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Omicron Spread May Disrupt Global Supply Chain: EEPC India

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The sustained growth momentum demonstrates the sector is well on track to grow its market share in the global trade, EEPC India chairman Mahesh Desai said in a statement on Friday.

Engineering Export Promotion Council of India has expressed concern that the spread of Omicron, the new variant of coronavirus, may once again disrupt the global supply chain, which could lead to a slowdown in trading activities.

Exports of engineering goods registered a 38 percent year-on-year growth in December 2021 to USD 38.4 billion.

The sustained growth momentum demonstrates the sector is well on track to grow its market share in the global trade, EEPC India chairman Mahesh Desai said in a statement on Friday.

“While the order pipeline has been remarkably good, we could see some slowdown if Omicron disrupts the global supply chain. In the recent weeks, we have seen some signs of volatility and uncertainty due to the ongoing pandemic wave across the world but by putting suitable policy measures in place, the government could provide cushion to trade and business,” Desai said.

He called for urgent action on part of the government to reduce soaring raw material prices and logistics costs.

“We hope that in the upcoming budget, the government will take appropriate measures to reduce the cost of primary steel, copper, aluminum and other raw materials. This will be a major relief for the sector which is dominated by micro, small and medium enterprises,” he said.

Some policy push now would keep the industry ready to take challenges in future and set higher export targets next financial year, he added.

(PTI)

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GDP Likely To Grow By 9.2% In FY22: SBI

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Cases have been rising significantly in India as well as across the globe. However, studies so far reveal that the current Omicron variant is less severe than the Delta variant, the report mentioned.

Amid the economic recovery, the State Bank of India (SBI) on Saturday said that India is expected to witness GDP growth at 9.2 percent and the GVA growth estimate is 8.6 percent. Nominal GDP growth is whopping at 17.6 percent.  

According to the SBI report, this is the second-highest nominal growth achieved with 19.9 percent nominal growth registered in 2010-11 and 17.1 percent growth in 2006-07. 

The report also indicated that the overall GDP growth is 1 percent above the pre-pandemic level (FY20). Almost all sectors except ‘trade, hotels, transport, communication and services related to broad- casting’ (which are still 8 percent below the pre-pandemic level) reached the pre-pandemic level.  

On the expenditure side, private final consumption expenditure is still 3 percent below the pre-pandemic level. The additional spending announced by the government in early Dec’21 fiscal deficit of the centre still comes at Rs 15.88 lakh crore or 6.8 percent of the GDP. For FY23, the fiscal consolidation should remain limited to 30-40 bps from the current fiscal, it said. 

Cases have been rising significantly in India as well as across the globe. However, studies so far reveal that the current Omicron variant is less severe than the Delta variant. Data also substantiate this fact, the report mentioned further. 

SBI business activity index is at its all-time high of 114.6 for the week ended 3 Jan’21, indicating that economic activity is not getting affected by the sudden bout of infections. The index has been above the pre-Covid level since mid-Jul ’21 barring some minor exceptions.

“Going forward, we believe even if the rising infections could impact mobility, yet economic activity is not expected to get affected much,” the report mentioned. 

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OPEC And Allies Gradually Pump More Oil Amid Omicron Spike

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The 23-member OPEC+ alliance led by oil cartel member Saudi Arabia and non-member Russia said it would add 400,000 barrels per day in February, sticking with a road map to slowly restore cuts in output made during the depths of the pandemic

OPEC and allied oil-producing countries decided Tuesday to pump more oil to the world economy amid the hope that travel and demand for fuel will hold up despite the rapid spread of the omicron variant of COVID-19. 

The 23-member OPEC+ alliance led by oil cartel member Saudi Arabia and non-member Russia said it would add 400,000 barrels per day in February, sticking with a road map to slowly restore cuts in output made during the depths of the pandemic.

Oil prices plunged, and stocks slid in late November after the first reports about the ultra-contagious omicron variant. But prices have since recovered and markets calmed down. Analysts say vehicle traffic and aviation activity suggest that omicron, while it is dominating headlines and raising concerns about hospital capacity, may wind up not drastically reducing demand for fuel.

