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Consumer Price Index: Components And Impressions Post COVID-19

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Consumer Index In India

By definition, “A comprehensive measure used for estimation of price changes in a basket of goods and services representative of consumption expenditure in an economy is called Consumer Price Index (CPI).”

Features of Consumer Price Index

  1. This statistical estimate is computed periodically (mainly monthly basis);
  2. Used to measure ‘Inflation’;
  3. The current prices or the market prices which are frequently changing are considered;
  4. Both ‘goods’ and ‘services’ are included;
  5. Measured by the National Statistical Office (NSO)

Importance of Consumer Price Index

  1. Provides an idea about the ‘cost of living’;
  2. Assess how the economy responds when faced with either ‘inflation’ or ‘deflation’;
  3. Assists on how to spend your money correctly;
  4. Influences a Consumer’s decisions.

Six Components of Consumer Price Index

On September 14, 2020, the Ministry of Statistics and Programme Implementation (MOSPI) took to twitter to state the six components based on which the required data is collected and featured every month.

The Components Combined (Rural & Urban) Provisional Weights of the All India Consumer Price Indices (for August 2020)

Components Combined (Rural & Urban) Provisional Weights of the All India Consumer Price Indices (for August 2020)
Food & Beverages 45.86
Miscellaneous 28.32
Housing 10.07
Fuel & Lights 6.84
Clothing & Footwear 6.53
Pan Tobacco & Intoxicants 2.38
TOTAL 100.00

Note: – The above table has been extracted from MOSPI’s Official release on September 14, 2020. The base used for the calculation is 100, of the year, 2012.

  • Food and Beverages- Comes under the basic necessity and have 12 sub-headings:-
    a. Cereals and products; b. Meat and fish; c. Egg; d. Milk and products; e. Oils and fats; f. Fruits; g. Vegetables; h. Pulses and products;  i. Sugar and confectionery; j. Spices; k. Non-alcoholic beverages; l. Prepared meals, snacks, sweets, etc.
  • Pan, Tobacco and Intoxicants- As individuals continue to consume these items, despite strict warnings from the health authorities, these are not omitted while calculating the CPI;
  • Clothing and Footwear- It is undeniable that today, people spend a whole lot in this area, thus making it a vital part calculation of CPI;
  • Housing- Comes under the basic necessity; The growth rate of the construction industry across India jumped to 5.65 per cent between 2015 to 2020 from 2.95 per cent between 2010 to 2015;
  • Fuel and Light- Transportation has become an indispensable bit in today’s fast-paced world. Also, with the increase in the number of houses built, led to the rise in the usage of electricity. So, these cannot be omitted from the ‘basket of goods or services’ for calculating consumer price index;
  • Miscellaneous- The items not falling under the above five headings will come under the ‘Miscellaneous,’ which are:-
    a. Household goods and services; d. Recreation and Amusement;
    b. Health; e. Education;
    c. Transport and Communication; f. Personal care and effects.

How are these factors arrived at?

  1. The collection of monthly Price data is from a selected number of urban markets (1,114) and villages (1,181) through personal visits conducted by the field staff of the Field Operations Division of NSO. For arriving at the above figures (for August 2020), the Price data was successfully collected from 1,074 urban markets and 1,135 villages;
  2. Priced data are received through web portals which are maintained by the National Informatics Centre;
  3. Final indices for the previous month and provisional indices for the current month are compiled by following what the NSO terms as ‘the bottom-up approach’ (aggregating from State level indices).

Effect of Pandemic on Six Components of Consumer Price Index

CPI’s Component Impacts
Food and Beverages

Its consumption has reduced significantly coupled with the supply chains being disrupted.

Eating ‘inside home’ is inversely proportional to eating ‘outside home’.

Pan, Tobacco and Intoxicants There was a massive outcry from the consumers of this particular sector. In April 2020, according to reliable reports, there was a sharp 200 per cent increase in calls, which might have led the Indian government to help them out. However, there was no much improvement after the ‘helpline’ offered by the government.
Clothing and Footwear The Fashion industry was hit hard too. Thousands of India’s craftsmen are without work. Customers are hesitant to enter malls and shops to avoid contact with the virus. Online shopping gained momentum.

Housing

Construction workers started migrating to their hometowns which rendered the people unemployed, thus slowing the pace of this industry. According to Mr. S. Sridharan, (Chairman at Confederation of Real Estate Developers Association of India [CREDAI]), there is only 30 to 35 per cent workforce in Tamil Nadu alone, besides some migrant workers, who have not gone back to their homes. The workers’ livelihoods are also affected due to lack of living.   
Fuel and Light When compared to the rest of the world, the electricity demand recovered faster. However, it was interrupted in the last two weeks of August 2020 due to the weather conditions across India. There have been significant declines in the ‘industrialized states’ (namely, Gujarat and Maharashtra).
Miscellaneous

Here, transportation was hit worst while the other criteria sustained considerably with the people adopting the ‘online’ way of approaching the subjects.   

