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THIS WEEK'S HIGHLIGHTS

The new COVID-19 variant- Omicron took center stage during the current week. With no significant clarity on the damage that the variant is capable of – i) South African doctors have claimed mild symptoms amongst infected, with WHO confirming no reports of death yet, ii) Higher transmissibility is being suspected along with higher risk of reinfection, and iii) efficacy of vaccines on the new variant still remains questionable. India has confirmed two Omicron cases but more than 18 suspects remain. States have thus not only firmed up testing at airports but some have announced extension of curbs and delays in unlocking.

On the fiscal front, i) the Centre sought for the Parliament's approval for a net outgo of INR 3trn in FY22, ii) moderation in spending growth in Oct’21 was disclosed in the Centre’s account with cumulative fiscal deficit at c.36% of the budget estimate as opposed to 120% last year, and iii) the RBI warned states to lower their debt-to-GSDP levels that is expected to touch 31% by Mar-22 vs. the FRBM target of 20% by Mar’23. Data releases for Nov’21 revealed- i) robust GST collections, the 2 nd highest since implementation, ii) record high goods trade deficit on account of elevated gold imports, and iii) further rise in manufacturing PMI and a steady services PMI.

Other highlights of the week included- i) steep cut in VAT on fuel by the Delhi Govt., and ii) the real economy reaching pre-pandemic levels in 2QFY22 as per the GDP data. Globally, i) OPEC+ approved an increase in production of 0.4mn barrels per day for Jan’22, in line with their earlier decided pattern to raise monthly output, ii) the FED hinted that Omicron could fuel US inflation, and iii) US job hiring for Nov’21 stood lower-than-expected.

Meanwhile, i) forex reserves fell by USD 2.7bn WoW to USD 637.7bn on 26Nov’21, ii) the INR weakened to 75.17/USD, and iii) Brent crude fell to USD 71.5/bbl. In the coming week, we keenly look forward to the RBI’s monetary policy.

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