IMA Analysis

Sunday November 21, 2021

India Brief - October 2021

Political & Policy Issues to Watch

Progress in a range of policy areas

The Centre notified the PLI (production-linked incentive) scheme for automobiles and auto components, covering electric and hydrogen vehicles and certain advanced components. It also announced a new digital health-identity programme, which is expected to streamline the storage and sharing of health records. Crucially, it unveiled a set of relief measures for the beleaguered telecom sector. These include a moratorium on outstanding dues, a rationalising of levies, allowing 100% FDI under the automatic route, and certain procedural changes. Contrary to market expectations, the Air-India sale appears to be on track. Finally, the GST Council set up two Groups of Ministers to look at rationalising tax rates and tax slabs (to eliminate inverted duty structures) and consider system-level reforms.

Changes of leadership in 2 key states ahead of next year’s polls…

A feel-good visit to the US

In the last few weeks, the BJP has replaced its Chief Minister in Gujarat, and the Congress its CM in Punjab. Both moves were made with an eye on next year’s Assembly polls, but the one in Punjab appears to have triggered a fresh crisis within the Congress, raising new questions about the party’s leadership.

Prime Minister Modi made a whirlwind trip to the US. Coinciding with a UN General Assembly session and the first in-person meeting of Quad leaders, it hit all the right notes, reaffirming the importance of the Indo-US strategic partnership.

Outlook for the Market

PMI, GST and trade numbers all signal a rebounding economy, as does an on-track government borrowing programme

Macro data continue to point towards a broad-based recovery. The September IHS Markit Manufacturing PMI improved to 53.7, from 52.3 the previous month even as the Services index eased to 55.2, from an 18-month high of 56.7. GST collections touched a 5-month-high of Rs 1.17 trillion, though GST e-Way bill issuances dipped to 57 million, from a massive 66 million the previous month. Foreign trade remains strong, with exports staying above the USD 30 billion mark in September for the 7th consecutive month but imports – a good measure of domestic demand – jumped by USD 9 billion MoM, to a record USD 56 billion. Most automobile manufacturers continue to report weak dispatches – Maruti and Hyundai’s saw YoY declines of 57% and 34%, respectively, in September – but that is mainly on account of supply-side issues (a global chip shortage). However, order-books remain firm. Also indicative of a rebounding economy, the government recently announced that its borrowing programme for the second half of FY21 remains on track thanks to better-than-expected tax collections.

Inflation has eased a bit, FPI flows are up, and so is the rupee

Consumer inflation – both core (excluding food and fuel) and non-core – continues to moderate, falling to 5.3% in August from 5.6% the previous month. Wholesale (WPI) inflation though rose mildly, from 11.2% to 11.4%, mainly on the back of a low base effect from last year. Financial markets remain buoyant, touching new highs, while FPI inflows nearly doubled, to USD 3.8 billion in September. Partly because of this, the rupee gained nearly 2% in the month, touching 73.2/USD.


Fiscal year starting 1 April






GDP mp (FY12 series), real growth, %






Inflation - WPI, yr avg (FY12 series), %






Inflation - CPI, yr avg (FY12 series), %






RBI lending (repo) rate, yr-end, %






Rupee to US$1, RBI Ref Rate, yr-end