Tag: GDP growth

India is on the cusp of an investment boom, says Nomura’s Rob Subbaraman

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s GDP growth for the third quarter was at 8.4% with investments doing much of the heavy lifting with a growth of 10.6%. Rob Subbaraman, Head-Global Macro Research at Nomura believes India is on a cusp of an investment boom and if that continues the country can sustain a 7% to 8% GDP growth in the coming years with low inflation.

In an interaction with CNBC-TV18, Subbaraman said, “That’s very much what an emerging economy needs if you get strong investment, because India really needs to develop its infrastructure hard and soft. And I think if you can have successive years of strong investment, that creates capacity, and allows you to keep inflation low, and raise your potential growth.”

While the GDP growth has been solid, the gross value added (GVA)–calculated as the GDP plus indirect taxes minus the subsidies–was in line with expectations at 6.5%. While this could mean either a sharp increase in indirect tax collections or a significant drop in subsidies year-on-year (YoY). The net indirect taxes for the quarter have risen 32%. But analysts estimate that lower subsidies had a greater implication on the overall GDP numbers.

Subbaraman said that while there’s been a lot of discussion about indirect taxes and value-added GDP growth (GVA) being a bit weaker than the headline number, it should be noted that even at 6.5%, India would by far be the fastest growing economy among all the major economies around the world.

Discussing the implications of the consumption growth lagging investment growth for the fifth consecutive quarter, Subbaraman said his base case is that consumption is slower partly because of the higher cost of living in India in the recent years.  He believes the strong capital expenditure (capex) will create demand for labour, in turn, boosting consumption. Continued investments will also narrow the gap between the very strong public capex and private consumption, he noted.

He also highlighted the positive trends in foreign direct investment (FDI) and the healthy state of corporate balance sheets, indicating a favorable environment for economic development.

“Hopefully, as interest rates come down this year, as we see stronger foreign direct investment into India, and with fairly healthy corporate balance sheets, we will start to see private investment after the election picking up strongly. I think that’s the important ingredient needed to join the public investment and if that happens for a couple of years, I will get more confident that India’s potential growth is going to be an upward trend.”

Subbaraman also noted a gradual easing of the inflation worries forecasting an easing off in the cost of living pressures if the country continues to get strong investment.

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India economic outlook 2024: Experts weigh in on growth, interest rates, and rupee

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian economy grew a solid 6.5% in 2023, outpacing most major economies. However, the road ahead may be bumpy given the weak global economic outlook, according to economists who shared insights with CNBC-TV18 on their estimates of GDP, interest rates and the rupee.

Samiran Chakraborty, Chief India Economist at Citi, predicts a modest 50 basis points (bps) drop in GDP growth rate for India in the fiscal year 2025. Citi’s global economists forecast a drop in global growth from 2.7% in 2023 to 1.9% in 2024, affecting India’s growth rate.

Santanu Sengupta, Chief India Economist at Goldman Sachs, attributed the lower growth forecast of 6.5% for fiscal year 2025 to a fiscal drag. He noted optimism in US growth but emphasised the impact of fiscal policies on India’s economic prospects.

Sakshi Gupta, Deputy Vice President and Sr. Economist at HDFC Bank, echoed these sentiments, projecting a growth rate of 6.3% for the upcoming year. Gupta anticipated a slowdown due to the global economic downturn and foresees a fiscal drag affecting India’s economic performance.

Gupta anticipates a tight monetary policy for at least the first half of the year. Even if rate cuts are implemented in the latter part of the year, they are expected to be gradual. The tight monetary stance, coupled with global economic challenges, is likely to exert pressure on India’s growth prospects.

Also Read | India’s agricultural outlook for 2024: Experts flag election challenges, low harvests, and inflation woes

Neeraj Gambhir, Group Executive and Head-Treasury, Markets, and Wholesale Banking Products at Axis Bank, foresees a range-bound bond market with stable rates. Despite potential fluctuations in deposit rates, a generally stable rate regime is expected.

Sakshi Gupta further suggested that once the election uncertainty subsides, the second half of the fiscal year might witness more broad-based signs of private capex revival. This indicates a potential turnaround in economic sentiment and investment patterns.

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For more, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Indian government is not ‘alarmed’ by the rise in oil prices

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Finance Ministry of India has kept its forecast for economic growth, as measured by gross domestic product (GDP), at 6.5 percent for the financial year ending March 2024. This, despite high crude oil prices and the monsoon deficit, both of which have led to a sharp rise in inflation in the world’s fifth largest economy.

