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Relief on inflation continues! August WPI eases to 4-month low at 4.53%

Inflation based on wholesale prices eased to a four-month low of 4.53 per cent in August on softening of prices of food articles, especially vegetables. The Wholesale Price Index (WPI) based inflation stood at 5.09 per cent in July and 3.24 per cent in August last year.

According to the government data released Friday, food articles registered deflation at 4.04 per cent in August 2018. Last month, deflation in this category was 2.16 per cent. Deflation in vegetables was 20.18 per cent in August, as against 14.07 per cent in the previous month.

Deflationary trend in food articles offset the double-digit inflation in ‘fuel and power’ basket in August. Inflation in this category was 17.73 per cent as prices of domestic fuel increased during the month, in line with high global crude oil rates. While inflation in liquefied petroleum gas (LPG) was 46.08 per cent, in diesel and petrol it was 19.90 per cent and 16.30 per cent, respectively, during August.

Among food articles, potato inflation continued to rule high at 71.89 per cent in August, while onion and fruits witnessed deflation of 26.80 per cent and 16.40 per cent, respectively. Deflation continued in pulses at 14.23 per cent in August.

The 4.53 per cent inflation is the lowest in four months, and a lower inflation than this level was last seen in April at 3.62 per cent. As per the data, the WPI inflation for June was revised downwards to 5.68 per cent from the provisional estimate of 5.77 per cent.

Brent crude oil price is hovering at around USD 79 a barrel. This, along with a depreciating rupee has increased the oil import bill, thereby making petrol and diesel costlier. Petrol price Thursday climbed to an all-time high of Rs 81 per litre in Delhi, while in Mumbai it inched up to Rs 88.39. A litre of diesel in the national capital was priced at Rs 73.08 and Rs 77.58 in Mumbai.

Data released earlier this week showed retail inflation eased to a 10-month low of 3.69 per cent in August. RBI mainly takes into account retail inflation data while formulating monetary policy. In its third monetary policy review for the fiscal, the Reserve Bank last month hiked interest rate by 0.25 per cent to 6.5 per cent on inflationary concerns.

For July-September, RBI pegged CPI-based retail inflation at 4.2 per cent, which it saw firming up to 4.8 per cent in the second half of the current fiscal.

Fuel price hike: Delhi HC declines to interfere with petrol, diesel rate issue, says its economic policy decision

Daily change in fuel prices was a “economic policy decision” of the central government and the courts must remain away from it, the Delhi High Court said Wednesday. A bench of Chief Justice Rajendra Menon and Justice V K Rao made it clear it was not inclined to interfere with the government’s decision, saying “there are larger economic issues” involved. “It is an economic policy matter of the government. There are larger economic issues. The courts must remain away from it. Government may do it (fix a fair price). We cannot issue a mandamus (direction) to them to do it,” the court said.

The bench was hearing a PIL by Delhi-based designer, Puja Mahajan, challenging the daily rise in fuel rates and seeking a direction to the Centre to fix a fair price for petrol and diesel by treating them as essential commodities. The petition, filed through advocate A Maitri, also claimed that Mahajan”s representation to the central government on the issue has not yet been decided.

The court, thereafter, directed the central government to decide the representation within four weeks and listed the matter for hearing on November 16. The petition has alleged that the government had “indirectly given implied consent” to oil marketing companies (OMCs) to hike petrol and diesel prices at their own “whims and fancies”.

It has claimed that the implied consent was evident from the lack of revision in fuel prices for around 22 days in the run-up to the Karnataka Assembly polls. The petition has also alleged that the government was spreading “misleading information” by connecting the rising fuel prices here with the global increase in the rate of crude oil as the cost of petrol and diesel did not go down when crude was cheaper.

The petitioner has also said that in July, she had moved a similar plea, which the court had disposed of by asking the Centre to treat it as a representation and take a decision. However, since the government had not taken a decision till date on her representation, she filed the present petition, the plea has said.

India-US 2+2 dialogue: talks on between New Delhi, Washington for ‘new and better’ trade deals, say officials

Negotiations for “new and better” trade deals between the US and India that meet the needs of both the countries are at the beginning stages, senior Trump administration officials have said. India and the US last week held their maiden 2+2 Dialogue in New Delhi during which a long-negotiated defence pact under which critical and encrypted defence technologies will be provided to the Indian military by the US was inked. According to the Principal Deputy Assistant Secretary of State for South and Central Asia Alice Wells, primarily being a strategic dialogue, trade related issues were also discussed.

“A number of administration officials just recently came back from India. They expressed their willingness to negotiate new and better trade deals, and those conversations are at the beginning stages,” White House Press Secretary Sarah Sanders told reporters at her daily news conference. The conversation between the two countries was how can they grow their trade relationship in a fair and reciprocal manner, Wells told reporters during a separate conference call.

Tariffs and non-tariff barriers, she said, have been the subject of long-standing concern. But we’re working with the government of India to address these market access challenge issues. “We have a variety of ongoing high-level discussions that are taking up these issues. Specifically, what I heard out of the 2+2 is a commitment by our leadership to the importance of resolving this and coming out as a fair agreement that meets the needs of both the US and India, the private sector as well as people,” Wells said.

Responding to a question, she said that “there wasn’t specific conversation” on aluminum and steel during the 2+2 Dialogue. There is acknowledgement that the US is India’s best trading partner. The US is certainly India’s top markets for exports. Bilateral trade expanded USD 12 billion in 2017 and now totals USD 126 billion and two-way investment expanded almost USD 57 billion, Wells said. “Tariffs and non-tariff barriers have been the subject of long standing concern. But we’re working with the government of India to address these market access challenge issues.

