
Retail Inflation at 6-year Low; WPI Turns Negative
India's key inflation gauge dropped to pre-pandemic lows on the back of a sharp decline in food inflation, triggering hopes of another rate cut by the Reserve Bank of India (RBI). Retail inflation in June based on the Consumer Price Index (CPI) dropped to 2.1%, the lowest in more than six years and just shy of the lower end of the central bank's 2-6% target range, official data released Monday showed.The RBI is mandated to target 4% retail inflation within the range. This is the fifth consecutive month that CPI inflation has printed below 4%. Retail inflation is at its lowest since January 2019, when it was 1.97%.The Wholesale Price Index (WPI) slipped into the deflation zone, hitting a 20-month low of -0.1% in June against 0.4% in May. The drop in the inflation rate was driven by a decline in food and fuel prices and a moderation in manufactured goods. ICRA chief economist Aditi Nayar said a 25 bps cut in August cannot be ruled out, continuing the cuts seen this year in June.Others didn't concur.'This number will not have any impact on the policy decision and hence a status quo can be expected,' said Madan Sabnavis, chief economist at Bank of Baroda.CareEdge chief economist Rajani Sinha said, 'The Reserve Bank of India has already front-loaded the rate cuts anticipating moderation in inflation, hence we do not expect further rate cuts, unless economic growth weakens materially.'A basis point is 0.01 percentage point.In its last policy announcement on June 5, the RBI cut the repo rate by more than expected 50 basis points, delivering a cumulative one percentage point reduction in calendar 2025 to boost demand. It also lowered the cash reserve ratio (CRR) by 100 bps, but shifted its stance to neutral from accommodative, suggesting a pause on monetary action.Nayar reasons that a slowing economy may bring an August rate cut by the central bank's monetary policy committee (MPC).'Given the weakness in a majority of the available high-frequency indicators, we foresee the gross domestic product (GDP) growth to print at 6.0-6.5% in Q1FY26, the data of which will only be available at end-August i.e. after the MPC's meeting,' said Nayar.The Centre will release GDP data for the June quarter in August. The MPC meets August 4-6.Low inflation is expected to help prop up demand.'The declining inflation is expected to provide a significant boost to the real wages of the households in FY26,' said Paras Jasrai, associate director at India Ratings and Research (Ind-Ra). Jasrai said one more 25 basis point cut could still occur this fiscal year unless there are surprises from global developments or growth hits a slump.The average retail inflation rate was at a 25-quarter low of 2.7% in the June quarter, lower than the central bank's forecast of 2.9%, while average wholesale inflation dropped to a five-quarter low of 0.4%.Food inflation, a major component of CPI, slipped to deflation, coming in at -1.1%, the lowest in over six years.Core inflation, which excludes volatile food and fuel prices and signals demand pressures, rose to 4.4% in June, the highest since September 2023, largely due to an uptick in jewellery.Food inflation dropped due to a favourable base effect and a fall in prices of vegetables (-19%), pulses (-11.8%), and meat & fish (-1.6%). Cereal inflation hit a 41-month low of 3.7%.Out of 22 major states and union territories, 10 recorded inflation above the national average, with Kerala leading at 6.7%, followed by Punjab (4.7%), Jammu and Kashmir (4.4%), Uttarakhand (3.4%), and Haryana (3.1%).
