KEY TAKEAWAYS

 

• Bank Rate and the marginal standing facility (MSF) rate remained unchanged at 4.25 percent.

• The standing deposit facility (SDF) rate, will be at 3.75 percent.

• The consumer price index (CPI) inflation medium term target kept at 4 percent within a bank of +/- 2 percent, while supporting growth.

• The MPC decided to remain accommodative while focusing on the withdrawal of accommodation to ensure that inflation remains within the target going forward, while supporting growth.

• The National Statistical Office (NSO) placed India’s real Gross domestic product (GDP) growth at 8.9 percent.

• Real Gross value added (GVA) rose by 8.3 percent in 2021-22.

• Merchandise reached US$ 418 billion in 2021-22 surpassing the target of US$ 400 billion.

 

Inflation

 

 

Headline CPI inflation edged up to 6.0 per cent in January 2022 and 6.1 per cent in February, breaching the upper tolerance threshold. Pick-up in food inflation contributed the most in headline inflation, with inflation of cereals, vegetables, spices and protein-based food items like eggs, meat and fish being the key drivers. Fuel inflation moderated on continuing deflation in electricity and steady LPG prices. Core inflation, i.e., CPI inflation excluding food and fuel remained elevated, though there was some moderation from 6.0 per cent in January to 5.8 per cent in February, primarily due to the easing of inflation in transport and communication; tobacco and intoxicants; recreation and amusement; and health.

 

Inflation is now projected at 5.7 percent in 2022-23, with Q1 at 6.3 percent; Q2 at 5.8 percent; Q3 at 5.4 percent; and Q4 AT 5.1 percent.

 

 

GDP

 

As per RBI estimates, the real GDP growth for 2022-23 is now projected at 7.2 percent, with Q1 at 16.2 percent; Q2 at 6.2 percent; Q3 at 4.1 percent; and Q4 at 4.0 percent.

 

Merchandise Trade

 

 

Merchandise exports remained buoyant and clocked double-digit growth for thirteenth successive month in March 2022 and reached US$ 418 billion in 2021-22 surpassing the target of US$ 400 billion.

 

Import of capital goods increased robustly in February. All categories of imports, however has risen even faster, leading to merchandise trade deficit at an annual level of US $ 192 billion in 2021-22 or 6.1 percent of GDP.

 

Agriculture

 

On Agriculture side touched new record; food grains production touch a new record in 2021-22, with both Kharif and Rabi output crossing the final estimates for 2020-21 as well as the targets set for 2021-22.

 

Manufacturing & Services

 

 

The manufacturing PMI remained in expansion zone to 54.0 in March. Services sector indicators – railway freight; e-way bills; GST collections; toll collections; fuel consumption; and electricity demand were in expansion in February-March. The capacity utilisation (CU) in the manufacturing sector recovered further to 72.4 percent in Q3 2021-22 from 68.3 percent in the previous quarter. The service PMI continued in expansion mode, inched up to 53.6 in March from 51.8 in the preceding month.

 

 

 

PMIs show that employment under both manufacturing and services sector contracted for the third consecutive month PMI.

 

Liquidity & Foreign Exchange Reserves

 

 

 

RBI maintained overall system liquidity in large surplus, with an average daily absorption under the LAF at 7.5 lakh crore in March. Reserve money expanded by 10.9 percent YoY on April 1, 2022.

 

India’s foreign exchange reserves increased by US$ 30.3 billion to US$ 607.3 billion in 2021-22.