Biz activity grows to new high despite Omicron threat: Nomura

Source: Economic Times, 14 December 2021

Mumbai: Despite fears of the Omicron variant, business activity touched an all-time high since the onset of the pandemic for the week ended December 12, a Japanese brokerage said on Monday. The Nomura India Business Resumption Index (NIBRI), which compares the activity for a particular week as against one before the onset of the pandemic, rose to 115.8 from the 112.9 for the previous week.

“Despite Omicron risks, neither policy restrictions nor public fear factor appear to have had any impact on mobility so far, which is supporting a further normalisation in services,” it said in a statement.

The labour participation rate picked up to 41.4 per cent from 40.5 per cent — its highest in eight weeks — and power demand reversed last week’s fall with a 3.7 per cent gain, it added. 

After supply-constraint induced declines in August and September, industrial output growth rose sequentially in October, although its pace appears to be plateauing. 

India remains at risk of virus setbacks since those fully vaccinated account for only 37.5 per cent of the overall population, it said, adding data thus far suggest that incremental growth momentum in Q4 may be driven more by services and re-opening and less by industry.

Fitch cuts India GDP forecast for FY22 to 8.4%

Source: Financial Express, 08 December 2021

Fitch Ratings on Wednesday cut India’s economic growth forecast to 8.4 per cent for the current fiscal year ending March 31, 2022, but raised GDP growth projection for the next financial year to 10.3 per cent.

Fitch Ratings on Wednesday cut India’s economic growth forecast to 8.4 per cent for the current fiscal year ending March 31, 2022, but raised GDP growth projection for the next financial year to 10.3 per cent.

Fitch had in October forecast a GDP growth of 8.7 per cent in 2021-22 (April 2021 to March 2022) fiscal and 10 per cent in FY23. “We have cut our FY22 (financial year ending March 2022) GDP growth forecast, to 8.4 per cent (-0.3 pp). GDP growth momentum should peak in FY23, at 10.3 per cent (+0.2 pp), boosted by a consumer-led recovery and the easing of supply disruptions,” Fitch said in its Global Economic Outlook.

With recovery widening, Icra sees Q2 GDP at 7.7%

Source: Economic Times, 21 October 2021

With half of the 15 high-frequency indicators recovering to the pre-pandemic levels in the second quarter, the economy finally looks nearly out of the pandemic woods, helping the Q2 GDP print at 7.7 per cent, according to a report. However, the September print was not as good as the quarter, indicating that the recovery remains uneven, it added.

While continued base normalisation, emerging supply-side constraints and excess rainfall have dampened the year-on performance of most of the 15 high-frequency indicators in September, the economic recovery has widened in Q2 as the crisis wrought by the second wave has abated, with a larger number of sectors bettering their pre-pandemic performance, relative to Q1, Icra Rating chief economist Aditi Nayar said in a note on Thursday.

The annualised performance of 14 of the 15 high-frequency indicators, except non-food bank credit, have worsened in September compared to August.

Accordingly, Nayar projects real GDP in Q2 to have mildly trailed the level of Q2 of FY2020, at 7.7 per cent, compared to 2.21 per cent in Q1, led by the continued subdued performance of the contact-intensive sectors.

She also expects the daily average generation of the GST e-way bills in October to surpass the peaks seen in February-March 2021, indicating a better print of the growth numbers in the second half of the current fiscal.

Despite the widened recovery in Q2 with a larger number of sectors bettering their pre-pandemic performance, the revival is multi-speed, with a considerable variation in the pace of growth across sectors, Nayar said.

There is also the growing evidence of a K-shaped recovery, as is evidenced by the sharp disparity in the performance of the stock markets, robust growth in direct tax collections and improved business sentiment, juxtaposed with the continued pessimism displayed by urban households in the RBI’s latest consumer confidence survey.

The low performance in September was mainly on account of a combination of factors such as continued base normalisation (especially for motorcycles and scooters, domestic airline passenger traffic, and generation of GST e-way bills), supply-side constraints (non-availability of semi-conductors particularly for passenger vehicles) and excess rainfall.

The trend was split compared to Q1 volume performance — seven of the 14 non-financial indicators, including the quarterly output of commercial vehicles, rose above their pre-pandemic volumes in Q2, such as non-oil exports, GST e-way bills, the output of Coal India and electricity generation.