ALSO READ: India defends GDP numbers with 10-point response amid data credibility concerns

The price of crude oil — India imports more than 80 percent of all the oil it needs — has gone up from nearly $71 a barrel in mid-June to over $93 a barrel. The cost of the Indian crude oil basket had risen to over $94 a barrel on September 20. In metro cities like Mumbai, New Delhi, Kolkata and Chennai, the price of petrol remains above Rs 100 a litre, and the price of diesel ranges from nearly Rs 90 to Rs 97 a litre, today (September 22).

But as per the August Economy Review released by Finance Ministry, the government is not “alarmed” by the rise.

In April 2023, the Reserve Bank of India (RBI) had expected the price of crude oil to average around $85 a barrel for the whole year. The current price of crude oil is well above that estimate.

Meanwhile, the monsoon had been disappointing as well, until now. A late burst of rains in September has reduced the rain deficit for the year to 7 percent, according to India Meteorological Department (IMD).

Earlier this month, the IMD had projected a 11 percent deficit, which would have been the least amount of rain in eight years. However, there has been some relief from rains, which, the government hopes, may ease the shortage in certain crops.

Food inflation in India has been high for at least a few months now, made worse by the rising cost of fuel. Overall, retail inflation went up to 7.44 percent in July (the highest in the preceding 15 months), before cooling off a little in August, to 6.8 percent.

It is likely to ease further, according to the finance ministry official, who also said that the high-frequency indicators are shaping up well.

The government is also taking heart from the 24 percent spike in advance tax collection in September. “They (private sector) are investing,” the official said.

Recently, Goldman Sachs, had projected India’s GDP growth at 6 percent for the full-year ending March 2024. In the following interview, Santanu Sengupta, Chief Economist, India, Goldman Sachs, explains the rationale for his estimates.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s GDP growth may be faster than RBI’s projection for April to June, says ICRA

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India’s economic growth will accelerate to 8.5 percent in the April-June period of the current fiscal from the 6.1 percent growth rate witnessed in the preceding January-March quarter, ICRA Ratings said in a report on Tuesday.

The rating agency attributed the faster growth to a supportive base and also a recovery in the services sector.

Though its estimate is higher than the RBI’s forecast of 8.1 percent, ICRA‘s chief economist Aditi Nayar said the second half of the fiscal is likely to witness headwinds, which will prove a dampener.

Nayar said erratic rainfall, narrowing differentials with year-ago commodity prices, and possible slowdown in momentum of government capex “as we approach the Parliamentary elections will limit the growth”, and maintained her 6 percent real GDP growth estimate for FY24 which is lower than RBI’s 6.5 percent.

In the first quarter, unseasonal heavy rains, lagged effect of the monetary tightening and weak external demand exerted a downward pressure on GDP growth, she said.

Factors like a continued catch-up in services demand and improved investment activity, particularly a welcome front-loading in government capital expenditure, and sharply lower prices of various commodities which expanded margins in some sectors boosted growth in the June quarter, she said.

The agency projected that the gross fixed capital formation (GFCF) expansion in Q1 FY24 to be in double digits, based on the robust year on year growth performance of a majority of the investment-related indicators.

The aggregate capital outlay and net lending of 23 state governments (except Arunachal Pradesh, Assam, Goa, Manipur and Meghalaya), and the government of India’s gross capital expenditure expanded by a sharp 76 percent to Rs 1.2 lakh crore, and 59.1 percent to Rs 2.8 lakh crore, respectively, in Q1 FY24, it added.

Capex-related external commercial borrowings for the purpose of modernisation, new projects, and local purchase and imports of capital goods jumped to USD 13.0 billion in Q1, exceeding the full-year FY23 levels of USD 9.6 billion, it said.

It estimated that the services’ gross value added growth to have risen to 9.7 percent in Q1 FY24 from 6.9 percent in Q4 FY23, adding that 11 of the 14 high-frequency indicators pertaining to the services sector recorded a growth during the quarter.

Growth in electricity generation dipped to an 11-quarter low of 1.3 percent in Q1 FY24, owing to an unfavourable base as well as the excess rainfall seen in the first half of the quarter, ICRA said.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

US Fed’s delay in rate cuts could exert pressure on emerging markets: Nomura

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The global economy has been in a state of flux lately, with various factors impacting growth and stability. Many emerging markets rely heavily on foreign capital inflows, which could decrease if the US Federal Reserve decides to delay rate cuts. This could lead to increased volatility in these markets and make it more difficult for them to attract the foreign investment they need to grow.

