India File: Modi's pro-farmer policy shift
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Oct 1 - By Ira Dugal, Editor Financial News, with global Reuters staff
Hello, I'm Ira Dugal and I head financial news for Reuters in India. Join me each Tuesday as I lead you through the biggest stories out of India, and Asia.
The Indian government is unwinding a series of restrictions on exports of key agricultural commodities while adopting import duties and price supports to help farmers. A short-term play for rural votes, or a substantive shift in policy priorities? That's the focus of our discussion this week.
Gold recorded its best quarterly gain since early 2020. Scroll down for more on that in our "Market matters" section.
THIS WEEK IN ASIA
**Painful policy choices loom after China's 'monumental' consumer stimulus plan
**Japan's incoming PM Ishiba calls election for Oct 27, seeks to unify party
**Cross-border M&A recovers in Asia as dealmakers look abroad for growth
**North Korea appears to dismiss return to personal diplomacy with US
BALANCING ACT
India's anti-inflation measures for agricultural commodities - introduced over the past year to rein in domestic food prices - are rapidly being replaced with more farmer-friendly policies.
A resumption of exports of non-basmati rice was announced on Saturday, just one day after export duties on a few other varieties of rice were cut in half. Earlier in September, a floor price for basmati rice, a premium aromatic variety, was removed, allowing farmers to sell in the global markets at more competitive prices.
Across other commodities, the government said it will step in to buy soybeans from farmers reeling from losses, while the import tax on edible oil was raised sharply to support domestic producers struggling with lower oilseed prices.
The steps are aimed at placating farmers who have borne the brunt of India's fight to control food inflation. They also surprised markets, as the government typically favours consumer interests during the peak festival season from September through the year-end, wrote Mayank Bhardwaj and Rajendra Jadhav in this piece.
After the ruling party's weaker-than-expected victory in national elections that concluded in June, the government is prioritising farmers as it faces another set of high-profile polls over the next couple months in the major agricultural states of Haryana and Maharashtra.
Since the elections, hints of populism have emerged as Prime Minister Modi and his party try to regain their political footing.
The latest pro-farmer measures were possible in part due to abundant inventories of rice and other commodities, after this year's mostly favourable monsoon and last year's government moves to restrict exports and free up imports. Those measures sought to address an El Nino-disrupted growing season and consumer anger over food prices.
Weather-related supply disruptions are likely to remain the norm in India, rendering food price inflation endemic, the central bank warned in a research paper published in August.
Indeed, there are signs a decline in food prices in August may be short-lived, with vegetable prices up 8% in September from the month before, according to data from IDFC Economic Research. And this year's prolonged monsoon was not without its downsides, including crop damage from surplus rain.
These risks could push headline inflation back up above the central bank's target of 4% over the remainder of the financial year and prompt interventions such as the release of onion stocks announced last month.
As the government considers further policy moves, it will face some tough choices to balance the interests of consumers, who spend half their disposable income on food, and the politically influential agriculture sector, where 45% of India's 1.4 billion people make their living.
The Indian government has turned to spending programmes to help ease its dilemma, approving in September a special fund of more than $4 billion until the fiscal year 2025/26.
That money will be used to prop up prices for producers or ensure stable prices of essential commodities for consumers, the government said.
But the Modi government will have limited room to spend its way out of the dilemma if it hopes to stick to the fiscal conservatism of its past two terms, with the aim of attracting investors and keeping interest rates in check.
What are India's best options to tackle extended bouts of food inflation, in a way that protects consumers without over-burdening farmers? Write to me at ira.dugal@thomsonreuters.com.
QUOTE OF THE WEEK
"We are investing on all fronts in India. We're adding bankers, we're putting more capital into the business and we're building capabilities such as technology investments to service new segments of the markets."
Sjoerd Leenart, JPMorgan's Asia Pacific CEO, said in an interview that India remains a top market for the Wall Street bank.
MARKET MATTERS
Gold rose more than 13% in the quarter to end-September, its best quarterly gain since early 2020. The historic rally was led by the U.S. Federal Reserve's half-percentage-point cut and flare-ups in the Middle East. India is the world's second-largest gold consumer.
