Retail inflation rises to five-month high of 7.41%, industrial output falls
India’s consumer price inflation jumped to a five-month high of 7.41 percent in September because of higher food prices, adding pressure on the Reserve Bank to raise policy rates aggressively. Food inflation soared to a 22-month high of 8.4 percent, led by sharper price rise for vegetables, cereals, and spices. Industrial production shrank for the first time in 18 months, declining 0.8 percent in August from a year earlier due to a slump with heavy rain slowing mining and construction activity.
Why it’s important: This was the ninth month in a row that retail inflation has remained above the Reserve Bank’s upper tolerance limit of 6 percent. It shows no signs of cooling at a time when wholesale inflation remains in the double digits. The economy is bound to stumble unless there’s price stability.
Budget to sustain growth and tame inflation, says finance minister
The next federal budget will have to be carefully structured to sustain growth and contain inflation, finance minister Nirmala Sitharaman said, adding that GDP growth could be around 7 percent in 2022-23. The statement follows a sharp downward revision by the IMF to 6.8 percent in its latest outlook from 7.4 percent estimated earlier. High energy prices were among the biggest problems facing the economy in the near future, Sitharaman said.
Why it’s important: India is facing the double challenge of high inflation and slowing economic growth, similar to other major economies, at a time of monetary policy tightening and slowing global demand. Sustaining the growth momentum will not be an easy task.
Byju’s to fire 2,500 staff, promises to achieve profitability by March
Edtech firm Byju’s will lay off nearly 2,500, or 5 percent, of its employees as part of an optimization plan. The company is targeting profitability by March 2023 and bring the K10 subsidiaries — Meritnation, TutorVista, Scholar and HashLearn — under the India business unit. Aakash and Great Learning would function separately. In June, Byju’s laid off about 600 employees at its group companies to drive cost efficiency, it has then said.
Why it’s important: The move by India’s most valuable startup comes amid a funding winter and steep losses. It has been under intense scrutiny after an 18-month delay in posting 2020-21 financial results. The company remains deeply in the red.
Reserve Bank using currency swap trades to stabilise the rupee’s slide
The Reserve Bank of India is seen as relying on buy-sell currency swap trades to neutralise the liquidity impact of conventional spot market interventions, helping the rupee to stabilise itself against the dollar while at the same time ensuring adequate rupee availability to boost economic growth.
Why it’s important: The currency market appears to be stable as of now. The central bank has already tweaked rules for unhedged currency exposures. The rupee is expected to slide further as the flight to dollar assets continues.
Government to regulate messaging apps like WhatsApp and Telegram
The department of telecom will only regulate only communication apps such as WhatsApp, Signal, Google Meet, Facetime and Telegram, among others, and not apps that offer content and e-commerce services under the proposed telecom bill. The regulation of messaging apps will be done to ensure security and will not focus on revenue measures such as license fees.
Why it’s important: According to the government, any two-way communication between an app and its users constitutes a telecom service, which may be regulated. The draft telecom legislation has been put up for public consultation.
Oil marketers to get Rs 22,000 crore in compensation for cooking gas losses
The cabinet has approved a one-time payment of Rs 22,000 crore to oil marketing companies to compensate them for their losses in selling cooking gas below cost. Between June 2020 and June 2022, international prices of LPG rose by around 300 percent, but domestic LPG prices were raised by only 72 percent to insulate consumers from price fluctuations.
Why it’s important: The state-owned oil marketers have posted huge losses in the June quarter due to shrinking marketing margins of auto fuels and cooking gas. The government’s oil subsidies might rise further if crude prices do not moderate in the near future.
New rules for asset reconstruction firms to shake up industry, improve transparency
The Reserve Bank of India’s revised norms for asset reconstruction companies will raise the bar for governance and disclosures but may trigger a shake-up in the industry comprising 29 players due to higher capital requirements and stringent diligence. The central has raised the minimum capital requirement to Rs 300 crore from Rs 100 crore earlier.
Why it’s important: Some of the smaller asset reconstruction companies may find it challenging to meet the enhanced norms. This could lead to consolidation in the industry.
Despite market volatility, several Nifty 500 stocks show resilience
The Sensex and Nifty, which comprise the biggest of India’s blue-chip firms, have been wobbly in the past six months but some stocks have shown resilience. Out of top 500 stocks on the NSE, 30 percent are trading above three key trend indicators, pointing to bullishness. Most of these stocks trading above the three key indicators are in sectors such as consumers, pharmaceuticals, capital goods, infrastructure, public sector enterprises, and banking.
Why it’s important: Several mid-cap stocks are still bullish because of retail appetite. The prospects for several large-cap stocks on the Sensex and Nifty have been uncertain because of sustained selling by overseas investors.
Haryana bans production at Maiden Pharmaceuticals, citing several breaches
Haryana halted all production at Maiden Pharmaceuticals, while the Delhi government prepared to test cough syrups made by other firms as well in a widening crackdown on potentially fatal drugs prompted by the Gambian children’s death tragedy. The actions came after police in Gambia said three more children died of acute kidney injury after consuming cough syrups, taking the toll to 69. The WHO said the deaths are linked to four formulations made by Maiden.
Why it’s important: Haryana’s drugs regulator said Maiden Pharma has not been sticking to good manufacturing processes. The African tragedy has cast a bad light on India’s entire pharma sector.
Private infrastructure investments see a return to animal spirits
Private infrastructure investors are increasingly preferring a model for projects designed for the private entity to bear financial risks, which is a sign of the sector regaining its animal spirits, said Padmanabhan Raja Jaishankar, managing director of state-run India Infrastructure Finance Company.
Why it’s important: The risk appetite of private entities over infrastructure seems to be rising. A higher momentum on infrastructure projects will provide a boost to India’s growth story.
