SAIL managed to turn around to its first profit in the last 11 quarters as a more conducive steel market and a favourable government policy helped the steel industry to turn around. To the credit of SAIL, it has reduced excess labour and also undertaken a modernization program. For the year, its crude steel capacity is expected to rise by 50% to 21 million tonnes. SAIL had embarked on an expansion and modernization program worth $10 billion almost 10 years ago and the results are now beginning to show. India steel demand is likely to increase 3-fold by 2030, which is the big steel story!

The December quarter saw some large banks like SBI, IOB and Bank of India writing off huge amounts in the form of NPAs. In fact, NPAs for the December quarter were up by 34.5%, which indicates that the NPA cycle is far from over. The overall Gross NPAs of the major banks in India increased to 9.45%; the PSU banks saw gross NPAs to the tune of 12.4%. On the positive side, there is growth in interest income at 8.9% but the real challenge would be to call a bottom on the worsening NPA cycle. Even private banks like ICICI Bank have seen their NPAs rise up to more worrying levels.

With the controversy surrounding the various stressed loan schemes and with NPAs still rising, the RBI has come out with a new overarching framework for bad loan resolution for Indian banks. The new model allows exactly 180 days to banks to arrive at a resolution consensus failing which the case will be immediately referred to the IBC. Some of the existing stressed loan schemes like the Corporate Debt Restructuring (CDR), Strategic Debt Restructuring (SDR), S4A and Flexible Structuring of Long Term Loans will now be subsumed into the new IBC. The overhang of vigilance still continues.

The merger of the 3 insurance companies, NIC, UII and OIC, will be completed before March 2019 as promised in the Union Budget 2018. The next year there will be no full-fledged budget due to the impending central elections and hence there will only be a vote-on-account. The idea was to merge these 3 insurers to create market scale and then to look at a stake sale in the merge entity to get better value from synergies. These 3 insurance companies will also have a big role under the NHS to provide health cover to 10 crore Indian families at the rate of Rs.5 lakh per family.

CPI inflation for January 2018 came in at 5.07%, slightly lower than the 5.21% inflation reported in December 2017. While rural and urban inflation eased during the period, housing and clothing were the only two categories that saw an uptick during the month of January. Mandi prices have been depicting a declining trend and that means food inflation could lead the overall CPI inflation below the 5% mark. The RBI policy has already guided inflation at well above 5% in the first half and below 5% in the second half of the current calendar year. However, with CPI inflation being above the 5% mark, any rate cuts are almost ruled out in the next credit policy in April this year as the US Fed is also expected to affect a 25 basis points rate hike in its March Fed meet. Oil could be the major X-factor for inflation.

For the month of December 2017, the index of industrial production (IIP) came in at 7.1% compared to a more impressive 8.4% in the previous month. The sharp growth of vehicles and transport portends a turnaround in the capital cycle and that could be a good indicator, especially with commercial vehicles sales expanding by 36.6%. There has also been a positive contribution from cement, diesel and two-wheelers; all of which are positive lead indicators. The IIP is a major input for a recovery in the GDP growth in the second half of the fiscal year 2018, which should be closer to 7%.