Do it yourself

Resilient growth despite disturbance and challenges The full year FY25 growth (6.5% vs 9.2% in FY24) came in line with the second advance estimates of NSO; 4QFY25 growth rate (7.4% on a high base of 8.4% in 4QFY24) is much better than the estimates of the market professionals, though in line with NSO advance estimates. The higher Q4 growth is mostly attributable to— (i)     High gross investment (GCFC) led by the construction sector (4QFY25 10.8%), reflecting strong government capex. Investment (Gross Fixed Capital Formation or GFCF) grew 9.4% yoy in 4QFY25, marginally above the long-term average. However, the higher public capex seen in 4QFY25 could be due to slow 1HFY25, as government functioning was impacted by the model code of conduct implemented during the general; elections. (ii)    Farm sector growth of 5.4% in 4QFY25 (on a low base of 0.9% in 4QFY24). On a full year basis (FY25) also, the sector was up 4.6%, compared to 2.7% in FY24. If we c...

In the year 1689, British monarch William of Orange put steep tariffs on French wine. He wanted to encourage the British to drink their own booze - make and drink. It was not a great idea because without wine, Britain turned to the hard stuff - gin. So, for the next 50 years, England was in the grip of the so-called gin craze. And newspapers wrote about the surge in crime and death and unemployment. In the 18th century, Britain put trade restrictions and taxes on tea being shipped to the colonies. This eventually led to the Boston Tea Party, an iconic event in the American war for independence. In the 1800s, the Brits were importing a lot of tea from China, and they didn't like the trade deficit, so they started to export opium to China, which caused an opium epidemic in China. China put a tariff on opium and then banned it altogether. This led to the very bloody Sino-British Opium Wars. The Qing lost the war. This defeat is popularly believed to be the first step in the direction ...

India’s real GDP grew by 5.4% yoy during 2QFY25 (July-Sep); the slowest growth rate recorded since 3QFY23. The Reserve Bank of India had forecasted a growth of 7%, just a month ago, while the market consensus was less sanguine at ~6.5%. For the argument’s sake, some of the slowdown in 2QFY25 could be attributed to a high base (2QFY24 GDP grew at 8.1%). However, it is tough to deny that the Indian economy has been growing below potential in most of the post global financial crisis (GFC-2009) period. In fact, it will not be totally perverse to argue that in the past one decade or so, the potential growth curve itself has moved lower. For record, the Indian economy has grown at an average rate of 5.8% during the past decade (FY15-FY24). Even normalizing for the Covid-19 lockdown impact, the Indian economy has grown at an average rate of 6.0%, much below the estimated potential growth rate of over 8%. The real GDP had grown at an average rate of 7.8% during the preceding decade (FY05-FY14)...

After the conclusion of the recent Haryana Assembly elections, a lot of people, including some of the senior most political analysts & observers, wondered why the Congress party lost the election, contrary to the popular perception. The ruling party was witnessing serious anti-incumbency issues. The Congress party, being the principal opposition party, had raised all the pertinent issues concerning the common people. Congress leader Rahul Gandhi carried an effective campaign. Almost every poll projected a clear lead for the Congress Party. At a gathering last evening someone asked me “how do you explain the repeated poor performance of the Congress Party, despite the rising popularity of its main leader?” My answer was simple, “Congress leaders are telling people what problems (inflation, unemployment, nepotism etc.) they are facing, as if people are not aware of their problems. Congress leaders, however, do not offer a solution for any of the peoples’ problems. That is why they lo...

The ongoing celebrations of the Festival of Democracy shall end on 4 th June 2024, with the announcement of election results for the 18 th Lok Sabha. In the past two months, the market narrative in India has pivoted around the election outcome. Even though 4QFY24 earnings did impact the performance of specific stocks materially; speculation about the election results has mostly dominated the sentiments. Once the elections are over and the contours of the new government are clear in the first fortnight of June, the focus will shift to the presentation of a full budget for the current financial year. To keep the tradition, only an interim budget (vote on account) for FY25 was presented in February 2024 to run the government till a new government is formed for the next five years. A final budget is expected to be presented by the new government in the last week of July 2024. Some media commentators and market experts have attempted to sketch the final budget based on the election sp...

ले दे के अपने पास फ़क़त इक नज़र तो है , क्यूँ देखें ज़िंदगी को किसी की नज़र से हम — साहिर लुधियानवी Last Thursday, the finance minister presented an interim budget for the fiscal year 2024-25. The budget presentation had two part – (i) rhetorical and (ii) substantive. The first part included a speech about the performance of the governments led by Prime Minister Narendra Modi for the past 10 years and promises for the next 23 years. The finance minister spoke about how in 2014 their government inherited an economy that was in shambles; and how they have pulled it out from a total mess and put it on the fast track to achieve the status of a developed nation by the year 2047; when we would celebrate 100 years of our independence from the colonial British rule. The finance minister also promised to implement a slew of development schemes over the next five years. She however refrained from listing any specifics or financial details. The second part included (i) the...

“Sir, I rise to present the Budget of the Central Government for the year 1962-63. The main purpose of this Budget is to place before Parliament an account of the finances of the Central Government for the current year and to obtain from the House a vote on account to meet the expenditure of the Government until the new Parliament considers the Budget again.” (Shri Morarji R. Desai, Minister of Finance, introducing the interim budget for the year 1962-63) Tomorrow, the union finance minister will present an interim budget for the fiscal year 2024-25. An interim budget is necessitated due to the impending general elections, which ought to be completed by the end of May 2024. The union budget for the current fiscal year 2023-24 authorized the expenses of the union government till 31 March 2024. The incumbent government has the mandate to be in power only till the general elections are completed and a new government is sworn in. It is a convention of parliamentary ethics that the incumben...

  India rates: Liquidity update (Nomura Securities) Liquidity update: Over the past few months, liquidity in the interbank market has been relatively range bound, largely tracking the normal inter month seasonal patterns. However, overall system liquidity, including the government’s cash balance, has increased because of the larger-than-expected RBI dividend and the liquidity infusion from the INR2,000 note’s withdrawal. As of 26 July, interbank liquidity was approximately INR1.24trn, while overall system liquidity was INR3.6trn on 14 July. As a percentage of NDTL, interbank liquidity is approximately 0.7%, while overall system liquidity is 2%. Despite the increase we have seen MIBOR spike above the MDF rate on various occasions. What has been affecting INR liquidity? Currency in circulation (CIC) has been decreasing since the RBI announced that the INR2,000 note would be withdrawn . Since the announcement, CIC has declined by INR1.36trn up to 14 July. This is in line with ou...

Stabilization is the key (Yes Bank) This Budget would have the daunting task of progressing towards consolidation after the covid related fiscal push. On the other hand, an eye needs to be kept on the economic growth in an atmosphere of slowing global growth and tightening domestic financial conditions. On a strategic level, the broad reforms process should continue with outlays earmarked for rural development, boosting manufacturing, employment generation, and capacity building through infrastructure. Despite this being the last Budget before general elections, we do not anticipate much in terms of tax dole outs for the masses. For FY24E we anticipate the Budget deficit to increase to INR 17.8 tn, GFD/GDP to print at 5.9% (after attaining the 6.4% target for FY23BE). Net and gross borrowings are likely to increase in FY24E to INR 11.7 tn and 15.4 tn respectively. Despite RBI pausing after another 25bps hike in February 2023, we see a scope for yields to rise in H1FY24 towards 7.60...