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India’s manufacturing PMI gains steam in Oct, expands for 4th straight month

Growth in manufacturing activities in India continued gathering momentum, remained in the expansion territory for the 4th straight month in October, a private survey showed on Monday.

The seasonally-adjusted IHS Markit Purchasing Managers’ Index came in at 55.9 in October, rising from 53.7 in September. Do note, a PMI number greater than 50 indicates expansion in business activity. A number less than 50 shows contraction.

Data shows that panelists continued to report rising prices for several materials & transportation. Selling charges had to be lifted again as overall input costs increased at the sharpest rate since February 2014. Pollyanna De Lima, Economics Associate Director at IHS Markit, said “Manufacturing activity will continue to expand throughout the third quarter of fiscal year 2021/22 should the pandemic remain under control.”

New orders also posted an increase in October. In fact, the spike in new orders was quite sharp, the survey shows, and expanded at the fastest rate in seven months. And as such, factory output too saw a sharp recovery & was the increased at the fastest pace since March. “Upbeat business confidence and projects in the pipeline should also support production in the coming months,” De Lima added.

Highlighting the inflation concerns, De Lima noted that the input cost inflation accelerated substantially in October, to a near eight-year high amid strong global demand for scarce raw materials. The overall rate of input cost inflation surged to a 92-month high. A vast majority of the manufacturers left their fees unchanged, which led to ‘moderate overall inflation’, the report shows.

“Despite the overall improvement in operating conditions, jobs failed to increase. This was often linked to sufficient capacity to deal with current workloads and government norms surrounding shift work,” De Lima added.

Cooking oil prices cool off ahead of festive season

Cooking oil prices in India have started cooling from the previous month’s highs, in part due to the reduction in import duty on edible oils and the Centre’s directive to the states to maintain stocks and prevent hoarding of the essential kitchen commodity.

The wholesale price of soyabean

oil

has dropped to Rs 129 per litre from Rs 142 a month ago, while that of palm oil has come down to Rs 121 from Rs 130. Sunflower oil now costs Rs 138 per litre, down from Rs 147. But mustard oil prices are expected to rule firm until the new mustard crop comes in in February-March, industry executives told ET, adding that a sudden spike in prices of edible oils in the upcoming festival season is unlikely.

“Prices of imported oils have corrected in the range of 5 per cent to 9 per cent in the last one month due to reduction in import duty. The recent diktat from the Centre to the state governments will keep the prices stable during the upcoming festive season. Prices have started cooling off and we do not see a sudden spike in prices,” said Sandeep Bajoria, chief executive of Sunvin Group, a vegetable oil broker. “The kharif oilseeds have started arriving to the market, which too will keep a check on soyabean oil prices.”

On October 12, the Uttar Pradesh government issued a stock limit order, which will is expected to considerably bring down the prices of edible oils. Other states like Rajasthan, Gujarat and Haryana may impose stock limits soon, trade sources said.

The Centre on Monday asked the states to speed up the process of issuing stock limit notifications for edible oils in view of the upcoming festival season, which starts on November 4 with Diwali.

To provide near-term relief to consumers, the government has reduced import duty on crude edible oils—first in September and then again in October this year—helping bring down to zero. This will be in effect till March 2022.

“However, the government’s move may not provide much relief to the consumers, as the reduction in import duty by India has been offset by a rise in global prices of crude edible oil,” said BV Mehta, executive director of the Solvent Extractors Association of India. “Malaysian palm oil prices have shot up significantly, which is impacting our prices too, as we depend on imported oils.”

India Ratings & Research (Ind-Ra) has indicated that the imports of edible oils could touch 13.15 million tonnes for the November 2020–October 2021 period, and edible oil inflation will remain elevated in the near term.

DHL Express to increase rates by 6.9% in India

NEW DELHI: DHL Express, an international express courier service provider, today announced the average price increase of 6.9 per cent in India with effect from January 1, 2017.

“DHL Express…announced its annual general average price increase, effective January 1, 2017. In India, the average price increase will be 6.9 per cent,” the company said in a statement.