The production increases are gradually restoring deep reductions made in 2020, when demand for motor and aviation fuel plummeted because of pandemic lockdowns and travel restrictions. At times, OPEC+ hasn’t moved fast enough in raising production for U.S. President Joe Biden, who has urged producing countries to open the taps wider to combat surging gas prices and aid the economic recovery.

The U.S. and other oil-consuming countries on Nov. 23 announced a coordinated release of oil from strategic reserves in an effort to contain rising energy prices that have helped fuel inflation and raised politically sensitive gasoline prices for U.S. drivers. Yet Biden’s move is seen as having only a muted effect on prices.

A recent decline in U.S. gasoline prices which are significantly influenced by the price of crude has steadied at a national average of USD 3.28 per gallon, down from about USD 3.40 in mid-November. 

(PTI)

economy

CEOs Expect 9-10% Growth, Strong Rebound In Current Fiscal: CII Poll

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A large number of CEOs polled, however, appeared worried about the impact of the new COVID variant Omnicron on services and the manufacturing sector.

Indian economy is all set for a strong rebound in the current fiscal posting a growth rate of 9-10 percent, says a CEOs poll conducted among the members of the CII National Council.

A large number of CEOs polled, however, appeared worried about the impact of the new COVID variant Omnicron on services and the manufacturing sector.

As regards growth, about 10 percent of the CEOs polled believe that it could even exceed 10 percent during 2021-22, the CII said in a release on Sunday.

“Government’s strong emphasis on public works, timely interventions to boost liquidity and several reforms carried out in the recent months including easing regulations, Production Linked Incentives scheme, RoDTEP and several other bold reforms have buoyed the optimism on higher economic growth,” said CII President T V Narendran.

The poll is based on the responses of about 100 CEOs.

On the impact of Omicron on business, 55 percent of the CEOs polled expect that the services sector would get adversely impacted due to the spread of the new variant of coronavirus, while another 34 percent of the CEOs indicated that it could adversely impact manufacturing activities.

According to the CEOs poll, 56 percent of the respondents indicated that the economy would grow in the range of 9 percent to 10 percent during 2021-22, while another 10 percent polled expected the growth rate in excess of 10 percent this fiscal year, CII said.

The respondents were also upbeat on sentiments regarding their business, with 35 percent of the CEOs indicating that the increase in revenue this year in the range of 10-20 percent when compared to pre-COVID year (2019-20), while another 33 percent expected a bigger jump of more than 20 percent.

It further said that about 35 percent of the CEOs polled expected more than 20 percent increase in gross profits when compared to the pre-Covid year, while another 17 percent indicated an increase of 10 percent to 20 percent. 

This optimism among the CEOs is despite more than a third of them (70 percent) observing that supply chain bottlenecks were causing problems in the movement of goods in their industry sector, the release said.

Further, given the pick-up in business activity this year, 59 percent of the CEOs noted that capacity utilization in their companies was currently in the range of 70 percent to 100 percent, while 18 percent of them felt that it could be more than 100 percent.

Nearly a similar proportion (62 percent) of the CEOs polled projected capital expenditure in their companies for the year 2022-23 to be up to Rs 500 crores.

Additionally, 71 percent of the CEOs polled indicated that they did not raise resources in the Indian or global markets in the past year, while 18 percent of them said that they had raised debt and another 11 percent said that they raised equity in the Indian or global markets in the past year.

On expected growth in exports, 35 percent of the CEOs polled indicated up to 20 percent increase in exports when compared to the pre-Covid year 2019-20, while 24 percent felt that it would remain the same as in FY20. 

Interestingly, about 10 percent of the CEOs indicated more than 50 percent growth in exports in their companies in the current year when compared to the pre-COVID year 2019-20.

On the imports front, 73 percent of the CEOs indicated that less than 10 percent of their imported goods came from China, while another 22 percent said that the share of their imports from China could be in the range of 10 to 25 percent. 

