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Opnion: Back to the book: RBI Policy Dec 2019

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RBI

The Monetary Policy Committee (MPC) shocked expectations by keeping rates on hold. While not acting on Thursday, the MPC has nevertheless acknowledged monetary policy space for future action. It also reiterated continuation “with the accommodative stance as long as it is necessary to revive growth, while ensuring that inflation remains within the target”.

(The key forecast changes around growth and inflation are shown in the accompanying graph)

Takeaways

The decision to wait and watch seems to have been driven by the following factors:

  • Consumer Price Index (CPI) forecast for H2 FY20 has turned up sharply (Q3 higher by 1.6% and Q4 by 1.0%). Although CPI is expected to fall back to 4% by Q1 of the new financial year, the RBI doesn’t seem to have enough confidence yet that this will necessarily be so. Similarly while core CPI has collapsed lately, the RBI seems worried about the impact of the recent hikes in telecom charges on CPI.
  • The MPC wants to give more time for measures already taken both by government and RBI (including accumulated monetary easing thus far) to show their impact. There is also optimism that bank transmission will improve with external benchmarking of rates.
  • There is also a sense that further monetary action should wait to see what countercyclical measures, if any, the government announces in the Union Budget.
  • The standout point made by the Governor was an assessment that indicators showed capex cycle is picking up and that the revival in fixed asset investments seemed broad-based. This requires more analysis since the impression thus far has been quite the reverse.

The RBI also downplayed the point about broader transmission, noting that this “has been full and reasonably swift across various money market segments and the private corporate bond market”. However, transmission to government bond market has been partial, while credit market transmission remains delayed but is picking up. The issue of elevated term spreads was raised by media in the post policy call but wasn’t much entertained by the Governor (determined by market but not as if we are not looking at them).

Similarly there was a somewhat cryptic response to a question with respect to ‘twist’ operations which entails selling short bonds and buying long in order to influence term spreads.

To say that this policy is a surprise to us is an understatement. Nominal GDP has collapsed from 11-12% between mid 2016-mid 2018 to just above 6% for the last reading. Even for the full FY, it is very likely going to be 7-8%.

Thus there has been a 3-4% fall in nominal GDP over little more than a year and a half. While structural measures like greater Foreign Direct Investments (FDI), labour reforms and privatization are welcome, they are almost ‘truisms’ which are welcome at possibly every point in time. It is very hard to argue against a robust counter-cyclical response for such a drastic fall in nominal growth.

Also between fiscal and monetary policy, it is quite clear that there is next to no room in the former especially when one looks at aggregate public deficit versus net household financial savings. It is thus evident (at least to us) that there is a greater role for monetary policy here. This is especially as, by definition since nominal demand has collapsed, almost all current issues with respect to CPI pertain to a supply shock.

Finally, the Governor has kept on saying that they don’t operate off a framework of real rates. This time around he even seemed to refer to this as an ‘objective’ seemingly saying that RBI can’t have multiple objectives. In our view, this is an erroneous way of looking at real rates. Rather, real rates are a tool to measure net effective change done by the central bank.

Thus if real growth is much below trend (which seems to be the case now) and policy is being eased to close this output gap, the central bank will need to have a handle on real effective easing as an input on how much work has been done towards closing the gap, all other things remaining constant. The same concept will apply on the way up as well when real tightening may have to be done to bring an overheating economy back to trend.

We have deflated nominal policy rates with the Gross Domestic Product (GDP) deflator, assuming this denotes a better measure of economy wide price pressures. As is evident, real repo rate has actually gradually been inching up and is unlikely to fall dramatically in a sustainable fashion (even though there may be a temporary effect courtesy near CPI inflation).

Given the size of our economic slowdown, and taking into account that discretionary fiscal expansion from the government in response to the slowdown is hardly amounting to 0.5% of GDP thus far, this seems a very underwhelming response from the central bank.

Investor Implications

Investors should probably breathe a sigh of relief insofar that this provides a longer window to keep locking into front end quality interest rates. A 175 bps odd spread between overnight to 4 year AAA bonds is there for the receiving given our high conviction view of a ‘lower for longer’ policy regime.

Longer end rates will struggle for now, but are also cheap given almost 200 bps spread between overnight and long duration government bonds, and with these bonds currently trading close to the year’s predicted nominal GDP growth (!). However, a sustained move here will depend upon the government not over-exerting the fiscal lever and fresh risk capital entering the system.

(The writer is Head – Fixed Income, IDFC AMC).

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Festivities at Rajasthan’s Cattle Fair

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Pushkar Camel Fair

Dotted with majestic forts and palaces, deserts and colourful people, Rajasthan is famous for a great many fascinating and interesting festivals. Each festival has its own significance and legends – tales that can keep you entertained forever!

Coming up at the end of this month is Rajasthan’s 2nd largest Cattle Fair at Nagaur. Celebrated with great enthusiasm and full of exciting events, the Fair attracts tourists from all over the world. Visitors have often said that the festivals of Rajasthan are so full of cultural beauty, colour and vigour, that given the chance, they would love to return every year.

