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Budget sets better economic prospects; Fiscal challenges continue to weigh in

Liquidity boosting measures to accelerate rate transmission and boost credit demand Budget proposals and the RBI’s liquidity boosting measures, coupled with previously announced government measures, are expected to bring the domestic economy on an improved growth track in fiscal 2020.

Announcement of liquidity boosting measures to accelerate rate transmission, but absence of demand side boost will constrain the impact of supply side measures

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has maintained the policy repo rate at 5.15%, also maintaining an accommodative stance with a view to revive growth and ensure inflation remains within target. The unchanged rate and stance are both in line with BWR expectations.

MPC to maintain status quo; GDP to rebound in next fiscal

Even as there are expectations of a moderation in inflation from the elevated level of 7.35% in December 2019, the Monetary Policy Committee (MPC) of the RBI islikely to maintain the policy repo rate at 5.15% in the upcoming monetary policy meeting to be announced on 6 February 2020. We anticipate the slump in GDP growth has bottomed out to 5% in 2019-20 and expected to rebound in 2020-21 to 5.5-6%, aided by the government measures and the transmission of past rate cuts.

Union Budget 2020-21- A Review

In depth Analysis and Credit Impact on Various sectors.

One more footstep taken towards economic recovery; Nation to attract more foreign flows via VRR - says Brickwork Ratings

The revision in investment limit under Voluntary Retention Route (VRR) to INR 1.5 trillion from earlier limit of INR 750 billion, announced by Reserve Bank of India, is a big positive for debt market as availability of on tap investment facility with first come first serve basis will boost the foreign flows in India at the right time which the nation needs in a bid to shore up its economy. Also, the minimum retention period of 3 years will further help to stabilize the economic situation on the back of voluntary commitment to retain a minimum percentage (75%) of investments for a definite period.

Union Budget - An Opportunity to Unleash Reforms

BWR expects Union Budget to provide a boost to Investments and Savings The Union Budget 2020-21, to be presented on 1 February 2020, is expected to announce appropriate measures to restore the economic growth and to set a clear roadmap for achieving the ambitious USD 5 trillion economy by 2025. Amidst the current slowdown in the economy evident from the 11-year low GDP estimates of 5%, the approach to the economic policy for the next year needs to be genuine and realistic

Little scope for MPC to continue with monetary policy easing at least in the short-term

CPI inflation at 5.5 years high, Crosses MPC's upper band target of 6% for the first time since 2016 As per the provisional estimates on CPI inflation released by MOSPI on 13 January 2020, the Consumer Prices Index (CPI) registered an increase of 7.35% for December 2019, on account of sharp uptick in food price inflation led by increase in the prices of vegetables and pulses.

Nascent signs of Economic Revival

Governments measures and Monetary easing by RBI expected to reverse the economic slowdown in 2020 The domestic economy may see a moderate improvement in GDP in the next fiscal, supported by Government measures. Muted manufacturing activity hit by slowdown in automobile sector led the slowdown in the GDP to hit 4.55% in Q2 2019-20, the lowest in last 26 quarters

IMF Report emphasises on fiscal consolidation rather than stimulus

The declining investment, stagnant exports and rising unemployment on the eve of budget presentation pose formidable challenges to the Finance Minister in formulating the budget. The reforms so far have yielded little and despite reducing the policy rate by 135 basis points, its transmission has been sluggish and impact is marginal.

Economy on the mend; further measures needed

Brickwork Ratings expects more measures to reverse the economic slowdown While slow-down is a global phenomenon, India has remained insulated from such events in the past due to its burgeoning consumer demand at the back of its demographic dividend. The Indian economy was expected to grow at a much faster pace encouraging the nation to set a goal of a $5 trillion Economy in next 5 years thereby targeting a CAGR of 15%.

Brickwork Ratings expects more such RBI's special OMOs may follow to brace yields

In a bid to contain the rising yields on the longer end of the yield curve, the Reserve Bank of India has strategically arranged this debt-to-money market swap wherein they suck out the government bonds of long duration (10 years) and pump in short duration (about 6 months) worth INR 100 billion through special Open Market Operations (OMO) to improve both liquidity and bond yields.

