While most economists were expecting GDP for the fourth quarter at 6-6.3%, the actual Q4 GDP surprised on the downside at 5.8%. To add to it, the unemployment number also came in at 6.1%. In fact, Q4 GDP at 5.8% was lower than the GDP number seen in the quarter after demonetization. The full year GDP at 6.8% also calls for some rapid measures to boost growth and the government may have its hands full. The NSSO has put out unemployment figures at 6.1%, which is the highest in the last 45 years. This may set the tone for the Union Budget on July 05th as well as the credit policy on 06th of June.
The noose may finally be tightening on the IL&FS top management that was replaced last year. The SFIO probe nails culpability of IL&FS top management; as per BS report. The Serious Frauds Investigation Office (SFIO) has charged the erstwhile management of IL&FS with forming a coterie with auditors and independent directors to defraud the company. If personal benefits can be proved, then this will be a very serious lapse in corporate governance. IL&FS had defaulted to the tune of Rs.96,000 crore and SFIO had investigated the former top brass for dereliction of duty and fraud, including independent directors.
IATA is quote clear that the global aviation growth will still be driven by India and China which are expected to account for 50% of global aviation growth. In fact, IATA has dismissed the negative growth in the Indian aviation sector as a temporary phenomenon. IATA still believes that Indians and Chinese will not only increase their per capita travel, but also bring in large swathes of population as airline customers. However, IATA noted that Indian airport infrastructure needed to keep pace with the growth in flyers to leverage this growth potential. This remains a major challenge for the Indian state.
After a tepid first half marked by selling, the second half of May more than compensated in the form of Foreign Portfolio Inflows. FPIs infuse a sum of Rs.9031 crore in the month of May 2019 of which equity inflows accounted for nearly Rs.8000 crore with the balance being accounted for by debt inflows. May had begun on a negative note with FII selling but it turned around in the second half of May after the exit polls predicted an easy win for the NDA government. Of course, the May inflows are sharply lower than April inflows of Rs.45,000 crore. Budget could be the next big trigger for FPI flows into India.
Global Oil has entered a peculiar phase during which the pressures on both the sides appear to be equally matched. During the week, the price of Brent Crude cracked lower to $61.55/bbl on demand and consumption concerns. However, Iran is of the view that Brent Crude could touch $100/bbl in the event of Middle East war. As the situation in the Middle East became more sensitive, Iran has warned that the US and Saudi Arabia that any full-fledged war in the Middle East would push oil prices well above $100/bbl. Ironically, the last week saw a sharp correction in the price of crude with Brent closing at $61.55/bbl. This marks a fall of nearly 18% from the peaks of $75.61/bbl that crude touched in May. The big worry on the higher sides is the trade war and on the lower side it is Iran sanctions.
GST collections again scale above Rs.1 trillion for the month of May 2019 and despite a hat-trick, the GST collections may still fall short. The big challenge for Ms. Sitharaman could be that the GST target for FY-20 is nearly 35% higher than the previous year and GST collections must get closer to Rs.1.25 trillion each month to get close to that target. In the last one year, the GST collections fell nearly Rs.1 trillion short of the full year target and the GST Council will have to really pull all stops to ensure that revenue collections get to the desired level. Sitharaman will chair the GST Council for the first time in June.
