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New Congress President will have to shed tag of ‘Gandhi rubber stamp’

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Congress’ political rivals have already claimed that the incoming chief would be remote-controlled by the Gandhis

Representative image.

After over two decades, the party president’s office at the AICC will open its doors for ordinary workers” is how a Congress leader described the one possible change expected after the upcoming organisational elections to the President’s post.

Due to security reasons, the Congress President’s designated office at the All-India Congress Committee (AICC) headquarters at 24, Akbar Road in Delhi has virtually been closed ever since Sonia Gandhi took over the reins of the party from Sitaram Kesri in March 1998.

Rahul Gandhi followed suit in his tenure from December 2017 to May 2019, and later Sonia Gandhi continued with this practice after reassuming office in August 2019.

The Special Protection Group had suggested that the Gandhis —  Sonia Gandhi, Rahul Gandhi, and Priyanka Gandhi Vadra — should not officiate from the AICC headquarters.

As a result, Sonia Gandhi’s residence at 10 Janpath, adjoining the party headquarters, became the power centre during all these years, and later Rahul Gandhi’s official home at 12, Tughlak Lane was the go-to-place for Congress leaders.

While easy accessibility was cited as the spur behind the SPG’s proposal, the flipside of the move translated into a denial of access to common party workers, or at least that was the perception created.

With a non-Gandhi is set to become the Congress President now, the AICC could once again reclaim its glory days as a nerve centre of the grand old party, although 10 Janpath and 12 Tughlak Lane will continue to occupy the central place in the party.

While this might be the obvious change on the ground, the bigger challenge for the next Congress President would be to dispel the notion of being a rubber stamp of the Gandhi family.

Congress’ political rivals have already claimed that the incoming chief would be remote-controlled by the Gandhis.

The Gandhis have repeatedly assured of their neutrality in the contest, but reports suggesting that Rajasthan Chief Minister Ashok Gehlot has the blessings of Sonia Gandhi may cast a shadow on the results.

Many in the Congress believe that a ‘puppet’ President would not be able to establish control over the organisation, or bring about the much-needed changes in the party, and the status quo will persist.

The big question is whether the Gandhi family would continue to be the ‘high command’, or the new head would wield those powers.

Sonia Gandhi will undoubtedly continue to be the patron of the grand old party, with Rahul Gandhi as its driving force, and Priyanka Gandhi a key office bearer. Navigating these power centres to establish his writ on the party will be a tough challenge for the new party President.

It may be recalled that the buzz of the installation of KC Venugopal as the titular Congress President in August 2020 led to the emergence of the group of dissenters, known as G-23.

Some of the G-23 leaders, including Ghulam Nabi Azad and Kapil Sibal, have since quit the Congress.

Halting the growing attrition rate will be another tough task for the new chief given that a large number of leaders are feeling frustrated in the Congress following a series of electoral setbacks in states and nationally since 2014, and are easy pickings for other parties.

It would also be interesting to see if the new President reaches out to those who have left the Congress over the years, and tries to bring them back to the party fold.

Apart from dismantling all the walls that the managers or so-called strategists had erected between the leadership and workers from time to time, the other important tasks for the new President would be to accommodate some of the veterans and the side-lined leaders in the decision-making.

For the party’s revival, it is imperative for the leadership to communicate directly with the cadre, to make it fighting fit, and match the powerful machinery of the ruling Bharatiya Janata Party (BJP).

So far, the two names of Gehlot and Shashi Tharoor as candidates are doing the rounds, but a clearer picture of those who have decided to throw their hats in the ring will emerge on October 8, the last date of the withdrawal of nomination papers.

Among the two, Gehlot is a three-time Chief Minister, has a bigger stature, and a large following within the party. Although he is said to have agreed to relinquish the Chief Minister’s post if elected Congress President in accordance with the ‘one-man, one-post’ norm adopted as part of the Udaipur declaration, Gehlot is no pushover.

A wily politician, he is credited with being able to keep his flock together, and outwit his rivals within and outside the Congress.

While Gehlot’s loyalty towards the Gandhi family is unquestionable, the independent-minded politician is unlikely to acquiesce to be a rubber stamp President.

A glimpse of the master strategist's acumen was on display on September 25 night when his loyalists thwarted a meeting of the Congress Legislature Party (CLP) called to elect Sachin Pilot as his successor. As many as 90 legislators owing allegiance to Gehlot submitted their resignations to Speaker CP Joshi, plunging the party and the government in deep crisis. They want a Gehlot nominee and not Pilot to be the next Chief Minister, and that too after the election of the new Congress President on October 19.

