The Signal: The Week Highlights

1. Relief Package 2.0 Serves As Feed For India’s Next Need

RBI’s intervention and Government’s prompt and reactionary actions have helped turn things around as is reflected in India expected to become the fastest growing economy starting FY22. Broadening Relief Package to ~15% of GDP by expanding PLI scheme can expedite New normal in no time. 

Coming out of Covid trouble bubble is looking tough in address and attempts. India’s growth path in shifting from Co-vid to Go-vid is lined with multi-lateral challenges, which carry direct & indirect effects. The country needs to be quick in adapting and improvising on current challenges to convert them into future opportunities for growth. 

2. Inflation Increases With Intensity

India’s retail inflation touched its highest figures in last 6 years, coming in at 7.61%, thus staying above RBI tolerance level for 7th consecutive month. Rise in CPI is mainly credited to rise in vegetable prices, which may moderate courtesy of Govt.’s farmer-incentives and healthy monsoon. 

As virus continues building blocks of uncertainty, we expect supply challenges to sustain over the short-term. RBI likely to vouch for liquidity-infusible methods via outside-the-box policy actions to curb prevalent systemic challenge. Likely to remain on pause in December meet.

3. In Shifting From Co-vid To Go-vid, IIP Stands For “India’s Industry (Is) Positive”

IIP grew by 0.2% in September’20 vs -7.4% in August’20 and -4.6% in September’19. Even though IIP turned positive for 1st time since pandemic hit the country, it recorded contraction of -21.1% during April -September 2020 vs +1.3% growth during same period last year

The unlocking of economies, and festive season drove manufacturing and demand for primary goods upwards, thus boosting production numbers.Revival of demand and consumption can be hinted by growth seen in consumer durables, non-durables and electricity element. GDP revival on the cards, reducing Covid count, and Amanirbhar package, can expedite recovery process and provide much needed boost to manufacturing.

4. The GDP train Is Back On Track

Moody’s raised its forecast for India’s growth to -8.9% for CY202 from -9.6% and to 8.6% from 8.1% earlier for FY22. IMF followed suit too by reducing its estimates from earlier -10.3% to -9.5%. Improvement in estimates were credited to Govt. and it’s banker (RBI) policies and packages in kickstarting the economy. All economic indicators are pointing upwards with relative strength in sustainability in the coming months, as India looks to what can be from what was.

The rage of Virus and Volatilities in international markets coupled with India’s 2020 tactics to tackle 2020 issues, is bearing fruit as individuals and institutions acknowledge India’s growth trajectory. Shifting from Covid-19 to Go-vid 21, has growth drivers putting the pedal to the metal. Revision in estimates show rejuvenation of their belief in India today and its economic aspirations in the years to come.

5. State’s Infrastructure Interest To Overwhelm Their Fiscal Fodder

The budgeted 31% increase in state spending is met by contracted -22% H1FYTD spending, courtesy of Covid-19 induced lock-downs. The vitality if public spending is seen in higher growth multiplier they carry and its potential in ailing the failing private investment conundrum. Even after liberal transfers by Centre from divisible tax pool, tax revenues of 14 states declined by more than a quarter during April-September. 

Current state of things don’t spell too bright for sates. However, as strength is rejuvenated in economic indicators with govt. policies aligned to help India finds its footing again, states can dwell on expediting spending courtesy of the expanded budget”.