The Signal: The Week Highlights

1. Bank Credit To Small Businesses Jumps 6.4% in January; MSE’s Share Dips Marginally

YoY growth in gross bank credit deployment to MSEs continued to be above the 6% mark in Jan 21. Credit Deployed by banks stood at INR 11.48 lakh crore, up 6.4% from INR 10.79 lakh over year ago. Growth remained till Dec 20 in FY21 even as it improved from Nov 20 and Oct 20.

ECLGS and CGSSD are supported by monetary and regulatory measures by RBI via interest rate cuts, high liquidity, moratorium, asset classification standstill, loan restructuring and CRR exemptions on credit disbursed. The measures will ameliorate stress and open new opportunities.

2. Indian Government Bonds On FTSE Radar For Possible Inclusion

The Indian government securities could be included in the FTSE Russel Emerging Markets Government Bond Index (EMGBI)

This would encourage the entry of fresh funds at a time when the government is borrowing huge sums to bridge the fiscal deficit. The inclusion may also help deepen the illiquid secondary market.

3. Inflation Target Stays At 2-6% For Next Five Years.

The Centre kept inflation target of the monetary policy framework unchanged at 2-6 percent for the next five years.

The 4 percent target for inflation with upper tolerance limit of 6 percent and lower limit of 2 percent, measured in terms of Consumer Price Index CPI based inflation was set by government in consultation with RBI. The inflation target helps Monetary Policy Committee of RBI to take key decisions to increase or decrease rates.

4. Current Account Deficit Slips Into Deficit

After maintaining in for surplus for three quarters, India’s current account balance recorded a deficit of $1.7 billion in December quarter (Q3FY21) as domestic demand recovered due to festive season.

The deficit is further expected to increase in Q4FY21, with Covid-19 vaccine rollout improving sentiment and pushing up commodity prices, as well as resurgence in domestic demand for gold.

5. GST Mop-up Hits Record INR 1.2 Trillion

The Goods and Services Tax revenue touched an all time high in March, with the government collecting nearly INR 1.24 trillion. A steep increasing trend over this period is a clear indicator of rapid economic recovery after the pandemic.

This increase in GST revenue can be attributed to stringent measures to monitor fake billing and deep data analytics. It is also expected that tax collection is likely to exceed the RE for fiscal year, resulting in a fiscal deficit lower than 9.5% of GDP estimated for 2020-21 (FY21).