The Signal (weekly highlights)

1. India Ratings projects economy to grow at 7.6% in FY23

The agency said after a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in 2022-23 is expected to be 9.1 per cent higher than that in 2019-20

It said if the impact of Omicron on the fourth quarter growth turns out to be greater than its estimate, then there could be some upside to 2022-23 growth originating from the base effect.

2. FDI flows to India slip 26 per cent in 2021

Foreign Direct Investment (FDI) flows to India in 2021 were 26 per cent lower, mainly because large M&A deals recorded in 2020 were not repeated. That said, global foreign direct investment flows showed a strong rebound in 2021, growing 77 per cent to an estimated USD 1.65 trillion, from USD 929 billion in 2020, surpassing their pre-COVID-19 level.

FDI flows to South Asia decreased 24 per cent to USD 54 billion in 2021 from USD 71 billion in 2020.FDI in the United States – the largest host economy – increased by 114 per cent to USD 323 billion

3. UK inflation hits near 30-year high, pressuring BoE and households

Inflation in Britain rose faster than expected to a near 30-year high in December, intensifying a squeeze on living standards and putting pressure on the Bank of England to raise interest rates again.

The annual rate of consumer price inflation increased to 5.4% from November’s 5.1%, the highest since March 1992. Two-year British government bond yields, which are sensitive to financial markets’ interest rate expectations, came within a whisker of their highest level since 2011.

4. Borrowing cost for states rises on increase in G-Sec yield

According to the Reserve Bank of India (RBI), the 10-year weighted average borrowing cost for states was at 7.24% on January 18,  higher than 7.14% on January 11. With this, the spread between 10-year government securities and SDLs has widened to more than 61 basis points as against the spread of 58 basis points a week ago.

Global factors have raised an expectation among market participants that the central bank will soon hike interest rates. The US Federal Reserve has already announced a possible rate hike in this calendar year and tapering of its bond purchases

5. EPFO adds 1.3 million subscribers in November 2021, clocks 38% YoY rise

Retirement fund body EPFO added 13.95 lakh subscribers on a net basis in November 2021, an increase of nearly 38 per cent compared to the year-ago period, according to the latest payroll data.

An industry-wise payroll data showed that ‘expert services’ category — consisting of manpower agencies, private security agencies and small contractors, among others — constituted 41.48 per cent of the total subscriber additions in November. Further, there is a trend of growing net payroll additions in industries like building and construction industry, textiles, schools, restaurants and cement.