The BJP continues to expand its political footprint while the economic recovery gathers steam
The BJP achieved more victories in recent ly concluded assembly elections in 3 north eastern states. In Tripura, it trounced the Congress and the incumbent Left front to win 43 out of 59 seats. In Nagaland, its coalition NDPP won 29 out of 60 seats while in Meghalaya it partnered the winning NPP coalition. Historically, the BJP has been non-existent in the three states and it is Narendra Modi’s mass appeal and Party President Amit Shah’s organisational skills that have brought about the change in fortunes. On another count, the party suffered a blow as one of its partners, the Telugu Desam Party (TDP), exited the National Democratic Alliance (NDA). The dispute stemmed from the TDP’s demand for special treatment for its state of Andhra Pradesh which the BJP maintained would breach constitutional propriety.
The Cabinet Committee on Economic Affairs approved what is equivalent to the opening up of India’s coal mining sector to the private sector through its decision to auction coal blocks to the highest bidder without restrictions on end use, quantity or pricing. Any player, private Indian or foreign, can now bid and mine coal on a commercial basis. Coal mining was nationalised in 1973; subsequently, private mining was allowed only for captive consumption by power, steel and cement companies.
GDP growth for Q3 (October- December) 2017 came in at 7.2 per cent yoy against 6.8 per cent yoy last year and 6.5 per cent yoy in Q2, confirming the ongoing recovery in the economy. Encouragingly, investment provided the main impetus to growth with capital formation rising 12 per cent yoy against 8.7 per cent yoy last year. This is corroborated by IIP growth which increased to 6 per cent yoy in Q3 from 3.9 per cent yoy last year, led by an 11 per cent increase in capital goods production (-1.8 per cent last year). From a sector point of view, GVA growth at 6.7 per cent yoy in Q3 was driven by 8.1 per cent growth in manufacturing, 6.8 per cent in construction and 7.7 per cent in services.
Nevertheless, there are reasons for markets to worry. In January, the fiscal deficit for FY18 stood at 114 per cent of the revised target of 3.5 per cent of GDP and even if budget cuts are made, a further slippage is possible. Further, with inflation sticky at over 5 per cent, markets are anticipating a rate hike with 10- year treasury yields moving up from 7.3 per cent to 7.7 per cent through February.
|Fiscal year starting 1 April
|GDP mp (FY12 series), real growth, %
|Inflation - WPI, year average (FY12 series), %
|Inflation - CPI, yr avg (FY12 series), %
|RBI lending (repo) rate, year end, %
|Rupee to US$1, RBI Ref Rate, yr end
|Sources: 2015-2017 data from the government (NCI, RBI) and CEIC.