S&P revision of India's outlook to "Positive" from "Stable"; RBI analysis says growth momentum is picking up in FY24-25.

 S&P Global Ratings revised India's outlook to "Positive" from "Stable" in May 2024, while affirming the 'BBB-' long-term sovereign credit ratings. This indicates that there is a possibility of an upgrade to 'BBB' in the future, but the timeline is not specified.

S&P mentioned that they may raise the ratings if they observe:

• Sustained improvement in the central bank's monetary policy effectiveness and credibility, leading to a durably lower inflation rate over time.
• Continued robust economic growth that strengthens India's external position.
• Further consolidation of the government's fiscal position, leading to a declining net general government debt/GDP ratio.

The actual upgrade to 'BBB' will depend on India's performance in these areas over the next 12-24 months. If India continues to demonstrate strong economic fundamentals and effective policymaking, an upgrade is likely within this timeframe. However, if there are significant setbacks or a reversal of positive trends, the upgrade may be delayed or not happen at all.

It is important to note that credit rating decisions are complex and depend on various factors, including global economic conditions and geopolitical events. Therefore, while the "Positive" outlook is a positive sign, it does not guarantee an upgrade to 'BBB'.

The net general government debt/GDP ratio for India currently stands at around 81.68% as of 2022, according to Statista. This indicates the total amount of debt owed by the government relative to the size of the economy.

S&P has not explicitly stated a target net general government debt/GDP ratio that India needs to achieve for an upgrade. However, they have indicated that they expect to see a declining trend in this ratio as one of the conditions for a potential upgrade. This implies that India needs to demonstrate a continued commitment to fiscal consolidation and debt reduction to meet S&P's expectations.

Based on recent trends and S&P's commentary, a gradual reduction in the debt/GDP ratio over the next 12-24 months would likely be seen as a positive signal by the rating agency. The pace and extent of this reduction will depend on various factors, including economic growth, fiscal policies, and interest rates.

It is important to note that while a declining debt/GDP ratio is crucial, it is not the sole determinant of a credit rating upgrade. S&P will also assess other factors like inflation, economic growth, and external position before making a decision.

 The Reserve Bank of India (RBI) in its Annual Report on the Indian Economy for FY24-25 has expressed optimism about the growth prospects for the Indian economy. This optimism is based on several factors including:

• Resilient domestic demand: Despite global headwinds, domestic consumption and investment demand have remained strong, supported by government initiatives and a rebound in private sector activity.
• Moderating inflation: The RBI has successfully brought down inflation to within its target range, providing a stable macroeconomic environment for growth.
• Strong external sector: India's foreign exchange reserves are at comfortable levels and the current account deficit remains manageable, providing a buffer against external shocks.
• Supportive government policies: The government's focus on infrastructure development, digitization, and ease of doing business is expected to improve the long-term growth potential of the economy.

The RBI has projected a real GDP growth rate of 7% for FY25, indicating a continued momentum of economic activity. This growth is expected to be broad-based, with contributions from both the manufacturing and services sectors.

However, the RBI also acknowledged the potential risks to the outlook, including:

• Global economic slowdown: A slowdown in global growth could adversely impact India's exports and overall economic activity.
• Geopolitical tensions: Escalating geopolitical tensions could disrupt global supply chains and increase uncertainty, leading to a flight of capital from emerging markets like India.
• Climate change-related risks: The increasing frequency and intensity of extreme weather events could disrupt agricultural production and infrastructure, impacting economic growth.

Overall, the RBI's assessment suggests that the Indian economy is well-positioned for growth in FY24-25, but it is important to remain vigilant about the potential risks and uncertainties. The RBI's policy stance will continue to be data-driven and focused on maintaining macroeconomic stability while supporting sustainable growth.

Indian Exporter community may have to hedge their open positions, now!!

 Total exports of merchandise and services in FY 2024-25 begins with strong growth of 6.88% estimated at USD 64.56 Billion in April 2024 as compared to USD 60.40 Billion in April 2023.

