Research

Commercial Real Estate Industry in India

The commercial real estate market in India is projected to reach approximately USD 40.71 billion in 2024, and is likely to grow to USD 106.05 billion by 2029, reflecting a CAGR of 21.1%. This growth is being fueled by demand in office spaces, retail, warehousing, and the expanding co-working sector. The Indian commercial real estate market is undergoing a significant recovery, driven by promising growth opportunities and transformative trends. It is set for continued expansion in the coming years, supported by digital advancements, infrastructure development, government initiatives like Smart Cities and Make in India, and the rising adoption of PropTech solutions.

Weekly Wrap

The RBI has cut its benchmark interest rate for the first time in nearly five years in an effort to stimulate sluggish economic growth. The central bank lowered the repo rate by 0.25 percentage points to 6.25 percent. Finance Secretary Tuhin Kanta Pandey called on India Inc to show more "animal spirit" and ramp up investments, stressing that for India to become a developed nation, both the government and the private sector must collaborate as a unified team.

RBI Monetary Policy Meet Outcome- Cuts Repo Rate by 25 Bps

RBI Cuts Repo Rate by 25 Bps to 6.25% on February 7, 2025, marking the first policy decision under the chairmanship of the newly appointed RBI Governor, Sanjay Malhotra. This decision marked the sixth and final bi-monthly monetary policy review of FY25. Consequently, the standing deposit facility (SDF) rate adjusted to 6.00%, and the marginal standing facility (MSF) rate and the Bank Rate to 6.50%.

ECONOMY OUTLOOK- FEBRUARY 2025

The Economic Survey for the fiscal year 2025-26, presented by Finance Minister Nirmala Sitharaman on January 31, 2025, projects India's real GDP growth to be between 6.3% and 6.8%. This forecast reflects a significant slowdown compared to the previous year's robust growth of 8.2% in FY24, indicating challenges ahead for the Indian economy as it navigates through various headwinds

Food and Food Processing Industry in India

The food processing sector has emerged as a significant contributor to India's economy in recent years, fueled by forward-looking policy initiatives from the Ministry of Food Processing Industries and the Government of India. India's food processing market is projected to grow at a CAGR of 8% to 10% for the forecasted period between 2025 to 2029 with Tier-2 and Tier-3 cities emerging as key consumer markets for FMCG and Food processing businesses, closely mirroring consumption trends seen in metropolitan areas.

Outcome of India's Union Budget 2025-26: Analysis

India's Union Budget 2025-26, presented by Hon'ble Finance Minister Ms. Nirmala Sitharaman, emphasizes a growth-oriented approach through four key engines: Agriculture, MSMEs, Investment, and Exports, promoting inclusivity and resilience to stimulate economic growth. The budget outlines significant allocations and reforms aimed at stimulating economic growth and enhancing social welfare.

Weekly Wrap

India's economic survey forecasts GDP growth rate of 6.3-6.8 percent for 2025-26, driven by a robust external account, strategic fiscal consolidation, and steady private consumption. It also emphasized that domestic growth drivers will play a more significant role than external factors in the coming years for India's economy.

India's Union Budget 2025-26: Key Expectations

As India approaches the presentation of its Union Budget for the fiscal year 2025-26 on February 1, 2025, various sectors and stakeholders have articulated their expectations and recommendations. The Union Budget 2025 is expected to balance capital expenditure with consumption initiatives, focusing on infrastructure development, agriculture, and support for MSMEs, crucial for job creation and economic stability amid subdued economic momentum and global uncertainties.

Weekly Wrap

The RBI, in its monthly bulletin, stated that India's economic growth is set to recover as domestic demand strengthens. However, it highlighted the need for careful monitoring of the "stickiness" in food inflation.

Weekly Wrap

According to a World Bank report, India's fiscal deficit is expected to decrease, driven by higher tax revenues, indicating an improved fiscal position. With a projected GDP growth of 6.7% for FY26 and FY27, the services and manufacturing sectors are set to experience continued expansion. However, concerns persist regarding the government's debt-to-GDP ratios and elevated borrowing costs

Weekly Wrap

India's economy growth is expected to slow down in FY25 due to a significant downturn in the manufacturing sector, with the government's GDP forecast of 6.4% for the current fiscal year being lower than the RBI's 6.6% estimate. The upcoming Union Budget for India, scheduled for February 1, 2025, is viewed as a pivotal opportunity for India to foster sustainable growth, strengthen its taxation system.

