Economy
India: WPI exits deflation

India's wholesale price index (WPI)-based inflation rose 0.3% in April from 0.9% a month ago, returning to a positive territory after remaining in deflation for 17 months. However, Nomura feels that owing to rising costs amid still-subdued domestic demand, profit margins could come under pressure.

 

"Indeed, a breakdown of the WPI into input and output prices shows that the majority of the pick-up was driven by higher input costs (food, fuel and commodities), which accelerated to -0.5% from -2.1% in March. Output price inflation also rose, but marginally to 1.7% from 1.3%, indicating that producers in select segments also passed on higher input costs to consumers," it said in a research note.

 

According to Religare Capital Markets Ltd the turnaround was on due to a surge in food product inflation (led by sugar) – core WPI stayed in the negative zone, at -0.8%. "Given that the deflation in global commodity prices is moderating, we expect the WPI to continue to edge up – this is positive for a recovery in nominal growth," it added.

 

 

 

WPI food price inflation (primary plus manufactured) rose 5.4% in April from 4.0% in March, while core WPI (WPI manufactured ex-food) deflation eased to -0.8% from -1.1%.

 

 

 

The uptick in April was driven by three factors, food prices, higher global commodity prices and better domestic demand, Nomura says.

 

1. Food prices sequentially rose sharply led by a pick-up in the prices of pulses (4% m-o-m), vegetables (4.7%) and manufactured food such as sugar (8.4%) and tea and coffee (12.9%). Although fruit and vegetable prices typically rise during the summer months, the pick-up in the case of vegetables was stronger than a year ago, driving up y-o-y food price inflation.

2. Higher global commodity prices pushed up the prices of fuel (aviation turbine fuel, bitumen, petrol), primary non-food articles (oilseeds and fibres) and select manufactured products (basic metals and chemicals).

3. Better domestic demand pushed up the prices of cement, beverages & tobacco and wood products. However, we do not view demand-side pressures as broad-based, as segments such as paper and leather products witnessed sequential price declines.

 

According to Religare, the deflationary spell in the Indian economy was largely driven by a sharp fall in global crude oil and metal prices. Ex-crude oil, mineral oils and metals, WPI stood at 2.4% in April 2016 and has remained positive in 15 of the last 18 months. "Given moderating deflation in international commodities, we expect WPI to continue to rise in the near term – positive for nominal GDP growth," the report concluded.

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COMMENTS

B. Yerram Raju

1 year ago

Deflation in India if at all believed to have existed, it was in statistician's books. Retail inflation still rules roost. Food inflation is likely to touch the alarming territory with 10 states reporting drought for a consecutive second year.

Nifty, Sensex put in a counter-trend rally: Monday closing report
We had mentioned in Friday’s closing report that Nifty, Sensex were struggling to rally. The major indices of the Indian stock markets rallied, a little, on Monday to close with small gains of less than 1% over Friday’s close. Also, the trading volumes on NSE were lower. The trends of the major indices in the course of Monday’s trading are given in the table below:
 
 
Disappointing macro-economic data subdued the Indian equity markets on Monday. Consequently, key indices traded flat -- marginally in the green during the mid-afternoon session, as heavy selling pressure was witnessed in banking, capital goods and oil and gas stocks. Initially, the key indices opened on a positive note on Monday, in sync with their Asian peers. However, investors were disappointed after a key macro-economic data showed a faster rise in annual wholesale inflation. 
 
India's annual wholesale price index (WPI) moved up into the positive zone at 0.34% for April, from (-)0.85% in March and (-)2.43% during the corresponding month of the previous year. The WPI moved up after staying in negative zone for 17 straight months, mainly on the back of a rise in global commodity prices. The rise comes after the Consumer Price Index (CPI) for last month also showed an upward movement in annual retail inflation. The rise in both the inflation indices has reduced the chances of the Reserve Bank of India (RBI) to further ease its key lending rates during the monetary policy review scheduled in June.
 
Apart from the WPI, investors' sentiments were subdued after data released on May 13 showed that India's merchandise exports in April fell for the 17th straight month. Last month's exports were valued at $20.57 billion -- down 6.74% against $22.05 billion in the like month of last year.
 
Besides, selling pressure was witnessed in the banking sector after the Bank of Baroda (BoB) reported its second consecutive quarter of losses. The BoB's quarterly results were released after the market hours last Friday. 
 
China's central bank on Monday pumped 25 billion yuan ($3 billion) into the market to preserve liquidity. The People's Bank of China (PBOC) put 45 billion yuan into seven-day reverse repo, a process by which central banks purchase securities from banks with an agreement to sell them back in the future. The reverse repo was priced to yield 2.25%, according to a PBOC statement. 
 