GOI has released a PIB release on  Trade metrics:

Here are some key points from the release:

• Overall Exports: India's total exports (merchandise and services combined) for April 2024 are estimated at USD 64.56 billion, reflecting a 6.88% increase compared to April 2023.
• Merchandise Exports: Merchandise exports witnessed a modest growth of 1.08% at USD 34.99 billion in April 2024 as compared to USD 34.62 billion in April 2023.
• Import Growth: However, merchandise imports grew at a faster pace of 10.30%, reaching USD 54.09 billion in April 2024 compared to USD 49.06 billion in April 2023.
• Trade Deficit: This resulted in a widening of the merchandise trade deficit to USD 19.1 billion in April 2024.

The PIB release also highlights some positive aspects within merchandise exports:

• Growth in exports of Electronic Goods (25.8%), Organic & Inorganic Chemicals (16.75%), Petroleum Products (3.10%) and Drugs & Pharmaceuticals (7.36%).More than 25% growth in Electronic goods is a heartening news.
• Imports have grown mainly due to huge Gold imports which tripled to US$3.11 billion from $1.01 billion
• Almost all of the sharp 32.3% year-on-year surge in April's goods trade deficit of US$19.1 billion ad compared to a US$14.4 billion gap in April 2023, was due to gold imports and also 20.2% rise in the oil import bill amounting to US$2.8 billion.

                                               Table : Trade during April 2024

• 		April 2024 (USD Billion)	April 2023 (USD Billion)
  Merchandise	Exports	34.99	34.62
  	Imports	54.09	49.06
  Services*	Exports	29.57	25.78
  	Imports	16.97	13.96
  Total Trade (Merchandise +Services) *	Exports	64.56	60.40
  	Imports	71.07	63.02
  	Trade Balance	-6.51	-2.62

  * Note: The latest data for services sector released by RBI is for March 2024. The data for April 2024 is an estimation, which will be revised based on RBI’s subsequent release.

  Courtesy: Ministry of Commerce & Industry, GOI

Given that  INR has been depreciating against US $ in an orderly fashion and India's Trade deficit is under control, it looks like in the short to medium term the INR is bound to appreciate and all those with substantial exports must cover themselves atleast for a year from now on.

The graph given below is illustrative of the above point.

All exporters may have to take this important call to safeguard their profitability in the next few months upto one year.

"Redistribution" of wealth is easier said than done! But who is baking a bigger "Apple pie"?

 You all might have noticed that Congress rhetoric is only on " redistribution " and has no clue on baking a bigger " Apple pie". They have relegated Building a Better and Bigger Bharat to irrelevance and they very well know only Modi can deliver a bigger shareable "Apple pie". Journalists and media have a responsibility in calling this bluff of Congress! Congress " redistribution" policy is for bitter and beggar Bharat and people will have to be educated that you cannot legislate to make poor , rich and vice versa is what Congress is intending to do! Congress has morphed into Communists - making CPM and CPI jobless already!!This Marxist, Maoist communist philosophy has no takers in today's world.

We all know that you can distribute poverty and bringing everybody down to poverty is easier- it is like distributing the marks obtained by class toppers to everybody in the class!! After such "redistribution" the marks left with the topper will be equal to the average of the class!!The topper will lose interest in wealth creation in an economy or in getting top marks in his exams!!

Such ideas look utterly stupid , idiotic and perverted but not for those who want to give false promises to gullible people to win elections.

Weekend musings!!

 

Why Opposition Congress, Communists, and NGOs want Elections based on Ballot papers

Because people want to create booth capturing and ballot papers/ VVPAT rigging scenarios where bombs can b thrown at the crowd to kill them while miscreants can destroy all ballot papers/VVPAT evidences etc. And finally they can blame Modi for rigging and not able to manage elections etc.

If 100% VVPAT print out is given to the people, then also they can sell the printouts for money to the parties .

How SC can stop selling of votes with VVPAT printout proof for higher amounts? Indirectly such VVPAT printouts will only encourage more black money to flow into our elections.

GOI should bring in a legislation whereby the Elections are jointly funded by Centre  through Budgetary allocations.SC should support the Govt for greater control, stricter monitoring and vigilance over expenses of Candidates who stand for elections. Only this can minimise use of black money in elections.

