EIC Framework

Download as pptx, pdf, or txt
Download as pptx, pdf, or txt
You are on page 1of 49

EIC Framework

Step 1 Economy Analysis


Prof. Anjali M. Kulkarni
Brief Outlook
• The economy likely declined at one of the
sharpest paces on record in Q1 FY 2020 (April–
June) as lockdown measures remained in
place for most parts of the country and, in
turn, hammered economic activity. The
private-sector PMI averaged significantly
lower in the quarter compared to the previous
period, indicating sharp deteriorations in the
manufacturing and services sectors.
Brief Outlook..
• Meanwhile, despite a softer contraction in
industrial production in June, output fell severely in
Q1 FY 2020. Turning to Q2 FY 2020, the economy
remains gloomy, with the composite PMI for July
dipping due to a sharper deterioration in the
manufacturing sector, unemployment remaining
elevated, and the threat of extended lockdown
restrictions amid heightened new Covid-19 cases
likely weighing on business and consumer
confidence.
India Economic Growth
• The economy is expected to contract sharply
in FY 2020 due to containment measures
hampering domestic activity, and amid
anaemic external demand. A major downside
risk is a prolongation of lockdown measures.
On a brighter note, fiscal stimulus and a more
accommodative monetary policy should
support the economy, although the rising
fiscal deficit clouds the outlook.
Parameters for Economic Analysis
• Gross Domestic Product
• Inflation
• Unemployment
• Foreign Direct Investments
GDP Growth Rate
• GDP Growth Rate is the measure of the total
amount of goods and services produced in a
country during a particular year.
2015   2016   2017   2018   2019  

GDP per
1,633   1,766   2,018   2,023   2,113  
capita (USD)

GDP (USD
2,096 2,295 2,657 2,699 2,857
bn)
Inflation Rate
2015   2016   2017   2018   2019  
Inflation Rat 4.8 3.9 4.3 2.9 5.9
e (CPI, annu
al variation i
n %,
Inflation Rat 4.9 4.5 3.6 3.4 4.8
eeop)
(CPI, annu
Inflation
al (PPIi
variation -3.6 1.8 2.9 4.3 1.7
,nannual
%) vari
ation in %)
Market size
• India's gross domestic product (GDP) (at
constant 2011-12 prices) was estimated to be Rs
145.65 lakh crore (US$ 2.06 trillion) for 2019-20,
growing 4.2 per cent over the previous year.
• India retained its position as the third largest
start-up base in the world with over 8,900-9,300
start-ups as 1,300 new start-ups got
incorporated in 2019 according to a report by
NASSCOM. India also witnessed the addition of
7 unicorns in 2019 (till August 2019), taking the
total tally to 24.
Market size..