India's GDP Growth Rate Estimates Slashed to 6.4% For FY25; Expect Rebound in H2FY25

India's Gross Domestic Product (GDP) is projected to grow by 6.4% for the financial year 2024-25, according to the First Advance Estimates released by the National Statistics Office (NSO). This marks a significant decrease from the 8.2% growth recorded in 2023-24 and marking the lowest rate since FY21, when the economy contracted due to the pandemic.

Weekly Wrap

India's economy is expected to grow by approximately 6.6% in FY25. This growth is attributed to a revival in both urban and rural demand, as structural growth drivers continue to support the economy, despite a recent slowdown. India's core sector growth reached a four-month high of 4.3% driven by increases in six of the eight core sectors.

ECONOMY OUTLOOK - JANUARY 2025

India's economy in December 2024 reflects a period of resilience and growth, positioning the country as a significant player on the global economic stage. The year has been marked by a projected GDP growth rate of 6.6% for the fiscal year 2024-25, continuing the momentum from previous years and reinforcing India's status as the world's fifth-largest economy.

Weekly Wrap

The Indian economy is showing signs of recovery from the slowdown observed in the Q2 of the fiscal year, driven by strong festive demand and continued growth in rural consumption. The Finance Ministry projects the Indian economy to grow at approximately 6.5% in the FY25.

Indian Auto Component Manufacturing Industry

The Indian auto component manufacturing industry, valued at $57 billion (bn) in 2023, is expected to grow to $85 bn by 2026, contributing significantly to employment and GDP. India's auto component industry experienced a 9.8% growth rate in fiscal 2023-24, with a turnover of around $73.1 billion. This growth is driven by steady vehicle production, a thriving aftermarket, and increased exports

Weekly Wrap

India's WPI based inflation in November 2024 dropped to a three-month low of 1.89%, down from 2.36% in October. This decline was primarily driven by lower prices of food items. The merchandise trade deficit reached a record USD 37.84 billion in November, driven by a rise in gold imports and a decline in exports due to falling crude oil prices.

Weekly Wrap

India's Index of Industrial Production increased by 3.5% in October, compared to 3.1% in September 2024. This growth was primarily fueled by strong performances in major sectors such as basic metals, electrical equipment and refined petroleum products while retail inflation decreased to 5.48% in November, down from 6.21% in October, as food prices showed signs of moderation.

Weekly Wrap

Chief Economic Advisor V Anantha Nageswaran stated that the Economic Survey forecasts Indias GDP growth to range between 6.5% and 7% for 2024-25, a decrease from the 8.2% growth recorded in the previous financial year

RBI Monetary Policy Meet Outcome – December 2024

RBI Keeps Repo Rate Unchanged at 6.5%; Cuts CRR by 50 bps to 4% and Lowers FY25 GDP Growth Projections to 6.6%. The Reserve Bank of India (RBI) has decided to maintain a steady repo rate of 6.5% due to rising inflation and slowing India’s GDP growth, which has reached a seven-quarter low of 5.4% for the July-September 2024 period

ECONOMY OUTLOOK - DECEMBER 2024

India’s recent economic performance has raised significant concerns, particularly following the announcement of a disappointing GDP growth rate of 5.4% for the second quarter of 2024, marking the slowest expansion in seven quarters. This decline is symptomatic of broader economic challenges facing the country.

Weekly Wrap

Indias GDP growth in Q2 FY25 slowed to a 7-quarter low of 5.4%, driven by a slump in the manufacturing sector. Manufacturing growth in Q2 decelerated to 2.2%, a sharp decline from 7% in Q1

Weekly Wrap

RBI Governor Shaktikanta Das stated that the Indian economy is well-equipped to manage any potential spillovers from global events

KEY TAKEAWAYS FROM RBI BULLETIN-NOVEMBER 2024

The Reserve Bank of Indias (RBI) November 2024 bulletin shows private consumption has regained its primary role as domestic demand driver, with festival spending boosting real activity in the third quarter. According to the RBI, private consumption is expected to improve due to favorable agricultural outlook and increased rural demand.

Weekly Wrap

Indias merchandise exports rose by 17.25% in October 2024, marking the fastest growth in 28 months

Drugs & Pharmaceuticals Industry - India Market

The Indian pharmaceutical industry is often referred to as the "Pharmacy of the World." Currently, it ranks as the third-largest pharmaceutical sector globally by volume, with a market size of approximately USD 65 billion (bn). Projections indicate it could expand to USD 120-130 bn (Rs. 9,84,000 to Rs. 10,66,000 crores) in the next decade, potentially increasing its contribution to the GDP by about 100 basis points.

