Business Today 24-Jan-21

Welcome to new beginnings in 2021. The New Year raises new hopes, new expectations, new aspirations—even new anxieties. Finance Minister Nirmala Sitharaman has raised hopes by inviting ideas to spur growth with a promise to deliver “a Budget like never before”. Centre has shown an open mind to suggestions. That has given rise to the belief that the government will finally act on the biggest problem facing the economy — demand or consumption. Centre’s attempts so far to accelerate supply-side economy, idolising the China model of investment-led growth has turned out to be a wrong diagnosis of the current state of Indian economy. It delivered neither investment, nor growth. Instead, it caused several quarters of unimpeded deceleration as demand collapsed on the back of slowdown, uncertainty and job losses. Covid…

Central government expenditure rose 9.5 per cent year-on-year in October to ₹1.8 lakh crore in comparison to robust 46.7 per cent increase in non-debt receipts. It was the first rise in two months This helped government keep gross fiscal deficit (GFD) at ₹39,160 crore in October as compared with ₹79,000 crore monthly average for April-October Capital spending more than doubled to ₹31,520 crore from ₹13,760 crore in October 2019 Source: MOSPI CENTRAL GOVERNMENT EXPENDITURE (Y-o-Y % Change)…

Sales of a sample of 134 real estate companies fell 35.2 per cent in first half of FY21 compared to a CAGR of 6.5 per cent between FY16 and FY20 The lockdown brought down sales to almost nil for a large chunk of developers Other parameters such as interest coverage ratio also deteriorated (from 2 in H1 of FY20 to 1.1 in H1 of FY21); operating profit margins also turned for the worse’ Source: ACE Equity, CARE Ratings SALES GROWTH (+/-) NPM (%) OPM (%) ICR (TIMES)…

Worrisome Dip BCI Falls to Record Low Level in October-December Quarter Macro Update Gap between exports and imports shrinks, inflation another bright spot First things first! Business Confidence Index (BCI) has changed. For over nine years since BCI started, the survey has set the benchmark for gauging the mood of corporate India. But to improve upon the survey, we have tweaked the methodology in the latest survey. The good news is that in a sea of similar confidence surveys (most of which were commissioned after Business Today’s BCI), the new methodology has raised the game by measuring the sentiments with sheer precision. The bad news is that corporate India seems to remain largely despondent about their business prospects and economy per se. On a scale of 100, BCI fell sharply…

FINANCE MINISTER NIRMALA SITHARAMAN will present Budget 2021 in the backdrop of an exceptionally chaotic 2020. In Q1 of FY21, India’s lockdown-struck gross domestic product (GDP) contracted an unprecedented 23.9 per cent, the worst among major economies. When the economy opened up, pent-up demand pushed up consumption, but GDP still shrank 7.5 per cent in Q2. And even though the RBI predicts that the economic shrinkage is over and GDP will grow 0.1 per cent and 0.7 per cent in third and fourth quarters, respectively, FY21 is destined to go down in history as India’s fifth recession. It is in this backdrop of extreme stress that Sitharaman sought growth inducing ideas with the promise to deliver “a Budget like never before”. Under the circumstances, that’s a herculean task. After all,…

NEGATIVE GDP GROWTH, AND SLIDING SINCE MARCH 2018 GDP (Y-o-Y% change) LITTLE HOPE FOR FY21 GDP Growth Projections (%) HIGH CONSUMER INFLATION CPI (Y-o-Y % change) INVESTMENT COLLAPSE Y-o-Y % change STALLED EXPORTS Exports ($bn) $60 BILLION Trade deficit with China, likely to come down to $30-35 billion …AND FACTORS THAT MAY HELP HER STEER THE ECONOMY INTEREST RATES TOUCH ROCK BOTTOM Repo Rate (%) INDUSTRY SHOWS SIGNS OF COMING BACK TO LIFE IIP (Y-o-Y % change)…