However, Q2 FY22 performance of sectors like air travel, supply of and demand for automobiles, ports cargo traffic and diesel consumption lagged the level in Q2 of FY20.

Yet, this marks an improvement relative to the situation in Q1 FY22, when only three sectors — ports cargo traffic, rail freight and non-oil exports — had reported higher volumes relative to Q1 FY20.

We also expect a base-effect led moderation in the pace of annualised growth of real GDP to 7.7 per cent in Q2 from 20.1 per cent in Q1 FY22, Nayar said.

Early data reveal mixed trends for October. Electricity demand has risen mildly to 2.7 per cent so far in the month, from 0.8 per cent in the previous month, with demand contained by the dip in temperature levels with surplus rainfall amid concerns regarding coal availability.

The daily average generation of the GST e-way bills in October may surpass the peaks seen in February-March 2021, boosted by healthy demand during the festive season. But, supply-side constraints would dampen output in sectors like automobiles, with the semi-conductor shortage set to suppress production in October as well, Nayar noted.

India’s GDP is expected to grow at 9.1% in 2021-22, says Ficci

Source: Business Standards, 07 October 2021

India’s GDP is expected to grow at 9.1 per cent in 2021-22 as economic recovery, post the second wave of the pandemic, seems to be holding ground, Ficci said on Thursday. Ficci’s Economic Outlook Survey also noted that the ongoing festive season would support this momentum.

However, the industry body cautioned that a likely surge in people’s movement during Diwali can lead to a rise in the number of COVID cases again.

“The latest round of Ficci’s Economic Outlook Survey has put forth an annual median GDP growth forecast for 2021-22 at 9.1 per cent. This marks a marginal improvement from the growth projection of 9 per cent recorded in the previous survey round (July 2021),” the chamber said.

Pick-up in monsoon rains in the latter part of the season and subsequent increase in kharif acreage is likely to keep growth expectations of the agriculture sector upbeat, it said.

The survey was conducted in September 2021 and drew responses from leading economists representing the industry, banking and financial services sector.

“The second quarter GDP data and the upcoming festive season should give a clearer idea of where we are headed on the recovery path and how the demand situation is panning out,” it said.

With regard to heading back to the process of normalization, it was largely felt that the Reserve Bank may indicate a change of stance from accommodative to neutral in the February 2022 policy meeting, the survey said.

“However, a hike in the repo rate only looks imminent in the next fiscal year (April 2022). Also, the path towards positive real interest rates is expected to be a staggered one. Much would be contingent on the build-up in domestic price levels and the extent of tapering by the Federal Reserve,” it said.

Railways’ bigwig Alstom contributes €438M in indirect and induced GDP to India’s economy: Report

Source: Financial Express, 29 September 2021

Alstom claimed that it is committed to improving its diversity ratio and plans to include 28 per cent women in management, engineering and professional roles by the year 2025, while retaining its Top Employer position.

In five years, Alstom contributed €438M in indirect and induced GDP to India’s economy. A global leader in sustainable and green mobility solutions, Alstom has recently released its first India Impact Report in partnership with Ernst & Young. The India Impact Report captures the socio-economic contributions as well as ESG goals by Alstom in the country until the end of March 2021. Alstom India had purchased €331 million worth of goods and services, among which 75 per cent is made with Indian suppliers. Overall, €142M (Rs 12,556 M) has been invested by the company locally in the last five years. In addition, the firm has conducted 21 technology transfers across Alstom locations, to suppliers as well as other partners.

As of March 2021, the company had a total of 7,634 direct employees in the country. In addition to this, the firm has supported 71,340 indirect as well as 27,770 induced jobs across the nation. Alstom claimed that it is committed to improving its diversity ratio and plans to include 28 per cent women in management, engineering and professional roles by the year 2025, while retaining its Top Employer position.

According to the company, it has noted ten times lesser Carbon dioxide emissions from Alstom built freight as well as metro trains vs other modes of transport. In comparison to the high carbon dioxide emissions from cars (79.5 g carbon dioxide/ passenger km), Alstom’s metro trains in the country emit only 7.9 g CO2/passenger.kms. Similarly, the electric locomotives deployed for high speed freight transportation in India, emit 13.4 g carbon dioxide/ton km of CO2, while goods trucks account for 92.3 g CO2/ton.kms.

