US third quarter GDP growth came at 3.2% as per the third and final revised estimate for GDP growth put out by the US Bureau of Economic Analysis (BEA). The first estimate for Q3 GDP had pegged growth at 2.6% which was later revised to 2.9% in the second estimate and now to 3.2% in the third estimate. The boost to GDP came from consumption of services and positive trade in the form of surge in exports and lower imports. However, there is still pressure on housing and construction due to steeply higher rates.
Reliance Retail officially completed the purchase of the Metro Cash & Carry business for Rs2,850 crore. It may be recollected that Metro of Germany had forayed into India in 2003 and after 20 years they are calling it quits. With this deal, Reliance Retail gets access to a wide network of Metro stores, a large base of Kirana stores and massive network of customer and suppliers that will help enhance the B2B business of Reliance Retail. The transaction is subject to regulatory approvals and will be consummated by Mar-23.
It is being reported that the COVID situation in China may be just getting out of hand. China is apparently reporting 1 million cases per day with more than 5,000 deaths on a daily basis, although the official news agency of China appears to have blocked the news flows. This data was put out by Airfinity, a London based analytics company. According to Airfinity, another surge in March is likely to push the infections to as high as 4.2 million a day. COVID infections have also been rising in South Korea, Brazil and also the US.
A subsidiary of Reliance Jio has won a prestigious order to power the retail automation of IOCL. This unit will deploy and manage SD-WAN for IOC across its 7,200 outlets all-India. It includes payment processing, daily price updates, remote desktop protocol software and network monitoring. This will be part of IOCL digital transformation initiative. This will mark one of the biggest implementation of SD-WAN across India and also Asia. This is a wide area network solution that Jio is implementing across its wide customer base.
At a time when FMCG companies have been worried about rural volumes, there are the first green shoots of recovery in terms of demand from rural India. Currently, rural India contributes more than 35% of the annual sales of FMCG companies and it is higher in volume terms. Improved liquidity with farmers and the government focus on rural spending have helped in a big way. In November 2022, rural volumes grew by 7% as compared to 2-3% rural volume growth in last few quarters. Tapering inflation has also helped.
If export sales were the driver for the auto sector till last year, the tables have turned in the recent two quarters. For a company like Bajaj auto, which derives more than 50% of its sales revenues from exports, the last two quarters have been tough on the export front. Weak global demand and fears of a recession have curtailed the global demand for two-wheelers resulting in a sharp fall in exports. However, the good news for Bajaj Auto, according to Rajiv Bajaj, is that domestic sales are more than compensating for it.
Due to the sudden rise in COVID cases in China, India has issued revised guidelines for international arrivals effective from 24th December. All travellers will need to be fully vaccinated and follow rules of wearing masks and physical distancing. Passengers with symptoms of COVID be isolated. Arriving passengers will be thermally screened on arrival. The government has also stipulated that 2% of arrivals will undergo random testing. Self-monitoring post arrival will also be mandatory. India will not be taking any chances.
With sales of passenger cars growing, the next big growth engine in FY24 is likely to be EVs. EV sales are pegged at 50,000 in FY23 and projected to double to 100,000 in FY24. Remember just 3 years back the total EV sales stood at just about 3,000 units, so the growth has been humongous. Some of the big EV launches that are likely to drive EV sales in the coming fiscal year are Tata Motors, M&M and MG Motors. However, the big trigger or the tipping point could only come once the EV infrastructure has expanded.
