Do it yourself

  The former NITI Aayog Vice Chairman, Arvind Panagariya claimed that India may record a real GDP growth rate of 8% in FY23. However, there are not many who would agree with him. The Reserve Bank of India has projected a growth rate of 7% for FY23, in their latest forecast. Most professional forecasters have much lower forecast for the growth in the next few quarters. The average of professional forecasters’ projected growth of the Indian economy for 2023, as per Bloomberg, is close to 6%. In their latest forecast, Goldman Sachs Group projected the Indian economy to grow at 6.9% in calendar year 2022 and 5.9% in 2023. Morgan Stanley Research expects the Indian economy to grow at 6.8% in 2022 and 6.2%in 2023. Fidelity International expects the Indian economy to grow between 5.5 to 7% in 2023. Recent economic data has been giving mixed signals about the economy. While the domestic sector is showing resilience, the external sector continues to remain a concern. Weak external secto...

As per the latest reported data (7 January 2022), RBI was holding a total of US$632.7bn in non INR assets. This includes US$569.3bn foreign currencies, US$39bn gold, US$19.1bn SDRs and US$5.2 reserve position in the IMF. Considering our emotional attachment to gold, I would like to categorize it as emergency reserve only. So effectively, RBI has US$569.3bn worth of foreign currency to meet the regular demand. Considering an expected trade deficit of US$200-220bn for FY23, we appear adequately covered for monetary tightening by global central bankers and consequent unwind of USD carry trade potentially leading to FPI outflows. Assuming, that the global central bank monetary tightening is able to reign the runaway inflation, and India inflation remains at midpoint of RBI target range, we may end up with 2-2.5% INR depreciation for the year, implying end FY23 exchange rate (INR/USD) of 75 to 75.5; of course, not a matter of much concern. Some recent news headlines have drawn atten...

The recently published foreign trade data ( see here ) further confirmed the persisting slowdown in Indian economy. As per the data, the non-oil non-gold imports during April-December 2019 period contracted ~8% yoy. The oil import in the same period was down ~12% yoy. If we consider ~17% rise in oil prices during this period, the fall in volume of oil import is much higher. Overall the merchandise imports contracted ~9% yoy in USD terms and ~8% yoy in INR terms during the first nine months of current fiscal. In the nine month period during April-December 2019, the merchandise exports were lower by ~2% yoy. During this period non-oil non-gems & jewelry exports were almost flat yoy. The services exports (up ~5.6% yoy) and imports (up ~7.5% yoy) during nine month period April-December 2019 have however recorded decent growth as compared to the merchandise trade. Consequently, the trade balance is much lower as compared to the previous year. The overall tra...