PremiumIndia’s GDP data for the July-September quarter is due this week. The Parliament’s Winter Session is set to begin on Monday, with a bill on cryptocurrencies set to be discussed.
Every Monday, Mint’s Plain Facts section features five key data releases and events to watch for in the coming week. The winter session of Parliament will start on Monday. The government will also release the GDP data for Q2 this week. Stock markets will eye an IPO by health insurer Star Health and Allied Insurance. Here are the big events and data to watch for:
1. Parliament Session
Even before the winter session of Parliament starts, it is in the news because of two proposed bills: Farm Laws Repeal Bill, 2021, and The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.
The farm laws were passed amid pandemonium in the monsoon session. Now the repeal bill is part of the legislative agenda for the upcoming session, starting Monday.
The bill on cryptocurrencies, which was introduced during the budget session but could not be discussed, seeks to “prohibit" all private cryptocurrencies in India, with exceptions, and aims to facilitate a framework for creation of an official digital currency. This has already created panic among domestic crypto investors.
Of late, Parliament has passed bills without adequate discussion among members and review by committees, the farm bills being a case in point. Will the proposed bills make the winter session more vibrant?
2. India’s GDP
India’s official GDP data for the July-September quarter will be released on Tuesday. The second covid-19 wave had disrupted economic activity in April-June, but it got masked by a meagre base. GDP grew 20.1% year-on-year mainly on the back of revival in the manufacturing and construction sectors. This will be significantly smaller in July-September, with economists pegging it in the range of 7.5-9.6%, but that will be enough to take GDP above pre-pandemic levels.
The economy witnessed a rapid rebound in activity during the quarter as covid-19 cases subsided and vaccination picked up pace. The revival in manufacturing, construction, and mining sectors is expected to have continued, along with a recovery in the services sector. Agriculture may not be a silver lining due to the erratic monsoon but is unlikely to play a spoilsport either. However, the pace of recovery faces risk from global supply shortages, which have hit production in the automobile sector.
3. India’s Fiscal Data
The Controller General of Accounts (CGA) will release on Tuesday the Centre’s spending and revenue data for the seven months ended October. The Centre’s tax mop-up this year has been strong, aided by a low base, and this is expected to keep fiscal deficit in check even with robust spending. In the first six months, the fiscal deficit was only 35% of the budgeted aim, giving room for a capital expenditure push. Many economists expect the fiscal deficit to come in 20-30 basis points lower than the Budget aim of 6.8% of GDP for 2021-22.
Tax collections are expected to remain robust in October on the back of steady economic recovery and festival demand. The government’s excise duty collections may take a hit from November onwards because of the cut in levies on petroleum products but economists do not see it as a concern considering the comfortable fiscal position.
4. India’s PMI
India’s manufacturing and services purchasing managers' index (PMI) numbers for November will be released on Wednesday and Friday, respectively. Buoyed by pent-up demand and improving business sentiment, both prints stayed in the expansionary zone in October and even recorded robust growth. The manufacturing PMI rose to 55.9, while services activity was at 58.4. Factory output increased at a sharp pace and new work intakes posted the strongest growth since July 2011.
With quicker expansion of new orders, companies are gearing up for further improvements in demand by building up stocks. Rising consumer footfalls and ebbing covid-19 infections bodes well for services activity, which rose to a decade-high in October. However, while domestic demand has helped boost sales, international orders remain weak. Persistent inflationary pressure could deter growth. The impact of global supply bottlenecks may also start reflecting more in PMI figures soon.
5. Star Health IPO
Star Health and Allied Insurance Co, backed by ace investor Rakesh Jhunjhunwala, is all set to tap the capital markets on Tuesday with an issue size of over ₹7,000 crore. It would be the first standalone health insurance firm to be listed in India.
The company has strategically focused on the retail health market and is by far the largest player with 31% market share. It has a strong profitability record, reflected in its healthy average return on equity of 18% between 2017-18 and 2019-20. The company also has a strong distribution network compared to its peers and has a healthy product suite.
However, despite having a strong moat, increased competition from insurers with a much-diversified product portfolio poses a risk for this single-segment player, which derives 89.3% of its total health gross written premium from retail health insurance products. Moreover, any rise in claims in the event of a possible third wave may prove detrimental to its earnings.
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