“We have a variety of ongoing high-level discussions that are taking up these issues. Specifically, what I heard out of the 2+2 is a commitment by our leadership to the importance of resolving this (issue) and coming out as a fair agreement that meets the needs of both the US and India, the private sector as well as people,” Wells added. Meanwhile, former foreign secretary S Jaishankar, who is now part of the Tata Group, met Congressman Pete Sessions to discuss ways to strengthen relationship with India.

“Specifically, we discussed how our two countries can partner together to advance our commercial and strategic partnership, strengthen the bonds that unite our two countries, and create economic opportunity for American workers in the United States,” Sessions said. “Currently, India is our 9th largest trading partner but it is my hope that our bilateral trade continues to grow,” he added.

 

India’s economic growth to slow in second half of this fiscal, says UBS report

India’s economic growth is expected to moderate in the second half of this financial year after a strong first quarter, owing to tighter financial conditions, high oil prices and slowing global growth, says a UBS report. The global financial services major expects real GDP growth to slow to 7-7.3 per cent in the second half of this fiscal from 8.2 per cent in June 2018 quarter.

“We believe headwinds, including tighter financial conditions, high oil prices, slowing global growth and a still muted private corporate capex recovery on legacy issues of high debt and weakened balance sheets will weigh on India’s growth momentum,” UBS Securities India’s Economist Tanvee Gupta Jain and Strategist Rohit Arora said in a research note. According to official data, the Indian economy grew at a two-year high of 8.2 per cent in the April-June quarter of current fiscal on good show by manufacturing and farm sectors.

On the monetary policy front, the report said that the Monetary Policy Committee (MPC) of the Reserve Bank is expected to take a breather in the near-term amid rising global uncertainties like trade wars and oil prices. “In a scenario where trade wars drag global growth and push commodity prices lower, India might benefit as a disinflationary environment lowers external stability risks. Rates will likely be kept on hold in this case,” the report said.

However, “in an alternative scenario where India continues to be affected by the headwinds of rising oil prices, capital outflows, populist spending and political uncertainty leading to financial stability concerns, a 50 bps hike is likely for the rest of this fiscal,” it noted.

India’s share in Asia-Pacific’s GDP rises to 17.3% from 14. 6% in 2000, says ADB report

India’s share in the GDP of Asia and Pacific region has increased to 17.3 per cent in 2017 from 14.6 per cent in 2000, a ADB report said Monday. As per the ADB’s report on ‘Key Indicators for Asia and the Pacific 2018’, the Asia and Pacific region accounts for more than two-fifths of the share of global GDP in PPP (Purchasing Power Parity) terms.

Asia and the Pacific’s growing share of global output, which increased from 30.1 per cent to 42.6 per cent during the review period, came at the expense of the global shares of North America, Europe, South America, and the rest of the world, which declined by 6.8, 4.7, 1.3, and 0.3 percentage points, respectively. The report said the three largest economies in Asia and the Pacific — People’s Republic of China (PRC), India, and Japan — accounted for more than 70 per cent of the region’s GDP at PPP in 2017, up from about 63 per cent in 2000.

China accounted for 42.7 per cent of the region’s total output at PPP in 2017, compared with 25.1 per cent in 2000. “The next largest regional share of GDP at PPP in 2017 was that of India at 17.3 per cent, up from 14.6 per cent in 2000,” said the report of the Asian Development Bank (ADB). Japan was third, with a 10.2 per cent share in 2017, down from 23.1 per cent in 2000.

The report further said that combined population of Asia and the Pacific reached 4.14 billion in 2017, or 54.8 per cent of the world’s total population, down from 56 per cent in 2000. In 2017, 5 of the 10 most populous economies in the world were located in Asia and the Pacific, including the two most populous, China (1.39 billion) and India (131 billion).

The region’s population is gradually ageing amid increasing life expectancy and decreasing fertility rates. In 2050, the number of people in Asia and the Pacific over the age of 65 is expected to exceed the number under the age of 15, the report said. The report, the 49th edition in an annual series, provides statistics on a comprehensive set of economic, financial, social, and environmental indicators for the 48 regional members of the Asian Development Bank (ADB).

Donald Trump calls US a developing country; says can’t give aid to India, China

Terming United States as a ‘developing’ country, US President Donald Trump said that the nation and can’t afford to subsidize countries like India and China anymore. While addressing a fundraiser in Fargo, North Dakota recently, Trump said that he wants to stop helping to fund growing economies like India and China, and focus on US first. “We are a developing nation, too, OK? We are. As far as I’m concerned, we are a developing nation. I want to be put down in that category because we are growing, too. We are going to grow faster than anybody,” said Trump. In his address Trump also blamed the World Trade Organization (WTO) for allowing China to become a “great economic power” by categorizing it as a developing country. “Under that category they get subsidies,” he said.

Earlier, the Trump administration had alleged that major emerging economies like India, China, Brazil and South Africa are availing several concessions by self-declaring as a developing nation. “Any country may self-declare itself as a developing country, thus entitling it to all special and differential treatment afforded to developing countries under the WTO Agreements, as well as any new flexibilities afforded to developing countries under current or forthcoming negotiations,” the Trump administration said in its trade policy agenda and annual report in March this year.

According to the Trump administration, categorizing itself under the developing category, more advanced countries like Brazil, China, India and South Africa receive the same flexibilities as Sub-Saharan African and South Asian non-LDCs (Least Developed Countries), despite their very significant impact in the global economy.

“We have some of these countries that are considered growing economies. Some countries that have not matured enough yet, so we are paying them subsidies. Whole thing is crazy. Like India, like China, like others we say, ‘Oh, they’re growing actually.We have to pay them money… but we’re going to stop it. We’re going to stop it. We have stopped it,” President Donald Trump said.

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