Rising food prices played an important role in the acceleration of inflation across Asia and the Pacific
region during 2007 and the early months of 2008. Not only is food price inflation the most regressive of all
taxes, it also leads to lower growth and accentuation of income inequality.
An Evaluation of the Impact of Fluctuating Oil Revenue and the Performance of...Triple A Research Journal
ABSTRACT
The up and down movement in the price of crude oil in recent years has led to increasing concern about its macroeconomic implications for the Nigerian economy as economic planning has become very uncertain given the fact that the economy is highly vulnerable to oil price fluctuations. It is with this view in mind that this paper empirically analyses the impact of fluctuating oil revenue and the performance of the Nigerian economy between 1999 to 2016 (a seventeen years period of democratic governance), using secondary data sourced from Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators with VAR econometric tools of analysis. After appropriate stationary and robustness checks, the study finds out that oil price shocks (proxy for oil revenue) retards economic growth as it has a negative relationship with economic growth. An interesting outcome from the VAR Block Exogeneity Test is the unidirectional causality running from Oil Revenue to Real Gross Domestic Product (economic growth) which reveals the fact that during the years under reference, proceeds from oil export were mainly responsible for the level of astronomical growth recorded in the economy. The study concludes that oil price fluctuation paints an unstable future for the Nigerian economy because macroeconomic variables like employment, interest rate and price stability become victims. Both fiscal and monetary tools are frequently revised to keep the system afloat during price shocks. Nigeria remains a victim of these policy shocks because of overdependence on oil export earnings. A major policy recommendation is the need for policy makers to concentrate on policies that will strengthen and stabilize the macroeconomic structure of the Nigerian economy with specific focus on alternative sources of government revenue (reduction of dependence on oil proceeds) and reduction in monetization of crude oil receipts (fiscal discipline).
Keywords: Oil shocks, Economic Growth, VAR, ECM, Granger Causality
Rising food prices played an important role in the acceleration of inflation across Asia and the Pacific
region during 2007 and the early months of 2008. Not only is food price inflation the most regressive of all
taxes, it also leads to lower growth and accentuation of income inequality.
An Evaluation of the Impact of Fluctuating Oil Revenue and the Performance of...Triple A Research Journal
ABSTRACT
The up and down movement in the price of crude oil in recent years has led to increasing concern about its macroeconomic implications for the Nigerian economy as economic planning has become very uncertain given the fact that the economy is highly vulnerable to oil price fluctuations. It is with this view in mind that this paper empirically analyses the impact of fluctuating oil revenue and the performance of the Nigerian economy between 1999 to 2016 (a seventeen years period of democratic governance), using secondary data sourced from Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators with VAR econometric tools of analysis. After appropriate stationary and robustness checks, the study finds out that oil price shocks (proxy for oil revenue) retards economic growth as it has a negative relationship with economic growth. An interesting outcome from the VAR Block Exogeneity Test is the unidirectional causality running from Oil Revenue to Real Gross Domestic Product (economic growth) which reveals the fact that during the years under reference, proceeds from oil export were mainly responsible for the level of astronomical growth recorded in the economy. The study concludes that oil price fluctuation paints an unstable future for the Nigerian economy because macroeconomic variables like employment, interest rate and price stability become victims. Both fiscal and monetary tools are frequently revised to keep the system afloat during price shocks. Nigeria remains a victim of these policy shocks because of overdependence on oil export earnings. A major policy recommendation is the need for policy makers to concentrate on policies that will strengthen and stabilize the macroeconomic structure of the Nigerian economy with specific focus on alternative sources of government revenue (reduction of dependence on oil proceeds) and reduction in monetization of crude oil receipts (fiscal discipline).
Keywords: Oil shocks, Economic Growth, VAR, ECM, Granger Causality
This presentation consist of the theoretical concepts of interest rate, economic growth, inflation, monetary policy, foreign flow of funds, budget deficit. And further data analysis is given based on 5 years monetary policy statement.
International Trade and Economic Growth: A Cointegration Analysis for UgandaPremier Publishers
The focus of the study was to establish whether there exists a long run relationship between various trade and other macro economic variables for Uganda for the period 1982 to 2018. The Autoregressive distributed lag (ARDL) model was used to establish the existence of a long run relationship between economic growth and trade variables. The empirical results suggest that in the short run, imports reduced development by -0.11 in second lag as P=0.025<0.005, while the exports increased development by 0.08 in the first lag as the p=0.015<0.005. But this was not true for the second lag. Lastly at all lags for the short run, inflation had positive run relationship on development (GDP). However, in the long run inflation reduced development by 0.61 ceteris-paribus at 5% level of significance.