In an interview with CNBC-TV18, Rob Subbaraman, who is the head of global macro research at Nomura, spoke about how emerging markets (EMs) could feel the pressure from a delay in rate cuts by the US Federal Reserve.

He said, “We are going to see more credit tightening in the US. The debt ceiling crisis that is building could get worse and when that happens, markets are going to be demanding for the Fed to start cutting. With inflation so high, I don’t think the Fed is ready to cut and it could be a bit of a negative situation for emerging markets when growth slows, but inflation is still high, and the Fed is not ready to cut but the market wants cuts.”

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Subbaraman also commented on the recent dovish statement made by US Fed Chair Jerome Powell. He suggested that Powell’s statement could indicate a shift towards a more accommodative monetary policy, which could help to support global growth in the short term. However, he cautioned that this could lead to higher inflation in the long term, which would be detrimental to both emerging and developed markets.

Turning his attention to China, Subbaraman predicted that China’s growth would slow down, which could impact India’s export sector. China is one of India’s largest trading partners, and any slowdown in the Chinese economy could have significant implications for India’s exports. Subbaraman suggested that India needs to focus on diversifying its export markets to reduce its reliance on China.

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Robert Sockin, who is a Global Economist at Citi, spoke about the pressure on the Fed to hike rates more. He noted that the US economy has been performing well, with low unemployment and solid GDP growth. This could lead to increased pressure on the Fed to raise interest rates to prevent the economy from overheating.

However, Sockin also pointed out that there are risks tilted toward pausing versus hiking more. He suggested that the Fed needs to strike a delicate balance between supporting economic growth and preventing inflation from spiraling out of control.

For the entire discussion, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s Q3 GDP likely grew by 4.7% – data to be out later this evening

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The National Statistical Office (NSO) on Tuesday will announce its gross domestic product (GDP) estimate for the third quarter of the 2022-23 fiscal year.

As per the CNBC-TV18 poll, the economy will have grown by 4.7 percent in the FY23 October-December quarter. This comes over a 5.4 percent growth in the year-ago period. Meanwhile, the growth was 6.3 percent in the second quarter of this fiscal.

The Reserve Bank of India (RBI) had estimated that the third quarter GDP growth would come in at 4.4 percent, but a CNBC-TV18 poll is saying 4.7 percent. Assuming the economy grows at 4.7 percent as the CNBC-TV18 poll shows, the quarterly GDP will come to a little over Rs 40 trillion in real terms. This is not nominal.

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At Rs 40 trillion, the economy will be 11 percent bigger than it was in the third quarter of FY20, exactly the pre-COVID quarter. This gives a 3.5 percent compounded annual growth, probably not still pre-COVID level of momentum.

In an interview with CNBC-TV18, Abhishek Upadhyay, a senior economist at ICICI Securities Primary Dealership, said that 4.7 percent growth is a very strong number.

Also Read | Heatwave likely to impact India’s GDP growth in FY24

“4.7 percent growth is a slowdown compared to the previous quarter, but on a quarter-and-quarter, seasonally adjusted annualised growth it’s a very strong number. This number is realised, and we are expecting 4.6 percent growth in the third quarter,” he said.

Meanwhile, Indranil Pan, the chief economist at Yes Bank, said, “We are normalising towards the trend path goal, which is unfortunately, in my opinion, about a 5.5 percent now. So, from that perspective, 4.6 percent looks to be a relatively weaker number. But on the average, we are looking at a 6.8-6.9 percent for the current financial year, and that to dip to about 6.1-6.2 percent in the next financial year.”

With inputs from Reuters

For the entire discussion, watch the accompanying video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Heatwave likely to impact India’s GDP growth in FY24

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India Ratings and Research expects the GDP to grow 5.9 percent year-on-year in FY24, much lower than the National Statistical Organisation’s estimate of 7.0 percent. The agency believes that the GDP growth will be directly impacted by the heatwave that India is witnessing. It also added that demand in the system is facing headwinds from global growth slowdown.

“The economic survey and CEA speak about 6-6.5 percent growth. But a lot has happened since the presentation of the survey. The main issue right now is the heatwave that we are witnessing. It is going to have an impact on agriculture and in turn on the wages growth that we are expecting from the agriculture sector and households,” said Devendra Kumar Pant, Chief Economist, India Ratings & Research.

