The troubles of Indian manufacturing come partly from high costs. What are the implications of recent trends in commodity prices? For example, as Table 1 shows, international oil prices have dipped recently after a sustained plateau centred at $115/barrel. As the dip in 2008 shows, this can reflect a global slowdown. However, as is revealed in Table 2, the effect of the rupee’s depreciation is to not pass on the full impact of the softening of world prices — something true of other commodities, as well. Table 2 shows (rupee) oil futures throughout the year had begun to dip before rising. Gas futures, which declined precipitately at the beginning of the year, have now pretty much made up all the ground that they had lost at that time, as Table 3 reveals.
Perhaps the rupee’s impact on domestic vis-a-vis global prices is most obvious in the case of gold. Table 5 shows that international gold prices have been declining since the beginning of this year — but domestic gold prices have, largely, continued to increase. For other metals, too, the reduction in prices has been marginal, as revealed in Table 6. Aluminium, particularly versatile, and copper — because of its many industrial uses, a proxy for input costs and demand — have actually risen in price this year. This is in spite of the fact that, worldwide, aluminium has decreased in price over the first six months of this calendar year, as Table 7 shows. The same table reveals this is the case with other commodities.
For agri-commodities, too, prices have risen over the year, particularly in the past months — on fears of a poor monsoon. Sugar, after staying below Rs 3,000/quintal, is beginning to spike upwards, shows Table 8. This will only get worse if the monsoon also gets worse.