Daily Financial News Analysis – 14th Oct’20 – Free PDF Download


IIP and Inflation

  • Economic recovery gathered pace – Industrial production contracted at a slower pace in August than in the month before
  • Industrial production, as measured by the index of industrial production (IIP), shrank 8% in August.
  • It contracted 10.7% in July and 15.7% in June
  • In the first five months of FY21, India’s factory output shrank 25% compared with 2.4% growth in the year-ago period.
  • Manufacturing, mining and electricity contracted 8.6%, 9.8% and 1.8%, respectively.
  • Capital goods — an indicator of investment — witnessed the steepest decline of 15.4%.
  • Consumer durables production, an indicator of urban demand, declined 10.3%.
  • Consumer nondurables shrank 3.3%.
  • Goods and services (GST) tax collections, power demand and e-way bills were among a number of indicators that were higher in September from a year ago.
  • Retail inflation accelerated to 7.34%, exceeding the target rate, in September from 6.69% on dearer food inflation that reached the double-digit level of 10.68%.
  • Retail inflation climbed to an eight-month high in September
  • Predominantly, driven by higher food prices
  • Food inflation was driven by inflation in vegetables at 20.73% in September compared with 11.4% in August
  • Inflation in fruits stood at 3.21% against 1% last month.
  • Clothing and footwear inflation was at 3.04% in September, housing inflation at 2.83%, and fuel and light inflation was 2.87%.
  • “With expectations of firming inflation at the retail level for next couple of months, it is unlikely for the RBI to lower rates in December,” CARE Ratings
  • It will delay monetary easing
  • The RBI expects India’s GDP to contract by 9.5% in the current fiscal year.

Retail Spends

  • CMS Info Systems — handles cash movement and ATMs across the country.
  • India’s September retail spending rose 12% from August with revival strongest in rural areas.
  • The biggest increase was seen in spending related to ecommerce, FMCG, consumer durables, insurance, utility payments, healthcare, logistics and transportation, which surpassed January levels.
  • Fino Payments Bank, which also runs a cash management business, said it had surpassed pre-Covid performance.
  • Rural spending has surpassed pre-Covid levels, while semi-urban areas are at 93% of pre-pandemic spends and urban markets have recovered 60%, CMS said.
  • Nearly 70% of the company’s business is concentrated in rural markets, which are consuming and spending more cash than before.
  • Monsoon has been good and direct benefit transfers by the government have had a positive impact.
  • Spending on FMCG was up 16% from pre-Covid levels, ecommerce by 9%, consumer durables by 7% while insurance was at 99%.
  • The sectors that remain affected by the pandemic are media and entertainment at 40% of pre-Covid levels, hospitality at 49%, apparel at 50% and railways at 33%.

Smart TV OS Case

  • The inclusion of Xiaomi India and TCL India in an antitrust complaint against Google’s alleged abuse of dominance in the smart TV operating system (OS) market has brought to the fore questions of collective dominance and its absence in Indian competition law.
  • Experts said a case of collective dominance might not stand in the absence of such a provision in the law.
  • Collective dominance refers to a market in which two or more independent players, having economic links, jointly hold a superior market position relative to other players in that market.
  • The two smart TV manufacturers have been made party to the case since they are seen as restricting the entry of other OS developers into the market by voluntarily agreeing to anticompetitive clauses in Google’s terms of service.
  • Section 4 for the Competition Act defines a dominant position as one which enables an entity “to operate independently of competitive forces prevailing in the relevant market or affect its competitors or consumers or the relevant market in its favour”.

2020 Nobel Prize in Economics

  • US economists Paul Milgrom and Robert Wilson won the Nobel Economics Prize on Monday for work on commercial auctions, including for goods and services difficult to sell in traditional ways such as radio frequencies, the Nobel Committee said.
  • The duo was honoured “for improvements to auction theory and inventions of new auction formats,” the jury said.


Paul Milgrom and Robert Wilson

  • The Royal Swedish Academy of Sciences noted that the discoveries by Milgrom, 72, and Wilson, 83, “have benefitted sellers, buyers and taxpayers around the world,” it said in a statement.
  • Wilson, a professor at Stanford in the US, was spotlighted for developing a theory for auctions with a common value, “a value which is uncertain beforehand but, in the end, is the same for everyone,” according to the academy.
  • Wilson’s work showed why rational bidders tend to bid under their own estimate of the worth due to worries over the “winner’s curse,” or winning the auction but paying too much.
  • Milgrom, also at Stanford, then came up with a more general theory of auctions, by analysing bidding strategies in different auction forms.
  • “In response, Milgrom and Wilson invented new formats for auctioning off many interrelated objects simultaneously, on behalf of a seller motivated by broad societal benefit rather than maximal revenue,” the academy said.




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