The report suggests that an annual GDP growth of 7.6 percent is required till FY37 to catch up with the pre-pandemic GDP trends.

Also Read: Main concern is impact on agriculture, says IMD scientist of heatwave alert

The rating agency’s report on the economic outlook of India noted that even though recovery is on course but certain risks will have a bearing on growth. The report particularly noted that the growth in manufacturing sector is still lagging and the consumption demand is not broad based.

The decline in nominal wage growth in the household sector from 8.2 percent in FY12-16 to 5.7 percent in FY17-21 is a negative when it comes to sustained recovery in consumption demand.

The ratings agency expects industrial sector to grow at 3.9 percent year-on-year compared to NSO’s AE estimate of 4.1 percent. The agency said that the industrial growth momentum will remain tepid because of a K-shaped recovery, which is not allowing consumption demand to become broad based.

The agency said that inflation and commodity prices are the major risks to the revival of investment cycle. “Coming to the fault line. The biggest risk to the economy globally is inflation. The way the inflation is out of control, the monetary policy response is going to kill some demand. If inflation remains high, the real wage growth will go down which will lead to slower growth of the consumption expenditure, which in turn means lower investment growth,” said Devendra Kumar Pant, Chief Economist, India Ratings & Research.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

India’s GDP may grow 7% in FY23: First advance estimates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian economy is estimated to grow at 7 percent in 2022-23, as against the expansion of 8.7 percent in the previous fiscal, the National Statistical Office (NSO) said on Friday.

Releasing the first advance estimates of National Income for 2022-23, the NSO stated, “Real GDP or GDP at Constant (2011-12) Prices in the year 2022-23 is estimated at Rs 157.60 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of Rs 147.36 lakh crore, released on 31st May 2022. The growth in real GDP during 2022-23 is estimated at 7.0 percent as compared to 8.7 percent in 2021-22.”

The output of the manufacturing sector is estimated to decelerate to 1.6 percent as against a growth of 9.9 percent in FY22.

According to the CNBC-TV18 Poll, the FY23 real GDP is estimated at 6.9 percent, nominal GDP is seen growing at 15.8 percent to Rs 269 trillion, and the fiscal deficit works to Rs 17.2 trillion. The deficit for this year can be Rs 60,000 crore higher, without violating the 6.4 percent target.

The manufacturing sector output is estimated to decelerate to 1.6 percent in the current fiscal from 9.9 percent in 2021-22. Similarly, mining sector growth is estimated at 2.4 percent in the current fiscal as against 11.5 percent in 2021-22.

Also Read: Fertiliser price cooling off likely to help India’s fiscal deficit come down by 0.5%

It also said the nominal GDP or GDP at Current Prices in the year 2022-23 is estimated at Rs 273.08 lakh crore, as against the Provisional Estimate of GDP for the year 2021-22 of Rs 236.65 lakh crore. The growth in nominal GDP during 2022-23 is estimated at 15.4 percent as compared to 19.5 percent in 2021-22.

The agriculture sector is projected to see a growth of 3.5 percent in FY2022-23, higher than the 3 percent expansion recorded in the previous financial year. Trade, hotel, transport, communication, and services related to the broadcasting segment is estimated to grow at 13.7 percent from 11.1 percent in 2021-22.

Devendra Pant, the chief economist at India Ratings, said 7 percent GDP growth is more on the expected lines. “We were expecting it to be at 6.9 percent. However, our estimate of nominal GDP growth was much higher than 15.4 percent. We expected it to be at 16.5 percent or so,” he said.

The financial, real estate, and professional services segment is projected to grow at 6.4 percent in the current fiscal, up from 4.2 percent in 202-22. However, construction sector growth is expected to decelerate to 9.1 percent from 11.5 percent a year ago.

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Pronab Sen, the former chief Statistician, said 7 percent GDP growth is along expected lines. However, what this implies is that the growth in the last half of the year will not be very much higher than 4.5 percent or a little higher than that.

“As far as 15.4 percent nominal GDP growth is concerned, I think the NSO is expecting inflation to come down faster than even possibly the Reserve Bank of India has. So I think there is a little bit of optimism built into that,” he said.