                                                                     <======><======>

Is India moving towards Presidential form of elections with Modi projected as PM candidate

Multiparty democracy will come into play when TINA factor is absent. When u r posed with the question whether u want stability and progress of the Country for your Children and grand Children to prosper fast or you want Uncertainty , what would you choose? This is not…

when media and journalists caution apprehension that  our Parliamentary election is morphing towards mandate for Presidential form, r they not mouthing Congress/ Dot alliance views? When the common man is confronted with TINA factor , when the masses should choose between Certainty of stability vs Uncertainty in every sphere which can weaken the country and its future , what would they choose?This is Hobson's choice!!

                                                                    <======><======

Controversy created by Congress as to Minorities,especially Muslims will have first claim on Nation's resources

Speaking of giving minorities  first claim on national resources in the name of Secularism is nothing but appeasement for vote bank politics.If then PM had said inclusive growth is important and weaker sections like senior citizens, war widows,people with disabilities, destitute women and children would have first claim on nation;s resources then that would have been appropriate. But then Muslims would not vote for Congress!!

IMF, World Bank and Asian Development Bank-all three have revised upwards India's GDP growth for 2024 & 2025

 That's good news for the Indian economy. The World Bank and IMF have both recently increased their projections for India's GDP growth in fiscal years 2024 and 2025.

• The IMF expects India's economy to grow at 7.8% in FY24, which is higher than the government's estimate of 7.6%. IMF raises India's FY25 growth forecast to 6.8%; FY26 outlook unchanged: IMF noted that the growth surprised on the upside in the second half of 2023 as robust domestic demand fuelled activity, especially in emerging Asian economies. 
  and most notably India, recorded sizable positive growth surprises. In India, we expect investment to contribute disproportionately to growth, much of it public investment
• The World Bank projects a growth of 6.8% for both FY24 and FY25, attributing this to strong private consumption and public investment. 

• Recently India's GDP growth forecast has been revised upwards by the Asian Development Bank (ADB).

  Here's a quick summary of the key points:

  • The ADB upgraded India's GDP growth forecast for the current fiscal year (FY 2024-25) from 6.7% to 7%.
  • This revision is driven by factors like strong public and private sector investments, along with a gradual improvement in consumer demand.
  

Courtesy:The Print

In FY24, exports of goods came down by 3.2% yoy. Ready made garments, Gem & jewellery and Petroleum products were down but under Imports Oil imports were also down.So, the overall Trade deficit as a percentage of GDP is well contained below 2% of GDP.

Courtesy:CRISIL

The recently announced HSBC Flash India Composite Purchasing Managers Indices (PMI) indicate upbeat momentum in Indian economy. At 62.2 in April, the Flash India Composite PMI output index rose at the fastest pace in nearly 14 years.This clearly indicates that the Economy is growing at a robust pace and is emerging as a strong economy.

The most important outcome expected out of these GDP growth upward revisions and fiscal rectitude shown by GOI in containing the Fiscal deficit to 5.1% for FY25 , is Ratings upgrade by Global Rating agencies.

India's exports has come of age in FY 24

 February 2024 saw the highest monthly merchandise exports of the current fiscal year to yet. India exported USD 41.40 billion worth of goods in February 2024, up 11.86% from USD 37.01 billion in the same month the previous year.

Petroleum products, engineering goods, electronics, organic and inorganic chemicals, drugs and pharmaceuticals, and petroleum products are the main drivers of merchandise export growth in February 2024.
Exports of engineering goods reached USD 9.94 billion in February 2024, up 15.9% from USD 8.58 billion in the same month the previous year.