• India's labour force is expected to touch 160-170


million by 2020 based on the rate of population
growth, increased labour force participation and
higher education enrolment among other factors
according to a study by ASSOCHAM and Thought
Arbitrage Research Institute.
• India's foreign exchange reserves reached Rs 37.31
lakh crore (US$ 493.48 billion) in the week up to
May 29, 2020 according to the data from RBI.
Recent Developments 
• With an improvement in the economic
scenario, there have been investments
across various sectors of the economy.
The mergers and acquisition (M&A)
activity in India stood at US$ 28 billion in
2019, while private equity (PE) deals
reached US$ 48 billion. Some of the
important recent developments in Indian
economy are as follows:
Recent Developments 
• Merchandise export and import (in US$ terms)
declined by 4.8 per cent and 9.1 per cent, respectively,
in 2019-20.
• Nikkei India Manufacturing Purchasing Managers’
Index (PMI) stood at 30.8 in May 2020, showing
contraction in the sector because of coronavirus-
related restrictions.
• Gross tax revenue stood at Rs 15.04 lakh crore (US$
215.28 billion) in 2019-20 – income tax collection
contributed Rs 4.80 lakh crore (US$ 68.14 billion) to it..
Recent Developments 
• In 2019, companies in India raised around US$
2.5 billion through 17 initial public offers (IPO).
• India's Foreign Direct Investment (FDI) equity
inflow reached US$ 469.99 billion between April
2000 to March 2020, with maximum contribution
from services, computer software and hardware,
telecommunications, construction, trading, and
automobiles. India’s Index of Industrial
Production (IIP) for 2019-20 stood at 129.2.
Recent Developments 
• The combined index of eight core industries stood at
137 in March 2020. Its cumulative growth was 0.6
per cent in 2019-20.
• Consumer Price Index (CPI) – Combined inflation was
5.9 per cent in March 2020 as compared to 6.6 per
cent in February 2020. The annual consumer price
inflation increased to 4.8 per cent in 2019-20 from
3.4 per cent in 2018-19.
• Around 12 million jobs in a year were created in India
during 2015-19.
Recent Developments 
• India improved its ranking in World Bank's
Doing Business Report by 14 spots over last
year and was ranked 63 among 190 countries
in the 2020 edition of the report.
• India is expected to have 100,000 start-ups by
2025, which will create employment for 3.25
million people and generate US$ 500 billion in
value as per Mr T V Mohan Das Pai, Chairman,
Manipal Global Education.
About PMI
• The Institute of Supply Management (ISM)
originally developed PMI and is now
estimating it for the US economy. The ISM is a
non-profit group having more than 40,000
members from the supply management and
purchasing segments. Strength of the ISM’s
PMI is its large number of data quote.
For India
• For India, the PMI Data is published by
Japanese firm Nikkei but compiled and
constructed by Markit Economics. A
manufacturing PMI and a services PMI are
prepared and published by the two. The PMI
data are based on monthly surveys of carefully
selected companies.
What is PMI
• PMI stands for ‘Purchasing Managers’ index’
and is considered as an indicator of the
economic health and investor sentiments
about the manufacturing sector.
• The PMI is constructed separately for
manufacturing and services sector. But the
manufacturing sector holds more importance.
Why PMI?
• Policymakers and traders watch these surveys
closely as purchasing managers usually have early
access to data about their company’s performance,
rather than waiting for the hard data to emerge.
• While manufacturing accounts for a far smaller
percentage of economic output than services, it is
far more cyclical and is therefore a useful indicator
of where in the economic cycle the economy is
currently situated.
What are the Levels?
• In a PMI data:
• a reading above 50 indicates economic
expansion
• a reading below 50 points shows contraction
of economic activities.
Variables used in constructing the PMI for
the Manufacturing sector
• Output • Quantity of
• New Orders Purchases
• Employment • Suppliers
• Input Costs • Delivery Times
• Output Prices • Stocks of Purchases
• Backlogs of Work &
• Export Orders • Stocks of Finished
Goods.
What is IIP?
• IIP measures actual production output across
the industrial sector.
• IIP involves an yearly comparison.
• It is season neutral.
• Therefore, as the basis of IIP and PMI are
different, a comparison between the two is
really not appropriate.
PMI
• However, as the PMI is released on the 1st of
every month and the IIP is known on the 12th,
the PMI score is assumed to be a precursor to
the IIP. But the correlation between PMI and
IIP isn’t strong and the relationship between
the two variables is quite low and
insignificant.
Difference Between PMI & IIP
• PMI is a private sector survey while the IIP is
gauged by the government.
• The IIP is a measure of output. PMI measures
activity at the purchasing or input stage.
Global Manufacturing
Global PMI summary as of April, 2020:
•Global recession signaled with PMI at lowest since February 2009, led
by record drop in services activity.
Jobs
• Jobs being cut to degree not seen since 2009 (note
excludes self-employed)
• Selling prices falling at steepest rate since 2009. Supply
delays remain most severe since 2004, meaning
shortages prevalent but could provide support to prices.
• COVID-19 outbreak means April likely to see worse PMI
readings in US and Europe, but could see levels
steadying by Q3
• Stay up-to-date with timely insight into the health of the
global economy through.
Consumer Services
• Consumer services hardest hit •Japan downturn deepened while
Asia ex-Japan/China suffered
but record number of sectors steepest output fall since January
in decline globally as COVID-19 2009.
•China showed signs of the
impact spreads. downturn easing but care needs
• Europe saw biggest virus to be taken in interpreting this –
still second steepest fall in output
outbreaks in March and on record.
commensurately saw largest
PMI falls (record lows in UK
and all four largest eurozone
members), but US also saw
sharpest decline since 2009.
Global GDP
Indian GDP
India PMI
GDP
India at a Glance
Economic Challenges
India Indicators
India Indicators.
Manufacturing PMI
• The IHS Markit India Manufacturing PMI increased to 55.9 in October
2021 from 53.7 a month earlier and above market consensus of 54. This
marked the fourth straight month of expansion and the strongest growth
since February, as both output and new orders expanded at the fastest
rate in seven months, amid the easing of COVID-19 restrictions. New
export orders increased at a solid pace that was the quickest in three
months.
• Meanwhile, employment continued to decline, with the rate of job
shedding was marginal. Prices data showed input cost inflation jumped
to a 92-month high, due to a faster rise in prices of chemicals, fabric,
electronic component, oil, plastic and transportation costs. Meanwhile,
output prices increased marginally. Lastly, business confidence improved
at a near-record rate, amid strong input buying growth. source: Markit
Economics
Manufacturing PMI
Manufacturing PMI
India SENSEX Stock Market Index
India Balance of Trade
• India's trade deficit was revised lower to USD 19.7 billion in
October, compared to a preliminary estimate of USD 19.9 billion
and a USD 9.15 billion a year earlier. Imports jumped 62.5 percent
year-on-year to USD 55.4 billion mostly due to increase in purchases
of crude oil (140.5%).
• Meanwhile, exports surged at a softer 43 percent to USD 35.7
billion, mainly driven by sales of petroleum products (240 %), coffee
(81%), engineering goods (51%) and cotton and handloom products
(46.2%). On the downside, sales fell for iron ore (-77%), oil meals (-
51%), oil seeds (-16%) and tea (-11%).
• During the April-October period of 2021, the trade gap widened to
USD 97.85 billion, compared to USD 35.5 billion in the same period
of the previous year. source: Ministry of Commerce and Industry, India
India Wholesale Price Index Change