However, first things first. While the debate on the fairness of the elections, the neutrality of the Gandhis and the effectiveness of the new President can rage on endlessly, all eyes will be on the first full-fledged contest in the Congress, nearly 22 years after Sonia Gandhi defeated Jitendra Prasada in 2000.

Taliban’s Kashmir Policy | Will India’s diplomatic approach tip the scales in its favour?

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Considering its own interests and ideology, the Taliban will likely harbour both anti-Indian and anti-Pakistani outfits

Based on the Taliban’s evolving relations with Pakistan and India’s willingness to accommodate the Taliban. (Image: AFP/File)
Taliban also tried to overcome the West’s pressure by building a stronger relationship with other local jihadi outfits, including Lashkar-e-Taiba (LeT) and Jaish-e-Mohammed (JeM). Both of these factors incentivised the Taliban to further its interests by launching co-ordinated attacks against Indian workers, contractors, and diplomatic missions in Afghanistan. Rhetorically, however, it continued to maintain that it is non-partisan to India-Pakistan relations; had no links with terror organisations operating in Kashmir, and had no intention to attack India. Multiple Taliban leaders supported a peaceful resolution of the Kashmir issue, while asserting that it reserves the right to condemn India’s violence against Kashmiris, and other Muslims.

With its re-emergence to power in 2021, the Taliban has given out multiple statements on India, and Kashmir. It has reiterated that it wouldn’t target any country (including India); have no links with LeT or other militant organisations; wouldn’t interfere in the Kashmir issue; and would prefer India and Pakistan to resolve the Kashmir dispute peacefully. However, it also reasserted that it would raise its voice and stand in solidarity with fellow Muslims in Kashmir. While the Taliban’s contemporary rhetoric on Kashmir has remained the same, the ideological factors and interests shall determine its actual policy.

Terror Outfits, Ideology, and Interests

The Taliban share deep relations with al-Qaeda, and all its franchises, especially the Al-Qaeda Indian Subcontinent (AQIS). Some scholars even observe that it is difficult to differentiate the members of AQIS from that of the Taliban.

Al-Qaeda and AQIS have long set their eyes on Kashmir as the centre of their jihad in South Asia. They have even suggested outfits like Tehreek-e Taliban (TTP) to stop inciting violence in Pakistan, and shift their focus on India. However, much of its rhetoric is visible only in propaganda, and not in action. Despite their sharpened and increasing propaganda against Kashmir, AQIS and its affiliate Ansar Ghazwat-ul-Hind have failed to sustain themselves in Kashmir.

It is here that the Taliban’s policy will prove crucial for al-Qaeda. True, al-Qaeda’s existence in Afghanistan will not be as useful to the Taliban’s military might as it was during their fight against the West. From hosting bin Laden to sheltering al-Zawahiri in Kabul, the Taliban’s sympathy for al-Qaeda and its jihadist ideology has remained consistent. Interests-wise, al-Qaeda’s overt existence on Afghan soil may jeopardise the Taliban’s ambitions of seeking international legitimacy.

However, covert support to the organisation may enable the Taliban to stay connected with the rest of the jihadi world, and reap material and ideological benefits. This seems to be an easy alternative for the Taliban if it fails to gain international legitimacy. Given these ideological and organisational stakes, the Taliban will hesitate to completely prevent al-Qaeda from using Afghan soil for its activities (including against Kashmir).

The Taliban might also find fewer military advantages from sheltering the JeM. Ideologically, however, the Taliban’s sympathy is much deeper for fellow-Deobandi organisations. In the past, Deobandi organisations that targeted Kashmir, like Harkat-ul-Mujahideen, Harkat-ul-Jehadi Islam, and Harkat-ul-Ansar sought a safe haven and operational space in Afghanistan. The Taliban played a crucial role in the formation of Masood Azhar’s JeM too. Pakistan’s use of Deobandi organisations in Kashmir has only continued to incentivise the Taliban to shelter them on Afghan soil and leverage them to bargain with Pakistan.

Despite several elements of JeM distancing themselves from Pakistan, and the Pakistani state trying to portray the same, JeM enjoys significant interlinkages between ISI, the Taliban, and al-Qaeda. Thus, ideological and organisational interests favour the Taliban to continue letting the JeM use Afghan soil for the operations. This will continue to be the case regardless of Masood Azhar’s presence in either Afghanistan or Pakistan. Essentially, JeM maintains eight camps in Afghanistan’s Nangahar—three of which are under the direct control of the Taliban.

