Monday, November 16, 2020

Who is paying the experts?

 "The Indian economy is seen recovering faster than expected and the Reserve Bank is likely to have come to an end of the rate easing cycle, according to global forecasting firm, Oxford Economics." "It further said that inflation is expected to average significantly above 6 percent in the fourth quarter of the current fiscal". "Retail inflation surged to a 77-month high of 7.61 percent in October" and "According to the Index of Industrial Production (IIP) data, manufacturing sector output posted a decline of 0.6 percent." "India's wholesale inflation rose for the third consecutive month and firmed up to an eight-month high of 1.48% in October driven by manufactured items, data released by the commerce and industry ministry showed." One would expect manufacturing output to increase when prices are going up, but it fell. Extraordinary. "India's top retail trade body said on Sunday that sales during that the country's Diwali festive period rose by more than 10% year-on-year, indicating 'good business prospects' for small businesses." "India's retail inflation may stay elevated for at least three more months after hitting a six-year high in October, as excess rain has damaged standing crops and seedlings, while edible oils that the country imports have become expensive." Food prices are rising globally "led by cereals, sugar, dairy and vegetable oils, according to a report from the Food and Agriculture Organization of the United Nations". "India's trade deficit in October rose to its highest in the ongoing financial year as exports declined 5.12% year-on-year to $24.89 billion after growing in September, led by a fall in outbound shipments of petroleum products, gems and jewellery, leather and engineering goods." Trade deficit was $8.71 billion. "Indian services exports in September fell 1.4 percent to USD 17.29 billion, data from the Reserve Bank of India (RBI) showed." And yet, "The foreign exchange reserves jumped by a massive $7.779 billion to touch a lifetime high of $568.494 billion in the week ended November 6," the RBI said. So much money! "Foreign portfolio investors (FPIs) have invested a massive Rs 35,109 crore (Rs 351.09 billion) in Indian markets in November so far as corporate earnings and reforms measures undertaken by the government to revive investment activities kept the investors' sentiments upbeat." Buying dollars from the market releases an equivalent amount of rupees into the system by the RBI. At the same time, experts want the RBI to reduce rates by another 50 basis points. Excess liquidity and low rates can only add to already high inflation, so why do they want to lower rates even further? Could be because high inflation reduces government debt. Why help the government and kill people? Are they paid?  

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