Do it yourself

Continuing from yesterday ( Two short stories, and a big one ) As a common Indian household, I face three key issues in my daily life. From my discussions with several other common people, and observations during my travels across the country, I understand that I may not be alone in facing these issues. In fact, a large number of common households may be facing similar issues. These issues are – 1.     A conspicuous lack of the “service orientation” in our public servants. A large proportion of public servants usually act like entitled feudal lords and treat the common people as their underprivileged subjects. Even where a public servant is not extracting a fee (bribe) for his/her services, he/she ensures that the recipient of service feels deeply obliged to get, which was his/her right in the first place. The elected representatives put on hoarding (many times at public expense) to thank themselves for basic services done by civic authorities (like cleaning a choked...

In July 2025, India’s consumer price inflation (CPI) hit an eight year low of 1.55% (yoy). Several factors contributed to the fall in inflation, including, a favorable base effect, lower fuel inflation, and decline in beverages and food prices. Since the inflation is much below the RBI tolerance range of 4% to 6%, it has excited the market participants about another rate cut at the RBI’s October 2025 Monetary Policy Committee (MPC) meeting. The prospect of lower Goods and Services Tax (GST) rates from November 2025, which could keep inflation subdued further, has added fuel to the speculations. However, notwithstanding what RBI does at its next meeting, we need to answer a fundamental question - Is this low inflation—or even disinflation—a desirable thing for a growing economy like India? Positive side of low inflation Boost to Consumer Spending:  Lower prices for essentials like vegetables and pulses mean more disposable income, which could spur consumption in a country where priv...

The rate of Consumer Price Inflation (CPI) in India dropped to 3.34% in the month of March; below the lower bound (4%) of the regulator’s (RBI) target band of 4% to 6%. It is definitely a significant development insofar as the monetary policy consideration, macroeconomic stability, and consumer confidence are concerned. If this trend sustains, it would pave the path for further easing in the monetary policy; improve the fiscal outlook; improve the outlook for debt and currency markets; aid corporate profitability and encourage fresh investment flows. In this sense, it is certainly good news for the investors in Indian financial markets in the near-term. However, in my view, a low inflation rate does not help a large section of the Indian population much. A low inflation rate only implies a slower rise in the price level as compared to the prices in the base period. It offers no relief to the people who are already finding the existing prices of the essential goods and services unaf...

The 3-day bi-monthly meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) begins today. This would be the last meeting before presentation of the Union Budget for the year FY26. The members of the MPC would draw inputs from the latest national accounts (2QFY25 GDP data); October 2024 inflation data; October 2024 Professional managers’ survey results; September 2024 IIP estimates; November 2024 PMI and core sector growth data; April-October fiscal balance data; global developments (political and geopolitical); global inflation, rates, currency and market trends; expert opinions and views of the members of MPC; and assessment of the current and future situation provided by the staff of RBI. The statement of the MPC on macroeconomic outlook and likely direction of the monetary policy will be a key input in preparation of the Union Budget for FY26. However, the market participants’ interest in the MPC meeting appears limited to whether, or not, at 10AM on 6 th ...

The Consumer Price Index (CPI) inflation for the month of July came at 3.54%, the lowest in five years and below the RBI tolerance band of 4-6%. This has excited some market participants as their hopes of an earlier rate cut by RBI have been rekindled. I am however not sensing any imminent rate cut, for the following simple reasons. (i)       The headline inflation number is significantly impacted by a strong base effect, as the CPI inflation in the base period (July 2023) was 7.4%. Sequentially, the inflation has risen 1.42% MoM in July 2024 against 1.33% MoM rise in June 2024. As of now, there is no indication of a sustainable decline in inflation trajectory. (ii)      Core CPI inflation in July 2024 was 3.3% against 3.1% in the preceding two months. This is the first rise in core CPI after twelve months of consistent decline. (iii)    Food inflation remained sticky, rising 2.47% in July 2024 after a 2.69% rise in June 202...

