morning tomorrow, followed by a press conference at noon.
RBI started its first bi-monthly review of the new financial year with its Monetary Policy Committee meeting on April 3, April 5 and April 6. The central bank has six bi-monthly reviews of its monetary policy in a year. And, there are out-of-cycle reviews in which the central bank conducts additional meetings in times of emergency.

At the latest Monetary Policy Committee (MPC) of the RBI in early February, it decided to raise the repo rate by 25 basis points to 6.5 per cent to manage inflation. So far, RBI raised the repo rate, the rate at which it lends to banks, by 250 basis points cumulatively since May 2022.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

These meetings are being watched carefully by stakeholders as almost every central bank tries to take stock of the rising inflation, with a fear of a looming mild recession.

According to SBI Research’s latest Ecowrap report, the RBI is expected to pause its interest rate hike and the current 6.5 per cent repo rate could be the terminal rate for now.

The report asserted that the RBI has enough reasons to pause the repo rate hike in the April meeting.

At the latest Monetary Policy Committee (MPC) of the RBI in early February, it decided to raise the repo rate by 25 basis points to 6.5 per cent to manage inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

According to advisory firm Emkay Global Financial Services, RBI is likely to hike the repo rate by 25 basis points (100 basis points is equivalent to 1 percentage point).

“In addition (to the rate hike), the neutral stance will give the MPC flexibility to be non-committal on forward guidance, yet subtly give direction on a ‘pause’,” Emkay said in a report. (ANI)

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Pakistan Mehangai

Inflation Breaches 40% Barrier In Pakistan

By LokMarg

Consumer prices rose significantly in the outgoing week on the back of onions, chicken, eggs, rice, cigarettes and fuel, official data showed on Friday, driving the weekly inflation to over 40 per cent for the first time in over five months, the Dawn reported.

Though week-on-week inflation eased slightly, it still remained high as bananas, chicken, sugar, cooking oil, gas and cigarettes became costlier, the Pakistan Bureau of Statistics (PBS) reported.

As a result, short-term inflation, measured by Sensitive Price Indicator (SPI), jumped to 41.54 per cent on a year-on-year basis for the week ended on Feb 23, rising from 38.42 per cent in the previous week.

The hike in prices is the highest annual rise since the week ending September 8, 2022, when the SPI inflation was 42.7 per cent. And it was above 40 per cent for the first time since Sept 15, when the reading was 40.58 per cent.

Prices of onions, chicken, eggs, cigarettes and fuel see the highest increase, the Dawn reported.

The week-on-week inflation eased to 2.78 per cent from 2.89 per cent a week ago. Of the 51 items tracked, the prices of 33 items increased, six items decreased, whereas those of 12 items remained stable.

The previous week-on-week reading of 2.89 per cent reading was the highest since October 27, when the change in SPI was 4.13 per cent, official data showed.

During the week under review, the items whose prices increased the most compared to the same week a year ago were onions 372 per cent, cigarettes 164.7 per cent, gas 108.38 per cent, chicken 85.7 per cent, diesel 81.36 per cent, eggs 75.81 per cent, Irri 6/9 rice 75.41 per cent, broken basmati rice 74.16 per cent, bananas 72.22 per cent, washed moong pulse 70.39 per cent, and petrol 69.87 per cent.

In contrast, the highest year-on-year fall was recorded in the prices of tomatoes -67.93pc, chilli powder -7.42pc, and electricity charges for the lowest-income group (-6.64pc).

On a week-on-week basis, the biggest change was noted in the prices of gas 108.4pc (for the lowest-income group), cigarettes 76.45 per cent, bananas 6.67 per cent, chicken 5.27 per cent, sugar 3.37 per cent, cooking oil five-litre tin 3.07 per cent, vegetable ghee 2.5 kg pack 2.79 per cent, vegetable ghee 1 kg pack 2.2 per cent, and prepared tea 1.09 per cent.

The products whose prices saw the highest decline compared to the previous week were onions -13.84 per cent, eggs -5.5 per cent, tomatoes -4.23 per cent, garlic -3.03 per cent, LPG -0.81 per cent, and gram pulse -0.21 per cent.

