While the parliament debates, GDP numbers and RBI review comes into view in India

The winter parliamentary session kickstarts today. In view of the setback at the recent state elections and possibility of stiff resistance on passage of key bills, the government has reached out to the opposition to gather support. Inputs from the GST panel are also awaited, which might recommend a lower 18% revenue neutral rate according to the press. If confirmed, this will be lower than the 20-22% discussed earlier. Progress on the bipartisan consultations meanwhile is likely to a long-drawn process. While the contentious land and labour laws might gain more traction at the state level, priority will be given to the key Goods and Services tax (GST) constitutional amendments and bankruptcy bills, amongst others. 

Beyond the parliamentary session, we head into a busy week. Jul-Sep15 (second quarter FY15/16) GDP numbers are due on 30 Nov (Mon) followed by Reserve Bank of India policy meeting on 1 Dec. The RBI lowered its growth projection for FY15/16 to 7.4% from 7.6% back in Sep citing global headwinds, weak rains and sluggish private sector investment activity. These factors are expected to also influence Monday's GDP numbers, but firm discretionary spending will pick up part of the slack. For the Jul-Sep quarter, real GDP growth is expected to rise 7.3% YoY from 7% quarter before, but down from 8.4% in the corresponding period year ago. 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. Upcoming public-sector wage hikes will also be positive for consumption when it is rolled out next year. But this is counter-balanced by subdued rural demand on the back of weak wage growth, successive weak monsoons and lower fiscal support. Private consumption will likely rise 7.7% YoY in 2Q from 1Q's 7.4%. 

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 single-digits. Balancing these factors with the modest climb in PMIs and pick-up in capital goods output suggest activity is stabilizing albeit at weak levels. Externally, a combination of weak imports but sluggish exports will keep net exports in red. Overall, a cyclical recovery is underway, though a structural boost will need tougher reforms to be enacted. 

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. These concerns to be aired at the policy review, with the guidance likely to point towards a prolonged pause into the next fiscal year.