Gold Silver copper and crude backed off in the last two weeks and the rest of the base metals should be doing so now. This is outright deflationary. The impact is starting to be felt again in EM currencies, and the USDINR while acting god will not do so forever. In fact it is not in our interest to see a strong INR
This was stated by the government in Oct 2018, that a weak rupee to 74 maybe good. The need for inflation in a deflationary environment will get louder as we tread forward.
One of the reasons why the street will be crying will be that a large part of the recent growth story in India was predicated on the rural demand story. I am not sure how much of that comes from additional output or productivity gains. A large part depends on MSPs or simply rising prices, or inflation, and cheap credit. So much for the war on food inflation.
But it is going to get worse. I spent my time from 2015-2017 looking for a bottom in global agro commodities as I did believe that they will pick up in price after the long lull. More convinced after the dollar topped in 2017 into a bear market maybe. But every rally in global agro was short lived and by the time it was time for a 3rd wave the trend faltered. With that I bring you to the following chart of the Agro commodities index in India - the NCDEX
DHAANYA index of nearly a dozen agro commodities. It gives you a broad idea of things. The idea on this chart is that for years the attempts to make a new high ended in short corrective moves and now at the end of 2018 it looks like a long term ending pattern starting 2012. An ending diagonal at E once complete would mean a much steeper decline in Indian Agro prices. That would be outright deflationary and would put the farm sector into even more distress than it already is. The chart is ominous
and should be watched closely because global rice, wheat, corn, coffee and sugar prices are again falling in the last week and there is not sign of a bottom yet.