Weekly Wrap

The U.S. Federal Reserve cut its key interest rate by a quarter-point to support the job market and maintain 2% inflation. Central bankers reassess rate-cut plans as Trumps return could stifle global growth and fuel US inflation

Power Generation – Renewable (Solar, Hydro, Bio, Wind) Sector in India

Indias power sector is diverse, generating power from conventional sources like coal, natural gas, oil, hydro, nuclear power, and non-conventional sources like wind, solar, agricultural, and domestic waste. Renewable energy capacity has grown significantly since 2014, reaching 90.76 GW and 47.36 GW as of September 2024.

IMPACT OF THE UNITED STATES PRESIDENTIAL ELECTIONS ON INDIA

Donald Trump has won the 2024 U.S. presidential election, marking a historic political comeback after his defeat in 2020. President Trumps win solidifies his influence within the Republican Party as he prepares for another term in office beginning January 20, 2025. Donald Trumps return to the presidency has significant implications for India across various sectors, based on his previous term and current policy positions.

ECONOMY OUTLOOK - NOVEMBER 2024

In September 2024, India experienced a surge in retail inflation due to rising food prices, particularly vegetables, and a fading base effect, raising concerns for consumers and policymakers as inflation exceeds the Reserve Banks target range.

E-Commerce Market in India

E-commerce, the online sale of tangible commodities, has significantly expanded corporate reach and sales potential, encompassing various industries and businesses with both physical and digital outlets. The Indian e-commerce market is expected to grow at a compound annual growth rate (CAGR) of 27% to reach $163 billion (bn) by 2026

RBI Monetary Policy Meet Outcome – October 2024

The Reserve Bank of India (RBI) has maintained its repo rate at 6.5% for the tenth consecutive time, following its MPC meeting on October 9, 2024, aimed at managing inflation and supporting economic growth.

ECONOMY OUTLOOK - OCTOBER 2024- Tax Reform: A Tyranny of Status Quo

The GST Council meetings have become routine meetings to tinker with some rates and minor changes in the administration as needed by the exigencies rather than transforming the tax structure towards the best practice approach.

Automotive Telematics Market in India

The automotive industry has seen significant technological advancements in the past two decades, including the integration of wireless communication and GNSS-based technology. The Indian telematics market is expected to experience a 46.8% growth from INR 555 Crores in 2021 to INR 3796 Crores by 2026, driven by government regulations and increased awareness.

Economy Outlook- September 2024-Onwards and Upwards: Marching Towards Viksit Bharat

After the noise and euphoria following the Union budget presentation, this is the time to take a filtered look at the medium and long-term strategies and policy interventions needed to make India a developed country.

Ferrous Metal-Iron and Steel Sector in India

India was the 2nd largest producer of crude steel with an output of over 144 million tonnes (MT) in 2023, showing a y-o-y growth of 11.8%, and accounted for 7.6% of world crude steel production. India crude steel production increased by 14.2% y-o-y in 2023-24 to 144 MT, while finished steel production reached 102.2 MT, up 14.1% y-o-y, a significant increase from the previous year

Indias GDP Growth Slows to 6.7% in Q1FY25; Lowest in Five Quarters

Indias Gross Domestic Product (GDP) growth in Q1 FY25 dropped to 6.7%, the lowest in five quarters, and below the Reserve Bank of Indias estimate of 7.1% for the same period. This marks a significant decline from 8.2% GDP growth recorded in Q1 FY24 and 7.8% in Q4 FY24

Pradhan Mantri Jan Dhan Yojana (PMJDY): A Decade of Success

The Pradhan Mantri Jan Dhan Yojana (PMJDY), which aims to connect underprivileged individuals with the banking system for financial inclusion, has reached a significant milestone as it has completed 10 years since its launch on August 28, 2014

Takeaways from RBI Bulletin-August 2024

The Reserve Bank of Indias August 2024 Bulletin highlights Indias economic resilience amidst global uncertainties and inflation challenges, with improved business sentiment, surging rural demand, and positive private capex outlook.

Indias CPI inflation eases sharply to 3.54% in July 2024, the lowest in nearly 5 years

Indias Consumer Price Index (CPI) inflation (retail inflation) fell to 3.54% in July 2024, the lowest in five years and below the Reserve Bank of Indias 4% target since September 2019. This figure represents a notable drop in inflation, attributed primarily to a sharp decline in vegetable prices

RBI Monetary Policy Meet Outcome – August 2024

The Reserve Bank of India (RBI) maintained its repo rate at 6.50%, in its monetary policy meeting on August 8, 2024, marking the ninth consecutive meeting where the benchmark rate remains unchanged. The RBI maintained GDP growth and inflation projections at 7.2% and 4.5% for FY25 amid normal monsoon expectations.

