The Economic Survey 2020 will be released on Friday 31st January, a day ahead of the Union Budget announcement. Each year, the Economic Survey provides a review of the year gone by and the projections for the coming year and forms the basis for the key macro announcements in the Union Budget. The Survey assumes special significance considering the sharp slowdown in growth and the sharp spike in inflation, even as fiscal deficit management remains the big challenge for the Finance Minister. The survey will evaluation trends in agriculture, IIP, infrastructure, jobs, M3, prices and foreign trade.
Along with the trend in global stocks, oil prices also fell to a 3-month low on fears that the impact of the Chinese Corona virus could be much larger than original anticipated. The apprehensions got underlined after the WHO declared the pandemic an international emergency. This is likely to result in a much larger number of flight cancellations to China, travel & tourism advisories by various countries as well as embargoes on import and export relations with China. The pandemic is expected to lead to a short term compression in oil demand; and combined with US supply it pushed Brent prices to $58.29/bbl.
Even as Rahul Bajaj decided to hang up his boots as the executive head of Bajaj Auto, the company reported impressive numbers for the December 2019 quarter. An 8% growth in net profits for the December quarter at Rs.1322 crore, despite flat sales revenues, was much better than street expectations. The spurt was led by a 7% growth in exports even as domestic sales fell by 14%. Exports now account for 43% of Bajaj sales and that has given Bajaj Auto an advantage over other two wheeler players. Rahul Bajaj will be assuming the rule of non-executive director from April 2020.
Tata Motors managed to turn from losses to profits in the December quarter on the back off a good performance put up by its principal driver; Jaguar Land Rover. The company reported net profit of Rs.1756 crore compared to net loss of Rs.26,960 crore in the December quarter 2018. However, the revenues were down by 7%. The return to black was driven by solid growth in JLR numbers, especially in the Chinese market. The newly launched Range Rover Evoque has also been a major success for the company. However, domestic auto sales continued to be a major drag for the Tata Motors numbers.
In the midst of all the budgetary constraints, the Union Budget 2020 is expected to announce a $28 billion proposal to run the world’s biggest food welfare program. How the subsidy will be funded is likely to be clarified by Nirmala Sitharaman in her Budget speech on February 01. However, it is very likely that the government may make a much smaller provision in the budget and ask the Food Corporation of India (FCI) to resort to off-budget borrowings. This will ensure that the fiscal deficit is not disturbed, although the rating agencies don’t take too kindly to such off-budget allocations. In 2018-19, the government had promised food subsidies of Rs.1.71 trillion but allocated only Rs.1.02 trillion. Considering budget constraints, the allocation could be still lower now. It will focus on rice and wheat.
The US economy will have a lot to worry on the growth front with GDP growth for 2019 coming in at just 2.3%. This is way below Trump’s target of 3% GDP growth and much lower than the 2.9% clocked in 2018. It is surprising because this weak growth has happened despite the $1.5 trillion tax cut by the US government. The growth was clearly hit by the trade war with China. However, this remains the longest GDP expansion in history spanning 11 years and could repeat in 2020 as the lag effect of the 3 rate cuts by the Fed in 2019 start kicking in. Growth in Q4 was largely supported by defence spending.
