Global Economy
- Easing inflation, waning labour market strength, lackluster business activity points to a US slowdown.
- Post a 25-bps rate hike in May, US Fed could keep rates on hold for the rest of 2023.
- US Dollar and bond yields expected to ease on the impact of prior rate hikes.
- China’s Q1 2023 GDP growth beat market expectations at 4.5%, driven mainly by consumption.
- China’s export growth unlikely to sustain amid slowing external demand from key export markets.
- China’s real-estate sector continues to pose a pain point.
- PBOC rate cuts unlikely on risk of overheating the economy and worsening of net export position.
- OPEC’s oil balance expected to slip into a deficit in 2023 amid production cuts from May until end-2023.
Domestic Economy
- Consumption indicators stayed healthy in FY23, industrial activity signals resilience.
- New investment proposals (CMIE) at a record high of Rs 12.4 lakh crore in Q4 FY23.
- CPI inflation in March eased to a 15-month low of 5.7% on easing food inflation.
- Cereals and milk inflation stayed elevated despite moderation in food inflation.
- Average retail inflation projected to moderate to 5.1% in FY24 with inflation in Q1 pegged at 4.8%.
- Gross bank credit growth remained healthy and was led by the retail, services and industry.
- Credit growth expected to moderate to 12% in FY24 from an estimated growth of 15% in FY23.
- Merchandise trade deficit at a record high in FY23 amid sharp increase in imports.
- Merchandise exports projected to contract 5% in FY24 amid global demand weakness.
- Trade deficit likely to ease FY24 owing to lower imports and healthy services exports.
- Low volatility and widening India-US interest rate differential to benefit INR via attractive carry trades in FY24.
- Rupee likely to appreciate to 81 levels by end-FY24 on dollar weakness and narrowing CAD.
- 10-year benchmark bond yield eased 19 bps to 7.03% post-RBI’s April rate pause.
