FISCAL DEFICIT, or gap between Union government expenditure and revenue, was Rs 10.36 trillion, or 135.2% of the full-year target at February-end end mainly due to slower pace of revenue collections. Direct taxes were short by a little over Rs 2trillion as on March 16. Given the subdued tax collections, financing some part of the relief package announced by thegovernment through 2019-20 resources would mean India will have to rely on stretching fiscal deficit limits significantlyabove the FRBM limit which was already relaxed in the budget. The government’s revenue during April-Feb was Rs 13.78trillion—or or 74.5% of the revised target for 2019-20. 20. Tax revenue was 74.1% of the target at Rs. 11.14 trillion. Non-taxrevenue was Rs 2.63 trillion, or 74% of the revised target. Total expenditure during the same period was Rs 24.65 trillion,or 91.4% of the revised BE. Capital expenditure stood at 87.5% of revised target of Rs. 3.48 trillion.RBI advanced its meeting from March 31 and April 3, and held its meetings on March 24, 26 and 27 and announced severalsteps to significantly enhance systemic liquidity. MPC reduced the policy repo rate by 75 basis points to 4.4%. Policy ratecorridor widened from 50 basis points to 65 bps. The fixed rate reverse repo rate, which sets the floor of the LAF corridor,was reduced by 90 basis points to 4.0%, thus creating an asymmetrical corridor. The purpose of this measure relating toreverse repo rate is to make it relatively unattractive for banks to passively deposit funds with the RBI and instead, to usethese funds for on-lending to productive sectors of the economy. Cash reserve ratio has been reduced for all banks by 100basis points to 3% for one year. This reduction in the CRR would release primary liquidity of about Rs.1,37,000 crore.Minimum daily CRR balance requirement reduced from 90% to 80%, a one-time dispensation up to June 2020. MSFreduced to 2% of SLR allowing banks to avail an additional Rs.1,37,000 crore of liquidity under the LAF window. RBI toconduct TLTROs of up to three years tenor of appropriate sizes for a total amount of up to Rs.1,00,000 crore at a floatingrate, linked to the policy repo rate. Interbank call money rates mostly remained much below the RBI’s repo rate of 5.15%,and fell even below the floor rate on several occasions in the month of March, taking a few days to adjust to the fall inpolicy rate before falling back into the rate corridor at the end of the month. The MIBOR too remained aligned to the policyrepo rate in line with a flat LIBOR till mid-month month after which the LIBOR fell sharply. The MIBOR moved lower towards theend of the month with lower LIBOR and policy rates. RBI has removed investment limit for non-residents for some datedsecurities, with effect from April 1. Constant maturity yields (CMYs) of government securities fell across the maturityspectrum in March, reflecting RBI’s policy measures. Very short-term term yields dipped sharply by about 30 bps, while,medium term yields or 5- to 10-year CMYs fell marginally by 1 to 3 bps. Longer term yields fell by 7 to 17 bps.INDIAN EQUITY INDICES plunged in March 2020 as fallout of the pandemic, recording the steepest monthly fall afterOctober 2008 during the financial crisis. Benchmarks S&P BSE Sensex and Nifty 50 fell 23.5% and 23.1%, respectively,even after gaining 10% and 9% in a week's session. However, wealth destruction to tune of Rs. 14.6 trillion on the Sensexin March was much higher than that of Rs. 4.4 trillion in October 2008. The decline was mainly led by media, banking andfinancial stocks. YTD these major indices have fallen about 30%, while Auto, PSU Banks, Metals, Realty and Media, stockshave declined more than 40%. PSU banks have in fact plunged nearly 60% during the financial year 2019-20, initiallyaffected by banking crisis. The Sensex reached a High of 39,083.17 and a Low of 25,638.90 in March and closed the monthat 29,468.49, down from 38,297.29 in the previous month. The Nifty reached a High of 11,433.00 and a Low of 7,511.10 inMarch and closed the month at 8,597.75, down from 11,201.75 in the previous month. A gauge of global equity pricemovements, the MSCI All Country World equity index plunged 8.2% in the month reaching a High of 538.02 and a Low of379.00 in March.Massive sell-off in equities and bonds led to a huge fall in rupee against the dollar in the month of March. The rupee hit arecord low of 76.32 earlier in March before recovering. Net FPI flows to India’s stock market contracted massively inMarch and outflows worth Rs. 61972.8 crore ($8.4 billion) were recorded as compared with inflows of Rs. 1819.8 crore($0.26 billion) in the previous month. FPI net investment in the Indian debt market also contracted by Rs. 56211 crore($7.6 billion) in March, following inflows of Rs. 2096.76 crore ($0.3 billion) in the previous month. MF investment in theIndian equity market, however, jumped from inflows worth Rs. 9863.22 crore in February to Rs. 30055.96 crore in March,as domestic funds moved in to take advantage of the lower valuations. MF net investment in the Indian debt market,however, decreased from inflows worth Rs. 18026.73 crore in February to outflows to the tune of Rs. 17890.23 crore inMarch. As per the AMFI, the total assets of mutual fund industry stood at Rs 22.26 trillion as on March 31, 2020. Out of thisdebt funds had an exposure of 10.29 trillion. Overall debt funds saw a net outflow of Rs 1.94 trillion in March 2020, due tohuge redemption pressures for short term liquidity.E-UpDates April 20204Surge Research Support
Table of ContentsContents1. Key Rates2. Indian Economy — Growth Indicators3. Indian Economy — Price Indicators4. Indian Economy — Banking Indicators5. Indian Economy — Exchange Rates6. Indian Economy — Interest Rates7. Indian Economy — Stock Markets8. Indian Economy — Capital Flows9. Indian Economy — Commodity Markets10. Global Economy — Economic Indicators11. Global Economy — Stock Indices12. Global Economy — Commodity IndicesPage………… 6………… 7………… 9………… 10………… 12………… 14………… 17………… 20………… 23………… 25………… 26………… 27Special Feature—Highlights of the RBIGovernor’s Statement, April 17, 2020………… 28www.ecofin-surge.co.inResearchers interested in publishing abstracts of their work in “E-Updates”can send them in at: ecofin.surge@gmail.com.E-UpDates April 20205Surge Research Support
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