LeT, however, enjoys limited operational capabilities, and presence in Afghanistan. It increased its presence in Afghanistan only in 2006 — supplementing the Taliban’s capability to fight the West. It facilitated, recruited, and sheltered members from the Taliban, al-Qaeda, and other Deobandi organisations, and has occasionally supplemented them with manpower. However, despite this limited co-operation, LeT is looked upon with scepticism by several Deobandi outfits. This is for two reasons: ideological contradictions between the LeT’s Ahl-i-Hadith ideology and Deobandism; and LeT’s closeness to the ISI and acting as its proxy on several occasions. Relatively, the Taliban, thus, has a less ideological interest in letting LeT operate from Afghan soil, but the LeT’s proximity to the ISI ensures some bargaining and leveraging power to the Taliban. That is why LeT also operates in Afghanistan, albeit in a limited fashion.

India-Pakistan Factor

However, these interests will also likely be impacted by the Taliban’s India and Pakistan policy and vice-versa. The Taliban and Pakistan have had a complex relationship, despite the former seeking safe haven and assistance from Islamabad. The relationship has grown more complicated with the Taliban trying to seek domestic legitimacy and more autonomy by using anti-Pakistan rhetoric. The Taliban have also not yet accepted the Durand line and have continued to clash with the Pakistani forces on several occasions. In addition, its sympathy and harbouring of TTP have also increased tensions between both countries. That being said, the ISI still has some leverage within the organisation, and Kashmir is witnessing an increase in the inflow of advanced military equipment and weapons from Afghanistan.

On the other hand, the Taliban have tried to shun their over-reliance on Pakistan by engaging with India. The Taliban has invited India to further its military ties and investments, and guaranteed not to harbour any terrorist organisation that can target India. In this regard, India has offered food and humanitarian assistance to the Taliban, and has also re-opened its mission in Kabul — largely to avoid another 90s-like situation in Kashmir.

Overall, the Taliban is attempting to weaken ISI’s influence within the organisation, and this will likely moderate its extent of support to terror outfits targeting Kashmir. However, considering its interests and ideology, the Taliban will likely harbour both anti-Indian and anti-Pakistani outfits. This will help it seek concessions and leverages from both sides. Yet, how the Taliban will tilt in its balance on Kashmir will largely depend on how India and Pakistan can accommodate the Taliban’s interests, and vice-versa.

As the Taliban completes more than one year of governing Afghanistan, it is clear that the organisation of today is no different to that of the 90s. Restrictions on women are imposed, terrorist organisations have continued to seek safe haven, and targeted killings go on. In this context, it is crucial to revisit the Taliban’s promises and policy concerning Kashmir.

The Taliban’s contemporary rhetoric on Kashmir has stayed the same since they first came to power in the 90s. However, indifferent to the rhetoric, its actual policy has been defined by two factors: ideology, and interests. Both of these factors still favour the Taliban to shelter terror organisations that target Kashmir. But, there remains a possibility of change — based on the Taliban’s evolving relations with Pakistan, and India’s willingness to accommodate the Taliban.

Rhetoric And Beyond 

The Taliban’s Kashmir policy has largely remained the same since it initially came to power in 1996. Till 2001, the Taliban maintained the rhetoric of not interfering in India’s domestic matters and Kashmir, and promoting a good relationship with India. In reality, however, a large part of its policy was shaped by its ideology and interests.

ASBA for secondary market in the works: Sebi chairperson Madhabi Puri Buch

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Regulator not against algo trading but businesses 'cannot be a black box', she saysMadhabi Puri Buch

The Securities and Exchange Board of India (Sebi) is considering an ASBA-like structure for the secondary market, said the regulator’s chairperson, Madhabi Puri Buch, on Wednesday, referring to an application process for IPOs.

With Application Supported by Blocked Amount, money from an applicant's account is deducted on allocation of . The process facilitates investors bidding with multiple options to apply through self-certified syndicate banks (SCSBs) where they have accounts.

An instrument for the secondary market will remove structural vulnerabilities, said Buch at the Global  Fest in Mumbai.

 is not against algo trading, but certain principles must be followed to makes the process transparent. ”If algos claim they can deliver 350 per cent return, they must be able to simulate it in an independent arrangement so that  can validate. It cannot be a black box not open to sunlight to sanitise it."

