Moneycontrol Pro Panorama | Markets shrug aside growth niggles

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August’s GST collections data show them at a robust Rs 1.44 lakh crore, 28 percent higher over a year ago, but sequentially they have dipped a bit compared to the July and even June figures.

As the festival season kicks off, how this number behaves in the coming months will give clues on the health of the consumption economy. An exit from peak inflation could also be one factor to consider in commodity-based industries such as edible oils, metals and chemicals, for example, as lower prices will mean lower tax collections for the same quantity sold.

Headlines of downward revisions to growth are also making the rounds, not very surprising as Q1 growth came in lower than expectations. Moody’s had cut India’s GDP growth for 2022 from 9.1 percent to 8.8 percent in May 2022 and has now lowered it again to 7.7 percent. SBI’s economic research unit has also revised GDP growth for FY23 downwards, as its Q1 GDP estimate was 15.7 percent compared to the actual 13.5 percent figure. Major sell-side brokers too have lowered their estimates.

For investors, do the downward growth revisions point to trouble ahead? We had written yesterday about what the GDP data showed and also pointed to how PMI data for August pointed to a strong showing. In fact, SBI’s economic research unit believes that it’s time for a revision in the composition of the manufacturing index so that it captures growth more accurately.

But another Moody’s report points out that most emerging market sectors in the Asia-Pacific will do well in 2022, and it expects its sample of Asia-Pacific companies to report EBITDA growth of 28 percent in aggregate compared to 2019, compared to the 14 percent that developed market companies are expected to report.  It sees the highest earnings growth in Indonesia at 56 percent and 51 percent for India, among countries where it rates at least five companies, between 2022 and 2019. India’s improvement is the strongest, says Moody’s as its leverage (debt to equity) is expected to decline the most.

Thus, relatively speaking, India’s corporate earnings and quality of its balance sheet are likely to outperform even among emerging markets. That could also explain why foreign money has turned partial to it in recent times. Of course, there are headwinds such as inflation, rural slowdown and tightening monetary policy that investors must keep a watch over. We have a piece on how Indian markets have decoupled from global peers although domestic investors have taken a backseat for the moment. What can investors expect?

The K-shape of the recovery could explain how earnings and stock markets performance can diverge from the broad economic outlook. In today’s edition, we analyse recent ILO data that point to youth faring worse on the employment front, and also bring another piece on a government-sponsored report on how the country’s growth can be made more equitable. While the suggestions are all sensible, whether the government takes heed of them while preparing its economic agenda is the main question.

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