Although a rebound in the Indian economy is encouraging, the full and proper recovery of the economy still has a long way to go. Covid-19 vaccination rollout is positive, but the pace of the drive remains slow. India has vaccinated ten million-odd people in a month, but that is not even one per cent of the population. Unless most of the workforce is vaccinated, it will be a tough climb to get the economy back on track.
Recovery in export markets – like the USA and Europe – is also crucial to India’s journey as a manufacturing hub. The country is now well integrated with the global economy. The world is still very closed. The USA and Europe are big export markets. If Indian economy has to get back to an even keel, these countries need to be back on track as well.
The sudden cold wave in the US, particularly in Texas, has commodity experts worried about the harvest as well as prices. However, Australia is expected to have a bumper harvest this season that should offset any loss in global wheat production. Closer home, the farmers show no signs of calling off their agitation against the farm bills. The government is equally adamant on not agreeing to repeal the three farm bills before negotiation.
The recent Economic Survey released by the government of India had recommended an increase in selling prices of wheat and rice under the National Food Security Act (NFSA). It said that the food subsidy bill is “becoming unmanageably large” and there is a need to consider the revision of central issue price (CIP). However, the food minister Piyush Goyal has flatly denied any consideration of increase in CIP through the Public Distribution System (PDS).
The CIP is the price at which wheat and rice are sold at ration shops. There has been no change in these prices since 2013: wheat at Rs 2/kg and rice at Rs 3/kg. Though the NFSA prescribes revision of the CIP every three years, this hasn’t been carried out.
For the construction of highways, the government has allowed the usage of steel produced by secondary steel makers. Earlier, in highway construction, road developers were required to use steel produced by the primary steel producers only. The decision has been taken in the wake of rising prices of steel supplied by primary steelmakers. Union Minister Gadkari has been vocal about this as major steel firms were on a spree of price hiking for the last few months, mainly taking cues from their international peers.
While the Road Transport and Highways Minister took the matter to PM Modi, seeking his intervention, steel companies justified the price hike to rising prices of iron ore. Other than reining in the integrated steelmakers from further jacking up prices, the latest move will also widen the sourcing scope as well as provide a cushion to the secondary steel producers who were hit hard by the COVID-19 pandemic.
Globally sentiments on steel are turning bearish. The steel market may start seeing a drop in demand given high prices. The outlook for copper, however, is good because there are still some global supply shortages around the world. Problems in South American supplies still exist. The decarburization programme measures being implemented in electric vehicles will also use copper.
Gold price in India has been falling over the past week having reached Rs 46,690 per 10 grams on Friday. Silver price fell by Rs 600 to trend at Rs 69,000 per kg. At current prices, gold is trading at the lowest levels in eight months.
Meanwhile, during last month in January 2021, Switzerland’s monthly gold exports to India reached their highest since May 2019. The Swiss exports to China and Hong Kong however, remained at rock bottom. India and China are the world’s two biggest gold consumers. Demand for bullion plunged in both when the coronavirus struck last year but has bounced back in India much more quickly. Switzerland is the world’s biggest gold refining centre and a transit hub.
This week, platinum, however, surged above $1,300 an ounce for the first time in more than six years on bets that a recovery in industrial demand and stricter emissions rules will tighten supply of the metal.
Oil prices hit a new 13-month high above $65 a barrel on Thursday, as concerns that the rare cold snap in Texas could disrupt U.S. crude output for days. Brent crude was at $64.31 a barrel, after rising to $65.52 earlier in the session, its highest since Jan. 20, 2020. WTI crude also touched $ 62.26 a barrel during the week.
Texas, the largest energy-producing state in the United States grappled with massive refining outages and oil and gas shut-ins that rippled beyond its borders into neighbouring Mexico. About 4 million barrels of daily refining capacity has been shuttered and at least 1 million barrels per day of oil production is also out.
In India, petrol crossed Rs 100 a litre in Madhya Pradesh and Rajasthan. Diesel prices are flirting around Rs 90 a litre all across the country leading to many protests and demand for excise duty cuts by the central government. It is only a matter of time, before such high fuel prices lead to a crippling retail inflation.