Home / Economy / Week ahead: Ukraine, India GDP, state budgets
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- On Monday, India will release its GDP data for October-December. Meanwhile, the world will anxiously look for developments in Ukraine, which faces a full-scale invasion by Russia
1. Ukraine war: The world will anxiously await updates from the war in Ukraine following Russia’s invasion last week. Dozens of civilians have already been killed and Russian forces are trying hard to get major cities under Moscow’s control. All eyes are on the capital city, Kyiv, as Ukrainians, led by a defiant President Volodymyr Zelenskyy, resist Russian advances.
Russian markets may wake up to havoc on Monday after the central bank had its assets frozen and several banks were blocked from the SWIFT payments system. The reluctant last-resort step by Western leaders is expected to cripple Russia’s ability to support the rouble with the forex reserves it had planned as a hedge against sanctions.
After the US, Germany, the Netherlands and UK extended military and financial aid to Ukraine, more could follow this week. Crude oil prices, which have crossed $100/barrel, could surge. Thousands of refugees may keep fleeing, even as India continues its efforts to repatriate students still stuck in Ukraine.
2. India GDP: India’s official GDP data for the October-December quarter will be released on Monday. With economic activity returning to near-normalcy as covid-related disruptions ease, Asia’s third largest economy achieved its fourth consecutive quarter of positive growth in July-September at 8.4%—one of the fastest rates among major economies. The growth was supported by an increase in mobility and a robust pace of vaccination, as well as a favourable base in the corresponding quarter a year ago. The December-quarter data is likely to show further sequential recovery despite the impact of the Omicron variant which led to some restrictions in the last week of the year.
Economists at Barclays expect the economic growth in the December quarter to be led by a stronger pace of services output, but the growth rate will likely slow down from the levels recorded in the September quarter to 6.6% as low-base effects fade away.
3. State budgets: The budget season is on in India’s state legislatures. The Rajasthan government presented its budget for 2022-23 last week itself, whereas Gujarat, Himachal Pradesh, and Karnataka will likely do so this week.
Other states will follow suit over the rest of March.
State budgets, whose cumulative size is greater than the Union budget, bear extra significance at a time of sky-high general government debt when public investment is crucial to economic recovery. As the Centre goes big on infrastructure, it’s now incumbent on states to support the recovery through investment in priority sectors. The question is whether they have enough funds. The Centre’s transfers to states will remain flat at 30% of gross tax collections in 2022-23. Special loans to boost capex and relaxation in deficit were reasons to cheer for states, but these may not be enough for already crunched state finances.
4. India PMI: India’s manufacturing and services purchasing managers’ index (PMI) figures for February will be released on Wednesday and Friday, respectively. While both indices continued to expand in January, they slowed perceptibly on account of rising covid cases. Manufacturing, however, was more resilient than services, which fell to a six-month low.
Output orders and business grew in both sectors; there was, however, a decline in job growth owing to future uncertainty. Business confidence also sank amid supply-side shortages. Now that the third wave is likely past us, immediate concerns may have worn off. Inflation, however, remains a nagging pain for the industry. Companies have managed to transfer cost burdens to consumers, but these have not proven to be enough to compensate for increasing input costs. In any case, consumers may be willing to pay high prices in the short term, but the price will eventually start to pinch them, analysts said.
5. Women’s Cricket WC: The 12th ICC Women’s World Cup will start in New Zealand on Friday. The event was originally scheduled for early 2021 but was postponed due to the pandemic. The eight-nation tournament will be played in two stages—the round-robin stage and the knockouts. The top four teams at the end of the first round will qualify for the semi-finals. The final will be played on 3 April. India plays its first game against Pakistan on Sunday. Australia has been the most successful team by winning six titles so far. England, the defending champion, has won four. India came agonisingly close twice, finishing runners-up to Australia in 2005 and to England in 2017.
Heading into the tournament, India’s form has been poor. Since January last year, the team has managed to win only four out of its 16 matches. This edition could be the last for veterans Mithali Raj and Jhulan Goswami.
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