The company’s eco-design approach focuses on continuously improving the sustainability of its solutions by tracking as well as minimising their environmental impact throughout their life cycles. For example, the mass of materials and components utilized in manufacturing rolling stock for Mumbai Metro Line 3 are 96 per cent recyclable and 99 per cent recoverable.

The company claimed to be committed to limiting the environmental impact of its operations in the country and across the world. The firm, as part of its Green Energy Strategy, is also investing in linking renewable energy production systems to its locations, like the Sri City facility, where 1 MW of solar energy generation capacity has been developed. The project will result in an annual reduction of 1,132 tonnes of Carbon dioxide emissions as well as reducing non-renewable energy consumption by 30 per cent (by 2021-end).

Gadkari calls for increasing MSMEs share in GDP to 40%

Source: Retail.economictimes.indiatimes, June 7, 2021

NEW DELHI: Union minister Nitin Gadkari on Saturday stressed on increasing the share of the MSME sector in the country’s GDP to 40 per cent from 30 per cent currently. Addressing a virtual event, Gadkari said the world is now favouring India instead of China.

“We need to increase our GDP growth and agriculture growth rate. We can make Indian economy as one of the strongest economy of the world,” the road transport, highways and MSME minister said. Gadkari also stressed on making the country self-sufficient in edible oil production.

Noting that due to COVID-19 pandemic, the whole world is in danger, he said, “We are going to win the war against the COVID-19 pandemic.”

Gadkari said US-based Triton Electric Vehicle LLC will soon enter the Indian market. “Triton Electric Vehicle LLC will enter into Indian market . And this company’s electric truck is better than American electric car Tesla,” he said.

Fitch upgrades India’s GDP growth to 12.8% for FY22

Source: Business Standard, Mar 25, 2021

New Delhi: Fitch Ratings has revised India’s GDP growth estimate to 12.8 per cent for the fiscal year beginning April 1 from its previous estimate of 11 per cent, saying its recovery from the depths of the lockdown-induced recession has been swifter than expected.

In its latest Global Economic Outlook (GEO), Fitch said revision is on the back of “a stronger carryover effect, a looser fiscal stance and better virus containment.”

“India’s second half of 2020 rebound also took GDP back above its pre-pandemic level and we have revised up our 2021-2022 forecast to 12.8 per cent from 11.0 per cent,” it said.

“Nevertheless, we expect the level of Indian GDP to remain well below our pre-pandemic forecast trajectory.”


GDP surpassed its pre-pandemic level in December quarter, growing 0.4 per cent year-on-year, after contracting 7.3 per cent in the previous quarter.

“India’s recovery from the depths of the lockdown-induced recession in 2Q20 (calendar year) has been swifter than we expected,” it said. “The rapid pace of expansion at the end of 2020 was powered by falling virus cases and the gradual rollback of restrictions across States and Union territories.”

High-frequency indicators point to a strong start to 2021. The manufacturing PMI remained elevated in February, while the pick-up in mobility and a rise in the services PMI point to further gains in the services sector.

However, the recent flare up in new virus cases in some states has prompted us to expect milder growth in 2Q21.

“Moreover, the global auto chip shortage could temporarily diminish Indian industrial production gains in 1H21(first half of 2021),” it said.

The Union Budget for the fiscal year ending March 2022 (FY22) unveiled a fiscal stance more accommodative than expected.

Spending is set to be increased substantially, notably infrastructure, healthcare, and military outlays. Looser fiscal policy should support the short-term cyclical recovery, which along with stronger underlying growth momentum prompted FY22 GDP growth forecast revision, Fitch said.

“The increase in inoculation to the most at-risk people should allow restrictions to be eased significantly towards end-2021 and in 2022,” it said. “This should further support services sector activity and consumption.”

The rating agency however said an impaired financial sector is likely to keep the provision of credit tight, limiting investment spending.

“We expect GDP growth to ease to 5.8 per cent in FY23, a downward revision of -0.5 percentage points since December,” it said. “The forecast level of GDP remains substantially below our pre-pandemic trajectory.”