The Indian Meteorological Department (IMD) on Sunday said the southwest monsoon may hit Kerala by June 7 due to a slight delay. "The statistical model forecast suggests that the monsoon onset over Kerala is likely to be slightly delayed. The southwest monsoon is likely to set over Kerala on June 7 with a model error of four days," an IMD statement said. Normally, the monsoon rains begin in Kerala on June 1. But the "slight delay" would not affect the overall cumulative rainfall in the country, IMD officials said. "We continue without prediction of 106% rainfall this year. The delay predicted in Kerala is not much. A standard deviation of four to five days expected," an IMD official told IANS. IMD also said that conditions were becoming favourable for the onset of southwest monsoon over Nicobar Island, south Andaman Sea and parts of Bay of Bengal around May 17.  Some experts had predicted that monsoon would reach Kerala by May 28 in the Andaman and Nicobar Islands by May 15. The delayed monsoon could keep the stock market bulls also waiting.
 
India's manufacturing sector growth may slow down during the first quarter of 2016-17 ending June owing to factors like bleak export outlook, poor demand and high cost of borrowing, industry chamber Ficci said on Sunday on the basis of its latest survey. "While the bleak export outlook is responsible for this less optimistic outlook for manufacturing production in first quarter of the current financial year, there have been several other factors that have contributed like poor demand conditions, unstable roadmap for various sectors leading to uncertainty, high interest cost, among others," it added.
 
The top gainers and top losers of the major indices are given in the table below:

 
The closing values of the major Asian indices are given in the table below:
 

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Indians increasingly prefer private education, 71 mn take tuitions
In a recent "Mann Ki Baat" address, Prime Minister Narendra Modi stressed that every government should focus on quality learning and outcomes rather than the school enrolment.
 
His concerns, expressed on April 24, 2016, are not unfounded.
 
As many as 62% of children in India attended a government primary school in 2014, compared to 72.6% in 2007-08 - indicating a surging preference for private schools - according to an IndiaSpend analysis of data in a recent survey on education released by the National Sample Survey Organisation (NSSO).
 
At the upper primary level, the percentage of students in government schools reduced from 69.9% in 2007-08 to 66% in 2014.
 
An urban-rural divide is evident: Only 31% of children attended government primary schools in urban areas, against 72.3% in rural in 2014. Yet, this does not mean learning outcomes have improved, IndiaSpend reported last year.
 
No more than 26% of children in class V can do division, a drop of more than 10 percent over four years, according to the 2014 Annual Status of Education Report by Pratham, an education NGO.
 
Despite spending Rs.586,085 crore ($94 billion) over the last decade on primary education, India has been unable to arrest the decline in learning, IndiaSpend reported.
 
Government schools shunned, rising demand for government colleges
 
Till Class XII, students prefer private institutions over government, with 58.7% citing "better environment for learning" as the major factor for studying in private schools at the primary level.
 
Only 11.6% cited "English as a medium of learning" as a reason for studying in private schools.
 
However, when it came to graduation, post-graduation and diploma studies, many enrolled in private institutions because they did not get admission to a government institution.
 
For instance, 43% of respondents pursuing a diploma cited inability to get admission in a government institution as the reason to enroll in a private institution, while the same number was 27.5% for students pursuing graduation degrees and above.
 
The trends were uniform in rural and urban areas-although the demand for English-medium instruction in urban areas was higher by 7% at the primary level -pointing to growing educational and career aspirations.
 
26% of students across India sign up for private coaching
 
As many as 71 million students (26 percent of all students) enroll for private coaching in India: 273 of every 1,000 males and 243 of every 1,000 females.
 
Further, 89% of them cited "augmenting basic education" as the reason for additional tuition.
 
India’s private coaching market was likely to touch $40 billion (Rs.2.6 lakh crore) by the end of 2015, according to a report by Assocham, a trade watchdog.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Jyoti Dua

1 year ago

It has been evident for many years that quality of education has been deteriorating, specially in rural areas. Further, the teaching has not changed with time. The introduction of technology in education is also lacking in Govt schools. The State Govts have to own the responsibility for this sad situation.

D S Ranga Rao

1 year ago

It's very unfortunate and saddening that nothing happens to improve the falling standards of teaching and learning in our schools and colleges except everybody, including the Prime Minister, talking and talking about the same time and again. The reason for inaction appears to be that those who have the power and talk about it do not set right the things because their children study elsewhere in private schools and those who are helpless have to rest content with the substandard education because they can't afford a better(private) school. Time that our Prime Minister, for all his good intentions of providing "Maximum governance with minimum government", should have come up with a definite and time-bound plan of action to address this mess.

REPLY

Jyoti Dua

In Reply to D S Ranga Rao 1 year ago

Shri Rao, it should be the responsibility of State Governments to change the trend. To raise the level of learning in Govt schools, there is urgent need to train and upgrade the level of learning of teachers, provide better facilities for school, and above all ensure NO Corrupt practices in recruitment and transfers of teachers.

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