The Index of Industrial Production (IIP) for December rose at its fastest rate in 16 years, registering a growth of 16.8% year-on-year (y-o-y). The growth in the industrial output during December was broad-based and spanned across segments. The manufacturing segment posted the highest growth of a strong 18.5% y-o-y, followed by the mining and electricity segments with 9.5% and 5.4% y-o-y growth, respectively.
The inflation rate for January came in at 8.56%, which stood above the consensus estimate of 8.26% y-o-y. The inflation rate for January indicates a 125 basis points (bps) increase from the December inflation rate of 7.31%, led primarily by the rising prices of food products and articles.
India’s trade deficit for December came in at $10.14 billion, increasing on both y-o-y and sequential basis by 66.7% and 4.7%, respectively. Notably, the exports continued to expand during December and registered a y-o-y growth of 9.3%. Importantly, the import growth turned positive during the month registering a 27.2% growth on a y-o-y basis.
Concerns have surfaced recently over the ability of the Greek government to honour its debt obligations as the Greek fiscal deficit is threatening to reach about 12% of the nation’s output. Importantly, many other European nations (Portugal, Ireland, Spain etc.) too are in a similar situation and may only add to the fears of sovereign defaults.
The credit off-take (non-food) registered a growth of 15.2% y-o-y (as on 29 January), which was higher than the 14.4% y-o-y growth seen during the previous period (15 January). Deposits registered a growth of 17.1% y-o-y (as on 29 January), which was higher than the 16.8% y-o-y growth seen during the previous period (15 January).
The credit-deposit (CD) ratio remained more or less stable at 69.5% (as on 29 January), in line with the 69.9% CD ratio during the period ended 15 January. The money supply (M3) growth as on 29 January stood at 17% y-o-y, higher than the 16.5% y-o-y growth seen during the period ended 15 January.
The yields on the government securities stood at 7.87% as on 19 February, up by 23 bps from the previous month’s level. The government securities yields for all other maturities expanded on a sequential basis with the five-year and three-year yields expanding by 32 bps and 63 bps, respectively. The government securities yields rose due to the combined effect of rising inflation and expectations of the government taking measures towards fiscal consolidation.
The Reserve Bank of India (RBI) hiked the cash reserve ratio by 75 bps to 5.75%, which signals a shift in its stance to a distinctively hawkish one in a bid to contain spiralling inflation. However, the challenge for RBI remains as the sustainability of global recovery is still viewed with caution and inflationary pressures in food items are threatening to become more widespread.
During the month-till-date, or MTD, period (1-19 February), the average daily volumes contracted in both the cash and futures and options segments.
The total industry average assets under management declined by 4.1% sequentially during January. The net resources mobilized in equity schemes during January stood at Rs1,571 crore as the resources raised through the new and the existing schemes outpaced the redemptions.
During the MTD period in February (1-18), foreign institutional investors and domestic mutual funds remained net sellers.
The annualized premium earnings for the life insurance industry grew by a muted 2.3% y-o-y after registering a growth of 58.9% y-o-y in the previous month.