Concerns in emerging markets about climbing prices have suddenly taken a back seat to worries that economic growth could slow dramatically.
The shifting sentiment has been apparent in the large amounts of cash the UAE has poured into the banking system in an attempt to keep lending from contracting, and yesterday the Indian central bank did an about-face and lowered interest rates. The cut to the Reserve Bank of India's (RBI) repo rate effectively backtracked on three rate hikes in June and July aimed at fighting inflation in Asia's second-most-populous country. The repo rate is the discount rate at which a central bank buys back government securities from commercial banks.
China, the most populous country and Asia's second-largest economy behind Japan, moved to cut interest rates in the middle of last month and brought through a second rate cut on Oct 8.
The reason behind the change: emerging economies once thought to be insulated from the fallout of the global financial crisis are now feeling the effects.
"It has taken us a little by surprise - not that the measures were not required, but the speed and extent of those measures," said Mridul Sagar, the chief economist at Kotak Securities in Mumbai. "But these are extraordinary times and the government is doing everything possible to keep the economy going."
It is not as if inflation has gone away. From tomatoes to toothpaste, the cost of basic products at supermarkets in the UAE continues to climb - in some cases more than 50 per cent in recent weeks - despite a drop in the price of several commodities.
At the Abu Dhabi Co-operative Society, for example, one kilogram of Jordanian tomatoes cost Dh3.60 (US$0.98) on Oct 6, up from Dh1.95 in April, according to figures released last week by the Ministry of Economy. One kilogram of Indian dry red onions at Carrefour in Abu Dhabi increased from Dh0.35 in April to Dh1.55 last week, while Lulu Dubai was selling one kilogram of locally grown short cucumbers for Dh1.45 on April 21 - and for Dh4.95 on Oct 6.
After peaking at 12.9 per cent in August, India's inflation rate fell to a four-month low of 11.44 per cent in the week to Oct 4, still more than double the RBI's five per cent target.
However, with oil prices sinking to below $70 per barrel, from a peak of $147 in July, the price of many commodities has also taken a nosedive.
Last week, both corn and soybean prices had fallen by nearly 50 per cent from record highs earlier this year. Wheat has dropped 58 per cent since reaching a record $13.50 a bushel on Feb 27, while rice, a staple for many worldwide, is at about $735 per tonne, down from the record $1,038 per tonne for the benchmark Thai 100 per cent grade B, set on May 21.
Those falls will not translate immediately into lower prices, but the upwards pressure on prices will likely diminish over time.
"It will take three to four weeks before those products hit the shores and I can pass them through the system at a reduced price - and the same as when prices go up," said Jannie Holtzhausen, the chief executive for Spinneys in Dubai, adding that he expected prices to ease slightly in the coming weeks.
Indian central bankers looked at similar commodity price falls and drew similar conclusions. The cuts should keep India's economy growing at above seven per cent, a welcome result for the Congress Party, the leading party in the ruling United Progressive Alliance coalition, as it prepares for a national election early next year.
The finance minister Palaniappan Chidambaram called the rate cut "consistent with our objective to moderate inflation as well as ensuring satisfactory growth".
DK Joshi, the chief economist at India's Crisil ratings agency, said: "Inflation is still a focus, but financial stability seems to have taken precedence. We were anticipating interest-rate cuts at the start of next year, when they have a clear trend on inflation. But at this point everybody wants to be safe rather than sorry."
vsalama@thenational.ae
Specs
Engine: Dual-motor all-wheel-drive electric
Range: Up to 610km
Power: 905hp
Torque: 985Nm
Price: From Dh439,000
Available: Now
MATCH INFO
Euro 2020 qualifier
Norway v Spain, Saturday, 10.45pm, UAE
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Results:
5pm: Abu Dhabi Fillies Classic (PA) Prestige Dh 110,000 1.400m | Winner: AF Mouthirah, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm: Abu Dhabi Colts Classic (PA) Prestige Dh 110,000 1,400m | Winner: AF Saab, Antonio Fresu, Ernst Oertel
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6.30pm: Abu Dhabi Championship (PA) Listed Dh 180,000 1,600m | Winner: RB Money To Burn, Pat Cosgrave, Eric Lemartinel
7pm: Wathba Stallions Cup (PA) Handicap Dh 70,000 2,200m | Winner: AF Kafu, Tadhg O’Shea, Ernst Oertel
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Under 14 – Unam Pumas
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Best economy rate: 6.53 – Sunil Narine
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Quick pearls of wisdom
Focus on gratitude: And do so deeply, he says. “Think of one to three things a day that you’re grateful for. It needs to be specific, too, don’t just say ‘air.’ Really think about it. If you’re grateful for, say, what your parents have done for you, that will motivate you to do more for the world.”
Know how to fight: Shetty married his wife, Radhi, three years ago (he met her in a meditation class before he went off and became a monk). He says they’ve had to learn to respect each other’s “fighting styles” – he’s a talk it-out-immediately person, while she needs space to think. “When you’re having an argument, remember, it’s not you against each other. It’s both of you against the problem. When you win, they lose. If you’re on a team you have to win together.”
The specs
Price: From Dh529,000
Engine: 5-litre V8
Transmission: Eight-speed auto
Power: 520hp
Torque: 625Nm
Fuel economy, combined: 12.8L/100km
UAE currency: the story behind the money in your pockets
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Director: Jared Hess
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Rating: 3/5
If you go
The flights
Emirates (www.emirates.com) and Etihad (www.etihad.com) both fly direct to Bengaluru, with return fares from Dh 1240. From Bengaluru airport, Coorg is a five-hour drive by car.
The hotels
The Tamara (www.thetamara.com) is located inside a working coffee plantation and offers individual villas with sprawling views of the hills (tariff from Dh1,300, including taxes and breakfast).
When to go
Coorg is an all-year destination, with the peak season for travel extending from the cooler months between October and March.
How much sugar is in chocolate Easter eggs?
- The 169g Crunchie egg has 15.9g of sugar per 25g serving, working out at around 107g of sugar per egg
- The 190g Maltesers Teasers egg contains 58g of sugar per 100g for the egg and 19.6g of sugar in each of the two Teasers bars that come with it
- The 188g Smarties egg has 113g of sugar per egg and 22.8g in the tube of Smarties it contains
- The Milky Bar white chocolate Egg Hunt Pack contains eight eggs at 7.7g of sugar per egg
- The Cadbury Creme Egg contains 26g of sugar per 40g egg
Champion%20v%20Champion%20(PFL%20v%20Bellator)
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How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
Test
Director: S Sashikanth
Cast: Nayanthara, Siddharth, Meera Jasmine, R Madhavan
Star rating: 2/5
The specs
Engine: 2.4-litre 4-cylinder
Transmission: CVT auto
Power: 181bhp
Torque: 244Nm
Price: Dh122,900
