The missing piece in financial recovery:
The pace of contraction of the Indian economy slowed considerably in the September quarter (Q2). It caught lots of economists and analysts by surprise.
In Q2, the contraction in India’s gross domestic item (GDP) was at 7.5%, superior than the marketplace consensus of ~8.5-9%.
It is a exceptional worry taking into consideration the lack of government expenditure.
The government expenditure- which contains- public administration, defense and other solutions- decelerated additional from -10.3% in Q1 to -12.2% in Q2. Historically, the government’s spending on Capex has supplied key assistance to the economy.
Had the government stick to its pace of budgeted expenditure, the recovery in Q2 would have been more quickly. The growing fiscal deficit is a key constraint for the government. It is also feasible that the government would have taken a back seat as a huge quantity of components have been assisting in the recovery.
We could possibly see the government expenditure choosing up in the latter element of FY21 after other indicators get started moderating once again.
Good traction in demand for LCVs:
The November sales information of auto sales has pointed at demand recovery in the industrial automobile (CV) segment. Specifically, light industrial autos (LCVs) look to be in higher demand and driving the revival in the CV space.
From the month-to-month sales information released so far, Ashok Leyland’s LCV sales improved by 31% YoY in November even though Medium & Heavy industrial automobile (M&HCV) demand remained muted with -17% degrowth. Maruti Suzuki has also reported a comparable trend with 40% LCV sales development in November.
From the trends of November, the CV makers are probably to determine the LCV segment as a development driver of the future. Several management commentaries, post-September final results had indicated LCV segment to choose up amongst the fleet operators.
November information appears to have validated their stand and the future technique of CV makers is probably to revolve about the LCV segment. This trend will be additional validated in the coming days as Tata Motors and Eicher Motors are but to publish their November information.
Manufacturing activities moderates a small in November:
IHS Markit India Manufacturing Purchasing Managers’ Index (PMI) remained robust at 56.3% in November. However, it has lost traction and slipped from 58.9 in October. At 56.3, it is also at a 3-month low in November.
In PMI terminology, a print above 50 suggests expansion, even though a score beneath that denotes contraction.
Despite getting moderated from the leading, the Indian manufacturing sector witnessed robust development of new orders and output sustained in the course of November.
Shrinking pent-up demand, greater inflation, and uncertainty more than the fresh Covid wave continue to pose challenges. Under this impact, manufacturing PMI could moderate from the present elevated levels going ahead. However, it is largely unlikely that the manufacturing sector will once again go into contraction mode beneath 50.