Agricultural Export, Oil Export and Economic Growth in Nigeria: Multivariate ...Agriculture Journal IJOEAR
Abstract—Sustaining of nation’s economic growth for better footing and outlook is very crucial for the globe of recent, most especially for developing countries like Nigeria. The country as a vivid example of a developing nation is oil based economy, which adopts export promotion policy as the essentialtactic for growth. Yet the nation has not maximized her abundance of resources to aids growth, despite notable economic growth being experienced. In this view, there is an attempt to examine the relationship among agricultural export, oil export and output growth in Nigeria. The causal relationship among the variables was investigated by using times series data for the period between 1981 and 2014. All the macroeconomic variables were found to be stationary. The study revealed that there is significant relationship between economic growth and the agricultural export and oil export. Based on the findings, government of the country is being advised to initiate new and re-defined old policies that will diversify the export base. Likewise, policies that will improveand aid the nation’s domestic production is being encouraged, since long run relationship has been established among the macroeconomic variables.
This presentation consist of the theoretical concepts of interest rate, economic growth, inflation, monetary policy, foreign flow of funds, budget deficit. And further data analysis is given based on 5 years monetary policy statement.
International Trade and Economic Growth: A Cointegration Analysis for UgandaPremier Publishers
The focus of the study was to establish whether there exists a long run relationship between various trade and other macro economic variables for Uganda for the period 1982 to 2018. The Autoregressive distributed lag (ARDL) model was used to establish the existence of a long run relationship between economic growth and trade variables. The empirical results suggest that in the short run, imports reduced development by -0.11 in second lag as P=0.025<0.005, while the exports increased development by 0.08 in the first lag as the p=0.015<0.005. But this was not true for the second lag. Lastly at all lags for the short run, inflation had positive run relationship on development (GDP). However, in the long run inflation reduced development by 0.61 ceteris-paribus at 5% level of significance.
Agricultural Export, Oil Export and Economic Growth in Nigeria: Multivariate ...Agriculture Journal IJOEAR
Abstract—Sustaining of nation’s economic growth for better footing and outlook is very crucial for the globe of recent, most especially for developing countries like Nigeria. The country as a vivid example of a developing nation is oil based economy, which adopts export promotion policy as the essentialtactic for growth. Yet the nation has not maximized her abundance of resources to aids growth, despite notable economic growth being experienced. In this view, there is an attempt to examine the relationship among agricultural export, oil export and output growth in Nigeria. The causal relationship among the variables was investigated by using times series data for the period between 1981 and 2014. All the macroeconomic variables were found to be stationary. The study revealed that there is significant relationship between economic growth and the agricultural export and oil export. Based on the findings, government of the country is being advised to initiate new and re-defined old policies that will diversify the export base. Likewise, policies that will improveand aid the nation’s domestic production is being encouraged, since long run relationship has been established among the macroeconomic variables.
India Palm Oil Market Trends, CAGR Growth and Analytical Forecast 2025Jitendra
India palm oil market size is anticipated to reach USD 13.1 billion by 2025, at a CAGR of 15.4% according to a new report by Grand View Research, Inc Refined derivatives are widely being utilized in food owing to their lower price in comparison to other conventional edible oils derived from groundnut, soybean and sunflower.
Comparison of Consumer behavior towards “Parle” and “Britannia”santoshpati92
Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 percent of FMCG sales in India. Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55 percent) is the largest contributor to the overall revenue generated by the FMCG sector in India However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 percent of total rural spending.
March 2015 Edition of BEACON, A Monthly Newsletter by SIMCON.
Inside this issue:
About Us
Our Team
INDUSTRY ANALYSIS : Food and Beverage Industry
COMPANY ANALYSIS : Britannia Industries Ltd
BRAND ANALYSIS : Fevicol
Event Report: CONFLUENCE '15
Concept of the month
India FMCG Sector Report May 2014
For leading industry jobs, please visit http://iimjobs.com
India is likely to be the world's largest consumer market by 2030, according to a report by global consultancy Deloitte. The country’s retail market is projected to touch US$ 1.3 trillion by 2020, as per Mr KV Thomas, India’s Consumer Affairs Minister. With the online medium of retail gaining more and more acceptance, there is a tremendous growth opportunity for companies (international and domestic) in the retail and fast-moving consumer goods (FMCG) segment.
