Repeat of 2013 ?

Are we seeing a repeat of 2013 or Not, if Yes, then can we forecast what to expect in 2023 and if not what is unique in current macro economic situation.

The topic of Macro economics has always sparked interest in me, though my proficiency remains somewhere else, I don’t claim to be an expert.

This question had being bothering me for some time, is the current situation drawing some common from the past or not?

here are some facts

1.????Consumer Inflation

2013 India saw a lot of headwinds on inflation, the consumer side inflation breaching central banks target by far, and was hitting highs of 8-10 percent, a similar story we are observing 2022. ??????

2.????Rupee Depreciation

In both cycles of 2013 and 2018, We saw rupee depreciating, which has direct impact on CAD and also goes in correlation to inflation. We are seeing a similar though not steep trend shaping up in 2022 onwards, rupee in 5 months has depreciated by 4.46 Rupees

3.????Crude Oil

Brent Crude oil prices, are starting to reflect a very similar story of pricing going to all time highs of +$100 a barrel.

The data is depicting that we did encounter very similar trends in 2013, however at much deeper level. ?

FMCG Reactions

We saw many FMCG sensitizing the market back in 2012 and continued to do so early 2013 as well,

The sectors growth also had a very similar narrative of being driven by Pricing.

Back then we also saw momentum shift in urban shopping with channels shift from general trade to Modern trade, fast forward 10 year we now see rise of ecommerce as a channel of choice for many.

The markets rewarded companies with resilience and many companies consolidated position of strength.

Coming back, there are factors and indicators which also are indicating that the narrative might not be exactly the same.

1.???Government stability

Those were the years when the government at the center was not much stable, we had an alliance of many parties coming together, and BJP was shaping up as a strong formidable force to recon with.

In-fact the BJP went ahead and had a astonishing win in 2014 elections, with 282 seat we were looking at strong government at center.

2.????Producer Inflation

It is surprising to see the producer inflation at high double digits of 15%+, and they way it has stepped up since 2020.

It will be anybody’s guess if no fiscal measures are taken by government we might be looking at these numbers converting to inflation in wages, services and retail margins and thus trickling to CPI.

Fun fact : it was around 2013/14 only when RBI changed its monetary stance to benchmark CPI instead of WPI, basis recommendations from committee led by Dr Urjit Patel. :)

3.????Supply Constraints

China’s lockdown, US Sanctions, Ukrain war, it is sad that all of it has hit in continuing motion to the world, and needless to say has pushed and exported inflation to major countries, including India.

?Looking ahead

Undoubtedly it is anybody’s but mine guess as to what can happen, but a lot depends on critical factors of India’s political stability, US monetary stance and China’s revival, amongst others.

However one thing is sure that the period of inflation is not going away sooner, and it needs actions on both fiscal and monetary, more specifically to FMCG the key remains in volume demand, and looking at inflation/one-off adjusted growth and its drivers.

PS : The views are completely personal.