India Macro notes

JP Morgan comments on India’s Industrial Production and Balance of Payments Data:

Capital gains production surged 8.3% m/m, sa in July taking the quarterly momentum to 10.4% q/q, saar. This is a little more support for our thesis that first signs of a capex recovery may be underway (see “Has India’s capex cycle finally begun to lift?”, MorganMarkets, July 1, 2015) though likely concentrated in public infrastructure, given strong government capex spending the last few months.

Net capital inflows declined to $18.1 bn in 2Q15 from $30.7 bn in last quarter on the back of the reversal of portfolio flows which saw outflows of $2.3 bn in 2Q15 in contrast to the large inflows of $12.5bn in the last quarter. Part of this decline was compensated by banking capital inflows which rose sharply to $11 bn in 2Q15 from $1.7 bn in last quarter. Most importantly, however, the impressive run of FDI continued with net inflows rising further to $10.2 bn in 2Q from $9.6 bn in 1Q and $7.2 bn in 4Q14. All told, the BoP surplus narrowed from an unsustainably-high $30 bn in 1Q to a still-solid $11.4 (annualized $45 bn) in 2Q

All the foreign trips are not in vain.

But, freight statistics are disappointing (from Credit Suisse):

Rail freight growth (-1.4% YoY) continued to disappoint in July, falling for the first time in 22 months. Tonnage grew a tepid 1.3% but distance travelled fell 2.7%. 3MMA growth went negative too, and at -0.1% was the lowest since Dec-13 (Fig 1). Weakness was broad based, with only steel & fertilisers growing (Fig 2). Coal freight fell 2.4% YoY (+3.4% vol., -5.6% distance). As coal based power output grew 2.4%, and CIL’s shipments rose 7.5%, imported coal use got limited to the coast, pushing down avg. distance. Power plants have record high coal stock (24 days).


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