Depiction of CPI (for August 2020) in the form of Graphs (as tweeted by MOSPI)

  • Year on year inflation, based on CPI and Consumer Food Price Index (CFPI)

  •  Month to month change, based on CPI and CFPI

Analysis

According to the data released by MOSPI for August 2020, retail inflation growth softened to 6.69 per cent; worsening beyond the Reserve Bank of India’s (RBI) upper margin of 6 per cent. Mr Rahul Gupta, the Head of Research-Currency, Emkay Global Financial Services, said, “Despite unlocking phases, the supply-side disruption is surging the food and fuel prices. The inflation figure for the fifth month in a row remains above RBI’s medium-term target of 6 per cent, so RBI rate cut hopes remains low at least at the October policy.”

August month’s retail inflation of 6.69 per cent was lower when compared to the forecast of 6.85 per cent made by the analysts in a Reuters poll and of 9.73 per cent registered in July 2020. Upasna Bhardwaj, the Senior Economist at Kotak Mahindra Bank, went on to state that “While CPI inflation reading continues to remain uncomfortably elevated, it has started to trend lower providing some relief. However, several uncertainties remain ahead as the supply side disruptions continue to dominate the weaker demand-side pressures along with one-off idiosyncratic factors weighing on core inflation. Going ahead as inflation remains elevated in the near term, we see limited room for policy easing at least through the December policy.”

The next announcement regarding the Consumer Price Index data for the month of September 2020 will be released on October 12, 2020.

All this is to assist a consumer in arriving at better decisions. When investment decisions are to be taken, better options can be resorted by consulting certified experts.

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How SEBI’s New Margin Rule Is Affecting Retail Traders?

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SEBI Margin Rule | News Aur Chai

Securities and Exchange Board of India has introduced new margin rules for traders. Traders and Brokers are not happy with the new regulations because they will have to invest a large amount of cash in fulfilling margin requirements for trade.

SEBI had introduced the new margin rule in the year 2020 for intraday traders. It is being implemented in a phased manner. Traders were supposed to maintain 25 per cent of the peak margin in the first phase; the margin was raised by 50 per cent in the second phase. In the third phase, as per the new margin rule, intraday traders will have to pay a 100 per cent upfront margin. According to new norms, the margin requirements will be calculated four times during every trading session because the money margin must be greater than the need.

As per the new rule, brokers must collect margin from investors for any purchase or sale, and if they fail to do so, they will have to pay the penalty. Thus, brokers will not receive power of attorney. Brokers cannot use power of attorney for pledging anymore.

Those investors who want to make use of margin will have to create margin pledges separately. As per the new rule, investors will have to pay at least a 30 per cent margin upfront to avail a margin loan. Shares brought today cannot be sold tomorrow. Funds from shares sold today cannot be used for new trades on the same day.

The market experts said that there must be proper adjustments for implementing new rules, or it may create chaos, trouble and disturbance to the market participants. The CEO and founder of Zerodha broking firm, Nithin Kamath tweeted that, “the day when the new rules came into effect was the dreaded day for brokers, exchanges, intraday traders”.

Traders Are Not Happy:

Changes in rules have evoked strong reactions from traders because they will have to invest a large amount of cash in fulfilling margin requirements for trades as per new margin rules. Even the trading in futures and options will become more expensive. Traders are disappointed because they will have to pay up more money to bet in stock markets. As per new margin rules, Traders are also liable for the penalty if the rules are not followed during the trading session. If a trader wants to buy Nifty worth Rs 10 lakh, he will have to pay a 20 per cent margin of around 2 lakh. If the margin of the trader does not meet the need, he will be penalized. Traders will have to pay the minimum amount for opening the Multilateral Trading facility account, and they have to maintain a minor balance at all times.

Why Gas SEBI Introduced A New Margin Rule?

SEBI has introduced new rules to protect retail investors from purchasing difficulty. The intended goal of SEBI behind new margin rules is to bring down the difficult market situation and avoid huge fluctuation in stock markets during extreme stress. The new margin rules are likely to bring transparency to the market; it is expected to strengthen the market’s safety.

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Maya Global Education Society Acquires GIAP Journals

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GIAP MGES Journals | News Aur Chai

Gyandhara International Academic Publications (GIAP Journals), headquarter at Mira Road, Thane, Maharashtra, has been completely acquired by Maya Global Education Society (MGES), Prayagraj, India, with effect from 25th August 2021. Maya Global Education Society is an emerging confluence of academicians to cater to challenges in the educational and research domain in the post-pandemic world. Its headquarter is at Prayagraj, India.

According to our trusted sources value of this acquisition is around 50,000 USD. MGES claimed that their core activity is developing an online research-based education and training system that will reach all parts of the society irrespective of their economic status.

MGES aims to delve into the following activities:
* Training to academicians on tools and systems to improve students’ engagement in an online environment.
* Training to early researchers on research tools, software, and methodology.
* Training to early professionals and graduates to meet the skills demand of Industrial Revolution 4.0 (based on World Economic Forum suggestions).
* Publication of open access research journals and books (Recently acquired GIAP Journals).
* Distribution of scholarly content to Universities and higher education institutions.