“DHL Express is focused on being the quality leader in the international time definite delivery business,” DHL Express CEO Ken Allen was quoted as saying in the statement.

“Our annual price increase supports this aspiration by allowing us to invest in a truly world-class network that generates significant value for our customers. Our prices reflect both the value embedded in our service and our uncompromising long-term commitment to service quality,” Allen said.

“DHL continues to invest in India and its global network to improve delivery speed, efficiency and provide superior service quality to our customers. The annual rate increase will support ongoing expansions, quality enhancements while helping to neutralise the impact of inflation and the depreciating rupee,” DHL Express India SVP and Country Manager R S Subramanian said.

DHL Express adjusts its prices annually, taking into account inflation, currency dynamics and other rising costs, such as expenses related to compliance with enhanced security regulations, in each of the more than 220 countries and territories that it serves.

Price adjustments will vary from country to country, depending on local conditions, and will apply to all customers where contracts allow.

Unilever India warns of inflationary pressures after profit jump

Hindustan Unilever, the Indian arm of the global consumer goods titan, posted quarterly profit in line with market estimates, boosted by a broad economic recovery that was overshadowed by warnings of inflationary challenges ahead.

Net income for the Mumbai-based unit of Unilever rose 9% to Rs 2,190 crore ($291 million) in the quarter ended Sept. 30, according to an exchange filing. That nearly matched the average 22 billion rupees forecast by analysts in a survey by Bloomberg. Revenue advanced 11% from the year-ago period to Rs 12,520 crore while costs jumped 12%.

Benefits from a rebounding economy as lockdown-weary Indians finally started stepping out were offset by the unprecedented rise in raw material prices for the maker of Dove soap and Lipton tea. The company management indicated that these inflationary were likely to persist, spooking investors.

The “quarter witnessed a sequential improvement in trading conditions, albeit remained challenging with unprecedented levels of input cost inflation and subdued consumer sentiments,” Chairman and Managing Director Sanjiv Mehta said in a statement. “We haven’t seen this kind of inflation for many years,” he later told reporters on a media call.

Hindustan Unilever’s shares slipped 4% at the close of Mumbai trading — the most since early May — paring this year’s climb to 6.3% and under performing the rise of the benchmark S&P BSE Sensex gauge, which has climbed almost 30% in 2021.

Energy Costs
High inflation is “bound to continue” as energy and commodity costs escalate, its Chief Financial Officer Ritesh Tiwari said on the call. “It will remain firm, ” he said, adding that the freight rates have “increased multi-fold.”

In July, the parent group warned that costs for raw materials that go into shampoo, detergents and ice cream were increasing at the fastest pace in more than a decade, forcing Unilever to scale back profitability goals.

“Calibrated price increases and laser sharp focus on savings has helped us protect our business model,” Mehta said in the statement.

While high input prices have been eating into its margins, Hindustan Unilever has benefited from a rebounding local economy and ease on movement restrictions as daily Covid infections slipped to less than one-tenth of the fresh cases reported in early-May. The company reported “high double-digit growth” in skin care and cosmetics as mobility improved.

Some Cheer
The incoming festive season may also bring some cheer. Retailers in India are anticipating rising demand in coming weeks which may boost the consumer goods sector. Companies are adding staff in warehouses as well as in their delivery hubs as Indians next month celebrate their first Diwali — the Hindu festival of lights — since the country’s two massive Covid outbreaks confined millions to their homes.

The Reserve Bank of India expects the months-long festival season to bolster urban demand in the second half of the financial year to March 2022, while rural demand will likely be buoyed by a robust monsoon and record food grain production.

India’s finance minister told Bloomberg Sunday that the country is in no hurry to unwind the Covid-era stimulus.

But that isn’t immediately reassuring for Hindustan Unilever’s investors. Besides the profit booking in the market, “there is a concern on margins and rising input costs,” Kranthi Bathini, a strategist at Mumbai-based consultancy WealthMills Securities Pvt., said on the latest quarterly earnings.

