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Last month, the major market mover was the Jackson Hole Symposium. The Fed Chair hinted at a faster pace of rate hikes to control inflation, the report stated
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Even as India overtook the United Kingdom (UK) to become the world’s fifth-largest economy and witnessed 13.5 per cent gross domestic product (GDP) growth, it is likely to grow moderately due to global factors, said Bank of Baroda in a research report.
Talking about the growth front, the report stated that domestic indicators remained broadly buoyant. PMI print, credit demand (especially personal loans), GST and toll collections showed to pick up.
"Going forward, however, we expect some moderation might be on the cards, as a global growth slowdown might impinge on domestic macros sooner or later," it stated.
India’s manufacturing and services PMI for Aug 2022 signals a continued momentum in activity supported by strong demand and easing price pressures, it said.
Other indicators such as credit growth, toll collections, GST collections and electronic imports show an improvement. Further, the South-West monsoon has progressed well (5 per cent above LPA as of 5 Sep 2022) and storage levels in reservoirs are adequate.
However, it also mentioned that with several parts of Eastern and Northern India receiving deficient rains, Kharif sowing has been impacted and is 13.7 per cent lower compared with last year. This has been led by lower sowing of rice (-22.9 per cent) and pulses (-5.9 per cent)
Supported by a drop in overall spending in July 2022 and buoyant revenue growth, the centre recorded a surplus of Rs 11,040 crore (a first since March 2020). With this, the fiscal deficit came down to 6.3 per cent as of July 2022 versus 6.6 per cent as of Q1FY23, it said.
On the expenditure side, overall growth slowed to 12.2 per cent in FYTD23 (till July 2022) versus 15.4 per cent in Q1. This was led by the sharp slowdown in revenue spending (4.8 per cent from April to July versus 8.8 per cent in Q1).
Centre’s gross tax revenues rose by 24.9 per cent in FYTD23 versus 22 per cent growth in Q1, led by a pick up in direct (42.7 per cent versus 25.4 per cent) tax collections. Indirect tax collections (10.9 per cent versus 11.1 per cent) were broadly stable.
"Centre’s net revenues also rose sharply by 12.9 per cent, compared with 5 per cent in Q1FY23. We believe the centre will meet its fiscal deficit target for this year," according to the report.
Talking about the Indian rupee, the report said that it came under renewed pressure after the US Fed Chair’s speech at the Jackson Hole Symposium. In fact, the rupee briefly breached the 80 per USD mark but saw a correction, supported by RBI’s active intervention.
However, with rising external headwinds in the form of a stronger dollar and weakening export momentum, the outlook for the Indian rupee remains dim.
"Apart from this, higher rates in the US may spur a fresh bout of FPI withdrawals from India which again also weigh on the Indian rupee, as per the report.
"On the positive side, oil prices may see some correction as higher rates tip the global economy into a slowdown if not recession. Overall, we may expect the rupee to trade in the Rs 79.75-80.0/USD range in the near-term," it added.