Teji Mandi: Three things investors should know on December 14, 2020
Teji Mandi

The Centre has made record payments to workers enrolled in the MGNREGA scheme in the first eight months of FY21. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is a rural employment generation scheme.

The center has already spent Rs 76,800 crore on the scheme from Rs 84,900 crore allocated for the scheme. Total spending on the scheme last year was at Rs 50,000 crore for the same period last year.

During the lockdown, the government focused extensively on the rural sector. Increased MGNEREGA spending is a reflection of that. Now with the resumption in economic activities, migrated workers have started returning to cities. Hence, we believe that work demand under MGNEREGA will reduce sharply from here on.

Aiming for global leadership in mobile manufacturing:

The Indian government has identified electronics as one of the sectors under the Atamnirbhar scheme. Under this, India is aiming to become a global leader in mobile phone manufacturing, surpassing China.

India is currently among the top 5 mobile manufacturing countries. It produces ~11% of all mobile phones produced in the world. The figure was just 3% in 2014. China, on the other hand, has close to a 25% global market share in mobile phone manufacturing.

In this ambitious plan, the government is pinning high hopes on the PLI scheme. The production linked incentive (PLI) scheme was introduced recently for 10 sectors. Electronic Products is one of the sectors. Relocation of global manufacturing facilities post-Covid has also sparked hopes.

However, in electronic manufacturing, China enjoys an upper hand over the world due to the availability of resources. Around 16 rare earth materials required to manufacture mobile phones are found in China. It will be difficult for India to nullify this advantage.

Inflation continues to inch up:

The Wholesale Price Index (WPI) based inflation rose to 1.55% in November, as against 1.48% in October.

Food inflation for November 2020 is at 4.27% compared to 5.78% in October 2020. Manufactured products inflation is at 2.97%, compared to 2.12% in October 2020. Fuel and power inflation is at -9.87%, compared to -10.95% in October 2020.

The annual wholesale price index rose in November as prices of manufacturing items increased in the festival season. Food prices continue to remain elevated, causing inflation to inch up further.

However, RBI in its monetary policy has expected food prices to reduce post-December. If that happens, we can expect to get some relief from inflation.

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