Elaborating on how the  is working to narrow down the regulatory gap, Buch shared principles that could help  entities get regulatory go ahead.

Buch said financial technology companies (fintech) must not play on anonymity and nor they build barriers for investors or customers, she said.

Govt's intervention to protect rupee takes large bite from record reserves

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While economists and the Reserve Bank of India aren't ringing any alarm bells just yet, investors are watching closely given the rupee's slump to an all-time low last month

Indian rupee

India’s intervention to protect the rupee is running down currency reserves at a rate that’s poised to eclipse the drawdown during turmoil a decade ago.

While economists and the  aren’t ringing any alarm bells just yet, investors are watching closely given the rupee’s slump to an all-time low last month and the risk of a widening in the current account deficit.

Given a steady buildup in the reserves through to their peak last year, they remain at a much healthier level than during the previous period that covered part of the Eurozone crisis and the taper tantrum triggered by the .

Also Read: RBI net-sold $19.05 billion in forex market in July to protect rupee

That crisis saw the rupee tumble almost 30% against the greenback between September 2011 and September 2013, making it one of the worst-performing emerging-markets currencies at the time. It’s dropped about 6.8% against the greenback in 2022, which is a much smaller loss than that of most of its peers.

Still, the central bank does need to be mindful that  have declined by $90 billion from their September 2021 peak of $641 billion -- a drop of 13.9%, according to RBI data. The drop in the two years a decade ago was 14.3%.

“Falling FX reserves, persistently-high commodity prices, limited exchange rate pass-through to inflation and elevated INR valuations will likely tilt the balance towards a less interventionist FX policy in coming months,” Madhavi Arora, lead economist at Emkay Global Financial Services Ltd., said in a note.

The drawdown has reduced the import cover these reserves provide to nine months, still above a standard benchmark of three months, but far below the 19 months at the beginning of 2021.

graph


Meanwhile, economists at Citigroup Inc. have forecast India’s current account deficit to reach 3.9% of gross domestic product in the fiscal year through March, versus 1.2% last year. This would be expected to weigh on the rupee and increase pressure on the RBI to intervene to reduce the sharpness of declines.

So far though, central bank governor  maintains that the level of reserves and the banking system are both healthy and well placed to handle any external shocks.

The RBI has said it expects the country’s current account deficit to stay within 3% of GDP, which it judges to be sustainable amid softening global fuel, food and fertilizer prices while portfolio flows and exports pick up.

Inflation or growth — which side of the equation will RBI consider?

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Although supporting a recovery may have precedence, a growing divergence in monetary policy and negative real rates will not be easy to sustain in a hazardous environment of unknown duration

RBI Governor Shaktikanta Das. (File Image: Reuters)

A higher-than-anticipated rise in prices last month surprised analysts, much like the first-quarter GDP data had less than a fortnight ago. Headline retail inflation, 7 percent year-on-year in August, did not deviate as much from the consensus, 6.9 percent, as the 13.5 percent real GDP growth did, missing forecasts including the central bank’s, by 2.5-3 percentage points. Concerns about the growth deficit have also been compounded by July’s industrial output that rose a bare 2.4 percent year-on-year.

The latest data continue the doubt if the current inflation episode has concluded. This picked up compared to July’s 6.7 percent, while there are no convincing signs of a stabilising recovery. Which side of the equation will the central bank prioritise at its review meeting this month end is complicated by macro stability considerations. There are no easy choices.

The weaker-than-expected growth in the April-June quarter showed a sequential contraction of -1.4 percent in seasonally adjusted terms that, according to the OECD, was the second-worst amongst G20 nations (overall contraction of -0.4 percent) and lagged only China’s -2.6 percent.

Net exports pulled down the most; this drag could accentuate from a further slowing of the world economy ahead. Supply-side weaknesses showed up in sequential declines in manufacturing, construction, trade, hospitality, transport, and communication services’ segments. In fact, the shrinkage in the trade, hospitality, transport category is considerable over April-June 2019, whose level it trailed at 84.5 percent with construction rising 1.2 percent.

Progress in industrial output is also best compared to April-July 2019 due to distortions in Q1:FY21 and Q1:FY22. In this year’s first quarter, industrial production has risen 5 percent above Q1:FY20, slowing to 2.1 percent in July. The use-based production data is a good gauge of consumer demand strength. Here, signs are disappointing: Consumer durables’ output contracted -7.9 percent over April-June 2019, or at 92.1 percent of its level then; non-durables’ output, which proxies lower-end consumption demand more closely, still lagged at 98.8 percent of its size in the quarter three years ago; while capital goods contracted -4.4 percent. No visible improvements were seen in July 2022 over 2019 — durables contracted -6.8 percent, non-durables -2.5 percent, and capital goods output growth of 6.5 percent was upon a -7 percent year-on-year contraction in July 2019.