Economy Outlook- August 2024- Onwards and Upwards: Sprinting on Two Legs

The impressive growth performance since 2021-22 has placed India as the fifth-largest economy and it could become the third largest by 2028. Working out strategies and setting reform priorities to accelerate growth and create employment opportunities for those entering the workforce was, to some extent, done in the first budget of the Modi governments third term presented on July 23.

EDUCATION INDUSTRY IN INDIA

India boasts of one of the largest education systems with about 1.49 mn schools, 9.5 mn Number of Colleges in India teachers, and nearly 265 Mn students. Being the world’s most populous nation, India has a remarkable demographic advantage with a substantial youth population.

UK GDP Grew 0.4% in May 2024

The UK economy grew by 0.4% (estimated) in May 2024, a stronger performance compared to stagnant growth in April and a modest contraction in the third and fourth quarters of 2023

UNION BUDGET REPORT - 2024-2025

The much-awaited first budget of the Modi-3 government is on predicted lines. This is the seventh straight budget presented by the present Finance Minister. The budget attempts to set priorities for the long-term goal of achieving the developed-country status in the centenary year of independence.

US Inflation Cools in June, Falling 0.1% and Bolstering Case for Rate Cut

The annual inflation rate in the US as measured by the consumer price index (CPI) decreased to 3% in June, down from 3.3% in May, marking a significant slowdown in inflation from its peak of 9.1% in 2022, and bringing it closer to the Federal Reserve's 2% target.

RESIDENTIAL REAL-ESTATE SECTOR IN INDIA

The Indian real estate sector has witnessed significant expansion over the decades. This sector Market Size of Real Estate Sector in India ($ billion) has grown from a market size of $120 billion in 2017 to $477 billion in 2022 and the market size is estimated to be worth $1 trillion by 2030, largely led by the affordable housing scheme, according to real estate consultant Anarock and realtors body NAREDCO.

Economy Outlook- July 2024- Union Budget to drive the domestic economy in July

The 18th Lok Sabha elections are done and dusted, and The NDA coalition government has returned to power to rule the country for the next five years. The wild swings in the stock market as the results trickled in fearing the discontinuity and reform momentum too have settled to the reality that the BJP government must take the consensus route in calibrating policies.

RBI monetary policy meet outcome- June 2024; RBI keeps interest rate steady; raises FY25 growth outlook to 7.2%

The Reserve Bank of India Monetary Policy Committee (MPC) has maintained the benchmark repo rate at 6.5% for eight consecutive times amid ongoing concerns about food inflation and the need to balance growth and price stability

June 2024 promises improved growth, but presents numerous uncertainties

The World Economic Outlook brought out by the IMF in April does not project an optimistic economic scenario for the global economy. The world economy is estimated to grow at 3.2% in 2024 and 2025 which is the same rate as it was in 2023. While developed economies are expected to see a marginal acceleration in growth from 1.6% in 2023 to 1.7% in 2024 and further to 1.8% in 2025, emerging economies are expected to see a marginal slowdown to register 4.3% in 2023 and 4.2% in 2024 on average.

Tax Buoyancy: Opportune Time for Second-Generation Reforms

The implementation of Goods and Services Tax (GST) in India is variously described as “one country-one tax”, “a game changer” and “a reform of the century”. The standard invoice-credit destination-based value-added tax (VAT) on goods and services in a large and diverse federal country at both national and sub-national levels ruled by different political parties is a remarkable achievement.

India Foreign exchange reserves on a rising spree

India foreign exchange reserves have been on a rising trend for the past few weeks in 2024 and touched all-time high of $648.6 billion (bn) for the week ended April 5, 2024.

RBI Monetary Policy, April 2024: Analysis

The Reserve Bank of India (RBI) monetary policy committee (MPC) kept repo rate unchanged at 6.5% in the seventh consecutive meeting along with the marginal standing facility (MSF) and standing deposit facility (SDF) rates unchanged at 6.75% and 6.25%, respectively.

“Viksit Bharat”: REFORMS IMPERATIVE

Indian economy witnessed a sharp contraction of 5.2 per cent in 2020-21 due to the pandemic. However, despite the global headwinds, the recovery has been equally impressive recording growth at 9.2 per cent in 2021-22 and by 7.2 per cent in 2022-23.

Second Advance Estimate on National Income; Investment Led Growth

The Second Advance Estimates (SAE) of National Income FY 2023-24 released by the National Statistical Office (NSO) show that the Indian economy is estimated to grow at 7.6% in FY 2023-24 as against 7.0% in FY 2022-23 and 7.3% growth in the first advance estimates of 2023-24.

