Do it yourself

The Reserve Bank of India, in its latest policy review, refrained from making any projection for the economic growth for the current fiscal year. It however admitted that the economy may see some contraction in the current fiscal year FY21. Post announcement of economic performance data for 1QFY21 a number of agencies and brokerage firms have reduced the full year FY21e GDP contraction number to ranging from -5% to -11%. Similarly, the fiscal deficit number for FY21 now range from 6.5% to 8.5%. Recently, the former governor of RBI, Dr. C. Rangrajan surprised the markets by stating that FY21 GDP may actually post a small growth instead of contraction. This was a clear departure from his views expressed a couple of months back. A paper titled ‘India’s Growth Prospects and Policy Options: Emerging from the Pandemic’s Shadow’, jointly written by Rangarajan and India EY India chief policy advisor D K Srivastava noted that notwithstanding the forecasts of GDP contraction made by many n...

The economic growth in first quarter of current fiscal year (FY21) contracted ~24% as compared to 1QFY20. The data released on Monday evening was not shocking as this quarter was impacted by the total lockdown of economy to mitigate the impact of COVID-19 pandemic. However, it was surprising to the extent that it surpassed all the worst case estimates and is the worst economic performance amongst all major global economies. The sharp economic contraction has come after a sustained economic slowdown over past four years. The investment activity and new employment creation has virtually collapsed in post demonetization (November 2016) period. The household savings, which traditionally cushioned the fiscal profligacy of governments, have declined sharply and rate of incremental rise in per capita income has also declined. The wealth and income inequalities have seen sharp rise causing widespread civic disquiet in the country. The stress on financial sector is not easing materially des...

The 1QFY21 results announced so far have been mostly better than average estimate of various analysts. About two third of the companies in Nifty 50 universe have declared their results so far. Out of these about 10% companies have missed the analysts on EBIDTA front; while 60% have surpassed the estimated with decent margins. This has obviously comforted the investors. Nifty sales has declined 28% (yoy) while EBIDTA decline is marginal at 1%. This highlights that most companies have managed their cost very well. The empirical evidence suggests that cost savings are mostly sticky with most of the Indian companies. This certainly augurs well for the future profitability of companies. The good news however ends here. On macroeconomic side, the incremental data is indicating that the economic recovery might be stalling after small recovery in May and June. Many economists and strategists have underlined this phenomenon in their recent reports. For example, note the following: ...