DSP TATHYA - March 2024

Personal loans have remained steady, and so have retail payments. Consumer sentiment has continued to register a fall for second consecutive month. The massive rise in non-oil imports is because of a very low base. The stable rise in two wheelers could be seen as a sign of much-awaited rural recovery.

The disinflationary trend in core CPI has passed the downside surprise stage, and might begin to add some worry with how the growth of the economy has been sustained at the levels it has with the core number coming down consistently.

The 11% YoY growth in Manufacturing GVA is notable, but with a modest 5-year CAGR of 3%, suggesting stagnant supply-side dynamics likely to persist into Q4FY24. Initial Q4FY24 IIP numbers indicate a downward trend, possibly continuing throughout the quarter. Consumer durables show decent growth, but consumer non-durables remain subdued, possibly due to rising food prices impacting rural incomes. An average FY24TD WPI of -0.8% is unusual for India. Although there are signs of recovery, if deflation in the start of the FY continues to dominate the statistical average, it could lead to an annual negative WPI.

E-toll collections have surged with an impressive 63% CAGR over the past six years, largely fueled by the widespread adoption of Fastag. Now that the transition to Fastag is nearly complete, the growth rate has stabilized. Additionally, there has been a notable increase in railway freight traffic, indicating a positive uptick in economic activity.

Credit to deposit shows marked strength, while money supply also made a decent rise. A consistent downtick in inflation, on the back of rising foreign debt flows, sets the stage for lower yields.

On fiscal front, considering elections are underway, there was no significant uptick in revenue expenditure, establishing an average on 2.6Tr, similar to that of 2023, a non-election year. But with the model code of conduct in effect, this number might see a downtick in the coming months.

Trade balance rises from its previous 9- month low, helped by a marginally higher sequential rise in imports than exports. Services surplus continue to widen to an alltime high for third consecutive month.

Debt investments from FIIs and ECBs have seen a notable uptick, attributed to India's inclusion in Bloomberg EM index after JP Morgan Bond Index. There has been greater traction towards managed money, thus, a significant rise in MFs and SIP books.