Indian Economy : News,Discussions & Updates

India Ratings cuts FY22 GDP forecast to 9.4% from 9.6%​

India Ratings on August 19 cut its FY22 gross domestic product growth estimate for India to 9.4 percent from 9.6 percent, saying while there has been a strong recovery after the second Covid-19 wave, the aim of vaccinating the entire adult population by year-end would not be met.

"Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31, 2021," Principal Economist Sunil Kumar Sinha said on August 19.

In its previous forecast in June, the ratings agency had said the recovery would depend on the progress of the vaccination drive. "If India is able to vaccinate its entire adult population by 31 December 2021, then the GDP growth is expected to come in at 9.6 percent in 2021-22, otherwise it may slip to 9.1 percent," it had said.

The agency’s estimate suggests that 5.2 million daily doses would have to be administered from August 18, 2021 to vaccinate more than 88 percent of the adult population by year-end as well as to administer single doses to the rest by March 31, 2021.

"Accordingly, we have revised our GDP growth for FY22 to 9.4 percent because with the ebbing of the second wave, several high-frequency indicators are showing a faster rebound than expected, kharif sowing is indicating a significant pick-up with the revival of southwest monsoon and exports volume and growth showed a surprise turnaround," Sinha said.
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India Ratings said that Private Final Consumption Expenditure (PFCE) growth, after a gap of three consecutive quarters, turned positive in January-March quarter and was expected to maintain the momentum.

"But the second wave hit the country in April and May 2021 with such speed and scale that once again there has been a push back. India Ratings thus expects PFCE growth to come in at 10.4 percent in FY22 compared with 10.8 percent projected earlier," it said.

Sinha said that the Indian economy had begun to witness a consumption slowdown even before the COVID-19 pandemic hit it. The lockdown caused by COVID-19 in FY21 only aggravated it as jobs, livelihoods and household budget were severely Indented.

"Unlike the first wave, which was largely an urban phenomenon, the second wave spread to rural areas as well. Even if the agricultural output/income remains intact in view of the progress of monsoon so far, rural households are unlikely to loosen their purse strings in view of a likely rise in health expenditure as also the uncertainty/insecurity associated with the likely future waves of COVID-19," he said.
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India Ratings cuts FY22 GDP forecast to 9.4% from 9.6%

Going by the pace of vaccination, it is now almost certain that India will not be able to vaccinate its entire adult population by December 31, 2021, Principal Economist Sunil Kumar Sinha has said
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jetray said:
we should be very happy that western company has full faith in us that we can manufacture more than nuts & bolts to sheet metal. mahindra should manufacture this component for next 100 years and help boeing save a lot of cost.
Click to expand...

which boeing 737? Is it the max one?
 
jetray said:
No idea.
But the decision is quite ominous, seems we have been sold out pretty cheap.

www.reuters.com

India allows Boeing 737 MAX planes to fly ending an over 2-year ban

India's air safety regulator said on Thursday it had cleared Boeing Co's 737 MAX aircraft to fly with immediate effect, ending its nearly two-and-a-half-years of regulatory grounding in a key travel market for the planemaker.
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Click to expand...

The Boeing has lost it's reputation for ever. This is not the first time it has happened. But some how they manage to bribe and get the approval.

India in return should have asked for turbine technology.
 

Why India’s forex reserves saw a spike, and what to expect in the near future​

Ahead of the latest policy meeting of the United States Federal Reserve on July 28, Indian equity markets corrected for three consecutive sessions fearing negative developments around tapering of the US quantitative easing (QE) programme. However, despite inflation in the US touching a 13-year high at 5.4 percent, the meeting concluded without any exceptionally hawkish comments from the Fed.

Consequently, Nifty 50 proceeded to rally and scale one lifetime high after another. Considering what happened in the 2013 taper tantrum (heavy foreign outflows leading to rupee depreciation, costly imports, and shrunk margins for most corporates), such a reaction of the stock market was not irrational.


Here we will discuss the multi-faceted impact of foreign inflows on the Indian economy. We shall extend the logic to build expectations around what the future may hold as we approach the next QE tapering.

In the wake of the pandemic, countries around the world pulled out all the stops of monetary and fiscal support to help boost flailing economies. As a result, economies were flush with liquidity, some of which made it to emerging markets in search of higher yields.

India was one of the recipient economies, which helped shore up its foreign exchange reserves by a whopping 33 percent from the pre-pandemic levels (~$450 billion) to the current levels of $600+ billion. If we were to look closely at this spike in India’s forex reserves, we would find that most of the accumulation happened between April 2020 and November 2020.

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indian-forex-reserve


Any country’s foreign exchange reserves are built-up (or eroded) as a result of net foreign direct investments (FDI), foreign portfolio investments (FPI), exports, and remittances. Drilling down into the reasons behind the surge in India’s forex reserves, we looked at each of these factors during this ‘spike period’ (April to November 2020) in comparison with the longer-term trend.