Many questions surface about the recovered demand strength, if the recovery is exhausting itself even before complete restoration, of an uncertain and uneven revival as substantial parts of the services’ economy lag behind, to cite some. The growth deficit in the trade, hospitality, transport category, and weak growth of construction is significant from the standpoint of aggregate demand — these are comparably informal economic segments employing large numbers of un- and semi-skilled persons; diminishment over a three-year period could reflect permanent damage or lowered potential output. In this context, the strong persistence of inflation, elevated unemployment and anecdotal evidences of K-shaped recovery, create uncertainty about the size of the output gap.

The August inflation data shows fairly broad-based price pressures, not restricted to food prices subject to much intervention and manipulation. Retail food and beverages inflation accelerated to 7.6 percent annually, that in cereals jumped to 8.6 percent from 6.8 percent in both categories in July; the impact of lower acreage, insufficient buffer stocks to influence prices, and incentives needs to be seen.

Core inflation is unmoving around 6 percent, prices of both goods and services components rose in August, the sequential momentum in different core-inflation measures was either firm or rose, services’ inflation shows signs of comeback pressures, while firms continued to pass-on costs and ease their burdened margin. Wholesale inflation data released on September 14 showed it moderating to 12.41 percent in August 2022 compared to 11.64 percent one year ago, from 13.93 percent in July and 16.23 percent in June. It remains high and in double-digit nonetheless; coupled with pipeline pressures, prospective passthroughs of costs to retail levels with the inception of festival demand this quarter and beyond cannot be ruled out.

The feeling that inflation is under a firm grip owes a lot to the passed peak of 8.3 percent in April that hasn’t resurfaced. But that does not diminish the fact that 7 percent inflation is way above target, that it looks neither low nor stable; and that inflation surprises, in both directions, cannot be ruled out. This doubts if the present inflation incident is durably over.

The trade-off is more complicated because the external environment has turned much riskier. The US central bank is expected reacting aggressively as US inflation and demand both remain strong; a 75-basis point increase is expected at the FOMC meeting on September 20-21.

Preserving macroeconomic stability at a time of extraordinary and fundamental realignments assumes importance, especially for the currency. Although supporting a recovery may have precedence, a growing divergence in monetary policy, negative real rates, would not be easy to sustain in a hazardous environment of unknown duration. Most expect the RBI, which will also revise its growth forecast the second time this year, to adjust the repo rate by 35-50 basis point this month. We should know soon.

Samarkand SCO | Significance of the Modi-Xi non-meeting

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If India chose not to request a meeting, or turned down a request for one with Xi Jinping, then this is a fairly explicit declaration of the direction of India’s relationship with China given that there is an extremely high likelihood Xi will return to power for a third term as General Secretary of the Communist Party of China in October

Prime Minister Narendra Modi (left) and Chinese President Xi Jinping (right).
(Image: PTI/PIB/File)

Prime Minister Narendra Modi did not meet one-on-one with Chinese President Xi Jinping in Uzbekistan on the sidelines of the 22nd meeting of the Shanghai Cooperation Organisation’s (SCO) Council of Heads of State. At least there is no publicly shared evidence of the meeting so far. One cannot be absolutely sure, of course, for such is the nature of diplomacy.

In a media briefing on the eve of the summit, Foreign Secretary Vinay Kwatra was notably cagey about what other bilateral meetings the Prime Minister would have apart from the one with the President of the host country, Uzbekistan.

If Modi and Xi did not meet, was it the case that either side did not request for a meeting, or that one or the other side did not accept the request? What are the larger implications of this development?

From India’s perspective, the non-meeting could be seen as a necessary corrective after the informal summits between Modi and Xi in 2018, and 2019. The only real outcomes of those summits after all, were Chinese success in misleading the Indians with post-Doklam bonhomie, and showing up the lack of Indian military preparedness to tackle the large-scale Chinese transgressions across the LAC in the summer of 2020.

One, if the Prime Minister chose not to request a meeting, or turned down a request for one with Xi, then this is also a fairly explicit declaration of the direction of India’s relationship with China given that there is an extremely high likelihood Xi will return to power for a third term as General Secretary of the Communist Party of China (CPC) in October.

