Impact 
Sometimes you have to believe in what otherwise looks unbelievable. Supply side shocks and higher demand for any product results in price escalation. Something similar has happened in case of pulses over last one year.
Are pulses going to become cheaper this season? Monthly inflation in pulses calculated on Year-on-Year basis
(Source: MOSPI, PersonalFN Research)
Between May 2015 and May 2016, inflation in pulses averaged at 33.1%. However, you may now see the reversal of this trend and prices can actually come off this season. A possible price decline in pulses might aid in getting down the overall food inflation to an extent.
Why pulses prices spiked?
Higher prices in the international markets, persistent domestic demand and severely affected supply drove pulses prices sky-high throughout last 12 months. Deficient monsoon and lower inventories in the previous session pushed prices further up. Although it is easy to blame the monsoon for a demand-supply mismatch, the real culprit for poor harvest has been the miserable state of irrigation facilities in many growing areas and ordinary crop planning. However, learning from mistakes, the Government has taken timely measures this year to curtail prices of pulses. Looking at the current status of events, you may hope to see pulses prices finally dropping late this year.
What are the factors that are expected to dampen the prices now?
- As per the Food Ministry estimates, production of pulses may rise by nearly 17% as compared to that reported in the last two years. Better prospects of monsoon and higher Minimum Support Prices (MSPs) may help India produce close to 20 million tonnes of pulses this season.
- The sowing area for pulses has increased 12% this season from 19.85 lakh hectares in June 2015 to 22.25 lakh hectares in June 2016.
- The Government has been building up inventories by importing pulses. It has been holding talks with large producing nations such as Mozambique and Myanmar. In fact, the import of pulses is supposed to be at the top of the Agenda of the Prime Minister Narendra Modi during the 4-nation African Tour that started on July 7.
Are there any signs of price decline?
As a result of favourable conditions that hint demand-supply equation is getting better this year, the expectation of price rises among wholesalers has fallen considerably this year. Lately, demand for pulses has stabilised and rates have been seeing stagnation in India’s prime wholesale markets.
Whether pulses become cheaper, this year is still a wait-and-watch game. PersonalFN is of the view that, by earning better inflation-adjusted returns, you can lessen the impact of price rises on your wallet. PersonalFN offers a variety of services that assist you in generating positive inflation adjusted returns.
Impact
The sharp rise in bad loans over last few years has spooked banks in India. The problem of bad asset quality has marred the performance of Public Sector Banks (PSBs) in particular. As reported by Financial Express dated July 07, 2016, PSBs accounted for 90% of Rs 6,000 lakh crore worth accumulated bad loans. Reckless lending during the boom period of 2002 and 2007 primarily led to the debut of the monster of NPA (Non-Performing Assets). However that being said, India’s systemic constraints and structural problems nurtured it all these years. On the World Bank’s ranking, India is 53rd most ineffective nation to handle the insolvency issues. It ranked 136 on the list of 189 countries in 2016. Over the last three years, the debt recovery tribunals have witnessed a 12-fold jump in the cases of liquidation, which is currently 70,000.
Newly passed Insolvency and Bankruptcy Code, 2016, brings a new ray of hope to tackling the conundrum of NPA. Before this code came in the being, India had no dedicated law to deal with the cases of insolvencies. So depending on circumstances, various authorities such as Courts, Company Law Board, and Board for Industrial & Financial Reconstruction (BIFR) among others were handling the cases of insolvencies. This led to inordinate delays in resolving cases and also propagated corruption. The new law laid down the strong legal framework and provided specific authorities, intermediaries and other professionals involved in ensuring the effective implementation of the new law.
What will change now that the dedicated act is in place?
- Identifying financial distress at a very early stage would be possible due to a proposed information-sharing infrastructure that may soon start operating in a full-fledged manner.
- Insolvency professional agencies would now set Standard Operating Practices and ethical codes. They would act as the first layer of regulators. This might assist in dealing with cases of insolvencies effectively.
