Apara nostradamus Sarumankabap ka warning... USDINR will reach 200 -- Update 8/22

August 22, 2019

USD reached 72. Its already up 3 rs since my last post. Sarumankabap ka warning. Dont be a fool and start remitting money yet. You will lose dearly.

See these warning bells. There are no jobs, no credit. People are not even buying 5rs biscuits leave out big purchases.

-Sarumankabap.

thehindubusinessline.com

Parle fears that if steps to boost demand not taken, it will forced to lay off

3 minutes

At a time when concerns about overall demand slowdown has intensified, biscuits major Parle Products feels that if immediate steps are not taken to boost consumption, it may lead to retrenchment of its 8,000-10,000 direct and indirect employees.

The company currently has one lakh direct and indirect employees.

It has urged the government to reduce GST on biscuits that are priced at ₹100 per kg or below. Mayank Shah, Category Head, Parle Products, said, “Since the implementation of GST, biscuits priced at ₹100 per kg or below have been put in the 18 per cent GST slab. The industry has been urging the government that this category of biscuits is typically consumed by lower-income consumers and should not be taxed at a similar level as premium biscuits that are priced above ₹100 per kg.”

In the previous tax regime, biscuits – priced at ₹100 per kg or below, – were taxed in the 12-14 per cent range. The lower priced biscuits were also exempted from excise duty and only attracted sales tax..However, under the GST regime all categories of biscuits have been put in the 18 per cent tax slab.

He further added that the company did not take a price hike for the past one and half year, in the anticipation that there will be correction in the GST tax rates. But was eventually forced to hike prices by about 5-7 per cent in December last year.

“Biscuits is an extremely price-sensitive category and the price hike has severely hit demand. This coupled with the overall slowdown in the economy and consumer sentiment has further aggravated the situation for us,” Shah said.

Biscuits priced ₹100 per kg and below, which have a higher penetration in the rural regions, has seen a 7-8 per cent decline in volumes in the last quarter, according to industry estimates.

“We are hopeful that the government will intervene as they have been positive towards the industry’s demand.. But in the worst case scenario,we would be forced to take production cuts and this could lead to lay off of 8,000-10,000 direct and indirect employees. This may happen over the course of one year,” Shah added.

Factors such as weak macro-economic environment, liquidity crunch hurting wholesalers besides lower government spending leading to slowdown in rural consumption has adversely impacted FMCG industry's volume growth.

businesstoday.in

Indians pawning the family gold amid credit crunch

4-5 minutes

Refused a loan by a state-run lender and desperate for funds to buy cotton seeds before the summer sowing season window closed, Indian farmer Babasaheb Mandlik ran out of choices - he pawned his wife's gold jewelry.

Mandlik, who owns an 8-acre cotton farm in western India, pledged 70 grams of gold, almost all of his wife's precious trinkets, in June in return for 150,000 rupees ($2,105).

"Pawning the jewelry was a difficult decision as my wife likes to wear it at festivals and weddings," 50-year-old Mandlik told Reuters. "I convinced her that we didn't have any other option."

Mandlik is not alone. While pawning gold has long been an option for quick funds in a country that is the world's second-biggest consumer of the yellow metal, several lenders told Reuters of unprecedented demand as people struggle to secure loans from banks grappling with bad debt and a shadow lending industry stung by a liquidity crunch.

The trend, which has prompted some lenders to impose restrictions as risks and borrowing costs rise, has been accelerated by record gold prices.

Indians' penchant for gold spans centuries and is rooted in the Hindu religion. Households own an estimated collective 25,000 tonnes of gold, which passes from one generation to the next.

Domestic gold prices have risen more than a fifth this calendar year, hitting a record high of 38,666 rupees per 10 grams earlier this month amid a global rise.

"As a lot of NBFCs (non-bank financial companies) have become cautious of giving unsecured or even secured loans, we are seeing more customers opting for gold loans instead," said Sumit Bali, chief executive officer of IIFL Finance. "One can obtain a gold loan and walk out of the branch in just thirty minutes."

IIFL's gold loan portfolio stood at 65.83 billion rupees ($922 million) at the end of the June quarter, up 46% compared to a year earlier.

Those pawning their precious possessions are most often independent workers, including farmers and small shop owners.

Muthoot Fincorp, a leading gold financing shadow bank with 2.98 million customers, said its gold loans rose 6.6% between April 1 and July 24 this year to 358 billion rupees.

"Pledging gold is becoming more lucrative with rising prices. We have seen healthy demand for gold loans in the last few months," said George Muthoot, director at Muthoot Fincorp.

Ashutosh Khajuria, the chief financial officer of Federal Bank Ltd, a private lender headquartered in south India, said its gold loan portfolio was at an all-time high of around 80 billion rupees and is expected to grow further.

CREDIT CRUNCH

Indian shadow banks began to face a liquidity crunch following the collapse late last year of Infrastructure Leasing & Financial Services, a major player in the non-banking financial companies space. That led to a surge in borrowing costs, forcing NBFCs to freeze, or tighten lending practices.

Some gold lenders who are also NBFCs have not been immune, despite their increased popularity with borrowers and the solid commodity backing their loans.

Manappuram Finance (MNFL.NS), which has 2.5 million gold loan accounts, last week revealed its cost of funds in the April-June quarter rose to 9.34% from 8.77% a year earlier.

Muthoot has independently decided to trim the maximum loan amount of 75% of gold value imposed by India's central bank to 70%, citing higher borrowing costs and the need to shield itself from any future volatility in gold prices.

"We are still expecting growth of 15% to 20% in gold loans in 2019/20," said George Muthoot.

Mandlik, meanwhile, is hoping to be able to buy back his pawned gold, which includes pieces gifted to his wife by her parents, after the cotton harvest in October. But the success of his crop - and the future of his wife's jewels - is at the mercy of India's monsoon rainfall.

"You can sow the seeds, but yield depends on monsoon rains," said Mandlik, who lost his 2018 crop to drought.

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