GROWTH PROMPTS POLICY CONTINUITY

The interim budget presented in the election year does not indulge in giveaways or indulge in populism. It gives clear signals on policy continuity and the confidence of the government returning to power and continuing on the path of fiscal consolidation while prioritising infrastructure spending.

FOREIGN DIRECT INVESTMENT FLOWS TO INDIA Trends and Perspectives

India received massive net foreign portfolio investment (FPI) inflows of $ 9.5 billion, majorly comprising equity inflows, in December 2023. It was boosted by the resilient growth outlook for India along with stability in the position of foreign exchange reserves and external debt.

Analysis of RBI Monetary Policy, February 2024

The Monetary Policy Committee (MPC) at its bi-monthly meeting (December 6 - 8, 2023) kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%. Accordingly, the standing deposit facility (SDF) rate also stands unchanged at 6.25% and the marginal standing facility (MSF) rate and the Bank Rate stand at 6.75%.

IN PURSUIT OF VIKSIT BHARAT Interim Budget 2024-25 Reiterates the Commitment to Fiscal Discipline and Growth

India’s Interim Budget 2024-25 aptly proposed the vote on account to enable authorized expenditures till the next government presents a full budget for FY 2024-25. As it opens with the resolve that, “We are working to make India a ‘Viksit Bharat’ by 2047”, it spells out the vision for a developed India in harmony with nature and modern infrastructure, and with opportunities for all - citizens and regions.

India Welcomes 2024 Optimistic Growth Outlook Supports Aspirations

The first advance estimate of the National Accounts for 2023-24 released on January 5, comes as a pleasant surprise. The estimated GDP growth at 7.3% and the GVA estimated to increase by 6.9% is much better than the market expectations and much higher than the estimates by the multilateral institutions and international credit rating agencies.

COMMERCIAL REAL ESTATE Building Future Workscapes in India

The real estate industry in India has been exhibiting major resilience in recent years. The industry has tided over from the slowdown induced by the onset of Covid -19 pandemic and is now robustly contributing to economic growth. The massive growth seen in the Indian real estate industry is driven by the rise of demand for urban and semi-urban housing units and office and commercial space.

First Advance Estimates of National Income Stand On an Optimistic Note

The National Statistical Office (NSO) has released the First Advance Estimates (FAE) of National Income FY 2023-24. The release suggests that the Indian economy is estimated to grow at a rate of 7.3% in FY 2023-24 against the provisional growth rate of 7.2% in FY 2022-23.

SURGING Foreign Portfolio Investments to India Speak Volumes in December 2023

Foreign investments including the foreign portfolio investment (FPI) flows are majorly driven by macroeconomic factors in the recipient country. Factors such as higher interest rate, lower inflation, stable or higher GDP growth, currency depreciation, and stable trajectory of foreign direct investments often divert the flow of FPIs towards a particular country.

GROWTH STANDS ON BASE EFFECTS Higher Productivity and Prompt Vigil Indispensable

After the serious setback suffered during the pandemic, India has shown a stellar growth performance. The “V” shaped recovery resulted in the economy growing at 9.2% in 2021-22 followed by 7.2% in 2022-23.

As Expected, RBI Keeps the Key Policy Rates Unchanged and Focuses on Withdrawal of Accommodation

The monetary policy announced by the RBI today has kept the key policy rates unchanged. It has reiterated to withdraw accommodation and bring inflation closer to target while not adversely impacting on growth. The Monetary Policy Committee (MPC) at its bi monthly meeting (December 6 - 8, 2023) kept the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 6.50%.

ECONOMY TREADS WITH CAUTION AND CONCERNS

With elections to five states scheduled in 2023-24 and followed by the general election to the Lok Sabha early next year, there are concerns about serious fiscal slippage in the country. At a time when the country has been slowly recovering from the fiscal disruption caused by the pandemic, electoral promises involving large expenditure commitments to confer short-term gains to the electorate pose significant threats to fiscal sustainability. The success of the Congress party in the Karnataka elections which is presumed partly due to the five guarantees announced before the elections is being repeated in other states and the promises are flying thick and fast.

RBI has assigned higher risk weights to unsecured loans – A prudent and preventive step against potential NPAs

As a part of regulatory measures towards consumer loans and bank credit to NBFCs, the Reserve Bank of India (RBI) last week assigned higher risk weights to unsecured consumer loans of commercial banks and NBFCs by 25 percentage points. Consumer credit of banks and NBFCs which has a risk weight of 100% will now attract a risk weight of 125%. Risk weights on credit cards have been raised by 25 percentage points to 150% for banks and 125% for NBFCs. The move follows significant increase in the lending by the commercial banks on these categories of borrowers.

