India Macro Weekly: Industrial growth strong, inflation softens




For the fortnight ending February 24, 2018:
  • Two inflation data points were released during the past fortnight – CPI and WPI. Both components showed a comeoff in inflation. While CPI inflation fell to 5.07% in January, 2018 after hitting a 16 month high during the previous month (5.21%), it still remained stronger than the levels seen during January, 2017.  
  • WPI inflation, on the other hand, not just fell to sub-3% levels of 2.84% in January, 2018, hitting a 5 month low, it was also lower than the level seen during the same month of the previous year.
  • At 7.1%, IIP growth continued to remain strong for the second month running in December 2017, even as it softened from the previous month’s high. Manufacturing, capital goods and consumer goods drove production, while all other components showed middling growth, at best. 
  • The foreign trade report showed strong growth in imports, exports’ growth stayed positive too, but the trade deficit continues to rise.
  • Cumulative FDI inflows came in at USD 48.2bn for the April-December, 2017 period, showing virtually no change from the corresponding period of the previous year. This, is on account of a significant decline in inflows during Q3, 2017-18 compared to the previous quarter. 

India Macro Weekly: WPI inflation softens, industrial outlook good



For the week ending January 20, 2018:
  • Inflation based on the Wholesale Price Index (WPI) was at 3.6%, a softening to a three month low in December, 2017, but still higher than the levels seen during the corresponding month of the previous year.
  • Merchandise trade growth remained robust, as both exports and imports increased at double digit rates in December, 2017 of 12.4% and 21.1% respectively. However, a rise in trade deficit to the highest in three years of USD 14.9bn is an indicator to watch out for in the coming months.
  • Outlook on industrial activity looks good, as the RBI’s Business Expectations Index showed improvement in both the assessment of the current situation and expectations for the future as per a survey of manufacturing firms. The expectations for Q4, 2017-18 are particularly good, as the index has reached its highest value ever of 115.9.
  • Economic activity on the ground also showed healthy trends as the foreign tourists’ report showed continued double digit growth in both foreign tourist arrivals and foreign exchange earnings in December, 2017.
  • On the asset markets’ front, crude prices continued to stay elevated above USD 60/bbl, while India’s equity markets continued to rise. The Sensex weekly average crossed 35k, while the Nifty 50 moved towards an 11k average. 10y bond yields came close to 7.5%.

India Macro Weekly: IIP growth accelerates, CPI inflation high


For the week ending January 13, 2018:
  • Growth in the Index of Industrial Production (IIP) picked up unexpectedly to 8.4% in November, 2017. Manufacturing led IIP growth, as did infrastructure/construction goods and consumer goods.
  • Consolidated corporate results for Q2, 2017-18 also showed robust sales performance, though net profits continued to languish. Containment in expenditure growth was achieved on account of softening in raw material costs. Manufacturing sales were particularly buoyant, while IT led net profits’ growth.
  • The price front was disappointing as inflation based on the Consumer Price Index (CPI) rose further to a 16 month high of 5.2% and core inflation crossed 5% as well, suggesting a hardening in underlying inflationary pressures. With global fuel prices staying elevated above USD 60/bbl, inflation is expected to continue to remain relatively high. 
  • Asset price inflation also continues in equity markets, as both the Sensex and the Nifty 50 continued to rise. The former saw an average level cross 34,000 during the week, while the level rose above 10, 500 for the latter. 
  • Reciprocally, bond markets continued to show weakness as the 10 year government bond yield rose for the seventh consecutive week, staying well over 7%.
  • The USD/INR exchange rate depreciated, but remained at sub INR 64 levels.

India Macro Weekly: Growth forecasts lower, house price inflation subsides


For the three weeks up to January 6, 2018: 
  • The Central Statistical Organisation (CSO) made a disappointing growth forecast of 6.1% for Gross Value Added (GVA) in 2017-18 as per its first advance estimates, on continued slowing in industrial growth and  despite a pickup in services growth. On the expenditure side, consumption spending is expected to soften, while investments are expected to improve from the previous year. 
  • Inflation based on the House Price Index (HPI) declined further to 7.3% in Q2, 2017-18, the slowest in five quarters, though on a trend basis, prices still remain robust. Tier 2 cities are witnessing the fastest increases in HPI, while the metros still largely lead in terms of the absolute levels.
  • Credit growth continued to inch up in November 2017, indicating that the upturn witnessed during the previous month was not a one off occurrence. At 8.3%, credit growth touched a 14 month high. 
  • The core sector also showed relatively strong growth of 6.8% in November 2017, which is partly on account of a favourable base effect, but also reflects continued improvement in production levels.  
  • External borrowings also came in strong at USD 3bn in November 2017, though they corrected from the highs seen during the previous month.

India Macro Weekly: Economic health improves, international flows strong


For the week ending December 2, 2017:
  • Growth in Gross Value Added (GVA) improved to 6.1% in Q2, 2017-18, a three quarter high, on account on some pick up in industrial growth. Agriculture and services, however, showed a softening. 
  • Growth in Gross Domestic Product (GDP) commensurately improved to 6.3%, on account of some improvement in investment growth as well as a softening in trade deficit, but despite a cooling off in consumption growth.
  • Credit growth rose to a 7 month high of 5.9% for October, 2017 as the drag from industrial credit lessened and growth in credit to services stabilised. Data for the fortnight ending November 10 shows further pickup in credit growth to 8.6%.  
  • Growth in the Index of Core Industries corrected from the previous month, but still stayed relatively healthy at 4.7% in October 2017, despite a strong base.
  • On the external sector front, FDI inflows in the first half of 2017-18 came in strong, rising by 63.4%.  
  • External borrowings came in at their highest since February 2014.