Organic and inorganic chemical exports rise by 33.04% from USD 2.22 billion in February 2023 to USD 2.95 billion in February 2024. Exports of electronic goods grow by 54.81% to USD 3.00 billion in February 2024 from USD 1.94 billion in February 2023.
In February 2024, the value of drugs and pharmaceutical products exported was USD 2.51 bn

an increase of 22.24% overUSD 2.06 Billion in February 2023

Petroleum Products exports in February 2024 grew by 5.08% at USD 8.24 Billion from USD 7.84 Billion in February 2023

Exports of Agricultural products including Tobacco (58.24%),Meat, Dairy & Poultry Products (37.83%), Oilseeds (37.71%),Cereal Preparations & Miscellaneous Processed Items(17.69%), Spices (14.84%), Fruits & Vegetables (12.72%)

and Rice (1.81%) showed growth momentum in February 2024

Overall trade deficit improved by 37.80% from USD 116.13Billion in April-February 2022-23 to USD 72.24 Billion in April-February 2023-24

Last but not the least, the merchandise trade deficit improved by 8.43% from USD 245.94 Billion in April-February 2022-23 to USD 225.20 Billion in April-February 2023-24. 

Courtesy:PIB press release dt 15th April 2024

This trend shows that India has come of age in Exports and has sustained this growth trend despite global head winds like recession in some of the economies, war in Ukraine and in Middle east. Hopefully this momentum will continue to grow in FY 25 and thereafter also.

Oil price movements can be the big party spoiler  and  so needs to be monitored closely!

Current Positive Economic Indicators for FY 24-25 and beyond ,for Indian Economy

 

GST collections and core sector growth in FY24 paint a positive picture of the Indian economy at the end of the fiscal year. Here's a breakdown of what we know:

• GST Collections: Reports indicate that GST collections remained buoyant throughout FY24. In February 2024, collections reached Rs 1.7 lakh crore, reflecting a year-on-year growth of 12.5% [1]. This trend is consistent with the entire fiscal year, suggesting increased economic activity.

• Robust Core Sector Growth: The core sector, which comprises eight key infrastructure industries in India, witnessed strong growth in February 2024. The Purchasing Managers' Index (PMI) for manufacturing activity rose to 56.9, indicating a significant expansion. Additionally, the output of these core sectors reached a three-month high of 6.7% in February, compared to 4.1% in January [2].

Connection Between the Two: A rise in GST collections often reflects a growth in economic activity. Businesses tend to collect and pay more GST as they sell more goods and services. So, buoyant GST collections can be seen as a positive indicator alongside robust core sector growth. This suggests that FY24 might have been a period of economic expansion in India.

It's important to note that these are glimpses from reports and might not represent the final figures for FY24. However, they do provide encouraging signs about the Indian economy.

Here are some other positive economic indicators for India, besides the ones you mentioned:

• Rising Foreign Exchange Reserves: High forex reserves provide a buffer against external shocks and can be used to stabilize the rupee.
• Fiscal Deficit contained at 5.8% fo GDP and budgeted lower at 5.1%: This means the Govt is fully committed to fiscal consolidation glide path to bring down the Fiscal deficit to 4.5% or lower by FY26.
• Increasing Foreign Direct Investment (FDI): FDI inflows indicate that foreign investors are confident in the Indian economy and see it as a good place to invest.
• Indian Govt Bond inclusion in JP Morgan and Bloomberg Indices in FY 24-25: This is expected to bring an inflow of US25 billion in the Financial year ending 2025.
• Likely Improvement of Credit Rating: Due to the above positive economic indicators, the new Indian Govt after elections can rightfully expect a good credit rating upgrade from international agencies which will allow India to borrow money at lower interest rates and with all the positive news can attract capital at cheaper costs.
• Growing Startup Ecosystem: A thriving startup ecosystem signifies innovation and entrepreneurship, which can drive future economic growth.
• Government Reforms: Recent government reforms aimed at improving ease of doing business and attracting investments through schemes like PLI can boost economic activity, employment and a growing manufacturing pie.This can have Multiplier effect across the economy on income and employment opportunities.
• Growing Services sector and Services Exports:According to the commerce ministry, India's services exports in April 2023–February 2024 were $314.82 billion, which was a 7% increase from the same period in 2022–2023

It's important to remember that a healthy economy relies on a balance of various factors. While these indicators are positive, we should also monitor potential challenges like inflation, unemployment rates, and global economic conditions.