[‘Daily News Updates’ will provide you with a simplified understanding of the important economic/financial events across the country]
Clarification on Adani Group Shares and the Freeze on three Foreign Funds
In yesterday’s edition of ‘Daily News Updates,’ we had reported that the National Securities Depository Ltd. (NSDL) froze the accounts of three foreign funds (Albula Investment Fund, Cresta Fund, and APMS Investment Fund), which have an investment of Rs. 43,500 crores in Adani Group Companies. Adani Group later clarified that the report is blatantly false and erroneous, aimed at misleading the investing community. As per a source at the NSDL, the accounts were frozen on 31st May itself, and the freeze is on accounts holding certain other securities, not Adani Group’s. An erroneous report led to a massive fall in the value of Adani Group’s shares, with Adani Enterprise’s share price falling by 25%, its steepest fall in a decade.
Unemployment Rate Reduces as the Economy Revives
In a previous edition of Daily News Updates, we noted the substantial job losses in April and May, according to the Centre for Monitoring Indian Economy (CMIE). In April, the monthly unemployment rate was 7.97% which erased about 7.35 million jobs. It further increased to 11.9 % in May as the situation in India worsened due to COVID-19 and stood at 12.15% at the end of May. However, in the week ended on 13th June, the rate has improved to 8.7%, a 6-week low. The improvement is mainly because of relaxed lockdown rules and the opening up of the informal sector.
Consumer Price Index (CPI) breaches the MPC’s Targets, hits 6.3%
In a previous edition of Daily News Updates, we noted that the Consumer Price Index (CPI) is well within the range set by the RBI’s Monetary Policy Committee (MPC), while the Wholesale Price Index (WPI) [This index measures the price level of goods traded in the wholesale market] is soaring, expected to touch the highest rate (13.3%) in three decades. Yet, the RBI kept key policy rates unchanged and did not go for inflation targeting, prioritising growth instead. [Read both the previous editions to understand the update better. Also read- Inflation Demystified].
The main objective of the Monetary Policy Committee is to maintain inflation targets, set up by the Central Government, in consultation with the RBI, every 5 years. The current inflation target till 31st March 2021 is 4 % within a band of +/- 2 %. Hence, the upper limit of 6 %, and the lower limit is 2 %—[Read- Monetary Policy Committee Explained]. However, the CPI doesn’t seem to be within the range anymore.
Because of the rising prices of edible oils and protein-rich items, the CPI has breached the 6% limit and reached a six-month high of 6.3%. The previous high was 6.93 % in November 2020. The CPI has breached the 6% limit ten times since the MPC’s first meeting in October 2016. The steepest increase has been seen in the ‘Oil and Fat’ segment, with a 30.8 % increase on an annual basis. Thus, it is unlikely that RBI will go for cutting key rates anytime soon. With easing lockdown restrictions and increasing demand, the high WPI might further increase the CPI.
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