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MOSL: Morning India (18/April/19): 1. Economy (Thematic – When will government accept fiscal policy limits?); 2. Wipro (Marginal revenue miss; In-line margins); 3. Mindtree (Operationally in line); 4. Oil & Gas

MOrning India (18/April/19): 1. Economy (Thematic – When will government accept fiscal policy limits?); 2. Wipro (Marginal revenue miss; In-line margins); 3. Mindtree (Operationally in line); 4. Oil & Gas; 5. Healthcare

 

Today’s top research theme

Economy (Thematic): When will government accept fiscal policy limits? A denial is likely to weigh on private sector massively

We analyzed the 2019-20 budgets of 20 major states of the Indian economy, which together account for ~93% of national GDP and ~95% of total spending by all states. Our key findings are:

• Total fiscal spending in FY18 grew much slower and thus, real GDP growth for FY18 could be revised down by more than one percentage point (pp) to ~6%. With fiscal policy reaching limits, its support to economic activity will remain weak in FY20 too. We expect 6.8% growth this year.
• Record-high borrowings by the general government would consume a larger share of financial savings in the economy, and thus, has the potential to tighten market liquidity and crowd out private borrowings.

Piping hot news

Reliance Industries silent on stake sale talks with Saudi Aramco reports

• Reliance Industries has declined comments on reports that the company is in talks with Saudi Aramco to sell 25% in its refining and petrochemical business but stated that the conglomerate evaluates opportunities on an ongoing basis. Saudi Aramco, world’s largest oil exporter, is believed to have first shown interest in Reliance about four months ago but the talks gathered momentum after Saudi crown prince Mohammed bin Salman (MBS) visited India in February. He had then met RIL’s head Mukesh Ambani.