A third term would underline Xi’s status as China’s most powerful leader since Mao Zedong, and likely mark an even more assertive turn in Chinese foreign policy than is already evident. India, will without doubt, be one of those at the receiving end of this assertiveness.

The argument could then be that Modi did not need to go through the motions by meeting with Xi if this assertive turn is inevitable.

Two, however, if this is the Indian approach, is New Delhi also ready for the consequences of rebuffing or ignoring Xi? Yes, Indian troops remain deployed at full strength along the LAC, and a new aircraft carrier has been commissioned but crucial tasks such as the theaterisation of military commands continue to plod along, and as important a vacancy as that of the Chief of Defence Staff remains unfilled nine months after the last incumbent was killed tragically in the line of duty.

This then leads to a third major question: was the non-meeting a concession to politics at home? In other words, is the government’s China policy still driven by various domestic dynamics rather than by a clear understanding of India’s foreign policy and security interests?

Several senior retired Indian Army officers who have served in the area have noted that India’s disengagement from various points of friction along the LAC in eastern Ladakh has involved the creation of ‘buffer zones’ on the Indian side, which prevent patrolling by Indian troops to points they earlier had access to.

Konchok Stanzin, councillor from the Chushul constituency along the LAC, has amplified such concerns by claiming that grazing grounds used by local herders have in the process not only now become ‘buffer zones’ but also ‘disputed areas’, and that decisions are being taken without democratic consultation. Under the circumstances, a Modi-Xi meeting could have been poor optics domestically.

The validity of the thesis of ‘buffer zones’ can be questioned, however. Disengagement is after all only one part of the ongoing diplomatic process between the India and China, and it can also be logically expected that the Chinese too have been forced to create buffer zones on their side of the LAC.

Meanwhile, what of the Chinese if they too did not request a meeting, or if it was them that rebuffed a request?

One rationale could be to not take attention away from Xi’s meeting with Russia’s President Vladimir Putin, which also had the purpose of showcasing an anti-Western front. A meeting with Modi, seen as a close ally of the United States could have ended up confusing the message.

Two, Xi might not have wanted to meet with the Indians for fear of highlighting the sharp differences between China and India on the response to COVID-19. While India made a hash of its response to the second wave, it has overcome with efficacious vaccines and a successful vaccination programme. The Indian economy too, is largely back to normal operations. China, by contrast, is still locking down cities with millions of people. With the 20th CPC Congress round the corner, the party’s image managers would have wanted toavoid unflattering comparisons.

Three, the Chinese probably did not want to give the impression so soon after the disengagement at PP-15 that they had bowed to any kind of pressure to get a meeting with Modi. Remember that India got China to vacate the Depsang intrusion in 2013 by threatening to cancel Premier Li Keqiang’s first planned foreign visit to New Delhi.

The Modi-Xi informal summits were poorly thought through, and a mistake from the Indian perspective, but by not meeting in the current circumstances, despite the opportunity available, the two leaders have also undermined in a way the entire diplomatic process underway. Even though there is an opportunity to make up at the G-20 summit in Indonesia in November, the non-meeting at Samarkand possibly marks a significant passage in the history of Sino-Indian relations.


Return of pricing power to keep retail prices elevated

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That’s because the consumer price index, currently hovering above the central bank’s 2%-6% target band, has shown little correlation with the wholesale measure in the past decade.A shopper browses clothes in a market in Lucknow, India, on Wednesday, Oct. 13, 2021. The Reserve Bank of India expects the months-long festival season to bolster urban demand in the second half of the financial year to March 2022, while rural demand will likely be buoyed by a robust monsoon and record food grain production.

A shopper browses clothes in a market in Lucknow, India, on Wednesday, Oct. 13, 2021. The Reserve Bank of India expects the months-long festival season to bolster urban demand in the second half of the financial year to March 2022, while rural demand will likely be buoyed by a robust monsoon and record food grain production.

Indian consumers expecting retail inflation to cool in tandem with easing wholesale prices are in for disappointment.

That’s because the consumer price index, currently hovering above the central bank’s 2%-6% target band, has shown little correlation with the wholesale measure in the past decade. And if historical trends are any indication, the two indexes have had an inverse relationship for the most part of that period, which analysts attribute to the pricing power of most businesses.