Acquisition of Ruchi Soya Industries credit neutral for Patanjali Ayurved Ltd

Patanjali Ayurved Group has announced acquisition of Ruchi Soya Industries Ltd (BWR unrated) by Patanjali Consortium Adhigrahan Pvt Ltd (PCAPL) (BWR unrated) a wholly owned subsidiary of Patanjali Ayurved Ltd (PAL) (BWR AA-, Outlook Negative). This acquisition is funded by debt of INR 33 billion from a consortium of banks and with funds infusion of ~ INR 10 billion from the promoter PAL..

Avoiding Stagflation: Urgent Action is the Need of the Hour

The recent spike in CPI inflation numbers and decelerating growth scenario bring back the memories of low average growth of 4.1% during 2000-01 to 2002-03 and the more recent 4.3% during the July-September quarter of 2013. In both these episodes, low growth was combined with high inflation and as the growth falters to 4.5% and consumer price index moves up to 5.54% in July-September of this year, there are concerns of the economy heading towards a stagflationary situation.

Much needed measures to address liquidity troubles faced by NBFC/HFCs

The revision in eligibility norms for "Partial Credit Guarantee Scheme", announced in the Union Finance Budget 2019-20 by the Union Cabinet, is a big positive step for NBFC and HFCs. There has been limited traction in the earlier scheme announced in the budget, due to the high rating requirement making it unattractive. In addition, higher credit enhancement required in the previous scheme made it less feasible

Automobile sales decline for 12th month in a row

Domestic automobile sales fell by 12% y-o-y in the month of November 2019 largely driven by weak sales of commercial vehicles and two wheelers. Commercial vehicle sales were down by 15% and two & three wheelers sales were down by 14% y-o-y in November 2019. The weak commercial vehicle sales reflect the subdued state of industrial activity in the country and weak two wheeler sales indicate low rural demand. Commercial vehicles sales were also impacted by revised axle norms and financing issues due to NBFC crisis..

Fears of Economic Slowdown Intensified

The release of the second quarter GDP estimate has confirmed the fears of continuing slowing down of the Indian economy. The economic performance has slid further in the second quarter despite the policy initiatives taken by the government during the past few months and RBI's continued accommodative stance. The GDP grew at a much lower rate of 4.55% in the second quarter, the lowest in last 26 quarters, despite favourable base effect. With this, the first half of 2019-20 GDP stands at 4.8%, plunging to the levels seen in March 2013.

Brickwork Rating sees many positives in the Bharat Bond ETF

The announcement of first corporate ETF namely Bharat Bond Exchange traded Fund by Government of India (GoI) is a 'three in one' step. Firstly, it will help the healthy PSUs including banks in raising cheaper funds, secondly, it will give an opportunity to investors to invest in safer instruments with tax advantage and thirdly, it will help the hitherto lagging bond market to develop and deepen.

Slowing Economy Demands One More Dose of Rate Cut

The release of the second quarter GDP estimate has confirmed the fears of continuing slowing down of Indian economy. The first quarter GDP estimate for the fiscal at 5% was the slowest seen in the last 6 years. The economic performance has slid further in the second quarter despite the policy initiatives taken by the government during the past few months and RBI's continued accommodative stance. The GDP grew at a much lower rate of 4.55% in the second quarter, the lowest in last 26 quarters, despite favourable base effect.

Deferment of spectrum dues and possible tariff hikes a positive but AGR overhang remains

The Finance Minister in her press conference on Nov 20, 2019 announced that the cabinet has approved deferment of the spectrum dues for FY21 and FY22, although the interest as stipulated in the terms of assignment will be charged as it is. This announcement is expected to improve the cash flows for the telecom players but it will not have net benefit on their balance sheet as they have to pay the fees along with interest charges after two years.

Uptick in Inflationary expectations warrants cautious approach by MPC

CPI Inflation crosses MPC mid-point target of 4% in October 2019. The Consumer Prices Index (CPI) increased by 4.62% year-on-year for October 2019, largely due to continued rise in vegetable prices. Core inflation actually slipped to 3.5%, its lowest level in the current series.

Deepening economic slowdown calls for further intervention by the government

IIP contracts to series low of -4.3% in September 2019. All three components of IIP reported contraction in output in September. 17 out of the 23 industry groups in the manufacturing sector reported negative growth

Financial aid to help resolve stressed developers but demand side issue still unaddressed: Brickwork Ratings

The Government of India's announcement of establishing an Alternate Investment Fund (AIF) worth INR 250 billion aimed at priority debt financing for the completion of stalled housing projects that are in the affordable and middle-income housing sector, will go a long way in providing the much- needed relief to the developers having funding requirements. It will also to provide relief to homebuyers having investments in these projects. However, on a broader level, this may not completely address the urgent need of the sector that is plagued by huge unsold inventories.