The Indian consumer sector can be broadly categorised into urban and rural markets. The bourgeoning sector is attracting global marketers like never before. The pace at which India’s consumer market is changing can be put down to dramatic shifts in consumer behaviour, increasing urbanisation, presence of a strong service sector, changing lifestyle, and most significantly, the expanding retail segment.
Businesses that can cater to the requirements of India's ambitious middle class, keep prices reasonable, build brand loyalty in new consumers, and adapt to a rapidly changing environment will find tremendous rewards in India’s potential-filled consumer market.
India’s urban population has contributed majorly to the growth of the online market in the country. Around 30–40 per cent of the total retail in India’s top 75 cities is expected to be carried out online in the next 7–10 years, said Mr Arvind Singhal, Chairman and Founder, Technopak Advisors. Amazon, the world’s biggest internet retail company, has seen potential in the Indian market. In June 2013, India became only the tenth market where Amazon has established a country-specific retail website.
Italian high-end accessories brand Furla plans to expand its presence in the Indian market, with the government clearing the company’s joint venture with Gurgaon-based Genesis Luxury Fashion. The alliance is expected to invest about Rs 13 crore (US$ 2.08 million) in the first four years to open stores.
The Cabinet Committee on Economic Affairs (CCEA) has given the go-ahead to Swedish furniture retailer IKEA's application to enter the Indian industry and establish a single brand retail venture in the country. The projected Rs 10,500 crore (US$ 1.68 billion) FDI would be the largest investment by a foreign brand in the Indian retail sector
This India FMCG Sector Report May 2014 also gives details on:
fmcg industry in india
fmcg industry india latest report
india
india fmcg report
india fmcg report 2013
Mercer Capital's Value Focus: Agribusiness | Q2 2015 | Segment: Crops and Cro...Mercer Capital
Mercer Capital's Agribusiness Industry newsletter provides perspective on valuation issues. Each newsletter also includes a sector focus, commodity pricing, comparable public company metrics, and key indices of the top agribusinesses.
This presentation poster infographic delves into the multifaceted impacts of globalization through the lens of Nike, a prominent global brand. It explores how globalization has reshaped Nike's supply chain, marketing strategies, and cultural influence worldwide, examining both the benefits and challenges associated with its global expansion.
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2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
where can I find a legit pi merchant onlineDOT TECH
Yes. This is very easy what you need is a recommendation from someone who has successfully traded pi coins before with a merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi network coins and resell them to Investors looking forward to hold thousands of pi coins before the open mainnet.
I will leave the what'sapp contact of my personal pi merchant to trade with
+12349014282
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
2. ABSTRACT
ThisreportprovidesdetailedinformationaboutRetail IndustryinIndia.Itexploreshow the GDP
changedinIndiain the last2 yearsand whathas been itsimpacton the retail industry.Itfurthertalks
aboutthe inflationary/deflationarypressuresinthe economy.Anditsimpactonsavingsandinvestment
inthe economy.The reportalsoincludesthe trendof India’sCurrentAccountdeficitanditsimpact on
exchange ratesandtherebyonthe retail sector.Italso highlightsgovernment’sfiscal andmonetary
policieswhichmayhave impactedthe sector
INTRODUCTION
The IndiaRetail Industryisthe largestamongall the industries,accountingforover10 percent of the
country’sGDP and around8 percent of the employment.The RetailIndustryinIndiahascome forthas
one of the mostdynamicand fastpacedindustrieswithseveral playersenteringthe market.InIndiathe
vast middle classanditsalmostuntappedretail industryare the keyattractive forcesforglobal retail
giantswantingtoenterintonewermarkets,whichinturnwill helpthe IndiaRetailIndustrytogrow
faster.Indianretail isexpectedtogrow25 percent annually.Modernretail inIndiacouldbe worthUS$
175-200 billionby2016. The Food Retail IndustryinIndiadominatesthe shoppingbasket.The Mobile
phone Retail IndustryinIndiaisalreadyaUS$ 16.7 billionbusiness,growingatover20 per centper
year.