India's retail and wholesale prices have moved inversely for much of the past decade

Data due later Monday will probably show retail inflation quickened to 6.9% last month from a year earlier, according to a Bloomberg survey of economists as of Sept. 10. That compares with estimates for wholesale price inflation easing for a third straight month to 12.9%, in numbers scheduled for release Wednesday.

With wholesale prices galloping in double-digits since April last year, companies found themselves in a fix -- raise prices too much and hurt a nascent recovery in demand or absorb costs and take a hit to profitability.

While many consumer-goods makers including Hindustan Unilever Ltd. and ITC Ltd. and Maruti Suzuki India Ltd. raised prices during the period, the increases were probably not enough to cover elevated costs. Maruti, Tata Motors Ltd. and Larsen & Toubro Ltd. reported a hit on their income in the April-June quarter due to high input costs and supply chain constraints.

As the gap between WPI and CPI narrows, firms will be reluctant to pass on the benefits of falling global commodity prices to retail consumers because they will likely look to recoup their margins, said Rahul Bajoria, an economist with Barclays Bank Plc.

That implies retail prices could take longer to fall back within the central bank’s target band of 2%-6%, belying expectations of some consumers and keeping the Reserve Bank of India on course to tighten further when its monetary policy committee meets later this month. The RBI, which has returned borrowing costs to pre-pandemic levels with 140 basis points of hikes since May, expects inflation to average 6.7% in the year to March.

Sticky Inflation

As the wholesale price index falls, “lower input costs will be used by firms to offset the ongoing margin squeeze, thereby keeping CPI inflation sticky,” said Sonal Varma, an economist with Nomura Holdings Inc., who expects the headline print to remain above 6% until February.

Global commodities prices are seeing a moderation amid fears of a slowdown caused by a US Federal Reserve-led monetary policy tightening. As a result, wholesale inflation is seen easing to less than 5% in the next one year, falling below consumer prices gains for the first time in more than two years, according to a Bloomberg survey.

There is a risk that the pass-through of past increases in input costs could continue, partly offsetting the favorable impact of recent fall in commodity prices, rate-setter Rajiv Ranjan said in the minutes of RBI’s latest policy meet.

Kerala's alcohol binge: Liquor worth Rs 624 crores consumed in Onam week

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The reason behind record sales can be attributed to low key festivities during the past few years. In 2018 and 2019, the festive 'spirit' was dampened by the floods and later by Covid outbreak for another two years.Kerala's alcohol binge: Liquor worth Rs 624 crores consumed in Onam week

Keralites chugged alcohol worth Rs 624 crore in a week during the run-up to the Onam festival, setting another record for the highest liquor sale in the state, Indiatimes.com reported on September 9. In 2021, liquor worth as much as Rs 529 crore was sold.

On September 7, the day of Uthradam, a day before the big festival liquor worth Rs 117 crores was sold, the report said quoting sales figures from government-owned state beverages corporation Bevco. Last year on Uthradam, liquor worth Rs 85 crore was sold.

The reason behind record sales can be attributed to low key festivities during the past few years. In 2018 and 2019, the festive 'spirit' was dampened by the floods and later by Covid outbreak for another two years. Last year, liquor outlets and bars were closed on Onam in Kerala. It was after a hiatus of four years, that the state witnessed resumption of festivities on Onam.

The National Family Health Survey (NFHS) which was carried out during 2019-20,  found that 19.9% of men and 0.2% of women, both above the age of 15, in the state of Kerala consumed alcohol. The countrywide figures of consumption among men and women were 18.8 % and 1.3%, respectively.

According to the report by Indiatimes, taxes on alcohol are quite steep in the state — A bottle of rum produced at a cost of ₹100-150 is sold at Bevco outlets for Rs 600-800.

Liquor and lottery are among the major revenue earners for the state. According to state data, in the last few years Kerala earned an annual revenue of Rs 14,000 crore from liquor and Rs 10,000 crore from lottery on average.

A Bevco spokesman told Indiatimes that the total revenue from the ten-day festival season is expected to cross Rs 700 crore. He however added a clause that the definitive data will emerge only after September 11.

Reliance Industries acquires Shubhalakshmi Polyesters for Rs 1,592 cr

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Reliance Petroleum Retail acquired the polyester biz of Shubhalakshmi Polyesters and Shubhlaxmi Polytex for Rs 1,522 crore and Rs 70 crore, respectively, in cashMukesh Ambani

Reliance Petroleum Retail (under name change to ‘Reliance Polyester’), a wholly-owned subsidiary of Reliance Industries, on Saturday acquired the polyester business of Shubhalakshmi Polyesters (SPL) and Shubhlaxmi Polytex (SPTex) for Rs 1,522 crore and Rs 70 crore, respectively, in cash.

