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Daily Current AFfairs 04.09.2021 (Edible oil prices likely to ease by December: official, PMI signals fastest rebound in services activity in 18 months, FSDC asks regulators to keep steady vigil on financial sector)

Daily Current AFfairs 04.09.2021 (Edible oil prices likely to ease by December: official, PMI signals fastest rebound in services activity in 18 months, FSDC asks regulators to keep steady vigil on financial sector)

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1.Edible oil prices likely to ease by December: official

But govt. unlikely to reduce import duties: Food Secretary

Soaring edible oil prices are likely to soften by December as international commodity futures show a declining trend and along with the arrival of domestic oilseed crops, Food Secretary Sudhanshu Pandey said on Friday. However, he indicated that the government would be constrained from further import duty cuts to reduce oil prices as it needs to augment its own resources affected by COVID-19.

Average retail prices of major edible oils have risen by up to 48% over the last year, driven by surging global prices and lower domestic production of soybean, which is India’s largest oilseed crop. However, Mr. Pandey expressed confidence that the spike is over.

“December futures for soybean and palm oil are showing marginally declining trends. So we can expect that there will be no more rise in prices,” Mr. Pandey said, adding that arrivals of domestic soybean crop and the rabi mustard would also help to soften prices. “Hopefully, prices should remain under control. There will be a decline, but not a very dramatic decline because global commodity pressures are still there.”

National Edible Oil Mission-Oil Palm (NMEO-OP)

  • The scheme, called National Edible Oil Mission-Oil Palm (NMEO-OP), for self-reliance in edible oil involves investment of over Rs. 11,000 crore (over a five year period).

Key Points

  • Aims:
    • To harness domestic edible oil prices that are dictated by expensive palm oil imports.
    • To raise the domestic production of palm oil by three times to 11 lakh MT by 2025-26.
      • This will involve raising the area under oil palm cultivation to 10 lakh hectares by 2025-26 and 16.7 lakh hectares by 2029-30.
  • Features:
    • The special emphasis of the scheme will be in India’s north-eastern states and the Andaman and Nicobar Islands due to the conducive weather conditions in the regions.
    • Under the scheme, oil palm farmers will be provided financial assistance and will get remuneration under a price and viability formula.
  • Significance of the Scheme:
    • Reduction in Import dependance:
      • It is expected to incentivise production of palm oil to reduce dependence on imports and help farmers cash in on the huge market.
      • India is the largest consumer of vegetable oil in the world. Of this, palm oil imports are almost 55% of its total vegetable oil imports.
    • Rise in Yields:
      • India produces less than half of the roughly 2.4 crore tonnes of edible oil that it consumes annually. It imports the rest, buying palm oil from Indonesia and Malaysia, soyoil from Brazil and Argentina, and sunflower oil, mainly from Russia and Ukraine.
      • In India, 94.1% of its palm oil is used in food products, especially for cooking purposes. This makes palm oil extremely critical to India’s edible oils economy.

Palm Oil

  • Palm oil is currently the world’s most consumed vegetable oil.
  • It is used extensively in the production of detergents, plastics, cosmetics, and biofuels.
  • Top consumers of the commodity are India, China, and the European Union (EU).

Edible Oil Economy

  • There are two major features, which have significantly contributed to the development of this sector. One was the setting up of the Technology Mission on Oilseeds in 1986 which was converted into a National Mission on Oilseeds and Oil Palm (NMOOP) in 2014.
    • Further it was merged with NFSM (National Food Security Mission).
  • This gave a thrust to Government’s efforts for augmenting the production of oilseeds. This is evident by the very impressive increase in the production of oilseeds from about 11.3 million tons in 1986-87 to 33.22 million tons in 2019-20.
  • The other dominant feature which has had significant impact on the present status of edible oilseeds/oil industry has been the program of liberalization under which the Government’s economic policy allows greater freedom to the open market and encourages healthy competition and self regulation rather than protection and control.
  • The Yellow Revolution is one of the colour revolutions that was launched to increase the production of Edible oilseeds in the country to meet domestic demand.
  • The government has also launched the Kharif Strategy 2021 for oilseeds.
    • It will bring an additional 6.37 lakh hectare area under oilseeds and is likely to produce 120.26 lakh quintals of oilseeds and edible oil amounting to 24.36 lakh quintals.
  • Oils Commonly Used in India: Groundnut, mustard, rapeseed, sesame, safflower, linseed, niger seed, castor are the major traditionally cultivated oilseeds.
    • Soybean and sunflower have also assumed importance in recent years.
    • Coconut is most important amongst the plantation crops.

2.PMI signals fastest rebound in services activity in 18 months

‘Output expands first time in 4 months, rising consumer footfall boosts sales’

India’s services sector expanded in August at the fastest pace in one-and-a-half years amid strong inflows of new work and improved demand conditions, a monthly survey showed on Friday.

