Weekly Economic Update
In the local economic news, India’s manufacturing PMI while declining to a 7-month low continued to remain in strong expansion mode with a reading of 55.4 in March, down from 57.5 in February. The key takeaways included an expansion in export orders for the seventh consecutive month and inflation in input costs continued to increase during the month. On the services’ front, activity declined from February levels with March PMI reading of 54.6 down from a level of 55.3 in February. With localised lockdowns taking hold in late March, April may be a difficult month for the services sector.
In policy announcements, RBI maintained its key repo and reverse repo rates unchanged while announcing what appeared to be ‘soft yield curve control’ in its Government Securities Acquisition Programme (G-Sap) 1.0, where it would be purchasing Rs 1 lakh crore in government debt securities during the first quarter of FY22. The first action on this would be a Rs 25,000 crore bond purchase, scheduled for April 15. While the benchmark 10-year bond yield reacted positively to the announcement (as yields declined from 6.08 per cent to 6.03 per cent), the rupee dropped on the news on investor concerns about capital outflows due to lower bond yields. In a bid to support the white goods and solar PV sectors, the Union Cabinet also cleared the PLI schemes, which would create an incentive of Rs 10,738 crore across both sectors over a 5-year period.
In the US economic news, job additions accelerated to a pace of 9.16 lakh in March, ahead of expectations for an addition of 6.75 lakh jobs as higher economic growth and an increased pace of vaccinations supported more business hiring during the month. The US unemployment rate now stands at 6 per cent. Interestingly, job sectors worst hit by the COVID crisis such as leisure and hospitality added a significant number of jobs i.e. around 2.8 lakh jobs for the month. Manufacturing sector growth in March continued at a blistering pace with the Institute for Supply Management’s measure of activity increased to the highest level since 1983.