INDIAN TEXTILE INDUSTRY: The Changing Landscape

Indian textile industry is one of the oldest in the world and has evolved over a period of over 5000 years. The earliest records of Indian cotton threads date to around 4000 BC and those of dyed fabrics are documented around 2500 BC. Over the years, Indian textile industry has transformed enormously and has set standards of fabric making as well as the fashion industry across the world. It has a history of producing high-quality textiles that are unique and representative of the rich cultural heritage of different regions and states in India.

GOVERNMENT’S THRUST ON CAPEX – Improving the Quality of Spending and Crowding in Private Capex

Expenditure on infrastructure, public health and education enhances productivity across the economy. An important aspect of the spending pattern of the government lies in the consideration of how much is actually allocated and spent on capital expenditure as the same crowds in private investment and enhances productivity. Ultimately, it is the effect of expenditure on economic growth and human development that matters. Incurred on the development of equipment, infrastructure, machinery, health facilities, education, etc., capex determines the quality of spending by the government while also reflects the policy aims of the government.

Sustaining Growth In Uncertain Times: Inflation Receding But Prompts Vigil

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) in its October 6 statement has maintained both GDP and inflation forecasts for FY 24 at 6.5% and 5.4% respectively. The growth is expected to decelerate from 7.8% in the first quarter to 5.7% in the fourth. While there are no changes in the quarterly projections of GDP, the inflation projection for the second quarter has increased from 6.2% to 6.4% mainly due to a sharp increase in the prices of vegetables. As expected, there has been a significant cooling down of vegetable prices, and the inflation rate has decelerated in September to 5%.

Monetary Policy Springs No Surprises

The monetary policy announced on October 6 by the RBI Governor springs no surprises. In a unanimous decision, the Monetary Policy Committee (MPC) has kept the policy rate unchanged at 6.5% and standing deposit facility and marginal standing facility rates remain at 6.25% and 6.75% respectively. The MPC has decided to focus on the withdrawal of the accommodative stance by a 5-1 majority to align inflation to the target.

ECONOMY RESILIENT, Growth Persists Amidst Inflation

The first quarter GDP growth estimate for the current year at 7.8% released by the Ministry of Statistics and Programme is indeed creditable in an environment of global slowdown and at a time when most countries have been struggling to post reasonable growth. Although it is lower than the 8% growth projected by the RBI, the estimate conforms well to the market expectations. Of course, in the coming quarters, the economy is likely to slow down and the growth for FY24 is estimated at 6.5% by the RBI.

Food Inflation – An Ingredient of Concern in Combatting CPI Inflation

Economies across the globe have been combatting inflation. In India, the y-o-y CPI inflation climbed a 15 months high to 7.44% in July 2023 mainly on the back of sharp escalation in food inflation by 11.4%. While the CPI inflation scaled higher on back of food inflation, the latter peaked due to higher prices of vegetables, spices, pulses, cereals and milk and milk products. Inflation in vegetables rose as high as 37.34%; tomatoes reached as high as Rs 200 /kg. Inflation in spices stood at 21.63%, pulses at 13.27%, cereals and products, 13.04% and milk and milk products 8.34%. The only respite to consumers lied in lowered prices of oil and fats that witnesses a deflation (-16.8%)

Aspirations for Internationalization – The case of the Indian Rupee during the 77 th year of Independence

The emergence of global crises with potential to generate major economic and financial upheavals such as the Southeast Asian Crisis of 1997, the US subprime crisis of 2008, or the Russian invasion of Ukraine in early 2022, have time and again brought forth the concerns and debates exploring the possibilities of ushering in a multi-currency system.

CPI Inflation - A Pressing Concern, Food Inflation - Too Costly A Component, Reveals Data for July 2023

The all India y-o-y CPI inflation scaled to 7.44% in July 2023, reaching a 15 months high and is much higher than the market expectation of 6.5%. The inflation rate was 4.8% in June. The sharp increase in the July inflation caused the Monetary Policy Committee (MPC) to revise the projection for the second quarter from 5.2% to 6.2% and for FY 2024 the projection has been revised from 5.1% to 5.4%.

Challenges Before the Sixteenth Finance Commission

The Sixteenth Finance Commission will have to be appointed soon and it will have challenging tasks in the prevailing difficult fiscal environment of Indian federalism. The Fifteenth Finance Commission‘s recommendations will be up to 2025-26 and the new Commission’s recommendations should be available for consideration by the Finance Ministry before presenting the Union budget for 2026-27.