(PTI)

economy

With PLI Schemes & Global Demand Recovery, India Exports Likely To Fly High In New Year

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The growth and global demand will also depend on whether the countries would be able to contain COVID-19 and the new variant Omicron through massive vaccination worldwide

After staging a strong recovery from COVID-induced slowdown in 2021, India’s exports are likely to extend the growth story to the New Year also on increased demand in the global markets, boost in domestic manufacturing due to production-linked incentive schemes, and implementation of some interim trade pacts. Expectations of positive growth in the country’s exports are also backed up by the outlook of the World Trade Organisation (WTO) which predicts a 4.7 percent expansion in the global merchandise trade volume in 2022. 

Exporters believe that the outbound shipments would cross USD 400 billion mark in this fiscal going by the current momentum and may reach USD 475 billion in 2022-23. However, the growth and global demand will also depend on whether the countries would be able to contain COVID-19 and the new variant Omicron through massive vaccination worldwide, they suggest.

According to a Reserve Bank of India survey, released in September, exports of software services, including services delivered by foreign affiliates of Indian companies, stood at USD 148.3 billion in the fiscal year to March 31, 2021. This is more than USD 145.3 billion the world’s top oil exporter, Saudi Arabia expects from oil sales in 2021. With the largest engineering population in the world, the software export story was seeded about four decades ago and has huge potential to go up further. But software exports are just a part of India’s export-led growth story which is gaining momentum.

Commerce Secretary BVR Subrahmanyam said that the world respects India as a trusted global business partner now and the country’s exports are growing in regions including the Middle East, Arica, and South American nations, besides India’s traditional destinations. “An intense review and monitoring at macro and geographical levels are helping to find new areas of trading relationships. Various measures to improve ease of doing business, incentivisation schemes like PLIs, rationalisation of duties is facilitating the trade like never before,” he told PTI.

To boost exports, the government has taken several measures such as notifying RoDTEP (Remissions of Duties and Taxes on Exported Products) rates, and releasing Rs 56,027 crore against pending tax refunds of exporters and steps to promote ease of doing business, the secretary added. Subrahmanyam said that a series of measures by the central government and the resilience of Indian exporters have helped in registering record growth in exports so far.

According to another senior official, the Department of Commerce is working on the new Foreign Trade Policy (FTP) and aggressively negotiating Free Trade Agreements (FTAs) with key trading partners including the UAE, the UK, and Australia and these measures would help in registering record growth in exports in “next year as well”. The centre has implemented a series of steps to promote exports of both goods and services and that includes the introduction of RoDTEP and Rebate of State and Central Levies and Taxes (RoSCTL) Schemes, the launch of Common Digital Platform for Certificate of Origin to facilitate trade and increase FTA utilization by exporters, promoting districts as export hubs by identifying products with export potential in each district and addressing bottlenecks, and promoting ease of doing business.

The recently introduced PLI schemes will also support growth in the New Year, particularly in mobile, electronics and drugs and pharma sectors as incremental production will push additional exports as well. According to Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai, much will depend on whether “we would be able to contain Covid-19 through massive vaccination across the globe and be able to create required capacity”.

This will decide whether the country should look for 15-20 percent growth or even more and looking into the emergence of new variants and supply-side challenges at this point of time, “we would like to be a little conservative and will aim for an export of USD 460-475 billion in 2022-23,” he said. Sahai added that while the demand side of exports should be taken care of by the industry, industry and the government should work together to address the supply side challenges.

“An increase in the prices of inputs, skyrocketing freight, and delays in shipments and payments have resulted in the need for additional credit. Unfortunately, additional credit requires additional collateral as well by the banks. The government may consider giving a push to container manufacturing in the country as we require a large number of containers for inland coastal shipping,” he suggested. Since January this year, exports are mostly recording double-digit growth on account of a low base. In 2020, exports were hit hard by the impact of the Covid-19 pandemic.

Rising imports of gold and crude oil have pushed the country’s imports and widened the trade deficit (difference between exports and imports). The trade deficit touched a record USD 23.27 billion in November. Leading exporter and founder chairman of Technocraft Industries India Sharad Kumar Saraf said that as the Indian economy is reviving at a faster pace, imports are rising.

