In this week's wrapup, we talk about the latest MPCE (Monthly Per Capita Consumption Expenditure) survey, ULIPs under the garb of mutual funds, Birla’s entry into the paints industry, KYC’s big makeover and why nutraceuticals may get a new regulator.

For the markets edition, we talk about Patanjali Foods. So let's start with that.

On Tuesday, the Supreme Court came down heavily on the Patanjali Group and imposed a temporary advertising ban on one of its entities. But could it hurt Patanjali?

Well, it’s not like Patanjali’s business has been in the pink of health all this while. Things began to turn sour a few years ago when MNCs started fighting tooth and nail to maintain their top spots in the FMCG sector by launching their AYUSH range of shampoo and soaps.

Patanjali’s big bang entry into the FMCG space in 2009 scared them. It capitalised on the Swadeshi (made in India) angle to get customers onboard. And it worked. Soon everyone had Patanjali products on their shelves ― biscuits, ghee, toothpaste, shampoo, you name it.

So it was natural for the big MNCs to turn defensive and launch a similar range of products too. And that may have hurt Patanjali quite a bit. It even stumbled again when GST kicked in because they weren't GST-ready. Product quality issues began to mushroom too. And slowly the demand for its products began to drop.

But Patanjali has been trying to shake things up a bit to turn things around for the better. And here comes another spanner in the works in the form of this new Supreme Court ban.

How could it affect the company? Click here to read our Markets edition about it.

Meanwhile, here’s a recap of what we wrote over the week.

KYC is getting a makeover. But why?

The government wants to simplify KYC (Know Your Customer) norms for businesses. And it may actually have a solid reason.

In the early 2000s, account opening procedures weren’t too stringent. You just had to walk into a bank to open an account. But this was as good as an open invitation to terrorism financing and money laundering. And this prompted the Reserve Bank of India (RBI) to introduce KYC regulations.

Cut to today, stringent KYC rules have become essential for financial transactions, but they've also become a pain point for businesses, especially the ones that have gone digital.

Why? You’ll have to read Monday’s story to find out.

An explainer on the Household Consumption Expenditure Survey

In 1857, a German statistician named Ernst Engel came up with a theory. In simple terms, it said that the percentage of income spent on food decreases as family income increases, although the actual amount increases. And this came to be called the Engel’s Law.

And that’s pretty much what the Monthly Per Capita Consumption Expenditure (MPCE) survey for 2022-23 reveals.

Nearly a decade ago rural households allocated nearly 53% of their expenses to food. That includes cereals, veggies, fruits, milk, eggs, etc. But that has now fallen to below 50%. Urban India’s food spending has dipped too. And this may actually be a good thing, especially for the poor since it implies that they can allocate more of their income towards improving their access to health and education, and try to break out of the poverty cycle.

But why is this happening? Find out in Tuesday’s story here.

A new regulator for nutraceuticals?

Indians are head over heels in love with nutraceuticals. Back in 2020 the market was valued at about $4 billion. But it could more than quadruple by 2025!

And this burgeoning growth might actually have some solid reasons.

People have little time to focus on having a balanced diet everyday. And the food we eat today may not be as nutritious as it used to be a few decades ago. So turning to nutraceuticals to make up for lost vitamins and minerals may be a natural thing. Not just that. The pandemic has also nudged many of us to go down the preventive healthcare route.

The end result may be that we’re popping pills without really understanding if they’re useful for our body. And you can imagine that the government isn’t happy with this casual nutraceutical consumption. So it wants to bring it under the control of India’s drug regulator ― the CDSCO.

But how easy will that be? Read Wednesday’s story to find out.

A ULIP in Mutual Fund clothing!

You walk into the bank to get some stuff sorted with your accounts. And your relationship manager plonks a leaflet in front of you. It says,

Launching, PNB MetLife Small Cap Fund
₹10,000 invested per month since 2004 in NIFTY Smallcap 100 Index
₹1.1 crores now
Avail PNB MetLife Small Cap Fund @ ₹10 NAV
From 19th Feb — 29th Feb’ 2024

It looks like a mutual fund. But it’s not. It’s actually something called a Unit Linked Insurance Plan (ULIP) in mutual fund clothing. Just think of it like this. If you invest ₹100 in this plan, ₹10 goes towards the insurance component and related charges. While the rest gets invested in the stock market or some government or company bonds depending on what you choose. And to manage your money these funds charge an annual fee too.

But insurance companies don’t tell you that. And you can’t even invest separately in the fund that’s linked to the ULIP unless you buy the ULIP itself. And it’s not just PNB MetLife. A lot of other insurance companies are launching such plans and resorting to such advertising.

But why don’t they just tell you that it’s a ULIP? Read Thursday’s story to find out.

Will paints be Birla's Magnum Opus?

Asian Paints is India’s favourite paint brand.

It started out from a garage in the early 1940s with just a few basic colours. But cut to today, it dominates the Indian market. It has over a 50% market share and a catalogue of 2,200 paint colours. If you’d invested ₹10,000 in its stock when it was listed over two decades ago, you'd be sitting on ₹12,75,000 today. A neat 12,750% gains!

But on 22nd February something sent shivers down the spine of Asian Paints’ shareholders — the stock slid over 7% since then. Grasim Industries, of the Aditya Birla Group, launched its new decorative paints brand “Birla Opus”.

So Asian paints may now have a huge competitor. And analysts believe that it’s all set to disrupt the paints industry.

But can it? Dive into Friday’s story to find out.

That's it from us this week. Also, the final edition of Money Milestones, our limited edition personal finance newsletter is going live tomorrow. We'll take about FIRE (Financial Independence, Retire Early) and if it's for everyone. So don't forget to tune in.

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