The Nagaur Cattle Fair is an annual festival celebrates the coming together of animals including horses, cows, bullocks, oxen and camels, adding up to more than two and half lakhs! Held in the historic town of Nagaur located between Bikaner and Jodhpur, every year traders and buyers, collect here to trade more than 75,000 camels, horses and bullocks. The Festival is spread over 4 days and offers a vast number of events to keep everyone entertained.

In the mornings there are bullock races, cock fights, tug of war, while the evening offers visitors enjoy vibrant folk music and dance performances. Meals seated around bonfires with groups of folk singers and dancers are among the most unforgettable experiences that everyone takes home. There are many competitors for contests. Among the most sought after competitions are for turban tying, for the longest and best mustache, gymnastic stunts, jugglers, puppet shows and storytelling.

The Nagaur Cattle Fair is also known as the Ramdeoji Cattle Fair, started 56 years ago when Maharaja Umed Singh invited Sufi saint Shri Ramdeoji to Nagaur to demonstrate his powers. People from around the town gathered at Nagaur to watch him and it is said that they were convinced about his supreme powers and insisted that he should stay in Nagaur. A Fort was built with massive walls around the existing dwellings and named – the Fort of the Hooded Cobra. Thereafter it became customary for them to visit him once a year, to pay their respects. Till today the day of the Fair coincides with the day Ramdeoji was born.

This year the Fair is scheduled from January 30th till February 2nd, 2020. However, the fair can last even for 10 days. Visitors can expect the fair to open with sellers showing off their cattle. Each dealer is given a shed of his own and buyers walk around looking for the best buy. There will be stalls selling the vast variety of artifacts made in Rajasthan. Games and competitions of all kinds can be expected.

By sunset most of the buyers would have left the fairground and the sellers stay on to guard their animals. The cultural programmes begin after sunset and music fills the air. Among the main attractions at the Fair is the Mirchi Bazaar, This is considered to be the largest chilli market of Asia. Contest for looks as well as attire among the animals, is the most popularly photographed activity. The handicraft exhibition is spread in stores around the fairground. Among the most popular items are camel leather accessories, wooden items, crafts made of iron and others.

Visitors are welcome to stay back and enjoy themselves after the fair closes which is when the locals gather together to dance and sing. There are games to play and the stores are kept open for selling. It is also the right time to taste the local cuisine at the shops, including the rather rare camel milk delicacies! The finale every night is a spectacular burst of fireworks!

(Shona Adhikari is a lifestyle and travel columnist)

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Cancer’s Big Five

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cancer types poster

Cancer is one of the most dreaded ailments, and from amongst the very many types of cancer, there are a few that Indian women are predisposed to.

47.2 percent of cancer in women is accounted for amongst the five types. The surprising fact is that these cancers can be prevented by early screening. Early detection and treatment reduces not only the death rate but the quality of life post cancer treatment. Dr Neena Singh, Associate Director, Obstetrics & Gynecology, Fortis La Femme, Delhi sheds some light on this.

She reveals the following are the top five types of cancer in women in India:

  • Breast Cancer
  • Cervical Cancer
  • Uterine Cancer
  • Ovarian Cancer
  • Colorectal cancer

BREAST CANCER :

Breast cancer is the most common cancer in women in India and accounts for 27 percent of all cases of cancer in women. It is more common in urban areas than rural areas.

High risk factors:

  • Family history of breast cancer
  • Long period of OCP (Oral contraceptive pills)

Screening test for breast cancer:

Self-examination of the breasts. If any abnormality found like lump, pain or change in shape, consult a doctor who would examine clinically if it is cancer.

  • Mammography is done which can detect small lesions.
  • MRI Breast is done for staging the disease.
  • Treatment at early stages carries good prognosis.

CERVICAL CANCER

Cervical cancer is the second most common cancer in India in women accounting 22.86 percent of all cancer cases in women. It is more common in rural women than urban women.

Risk Factors:

  • Young age at first intercourse (less than 16 years)
  • Multiple Sexual partners
  • Cigarette smoking
  • Human papillomavirus infection (HPV)
  • Immunosuppression

Screening test for cervical cancer:

Any abnormal symptoms like abnormal vaginal bleeding, vaginal discharge and contact bleeding (bleeding after intercourse) report to a gynecologist who would do a clinical examination and do some test on cervix.

  • Visual inspection with acetic acid (VIA)
  • Visual inspection with legal Iodine (VILI)
  • Magnified VI! Under colposcopy
  • Exfoliative cytology (Pap smear)-is gold standard for screening.
  • HPV-DNA testing

Do Cervical biopsy for confirmation. Early detection and treatment have very good prognosis.

Prevention by prophylactic vaccinations in childhood.

UTERINE CANCER (CANCER OF UTERUS)

Uterine cancer is a type of cancer that begins in the uterus in its lining called the endometrium. Hence also named as endometrial carcinoma.

