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Soft underbelly of India’s robust economic outlook (AXIS Capital) Is private consumption growth weak due to job distress or weak real income growth? Official labor surveys show that jobs are not a problem in urban India. Participation rates are stronger and unemployment rates are lower than 2019 levels. Both jobs and real incomes were improving over the past few quarters. But the latest bout of high food inflation is a setback for real income and hence broad-basing in consumption. India’s macro position is being hailed due to its relatively robust GDP growth and well-contained risk parameters like core inflation (within the headline target band) and current account deficit (<2.5% of GDP). However, the soft underbelly of India’s otherwise robust economic outlook is weak private consumption, with growth in real terms near 3% YoY as of the Mar’23 quarter. There is reason to be hopeful of stronger private consumption over the medium term, since the current growth is primarily led ...

Economy: Activity holds up; strong sequential rebound led by seasonality (Nirmal Bang) Early data for March’23 indicate that 78.1% indicators were in the positive territory on YoY basis, up from 68.8% in Feb’23. Final data for Feb’23 indicate that 71.4% indicators were in the positive territory on YoY basis. On a sequential basis, there was a sharp rebound in March’23, led by seasonality. Around 75% indicators were in the positive territory in March’23, up from 50% in Feb’23. Final data for Feb’23 indicate that 34.7% indicators were in the positive territory. Urban unemployment edged up to 8.5% in March’23 from 7.9% in Feb’23. Rural unemployment rose to 7.5% in March’23 from 7.2% in Feb’23. Rural wages have sustained their rebound since mid-FY23 and rose by 8.1% YoY in Jan’23 vs. 7.6% YoY jump in Dec’22. In other rural indicators, tractor sales continued to hold up, growing by 13.7% YoY in March’23 vs. 20% YoY growth in Feb’23 (up by 32.9% MoM). Two wheeler (2W) sales grew by 9...

Nominal GDP growth could be ~7.5% in FY24 (MOFSL) It is remarkable that the first three months of 2023 have already witnessed several different moods. The year began with very strong optimism on global economic growth; however, from mid-Feb’23, the positive sentiment started fading with US economic data turning out to be much stronger than expected. With the collapse of Silicon Valley Bank on 10th March 2023, the caution was quickly replaced by serious concerns. The US Fed hiked rates by 25bp this week, continuing its inflation fight. As highlighted in our earlier QEO, owing to increasing growth concerns in the US economy, inflationary concerns will take a back seat in 2HCY23. India, however, seems to be shrugging off these developments so far. Real GDP growth continues to remain strong but we keep our forecasts broadly unchanged at 7%/5.2%/5.6% in FY23/FY24/FY25. We see nominal GDP growth at 16.3%/7.7%/10% in FY23/FY24/FY25, slightly higher than 14.7%/7.3%/9.3% expected earlier. ...

After two years of disruptions, uncertainty and volatility, FY23 appeared a rather normal year. Both the markets and the economy regained a semblance of normalcy in terms of the level of activity, trajectory of growth, direction, and future outlook. Though, it would be inappropriate to say that skies are blue and bright; it can be reasonably stated that we have reverted to a market that is no longer euphoric. Pendulum swinging back to equilibrium The global economy that witnessed two years of extreme pessimism followed by a period of steroid stimulated exuberance began to normalize in FY23. Central bankers began the process of normalizing monetary policies by withdrawing liquidity and hiking rates. The broken supply chains have been mostly restored. Inflated asset and commodity prices are returning to more reasonable levels. The organs of the global ecosystem which were infected badly by the excessive liquidity, irrational exuberance and unsustainable stress are now getting amputated. ...