Weekly Economic Update
In the local economic news, a slew of economic data for February showed mixed results. While February Services PMI from Markit indicated a pick-up in growth with a reading of 55.3 (a reading above 55 indicates a strong expansion) for the month, compared to 52.8 in January, the pace of manufacturing growth remained solid with a reading of 57.5 (about the same as in January).
Automotive sales growth was also good in February with the country’s auto manufacturers selling 3.08 lakh units in February compared to 2.50 lakh units in the year-ago period (a growth of 23 per cent on a YoY basis). Optimism in the domestic economic activity, however, failed to show up on the trade front with exports growing just 0.25 per cent YoY to US $27.67 billion during the month.
On the policy front, RBI reaffirmed its support for the current flexible inflation targeting (FIT) framework and stated that the current inflation targets of 4 per cent +/- 2 per cent should be maintained for the five-year period starting April 1, 2021, as it had worked well for the government since its implementation. The central bank in a report noted that the average inflation before the FIT framework was implemented, was 9 per cent and this had subsequently declined to a range of 3.8 to 4.3 per cent during the FIT.
On the global front, in an address to China’s National People’s Congress, the country’s Premier Li Keqiang stated that the economic growth target for the country was 6 per cent for 2021. While most private analysts believe that the country could grow at a pace greater than that, the government appears to be taking a conservative approach towards the economy after it grew at just 2.3 per cent in 2020. In the US, its central bank noted that the economic growth was off to a modest start for the year in the ‘Beige Book’ survey, while also pointing out that ‘most businesses remain optimistic regarding the next 6-12 months as COVID-19 vaccines become more widely distributed’.