Looming uncertainty over economic revival

The deepening economic concern manifested itself with several economic indicators reporting weak or subdued performances in the recent months. In September 2019, aggregate auto production recorded a contraction for the eleventh month in a row (-18.3%), eight core sectors reported one of the worst performances ever with 5.2% fall in output and deployment of bank credit to industries in the current fiscal so far witnessed a fall of 3.8%..

MFIs weather the liquidity storm in the NBFC space in FY19; Assets under Management (AUM) grew by 47 per cent

Brickwork Ratings (BWR) expects micro-finance institutions (MFIs) AUM to grow by 40-45 per cent in FY20 with the availability of the credit, expectation of reduced interest rates and disciplined collection and recovery model. Also, the recent proposed increase by RBI in the household income limit for eligible borrowers and higher permissible indebtedness of borrowers, augurs well for the growth momentum.

Inflation remains within target, but deepening concerns of economic slowdown continues

CPI Inflation reaches near MPC mid-point target at 3.99% in September 2019. Spike in food inflation led the CPI inflation to increase by 55 basis points in a month. Fuel price inflation remained negative capping additional rise

Series of growth boosting measures fetch confidence in the economic revival

Renewed hopes of reversal in the economic slowdown. The gamut of measures announced by the government recently brought immense hope on the reforms front to the otherwise dismal economic scenario. Though, how these measures influence the economic revival in the long run is still debatable, given the current demand side constraints.

Brickwork Ratings expects more rate cuts in upcoming RBI Monetary Policies

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reduced the key policy repo rate by 25 bps to 5.15%; which is a fifth consecutive cut. The rate cut and stance both are in line with BWR expectations.

Sanguine economy can still do with a rate cut boost

BWR expects 25 basis points rate cut in the ensuing RBI MPC. The international economic scenario post Federal Reserve's rate cut and our government's efforts to push the growth momentum and subdued inflation are fertile arenas for a rate cut.

Revival in manufacturing activity reinvigorates economic prospects

IIP growth improved to 4.3% in July 2019. Revival in Manufacturing activity boosts IIP trends. Recovery in Manufacturing sector was due to improved production in basic metals and food products...

Government's stimulus to help economy to revive

Falling GDP growth suggests further moderation in economic activity. The recent Q1 2019-20 data on GDP shows deepening concerns on the growth front, but the host of measures announced recently is expected to help in combating slowdown with renewed prospects.

Mega Merger to revitalize the banks' operations and reduce cost

Finance Minister, Nirmala Sitharaman, on Friday (August 30) unveiled a mega merger plan for public sector banks (PSBs), amalgamating 10 banks into 4.

Pessimistic GDP Estimates Underline Urgency of Reforms

The first quarter estimate of GDP for the current fiscal has been much below the market expectations. The market had expected at least 5.5 per cent GDP growth and the growth at 5 per cent comes as a shocking disappointment. The growth rate in the first quarter of 2018-19 was 8 per cent and the growth in the previous quarter was 5.8 per cent. The GVA figure at 4.9 per cent is sub 5 per cent and this has not been seen for more than five years. With this, it is time for all to rework the GDP estimate downwards for the year as the prospect is not likely to be very different in the next quarter as well.

RBI's transfer to help the Government in combating economic slowdown and conform to fiscal targets, says Brickwork Ratings

The acceptance of the report of the "Expert Committee Reviewing the Extant Economic Capital Framework" chaired by Dr. Bimal Jalan by the RBI Board brings in the much-needed relief to the government in adhering to its fiscal targets. Based on the Capital framework recommended by the Committee, the Board decided to transfer Rs 1,76,051 crore comprising of Rs 1,23,414 crore surplus and an additional Rs. 52,637 excess contingency provisions. With this, the RBI is set to transfer...