“Exports will do better in 2022 on account of health demand in global markets, Customers who have moved out from China are looking at India. Schemes like PLI will start yielding fruits from the new year,” Saraf said. Ludhiana-based Hand Tools Association President S C Ralhan also said that exports would do good in the new year, but the government should take immediate steps in containing rising shipping rates and raw material prices.

Promoting exports helps a country create jobs, boost manufacturing and earn more foreign exchange.

(PTI)

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FM To Hold Pre-Budget Consultations With Stakeholders

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She will be seeking inputs from various stakeholders, including industry bodies, farmer organisations, and economists for reviving consumption and boosting growth hit by the COVID-19 pandemic

Finance Minister Nirmala Sitharaman will kick start the customary pre-Budget consultation exercise with stakeholders from Wednesday by holding the first such meeting with experts of agriculture and the agro-processing industry.

She will be seeking inputs from various stakeholders, including industry bodies, farmer organisations, and economists for reviving consumption and boosting growth hit by the COVID-19 pandemic.

The growth this year is expected to be in double-digit during the current fiscal. The RBI in its latest bi-monthly monetary policy review pegged a GDP growth of 9.5 per cent in 2021-22.

The government has projected a fiscal deficit of 6.8 percent of the gross domestic product (GDP).

 “Finance Minister Smt. @nsitharaman will start her Pre-Budget consultations with different stakeholder Groups from tomorrow, 15th Dec 2021 in New Delhi in connection with the forthcoming General Budget 2022-23. The meetings will be held virtually,” the finance ministry said in a tweet.

The Budget 2022-23 is likely to be presented on February 1 during the first half of the Parliament’s Budget session which usually begins in the last week of January every year.

“Finance minister Smt @nsitharaman will be holding her 1st Pre-Budget consultations with experts of Agriculture and Agro-processing industry tomorrow afternoon, 15th Dec 2021,” another tweet said.

The budget for the next year will have to address critical issues of demand generation, job creation and putting the economy on a sustained 8 percent plus growth path.

The Budget 2022-23 would come against the backdrop of surging cases of Omicron variant. The impact of this on the economy, however, is likely to be less severe due to rapid vaccination.

India will be among only a few economies in the world to rebound strongly from COVID-19 induced economic contraction of 2020-21, a Finance Ministry report said.

Real GDP in the second quarter of FY2021-22 has grown by 8.4 percent YoY, recovering more than 100 percent of the pre-pandemic output in the corresponding quarter of FY2019-20, said the monthly Economic Review prepared by the Finance Ministry.

“India is among the few countries that have recorded four consecutive quarters of growth amid Covid-19 (Q3, Q4 of FY21 and Q1, Q2 of FY22) reflecting the resilience of the Indian economy. The recovery was driven by a revival in services, full-recovery in manufacturing, and sustained growth in agriculture sectors,” it said.

The recovery suggests kick-starting of the investment cycle, supported by surging vaccination coverage and efficient economic management activating the macro and micro drivers of growth, the report said.

(PTI)

economy

Business Activity Grows To New High Despite Omicron Threat, Says Nomura

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The Nomura India Business Resumption Index (NIBRI), which compares the activity for a particular week as against the one before the onset of the pandemic, rose to 115.8 from 112.9 for the previous week.

Despite fears of the Omicron variant, business activity touched an all-time high since the onset of the pandemic for the week ended December 12, a Japanese brokerage said on Monday.

The Nomura India Business Resumption Index (NIBRI), which compares the activity for a particular week as against the one before the onset of the pandemic, rose to 115.8 from the 112.9 for the previous week.

“Despite Omicron risks, neither policy restrictions nor public fear factor appears to have had any impact on mobility so far, which is supporting a further normalisation in services,” it said in a statement.

Mobility indicators rose for the week, led by a 4 percentage point (pp) uptick in the Google mobility index, 2 pp increase in retail and recreation index, while the Apple driving index rose 2.9 pp.

