India Macro Weekly: External sector deteriorates



For the week ending March 25, 2017:
  • The Balance of Payments report for Q3, 2016-17 showed a sharp upturn in current account deficit (CAD) to USD 7.9bn, the highest in five quarters. While the services surplus showed an improvement over the previous quarter, it was not enough to counter the drag on account of the goods deficit, which expanded, at least in part, due to the spike in oil prices in the winter months.  
  • On the investments front, both net foreign direct investment and net portfolio investment figures fell in Q3, 2016-17, partly as an impact of demonetisation and partly on account of seasonal slackness in investments.  
  • Monthly numbers on external borrowings revealed a slack in external borrowings to USD 1bn in February 2017, to a three month low, reversing the sharp spike seen during the previous month.
  • Details on Q3, 2016-17 consolidated results for private sector non-financial companies revealed that while the IT sector led sales growth, it was manufacturing that continued to show the most robust trends in net profits. The big underperformer continued to be the non-IT services sector, which showed both a decline in sales as well as net losses.
  • The weekly Macro Meter rating continued to be unchanged, as the only updated data point – external borrowings – did not impact the overall trend.
  • On the asset markets front, crude prices continued to fall, while the rupee appreciated further.

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