It no longer expected the Reserve Bank of India (RBI) to cut its policy rate, owing to a brighter short-term growth outlook and a more limited decline in inflation. The RBI will nonetheless keep its policy loose over the forecast horizon to shore up the recovery. The central bank will likely continue to use forward guidance on policy rates and carry out open-market operations to keep a lid on borrowing costs, it added.

Pandemic pushes back India’s $5-trillion GDP goal by 3 years to FY32: Report

Source: The Economic Times, Mar 22, 2021

The pandemic-induced shocks to the economy which have already shaved off 15.7 per cent of the GDP from the previous year, will delay the ambitious target of becoming the third largest economy by three years to 2031-32 now, says a report. Currently, the country is the fifth largest economy in the world behind Germany. The government has set a target of becoming a USD5-trillion economy by 2030.

“We now expect the domestic economy to emerge as the world’s third largest economy in FY32, from FY29 earlier, due to the pandemic shocks. It should touch Japan’s nominal GDP in 2031 (in USD terms) if it grows at 9 per cent and in 2030 if it grows at 10 per cent,” a Bank of America (BofA) Securities report said on Monday.

The report however did not ascribe a size to either the domestic economy, which stood at USD 2.65 trillion in 2019-20, or to that of Japan, which in 2020 stood at USD 4.87 trillion.

This assumes a realistic 6 per cent real growth, 5 per cent inflation and 2 per cent rupee depreciation, the report added.

In 2017, BofA had predicted that the country would emerge as the third largest economy in 2027-28 based on its assumption of the demographic dividend, growing financial maturity, and the emergence of mass markets.

In their Monday’s report, the house economist at the Wall Street brokerage said they find all these three phenomena strengthening now.
There are two other catalysts that support structural changes. For one, the RBI has effectively attained a silent revolution in re-achieving adequacy of forex reserves after almost eight years now.

This should help stabilize the rupee by derisking the economy from global shocks.

Further, sustained policy easing is finally bringing down real lending rates that have been a drag on growth since 2016.

The only main downside risk to sustained growth is the oil prices, especially if it trends at over USD 100 a barrel.

If the GDP grows at 10 per cent, as BofA assumed earlier, this will be achieved in 2029-30 and if it grows at 9 per cent, overtaking Japanese economy will be pushed back by three years to 2031-32.

“Our projection of 6 per cent real growth is actually below the 6.5 per cent average since 2014 and our estimated 7 per cent potential,” it said.

Also, for the growth to pick up and sustain, the credit to GDP ratio, a proxy for financial maturity, should climb to 102 in 2031-32 from 44 per cent in 2001-17 and 25 per cent during 1980 and the 1990s.

Infra spends, PLI projects to drive growth next fiscal: Report

Source: The Economic Times, Mar 09, 2021

Projecting next year’s growth to be a story of two halves, with the low base-effect lifting the growth engine in the first half and a broad-based recovery in the second, a report on Tuesday said higher infrastructure investments and PLI projects will drive investments and thus GDP.

Like others, Crisil also expects growth to rebound to 11 per cent in the financial year 2021-22, after “an estimated 8 per cent contraction” this fiscal.

The agency sees four positive drivers converging next fiscal — people learning to live with the new normal after the pandemic, flattening of the coronavirus infection curve, more vaccinations, and investment-focused government spending.

“Our medium-term growth now hinges on a kick-start of the investment cycle.

Crisil Managing Director and Chief Executive Officer Ashu Suyash said, “There are early positive signs, powered by government spending through the national infrastructure pipeline, demand-driven capex (capital expenditure), and the production-linked incentive (PLI) scheme.”

But, the pace of growth will be different in the first and second halves as was in the outgoing year, with the first half benefitting optically from the low-base effect, second half seeing a more broad-based pick-up in economic activity, owing to rising commodity prices, large-scale vaccination and a likely stronger global growth, she said.
She was also quick to warn that recovery will not be easy, with small businesses and the urban poor still suffering from the impact of the pandemic, and urban markets and services still lagging manufacturing in recovery, even as the rural economy remains more resilient.

Trade has also normalised faster than the rest of the economy with both exports and imports scaling back to pre-pandemic levels.