CHANGING CONSUMPTION PATTERNS
In a developingeconomylike India,the biggestchallenge amarketerfaceswouldbe totackle the ever
changingconsumptionpractices. The majorityof the Indianconsumersare shiftingfrombrandloyalist
to value conscious,whichwouldrequire greatereffortsonthe partof a retailertosatisfythe billion
demandsandprovisionof enduringservices.These changesare reflectedinthe growingdisposable
income andper capitagrowthin the table below:
Source: www.tradingeconomics.com | World Bank Group
The above indicatorsclearlygive the belowinferences:
The total marketsize of retail inIndiawasUS$ 490 billionin2013, registeringaCAGRof 6.1 per cent
since 1998.
INDICATORS 2006 2008 2010 2012 2014
% Growth
2014/2006
Retail sector (Bn $) 321 368 424 518 534 66%
GNI per capita in PPP $ 3200 3730 4410 5000 5760 80%
GDP actual 834.2 1238.7 1365.4 1835.81 1861.8 123%
GDP per Capita PPP 3262.04 3805.69 4177.17 4786.74 5243.9 61%
3. GNI percapital [1]
; PPP(US dollar) inIndiawaslastmeasuredat5760 in 2014, according to the World
Bank.
The Gross DomesticProductpercapita inIndiawas lastrecordedat 1262.64 US dollarsin2014. The GDP
perCapita inIndiaisequivalentto10 percentof the world'saverage.GDPper capitain Indiaaveraged
477.50 USD from1960 until 2014, reachingan all-time highof 1262.64 USD in2014 and a record lowof
228.34 USD in1960. GDP per capitainIndiais reportedbythe WorldBank.
The Gross DomesticProductpercapita inIndiawas lastrecordedat 5565.05 US dollarsin2014, when
adjustedbypurchasingpowerparity(PPP).The GDPperCapita,inIndia,whenadjustedbyPurchasing
PowerParityisequivalentto31 percentof the world'saverage.GDPpercapita PPPin Indiaaveraged
3120.57 USD from 1990 until 2014, reachinganall-time highof 5565.05 USD in2014 and a recordlowof
1760.02 USD in 1991. GDP per capita PPPinIndiaisreportedbythe World Bank.
The foodand grocery segmentremainsthe primarysegmentwitharound65% share inthe total Indian
retail marketsegment.We have reachedto4% level inorganizedhorticulture whencompared
internationallywhere ithasreachedto56%. The Indianfoodprocessingindustryisorganizedupto25%
and consumersare buyingsuperiorvarietiesandqualityproduce,even dicedfruitsandvegetables.The
recenttrendshave alsowitnessedincrease inconsumptionof fruitsalthoughcomparedtovegetables,
the formerbeingexpensive inthe Indianmarketconditions.The Indianconsumersare projectedto
spendmore onfreshfoodand itis estimatedthatthere will be 130 millionnewconsumersinIndiaby
2015 as per the Euro monitorInternational'sCountriesandConsumersdatabase.
Global Retail DevelopmentIndex(GRDI) 2013, the global slowdownhasimpactedIndia‟sgrowthalso
and as a resultIndia’sgrowthrate fell froma10-year average of 7.8 percentto 5 percentand inGRDI
rankingIndiaslippedto14th.India’spreviouslow rankingwas6thplace inthe inaugural Index in2002
but in2009 it stoodfirst.Howeverthe GRDIreportpointsoutsome positive factorsleadingtooptimistic
expectations.These factorsare:stronglong-termfundamentalsandyoung,increasinglybrand- and
fashion-consciouspopulation.The reportprojects14to 15 percentgrowthper yearinretail sector
through2015 and due to more urbanizationandmore potential new investmentbyretailers,expectsa
higherproportionof modernretail whichis7percentin2012
[1]
GNI per capita based onpurchasing power parity (PPP): PPP GNIis gross nationalincome(GNI) converted tointernational dollars using
purchasing power parityrates.An internationaldollar has thesamepurchasing poweroverGNI as a U.S. dollarhas in theUnited States. GNIis
the sum of valueadded by allresidentproducers plus any producttaxes (less subsidies) not includedin the valuation ofoutput plus net receipts
of primary income (compensation ofemployees and property income) fromabroad.Data are in currentinternationaldollars.
4. Inflationary Pressures
Inflation as defined by classicaleconomist is “Inflation shows rise in the price level and fall in the
value of the money”. There are many reasons for inflationary pressures on an economy.