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Economic Times
an hour ago
- Economic Times
Former RBI Governor Raghuram Rajan isn't impressed by India's growth story; Here's what he thinks we're getting wrong
Agencies Former RBI Guv Raghuram Rajan "There is no room for another China." That's Raghuram Rajan's blunt assessment of India's industrial aspirations. In a recent interview with Frontline, the former RBI Governor made it clear that the world has changed. The conditions that allowed China to rise through mass manufacturing simply no longer labour is not the advantage it once was. Automation has moved into even the most basic factory roles. "What companies need now is people who can tend the machines, repair the machines—not those who do the manual work machines have replaced," Rajan said. In short, the manufacturing jobs India is chasing might already be to that the rise of protectionism. Countries are building domestic industries, shutting doors that were once open to global supply chains. "Everybody wants their own little manufacturing industry," Rajan said. India cannot expect to export its way to prosperity in this has been betting heavily on manufacturing as a way to absorb its young workforce. But Rajan cautions that the numbers just don't add up."We cannot expect that number of jobs in manufacturing," he said. Tariffs have gone up, production-linked incentives are scattered, and policies contradict themselves. For example, tariffs are applied not only to final goods but also to the intermediate goods needed to make them. "Then people complain, 'Oh, I can't make this effectively here because the intermediate goods are tariffed.'" This isn't just a policy hiccup. It signals a lack of strategic clarity. And without that, Rajan believes, manufacturing will remain a political slogan, not a real solution."Get a job wherever, create a job wherever you can." That, Rajan says, should be the guiding already commands a 4.5 percent share of global service exports. That includes everything from high-end software to back-end support. While these sectors can't employ everyone, they signal a clear competitive importantly, Rajan sees untapped potential in domestic, mid-skill service jobs—plumbers, drivers, technicians, healthcare workers. These jobs may not make headlines, but they could lift millions. All it takes is better skilling and targeted support. He also dismissed the idea that you need a strong manufacturing base to build high-end service sectors. "This canard, which is floated sometimes, that you need the manufacturing in order to do the associated services, is not necessarily true," Rajan said. Citing companies like Nvidia and Apple, he pointed out that design and innovation can flourish even when production is outsourced. The days of the free trade consensus are over. Rajan traced America's shift back to Trump and his economic advisers, who viewed trade deficits as signs of weakness. That thinking has stuck around. "Is he undermining the basis of US prosperity and its dominance of the post-Second World War economic system with this view? I think we are turning the tables on what worked," he said. Today, protectionist tariffs are not a blip. They are part of a permanent, structural shift in global politics. For India, it means the space to plug into global supply chains has shrunk. Trying to follow China's route now is like running for a train that already left the is growing at 6 to 6.5 percent a year. On paper, that sounds solid. But as Rajan points out, this pace is not enough to lift per capita income fast enough to avoid a demographic squeeze."We are the fastest-growing country in the G20," he said. "But also the poorest on a per capita basis. That has to change."Time is running out. India's young population won't stay young forever. If opportunities don't arrive soon, the demographic dividend could turn into a has long been vocal about the need for decentralisation. Giving more power to local governments, he argues, improves both accountability and outcomes."The village community can see when the funds transmitted from the State government or Central government are misspent or line the pockets of the village elite," he said. "State after state should give more power to the municipalities, to the villages. That will both enhance commitment to democracy but also allow for better governance."He contrasted this with the Centre's tendency to prioritise flashy schemes without follow-through. "We announce a campaign, but never actually determine whether it's working. It becomes an announcement rather than effective rollout."Rajan criticised the growing trend of suppressing inconvenient data or changing methodologies to suit political needs. That, he warned, is a recipe for bad policy."Suppressing data eventually hurts the government itself," he said. "Your critics are sometimes your best friends because they will identify what's going wrong and then you can make the changes and then get credit for it."Honest, reliable data is not just for economists. It is the foundation of public is spending big on infrastructure. But Rajan warns that not all investment is equal."Every small town wants a metro," he said. "That's overbuilding, and those will be white elephants."What matters more, in his view, is building up capabilities. This means investing in schools, research labs, skilling programmes, and targeted industrial policy. "We have to have a few national labs where you've got state-of-the-art equipment where you can actually be competitive."The message Rajan is sending is clear: Stop chasing China. That moment is gone. India needs a strategy rooted in its own strengths, challenges and people. That means backing services, not slogans. Empowering local governments, not hoarding power at the top. And investing in people, not just not glamorous. But it might just work.