The Debt Dilemma: Saving the Burden on the Future Generation

Elevated levels of India’s fiscal deficit and public debt have been a matter of concern in India for a long time. Even before the pandemic, debt levels were among the highest in the developing world and emerging market economies. The pandemic pushed the envelope further and relative to the GDP, the fiscal deficit in FY21 increased to 13.3% and the aggregate public debt to 89.6%.

GDP Growth in FY 2023: A Note of Cautious Optimism

A better-than-expected fourth quarter growth in 2022-23 at 6.1 per cent has pushed the growth rate for the year to 7.2 per cent. For most economic analysts, this came as a big surprise and is much higher than the assessment of the Monetary Policy Committee (MPC) of the RBI (6.8%). In a scenario of global slowdown, this is certainly creditable.

GST Reform to Aid Economic Recovery

The economic indicators show steady progress in the recovery process. Although the core sector growth continues to be muted, both manufacturing and service sector PMI indexes have shown a significant rise in April 2023 indicating a steady expansion of activities in these sectors. The manufacturing PMI increased to 57.2 as compared to 56.4 in the previous month, and this was the highest in the last 4 months.

State of the Economy: Challenges of Sustaining Growth and Controlling Inflation

In a surprise move, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) decided to take a pause after increasing the interest rate in 6 consecutive meetings. It has increased the repo rate by 250 basis points (bps) since May 2022.

Focus on Growth and Fiscal Consolidation

The economy has passed through successive shocks in the last three years posing difficulties in both growth and macroeconomic stability. Beginning with 2020-21, when the economy contracted by 6.6 per cent due to the successive waves of the pandemic, it barely staged a recovery to 8.7 per cent in the next year and close to 7 per cent in the current fiscal.

Fiscal Policy Stance is Clearer: On to the Monetary Policy

There were considerable apprehensions about how the Finance Minister would balance the fiscal consolidation objective with the objective of reviving growth by increasing infrastructure spending. The budget proposes to compress the fiscal deficit by half a percentage point to GDP to 5.9% while increasing the capital expenditure from 2.7% of GDP to 3.3%

The Inflation-Growth Dilemma: Walking the Tight Rope

The Finance Minister has the difficult task of preparing the budget at a time when both global and domestic economic environment is far from being congenial. According to the IMF, the world economy is projected to grow at just about 2.7% in 2023 as compared to 3.2% in 2022 and 6% in 2021.

The State of Indian Economy: Growth-Inflation Conundrum

The muted economic growth situation and rising inflation continue to be a matter of concern in India. The Q2FY23 estimate of GDP at 6.3% on year-on-year (y-o-y) basis is significantly lower than the growth in Q1FY23 (13.5%). This partly reflects the waning of the base effect and partly the stickiness in the recovery process. While the growth rate of GDP is as expected, Gross Value Added (GVA) growth is 0.7 percentage points lower at 5.6%, which shows that a considerable part of it is due to the high collection of indirect taxes minus subsidies

Lower Quantum of Rate Hikes

The statement of the Monetary Policy Committee (MPC) announced today by the Governor of the Reserve Bank of India (RBI) is in line with the BWR expectations. In a 5-1 majority, the MPC has decided to increase the policy repo rate by 35 basis points with immediate effect. With this, the repo rate at 6.25% has reached the February 2019 level. The stance of the MPC remains unchanged, continuing with calibrated withdrawal of accommodation, but with 4-2 majority.

Another repo rate hike is on its way

As the CPI inflation rate has continued to remain above the RBI’s tolerance limit of 6% for tenth consecutive months, the MPC is likely to continue tightening in its upcoming policy meeting. The RBI has already missed its inflation target range of 2% to 6% for three consecutive quarters, and with inflation still above the comfort zone, the rate hike seems inevitable. We expect the increase to be limited to 25 to 35 basis points.

Economic Recovery and Growth Acceleration: Searching for Fiscal Space

At last, there is some encouraging news on the economic front. Although the credit rating and multilateral lending agencies have been revising the growth rate downwards and inflation continues to rage above the upper tolerance limit, some high-frequency economic indicators are showing signs of continued recovery. Of course, it is still unclear whether this recovery will sustain, but it provides an encouraging possibility. Equally important is the fact that the fiscal implementation in the first half of the year has not been a matter of concern, but there could be challenges in ensuring adequate fiscal space to assist continued recovery while containing the deficits and debt at the budgeted level. It is important to take note of the challenges and ensure adequate fiscal space for continued recovery.

Fertiliser industry likely to witness healthy growth

BWR expects y-o-y growth of 2%-4% in domestic fertiliser production and 7%-9% growth in fertiliser imports during FY23 owing to an addition in production capacity, healthy demand backed by surplus rainfall and high sowing. Similarly,BWR expects that the fertiliser industry will maintain its profitability momentum in the remaining period of FY23 due to a massive subsidy allocation.

