The Signal: The Week Highlights

1. India’s PMI Number Resorts To Manufacturing Its Own Health

India’s factory activity grew for 2nd consecutive month, expanding at its fastest pace since Jan 2012. PMI stood at 56.8, vs 52 in August, marking the 3rd quickest surge in the survey’s history. Recovery readings are welcoming news for India, which is to mark its 1st full-year contraction since 1979!

As Covid 19 continues to press pain, Indian industries look to manufacturing a pain suppressant. Contrast in avg. PMI for Q2FY21 to Q1FY21, saw activity increase to 51.6 from 35.1. While uncertainty about the COVID-19 pandemic remains, producers can at least for now enjoy the recovery. Next month and after may tell a different story, but as open 4.0 happens, Manufacturing Sector is gearing up for opening 5.0. 

2. The Virus Gets Viral – The Spending Gets Stronger

The FinMin strikes the chord between saving & spending, creating headroom for Relief Package 2.0. Expanding few line-items, but keeping Q3 trend intact, total budgetary savings will amount to Rs.4 Lk Cr. Of which 3 LK Cr. Is used and 1 Lk Cr. Is ammo for next set of announcements.

Spending less is spending more’ – an anomaly aptly defining Covid economies. Realizing the expedition in normalizing the ‘new-normal’, intra-nations and inter-nations look for collective effort in curtailing virus’ spread by supportive policy actions, and 2nd wave of relief packages. India’s old saving habit plays key here as money saved today can be wealth generated tomorrow. India, today, is being fiscally savvy by wearing a fiscal defict.

3. A Depressed GST Mop-up to Mop States Woes

In a 1st since Covid lockdown, GST collection grew in Sept’20 after 6 month of contraction, on restocking ahead of festive season. Mop-up at >Rs1 Tn for 7th straight month even post June unlocking signals margin for growth as GST collection crossed Rs1 Tn in 7 months of the previous fiscal year.

Covid has broken the long-standing economic shackles, in its attempt to closing the economy down for nearly 75% of this calendar year. As GST collections stand as true reflections of the same, the rate of adopting to the new normal will be key in boosting GST to pre-covid levels. Opening 4.0 Is sure to welcome better times, as proof lies in correction from April’s abysmal GST collection, which nosedived 72% to record low levels. 

4. Covid 19 – The Virus Which Shrunk The Economy But Widened Debts

Gap between income and expenses at Rs 8.70 lk cr. In 1st 5 months for FY21, has deficit at 109% of budget vs 79% in year-ago period. Imposing strictest lockdown, revenue fell to 18% (By 1/4th in-line with GDP) of budget vs 31% in year-ago period. Current muted expenses can lift economy in future. 

Covid 19 has the country’s accounts all out of balance. The country is racking up debt at startling rates to refurbish the current broken economy. However, form troughs come peaks, although the journey uphill is 1 tough battle. As we chant Buzz lightyear’s golden words of “Onwards and Upwards”, we must remember the merit debt financing brings! So, if the cards play out right, the current debt overhang can be a long-term blessing in disguise! 

5. Foreign Players New Favorite Hindi Word – Reliance

Reliance Industries crossed the USD 200 Bn value earlier last month on euphoria of absorbing yesterday’s future retail for tomorrow’s Reliance Retail. Early believers in Jio continue to show faith as they pour in USD 2 Bn+ in reliance retail venture. Continuing to rake in believers, India’s biggest company (2x the size of 2nd biggest company – TCS) has truly become a household name. With Gas, Food and Phone, it can by itself carry India into post-covid era. 

FIIs find their favorite Hindi word in Reliance, as its fervor from Jio expands into retail. Onboarding domestic infrastructure and foreign money is the best strategy in any Indian business playbook. The Veteran in Reliance carries its legacy from yesterdays legend to tomorrows leader