Tuesday, April 10, 2018

Dots not connecting

"To begin, begin."
—William Wordsworth (English, 1770-1850)
Word for the day
Mea culpa (n)
An acknowledgment of one's responsibility for a fault or error.
Malice towards none
Raise your hand if you know what is Mudra Yojna?
Check with your rickshaw puller, vegetable vendor, pakora vendor, tea seller...if they are aware!
First random thought this morning
When the world is feeling jittery about the consequences of a full blown Trade War and need for diplomatic maneuvering is extreme, India is working with a finance minister and minister for external affairs who not fully fit.
This is little unfortunate on three counts. One PM must be taking lot of load of these two on himself and thus exhausting himself. Two, decision making in these two critical ministries might be getting delayed. Three, there must be lot of "backroom drama" taking place to replace the finance minister, which may not be good for the government, party and perhaps country.

Dots not connecting

Last week, RBI surprised the financial markets quite a bit by projecting a Goldilocks phase for Indian economy. RBI projected a positive outlook for overall economic growth and a rather dovish outlook on inflation. projected CPI inflation for 2018-19 to 4.7-5.1% in H1:2018-19 and 4.4% in H2
RBI projected that GDP growth to strengthen from 6.6% in 2017-18 to 7.4% in 2018-19, with risks evenly balanced. MPC resolution cites the following two key reasons, amongst other, for acceleration in the pace of economic activity in 2018-19.
(i)    There are now clearer signs of revival in investment activity as reflected in the sustained expansion in capital goods production and still rising imports, albeit at a slower pace than in January. Further the teething troubles relating to implementation of the GST are receding; credit off-take has improved in the recent period and is becoming increasingly broadbased, which portends well for the manufacturing sector and new investment activity; large resource mobilisation from the primary market could strengthen investment activity further in the period ahead; the process of recapitalisation of public sector banks and resolution of distressed assets under the Insolvency and Bankruptcy Code (IBC) may improve the business and investment environment.
(ii)   Global demand has been improving, which should encourage exports and boost fresh investment.
On inflation, MPC taking the following factors consideration, projected CPI inflation for 2018-19 to 4.7-5.1% in H1:2018-19 and 4.4% in H2—
(a)   Overall food inflation should remain under check on the assumption of a normal monsoon and effective supply management by Government.
(b)   International crude oil prices have become volatile in the recent period, with a distinct hardening bias in the second half of March, even as the increase in shale production was more than expected. This has adversely impacted the outlook for crude oil prices.
(c)    Indian domestic demand is expected to strengthen during the course of the year.
(d)   The statistical impact of an increase in HRA for central government employees under the 7th CPC will continue till mid-2018, and gradually dissipate thereafter.
At the same time however RBI noted that "Notwithstanding these salubrious developments, consumer confidence dipped in the March 2018 round of the Reserve Bank’s survey, with the respondents expecting a moderation over the year ahead in general economic conditions, employment situation and their income. Overall sentiment in the manufacturing sector a quarter ahead also fell in the March 2018 round of the Reserve Bank’s industrial outlook survey under the weight of weaker prospects for production, order books, capacity utilisation, employment and profit margins.".....to continue

No comments:

Post a Comment