Structural shifts in the inflationary process are caused by lower oil prices and deceleration in
agriculture prices and wages. These are simultaneously being reflected in dramatically improved
household inflation expectations. Three striking developments in three areas that signal a
structural shift in the inflationary process in India: crude-oil, agriculture, and inflation
expectations.
(Figure 1.1) a. Momentum of CPI(in % andbase2012) Figure-1.1b. Inflation rate inIndia (inpercent) (From 2013-15)
Crude-oil :
Crude-oil prices are expected to remain benign in the coming months. The average of
estimatesbythe IMF for (crude spot) and by the US EnergyInformationAdministration(EIA)
forBrentandWestTexasIntermediatecrude indicatesthatoil priceswill beabout29percent
lower in 2015-16 compared with 2014-15 (US$ 59 versus US$ 82) refer (Figure-1.2).The risk
that the decline in oil prices will reverse itself always exists because of unpredictable
geopolitical developments. However, the persistence of moderated oil prices seems highly
probable foratleastthree reasons:weakerglobaldemand,increasedsupplies,andthe global
monetary and liquidity environment. Finally, the anticipated end to the abnormally low
interestcycle inthe US and the prospectof future rate increaseswill favourextractionof oil
overkeepingitinthe ground,therebyfurtherboostingsupplyandkeepingpricessoft.Higher
rates will alsoleadtofinancial asset-reallocationawayfromcommodities,especiallyoil,asa
class into US financial instruments.
5. In additiontothat Inflationexpectationsare alsoreinedinbylowerfuel pricesandthis
couldhelpthe muchawaitedrate cutcycle inIndia,whichmostmarket participants expect
as a likely event by the second quarter of
thisyear.However,toolowanoil price isnota one waystreetforIndia.Ithassome marginal
negative effects aswell.India'sexportstooil producingeconomiescouldgetimpactedwhen
the growth rates of those economies take a dip due to low oil prices.
The fact that a large part of the Indian diaspora is
workinginoil producingcountries,anyslowdownthere
can also affect the inward remittances. Thus, it is very
critical that oil recovers to a level (say around $70) at
whichit isbalancedin favourof India'simportswithout
affecting its exports too much.
(Figure 1.2) Future price prediction of Crude Oil
The sectorsthat will have a positive impactdue to fallingoil pricesdirectlyaswell asindirectlywill be a)
automobiles, (b) plastic industries including pipes, (c) chemicals and resins selectively, (d) paints, (e)
footwear manufacturers etc. The benefit of a lower crude oil price is yet to be fullypriced in stocks like
Tata Motors,Bata,Relaxo,etc.Sectorsnegativelyimpactedwillbe upstreamoil andgascompanies.These
companies will feel a mixedeffect. On the positive side, a lower oil price means a lower subsidyburden
anda drop innetrealisationiscushionedbyadropinsubsidy.Realisation wouldgetimpactedforprivate
sectoroil companiesaswell.Companieswhichgetorder-flowsfromthe oilandgassector,couldseesome
slowdown in order inflow. Likewise, oil drilling and exploration companies are also likely get impacted
negatively. The oil price fall has created huge volatilityin world markets including India, which is not
insulatedfromthe contagioneffectsof thisdevelopment.However,the silverliningforIndiaisthatwhen
the dust settlesdown,the capital earmarkedforemergingmarketsandBRICseconomies,islikelytoflow
into India given its relative attraction compared to a weakening Brazil on falling iron-ore prices or a
collapsingRussiareelingunderthisoil price fall.Chinaappearsto be competitionbutIndiawitha newly
elected democratic, progressive government should steal the show in 2015.
Retail doesn’tbenefitmuch
Passingthe crude oil fall tothe retail customershasbeenonlyafractionof the actual fall.The fall in
crude pricescan’t be replicatedexactlyatthe retail level becauseseveral cost-intensive processesresult
intoitsrefined,usable form.Eventhen,passingthe crude oil fall wassmall.Crudeprices(USO) are down
~47% fromJuly2014 alongwithassociatedETFs(OIH).Atthe retail level,pricesonlyfell16% for Indian
consumers.One of the reasonsforthisis the excise dutyhike.Althoughithelpsboostthe government’s
revenues,itdissuadesoil marketingcompanies fromeffectingalargerprice cutat the retail level.