While exports recovery has been good for large industries and agriculture and allied sectors, it remains weak for gems and jewellery, garments, and leather products that are labour-intensive and small in scale.

Beyond 2021-22, agency’s Chief Economist Dharmakirti Joshi sees growth averaging at 6.3 per cent between fiscals 2023 and 2025. It is lower than 6.7 per cent average in the decade preceding the pandemic, but higher than 5.8 per cent average in the three fiscals before.

Yet, the economy will suffer a permanent loss of 11 per cent of GDP, which in real terms means the size of the economy will grow by a mere 2 per cent in 2021-22 over 2019-20, he said.

Expecting the dynamics of domestic demand and trade to continue to be unfavourable for small businesses, he called for continued policy support for them and for the urban poor, who have borne the brunt of the pandemic.

Meanwhile, corporate revenue growth has surprised with a V-shaped recovery in the first nine months of this fiscal by cresting three tailwinds — resilience in software and pharam exports, the commodity upcycle, and price hikes offsetting volume declines in automobiles.

Accordingly, the agency pencils in a 15-16 per cent revenue growth led by volume recovery across sectors and higher public investments, especially in roads, railways, and urban infrastructure.

Shorn of the optical base effect, revenue will be only 8-9 per cent higher in 2021-22 than in 2018-19. Operating profit margin, which touched a decadal high this fiscal, should sustain despite some cost pressure, he said.

Given this, the medium-term growth prospects hinge critically on revival of the investment cycle, something that has been missing for so many years now.

Next fiscal, many pieces can fall into place leading to 20-25 per cent overall growth in investments to Rs 14.6 lakh crore. The push by the Centre and the states on roads, railways and urban transport, will drive up overall infrastructure investments 17-20 per cent, said its Chief Operating Officer Amish Mehta.

Expecting a 45-55 per cent spike in corporate capex next fiscal, he says this will be driven by large companies in core industrial segments that have gained market share and are operating at higher-than-industry-average utilisation rates, pushing pedal on capex after staying away last fiscal; and secondly time-bound PLI-driven projects.

Among core industrial sectors, cement and metals are expected to see healthy investments; while for others, a meaningful recovery will be at least two years away.

According to Crisil analysis, the potential incremental revenue generation from the PLI scheme is Rs 35-40 lakh crore over the next five years across 14 covered sectors.

Oxford Economics ups India growth forecast to 10.2% for 2021

Source: The Economic Times, Feb 17, 2021

Global forecasting firm Oxford Economics on Wednesday revised India‘s economic growth projection for 2021 to 10.2 per cent from the earlier 8.8 per cent, citing receding COVID-19 risks and the shift in the monetary policy outlook. It further said the Budget 2021-22 will create positive externalities for the private sector, and forecast slower fiscal consolidation in FY22 than the government projections.

“Alongside the planned government spending boost in Q1 and receding Covid-19 risks, the shift in the monetary policy outlook supports our 2021 growth upgrade to 10.2 per cent from 8.8 per cent earlier,” Oxford Economics said.

The forecasting firm also noted that India’s latest Union Budget has raised hopes that fiscal policy will finally pick up the growth baton and ease pressure on the RBI to continue to lead the pandemic policy response. “We think the budget proposals will create positive externalities for the private sector, and forecast slower fiscal consolidation in FY2022 than the government projects.

“A proposed increase in capital expenditure should also lower the contractionary impact of the consolidation on GDP,” it said. Oxford Economics noted that if inflation risks materialise, the RBI may have to renege on its growth commitment, which is a downside risk to its growth forecast.

It said the Budget has been largely perceived as supporting growth, despite a projected narrowing of the fiscal deficit from 9.5 per cent of GDP in fiscal 2020-21 (ending March 2021) to 6.8 per cent in 2021-22. “In all, we do see merit in the view that the budget is growth-oriented and expect the positive spillover impact on the private sector to help nurture the ongoing recovery,” it said.

The Economic Survey has projected an 11 per cent growth for 2021-22, aided by a V-shaped recovery and a 7.7 per cent contraction for the current year. It also projects a lower 6.8 per cent growth in 2022-23. The Reserve Bank of India has projected a GDP growth rate of 10.5 per cent for the financial year beginning April 1, on the back of recovery in economic activities.