Key events/data releases during the week
* RBI balance sheet, reserve money and related updates (as of April 13, 2018) (Details in slides 4, 5, and 6)
* Notes issued: Rs18.5 tn (November 4, 2016: Rs17.7 tn)
* Currency in circulation: Rs18.7 tn (Rs17.9 tn)
* The Ministry of Road Transport and Highways informed that it has set a target to award 20,000 km of National Highway in FY2019 against 17,055 km in FY2018 (8,652 km by MoRTH, 7,397 by NHAI, and 1,006 by NHIDCL). The construction target for FY2019 has been set at 16,240 km of which 9,700 km will be constructed by MoRTH, 6,000 km by NHAI, and 720 km by NHIDCL. In FY2018 9,829 km was constructed. Per day construction target has been set at 45 km in FY2019 against 27 km in FY2018.
* Ministry of Finance informed that till April 17 more than 13.3 mn e-way bills have been successfully generated which includes 0.6 mn intra-state e-way bills generated by the six states of Andhra Pradesh, Gujarat, Karnataka, Kerala, Telangana and Uttar Pradesh which rolled out the intra-state e-way bill from April 15. From April 20 six more states (Bihar, Jharkhand, Haryana, Himachal Pradesh, Tripura, and Uttarakhand) would join the system.
* The minutes of the April MPC meeting reinstated the cautious approach of almost all members as inflation uncertainty has increased. Amid increased inflation uncertainty, possible closure of output gap with improved growth and consistent increase in core inflation also appear to worry a few members. Importantly, Dr Patra (vote: 25 bps hike) and Deputy Governor Acharya (vote: pause) emphasized the elevated levels of inflation above the 4% impinging on MPC target commitment. Dr Acharya went on to stress that in order to reinforce the MPC target credibility, he will “likely shift decisively to vote for a beginning of ‘withdrawal of accommodation’ in the next MPC meeting in June.” Dr Ghate argued that MSP-led inflation risks would warrant a follow-up policy response in a systematic way to maintain durability of the 4% inflation target. However, Dr Dholakia’s statements had some soft patches where he still appeared concerned on growth and also stressed that the second round impact of the HRA increases will not be material.
* The IMD forecasted the June-September normal monsoon at 97% of LPA though the probabilities are skewed more towards the weaker side. The IMD sees 42% probability of normal rainfall, 30% of below-normal, 14% of deficient, 12% of above normal, and 2% of excess rainfall.
* March WPI inflation was at 2.47% after 2.48% in February. The rise in inflation was largely led by fuel inflation even as primary food inflation and manufactured products inflation softened. Primary food inflation moderated to (-)0.3% from 0.9% in February. Fuel and power inflation increased to 4.7% from 3.8% in February. Core inflation fell marginally to 3.6% from 3.9% in February.
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