( Originally published on Oct 19, 2021 )

MPC to revise stance only after it sees a durable recovery

The members of RBI‘s monetary policy committee –MPC– in the minutes published on Friday have acknowledged an uneven recovery in the economy , expressing their concerns on growth outlook which is uncertain largely due to many global factors with inflation being addressed more by supply side measures. Monetary policy will align to inflation only when out-gap closes sometime in FY’23.

Members unanimously voted for a status quo in rates. But the only dissenting voice was by Prof Jayanth Varma of IIM, Ahmedabad who voted against the accommodative stance as risks to growth and inflation are well beyond the control of the MPC, but they warrant a heightened degree of flexibility and agility.

The MPC kept the policy repo rate unchanged at 4.0 per cent. The reverse repo rate too was maintained at 3.35 per cent. The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target of 2-6 per cent going forward.

” The biggest risks to India’s macroeconomic prospects are global and they could materialise suddenly” said RBI deputy governor Micahel Patra in his minutes adding that he was awaiting stronger evidence on demand-led inflationary pressures.” Until then, congenial financial conditions need to be in place”.

Members aknowledged that considerable uncertainty about output gap in pandemic times remains. ” If no new disruptions to growth emerge, output gap will close sometime in 2022-23″ said Mridul Sagar, executive director RBI. ” Monetary policy should start to gradually reposition to lowering underlying inflation and inflation expectations next year, especially if inflation edges up from the energy and services side amid sticky goods core inflation”

Investment activity has picked up over the levels seen 2020-21 but yet to reach the 2019-20 levels. The RBI has projected the economy to grow at 9.5 per cent in FY’22. The MSME and the informal sector firms face greater challenges in operating in conditions in which input price pressures are significant and consumer demand is still recovering. “Improving efficiency of logistics services and reduction in indirect taxes would play an important role in easing such exogenous shocks on the cost of transport services and overall inflation” said Shashanka Bhide, senior advisor at NCAER, justifying an accommodative monetary policy stance and the need for broader policy support.

“Overall, elevated global commodity prices, persisting supply disruptions, increasing inflation expectations and reviving domestic demand were cited as among the key risks to the evolving inflation outlook” said Rahul Bajoria, chief India economist at Barclays Capital.

The minutes also underscores the role of supply side factors in managing inflation. ” The theory that temporary Covid-19 related supply shocks are largely responsible for inflation seems to have held out well, although repeated commodity price shocks are an issue” said external member Ashima Goyal, professor emiritus at Indira Gandhi Institute of Development Research. ” Tax cuts on petroleum products are essential to break the upward movement that could impart persistence to domestic inflation. Government initiatives have contributed to the fall in food inflation. This, and relative fiscal conservatism, enables monetary policy to remain accommodative” Goyal said.

External member JR Varma reiterated that the Covid-19 pandemic has mutated into a human tragedy and monetary policy is not the right instrument to deal with this. The ill effects of the pandemic are now concentrated in narrow pockets of the economy, and monetary policy is much less effective than fiscal policy. Besides, at the global levels the ongoing transition to green energy worldwide poses a significant risk of creating a series of energy price shocks similar to that in the 1970s, the tail risk to global growth posed by by emerging financial sector fragility in China reminiscent of Japan of the late 1980s.” Both of these risks are well beyond the control of the MPC, but they warrant a heightened degree of flexibility and agility” Varma said in his defense of discontinuing the accommodative stance.

“We continue to believe that the MPC will look through the supply side factors that are pushing up inflation, and change the stance only after there is clear evidence of a demand revival stoking prices upwards” said Aditi Nayar, chief economist at ratings firm Icra. This is unlikely until the February 2022 policy review. Moreover, the RBI may refrain from hiking the reverse repo rate, until the MPC changes the stance to neutral.

Saudi inflation rises again in June, hits highest rate this year

Saudi Arabia‘s annual inflation rate rose to 6.2% in June, the highest this year, from 5.7% in May, official data showed on Thursday.

