Economy Watch Monitoring India’s macro-fiscal performance October 2019 Contents Foreword 3 1. Growth: IIP contracted by (-) 1.1% in August 2019 4 2. Inflation: CPI inflation increased to a 14-month high of 4.0% in September 2019 5 3. Fiscal performance: center’s fiscal deficit during Apr-Aug FY20 stood at 78.7% of the budgeted target 6 4. India in a comparative perspective: status and prospects 8 5. In focus - Landmark corporate income tax reforms: short-term revenue pain for long-term growth gain 9 6. Money and finance: RBI lowered the repo rate to 5.15% in October 2019 from 5.40% in August 2019 16 7. Trade and CAB: merchandise exports contracted at (-) 6.6% in September 2019 18 8. Global growth projections revised down to 2.9% in 2019 and 3% in 2020 19 9. Index of Macro Imbalance (IMI): pointed to a deterioration in the macro balance in 1QFY20 20 10.Index of Aggregate Demand (IAD): indicated sustained weakness in demand conditions in August 2019 20 11.Capturing macro-fiscal trends: data appendix 21 Prepared by Macro-fiscal Unit, Policy Advisory Group, EY India D.K. Srivastava, Chief Policy Advisor, EY:
[email protected] Muralikrishna Bhardwaj, Senior Manager, EY:
[email protected] Tarrung Kapur, Manager, EY:
[email protected] Ragini Trehan, Manager, EY:
[email protected] Highlights 1. IIP growth at (-)1.1% in August 2019 showed a contraction in industrial output for the first time in 26 months. 2. PMI also signaled a stagnation in manufacturing and a contraction in services in September 2019.