Similarly, public administration, defence, and other services growth is estimated to drop to 7.9 percent this fiscal from 12.6 percent in FY22. The growth in gross value added (GVA) at basic prices is pegged at 6.7 percent this fiscal, down from 8.1 percent in 2021-22.\

Abhishek Upadhyay, senior economist at I-Sec PD said, “The nominal GDP growth is pretty much close to our expectation of 15.6 percent. So this should give about Rs 95,000-1,00,000 crore of additional room to the government to run a higher absolute fiscal deficit even if they want to maintain the same deficit in the percentage of GDP terms. So that much is the leeway.”

Earlier last month, the Reserve Bank of India had lowered the country’s GDP (gross domestic product) growth forecast to 6.8 percent for the current fiscal from 7 percent earlier, on account of continued geopolitical tensions and tightening of global financial conditions.

Also Read: Government on track to achieve lower inflation, says Chief Economic Adviser

The RBI had projected the real GDP growth for 2022-23 at 6.8 percent, with the third quarter at 4.4 percent and the fourth at 4.2 percent. It had pared the growth projection for 2022-23 for the third time in December 2022.

In April 2022, the central bank cut the GDP growth estimate from 7.8 percent to 7.2 percent, and further lowered it to 7 percent in September, last year. The GDP growth in the second quarter of the fiscal slowed to 6.3 percent from 13.5 percent in the preceding three months.

The International Monetary Fund (IMF) too had reduced India’s growth prediction for FY23 to 6.8 percent from 7.4 percent projected in July 2022. The World Bank, however, has raised India’s GDP forecast for the current fiscal to 6.9 percent from its earlier estimate of 6.5 percent. The Asian Development Bank has kept India’s growth forecast unchanged at 7 percent for 2022-23.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Moody’s lowers India’s growth projections to 7% on high inflation, rising interest rates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Moody’s Investors Service has lowered 2022 real gross domestic product (GDP) growth projections to 7.0 percent from 7.7 percent. It said that it is expecting growth to decelerate to 4.8 percent in 2023 and then to rise to around 6.4 percent in 2024.

“The downward revision assumes higher inflation, high interest rates and slowing global growth will dampen economic momentum by more than we had previously expected,” Moody’s said in its report titled “Global Macro Outlook 2023-24: Global economy faces a reckoning over inflation, geopolitics and policy trade-offs”.

“The weakening of the rupee and high oil prices continue to exert upward pressures on inflation, which has remained above the Reserve Bank of India’s (RBI) 4 percent -/+ 2 target inflation range for much of this year. Annual headline CPI inflation increased to 7.5 percent in September after dipping below 7 percent in July. Wholesale price inflation, however, has declined for four straight months, from a peak of 16.6 percent in May to 10.7 percent in September,” it said.

From May to September, the RBI raised the repo rate a cumulative 190 bps to 5.9 percent in an effort to contain inflation risks.

Moody’s said it is expecting the RBI to raise the repo rate by another 50 bps or so as part of its objective to anchor inflation expectations and support the exchange rate. Eventually, the RBI will likely shift from inflation management to growth considerations, provided that the rate increases have the desired effect of taming inflationary pressures.

Underlying growth dynamics are fundamentally strong, boosted by a rebound in services activity. Government capital expenditure and manufacturing capacity utilization have also improved. September exports are down from the peak in March, but they are still around 30 percent above the pre-pandemic level. Nonfood credit growth shows solid momentum, Moody’s said.

The private sector, having deleveraged after the RBI’s Asset Quality Review in 2015, is now well-positioned to increase capex spending. Also, the Production Linked Incentive Scheme to attract investment in 14 key manufacturing sectors is showing results. While these domestic strengths will continue to support the domestic growth narrative, global financial tightening and slowing external demand will pose downward pressure on growth in 2023

On China’s real GDP, it said that it expects it to grow 3.0 percent this year, down from our 3.5 percent forecast in August, with growth projected to pick up to around 4.0 percent in both 2023 and 2024.

“Our forecasts reflect the impact of COVID-19 control measures, which are weighing on consumption. In addition, the property sector downturn will inflict losses on households, developers, bank and non-bank lenders, and local government finances,” it mentioned.

On global economy, Moody’s said that it is on the verge of a downturn amid extraordinarily high levels of uncertainty amid persistent inflation, monetary policy tightening, fiscal challenges, geopolitical shifts and financial market volatility.

“Global growth will slow in 2023 and remain sluggish in 2024. Still, a period of relative stability could emerge by 2024 if governments and central banks manage to navigate their economies through the current challenges,” it added

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow