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Finance Minister Nirmala Sitharaman's Defence As Rupee At Record Low

PUNE, Sept 24: Finance Minister Nirmala Sitharaman on Saturday said the rupee has "held back very well" when compared to other currencies against the US Dollar.

The Reserve Bank and the Finance Ministry are keeping a very close watch over the developments, the finance minister told reporters after the domestic currency sunk to a lifetime low against the greenback.

"If any one currency which has held its own and did not get into fluctuation or volatility as much as other currencies it is the Indian rupee. We have held back very well," she told reporters here on the final day of her three-day visit to Pune district which is a stronghold of NCP chief Sharad Pawar.

She also asked a reporter to do a study on how the other currencies are behaving against the US dollar in the latest round of depreciation.

According to experts, the latest round of depreciation is triggered by adverse global developments starting with the geopolitical tensions triggered by the Russian invasion of Ukraine earlier this year.

The war pushed up commodity prices, leading to a record surge in inflation in the developed world, which have resulted in steep rate hikes by the US Fed. This has resulted in a flight of capital back to the US, hence resulting in currency depreciation episodes.

The rupee slumped 30 paise to close at a fresh lifetime low of 81.09 against the US dollar on Friday, weighed down by the strong American currency overseas and risk-off sentiment among investors.

On Thursday, the rupee plunged by 83 paise -- its biggest single-day loss in nearly seven months -- to close at 80.79, its previous record low.

The RBI has been deploying the dollar reserves to defend the currency and has exhausted billions of dollars of currency assets in the fight.

There have also been policy moves to attract more deposits from the diaspora through further incentives and other such attempts to stem the fall.

India's First Chip Factory, $20 Billion, In Gujarat

NEW DELHI, Sept 13: Mining conglomerate Vedanta and Taiwanese electronics manufacturing giant Foxconn will invest ₹ 1.54 lakh crore to set up India's first semiconductor production plant in Gujarat.

The ₹ 1.54 lakh crore investment by Vedanta and Foxconn will be used to set up India's first semiconductor production plant, a display fab unit, and a semiconductor assembling and testing unit.

The plants will be set up on a 1000-acre land in Ahmedabad.

"The plant will start production in two years," Vedanta chairman Anil Agarwal told PTI after signing the memorandum of understanding (MoU) with the Gujarat government.
Foxconn is acting as the technical partner, while oil-to-metals conglomerate Vedanta is financing the project.

Vedanta and Foxconn will work closely with the state government to establish high-tech clusters with requisite infrastructure, including land, semiconductor-grade water, and power, the companies said in a joint statement.

The companies also said the project will create more than 100,000 jobs in Gujarat.

Semiconductor chips, or microchips, are essential pieces of many digital consumer products - from cars to mobile phones and ATM cards. The Indian semiconductor market was valued at $27.2 billion in 2021 and is expected to grow at a healthy CAGR of nearly 19 per cent to reach $64 billion in 2026. But none of these chips is manufactured in India so far.

Vedanta is the third company to announce a chip plant location in India after international consortium ISMC and Singapore-based IGSS Ventures, which are setting up in Karnataka and Tamil Nadu respectively.

A massive shortage in the semiconductor supply chain last year affected many industries, including electronics and automotive.

To cut dependence on imports from nations like Taiwan and China, the government brought a fiscal incentive scheme for manufacturing semiconductors in the country. Vedanta-Foxconn is one of the successful applicants for the Production Linked Incentive (PLI) scheme for semiconductors.

Retail inflation Rises Back Up To 7% In August After Falling For 3 Months

NEW DELHI, Sept 12: Retail inflation rose to 7 per cent in August, stalling a three-month downtrend on soaring food costs, pressuring the Reserve Bank of India to hike rates more aggressively to tame surging prices even at the cost of the economy.

That shows inflation has remained above RBI's 2-6 per cent tolerance band in each month this year.

Data released by the National Statistics office showed, consumer price index-based inflation (CPI) in August was higher than a survey of economists, rising to 7.0 per cent from a year ago, compared to the 6.9 per cent forecast, and above July's 6.71 per cent.

Food inflation, which accounts for nearly half the consumer price index (CPI) basket, soared as prices of essential crops like wheat, rice and pulses were driven higher by a record heatwave, squeezing already stretched household budgets further.

According to the data, inflation in food basket was 7.62 per cent in August, up from 6.69 per cent in July and 3.11 per cent in August 2021.

Erratic monsoon patterns across the country suggest more crop damages, keeping food prices elevated in the coming months, with negative seasonality kicking in for September-November and weighing on price pressures.

The government has put restrictions on the export of wheat, sugar, and rice in an effort to keep local prices from rising as a result of the country's uneven rainfall distribution.

"Another inflation print of 7 per cent bang in line with our expectation confirms our belief that price pressure is not going to go away anytime soon, although being a year-on-year print, inflation may be off the peak," said Kunal Kundu, India Economist at Societe Generale.

"Expectedly food prices moved up sharply as well. Given the tailwind generated by high food prices as production suffers due to erratic monsoon, we do not see consumers' cup of woes emptying out soon," he added.

Although crude oil prices have dropped significantly in recent weeks, the fuel and light inflation rose 10.8 per cent, suggesting the positive impact of falling commodity prices are not yet reflected and will be muted even when it does show because that makes up a very small portion of all categories.

Household budgets have been hard-hit by the increase in food and fuel prices.

"We have cut down spending on vegetables," Puspanjali Sahu, a resident of the eastern Indian city of Bhubaneswar, said. "We are not going out to any eatery, we are not watching movies in the cinema hall."

The RBI's projections showed inflation staying above the 6 per cent top end of its target range until early 2023.

While RBI Governor earlier this month said inflation has peaked and will likely moderate to around 5 per cent by the April-June quarter of next year, the latest surge back in price pressures contradicts the central bank's broad expectations and is not good news for a country whose bane has been supply-driven inflation.

The RBI governor also said that the policy aimed to control inflation while minimising any impact on economic growth. But the latest consumer price-based inflation pressures the central bank to act more aggressively and mirror the policy path of major central banks in the West - fight inflation at any cost, including a recession.

The central bank raised its key policy repo rate by 50 basis points (bps) in August to 5.40 per cent, taking the total rise since May to 140 bps. Its next policy decision is due on September 30, with expectations before the inflation data of a rise of fewer than 50 bps.

"We expect an additional 60 bps rate hike by the Reserve Bank of India (RBI) before they bring the rate hike cycle to an end as they shift the focus back to growth given the rather dismal employment situation," said Societe Generale's Mr Kundu.

Further breakdown of the data showed rural inflation above the urban price pressures for the third month in a row.

Separately, the National Statistical Office (NSO) data showed India's industrial production rose 2.4 per cent in July from a year ago, compared to an annual 3.2 per cent in July.

 

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