Except remittances, all factors contributed towards the build-up in forex reserves by witnessing significantly above-average figures during the spike period (highlighted by the blue-shaded box).

FPI-inflow


FDI-inflow


net-exports


remittances


The FPIs thronged in at record-high levels during FY21. Specifically, in equities, FY21 saw $37 billion FPI inflows, nearly $20 billion of which came in the October to December quarter. These FPI inflows can be attributed to rising yield spreads between the United States and India, as the US yields dropped to record-lows.

At the end of 2019, the spread between the US and Indian 10-year bond yields was 4.66 percent which jumped up sharply to 5.74 percent by April 2020. This explains why mere talks of the US yields picking up is enough to have the Indian markets in jitters.

If the Indian economy is not able to sustain the green shoots of recovery seen lately, yields in India will not be able to catch up as the US Fed starts pulling back on its bond purchase programme. In such a scenario, spreads will narrow down and the FPIs will start pulling out. This is why the uptick in high-frequency growth indicators for India in July along with the US Fed’s continued dovish stance was met with such enthusiasm by the Indian stock markets.

Rising-Yield-Spreads-had-brought-in-FII-Flows


Coming to FDI, there were a couple of sharp spikes during the period which saw the build-up in forex reserves. These spikes are partly explained by deals of foreign investors with Reliance Industries Limited. However, there is another arguably more ‘sticky’ reason behind the spikes — government-introduced reforms along FDI policy, investment facilitation, and ease of doing business. If similar pro-business reforms keep coming in, FDI flows would also sustain, and possibly pick up further.

Net exports also saw an above-average movement during the months between April 2020 and November 2020 as India’s trade balance turned positive for the first time in decades. While this helped further grow the forex reserves, it was more a cause for concern than a reason to celebrate. As the COVID-19 first wave touched India and a nationwide lockdown was implemented towards the end of March 2020, demand nosedived. As a result, both, exports and imports fell; just that imports fell more.

As the economy moves further along the path of recovery, demand will pick up, and so will India’s import bill. Of course, the impact on trade deficit would be cushioned if gold prices continue to cool off, and crude prices are reigned in further as a consequence of the recent OPEC+ pact.

All in all, the Indian economy is in a seemingly better state now than how it was during the 2013 taper tantrum — forex reserves are at double the 2013 level, and Current Account Deficit for FY22-23 is forecasted at ~1.5 percent of GDP compared to 4.8 percent of GDP in 2013. But, a few more pieces need to fall in place so as to ensure that India is well-prepared for the impending QE tapering.

The uptick in business activity needs to sustain, and demand needs to catch up as the vaccination drive picks up. At the same time, the government should continue to support the economy through more business-friendly reforms. This will help the economy recover, thus allowing the Reserve Bank of India to raise rates when the time comes and, thereby, maintain spreads with US yields.

Meanwhile, the continuing foreign inflows would ensure that India’s forex reserves stay beefed up to be able to support the rupee if the need arises.
www.moneycontrol.com

Why India’s forex reserves saw a spike, and what to expect in the near future

The Indian economy is in a seemingly better state now than how it was during the 2013 taper tantrum. But, a few more pieces need to fall in place so as to ensure that India is well-prepared for the impending quantitative easing tapering
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India's July core sector output grows 9.4%​

India's output of eight core industries grew 9.4 per cent year-on-year (YoY) in July as all sectors except crude oil registered an increase in output. On a month-on-month basis, output rose 5.4 per cent in July after growing 1.5 per cent in June.

The output of core sectors had registered a 7.6 per cent decline in July 2020 due to COVID-19 related restrictions.

The cement sector registered the highest YoY growth of 21.8 per cent in July 2021, followed by natural gas at 18.9 per cent and coal at 18.7 per cent. Steel production grew 9.3 per cent, while electricity generation rose 9 per cent during the month, government data showed.

Petroleum refinery production grew 6.7 per cent in July, while fertiliser production increased 0.5 per cent. Meanwhile, crude oil production saw a 3.2 per cent decline in output.

The output of core industries grew 21.2 per cent during the April-July period of 2021-22 as against a decline of 19.8 per cent during the same period a year ago.

The onset of the coronavirus pandemic and the nationwide lockdown announced by the government in March last year to curb the spread of infections had hit industrial production during the April-July period of 2020.

The government also revised the final growth rate of core sector output for April 2021 to 62.6 per cent from its provisional level of 56.1 per cent.

The eight core industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
www.businesstoday.in

India's July core sector output grows 9.4%

The output of core industries grew 21.2 per cent during April-July period of 2021-22 as against a decline of 19.8 per cent during the same period a year ago.
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Prosus doubles down on India with $4.7 bln deal for BillDesk​

AMSTERDAM, Aug 31 (Reuters) - Prosus NV (PRX.AS) doubled down on its investment in India on Tuesday with a $4.7 billion deal for payments platform BillDesk, making it one of the biggest players in the country's fast-growing fintech sector.