Big global banks expect gold to extend its price rally into 2025 because of large inflows to exchange-traded funds (ETFs) and expectations of additional interest rate cuts from prominent central banks around the world.
Spot gold price in USD per oz https://reut.rs/4eKQWc5
By Ira Dugal; Editing by Edmund Klamann
Τελευταία νέα
Δήλωση αποποίησης ευθύνης: Οι οντότητες του ομίλου XM Group παρέχουν υπηρεσίες σε βάση εκτέλεσης μόνο και η πρόσβαση στην ηλεκτρονική πλατφόρμα συναλλαγών μας που επιτρέπει στον ενδιαφερόμενο να δει ή/και να χρησιμοποιήσει το περιεχόμενο που είναι διαθέσιμο στην ιστοσελίδα μας ή μέσω αυτής, δε διαφοροποιεί ούτε επεκτείνει αυτές τις υπηρεσίες πέραν αυτού ούτε προορίζεται για κάτι τέτοιο. Η εν λόγω πρόσβαση και χρήση υπόκεινται σε: (i) Όρους και προϋποθέσεις, (ii) Προειδοποιήσεις κινδύνου και (iii) Πλήρη δήλωση αποποίησης ευθύνης. Ως εκ τούτου, το περιεχόμενο αυτό παρέχεται μόνο ως γενική πληροφόρηση. Λάβετε ιδιαιτέρως υπόψη σας ότι τα περιεχόμενα της ηλεκτρονικής πλατφόρμας συναλλαγών μας δεν αποτελούν παρότρυνση, ούτε προσφορά για να προβείτε σε οποιεσδήποτε συναλλαγές στις χρηματοπιστωτικές αγορές. Η πραγματοποίηση συναλλαγών στις χρηματοπιστωτικές αγορές ενέχει σημαντικό κίνδυνο για το κεφάλαιό σας.
Όλο το υλικό που δημοσιεύεται στην ηλεκτρονική πλατφόρμα συναλλαγών μας προορίζεται για εκπαιδευτικούς/ενημερωτικούς σκοπούς μόνο και δεν περιέχει, ούτε θα πρέπει να θεωρηθεί ότι περιέχει συμβουλές και συστάσεις χρηματοοικονομικές ή σε σχέση με φόρο επενδύσεων και την πραγματοποίηση συναλλαγών, ούτε αρχείο των τιμών διαπραγμάτευσής μας ούτε και προσφορά ή παρότρυνση για συναλλαγή οποιωνδήποτε χρηματοπιστωτικών μέσων ή ανεπιθύμητες προς εσάς προωθητικές ενέργειες.
Οποιοδήποτε περιεχόμενο τρίτων, καθώς και περιεχόμενο που εκπονείται από την ΧΜ, όπως απόψεις, ειδήσεις, έρευνα, αναλύσεις, τιμές, άλλες πληροφορίες ή σύνδεσμοι προς ιστότοπους τρίτων το οποίο περιέχεται σε αυτήν την ιστοσελίδα παρέχεται «ως έχει», ως γενικός σχολιασμός της αγοράς και δεν αποτελεί επενδυτική συμβουλή. Στον βαθμό που οποιοδήποτε περιεχόμενο ερμηνεύεται ως επενδυτική έρευνα, πρέπει να λάβετε υπόψη και να αποδεχτείτε ότι το περιεχόμενο δεν προοριζόταν και δεν έχει προετοιμαστεί σύμφωνα με τις νομικές απαιτήσεις που αποσκοπούν στην προώθηση της ανεξαρτησίας της επενδυτικής έρευνας και ως εκ τούτου, θα πρέπει να θεωρηθεί ως επικοινωνία μάρκετινγκ σύμφωνα με τους σχετικούς νόμους και κανονισμούς. Παρακαλούμε εξασφαλίστε ότι έχετε διαβάσει και κατανοήσει τη Γνωστοποίησή μας περί Μη ανεξάρτητης επενδυτικής έρευνας και την Προειδοποίηση κινδύνου όσον αφορά τις παραπάνω πληροφορίες, τις οποίες μπορείτε να βρείτε εδώ.
