India Macro Weekly: Govt. finances healthy, core activity strengthens

For the week ending November 4, 2017:
  • Central government finances showed a largely healthy picture. Receipts growth remains relatively strong in  the first half (H1) of 2017-18 at 12.2%. Expenditure is also in check, with a slowing down in growth from H1, 2016-17 to 11.8%, on account of softer revenue spending. In a positive development, capital spends showed growth acceleration.
  • Fiscal deficit as a proportion of GDP is at 7.4% up to Q1, 2017-18 on account of low GDP growth during the quarter, but a fuller picture will emerge only next quarter GDP data is out. 
  • Economic activity showed signs of strengthening as growth in Index of Core Industries (ICI) touch the highest levels in 2017-18 so far of 5.2% in September 21017. In so far as ICI is a subset of the monthly Index of Industrial Production (IIP), the latest figures bode well for the industrial sector. 
  • Industrial credit, however, still remains a cause of concern. Credit growth softened further to a four month low of 4.2% in September 2017, with the biggest drag coming from continued industrial slack. Industrial credit has now been contracting for one year running, and given that it is the largest credit component, the impact on overall credit growth is significant. This is despite robust growth in personal loans.  
  • Foreign Portfolio Inflows turned positive in October 2017 compared to the corresponding month of the previous year, coming in at USD 2.9bn.

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