Agriculture(Rural Inflation)
6. India’sinflationwillbe shapedbypressuresfromagriculture,foreignanddomestic.Accordingto
WorldBankprojections,global agriculturalpriceswillremainmuted-alikelydecline of4.8percent
in 2015 relative to 2014. This will likely have a key impact in moderating increases in domestic
support prices.
a. Food Inflation:
i. The major reason for food inflation is the mismatch of demand and supply of
agricultural products.Thiswouldincludefoodgrains,pulses,edibleoil,fruitsand
vegetables. The post liberalizationerahasseenasuddenspurtinthe percapita
income of the people withaconsequentincrease inthe demandforqualityfood
as people have become more conscious of nutritional value and their intake of
calories.
ii. Againinthe postliberalizationerathere hasbeenincreaseinpopulationof about
40 crores since 1991. This has also led to the increase in the demand.
iii. The demonstrationeffecthasinfluence themiddleclasstoimitatetheupperclass
regardingthe choice and consumptionof food itemsTherebyincreasingthe per
capita consumption.
iv. The occupational distribution of the population has undergone a drastic change
after 1991 due to diversification, though even today, agriculture remains the
backbone of Indianeconomy.Theynolongerwanttotoil underthesunbutprefer
‘white collar’ jobs which fetch them steady income because of this we can see
growth of industries and tertiary sectors to certain extent.
v. Urbanization or rural push/ urban pull factor has change the life of the people.
Mechanization has set in; labour intensive techniques have been replaced by
capital intensive techniques. As a consequence labourers become jobless and
move out in search of jobs.
vi. The change in the attitude of the people has also contributed to the increase in
demand for food grains. Since post liberalization, imported food items which
were noteasilyavailableinIndiaare tobe foundineverynookandcorner.People
do not realize the fact, that though it is their income which they are expending
they are burdening the country’s foreign exchange reserves.
vii. Popular schemes to increase agricultural growth rate do not find a place in the
final budgetary allocations. The government does not have control over the
fixation of the minimum price of the commodity which would be advantageous
bothtothe farmerandconsumer.Lackof control bygovernmentonprice fixation
has led to hoarding and black marketing of essential commodities so that it can
be sold later at sky high prices.
viii. There are certain factors that are beyond the control of the government like
population, per capita consumption, income and demonstration effect. India
beinga secularcountry it isdifficulttoenforce restrictionof familysize.Thishas
tobe atotal voluntarydecision.But,whatthegovernmentcandoistopropagate
is the benefits of small family. Increase in per capita income is welcomed by an
individual as well as a country. Though a part of the income is paid to the
7. government as tax the individual will still be left with a large proportion of his
income to spend.The large proportionof income leadstodemonstrationeffects
or deadinvestments.The excessincome maynotbe channelisedfor investments
that give returns.
Figure 1.3:FoodInflation(year-(2012-2015)) Figure-1.4Rural Wage Growth(in%)
b. Wage Pressure:The mostdramaticstructural changerelatestowagepressures.Asshown
in Figure 1.4, wage growth has declined to about 3.6 percent from over 20 percent. If
these trendscontinue,rural wage growthcancontinue todecelerate,furthermoderating
inflationary pressures.
Inflationary Expectation:
The third factorrelatestoinflationexpectations.Until recently,householdsurveysof inflation
expectationconductedbythe RBIshowedthatexpectationshave beenstubbornlypersistentandat
levelswell above actual inflation.Butinthe mostrecentsurveytheydroppedbynearly7-8percentage
pointsoverall horizons(Figure 1.5).If thischange conveyssome information,inflationexpectationswill
increasinglybe anchoredatmore reasonable levels,moderatingwage setting.Insum, the structural
shiftthatwas arguedinthe Mid-YearEconomicAnalysis2014-15 seemswell underway.
Consumerprice inflationwhichislikelytoprintat6.5 percentfor2014-15 islikelytodecline
further.Ourestimate for2015-16 isfor CPIinflationtobe in5.0-5.5 percentrange and forthe GDP
deflatortobe in the 2.8-3.0 percentrange.The implicationisthatthe economywill over-performon
inflationwhichwouldclearthe pathfor Trendsin financial marketssuggestthat there hasbeena
gradual easingof depositratesinrecentfew monthsasyieldson10 year governmentbondshave been
fallingconsistentlyduringthisperiod(Figure1.6).Decliningyieldscouldtriggerreductioninlending
ratesby banksin the comingmonths.Withthe easingof inflationaryconditions,the RBIhasalready
signalledashiftinthe monetarypolicystance whenitcutpolicyreporatesby25 basispointsto 7.75
percentinJanuary2015. In some ways,furthermonetarypolicyeasingwouldentail the policyrate
catchingup withmarketrates.
