Indian Economy share price target

Structurally, the contribution of crops to agri GVA has dropped from 63% to 52% over the past decade, while that of protein and nutrient rich foods from ‘livestock and fishing’ activity has risen sharply. Even within crops, the contribution of nutrient rich food items from horticulture (fruits and vegetables) has grown rapidly and overtaken cereals. Monsoon rain deficiency stood at 9% of LTA as on Sep 15, ‘23 with largely rice producing states like Kerala, Bihar, Jharkhand and north eastern states bearing the brunt (>20% deficiency).

Industrial output accelerated in Jul’23 to 5.7% YoY growth, and is likely to strengthen further as infrastructure goods stay strong, and capital goods output rebounds from a brief hiatus in growth momentum. Other pockets of strength included basic metals (+12.8% YoY, with steel output up 21% YoY) and pharmaceuticals (+12% YoY) in Jul’23.

A massive exercise and transformation in the power industry is underway. India is looking to bring its ailing distribution companies to the pink of health via: a) installation of smart meter in every house, i.e. 250mn; and b) upgrading the distribution infrastructure at a cost of INR 1.5trn (as per RDSS scheme).

India has retained its status as the fastest-growing large economy in the world, as real GDP accelerated to 7.8% YoY growth in Apr-Jun’23 (Q1FY24), taking growth in H1CY23 to 7% YoY – well ahead of China’s 5.4% for the period. With services (which constitute about 53% of GDP) growing 10.3% YoY in Q1FY24, and likely to grow more than 8% in FY24 (its average growth in the past 26 years), we expect real GDP to grow over 7% in FY24.

Credit offtake accelerates in July

Manufacturing sector growth slowed down to 1.3% YoY in FY23 resulting in a drop in its share of GVA to 17.7%. Breakup of ‘manufacturing sector’s GVA’ is not yet available for FY23, but IIP constituent trends indicate that ‘consumer products’ primarily dragged down manufacturing in FY23 with exceptions like auto, beverage and furniture, which staged robust growth.

India’s peak power demand grew 9% YoY in Aug’23 and peak deficit touched a new high of 9GW, i.e. 4% in 5MFY24 (vs 4% in FY23). Note that the growth print for last three years – FY21, FY22 and FY23 – was 4%, 7% and 6% respectively. Hitherto, peak deficit was close to nil. We believe the situation has turned adverse because of inadequate firm capacity addition.

Both core CPI inflation (4.7% YoY) and the Fed’s preferred inflation gauge, core PCE (+4.1% YoY) remain more than double the Fed’s target, precluding any near-term easing of monetary policy. Instead, with public debt above 120% of GDP, the fiscal deficit (8.6% of GDP in the year to Jun’23) is likely to place upward pressure on bond yields through the rest of CY23.

July 2023 saw some mixed macroeconomic changes, with Wholesale Price Index (WPI) inflation contracting, and Consumer Price Index (CPI) inflation rising.

Unemployment rates fell, while Foreign Institutional Investment (FII) inflows surged. Crude oil prices increased, while consumption has declined.