The labour participation rate picked up to 41.4 percent from 40.5 percent — its highest in eight weeks — and power demand reversed last week’s fall with a 3.7 per cent gain, it added.

After supply-constraint induced declines in August and September, industrial output growth rose sequentially in October, although its pace appears to be plateauing.

India remains at risk of virus setbacks since that fully vaccinated account for only 37.5 percent of the overall population, it said, adding data thus far suggest that incremental growth momentum in Q4 may be driven more by services and re-opening and less by industry.

(PTI)

Rbi cfo

Bankers Welcome RBI Stance Amid Omicron Fears

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“There is no change in the growth and inflation projections of the RBI for the current fiscal despite changes in the macroeconomic scenario. That is indeed a positive sign,” he added.

The RBI’s accommodative stance and retaining the GDP growth estimate at 9.5 per cent despite the Omicron variant, along with regulatory measures on the digital payments side, were welcomed by the bankers on Wednesday.

Reacting to the bi-monthly policy review, in which the rate-setting panel opted for a status quo on rates, industry lobby Indian Banks’ Association’s chairman and managing director and chief executive of the state-run UCO Bank, A K Goel, said the measures were as expected.

“There is no change in the growth and inflation projections of the RBI for the current fiscal despite changes in the macroeconomic scenario. That is indeed a positive sign,” he added.

Through its initiatives on digital payments, the RBI is giving a signal to encourage people to use the digital mode, he said, and also welcomed the central bank’s acknowledgment of IBA’s representations on the Libor transition.

Largest lender SBI’s chairman Dinesh Khara said the announcement on capital infusion in overseas branches without prior approval of RBI will bring in operational and seamless flexibility, and the decision to review the payment landscape and further fine-tuning UPI transfer for small value transactions could act as an enabler of mass digitisation.

National Payments Corporation of India (NPCI) chief executive Dilip Asbe tweeted saying the aim of 1 billion transactions a day is not very far.

On the enhancement in UPI limits for IPO, he said the NPCI’s platform has expanded the IPO market and with today’s measure, can become a core of IPO investments in the country.

Largest private sector lender HDFC Bank’s chief economist Abheek Barua said the policy was “more dovish than expected” and the central bank has provided little to provide any forward guidance on the path of future policy rate increases.

“The policy decision today tilted on the side of caution, continuing its support for growth and sounding caution on the omicron risk,” he said.

Foreign lender Standard Chartered Bank’s cluster chief executive for India and South Asia markets, Zarin Daruwala, said the MPC’s pro-growth stance came out very clearly and this augurs well for the economy, which is recovering from the effects of the pandemic.

Among the non-bank lenders, Rajiv Sabharwal of Tata Capital reacted to the policy saying the economy has gained growth momentum over the last six months but RBI will want to further nurture a broad-based recovery and will also aim at the sustainability of the same.

Religare Enterprises’ executive chairperson Rashmi Saluja said an unchanged repo rate augurs well for home buyers and small businesses as they can benefit from the low rates.

(PTI)

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Domestic Air Passenger Traffic Crosses 10-Mn Mark ; Omicron May Derail Recovery: ICRA

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After recording 1.23 crore domestic passengers in February 2020, domestic air travel demand dipped to 19.84 lakh passengers in the first month (June 2020) of the resumption of flight services on the local routes after a two-month hiatus.

Continuing on the recovery path, domestic air passenger traffic crossed the 10-million mark in November for the first time since the pandemic hit the aviation industry in March last year but the coronavirus’ new variant Omicron has the potential to spoil the party, according to rating agency ICRA.

After recording 1.23 crore domestic passengers in February 2020, domestic air travel demand dipped to 19.84 lakh passengers in the first month (June 2020) of the resumption of flight services on the local routes after a two-month hiatus.

The recovery in domestic traffic continued till March this year when a more virulent second wave of the pandemic hit the country, resulting in domestic travel demand nosediving to 21.15 lakh passengers in May 2021.

In the second phase of the recovery, domestic travel demand rose to 10.04-10.05 million (1.004 crore-1.005 crore) in November 2021 as against 63.54 lakh passengers recorded in the year-ago period, registering a robust 64 per cent year-on-year growth, ICRA said in a statement.