June marked a third consecutive monthly rise reflecting an increase in value-added tax introduced last year.

“Noting that consumer prices still reflect an increase of the value added tax (VAT) from 5% to 15% in July 2020, the rise of the CPI resulted mainly from higher prices of transport (+22.6%) and food and beverages (+8.1%),” the General Authority for Statistics said.

The VAT increase came as the Saudi government sought to bolster state coffers depleted by the twin shock of last year’s oil price crash and the COVID-19 pandemic, as well as voluntary oil production cuts implemented to help stabilise world prices.

To help alleviate rising living costs, Saudi Arabia, the world’s largest oil exporter, last week set a cap on local gasoline prices for July.

Month on month, consumer prices in June increased by just 0.2%, the statistics authority said.

Inflation is expected to start declining from July as the base effect of the VAT increase will drop out of the annual price comparison, London-based Capital Economics has said.

It estimated the headline rate will slow to around 1%-1.5% year on year.

The International Monetary Fund has said it expects annual average inflation of 3.2% this year.

Subscribers under pension schemes rise to 4.63 cr at Sept-end: PFRDA

The Pension Fund Regulatory and Development Authority (PFRDA) on Monday said the number of subscribers in various pension schemes rose 24 per cent to 4.63 crore as at the end of September 2021.

The total number of subscribers in pension schemes regulated by PFRDA had stood at 3.74 crore in the same month a year ago, the pension fund regulator said in a statement.

As of September 30, the assets under management (AUM) in various pension schemes regulated by PFRDA rose to Rs 6,67,379 crore as against Rs 4,94,930 crore at the end of September 2020, showing annual growth of 34.84 per cent, it said.

The PFRDA administers two pension schemes — National Pension System (NPS) and Atal Pension Yojana (APY).

The total number of subscribers under APY grew 32.13 per cent to 312.94 lakh as of September 30, 2021, according to the PFRDA data.

Centre imposes stock limits on edible oils to soften prices in domestic market

The Centre on Sunday imposed stock limits on traders of edible oils and oilseeds, barring importers and exporters, till March 31, in a bid to check rising domestic prices and give relief to consumers.

Already, futures trading in mustard oil on NCDEX platform has been suspended from October 8, it said.

Edible oil prices in the domestic retail markets have shot up sharply by up to 46.15 per cent in the last one year due to global factors and local tight supply situation, as per government data.

“The centre’s decision will soften the prices of edible oils in the domestic market, thereby bringing great relief to consumers across the country,” the Food and Consumer Affairs Ministry said in a statement.

As per the order issued to all states, state governments and union territories will decide the stock limit to be imposed on edible oils and oilseeds after taking into account the available stock and consumption pattern of that particular state or UT.

However, certain importers and exporters have been exempted from the stock limit.

The exemption is given to those exporters (being a refiner, miller, extractor, wholesaler or retailer or dealer) who have an Importer-Exporter Code Number issued by the Director General of Foreign Trade (DGFT) and are able to demonstrate that the whole or part of his stock are meant for exports and to the extent of the stock meant for export.

The exemption is also given to those importers (being a refiner, miller, extractor, wholesaler or retailer or dealer) who are able to demonstrate that part of his stock in respect of edible oils and edible oilseeds are sourced from imports, the ministry said.

In case, the stocks held by respective legal entities are higher than the prescribed limits then they shall declare the same on the portal (https://evegoils.nic.in/EOSP/login) of Department of Food and Public Distribution and bring it to the prescribed stock limits as decided by the states where it is conducting its business within 30 days of the issue of such notification by the said authorities.

The states have been asked to ensure stock details of edible oils and oilseeds are regularly declared and updated on the central government’s portal, it said.

The Removal of Licensing Requirements, Stock Limits and Movement Restrictions on Specified Foodstuffs (Amendment) Order, 2021, has been issued with immediate effect from September 8, it added.

