India's GDP numbers and RBI meeting in focus

While the winter parliament session carries on, focus is on today's growth report card and Tuesday's RBI policy meeting. For the Jul-Sep quarter, real GDP growth is expected to rise 7.3% YoY from 7% quarter before. The underlying trend is firming up, with the four-quarter moving average of QoQ pace inching up from the Jun quarter. OECD's lead indicator for India also turned above the 100 mark by Sep. 

Notably however not all growth cylinders are firing at the same time. Growth is likely to be more consumption-led than driven by investments. Urban demand is on the mend, as indicated by higher passenger car sales, indirect tax collections, easing financing costs and modest recovery in durables output. Investment spending, on the other hand, will be driven mainly by higher government capital expenditure, while private sector has been slow to catch-up. The stock of stalled projects climbed in the Sep quarter, while existing capacity is being under-utilized. This has, not surprisingly, lowered interest in greenfield investments, with industrial credit loan growth stagnating in singledigits. Externally, a combination of weak imports but sluggish exports will keep net exports in red. 

On policy, the RBI is expected to hold the Repo rate steady at 6.75% on Tuesday. A combination of pending wage adjustments, uptick in CPI inflation readings, delay in supply-side fixes and external event risks (US Fed rate hikes) will leave the central bank on a cautious footing.