India's FDI regulations eased, focus returns to today’s data releases

The Indian government eased FDI regulations in about 15 sectors, including defence, broadcasting, retail, private banking and civil aviation. Measures included an increase in some sectoral FDI caps, raising the single-window clearance ceiling and easing sourcing norms, amongst others. The intention is to simplify and rationalise the process of investments, with a stress on improving the ease of doing business. This comes on the back of net FDI inflows jump to a record USD 32.6bn (1.7% of GDP) in FY14/15 from USD 22bn (1.1% of GDP) year before. Simultaneous efforts to forge stronger ties with strategic global partners have also provided an 'open for business' image. 

To ensure that these higher FDI limits translate into material inflows, the buck stops on the need to address infrastructure deficiencies and enable a businessfriendly environment. The latter includes need for lower regulatory hurdles, tax clarity, ease of acquiring land and hiring labour etc. 

In this respect, the upcoming winter parliamentary session that will start in lateNov assumes importance. Following the setback at Sunday's election results, the hurdle to pass key legislations, especially land, labour and GST, has risen considerably. It remains to be seen if an anticipated cabinet reshuffle and watering down of provisions cuts any ice with the opposition parties. 

Broadly, these FDI measures are part of a renewed push to jumpstart reforms, despite the unfavouable state election results. Late last week a revival package for loss-making power distribution companies and an increase in support prices for lentils/select rabi crops were undertaken. 

Meantime, today's Sep industrial production and Oct CPI inflation are under scrutiny. The recent updrift in the core industries index sets the stage for a firm Sep industrial production (IP) print. While the headline is likely to slow to 5.0% YoY from 6.4% month before, pace will quicken on sequential basis. Domesticoriented firms will be the main source of support as exports face a challenging demand environment. 

Oct CPI inflation meanwhile is likely to rise 4.7% YoY slightly higher than Sep's 4.4%, on higher food prices. Readings are off the sub-4% trough in Jul-Aug, with base effects and pipeline food pressures to see inflation head past 5% in 4Q15. 

"On policy, after the bunched-up 50bps cut in Sep and ahead of the widelyanticipated lift-off in the US rates by end-year, we expect the Reserve Bank of India (RBI) to pause in December", says DBS Group Research.