Teji Mandi: Three things investors should know on January 15, 2021
Teji Mandi

Top pick from Dr. Raghuram Rajan's wishlist:

Ex RBI governor Dr. Raghuram Rajan wants the government to start selling their stake in PSUs, using the current upswing in the equity markets.

He also asked the government to prioritize spending to get the economy back on track. As per him, the focus should be on providing relief to the poorer households and MSMEs.

The government has prepared a long list of PSUs for divestment. But, subdued market conditions, prevented the government from getting desired valuations. Also, the divestment work of many companies is currently under various stages of implementation.

The stake sale is important given the depleted revenues and higher spending requirements. India's fiscal deficit is being pegged ~7-8% for FY21. And, selling PSU assets is also crucial to fund this deficit.

Non-food prices not dropping :

Wholesale price inflation for December has come in at a four-month low of 1.22%, compared to a year ago. It has received a big help from the high base of last year. Lower food prices have also helped inflation to cool down significantly.

Apart from food prices, the price in other baskets has continued to shoot up on MoM basis. That is a big worrying factor. Crude petroleum and natural gas prices went up by 5.47%. Minerals increased by 5.36%, fuel and power costs went up 3.18%. Wholesale prices of manufactured products also rose by 1.4%.

The decline in food prices is on expected lines with the entry of winter crops and vegetables in the market. However, commodity prices have continued to remain up globally. It is showing its effect on India as well.

Despite the worries, cooling inflation has come as a relief. If commodity prices also moderates, it will help RBI to bring down its inflation projections in the upcoming policy meet.

It also means that RBI will have the flexibility to keep the liquidity flow intact for a little longer.

Push for the national retail policy:

The apex retail industry body Retailers Association of India (RAI)

has requested the government to speed up the work on the national retail policy.

It has proposed to allow retailers to register as micro, small, medium enterprises. The body has also asked the government to remove the legal hurdles and extend easy credit facilities to the sector.

RAI's suggestions are important to bring the sector back on track after the covid led disruptions. The MSMEs receive many favorable considerations from the government regarding new opportunities, taxation, and other benefits. It would also grant them access to various lower interest & credit schemes. The combination of such benefits would be helpful for retailers to recover faster.

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