Panorama – August 2023
Panorama August 2023 edition is out now!
Panorama is a meticulously crafted report that offers an overview of the macro factors and market trends influencing the Indian economic landscape.
Here are the key insights from the report:
- The corporate sector witnessed a broad-based improvement in capital expenditure in FY23. The presence of a robust industrial order book points towards sustained capex momentum in FY24.
- Over the past two years, there has been a sustained improvement in new investment announcements, mainly led by the private sector. While the services sector drives a significant portion of these announcements, the manufacturing sector also witnesses improvement.
- The Central Government frontloads capital expenditure in FY24. Additionally, the double-digit growth in steel consumption and cement production also indicates a robust capex momentum.
- The recovery of capacity utilization to the pre-COVID average bodes well for investments in capacity expansion.
- Household inflation expectations remain well-anchored in July 2023 despite a steep rise in food inflation. The RBI also commits to looking through the spike in food prices if there are no signs of persistence. Forecasters no longer expect a rate cut in FY24, as inflation forecasts have been revised upwards. The growth outlook has improved from the previous survey round.
- The withdrawal of Rs 2000 denomination notes and foreign exchange intervention by RBI led to a liquidity surplus. The RBI introduced the Incremental Cash Reserve Ratio (I-CRR) to drain surplus liquidity, resulting in a liquidity deficit as banks maintain a higher CRR. The higher currency demand during the festive season will likely further drain liquidity. As a result, the I-CRR is expected to be a temporary measure.
- Excess liquidity hampers transmission during a rate hike cycle. Thus, the I-CRR represents a policy tightening that enhances transmission by draining surplus liquidity.