Lenders/Bankers should take cue from SEBI's guidelines on disclosure and provide timely information to CRAs says Brickwork Ratings

The market regulator, Securities and Exchange Board of India (SEBI), in its board meeting held on Aug 21, approved a slew of amendments in a bid to rationalize the existing regulatory framework for Foreign Portfolio Investors (FPIs) and boost efficient rating mechanism in India

Stagnant manufacturing activity needs further monetary stimulus

Lower fuel prices leads to marginal easing of CPI Inflation to 3.15% in July. The Consumer Price Index (CPI) inflation rate softened marginally in July compared to June 2019 largely driven by fall in fuel prices. As per the August release of Ministry of Statistics and Programme Implementation (MOSPI), the CPI inflation rate eased by 3 basis points over the previous month to 3.15%(provisional estimates, measured by y-o-y change) in July 2019. Despite gradually rising for last 5 months, the inflation remained within the mid-point of MPC range enabling rate cuts to 110 basis points in 2019 so far.

Economy's slow start needs to accelerate

In the July 2019 edition of Global Economic Prospects, World Bank cited that India's growth remains solid, supported by improved confidence, slowing inflation and still robust investment. The report suggests the economy to grow a slower pace than in 2018, although investment growth is expected to remain robust as benefits of recent policy reforms further materialize. Further, the report also projects the growth to accelerate to 7.5% in FY 2019-20, on the back of support from monetary and fiscal policies.

BWR sees a southern trend in interest rates; Looks out for quicker transmission of rates

Brickwork Ratings, 07 August 2019, Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reduced the key policy repo rate by 35 bps to 5.40%; which is a fourth consecutive cut in the policy rate and the lowest repo rate since April 2010. The MPC decided to keep the stance unchanged as accommodative, in line with BWR expectations.

BWR expects 25 basis points rate cut in August 2019 MPC

The Economic Survey 2018-19 and Union Budget 2019-20 indicated that the government aims to push the economy to USD 5 trillion by 2024-25. This would require the economy to grow at about 9% at the constant exchange rate. BWR feels that a rate cut would help to revive investment and provide consumption push to the economy and boost the critical factors contributing to the growth. Since the last June 2019 Monetary Policy Committee (MPC) meeting, indicators show economic activity has been slowing characterized by muted performances with respect to the high frequency indicators in critical sectors such...

IIP growth trends and marginal increase in CPI Inflation provide headroom for MPC to consider Monetary easing

In the July release of Ministry of Statistics and Programme Implementation (MOSPI), the Consumer Prices Index (CPI) witnessed increase for the fifth month in a row. CPI inflation rose to 3.18% (provisional estimates, measured by y-o-y change) compared to 3.05% reported in May 2019. Despite touching 3.18% in June, CPI inflation remained within the mid-point of the flexible inflation target of 4% mandated to the Monetary Policy Committee (MPC) of the Reserve Bank India (RBI).

Budget Proposals: A Booster Shot for the Economy

India managed to maintain macroeconomic stability by containing inflation within 4% and current account deficit (CAD) to GDP ratio at 2.1% during 2018-19. However, due to slowdown in the domestic economy on account of lower farm output witnessed in the fourth quarter (Q4) of 2018-19, the full year GDP growth rate was revised downwards to 6.8% compared to 7.2% reported in the previous year. Along with agriculture, manufacturing sector also witnessed deceleration in growth as evident from weak IIP numbers....


Presenting the first financial budget of the current Government, the Union Budget 2019-20, the Finance Minister has clearly articulated a combination of measures for the long-term and immediate year with a clear vision for a $5 trillion economy by 2025.In formulating the fiscal policies, the FM strives to be innovative, responding to community aspirations promptly and effectively, and providing a head start to foster long-term development.

Balancing Fiscal Deficit Target and Growth ' Key Challenge for the Finance Minister

While a full Budget would be presented on July 5th 2019 expectedly on the lines of the interim budget presented in February 2019, the reformist contours of policy making and the conundrum of fiscal prudence would be weighed-in. The challenges faced by the domestic economy particularly slowing trade, rising protectionism...

CPI Inflation has crossed 3% in May 2019 after a gap of 7 months

As per the latest data released by Ministry of Statistics and Programme Implementation (MOSPI), Consumer Prices Index (CPI) Inflation witnessed sequential rise for the fourth month in May 2019 to 3.05% (provisional estimates, measured by y-o-y change) from 2.99% (revised from 2.92% reported earlier) in April 2019.

Expected Revival in GDP Growth with Political Stability and Monetary Stimulus

GDP growth slowed down to 5.8% in Q4 2018-19, thus dragging down the estimates of FY 2018-19 growth at 6.8%. However, the domestic economy expected to improve in 2019-20 on the back of monetary easing, benefiting from benign inflation coupled with relatively lower oil prices than expected. Political continuity ensured by the outcome of the general elections also helped to improved growth prospects in 2019-20...

