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India’s Headline Inflation Through High Frequency Prices

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India’s Headline Inflation Through High Frequency Prices

Inflation is a vital tool to learn about the consumers’ behaviour. Price stability is indispensable for the proper functioning of an economy. Central banks around the world consider these tools in arriving at the respective country’s monetary policies. The Reserve Bank of India (RBI) considers the concepts, Inflation and Growth, to arrive at a suitable monetary policy for India.

  • Quick insight into Consumer Price Index (CPI)

The CPI was introduced in India in 2009 and is resorted to as an essential factor to determine inflation. It is calculated by the Central Statistics Office, using the data received from 1,181 villages and 1,114 urban markets, which cover all districts of the nation. The previous month’s CPI data is usually released around the 12th day of the succeeding month.

  • Headline and Core Inflation

Inflation is mainly understood through two main numbers: – Headline Inflation and Core Inflation. Core inflation is considered more crucial as the prices of food and fuel are dependent on exogenous factors.

In early 2012, India had to deal with ‘double-digit inflation rate’, which continued till the end of 2013. The stringent policies taken by RBI helped to lower the rate effectively. In the current scenario, the inflation rate slowly started to increase in January 2019 and was primarily driven by the increase in food prices in the latter half of same year.

Core inflation has been increasing since the start of the pandemic. This could be the result of supply chain disruptions, uncertainties and rise in inflation expectations. In light of Fuel and Light and Food and Beverages, the CPI figures display moderation when compared to the high statistics of January-March 2020.

  • Basis for using the ‘Daily prices’

Since the CPI data is released on the 12th day of the succeeding month, it gives rise to lag of information from the end of the previous month. If we consider the real-time prices from the beginning of the month, then it will lead to a lag of over 40 days instead of 12 days. Hence, the use of ‘daily prices’ will be useful.

The webinar’s organizers, ISI Emerging Markets Groups, resorted to the daily prices published by the following three governmental bodies:-

National Horticulture Board Department of Consumer Affairs Indian Oil
Fruits Pulses Fuel
Vegetables Oils and Fats
  Cereals  
  Sugar  
  Others  

• The Weights adding up to the total inflation basket

Items Weight (in %)
Food and Beverage 45.86
Pan, tobacco and Intoxicants 2.38
Clothing and Footwear 6.53
Housing 10.07
Fuel and Light 6.84
Miscellaneous 28.32
TOTAL 100.00

The above data has been made available in the Simple Model to understand the movement of prices and not just a particular number.

  • How does the Simple Model function (based on the approach adopted by webinar’s organizers)?

A. Data Selection

  1. Select the prices for those cities for which the data is available (for fruits and vegetables)- This tends to be complicated due to the ‘seasonal nature’ of the various cities from which the figures for fruits and vegetables are compiled;
  2. Select model prices (for other items)- These model priced areas sourced from the Department of Consumer Affairs;
  3. Select the prices across three cities; namely, Chennai, Mumbai and Kolkata (for fuel)- The necessary prices from the fourth metropolitan city, New Delhi, could not be published as the Indian Oil Corporation did not yet release the same at that point of time;

B. Fill any gaps in the data using the Linear Interpolation model, thereby making it consistent.
C. For the purpose of averaging the prices, the city population is used as weight. It is to be noted that the Census of India had published the population data used in 2011 (the year when the last survey was conducted);
D. Take year on year (y/y) changes of all the values to adjust for the seasonality.

Analysis of each line item (based on heat map created)

‘Heat map’ is a graphical representation of data where colours depict the values. For each line item, the required samples have been decided and chosen by the webinar’s organizers.

1.Fruits

June 2020

July 2020 August 2020
0.27 0.07

1.00

For the upcoming period, it is possible that the rates can be either similar or even lower than that of August 2020.

2. Vegetables

June 2020

July 2020 August 2020
4.00 11.00

11.4

Based on the heat map generated, there are chances that the rate for the month of September 2020 will slightly increase.

3. Pulses and Oils:

Pulses

Oils
June 2020 July 2020 August 2020 June 2020 July 2020 August 2020
17.60 15.70 14.40 11.50 12.20

12.50

The inflation rates for September 2020 will likely remain similar to that of August 2020.

4. Cereals, Sugar, Milk and Others

Cereals

Sugar Milk
June 2020 July 2020 August 2020 June 2020 July 2020 August 2020 June 2020 July 2020 August 2020
7.90 6.90 5.90 2.90 3.60 3.90 7.00 6.50

6.20

Price rates have shown continuous ups and downs per sample. It will likely remain in this manner for the upcoming period too.

5. Fuel

June 2020

July 2020 August 2020
0.50 2.66

3.10

As per the heat map generated, it can be observed that the overall inflation price could decrease.

Pros of the Simplicity Model

  1. Fares well in showing the movement of prices;
  2. Unnecessary complications have been avoided;
  3. Accessible and understandable to the users.

Cons of the Simplicity Model

  1. Prices from the National Horticulture Board are not updated daily for all the produce, despite its daily series;
  2. Cities are dynamic;
  3. Seasonal items are continually changing.

With the above data being compiled and further observed, one can hope that the future will not be detrimental to his/her survival and that the ‘post-Corona’ scenario will improve for a better tomorrow.


NOTE- The above information has been obtained based on the webinar conducted by the ISI Emerging Marketing Group (CEIC Data & EMIS) on October 8, 2020 and the materials provided after the webinar. The main speaker was Ms.Rohini Sanyal (Research Economist, India).

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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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