The benchmark stock indices have opened the day with moderate gains after suffering losses for four consecutive sessions.
The Centre's finance seem to be in a precarious situation with a report pointing to far greater dependence on external financing and a burgeoning deficit.
Join us as we follow the top business news through the day.
Manufacturing contracts for fourth straight month: July PMI
India’s manufacturing sector activity contracted at a slightly faster pace in July as demand conditions remained subdued amid prolonged closures, following which firms reduced both staff numbers as well as purchasing activity, a monthly survey showed on Monday.
The headline seasonally adjusted IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) stood at 46 in July, down from 47.2 in June.
This is the fourth straight month of contraction for the Indian manufacturing sector. In April, the index had slipped into contraction mode, after remaining in growth territory for 32 consecutive months. In PMI parlance, a print above 50 means expansion, while a score below that denotes contraction.
Indian shares inch higher; U.S. manufacturing data props sentiment
Some respite for Indian stocks after four straight sessions of losses.
Reuters reports: "Indian shares opened higher on Tuesday after four sessions of losses, led by auto and financial stocks after strong U.S. manufacturing data lifted global sentiment, though gains were capped by fears over rising coronavirus cases at home.
The NSE Nifty 50 index rose 0.17% to 10,910.50 by 0400 GMT, while the S&P BSE Sensex was 0.15% higher at 36,996.35.
An industry gauge released overnight indicated U.S. manufacturing activity accelerated to its highest level in nearly 1-1/2 years in July, lifting Asian shares.
In Mumbai trading, shares of automakers Hero MotoCorp Ltd and Maruti Suzuki India Ltd were among the top gainers on the Nifty 50 index, rising as much as 1.9% and 1.1%, respectively.
The Nifty financials index rose 0.71%, with ICICI Bank Ltd and Axis Bank Ltd gaining over 1% each.
Meanwhile, coronavirus cases in the world's second-most populous country jumped to over 1.80 million by Monday morning, including 38,135 deaths, health ministry data showed. The country has the world's third highest caseload after the United States and Brazil.
IT stocks were largely unchanged after reports U.S. President Donald Trump on Monday signed an executive order preventing federal agencies from contracting or subcontracting foreign workers, mainly those on H-1B visa."
Share of external financing of fiscal deficit soars to 4.5% in Q1 this fiscal: Report
Some very worrying news on the fiscal front.
PTI reports: "The share of external financing has jumped to 4.5 per cent in Q1 FY21 from 1.6 per cent in the same quarter last fiscal, which in terms of the quantum has skyrocketed by 325 per cent Y-o-Y, says a report analysing the fiscal numbers of the government.
The government has run 83 per cent of its borrowing target as of June, according to official numbers released on July 31, due to the impact of the pandemic that crippled the economy.
The massive spike in the share of external source of funding the fiscal deficit comes even as it has been continuing financing primarily through domestic sources -- as much as 96 per cent, according to an analysis by CARE Ratings.
“The share of external financing in the current financial year has jumped from 1.6 per cent as of Q1 of FY20 to 4.5 per cent in Q1 of the current fiscal. In terms of the quantum of external financing, this is a massive 325 per cent higher year-on-year during the first quarter,” says the report without quantifying the actual numbers.
When it comes to domestic financing of the fiscal deficit too, there has been a near 50 per cent increase in Q1 year-on-year. Domestic financing is mainly met through market borrowing, which has touched as much as 83 per cent so far, which is a full 117 per cent increase over the same period last fiscal, says the report.
The higher dependence on debt is due to the lockdown which created an unprecedented financial stress for the government due to the sharp decline in income and an increase in expenditure.
However, in an encouraging sign, despite the massive revenue shortfalls there has been an increase in capex.
The fiscal deficit in Q1 stood at Rs 6.62 lakh crore, which is 53 per cent more than a year ago; and as a percentage of the budget estimates it is 83 per cent as of June 2020 as against 61 per cent a year ago.
Government’s total expenditure has risen 13 per cent in Q1 led by an increase in capex; and of this revenue expenditure accounted for 89 per cent, which is up 11 per cent Y-o-Y.
The total capex has jumped a full 40 per cent in Q1, in spite of its income falling 47 per cent."