The acquisitions are subject to approval by the Competition Commission of India (CCI) and the respective lenders of SPL and SPTex.

SPL has a continuous polymerisation capacity of around 2,52,000 MT/annum and manufactures polyester fibre, yarns and textile grade chips through direct polymerisation route as well as extruder spinning with value addition through texturising. It has two manufacturing facilities located in Dahej (Gujarat) and Silvassa (Dadra and Nagar Haveli). SPTex has a texturised yarn manufacturing facility in Dahej.

The acquisitions are part of the company’s strategy to expand its downstream polyester business.

Recently, RIL backed out from the race to acquire the petrochemicals unit of JBF Induatries which is undergoing bankruptcy proceedings. RIL did not give any reasons for its exit.

Daily Voice | This wealth manager believes India's long term story is not just intact, but has become stronger

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Ram Kalyan Medury of Jama Wealth says most of the cement stocks are still down by 20 percent to 40 percent from their peaks. This is a cyclical sector and one has to be careful about entering the sector at the right time.Daily Voice | This wealth manager believes India's long term story is not  just intact, but has become stronger

"The markets have indeed turned around and are once again testing previous highs. However, we believe that there can be intermittent slides based on global macro scenarios," Ram Kalyan Medury of Jama Wealth told Moneycontrol in an interview.

With 23 years of experience in technology and financial services, the Founder-CEO of Jama Wealth believes that the long term India story is not just intact, but has become stronger. The boring mantra continues to be “stay invested”, he advised.

Ram, former CIO of the ICICI Group and former Group CIO of Poonawalla Fincorp, feels that the pandemic's impact is now down to statistical analysis, but a fresh wave with a deadlier effect can derail everything. Edited excerpts:

Do you think it is the right time to start betting on domestic cyclical sectors on expectations of strong economic recovery ahead?

We are seeing good traction in some sectors such as chemicals and manufacturing in the Indian industry. The expectations are buoyant about a strong economic recovery ahead. While we would not term it betting as such, we feel this is a good time to look at strong performers in specific sectors such as the ones we mentioned, and take a long term position in them.

Do you expect the current risk-on sentiments to continue in the coming days despite the uncertain global environment?

With a lot of bad news factored in, and a few positive developments, the risk-on sentiment has reduced a bit. The markets moved up over the last quarter and gave investors reasons to smile.

The Ukraine-Russia war is no longer grabbing headlines, with investors more concerned about commodity prices and interest rates, rather than the end of the war.

Do we still need to worry about inflation concerns and policy tightening by global central banks?

We are clearly not out of the woods. The Russia Ukraine war has not ended and may even take a turn for the worse. While Fed interest rates are now factored in, the expectation that rate hikes will moderate may not materialise as inflation continues to be high and negative surprises can have a global impact.

Covid continues, but it looks like its impact is now down to statistical analysis, but a fresh wave with a deadlier impact can derail everything.

Do you think Indian markets' uptrend is still capped due to likely recession fears in western nations?

The markets have indeed turned around and are once again testing previous highs. However, we believe that there can be intermittent slides based on global macro scenarios. The long term India story not just remains intact, but has become stronger. The boring mantra continues to be “stay invested”.

Are you bullish on the cement space because of the expected growth in infrastructure and real estate space?

Most of the cement stocks are still down by 20 percent to 40 percent from their peaks. This is a cyclical sector and one has to be careful about entering the sector at the right time. While the long term outlook in infrastructure in India is positive, the sector's headwinds and tailwinds need to be analysed closely.

As of now we can see that the cost pressures are reducing with the decline in raw material costs such as pet-coke and crude oil. Seasonality wise, the second quarter is a weak quarter, but these trends have buffeted their stock prices. However the trend in these commodity prices is linked to global macros and may turn swiftly.

Do you think the rally in the IT space is unlikely henceforth?

The IT space, is undergoing some headwinds in terms of wage pressure and consequently growth in earnings. This is notable among the majors, where we have also seen attrition rates climb to levels much higher, than where they were a year ago.

Investors must be cautious about the larger companies given these trends. However, some smaller and agile companies with niche specialisations in areas like Cloud, Internet of Things, Embedded System, Testing services could still do well, because they might be less vulnerable to budget cuts compared to the larger players.

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