8. Figure-1.4 Householdinflationexpectation(in %) Figure-1.6 Bonds Yield(in%)
Liquidityconditionshave remainedbroadlybalanced sofarduring2014-15. The implementationof a
revisedliquiditymanagementframeworkhashelpedinreducingvolatilityinthe overnightinter-bank
segmentandbetteranchoringthe call rate near the policyrate.Withthe fiscal deficittoremainunder
control and the newliquiditymanagementframeworkinplace,liquidityconditionsare expectedto
remaincomfortable in2015-16.
Deflationary Pressure( During April to November,2014)
Deflationarypressure persistedforthe sixthmonthinarow as fall inpricesof fuel andmanufactured
itemspulledinflationtoanewlowof (-)2.65 per centinApril,promptingindustrytodemandarate cut
by the Reserve Bank.Inflation,asmeasuredonthe Wholesale Price Index (WPI),hasbeeninthe
negative zone since November,2014. InApril lastyear,it was5.55 percent.The deflationarytrendhas
bolsteredthe case fora rate cut by RBI as retail inflationhasalsoeasedandindustrialproductionis
down. Asper the Inflationdata,manufacturedproductswitnesseddeflationforthe secondconsecutive
monthin April asinflationdroppedtoa recordlow of (-)0.52per cent.
Inflationinfoodarticlescategorystoodat5.73 percent, as against6.31 percent inMarch. Fuel and
powerinflationwas(-)13.03percentin April.Industrychambersraisedclamourforlowerinterestrates,
sayingthe data providesample space forRBIto slashthe keypolicyrate to fuel investmentsandpropel
growth.( refer Figure-1.7)
Figure-1.7 Depicts the deflationaryPressures that causeda dipininflation (during April-November,2014)
9. India'sretail inflationhitsthree-monthlow
India'sconsumerprice inflationunexpectedlyslowedtoathree-
monthlowinMarch, whichcouldencourage the Reserve Banktodeliveranotheroff-cycle interestrate
cut to boosteconomicrecovery.Retail pricesrose 5.17percentyear-on-yearlastmonth,slowerthana
5.5 percentannual rise predictedbyanalystsinaReuterspoll anda 5.37 percentgaininFebruary.Food
priceswere up6.14 percentyear-on-yearinMarch comparedwitha revised6.88 percentrise a month
earlier.Withinflationbelowthe 6.0percentupperendof the central bank's targetrange,The central
bankhas cut interestratestwice thisyearat unscheduledmeetings,butkeptitskeyreporate on holdat
7.50 percent,waitingtoassessinflationpressuresandgive commercialbanksmore time tocut lending
rates.Thishas raiseda further25 basispointcut i.e.Reporate reduced to 7.25.
Q).How has the inflationary/deflationarypressure impactedsavingsandinvestmentinthe economy?
Impact ofinflation/deflationonsavingsand investment
Inflationhasconsistentlygone downinlast5years.Witha higherGDP,thishas ledto increase inthe
real income andpurchasingpower.Savingsandinvestmenthave alsogone upproportionately.
10. Figure 1-8. Inflationtrendsoverlast2years
Figure 1-9. Savingstrendinlast5 years
Figure 1-10. Sector-wise growthinsavings
Inflationhasbeencontinuouslydecreasinginlast2 years.Ithas remainedbetween5to6 % of GDP on
an average as showninFigure 1-8. Withmore real income,bothsavingsandexpendituresof consumers
have gone up.
Householdsavingshave grownsteadilywith23.6 to 24.4 % of GDP inthe last 2 years.Private sector
savingshasalsoseensteadyprogressby0.1% everyyear.Publicsavingshasseensharpincrease from
2.0 to 3.5 % of GDP in last2 years.Asa result,the grossdomesticsavingshasgrownsignificantly
comparedto previousyears.Figure 1-9& 1-10 show the savingstrendandsector wise contributionto
the savings.
Bank depositshave beenthe mostpreferredchannel of savingsandcontinue tobe so.Besides,
insurance andshare marketinvestmenthave gone significantlyup.
But consideringthe higherGDPgrowthas comparedto the inflation,the savingscouldbe expectedto
grow higherthanthe numbersavailable.Thisindicatedthatconsumerexpenditureshave alsogone up.