Page 5 - Policy Economic Report - September 2024

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

India's retail inflation in August 2024 falls below the RBI's 4% target for the second time in about five
years. India's retail inflation was 3.65% in August 2024, according to the All-India Consumer Price Index
(CPI) data released on September 12, 2024. The combined inflation (rural and urban) fell to 3.65% in
August 2024, compared to 6.83% in August 2023. However, it has increased by 110 basis points when
compared to the previous month's 3.54%. This was the second time in nearly five years that overall retail
inflation fell below the Reserve Bank of India's 4% inflation target. The last time was July 2024. Urban
inflation fell to 3.14% in August 2024, compared to 6.59% in August 2023. Rural inflation fell to 4.16% in
August 2024, compared to 7.02% in August 2023.

The headline HSBC Flash India Composite Output Index – a seasonally adjusted index that measures the
month on-month change in the combined output of India's manufacturing and service sectors – dipped
to 59.3 in September from 60.7 in August. Softer expansions were seen across both the manufacturing
and services sectors. Growth in new orders moderated by a touch in September, but hiring levels rose at
a faster pace, supported by improving business confidence. The rise in employment in the service sector
was the steepest since August 2022, as companies responded to robust growth in new orders. The HSBC
Flash India Manufacturing PMI – a single-figure snapshot of factory business conditions calculated from
measures of new orders, output, employment, supplier delivery times and stocks of purchases – posted
56.7 in September, down from 57.5 in August. The reading signaled a further marked strengthening in
business conditions for goods producers, but the rate of improvement was the softest since January.

India’s overall unemployment rate comprising both urban and rural areas came down to 4.9% in 2023-
2024, from 5.1% in 2022-23, quoting the results of annual periodic labor force survey (PLFS). The labor
force participation rate (LFPR) also saw an increase in 2023-24, to 56.4% from 54.6% in 2022-23. The urban
LFPR rose to 50.8% from 49.4%, and rural LFPR climbed up to 58.9% from 56.7%. The reduction in
unemployment rate is consistent with the economic growth (8.2%) in the last fiscal year.

India's forex reserves jumped by $223 million to hit a fresh all-time high of $689.46 billion for the week
ended September 13, 2024. According to the Weekly Statistical Supplement released by the RBI, foreign
currency assets (FCAs) dipped by $515 million to $603.63 billion. Expressed in dollar terms, the FCAs
include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the
foreign exchange reserves. Gold reserves saw a surge of $899 million to $62.8 billion. Meanwhile, SDRs
for above mentioned week were down by $53 million to stand at $18.42 billion. Reserve position in the
IMF dipped by $108 million to $4.52 billion.

As far as oil and gas industry is concerned, the rapid decline in global oil demand growth in recent months,
led by China, has fuelled a sharp sell-off in oil markets. Brent crude oil futures have plunged from a high
of more than $82/bbl in early August to a near three-year low at just below $70/bbl on 11 September,
despite hefty supply losses in Libya and continued crude oil inventory draws.

Hedge funds and money managers continued their bearish stance on crude oil in August, following
significant reductions in net long positions in July. This contributed to oil price volatility and accelerated
the decline in oil futures prices. Net long positions in ICE Brent were reduced to their lowest levels since
at least 2011. The selling pressure was particularly strong for NYMEX WTI, where a substantial number of

September 2024 Page | 4