Winning Bizness Economic Desk

In March, India’s industrial production growth eased slightly to 4.9 per cent on a Month-on-Month (MoM) basis.

In the previous month of February 2024, factory output growth, measured in terms of the Index of Industrial Production (IIP) stood at 5.6 per cent while in March of last year (2023), the number was a very low 1.9 per cent.

For the entire last financial year (FY 24), the IIP growth stood at 5.8 per cent as against 5.2 per cent in the preceding financial year.

The manufacturing sector’s growth accelerated to 5.2 per cent in March as compared to a low 1.5 per cent a year ago while power generation too increased by 8.6 per cent in March as against a contraction of 1.6 per cent in the same month of the last year.

Mining output, however, slid to 1.2 per cent in March of this year as against the 6.8 per cent expansion in the year-ago month.

As per use-base classification, the capital goods segment growth declined to 6.1 per cent in March of this year from a healthy 10 per cent in the year-ago period.

Consumer durables output in March expanded by 9.5 per cent—it had contracted by eight per cent in March of last year.

Consumer non-durables goods production climbed by 4.9 per cent during the month as compared to a contraction of 1.9 per cent in March of last year. Infrastructure/construction goods clocked a growth of 6.9 per cent in March of this year as against a 7.2 per cent expansion in the year-ago period.

Data from the Ministry of Statistics and Programme Implementation showed that output of primary goods logged a 2.5 per cent growth in March this year, a slide from the 3.3 per cent of a year earlier.

Expansion in the intermediate goods segment was 5.1 per cent in the month under review, higher than the 18 per cent registered in the year-ago period.

April Retail Inflation Slides Slightly To 4.83 pc

India’s headline retail inflation number came in at 4.83 per cent in April of this year, according to data from the Ministry of Statistics and Programme Implementation (MoSPI).

In March, the Consumer Price Index (CPI) inflation or retail inflation stood at a 10-month low of 4.85 per cent. Here, a point that needs highlighting is that even though inflation declined to a 11-month low in April, it was still the 55-month in a row that it was above the Reserve Bank of India (RBI)’s medium-term target of four per cent.

An important point here is that the slide in headline retail inflation rate in April was limited by prices of food and beverages that remained high at 7.87 per cent, edging higher than the 7.68 per cent of a month ago.

It is important to highlight the fact that the CPI rate was within the Reserve Bank’s tolerance range of 2-to-6 per cent for the eighth month in a row, primarily because of a contraction in fuel and light inflation.

Similarly, clothing and footwear also eased along with housing inflation in April of this year to 2.85 per cent and 2.68 per cent, respectively, on a MoM basis.

Food inflation rose marginally with the index coming at 8.7 per cent in April as compared to 8.52 per cent in the previous month of March this year.

A northward movement was witnessed in the prices of meat and fish at 8.17 per cent as against 6.36 per cent a month ago and of fruits at 5.22 per cent as against 3.07 per cent, in March of this year.

Vegetables and pulses-driven inflation eased sequentially but it still remained in double-digits in April.

For the current fiscal year (FY 25), the Reserve Bank’s CPI inflation is pegged at 4.5 per cent.

Moody’s Pegs India’s FY 25 Growth at 6.6 pc

Moody’s Ratings has pegged India’s economic growth for the current fiscal (FY 25) at 6.6 per cent. The Reserve Bank of India has projected a seven per cent growth in the current fiscal while the Asian Development Bank (ADB) and Fitch have also pegged growth at the same figure.

Two other organisations, S&P Global Ratings and Morgan Stanley both expect the country’s GDP growth rate to be at 6.8 per cent.

Deloitte, however, has estimated India’s GDP growth to be lower at 6.6 per cent in the current fiscal, but said that the economic growth would be supported by consumption expenditure, a rebound in exports and capital flows.

On Non-Bank Finance Companies (NBFCs), Moody’s Ratings said that a strong credit demand combined with a robust economic growth would support the sector’s profitability.

“Funding costs for NBFCs in India are rising, but a strong credit demand fuelled by the country’s robust economic growth will support the sector’s profitability,” it said.

Additionally, robust economic conditions would help them preserve their asset quality even as increases in interest rates push-up the debt burdens of their customers, Moody’s added.

Monsoon Likely to Hit Kerala on March 31

The Indian Meteorological Department (IMD) has said that monsoon is likely to hit Kerala on the country’s western coast on May 31.

The monsoon is the lifeblood of the country’s economy, especially the agricultural sector. The monsoon provides nearly 70 per cent of the rain that helps water agricultural fields and re-charge reservoirs.

Here, a point to highlight is that around half of India’s farm lands, depend on the monsoon (between June-to-September) to grow a number of crops.

Rice, soybeans, cotton, sugar cane and corn are some of the crops that are sown during this period.

The monsoon had hit the Kerala coast on June 8 last year, which was the latest in four years.

India’s Forex Reserves Climb to USD 644.15-bn

India’s foreign exchange reserves have increased for the second consecutive week, reaching a peak of USD 644.15-billion as of May 10, according to data from the Reserve Bank of India (RBI).

During the reporting week, the reserves moved northward by USD 2.56-billion following a USD 3.7-billion increase in the previous week.

The Reserve Bank, India’s central bank, actively intervenes in the forex market to stabilise the Rupee (India’s currency) against excessive volatility.

Fluctuations in foreign currency assets are influenced by the Reserve Bank’s interventions and the changing values of foreign assets held within the reserves.

Additionally, India’s forex reserves encompass its reserve tranche in the International Monetary Fund (IMF).

India Leads in Asia in Auto Investments in Q1 2024, Says BMI

An auto industry outlook on investments in the Asia-Pacific region by BMI has revealed that the country has attracted the maximum number of auto-related investment during the first-quarter (Q1) of 2024.

BMI is an unit of Fitch Solutions.

The BMI report tracked 38 new automatic manufacturing projects announced or inaugurated in Asia (valued at over USD 44.4-billion in total).

The country has emerged as the most favoured investment destination with nine of these investments. Following India were South Korea and Thailand with six investments each.

The number of investments and value of investments tracked in Q1 2024 are down on a Year-on-Year (YoY) basis. The number of projects dropped by 17.4 per cent and the value drop was recorded at 36.6 per cent.

According to the BMI report, the Indian government has approved investments to the tune of USD 15.2-billion for developing three new semi-conductor manufacturing plants.

The point to highlight here are the reasons why investments in the country were recorded increasing. A key reason is the Red Sea crisis combined with the market focus on developing the semi-conductor industry.

Here, it must be pointed out that the latter witnessed significant investments, alongside the Indian EV value chain’s development.

Given the Red Sea crisis, companies have also accelerated de-risking their supply chains, especially for India by diversifying their logistic routes.

A reduction in the taxation on hybrid cars could be on the anvil and if this happens, it will provide a big boost for the Indian automotive sector.

As far as South Korea is concerned, the country performed well due to access to the US EV market, subsidies through the US Inflation Reduction Act (IRA) and increased collaboration by the local industry with Japan, Europe and US-based automotive players.

In Thailand, geo-political stability and lucrative government incentives including tax holidays spanning three-to-eleven years for EV production will help promote EV production in the country.