Risk Factors:

It is an estrogen dependent cancer. Persistent unopposed stimulation of endometrium with estrogen is the single most important factor for development of cancer endometrium:

Polycystic ovaries

  • Granulosa cell tumor of the ovary which secret estrogen
  • Hormone replacement therapy-unopposed estrogen therapy
  • Early onset of periods & late menopause (after the age of 50)
  • Age: – 75 percent women are post-menopausal

Nulliparity

  • Obesity, Hypertension & Diabetes (corpus cancer syndrome)
  • Tamoxifen therapy given in breast cancer
  • Endometrial hyperplasia especially atypical
  • Following radiation exposure to the pelvis
  • Family history of cancer uterus breast, ovary & colon

Screening test for uterine cancer:

If any irregularity in menstrual cycle, post-menopausal bleeding, contact bleeding and unhealthy vaginal discharge report to a gynecologist who would do

  • Clinical examination
  • Transvaginal sonography (TVS) to know endometrial thickness or irregularity.
  • MRI pelvis can be done for more details
  • Fractional curettage of uterus for histopathology examination or Hysteroscopy & directed biopsy from suspicious area. Early diagnosis & treatment has very good prognosis.

OVARIAN CANCER

Ovarian cancer constitutes 15-20 percent of all genital cancers. 85-90 percent of all cancers are epithelial in origin. Germ cell constitutes 5-7 percent.

Risk Factors:

Unfortunately, ovarian cancer doesn’t produce any specific symptoms. By the time symptoms appear its already in advanced stages. However, if patients have pain in the abdomen, back ache, indigestion, bloating not responding to basic treatment and lasts for more than two weeks then consult a gynecologist.

Screening test for uterine cancer:

No specific screening method is available. Doctor would do a pelvic examination to feel for ovarian mass.

  • Transvaginal sonography (TVS) to confirm ovarian mass solid or cystic.
  • Blood test like CA125 which is found raised in ovarian cancer.
  • CT Scan /MRI to know spread of cancer

Treatment:

Early diagnosis and treatment carry good prognosis.

COLORECTAL Cancer

When a cancerous growth originates in the colon and then spreads to the rectum, it leads to colorectal cancer. The risk of colorectal cancer is higher after the age of fifty years.

Risk Factors:

  • Smoking
  • Fat rich diet
  • Crohn’s disease
  • Colitis
  • Family history of colorectal cancer or polyp
  • Non residual diet
  • Chronic constipation

Screening test for Colon Cancer:

  • Frank blood in stools
  • Fecal occult blood test is positive
  • Double contrast barium enema (DCBE)
  • CT Scan
  • Colonoscopy
  • Stool DNA test
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More self-employed committing suicides than unemployed

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Suicide

It may appear strange but more self-employed people are committing suicide every day than the unemployed.

It may be a testimony to the bleak economic situation and the slump in various industries that an average of 36 self-employed people ended their lives every day as against a lesser number of 35 unemployed people.

While the government has been offering several categories of loans for the self-employed, the downturn in commercial activity in general, indebtedness and the stress of running a business may be taking a toll on the self-employed. Self-employed category accounted for 9.8 per cent of total suicide victims (13,149 out of 1,34,516).

Suicides by the self-employed and the unemployed in 2018, with the two categories together accounted for 26,085 deaths during the year, according to government data.

The self employed figure of suicides at 13,149 is more than the suicides by the unemployed at 12,936.

Both the categories combined outnumbered the suicide figures of those working in the farming sector at 10,349 in 2018, according to data compiled by the National Crime Records Bureau (NCRB).

“Each suicide is a personal tragedy that prematurely takes the life of an individual and has a continuing ripple effect, dramatically affecting the lives of families, friends and communities. Every year, more than 1 lakh people commit suicide in our country. There are various causes of suicides like professional/career problems, sense of isolation, abuse, violence, family problems, mental disorders, addiction to alcohol, financial loss, chronic pain etc,” says the NCRB adding it collects data on suicides from police recorded suicide cases.

A total of 1.34 lakh suicides were reported in the country during 2018, showing an increase of 3.6 per cent in comparison to 2017. The rate of suicides, which means deaths per one lakh population, also increased by 0.3 per cent during 2018 over 2017, the NCRB stated.

In a shocking revelation, one unemployed person committed suicide every hour during 2018. Of the total suicides, 92,114 male and 42,391 female, were reported in the country, NCRB’s data on “Suicide in India-2018” says.

The latest data, issued by the National Crime Records Bureau (NCRB) under Ministry of Home Affairs, reveals that a total of 12,936 unemployed persons committed suicide in 2018, which accounted for the 9.6 per cent of the total suicides, were of aged below 18 years to above 60 years.

Those below 18 years include 31 males and nine females while those between 18 and 30 years comprise 1,240 male and 180 female. A total of 868 male and 95 female were aged between 30 and 45 years. A number of 237 males and 21 females were aged between 45 and 60 years while 2,431 males and 310 females were above 60 years.

Of the total suicides by unemployed persons, males are 10,687 while the females are 2,249.

Majority of 12.3 per cent suicides committed by unemployed persons were in Kerala (1,585 out of 12,936 suicides), 12.2 per cent in Tamil Nadu (1,579 suicides), 9.7 per cent in Maharashtra (1,260 suicides), 8.5 per cent in Karnataka (1,094 suicides) and 7 per cent in Uttar Pradesh (902 suicides).

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