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Various measures announced by the government in the FY22 Union Budget to hike farm loan disbursal target by 10% to Rs  16.5 lakh crore and introduction of Agri infra cess is expected to give a further support agricultural credit growth, said a report.

The report from YES Bank’s Economist department titled ‘Uneven global recovery signal lingering woes’ , says that Credit growth in Agriculture sector clocked a double-digit growth of 10.2% YoY in February 2021 from 9.9% in January 21. A good monsoon and robust rural economy came as a major relief to the pandemic–battered economy.

The report also talks about Credit growth to Services sector that has improved to 9.3% YoY in February 21 as compared to 8.4% in the previous month. At a granular level, the improvement was led by shipping and NBFCs. However, credit offtake to professional
service segment continued to contract at a steeper pace for the fourth successive month followed by a moderation in tourism, hotels & restaurants, transport operators, and computer software.

Uneven Global Recovery

The report says that it has been more than a year since COVID-19 was declared as a pandemic and the global economic outlook has improved since then, however the fiscal support and monetary policy apparatus continues to remain highly

This is because of the still fragile growth impulses and uneven economic growth recovery not only amongst countries but also within sectors of each country. The only exception to this would be the US where the strong performance of both the manufacturing as well as the services sector has taken the markets aback.

According to the IMF, the US is expected to surpass its pre-COVID GDP level this year, while other DM economies will return to their pre-COVID levels only in 2022.

Meanwhile, among EM countries with the exception of China, which has already returned to its pre-COVID GDP in 2020, others are expected to do so well into 2023.

This has implications on timing of policy normalisations across countries. The markets have already started to experience the impact of growth differentials on interest rates as seen through the sharp increase in US treasury yields since January.

Talking about vaccinations in India, the report says vaccination progress remains slow with only 5.5% of the population having received the first dosage of COVID-19 vaccine as of April 7 and about 0.8% receiving the second dose.

The progress on vaccination has become a key barometer of India’s growth outlook at a time when India’s COVID-19 positivity rate has increased from 1.7% on January 1 to 8.20% as of April 5.

Amidst increase in infections in certain states that have resulted in localized lockdowns, the RBI has aptly shifted its forward guidance to ‘state-based’ from a ‘time-based’ approach. In view of the gnawing uncertainty in domestic growth conditions, the RBI kept the FY22 growth forecast unchanged at 10.5%.
YES Bank Economic Forecast for April


Date Data Period YBL Forecast Previous  Comment
12 Apr IIP (%YoY) Feb -5.5 -1.6 IIP is expected to decline sharply in line with the decline in core index, negligible increment in electricity sector output, moderation in steel production, and freight traffic along with decline in exports in Feb-21
12 Apr CPI (%YoY) Mar 5.49 5.03 CPI inflation is expected to increase due to higher food, fuel and core inflation. India crude basket increased by 5.6% MoM in Mar-21 after an increase of 12.5% in Feb-21. Increase in fuel prices as well as other international commodity prices are likely to weigh on the near term inflation trajectory.
15 Apr WPI (%YoY) Mar 6.16 4.17 WPI inflation is likely to pick up due to broad based increase in primary, fuel and manufacturing sector components. Fuel prices are expected to increase due to rise in petrol, diesel, LPG, ATF and HSD prices.
15 Apr Trade Deficit (USD bn) Mar 14.1 12.6 Trade deficit is expected to come in line with the preliminary estimate of USD 14.1 bn for Mar-21 amidst sharp increase in both export and import growth on the back of base effects. Imports are likely to remain strong as economic activities normalize and gold prices decline.

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