Meanwhile, the headline inflation measured by the Consumer Price Index (CPI) was recorded at 27.6 percent in January. However, the government has been taking strict measures under IMF conditions that are likely to further cool the economy and stoke inflation.

The government has already taken a string of measures, including adopting a market-based exchange rate; a hike in fuel and power tariffs; the withdrawal of subsidies, and more taxation to generate revenue to bridge the fiscal deficit.

As per the Dawn news, officials say the lender is still negotiating with Islamabad over power sector debt and a potential rise in the policy rate, which currently stands at 17 per cent.

The country’s economy has been in turmoil and desperately needs external financing, with its foreign exchange reserves dipping to around USD 3 billion, barely enough for three weeks’ worth of imports.

China this week announced refinancing of USD 700 million, which was received by the State Bank of Pakistan on Friday. (ANI)

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retail inflation June

India’s Wholesale Inflation Numbers Continue To Fall In Jan

By LokMarg

Wholesale inflation in India based on the Wholesale Price Index continued to stay moderate and was at 4.73 per cent (provisional) in January 2023, against the previous month’s 4.95 per cent, official data showed on Tuesday.

The index for fuel and power group (with an overall weightage of 13.15 per cent) declined by 1.39 per cent to 155.8 in January, data showed.
In October, overall wholesale inflation was at 8.39 and has been falling since then. Notably, the wholesale price index (WPI)-based inflation had been in double digits for 18 months in a row till September.

Meanhwile, retail inflation again breached RBI’s upper tolerance band in the month of January 2023, with the Consumer Price Index at 6.52 per cent, government data released on Monday showed.

The retail inflation in rural and urban India was 6.85 per cent and 6.00 per cent, respectively. Among groups, cereals and products, eggs, spices, among others, contributed to the elevation in retail inflation in January.

India’s retail inflation was above RBI’s six per cent target for three consecutive quarters and had managed to fall back to the RBI’s comfort zone only in November 2022.

Since May last year, the RBI has increased the short-term lending rate by 250 basis points, including the latest 25 bps hike, to tame inflation. Raising repo rate helps in cooling demand in the economy and thus helps in managing inflation.

Under the flexible inflation targeting framework, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 per cent range for three quarters in a row.

For the current financial year 2022-23 ending March, retail inflation was projected by RBI at 6.5 per cent, with an average of 5.7 per cent in the January-March 2023 quarter. (ANI)

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Pak Govt Raises Prices

Pak Govt Raises Prices Of Flour, Ghee, Sugar In Utility Stores

By LokMarg

The Pakistan government has increased the prices of wheat flour, sugar, and ghee by 25 to 62 percent for sale through the Utility Stores Corporation (USC) with immediate effect to reduce the impact of untargeted subsidies, reported The Dawn.

The Dawn report said, “The beneficiaries of the Benazir Income Support Programme (BISP) would be exempt from the price increase, while the limit for subsidized purchases from the USC has also been curtailed.”

The USC notified the new rates on Saturday, New Year’s Eve after the country’s federal cabinet approved Finance Minister Ishaq Dar’s recommendation to clear a hybrid model of subsidies involving targeted and untargeted elements of the prime minister’s relief package.

The price of sugar under the new rates has increased to Rs89 per kg from Rs70 per kg, an increase of 27 percent. The price of ghee has increased to Rs375 per kg from Rs75 per kg. The Wheat flour price has increased to Rs64.8 per kg from Rs40 per kg, a 62 percent increase.

Special, targeted subsidies will, however, be available to the poor populations registered in the BISP’s scorecard and below PMT-32 (Proxy Means Test to describe people below the poverty line), the USC said.

They would get wheat flour at Rs400 per 10 kg bag, ghee at Rs300 per kg, and sugar at Rs70 per kg. A discount of Rs15-20 per kg on pulses and rice will be available to them.

“However, their monthly purchasing limits have been capped to avoid the misuse of subsidies. Therefore, BISP beneficiaries under PMT-32 would be allowed to purchase a maximum of 40kg of wheat flour, 5kg of sugar, and 5kg of ghee per month,” reported The Dawn.

The Dawn report said: “All other USC customers would now be provided wheat flour at Rs648 per 10kg bag, and ghee and sugar at Rs375 and Rs89 per kg, respectively.”

