M FoundationIndia Economics – Macro Indicators Chartbook | Asia PacificStrength in Growth, Stability in Macro-FundamentalsMorgan Stanley India Company Private LimitedUpasana ChachraChief India Economist Upasana.Chachra@morganstanley.com +91 22 6118-2246 Bani GambhirEconomist Bani.Gambhir@morganstanley.com +91 22 6118-3027 Related Research: India Economics: Jan-24 Goods Trade Deficit Narrows; Service Trade Balance At Record Highs (15 Feb 2024) India Economics: January CPI: Broad-based Slowdown (12 Feb 2024) India Economics: RBI Policy Review: Even-handed Policy (8 Feb 2024) India Economics: High-frequency Data: Improved Momentum (6 Feb 2024) India Economics and Strategy: F2025 Interim Budget: Positive Fiscal Surprise (1 Feb 2024) Domestic demand improved in January, while macro stability remains comfortable, reflecting strength in the fundamentals. We maintain our constructive outlook on the economy. Risks emanate from global factors and elections in May 2024. 1) Growth: Domestic demand gathered pace on a YoY basis in January, as it inched up to a 3-month high, and also accelerated on a sequential basis. GST collections rose to their 2nd-highest, to INR1.7tn, growing 10.4% YoY, while Manufacturing PMI improved to 56.9, remaining expansionary since Jul-21. On the external demand front, exports grew 3.1% YoY in January from 1% in the previous month.2) Inflation: CPI inflation edged down to a 3-month low of 5.1% YoY in January from 5.7% in December, while core inflation, continued to remain benign, as it slowed further to 3.6%. WPI moderated to 0.3% YoY in January from 0.7% in the previous month.3) Trade deficit: Trade deficit narrowed to US$17.5bn in January from US$19.8bn in December. On a monthly annualised basis, the trade deficit moderated to 5.6% of GDP in January from 6.4% of GDP in December, while the trade deficit ex-oil and gold softened to 2.2% of GDP in January from 2.7% of GDP in the previous month. 4) Tracking policy: Interbank liquidity continues to remain in deficit in February (month to date), and is tracking at US$21bn, while the weighted average interbank call rate has moderated to close to repo rate at 6.5%. On the fiscal side, the 12-month trailing deficit rose a tad, to 5.8% of GDP in December from 5.7% of GDP in November. The FYTD fiscal deficit is tracking at ~55% of the F2024 budgeted target.5) Outlook: On growth, we expect GDP growth to remain healthy, and we are tracking QE Dec-23 at 6.5% YoY, even as it slows from 7.7% in H1F24. We expect GDP to average 6.9% YoY in F24 and 6.5% in F25. With regard to macro-stability, we anticipate headline inflation to remain range-bound around 5.0-5.2% YoY in 1Q24, supported by favourable base effect, and average 5.4% YoY in F24 and 4.5% in F25. The current account deficit is likely to remain benign, supported by strength in services exports and softening global commod...