RBI's revised directive provides much needed flexibility for lenders while ensuring credit discipline

The Reserve Bank of India today released revised norms for resolution of stressed assets in the wake of the judgment of the Hon�ble Supreme Court of India

BWR expects a rate cut in August Policy due to the recent slump in growth numbers and benign inflation

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reduced the key policy repo rate by 25 bps to 5.75%; which is a third consecutive cut in the policy rate and changed the stance to accommodative from neutral. The rate cut and stance both are in line with BWR expectations. All six members of the MPC, including the Governor of RBI, unanimously decided to reduce the policy repo rate and change the policy stance.

BWR expects Monetary Policy Committee to cut repo rate by 25 basis points

BWR expects the Monetary Policy Committee (MPC) of Reserve Bank of India (RBI) to cut key policy reporate by 25 basis points in the ensuing policy review of June 6, 2019. The MPC has reduced repo rates - 25 basis points each - continuously in its earlier two MPC reviews.

Inflation and IIP report

CPI Inflation increased to 2.92% in April compared to 2.86% in March. The overall inflation rate is expected to be benign in the next 12-18 months and provides room for the rate cut, although the core inflation has been higher than 5% in recent months. There are also risks arising from the US sanctions on Iran impacting the oil prices. On industrial output, while the growth has decelerated, the capacity utilization is at the highest level. Therefore, increase in output growth will critically depend on new investments.

FX Swap to Help Manage Liquidity Efficiently and Mitigate Rise in Interest Rates; Real Impact to be known by 2022

Brickwork Ratings, Mumbai, 15 May 2019: The Reserve Bank of India (RBI) introduced a new liquidity management tool in the form of dollar-rupee swap in March 2019 to meet the durable liquidity needs of the system. This is an addition to its many liquidity management tools like Liquidity Adjustment Facility (LAF) and Open Market Operations (OMOs).

CPI Inflation edges up to 2.86% in March 2019....

Inflation, measured by y-o-y change in the Consumer Prices Index (CPI), rose to 2.86% in March 2019, the second consecutive rise in 2019 after touching a 19-month low of 1.97% in January 2019. An upturn in food inflation coupled with marginal increase in inflation in the fuel group led 29 bps increase in the CPI inflation in March. With this, the average inflation for 2018-19 stood at 3.4% as compared to 3.6% during 2017-18.

Brickwork Ratings expects further rate cuts in FY20 in RBI Monetary Policy; Slow growth rate and benign inflation will be the basis of the expectation

Brickwork Ratings, 04 April 2019, Mumbai: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) reduced the key policy repo rate by 25 bps to 6%; which is a second consecutive cut in policy rate. The rate cut and stance both are in line with BWR expectations.

BWR expects Monetary Policy Committee to cut rates by 25 bps

Brickwork Ratings, 04 April 2019, Bengaluru: Brickwork Ratings expects Reserve Bank of India (RBI) led Monetary Policy Committee may again reduce the key policy rate- repo rate by a quarter point (25bps) at first Bi-Monthly Monetary Policy Statement of the financial year 2019-20 after one slice in February policy due to growth pressure and benign inflation state.

Funding Challenges to Continue for India's Shadow Banks in H1FY20

Liquidity Crunch fueled by muted demand from capital market and low appetite from banks.
Brickwork Ratings, Mumbai, 18 March 2019: Brickwork Ratings sees prolonged liabilities mismatch for India�s shadow banks � Non Banking Financial Companies (NBFCs).

Economy on the Revival Path: Need for a Calibrated View

The third quarter estimate of GDP for the year and the second advance estimate of National Income for 2017-18 released on February 28 shows that the economy, after the two major disruptions is in the recovery mode. There has been a steady acceleration in the growth of GDP from 5.7 per cent in the first quarter to 6.5 per cent in the second and further to 7.2 per cent in the third quarter.

Popular budget amidst attempt to fuel growth and infrastructure

Mumbai, 01 February 2018: Contrary to the expected populist budget, this year budget provides impetus to growth and is a good balancing act of driving growth agenda and keeping some popular measures for the masses. A strong emphasis has been given for uplift of Rural Sector, Healthcare, Education & Infrastructure to accelerate economic growth. The budget is credit positive for business environment especially for the MSME sector, one of the largest job generators in the country.