‘Economic recovery seeing phoenix-like rise’
India’s economic recovery is strengthening and policymakers may soon have more room for steps to support the revival, an article published in the Reserve Bank of India’s January bulletin said.
“Recent shifts in the macroeconomic landscape have brightened the outlook, with GDP in striking distance of attaining positive territory and inflation easing closer to the target. If these movements sustain, policy space could open up to further support the recovery,” the article said.
The article was accompanied by the usual disclaimer that
MUMBAI:
views expressed are those of the authors and do not necessarily reflect the views of RBI.
The central bank cut policy rates by 115 basis points last year to support the recovery but it has left rates unchanged in recent months due to rising inflation.
The article said the number of e-way bills issued in December 2020 was the highest ever, “suggesting that the recovery is no longer aloft on the fleeting tailwinds of festival spending but is rising phoenix-like on the wings of an intrinsic momentum”.
The article noted that in the first half of 2021-22, GDP growth will benefit from statistical support and is likely to be mostly consumption-driven.
“Recent high-frequency indiments the laws.
Agriculture minister Narendra Singh Tomar on Wednesday said the Supreme Court had put the laws in abeyance for a short time. “Our proposal is to put the laws on hold for a full year-and-a half or even more till a solution is found.”
Tomar added that if farmers were to accept the proposal in principle, then it would begin work on setting up the committee and its modalities, saying the laws would be suspended so that a committee could find a settlement.
“The farm unions have closed the option of any possibility of amendments. They want status quo. That is why they have showed no flexibility in dealing with the government,” said Abhinav Saikia, an agronomist with farm startup Indagro.
There are some other farm unions that are in support of the new laws.
“The government seems to have conceded a lot of ground with several proposals it has made so far, from diluting the laws’ provisions to putting them on hold, but the latest stand of farmers have brought matters to a standstill. We don’t want a repeal,” said Anil Bijoria, the leader of Haryana Farmers’ Producer Association, cators suggest that the recovery is getting stronger in its traction and soon, the winter of our discontent will be made glorious summer,” RBI paper said, quoting William Shakespeare.
The Indian economy shrank 23.9% in the first quarter and 7.5% in the second quarter on account of the Covid-19 pandemic. RBI expects the economy to contract by 7.5% in the current fiscal to March.
An early revival in investlockdown. Positive global cues, sustained foreign institutional investor inflows and strong corporate earnings kept the sentiments high. The upcoming budget could potentially lay the foundation for a long-term economic growth path,” said Motilal Oswal, managing director and chief executive of Motilal Oswal Financial Services.
Overall, Oswal expects the markets to continue its northward march on the back of an earnings rebound, continued inflows from foreign portfolio investors, positive developments on the vaccine front, a broad-based economic recovery and low interest rates.
Joe Biden, who took over as the 46th President of the US on Wednesday, is expected to push through a nearly $2 trillion US fiscal stimulus plan, a move that may support stocks worldwide.
From the lowest point in March, the Sensex has climbed 93% while the BSE Midcap index soared 99% and the BSE Smallcap index surged 113% till date.
With an aggregate current market capitalisation of ₹196.51 trillion, the stock markets have made investors wealthier by ₹94.64 trillion since last March.
The Sensex contribution to the overall market cap is 49%, will be critical to secure a durable turnaround and sustainable growth. The cash idling in the balance sheets of corporations and banks and reverse repo balances with RBI must find their way into credit to productive sectors and into real spending on investment activity before it imposes a persistent deflationary weight on real activity, it said.
The article reiterated RBI’S stance that the financial sector’s balance sheet could intensify with the expiry of the standstill on asset classification. However, banks this time are better prepared to handle the crisis with stronger capital buffers than the at the time of the global financial crisis.
FARM LEADER RAKESH TIKAIT SAID THE FULL GENERAL BODY OF THE FARM UNIONS FELT THAT ACCEPTING THE GOVT’S PROPOSAL WOULD DEFEAT THE PURPOSE OF THE AGITATION
GDP GROWTH IN THE FIRST HALF OF FY22 IS LIKELY TO BE CONSUMPTIONDRIVEN: RBI PAPER
while the BSE Midcap and the BSE Smallcap contribute about 13% each.
“The Sensex crossing the important milestone is a telling sign of the economy and markets, shifting orbits on a broadbased recovery and better days ahead,” said Vijay Chandok, managing director and CEO of ICICI Securities.
“The combination of strong capital inflows, low interest rates and leaner balance sheets of Indian corporates, along with government measures to support growth, is expected to lift the economy. The same is likely to keep the markets buoyant.”
In the past year, India’s benchmark indexes rose 17% in dollar terms, on par with gains seen in the MSCI World index. However, the MSCI Emerging Markets index, which captures large- and mid-cap representation across 27 markets, has outperformed with a 26% gain.
Analysts are optimistic that the markets will continue to surge ahead despite elevated valuations, except for bouts of volatility around the Union budget.
“The positive thing about the ongoing rally is that it has been fairly broad-based; across market caps and sectors. As the panic and crash was pandemicinduced, the pullback was led by pharma. Since then, banks, information technology, automobiles, etc, have also joined the rally,” said Joseph Thomas, head of research, Emkay Wealth Management.
However, the valuations do look stretched, said Thomas, adding that earnings disappointments remain the key risk at the current juncture.
“The continuous upmove, not backed by fundamentals, may make the rally fragile going ahead,” he said.