GIAP cofounder and CEO Mrs. Rajni told us in an exclusive interview that the journey of GIAP was like a dream come true. It started in 2012 with loans on personal jewelry. After serving in the academic fraternity for the last 9 years, it was a timely decision for all journals and books to grow under the able guidance of pure academicians and researchers.

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Kitex’s Stock Surged 46% In A Week Post Tussle With Kerala Government

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Kitex Vs Pinarayi Vijayan & Kerala Government 2021 | News Aur Chai

The stock of Kitex Garments, the world’s second-largest manufacturer of kids’ garments, based in Kerala, saw a secular uptrend recently, after the company’s announcement that it will relocate to Telangana following a squabble with the Kerala government. The group withdrew a 3,500-crore investment project from Kerala and is planning to move to Telangana with a 1000 crore worth investment project.

Sabu M Jacob, the chairperson and managing director of the Kitex Group, stated his morality forbids him from ever investing a single rupee in Kerala, his native state. The comment brings the confrontation between the Kerala government and the homegrown firm to a close.

What is at the root of the clash?

Kitex has been subjected to repeated inspections by various Kerala government authorities in recent weeks, with group chairperson Sabu Jacob publicly accusing Pinarayi Vijayan’s Left administration of hounding the firm.

The inspections, Jacob said, were intended to “harass” businesses like him and “push him into a corner.” The authorities who came down to examine the firm, he claimed, seemed as though they were on the lookout for thieves and criminals.

P Rajeev, the state’s Industries Minister, emphasized that the government had not conducted any Suo Motu inspections of the firm. While the industries department did not conduct any searches, he said the health and labour agencies did so in response to orders from the Kerala High Court and the National Human Rights Commission based on individual complaints. The accusations are allegedly related to the company’s treatment of employees and the contamination of a nearby river due to wastewater discharge.

A Congress MP and a Congress MLA, and a female employee filed charges against the organization. The charges ranged from polluting a local waterway to harassing employees and violating minimum wage laws.

The Kerala government has denied targeting Kitex on purpose. The inspections were carried out in response to complaints and directives from courts and the state’s human rights commission; according to state industries minister P. Rajeev, he said his government stands for “responsible investment”, and the state would be a hub for such investments in a few years. He added, “The LDF Govt. ensures that sustainable and innovative industries thrive here,”

What was the aftermath of the inspections?

Even though the final findings of the official inspections are still pending, Jacob escalated his feud with the government by announcing that he was cancelling investments worth Rs 3,500 crores that were announced during the ASCEND conference in January 2020. By 2025, the investments were intended at establishing an apparel park and industrial parks along the proposed economic corridor in Kochi, Thiruvananthapuram, and Palakkad, resulting in the creation of thousands of employment opportunities.

Without identifying anyone in the state administration, Jacob said that the state lacked a business-friendly environment. While he did not want to relinquish the intended investments in Kerala, he said he was compelled to do so due to political and bureaucratic persecution. He said that although other states in the country were gradually improving their economic environment, Kerala was still 50 years behind.

Jacob and a few Kitex officials went to Hyderabad last week on a private plane supplied by the Telangana government, where they met with a team led by the state’s Industries Minister, KT Rama Rao. The business revealed intentions to spend Rs 1,000 crore in an apparel park at the Kakatiya Mega Textile Park in Warangal after two days of negotiations.

The political consequences of the experiment

Jacob, the founder of the Kitex Group, is an industrialist who has also dabbled in politics. Jacob launched Twenty 20, a one-of-a-kind political experiment that won seats in panchayat elections in 2015 and then built on that success in the 2020 elections by winning seats in new panchayats.
This corporate-driven panchayat model has resulted in a lot of growth in tiny villages, putting both the Congress and the Communist Party of India in danger (Marxist).

Kerala’s rating in terms of ease of doing business

Kerala ranks worse than many other states and union territories when it comes to the ease of doing business. Based on improvements that states were asked to adopt in 2019, it was placed 28th out of 36 states and UTs in the ease of doing business rankings.

Kerala was judged to have failed to implement some labour reforms, such as single-window clearance and measures to ensure simple information flow and transparency.
Following the Kitex withdrawal, however, several groups that had thrived in the state for years came out openly in favour of the state administration.

RPG Enterprise’s chairperson Harsh Goenka publicly tweeted in support of the administration. He stated, “We are the largest employers in Kerala. We find the local government very supportive,”

Where does the company stand in the share market?

With the decision to invest in Telangana, Kitex’s shares were once again trapped in the upper circuit. On Wednesday, the stock soared almost 10%, reaching a record high of Rs 204.05.

Within a week, the stock price of the children’s clothing company rose by almost 85 percent. The stock price increased from Rs 110.05 to Rs 204.05, reaching its highest level in three years. The company’s market capitalization increased to Rs 1,357 crore from Rs 732 crore as a result of this.

Because it controls 55 percent of the firm, the promoter entity, which includes Kitex Managing Director Sabu Jacob, profited Rs 347 crore. Sabu Jacob’s entire share value increased to Rs 754 crore.

Meanwhile, the BSE pressed Kitex for an explanation for the sharp increase in share prices, which the firm attributed to a Rs 1,000 crore investment plan in Telangana.

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