The seasonally adjusted India Services Business Activity Index rose from 45.4 in July to 56.7 in August, as the reopening of several establishments and increased consumer footfall boosted sales.

The services sector witnessed the first expansion in output in four months and a rebound in business confidence. In Purchasing Managers’ Index (PMI) parlance, a print above 50 means expansion, while a score below 50 denotes contraction. “The Indian service sector bounced back in August, led by the reopening of several establishments and improved client confidence due to growing vaccine coverage,” said Pollyanna De Lima, economics associate director at IHS Markit.

New orders placed with service providers rose in August, ending a three-month sequence of reduction. Moreover, the pace of expansion of orders was the quickest in more than eight-and-a-half years. However, firms saw a further decline in new export orders. The downturn was often associated with the pandemic and travel restrictions.

“Service providers foresee a brighter outlook, with firms indicating that the economic recovery could be sustained if restrictions continue to be lifted and further waves of contamination can be avoided,” Ms. De Lima added. Still, service providers again cut headcounts in August, though the rate of job shedding was marginal and the weakest since January.

Purchasing Managers’ Index (PMI) 

It is a survey-based measure that asks the respondents about changes in their perception about key business variables as compared with the previous month.

  • The purpose of the PMI is to provide information about current and future business conditions to company decision makers, analysts, and investors.
  • It is calculated separately for the manufacturing and services sectors and then a composite index is also constructed.
  • The PMI is a number from 0 to 100.
    • A print above 50 means expansion, while a score below that denotes contraction.
    • A reading at 50 indicates no change.
  • If PMI of the previous month is higher than the PMI of the current month, it represents that the economy is contracting.
  • It is usually released at the start of every month. It is, therefore, considered a good leading indicator of economic activity.
  • PMI is compiled by IHS Markit for more than 40 economies worldwide.
    • IHS Markit is a global leader in information, analytics and solutions for the major industries and markets that drive economies worldwide.
  • As the official data on industrial output, manufacturing and Gross Domesr\tic Product (GDP) growth comes much later, PMI helps to make informed decisions at an earlier stage.
  • It is different from the Index of Industrial Production (IIP), which also gauges the level of activity in the economy.
  • IIP covers the broader industrial sector compared to PMI.
  • However, PMI is more dynamic compared to a standard industrial production index.

3.FSDC asks regulators to keep steady vigil on financial sector

Council discusses financial stability, sector development

The high-level FSDC headed by Finance Minister Nirmala Sitharaman on Friday discussed a host of issues concerning the economy and underlined the need for keeping a continuous vigil on the financial sector by the government as well as different regulators.

The Financial Stability and Development Council (FSDC) meeting was attended by various financial sector regulators, including RBI Governor Shaktikanta Das.

The 24th meeting deliberated on various mandates of the FSDC such as financial stability, financial sector development, inter-regulatory coordination, financial literacy, financial inclusion, and macro prudential supervision of the economy including the functioning of large financial conglomerates, the Finance Ministry said in a statement.

“It was noted that there is a need to keep a continuous vigil by government and all regulators on the financial conditions,” it said.

The council also discussed issues relating to management of stressed assets, strengthening institutional mechanism for financial stability analysis, framework for resolution of financial institutions and issues related to IBC, banks’ exposure to various sectors and government, data sharing mechanisms of government authorities, internationalisation of the Indian rupee and pension sector related issues.

This was the first meeting of the high-level panel in the current financial year. The previous meeting was held on December 15.

Financial Stability and Development Council

  • Establishment:
    • The Financial Stability and Development Council (FSDC) is a non-statutory apex council under the Ministry of Finance constituted by the Executive Order in 2010.
    • The Raghuram Rajan committee (2008) on financial sector reforms first proposed the creation of FSDC.
  • Composition:
    • It is chaired by the Finance Minister and its members include the heads of all Financial Sector Regulators (RBI, SEBI, PFRDA & IRDA), Finance Secretary, Secretary of Department of Economic Affairs (DEA), Secretary of Department of Financial Services (DFS), and Chief Economic Adviser.
      • In 2018, the government reconstituted FSDC to include the Minister of State responsible for the Department of Economic Affairs (DEA), Secretary of Department of Electronics and Information Technology, Chairperson of the Insolvency and Bankruptcy Board of India (IBBI) and the Revenue Secretary.
    • FSDC sub-committee is headed by the Governor of RBI.
    • The Council can invite experts to its meeting if required.
  • Functions:
    • The objective of FSDC is to strengthen and institutionalize the mechanism for maintaining financial stability, enhancing inter-regulatory coordination and promoting financial sector development.
    • It also intends to monitor macro-prudential supervision of the economy. It will assess the functioning of the large financial conglomerates.
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