India Macro Weekly: FDI inflows remain strong, public debt in check

For the week ended February 25, 2017:
  • It was a light past data week, with  data for FDI inflows and public debt being the only two significant  indicator releases. FDI inflows continued to remain strong, with  April-December inflows at USD 48bn, an increase of almost 18% from the corresponding period of the previous year. In Q3, 2016-17, total FDI inflows stood at USD 19bn, the fastest increase in the financial year so far. 
  • Numbers for public debt showed small increment for the period up to December 2016, from the period up to September 2016. Total public debt now stands at INR 61.8trn, majority of which is held in internal debt, while the remaining is in external debt. While no external debt has been raised in the last quarter, dated securities as well as treasury bill issuances have taken place, which come under internal debt.
  • The minutes for RBI’s last Monetary Policy Committee meeting reveal a unanimous concern on the durability of softening in consumer price inflation, considering strong core inflation, rising WPI inflation as well as hardening of global commodity prices.
  • The Macro Meter rating remained unchanged at 4.5 out of 5 in the past week, as FDI inflows, the only data point released, which also gets covered under it, showed an absolute increase from the corresponding period of the previous year.  As a result, the overall trend in external sector investments remained unchanged.
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  1. Their email said this note:• Indian companies’ are still diffident picking up domestic credit, though external borrowings strengthened, as per January 2017 numbers. Numbers for sectoral deployment of domestic credit showed that industry borrowings are still very weak, while personal loans continue to be robust. On the external borrowings front, January numbers came in at USD 1.8bn, which is the third highest level in 2016-17 so far. Is it a good trend?

    1. So far we have witnessed weakness in both domestic credit offtake and external borrowings. It is only during the past month that there has been a divergence in trend. Let us wait and watch whether it continues, and importantly, consider which companies are taking on external loans. If companies are willing to borrow from abroad, clearly borrowing appetite is back, but if that does not translate into domestic borrowings as well, clearly that is more a function of the domestic economic/banking environment than the demand for loans.