• The annual wholesale price inflation rate in India rose to 12.54


percent in October 2021 from 10.66 percent in the previous
month, exceeding market forecasts of 10.9 percent. This
marked the highest figure since December 1998, as cost
accelerated for fuel and power (37.18 percent v/s 24.81
percent in September), primary articles (5.20 percent v/s 4.1
percent), manufactured products (12.04 percent v/s 11.41
percent), basic metals (29.93 percent v/s 26.71 percent) and
food (3.06 percent v/s 1.14 percent). On a monthly basis,
wholesale prices increased by 2.28 percent in October,
reversing from a 0.15 percent drop in September.  source: Office
of the Economic Advisor, India
India Wholesale Price Index Change
India Industrial Production

• Industrial output in India went up 3.1 percent year-on-


year in September of 2021, easing from an upwardly
revised 12 percent rise in the previous month and
below market forecasts of a 4.8 percent gain.
Production slowed in all sectors: mining (8.6 percent
v/s 23.6 percent), manufacturing (2.7 percent v/s 9.9
percent) and electricity (0.9 percent v/s 16 percent).
On a monthly basis, industrial output slumped 2.6
percent, following a downwardly revised 0.1 percent
downtick in August. source: Ministry of Statistics and Programme
Implementation (MOSPI)
India Industrial Production
India Services PMI

• The IHS Markit India Services PMI jumped to 58.4 in October of 2021 from 55.2
in September and above market expectations of 55.7. The reading pointed to
the third straight month of expansion in the sector, and the highest reading in
ten-and-a-half years, amid further easing COVID-19 restrictions.
• Output grew at the fastest rate in over a decade, while new orders rose at the
steepest pace since July 2011, while employment increased to the strongest
since February 2020, and the pace of backlog depletion eased and was only
slight.
• At the same time, new export orders declined at the weakest pace since
March. On the price front, input price inflation accelerated to a six-month high,
due to higher fuel, material, retail, staff and transports costs, while output
price inflation rose to the strongest since July 2017. Looking ahead, business
sentiment was little-changed, amid worries impact of inflationary pressures on
the recovery. source: Markit Economics
India Services PMI
India Manufacturing PMI
• The IHS Markit India Manufacturing PMI increased to 55.9 in October
2021 from 53.7 a month earlier and above market consensus of 54. This
marked the fourth straight month of expansion and the strongest growth
since February, as both output and new orders expanded at the fastest
rate in seven months, amid the easing of COVID-19 restrictions.
• New export orders increased at a solid pace that was the quickest in
three months. Meanwhile, employment continued to decline, with the
rate of job shedding was marginal. Prices data showed input cost
inflation jumped to a 92-month high, due to a faster rise in prices of
chemicals, fabric, electronic component, oil, plastic and transportation
costs. Meanwhile, output prices increased marginally. Lastly, business
confidence improved at a near-record rate, amid strong input buying
growth. source: Markit Economics
India Manufacturing PMI

You might also like