Mint
2 hours ago
- Mint
Vijay L Bhambwani's Ticker: It's time for bulls to make their presence felt
Ticker is a weekly newsletter by Vijay L Bhambwani. Subscribe to Mint's newsletters to get them directly in your email inbox. Dear Reader, Last week, I wrote about the daunting prospect of overhead supply (selling by bulls trapped at higher levels) weighing on bulls. That hypothesis was validated by the markets as indices slipped in the latter half of the week. Triggers for the overhead supply remain unchanged. Proposed changes in the US and UK, which may reduce the flow of money to pension funds, are worrying bulls. It should be remembered that pension funds manage huge sums as long-term assets under management (AUM), which makes them the biggest institutional investors in equity markets. If AUMs fall in the pension fund industry, support to equity markets may be impacted as well. The delay in tying up trade deals and fears of slowing consumer spending worldwide are also weighing on sentiments. This is an expiry week, and therefore, traders are likely to be preoccupied with rolling over or squaring up (closing) their trades. Volatility is usually higher in expiry weeks. The positive trigger that emerged is that traded volumes perked up in the derivatives segment. This was partly due to Jane Street being allowed to resume operations in India. Aggressive follow-up buying will be crucial to revive sentiments. Do note the Nifty-50 has slipped for four weeks in a row, and bulls are running out of time. If they are to get a grip on sentiments, they must make their presence felt before the 24,800 support I have been mentioning for a fortnight is violated. In terms of sectoral action, public sector undertakings will continue to attract traders due to the emotional and financial stakes being relatively high in these stocks. Banking stocks within the PSU space will be particularly volatile. As we approach the Reserve Bank of India's announcement on interest rates on 7 August, traders are likely to ramp up their exposure on these stocks. Larger two-way moves are expected on these stocks. Metal prices may witness routine month-end short-covering, which can perk up metal and mining stock prices this week. Upsides will remain capped, however. Oil and gas-related stocks will also witness hectic trades, as energy prices are slipping on global commodity exchanges. Bullion remains bullish for the patient long-term investor, who is willing to look past calendar 2025. Oil and gas prices are likely to stay subdued, and rallies, if any, are likely to run into selling pressure. I maintain my long-standing view that energy markets are well-supplied and shortages exist only in market narratives. I recommend my readers traders light with tail risk (hacienda) hedges in place to avoid any shocks to capital. Being an expiry week makes it even more pressing to prioritize capital preservation over trading profits. A tutorial video on hacienda hedges is here - Rear View Mirror Let us assess what happened last week so we can guesstimate what to expect in the coming week. The fall was led by the broad-based Nifty, whereas the Bank Nifty logged gains. Being heavily weighted in the Nifty index, banking stocks cushioned the declines in the Nifty which, otherwise, may have slipped significantly. A weak dollar aided sentiments in emerging markets including India. Safe-haven buying eased in bullion, which otherwise remained firm. Oil and gas fell sharply as demand growth was feared to contract in the near future. The rupee eased versus a weakening dollar, which underscores the nervousness in the forex peg. Indian forex reserves slipped marginally, which weighed on sentiments. The Indian 10-year sovereign bond yields rose which dragged banking stocks since banks are the biggest investors in bonds. NSE market capitalization slipped 1.54%, which indicates broad-based selling. Market wide position limits (MWPL) rose routinely ahead of the expiry. US headline indices rose, providing tailwinds to our markets, which could have otherwise slipped deeper. Retail Risk Appetite – I use a simple yet highly accurate yardstick for measuring the conviction levels of retail traders – where are they deploying money. I measure what percentage of the turnover was contributed by the lower and higher risk instruments. If they trade more of futures which require sizable capital, their risk appetite is higher. Within the futures space, index futures are less volatile compared to stock futures. A higher footprint in stock futures shows higher aggression levels. Ditto for stock and index options. Last week, this is what their footprint looked like (the numbers are average of all trading days of the week) – Turnover contribution in the higher-risk, capital-intensive futures segment was marginally higher. Much of it can be attributed to the rollover of trades from the July to August series. This results in dual turnover being logged, which is routine. In the relatively safer options segment, turnover rose in the stock options segment which is marginally more riskier than index options. Some of it can be rollover trades from July to August series. Overall. risk appetite remained subdued. Matryoshka Analysis Let us peel layer after layer of statistical data to arrive at the core message of the first chart I share is the NSE advance-decline ratio. After the price itself, this indicator is the fastest (leading) indicator of which way the winds are blowing. This simple yet accurate indicator computes the ratio of the number of rising stocks compared to falling stocks. As long as gaining stocks outnumber the losers, bulls are dominant. This metric is a gauge of the risk appetite of 'one marshmallow' traders. These are pure intra-day traders. The Nifty clocked smaller losses last week, but the advance-decline ratio slipped from 1.11 in the prior week to 0.67 last week. That means there were 67 gaining stocks for every 100 losing stocks. Intra-day buying conviction was lower. This