- Debt Recovery Tribunal would resolve claims related to insolvency liquidation and bankruptcy of individuals and unlimited partnership firms while National Company Law Tribunal in respect of companies and limited liabilities entities respectively. Such a clear mandate and focused approach would be a significant advantage.
- The newly accepted law provides clarity on roles of various agencies and sets responsibilities, thereby smoothening the liquidation process mechanism
- Insolvency and Bankruptcy Code, 2016 puts up the order in which the assets of the entity should be distributed among various claimants. Interestingly, the Government dues will have to wait until the creditors are paid off.
- Dealing with overseas insolvencies would also become possible.
Will the new code solve India’s gridlock of NPAs?
It is unlikely that the new law alone will allow the complete resolution of the problem of NPAs. Many cases pending in the Tribunal have already become complicated and finding a new solution and fixing them early is out of the question now. In such a scenario, it would pay if banks tighten their risk management processes and observe diligence while lending. That being said, it seems the code would make it possible to deal effectively with cases that may arise in future, given its scope and revolutionary provisions.
PersonalFN believes, you should always pay close attention to the health of any financial institution, including a bank, before depositing your hard earned money with it.
Impact
India’s insurance industry is warming up for two crucial changes that may have a far-reaching impact on insurance companies, policyholders, and intermediaries. The first is, you will be able to purchase insurance policies from favourite e-tailers Flipkart and Amazon soon. Even insurance intermediaries will be allowed to set up e-platforms -- websites and mobile apps for servicing and promoting insurance policies. And the second is, insurance policies will be issued in an electronic form only.
The Insurance Regulatory and Development Authority (IRDA) is hopeful that these changes will lead to accessible, low-cost insurance products and improve the insurance penetration in the coming years. Moreover, service standards and efficiency towards policyholders will improve.
How are the industry participants responding to these changes?
Well, not everybody in the industry is happy. A few companies believe, by making these changes the IRDA is trying to shift focus from servicing to pricing. Those subscribing to this view are of the opinion that factors such as claim settlement should matter as much as pricing. While there are others who believe that allowing the sale of insurance products through e-commerce platforms and the mandatory issuance of policies in the electronic form will help insurance companies reach out to people living in remote areas, who otherwise lack access to the insurance products and services of intermediaries.
So, is it advisable to buy insurance products from e-tailers?
PersonalFN believes insurance is a subject matter of solicitation, hence when you buy insurance – be it a life and/or non-life policy(s) – be very clear, and opt for the most suitable product. After all, life insurance is a long-term contract of indemnity and holds immense importance to one’s financial health. Hence, insure yourself optimally to mitigate the detrimental impact on the family’s long-term financial wellbeing.
To ready more about this story and Personal FN’s views over it, please click here.
Impact
The Economic slowdown has become a common phenomenon globally. While events such as Brexit highlight the side effects of globalisationon domestic job creation and national welfare schemes, economic integration results in spreading of the contagion of slowdown from one economy to the other. In spite of these hurdles, a few economies manage to grow at a faster pace as compared to the majority of other economies in the word. At the moment, India is one such bright spot. Though the World Bank President acknowledged India’s growth story recently, it would be inappropriate to say all’s well with Indian Economy.
India faces some challenges...
India, despite major efforts, are still unable to surpass the target of 8.0% GDP growth. Attaining pre-global financial crisis levels looks like a pipedream at the moment. Indian banks, especially the public sector banks have been facing a persistent problem of deteriorating asset quality. India’s consumption demand is down due to inflation that sustained at higher levels for years. Although in recent times, retail inflation, as measured by the movement of Consumer Price Index (CPI), has been moderated considerably, household expectations of inflation are still higher. This has resulted in the softening of demand. Deteriorated corporate balance sheets and higher borrowing rates have been delaying recovery in India’s investment cycle. The Government has been trying to boost infrastructure expenditure, but that has been proving to be inadequate in pulling up the economy from the grip of stagnation.
To ready more about this story and Personal FN’s views over it, please click here.
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