According to the ministry, high prices of edible oils in the international market have a substantial impact on the domestic edible oil prices. However, the government has formulated a multi- pronged strategy to ensure that prices of essential commodities like edible oils remain controlled.

Measures like rationalisation of import duty structure, launching of a web-portal for self-disclosure of stocks held by various stakeholders had already been taken, it said.

As per the data maintained by the Consumer Affairs Ministry, average retail prices of soya oil were ruling at Rs 154.95 per kg on October 9, this year, 46.15 per cent higher than Rs 106 per kg in the year-ago period.

Similarly, average mustard oil prices rose by 43 per cent to Rs 184.43 per kg from Rs 129.19 per kg, while that of vanaspati by 43 per cent to Rs 136.74 per kg from Rs 95.5 per kg in the said period.

In case of sunflower, its average retail price risen by 38.48 per cent to Rs 170.09 per kg on October 9 this year from Rs 122.82 per kg in the year-ago period, while palm oil prices rose 38 per cent to Rs 132.06 per kg from Rs 95.68 per kg in the said period.

India meets more than 60 per cent of its edible oil demands through imports.

Inflation hits an eight-month low, eases to 4.35% in September

Retail inflation of India eases to 4.35 percent in the month of September from 5.3 percent witnessed in August, government data released on Tuesday showed.

It is for the third time in a row that the Consumer Price Index fell between 4 to 6 percent which is also Reserve Bank of India’s tolerance band for inflation.

The inflation number recorded in September is considerably lower than the reading in the corresponding month of last year during pandemic i.e. 7.27 percent.

Moreover, it is the lowest inflation growth recorded since April, 2021.

The moderation in the inflation growth rate is mainly on account of the ease in food prices that relaxed to 0.68% as compared to a Consumer Food Price Inflation (CPFI) recorded in August.

Since the country is witnessing recovery in demand after reopening of the economy, prices have driven up globally.

Last week, RBI Governor Shaktikanta Das had said that overall, the CPI headline momentum is moderating, which combined with favourable base effects in the coming months could bring about a substantial softening in inflation in the near term.

Employment under MGNREGA in September falls to lowest since Covid outbreak

Work demand and employment provided under Mahatma Gandhi National Rural Employment Guarantee scheme fell to its lowest since the outbreak of the Covid-19 pandemic as recovery gained ground with hiring picking up across sectors.

Data showed that work generated under the scheme fell by 10.9% in September to 23.47 crore person days compared to 26.36 crore person days in September 2020. Sequentially also, work generated under the scheme stood eased. In August work generated stood at 27.61 crore person days.

Demand for work fell by 8.3% last month to touch its lowest at 2.86 crore persons in the last 17 months.

But work provided under the scheme continued to be higher than the pre-covid levels. Households that benefited under the scheme in September 2019 stood at 1.20 crore while the persondays work generated was 14.6 crore.

Data from the Centre for Monitoring Indian Economy also corroborated the trend. It showed that s 8.5 million additional jobs were created in September with 76.5% or 6.5 million created in rural India across non-farm sectors. While agriculture absorbed an additional 0.55 million during the month, the remaining six million were absorbed in non-farm rural jobs, largely construction and manufacturing, it said.

Labour expert KR Shyam Sundar said the substantial decline in Mgnrega jobs in September was on the expected lines.

“With the pick-up in economic activity as seen from several indicators, it is expected that demand for work under Mgnrega will fall as the latter is the fallback option,” he said.

Sundar, however, cautioned that it may be too premature to draw a medium-term conclusion from monthly data, saying that the fluctuations in demand and supply should narrow down for the labour market to stabilise.

The Centre has till date released Rs 60,611.87 crore under the scheme, which is 83.02% of the Rs 73,000 crore allocated for the scheme for 2021-22. The budgeted allocation for 2021-22, however, is 34.52% lower than the revised estimate of Rs 1,11,500 crore in 2020-21, when additional Rs 40,000 crore were given under the scheme to meet the surge in demand for work under Mgnrega following mass scale reverse migration and loss of jobs following the outbreak of the pandemic.