{"id":15234,"date":"2021-05-15T00:00:00","date_gmt":"2021-05-15T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/15-05-2021\/commodities-in-supercycle\/"},"modified":"2021-05-15T00:00:00","modified_gmt":"2021-05-15T00:00:00","slug":"commodities-in-supercycle","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/15-05-2021\/commodities-in-supercycle","title":{"rendered":"Commodities In Supercycle"},"content":{"rendered":"<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>In Context<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Recently, there has been a rise in <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>global commodity prices<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> that is being billed as a new <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>commodity super cycle<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">.<\/span><\/span><\/span><\/p>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; table-layout:fixed; width:624px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fff2cc; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top\">\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>What is a Commodity\u00a0<\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Commodities are most often used as inputs in the production of other goods or services. The quality of a given commodity may differ slightly, but it is essentially uniform across producers.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>What is the commodity super-cycle?<\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is a sustained period of rising commodity prices driven by higher demand that producers struggle to match, sparking an increase in prices that can last years or in some cases a decade or more.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Major Highlights\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Steel<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, the most commonly used input in the construction sector and industries, is at <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>all-time highs<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, as most metals including base and precious metals prices have gone <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>through the roof over the last one year.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Agriculture:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> Commodities from agriculture \u2014 such as sugar, corn, coffee, soybean oil, palm oil \u2014 have risen sharply in the US commodities market, the effect of which is being seen in the domestic market, too.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Metals :<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Precious metals including gold and silver are also on an upward trajectory.\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh4.googleusercontent.com\/Mp0U9GDoXYb7MeYLl7j1X0mSLOwxbU0vB-IiNoF5Na4Zuajzxz9FyrVlCRSuiV6hs8ybO6Mxrhu954OGUQF2fem4oMJXojnmviURhoxiazDgTB0E46NhSdXwLYYbosPcO5gORwyD\" style=\"height:295px; width:624px\" \/><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The surge in prices, the National Stock Exchange\u2019s NIFTY Metal Index hit a fresh high.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Prices of copper are also at all-time highs, surpassing the previous peak in February 2011.<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Brent crude oil prices are also on a tear.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The domestic prices of petrol and diesel are, however, at record highs as steady increase in Central and state taxes have added to their final price to the consumers.<\/span><\/span><\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Causes\u00a0<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">A new commodity super cycle resulting from recovery in global demand (led by recovery in China and the US), <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>supply-side constraints and loose monetary policy of global central banks.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>Impacts\u00a0<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The Rise in global commodity prices is leading to input cost pressures.it is not only expected to have a bearing on the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>cost of infrastructure development<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in India but also have an <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>impact on the overall inflation, economic recovery and policy making.<\/strong><\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Higher metal prices will lead to higher WPI inflation and so the core inflation may not come down. However, the CPI may not get affected much and hence it won\u2019t impact the monetary policy.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Way Forward\u00a0<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>decision-makers need to look at the mismatch<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in supply and demand and they need to find out where to invest, where to incentivise through the <\/span><\/span><\/span><a href=\"https:\/\/www.nextias.com\/current-affairs\/18-02-2021\" style=\"text-decoration:none\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#1155cc\"><strong><u>PLI scheme <\/u><\/strong><\/span><\/span><\/span><\/a><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">to prepare ourselves to deal with the situation.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">Companies will have to decide between passing on the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> cost to the consumer or absorb the cost.<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<div>\n<table cellspacing=\"0\" style=\"border-collapse:collapse; border:none; table-layout:fixed; width:624px\">\n<tbody>\n<tr>\n<td style=\"background-color:#fff2cc; border-bottom:1px solid #000000; border-left:1px solid #000000; border-right:1px solid #000000; border-top:1px solid #000000; vertical-align:top\">\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>What is Inflation ?<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It refers to the rise in the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> prices of most goods and services of daily <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">or common use, such as food, clothing, housing etc.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It measures the<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> average price change in a basket of commodities<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> and services over time.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">It is indicative of the decrease in the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>purchasing power of a unit of a country\u2019s currency.<\/strong><\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">This is measured in percentage.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">In India, inflation is primarily measured by two main indices \u2014<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> WPI (Wholesale Price Index) and CPI (Consumer Price Index)<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">, which measure wholesale and retail-level price changes, respectively.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">The<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> CPI calculates the difference<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in the price of commodities and services such as food, medical care, education, electronics etc, which Indian consumers buy for use.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">On the other hand, the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>goods or services sold by businesse<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">s to smaller businesses for selling further is captured by the WPI. In India,\u00a0<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong><u>Loose and Tight Monetary Policies<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">A monetary policy that<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong> lowers interest rates <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">and <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>stimulates borrowing <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">is an <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>expansionary monetary policy or loose monetary policy.<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">A monetary policy that r<\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>aises interest rates <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\">and <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>reduces borrowing<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"> in the economy is a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#000000\"><strong>contractionary monetary policy or tight monetary policy.\u00a0<\/strong><\/span><\/span><\/span><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<p><a href=\"https:\/\/indianexpress.com\/article\/business\/commodities-in-super-cycle-hit-highs-but-cast-cloud-over-recovery-inflation-7309966\/\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:Arial\"><span style=\"color:#1155cc\"><u>Source :IE<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In Context Recently, there has been a rise in global commodity prices that is being billed as a new commodity super cycle. What is a Commodity\u00a0 A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Commodities are most often used as inputs in the production [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":15235,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[26,46],"class_list":["post-15234","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/7211175current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/15234","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=15234"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/15234\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/15235"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=15234"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=15234"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=15234"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}