From the Bollywood movie ‘Chak De India’ (Dir. Shimit Amin, 2007), the climax sequence has been particularly popular. It is perhaps one of the most popular, inspiring, and quoted pieces of Indian cinema. In one part of the climax, the protagonist (played by Shah Rukh Khan), who is the coach of the Indian national women’s hockey team, is guiding the team in the World Cup final match against the defending champion Australia. During a penalty shootout, the coach tries to anticipate the penalty shot of the Australian striker by reading her body language – leg position, eyes, hockey stick and wrist position etc. – and correctly concludes that the striker will hit the ball straight and guides the Indian goalkeeper to stay still in the middle of the goal post. The goalkeeper saves the critical penalty and India wins the match. Today the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is meeting for the last time in 2023 to review its monetary policy stance. The Governor o...

  The first half of the year 2023 has been good for risk assets. Despite strong headwinds in the form of aggressive rate hikes, banking sector turmoil, political & geopolitical events and credit warnings, the stock market made a steady move up with very low volatility. Another notable feature of the global market movement in 1H2023 was the stark underperformance of emerging market equities as compared to the developed markets – even though the development markets appeared to be facing serious growth challenges and financial sector stress. The emerging markets like India demonstrated much stronger economic resilience and price stability. Equities and Crypto recorded strong gains in the first half of 2023; while commodities (especially energy), USD and bonds lost some ground. The rally in risk assets though lacks belief of investors, as underpinned by high cash levels. Though at present equity markets appear strong on the back of a resilient demand environment, easing geopo...

  One of the most common narratives in all the investment advisory pitches is the impact of inflation on investors’ wealth. Inflation is often termed as termite that silently destroys investors’ wealth. Protecting wealth from inflation is therefore one of the primary objectives of almost every investment strategy. Over the weekend I examined more than twenty-five investment proposals, mostly focusing on elevated inflation and its impact on real returns. The common advice is to take higher risk by increasing the proportion of high yielding debt and equities. Discussions with investment advisors indicate the investment strategies aimed at protecting the real (inflation adjusted) value of the investors’ portfolios may be based on poor, and often wrong, understanding of the impact of inflation on investors. Most of them presented the official data of inflation and suggested investment products that may yield a return that is higher than the official CPI (Consumer Price Index) infla...

 In the current year 2022, inflation in India has consistently remained above the RBI tolerance band of 2-6%. For the month of August Consumer Price Inflation (CPI) was 7%, led primarily by the food inflation of 7.6%. Both rural and urban inflation recorded a MoM rise in August. Unfavourable weather conditions apparently led to sharp rise in the prices of vegetables, fruits, spices etc. However, the core inflation (CPI ex food and fuel) has also persisted over 6% since the past many months; emphasizing the persistent pricing pressures. The IIP growth in July also moderated to 2.4% led primarily by consumer non-durables – indicating pressure on household finances. The sharp rise in household debt, especially the expensive credit card rolling credits, also corroborates the rising stress on household finances. In view of the elevated price pressures, the Monetary Policy Committee (MPC) of RBI is expected to keep raising rates in line with the global peers. The market consensus is ex...

 The macro economic data released last week produced further evidence of the Indian economy struggling with stagflationary conditions; notwithstanding the denial by various authorities. Inflation impact widening and deepening The consumer price inflation date for the month of April 2022 was a negative surprise. The consumer prices escalated at a rate of 7.8% (yoy) during the month. The higher inflation was, to a large extent, a consequence of imported inflation which added almost 2% to the headline inflation number. Though, the inflation due to rise in domestic prices at 6.4% was also no comfort. Higher commodity prices (especially energy) have clearly started to show second and third round impact as the inflation is now becoming wider and deeper. The core inflation and services inflation were also higher on a yoy basis, as producers and service providers have started to aggressively pass on the higher costs. With worsening current account (and depreciating INR); continuing s...