India Macro Weekly: Corporates healthier, but industry trends discouraging

For the week ended July 2, 2016:
  • There was some good news on the data front as corporate sales turned the corner, after declining over the past year. RBI’s compilation of Q4 2015-16 results of companies across sectors showed a 2.3% year on year (yoy) sales improvement, along with continued decline in expenditure and further acceleration in net profits’ growth.
  • The segmental highlight of the sales turnaround was the manufacturing sector. However, other data releases on industry give less reason for optimism. For one, core sector growth plunged, even though some base effect is at place. Further, credit to industry slowed down significantly, dragging down total credit growth.  
  • On the policy front, the cabinet approved the recommendations of the 7th pay commission, which accounts for 5.8% of the total budget estimates for expenditure for 2016-17. This could marginally increase consumption, but will likely have no impact on the fiscal deficit-GDP ratio.  
  • The RBI’s technical advisory committee voted more in favour of status quo on policy interest rates than not for the June meeting, citing inflationary concerns.

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