Rising automobile sales to aid automotive demand

BWR expects the auto component industry revenue to report y-o-y growth of 11%-13% in FY23.Due to supply-chain disruptions and a shortage of semiconductors, there was a gap between demand and supply of automobiles in FY22, leading to deferred demand.BWR expects demand in the FY23 aftermarkets to further increase at 6%-8%, backed by a change in peoples preference towards using older vehicles for a longer period.

MPC Meeting: A Balanced Policy Approach

The statement of the Monetary Policy Committee (MPC) announced today by the Governor of the Reserve Bank of India (RBI) is in line with the BWR expectations. The MPC has decided to increase the policy repo rate by 50 basis points to 5.9% with immediate effect in a 5-1 decision. The stance of the MPC remains unchanged, continuing with the calibrated withdrawal of accommodation.

Modest moderation likely in FY23 GDP outlook

The prolonged war between Russia and Ukraine, and its adverse consequences have heightened the risk of a global recession. As central banks globally are aggressively raising interest rates to combat inflation, global growth recovery has weakened sharply, raising the fear of a recession in major advanced economies. Higher inflationary levels and a steady increase in the policy rate to combat the rising prices on the one hand and arrest the flight of capital on the other have increased the risk to the domestic growth outlook.

Cement demand to continue to witness healthy growth in FY23

BWR expects demand for cement to increase by around 10%-12% due to a rise in government spending on infrastructure development and real estate growth, despite a moderation in demand in the wake of higher inflation.With the rise in demand and continuous rise in input costs,BWR expects cement prices to further increase by about 4-6% y-o-y in FY23.

Monetary Tightening Approach to Continue

With the CPI inflation rate reaching the 7% level again in August 2022, the RBI is likely to continue with its monetary tightening in the upcoming policy meeting. We expect a 50 basis points increase in the repo rate and appropriate liquidity boosting measures to support growth.

Introduction of 5G: A Step Towards ‘Digital India’

Brickwork Ratings (BWR) expects the Average Revenue Per User (ARPU) and Minutes of Usage (MOU) to increase y-o-y by 20-22% and 13-15% owing to another price hike and launch of 5G premium plans. Similarly,BWR expects the EBITDA margins of telecom operators to witness a 20-22% growth in their EBITDA.

Mixed growth signals; Recovery continues

Domestic growth prospects continued to be impinged by adverse global developments such as the prolonged Russia Ukraine war, tightening of financial conditions and rising risks of a global recession. However, there is some easing in price challenges and external concerns, such as easing crude oil prices, a reversal in capital outflows and an improvement in manufacturing activities in the recent months, bringing optimism.

Infrastructure and Policy Initiatives to Enable EV Momentum in FY23

The adoption of Electric Vehicles (EVs) has globally increased exponentially over the past decades mainly in light of rising environmental issues, such as global warming, caused by higher pollution. In India, the shift in consumer preference to EVs is supported by government incentives and also due to the increasing maintenance cost of non-electric vehicles, considering a rise in fuel costs.

Road Construction: On the Path to Recovery

Brickwork Ratings (BWR) expects led by government initiatives, road construction to increase by 9-11% in FY23. Similarly, BWR expects connecting O&M to BPC would increase the HAM efficiency and smoothen the operation of the road projects awarded under the HAM, thereby further increasing the market share..

Rising Interest Rates and Growth Challenges

The growth dynamics for FY23 changed tremendously following Russia’s war with Ukraine, and rising price pressures have added to the dilemma. The domestic growth prospects continued to be impacted by adverse global developments such as the prolonged Russia-Ukraine war, tightening of financial conditions, and rising risks of a global recession. Persistent supply-side disruptions and a meteoric rise in energy-related supplies have led to a spike in inflationary challenges, while worsening external concerns, rupee depreciation and the retrenchment of capital flows have been adding to the woes. The record-level inflation has also intensified significant downside risks to the growth momentum.

Focus on managing inflation; Forward guidance a little more hawkish

The Reserve Bank of India (RBI), in its Monetary Policy Committee (MPC) statement announced today, has increased the policy repo rate by 50 basis points to 5.4% with immediate effect in a unanimous decision. The statement continues to focus on the withdrawal of accommodation without a change in the policy stance to neutral.

RBI likely to raise repo rate by 25 to 35 bps in August MPC

Despite a slight dip in inflation, the RBI is likely to continue with its monetary tightening and increase the repo rate by 25 to 35 basis points as CPI inflation is still above the MPC’s upper tolerance level of 6%

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