Do it yourself

The Indian economy has indubitably shown brilliant resilience and sustained the base growth rate of ~6%. In the current year FY26 also the real GDP is expected to grow in the range of 6.3% to 6.6% (vs 6.5% in FY25). It is expected that the tax incentive offered in the budget for FY26 may support urban consumption demand, that has been lagging for the past couple of years, while the rural demand has shown some pick-up. Good monsoon may further stimulate rural demand. Benign inflation and below potential growth trajectory shall keep the RBI on the monetary easing path. Rates may fall further and liquidity may remain supportive. Continued focus on capacity building by the government may however continue to remain the mainstay of the growth. The global environment remains challenging with trade related uncertainties and geopolitical tensions persisting. However, a resolution of trade and geopolitical conflicts could provide strong impetus. In my view, 6% (+/- 50bps) may now be the ba...

The 2025 th   year of the Christ is beginning on a very tentative note, particularly for investors in financial markets. The past four years have been relatively smooth for investors. With the benefit of hindsight, we can confidently claim that the markets were mostly driven by macro factors. Unprecedented liquidity infusion by the central banks and fiscal support to consumers across the world helped most asset classes to perform well. Despite massive global disruptions due to the pandemic and geopolitical, the volatility in markets was largely contained. Since most asset classes yielded decent returns for investors, they were not really pushed hard to make choices. However, the trend seen in the past few months is indicating that the conditions might change materially in the next 12-24 months. The macro trends may become ambivalent and unpredictable. Investors may need to make choices; and the return they would earn on their investment portfolios would largely depend on the choice...

  For me, Diwali this year was certainly not as it ought to be. Untimely demise of many close friends and relatives in the past few months; incessant horrific news flow from the active war zones; conspicuous signs of extreme socio-economic stress in a majority of the population; and apathy of the administration towards common man’s plight and worsening law & order situation dampened my spirit of festival. I spent the week wandering the streets, slums and villages of Delhi NCR region and adjoining districts. What I witnessed and experienced, makes me believe that blaming selling by the foreign investors for the extant pain in the stock markets is like treating “the effect” as “the cause” – which is not only inappropriate but borders foolishness. Household inflation, unemployment (including underemployment, disguised unemployment and most importantly unemployability), lack of basic civic infrastructure (drinking water, sanitation, primary health, decent primary education, etc.), ...

  FY24 Real GDP growth surpassed all estimates, even the most optimistic once, by a wide margin – growing 8.2% in FY24. The forecasts for FY25 have been upgraded sharply higher. Now most professional forecasters are projecting FY25e GDP growth to be in the 6.7-7.2% range. FY24 Real GDP growth has been led by investments (+9%). Consumption growth, both public (+2.5%) and private (+4%), continues to remain poor. The share of private consumption fell to 55.8%, lowest in decades. Exports (+2.6%) growth was also one of the lowest in a decade (excluding Covid affected FY20 and FY21). On the supply side, FY24 witnessed one of the worst agricultural GVA growth (+1.4%) in a decade; whereas Industrial growth (+9.5%) led by manufacturing and construction, was extremely strong. Services growth slowed down to 7.6% from 10% in FY23. In 4QFY24 , the surprise came largely from exports (+8.1%). Government consumption (+0.9%) completely collapsed due to election related restrictions. On the...

 The National Sample Survey Office (NSSO) released the results of the latest Household Consumption Expenditure Survey a few days ago. The report highlights some interesting trends in household consumption patterns over the last two decades. The changes in the rural consumption patterns are particularly noteworthy. Some of the key highlights of the survey could be listed as follows: Consumption levels ·          The average monthly per capita consumption expenditure (MPCE) in rural areas is Rs3773 while in urban areas it is about 71% higher at Rs6459. ·          Rural population spends 46% on food and 54% on non-food items. While in urban India this ratio is 39% and 61%. Consumption disparities ·          There is a significant regional skew in both rural and urban expenditure levels . Sikkim has the largest MPCE (Rs7731 for rural and Rs12105 for urban...

Last week, the National Statistical Office (NSO) released first advance estimates of the National Income for FY23. These estimates are important because the budget estimates for FY24 would be based on these estimates. The finance ministry will use these estimates to project the GDP, savings, tax revenue, expenditure and allocations for various sectors of the economy. Some key highlights of the data released by NSO could be listed as follows: FY23 real growth (2011-12 prices) GDP (at 2011-12 prices) may increase by 7% to against 8.7% in FY22. This estimate is marginally higher than the RBI’s latest estimate of 6.8%. Per capita GDP may increase by 5.8% to Rs1,13,967, in FY23, against a growth of 7.6% in FY22. Per capita private consumption may be Rs65,237, a growth of 6.6% over FY22. FY23 Nominal Growth (current prices) GDP may increase by 15.4% to US$3.3trn, against 19.5% growth in FY22. Per capita GDP may grow by 14.2% to Rs1,97,468 (US$2394), against a growth of 18.4% in FY22. Per cap...

A recently published paper by the RBI ( see here ) highlights the perceptible change in the macroeconomic outlook of the professional forecasters, in recent months. The latest round (September 2019) of the professional forecasters' survey (PFS) indicates that professional forecasters are growing increasingly skeptical about the macroeconomic conditions and growth in near term. I believe that in the next round of PFS (November 2019) we shall see further downward revision in the estimates as the data continues to deteriorate. In my view, the professional forecasters play a critical role in policy formulation and the quality of policy response to critical economic conditions. The fact that in the latest episode the professional forecasters have been quite slow in recognizing, underlines the inadequate policy response so far. The positive take away is that the realization of the gravity of situation is finally happening and it may hopefully reflect in the policy respon...