Indian Rupee Could Gain From Imported Inflation:
Recent discussions on the inflation of imported commodity prices have indirectly led to a betterment of the Indian GDP.
Imported inflation is the general price level increase in a country due to the rise of prices of imported commodities. The RBI took a stand to prevent further depreciation of rupee against the dollar and reduce Imported inflation. For example, crude oil prices have lowered the rupee value from 73.09 (September 1st) to 75.52 (October 12th) against the dollar. Although the push against the crude prices has depreciated the value of the rupee, it has recently started to appreciate.
This can be seen as the ratio is now 74.35 INR:1 USD. Furthermore RBI’s turnover from the forex market is in excess of 2.2 billion dollars has shown the appreciation of the Rupee. They have done this by regularly purchasing in the forex market.
The high domestic inflation of crude oil prices as seen in states like Assam, Haryana and Jammu and Kashmir (5.98%, 6.45% and 7.92% respectively), would motivate the RBI to further appreciate rupee as this leads to a reduction in imported inflation of metals and oil prices.
Backward and forward linkages refer to the relationship of an industry or institution with its supply chain. Since India has stronger backward linkages than forward linkages, a lower import inflation upon oils and metals coupled with a stronger GDP, will help the export ability of the country.
Young People Leading The Newcomers In The equities Market:
A recent RBI survey has concluded that a large number of young people have been entering the equity market. The survey shows that many brokerages such as Upstox, AngelOne, and banks like HDFC and ICICI have had an exponential growth of customers since the pandemic.
They have had a 100% increase in their customers and over 70% of their new found customers are first timers who are under 30 years old. Age groups ranging from 18-24 and 25-30 are not only the largest investors in stock markets but also the leading first time investors, being 39% and 34% respectively.
Many people state that this was due to tax savings but a few online surveys have shown results debunking such statements. For example, the online survey conducted by Groww partnered with Sequoia Capital, YCombinator, Ribbit Capital and Tiger global showed that 81% of survey respondents invested into stock markets and mutual funds, indicating long term money growth and not tax savings.
Furthermore tax savings has had a low influence on investment decisions as only 3% of investors considered to move into tax saving asset options. People ranging from 18-30 years have been investing to create long term wealth such as general savings, education, marriage and retirement planning showing the population's focus for the future.
The increase in young people investing in equities can be tied to increased liquidity in the hands of the youth, better information and education about financial management. The increased liquidity in the hands of youth is a direct result of inflation in salaries (as shown in the AON annual salary survey 2021-2022), better education and more urban and metro job employment opportunities. Furthermore, this increase can also be connected to investing in equity markets by way of direct purchase of stocks or investments into mutual funds, as well as limited benefits from debt instruments.
Written By: Arjun Kulkarni