There will be a limit on the monthly purchase of these customers. They would not be allowed to avail more than 20kg of flour and Rs3kg each for sugar and ghee per month.

Earlier, they were eligible for 40kg of flour and 5 kg each of ghee and sugar.

The people of this category were earlier eligible for 40kg of flour and 5kg each for ghee and sugar.

The people of Khyber Pakhtunkhwa, according to the USC, will be provided wheat flour at Rs400 per 10kg bag through designated sales points and mobile utility stores.

USC customers before visiting the store will be required to secure their monthly purchase eligibility through an SMS on 5566. They will then be provided with a one-time password and national identity confirmation to avail of the subsidy. (ANI)

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India Inflation 5.88%

India Inflation Dips 11-Month Low In November To 5.88%

By LokMarg

India’s retail inflation rate based on Consumer Price Index declined to 5.88 percent in November from 6.77 percent during the previous month, according to data released on Monday by the ministry of statistics.

This essentially means retail inflation in India is now at an 11-month low and it declined below 6 percent, which is in RBI’s comfort zone.

The central bank had so far already hiked the key policy rate by 225 basis points since May to 6.25 percent to cool off domestic retail inflation that has stayed above the RBI’s upper tolerance limit for over three quarters now.

Under the flexible inflation targeting framework introduced in 2016, the RBI is deemed to have failed in managing price rises if the CPI-based inflation is outside the 2-6 percent range for three quarters in a row.

An out-of-turn meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India was held in early November to discuss and draft the report to be sent to the central government for having failed in maintaining the inflation mandate.

The meeting was called under Section 45ZN of the Reserve Bank of India (RBI) Act 1934, which pertains to steps to be taken if the central bank fails to meet its inflation-targeting mandate. Further details about the special meeting are not officially in the public domain. (ANI)

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Pakistan

Pakistan Suffer 10-20% Rise In Rice and Wheat Prices Amid Floods

By LokMarg

Pakistan has increased the prices of wheat, and flour by up to 10-20 per cent, amid the ongoing inflation in the country, local media reported on Saturday.

Their prices of the wheat and wheat flour skyrocketed by up to 10-20 per cent on the outlook for a possible delay in the sowing of the staple crop in October and a doubling of the grain support price to Rs4,000 per 40/kg by the Sindh government for the next cultivation season, The Express Tribune reported.

The wheat flour price has increased by PKR20-25 per kilogram in a matter of a few days to PKR120-125/kg in Karachi, the newspaper stated citing people and grocery sellers.

On Friday, the Pakistan Bureau of Statistics (PBS) said in its report that the wheat flour price increased on average by 7.51 per cent nationwide to PKR106.38/kg in the week that ended on September 15 compared to PKR98.95 in the prior week which ended on September 8.

Similarly, the wheat (grain) price surged 14 per cent in a week to PKR88/kg compared to PKR77.42/kg in the prior week.

“Wheat has jumped 30 per cent in three months (as per PBS),” Ismail Iqbal Security Head of Research Fahad Rauf said, as per The Express Tribune.

Meanwhile, PM Shehbaz Sharif’s coalition government, which took over in April 2022, is grappling with multiple political and economic crises. Its current account deficit has surged to USD 17.4 billion or 4.6 per cent the size of the economy during the last fiscal year on the rising trade deficit.

A surging current account deficit amid depleting dollar inflows from multilateral and bilateral lenders, and shrinking foreign investment have brought the foreign exchange reserves and rupee under enormous pressure over the last several months.

It has stoked rapid inflation, forced the State Bank to boost borrowing costs to a multiyear high and eroded investor confidence in the economy. (ANI)

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Union Budget 2021-22

Watch – ‘Health, Defence Important; What About Inflation?’

By LokMarg

Common people have given a mixed response to Union Budget 2021-22. While some feel that there is little effort to hold back rising prices in Budget, there are others who feel the financial document has kept its focus on two biggest challenges before the country: outside threat on border and inside dangers of pandemic.

Although relief to senior citizens is appreciated, rise in petrol price has been a big concern as it will only lead to overall increase in commodity prices.

Watch the full video here