ratio must stay above 1.0 sustainably all week for bulls to regain their lost initiative. A tutorial video on the marshmallow theory in trading is here - The second chart I share is the market wide position limits (MWPL). This measures the amount of exposure utilized by traders in the derivatives (F&O) space as a component of the total exposure allowed by the regulator. This metric is a gauge of the risk appetite of 'two marshmallow' traders. These are deep-pocketed, high-conviction traders who roll over their trades to the next session/s. The MWPL rose routinely ahead of the expiry week, but the peak was lower than the prior month's peak. This week being an expiry one, this reading can only fall this week. Swing traders are showing signs of hesitation. If markets rally strongly in the August derivatives series, bulls must ramp up their exposure levels to make their presence felt. Post-expiry routine decline should be watched keenly. If the low is higher than the 26.20 level of last month, it would imply some optimism.A dedicated tutorial video on how to interpret MWPL data in more ways than one is available here - The third chart I share is my in-house indicator 'impetus.' It measures the force in any price move. Last week, both indices fell with falling impetus readings. That tells us the fall was more of a gradual slide triggered by poor buying support rather than aggressive selling. Ideally, the price and impetus readings should rise in tandem to confirm a sustainable upthrust. The final chart I share is my in-house indicator 'LWTD.' It computes lift, weight, thrust and drag encountered by any security. These are four forces that any powered aircraft faces during flight; so, applying it to traded securities helps a trader estimate prevalent sentiments. Last week, the Nifty logged smaller declines, but the LWTD reading fell sharply to its lowest after the week ended 18 April, 2025. That implies lower fresh buying support for the Nifty this week. While short-covering can occur, it can cushion declines. For a fresh rally, aggressive follow-up buying will be required. A tutorial video on interpreting the LWTD indicator is here - Nifty's Verdict Last week, we saw a red candle on the weekly chart. This is the fourth bearish candle in a row. It was an inverted hammer candle. That indicates an abortive attempt by bulls as they tried to push prices higher but failed, and the index slid back into negative territory. The price remains above the 25-week average, which is a proxy for the six-month holding cost of an average retail investor. The medium-term outlook remains positive for now, as long as the price stays above this average. Last week, I advocated watching the 24,800 level, which bulls needed to defend in case of a decline. Note how the weekly low was 24,806. This threshold remains as the immediate support area to watch out for. The longer the index stays below this threshold, the more difficulty bulls may encounter on the upside. That is because overhead supply (selling from bulls trapped at higher levels) can limit rallies in the near term. On the flipside, the nearest resistance is at the 25,250 level, which must be overcome if the Nifty is to have a reasonable chance to rally. Your Call to Action – watch the 24,800 level as a near-term support. Only a break-out above the 25,250 level raises the possibility of a short-term rally. Last week, I estimated ranges between 57,500 – 55,050 and 25,525 – 24,400 on the Bank Nifty and Nifty respectively. Both indices traded within their specified resistance levels. This week, I estimate ranges between 57,725 – 55,325 and 25,375 – 24,300 on the Bank Nifty and Nifty respectively. Trade light with strict stop losses. Avoid trading counters with spreads wider than eight ticks. Have a profitable week. Vijay L. Bhambwani Vijay is the CEO a proprietary trading firm. He tweets at @vijaybhambwani

The Hindu
3 hours ago
- The Hindu
CPI(M) flays economic priorities of State, Centre
Senior leaders of the CPI(M) flayed the State and the Central government for extending a red carpet to the corporates with the taxpayers' money while the burden of price rise was being borne by the poor. The CPI(M) leader U. Basavaraj said that though the people of the country pay ₹50 lakh crore in taxes to the Centre and ₹3-₹4 lakh crore is received by the State government, the amount was being used to benefit the corporate companies. He was speaking at the concluding programme of the political campaign organised by the CPI(M) Mysuru district committee at Gandhi Square here. Mr. Basavaraju said India ranked 105th in the Global Hunger Index, and the unemployment rate was high; hence, the claim that it was the fourth-largest economy was questionable. Though nearly 70 crore people were receiving rations through the public distribution system and nutritious food was being distributed through the Anganwadis, the scourge of hunger and malnutrition persisted and put a question mark on the claims of being the fourth largest economy, said Mr. Basavaraju. The economic policies of the Central and State governments also received flak, and the CPI(M) wondered whether the two were working for the corporates or the economically impoverished section of the population. District secretary Jagadeesh Surya said that no project has been introduced in the district for job creation. There is neither a government law college nor an engineering college in the district, and no government seems to be concerned about it, he added. The district ranks second in the State in terms of farmer suicides, but the State and Central governments are not focusing on improving farmers' lives here, he said. Mr. Jagadish Surya urged the government to establish ward-level clinics and strengthen primary health centres in the district. He also demanded that farmers cultivating gomala (common) and forest lands be issued cultivation rights. Homage was also paid to the former Chief Minister of Kerala V.S. Achuthanandan who died recently.