Prosus, Europe's answer to SoftBank and its Vision Fund, said BillDesk will complement its own PayU business, which operates in India, Latin America and Europe.

India has been a major focus for Netherlands-based Prosus but the BillDesk deal is its biggest investment there to date.

"This is really a transformative transaction for PayU and its position as one of the leading payment and fintech providers in India and actually in the world," Prosus CEO Bob van Dijk said on a media call.

Prosus, which was spun out of Naspers (NPNJn.J) of South Africa in 2019, owns stakes in consumer internet companies in online marketplaces, educational software, food delivery and fintech. It operates some of the companies.

Best known for its 28.9% stake in Tencent (0700.HK) of China, Prosus is betting that its long-term investments can fill a yawning valuation gap and give it the same name recognition as one of the world's most aggressive technology investors.

The rapid growth of the payments industry worldwide has been helped by rising demand during the pandemic.

PayU processed $55 billion in payments in the year ended March 31, 2021, a 51% increase on the previous year.

The companies did not give a comparative figure for BillDesk, but Prosus said it was more than $90 billion. BillDesk made a net profit of 2.71 billion Indian rupees ($37.05 million) for the year ended March 31 2021, suggesting an acquisition price of more than 100 times earnings.

PayU CEO Laurent le Moal defended the price tag, arguing it makes sense given the rapid growth in BillDesk's market, its leadership position, its current profit margins and the potential for the combined companies to enter adjacent markets.

The deal to buy BillDesk, which was founded in 2000, is subject to regulatory approvals, including by the Competition Commission of India.

Prosus said Tuesday's acquisition brings the total it had invested in the Indian market to more than $10 billion.

In India, it is a major investor in Swiggy, one of two food delivery platforms fighting for dominance.

($1 = 73.1500 Indian rupees)
www.reuters.com

Prosus doubles down on India with $4.7 bln deal for BillDesk

Prosus NV doubled down on its investment in India on Tuesday with a $4.7 billion deal for payments platform BillDesk, making it one of the biggest players in the country's fast-growing fintech sector.
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Q1 GDP: India's economy grew 20.1% in April-June quarter; manufacturing sector the bright spot​

India's real gross domestic product (GDP) grew by 20.1 percent in the April-June quarter of the fiscal year 2021-22, a record quarterly print on the back of a low base last year, data released on August 31 showed.

GDP contracted by 24.4 percent in the April-June quarter in FY2021 as the country went into a lockdown to curb the spread of the coronavirus. It was the steepest quarterly contraction in the economy in independent India's history.

The GDP print of 20.1 is at par with consensus estimates. As per a poll of 41 economists by news agency Reuters, India’s GDP was expected to rise 20 percent in April-June 2021.

The Reserve Bank of India had projected Q1 GDP to grow by 21.4 percent.

"The numbers are a lot better than what we had expected," said Probab Sen, former Chief Statistician and head of a standing committee tasked with overhauling India's statistical data collection.

Data released by the National Statistical Office on August 31 showed that the real gross value added for Q1 rose by 18.8 percent. The biggest year-on-year rise was in the construction sector at 68.3 percent. This sector saw the steepest fall in the same period last year at 49.5 percent as construction activity across the country had come to a halt.

Second wave impact blunted by manufacturing rise

Manufacturing, which fell 36 percent in April-June last year, bounced back to grow by 49.6 percent.

Trade, hotels, transport, communication and services related to broadcasting, which tanked 48.1 percent in April-June last year, grew by 34.3 percent in Q1FY22, indicating that touch services sectors like hotels, hospitality and tourism continue to be affected by the Covid-19 pandemic and will take time to recover.

Agriculture, the only sector which showed growth in Q1FY21 at 3.5 percent, grew by 4.5 percent in the first quarter of FY 22.

Though better, sectoral and headline numbers indicate that the recovery has not been as sharp as the contraction in the previous year, mostly due to the furious second COVID wave that peaked in May.

The starkest example is the household consumption, typified by Private Final Consumption Expenditure. As a rate of GDP, it was 55.1 percent compared with 55.4 percent even in the lockdown quarter. It remained nearly the same in a quarter with nationwide lockdown compared to a quarter in which there was economic activity.

However, Government Final Consumption Expenditure, as a rate of GDP, fell to 13 percent from 16.4 percent in the same period last year.

The Modi government's infrastructure and public investment push showed in the Gross Fixed Capital Formation figures, which came at 31.6 percent against 24.4 percent in the same period of the previous fiscal.
www.moneycontrol.com

Q1 GDP: India's economy grew 20.1 percent in April-June quarter; manufacturing sector the bright spot

The GDP print of 20.1 percent is at par with consensus estimates. As per a poll of 41 economists by news agency Reuters, India’s GDP was expected to rise 20 percent in April-June 2021
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