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BFSI Chronicle, 11 Edition September2022
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stance. India’s retail inflation measured by Consumer India which imports more than 80 per cent of its
Price Index (CPI) came down to 6.71 per cent in July domestic energy requirements. Softening of crude
from 7.01 per cent in June. While the July print is at prices can ease-off a part of “imported” inflation.
five -month low, inflation still continues to be above However, rapid slide of oil prices is also a reflection
the RBI’s tolerance limit of 6 per cent since Jan 2022. of expectations of slowdown in global growth which
The central bank has raised the Repo rate in its August may have its bearing on India’s growth too. Risk of
policy meet taking the policy rate to 5.4 per cent. lingering Russia-Ukraine war may exert upward
Tighter monetary policy by the RBI to achieve price pressure on crude and commodity prices. This, along
stability is likely to slow down growth. with demand revival in China as it gradually comes
out of Covid induced lockdowns, as also demand
Notwithstanding the global slowdown in growth, from Europe during the ensuing winter season may
Indian economy has demonstrated resilience. The Q1 see crude prices rising again.
22-23 GDP has grown 13.5 per cent (on the back of base
effect) against RBI estimate of 16.2 per cent. Growth Sustained energy prices may adversely impact
was fuelled by recovery in private consumption India’s external sector balances. For the first two
which grew 25.9 per cent during the quarter y-o-y. months of the Sep quarter, the monthly average
Contact intensive services saw a major revival with a trade deficit has trended higher at USD 29.3 billion
growth of 25.7 per cent. Private investment registered as against USD 23.5 billion in June quarter driven by
growth of 20 per cent. Government spending rose 1.3 strong domestic demand which resulted to surge in
per cent aiding crowding-in of private investments. imports, while the exports remained subdued amid
Construction was up 16.8 per cent during the international slowdown fears. As per ICRA, India’s
quarter. However, disappointment came from the Current Account Deficit (CAD) is projected to widen
Manufacturing sector which slowed down due to to an all-time high of USD 120 billion in FY 23 which
rising input costs. is 3.5 per cent of GDP. Widening CAD puts domestic
currency under pressure. INR is currently hovering
Growth outlook for Q2 also remains stable with high around an all-time high level of Rs. 80 per dollar.
frequency indicators in July and August pointing Like most Asian currencies, INR has been falling
towards a sustained growth in July-Sep quarter. in recent months due to strengthening dollar and
Manufacturing Purchasing Managers’ Index (PMI) risk aversion trades. INR is down 7 per cent Year
in July’ 22 came at an 8-month high of 56.4 due to to Date (YTD) against US Dollar, though continues
growth in new business orders and output. Services to be among the best performing currencies among
PMI also remained at expansionary zone (more than the Emerging Market (EM) peers. RBI is making
50) in July with a reading of 55.5. The double digit necessary interventions in the forex market from time
growth momentum in total bank credit and non-food to time to arrest volatility of the domestic currency.
credit continued in July from Q1 FY 22-23. GDP for FY A comfortable forex reserves of around $553.1 billion
22-23 is expected to grow between 7 and 7.4 per cent (as on Sep 2) has provided the necessary war chest to
as per various estimates. The headwinds to growth, the RBI to stem the fall of local currency.
however, may come from factors like slowdown in
exports due to global recessionary waves, elevated Earnings, Valuations & Markets
level of crude oil & gas prices, uneven monsoon Corporate earnings in Apr-Jun quarter has been
distribution, higher cost of capital, escalation of geo- mixed bag and largely in line with the market
political tensions et al. expectations. A bit of global growth slowdown and
margin pressures owing to high energy prices were
Brent crude sharply retreated from its 7th March high factored in the earnings estimates. The EBITDA
of $ 139 per barrel (intraday), and presently hovering or the Operating margin of Nifty companies at
around $ 90 a barrel. This comes as a big respite for 14.2 per cent in Q1 declined 310 basis points (bps)

The Institute Of Cost Accountants Of India

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