The month-on-month growth, however, stood at 15-16 per cent in November over around 8.98 million passenger traffic in October 2021, ICRA said.

ICRA Vice-President and Sector Head Suprio Banerjee said, ”Though the recovery continued in November, demand continues to be subdued from the corporate traveller segment as reflected by the passenger traffic being lower by around 19 per cent in November 2021 compared to pre-COVID-19 levels.” Moreover, the threat of the new variant, which has pushed the resumption of scheduled international operations, has the potential to derail the domestic recovery too, if it becomes a source of a fresh round of lockdowns/ restrictions in the near term, he added.

ICRA also said domestic carriers deployed 49 per cent higher capacity in the previous months vis-à-vis November 2020, logging around 80,750 departures in the month under review as against 54,132 departures in the year-ago period.

On a sequential basis, the number of departures in November was around 12 per cent higher as coronavirus infections demonstrated a downward trajectory, it said.

”For November, the average daily departures were at around 2,700, significantly higher than the average daily departures of 1,806 in November 2020, and higher than around 2,400 in October 2021,” said Banerjee.

The average number of passengers per flight during November was around 129, against an average of 125 passengers per flight in October 2021, according to the rating agency.

One major concern that continues to worry the aviation sector is the aviation turbine fuel (ATF) prices, which have seen a sharp 67.3 per cent increase on a y-o-y basis till December 2021, which is mainly attributed to an increase in crude oil prices, ICRA said.

This, coupled with relatively low capacity utilisation of aircraft fleet, will continue to weigh on the financial performance of domestic carriers in FY2022, it stated.

(PTI)

Rbi cfo

Reserve Bank Of India May Refrain From Reverse Repo Hike

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Fifty economists surveyed by Reuters in a December 1-3 poll expect the RBI to hold its benchmark repo rate at 4.00 percent.

The Reserve Bank of India will likely hold off on raising its key borrowing and lending rates on Wednesday, as it adopts a cautious tone amid the spread of the Omicron coronavirus variant, economists and market participants said.

Fifty economists surveyed by Reuters in a December 1-3 poll expect the RBI to hold its benchmark repo rate at 4.00 percent.

The reverse repo rate – the interest rate banks earn for parking short-term funds at the RBI – is mostly expected to remain unchanged at 3.35 percent, but several economists have priced in a small increase as the central bank tries to normalise the gap between the lending and borrowing rate to pre-COVID-19 levels.

“We believe, the RBI may deflate the hype around reverse repo hike in monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool,” Soumya Kanti Ghosh, chief economic adviser at the State Bank of India wrote in a note.

The RBI had cut the reverse repo rate more aggressively than the repo rate, widening the gap between the two rates to 65 basis points from 25 bps before the pandemic.

Several other economists felt that given the uncertainties of the new Omicron variant on the economy, it was better to adopt a wait-and-watch approach despite inflationary pressures.

Analysts expect further measures to absorb the liquidity surplus in the banking system and will also closely monitor any changes in growth and inflation projections.

India’s economy expanded 8.4 per cent in the September quarter from a year earlier, the fastest pace among major economies but economists said disruptions from the new virus variant risked slowing the recovery.

Inflation has been within the RBI’s 2-6 per cent target range due to the cuts in taxes on fuel by central and local governments but the damage to perishable food items due to unseasonal heavy rains and telecom price hikes are likely to push inflation up yet again.

“Inflation risks cannot be dismissed as the moderation in September-October inflation is likely to be followed by an updrift back above 5.5-6 per cent in 1Q22,” said Radhika Rao, economist with DBS Bank.

Consumer prices rose 4.48 per cent in October from a year earlier, accelerating from September’s 4.35 per cent.

Rao expects a 20-basis-point increase in the reverse repo rate followed by another hike of a similar quantum in February.

“The pandemic situation is the key wild card, with any signs of a worsening outbreak to push policymakers to err on the side of caution and slip into an extended status quo,” she said.

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