dfa-15-jan

Daily Financial News Analysis – 15th Jan’20 – Free PDF Download

 

Retail Inflation

  • High inflation at a wrong time.
  • December 2019: consumer price inflation 7.35%
  • Rise in prices of food commodities in general and particularly onions.
  • Stagflation: a condition of slow economic growth + inflation
  • Headline inflation number is driven mainly by food inflation at 14.12% — it was 10.01% in November and -2.65% in December 2018.
  • Onion pushed up price inflation in vegetables to a huge 60.50% compared to December 2018.
  • Prices of other food items such as meat and fish (up 9.57%), milk (up 4.22%), eggs (up 8.79%) and some pulses were also on the upswing.

  • These are a largely seasonal rise in prices and are driven mainly by supply-side factors and the prices will reverse once the supply shortfall is addressed.
  • State Bank of India’s research team: minus the increase in prices of onion, potato and ginger, headline CPI inflation would be just 4.48%
  • Core inflation: removes the CPI components that can exhibit large amounts of volatility from month to month, which can cause unwanted distortion to the headline figure.
  • Core inflation has only inched up marginally from 3.5% in November to 3.7% in December.
  • If core inflation were to shoot up or if food inflation does not cool down in the next couple of months.
  • Also, the effects of the increase in telecom tariffs, rail tickets and in fuel prices need to be closely watched.
  • Reserve Bank of India’s monetary policy review in February 2020.
  • The central bank stood pat on rates in the December policy precisely due to fears of inflation.
  • A lot would also depend on the fiscal arithmetic that would emerge from the budget to be presented on February 1.

RBI’s deputy governor

  • Michael Debabrata Patra has been appointed deputy governor of the Reserve Bank of India.
  • Patra, who is looking after the monetary policy department as the executive director, will be the fourth deputy governor of the RBI.
  • Patra is likely to retain the monetary policy department, which was handled by Acharya, as the deputy governor.

Dividend from Oilcos

  • The government is seeking a record ₹19,000 crore in dividend from state oil companies.
  • About 5% more than last year.
  • ONGC and Indian Oil, the biggest in the club, have been asked to pay about 60% of the total.
  • Executives also complained that the government is seeking high dividend even though its stake in the companies have come down.
  • ONGC has been asked to pay a dividend of about ₹6,500 crore
  • Indian Oil is expected to shell out ₹5,500 crore
  • BPCL ₹2,500 crore
  • GAIL ₹2,000 crore
  • Oil India ₹1,500 crore
  • Engineers India ₹1,000 crore

India-US

  • India and the US are preparing for President Donald Trump’s maiden visit to India in the last week of February.
  • Both sides look to seal a trade deal with limited scope ahead of US presidential polls.
  • A trade deal with India and China can boost Trump’s prospects as he seeks re-election.
  • 2+2 Ministerial Dialogue last month had in many ways laid the foundation for the key visit as a number of key pacts in defence and civilian sectors were signed on the occasion.
  • Trump’s visit will also boost the US administration’s support for India’s moves in Jammu and Kashmir.
  • India and the US are understood to have resolved most of the important trade issues.

Fund of Funds’ for MSMEs

  • MSMEs contribute around 29% to the country’s GDP.
  • Union Minister of MSMEs Nitin Gadkari  has targeted taking this figure to 50% in five years.
  • It would be modelled on the lines of an FoF suggested by former Sebi chairman UK Sinha-headed committee on MSME.
  • The committee had in June 2019, recommended setting up of a government-sponsored fund to help the sector.
  • The government is also likely to extend the interest subvention scheme for MSMEs, announced by Prime Minister Narendra Modi ahead of the Lok Sabha elections, in November 2018.
  • The prime minister had announced 2% interest subvention for all GST registered MSMEs on fresh or incremental loans.

 

 

 

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