Economic Update

Govt Launches National Monetisation Plan to Boost Revenue

Assets will be monetised through a "structured contractual partnership" and it involves monetisation of rights

Govt Launches National Monetisation Plan to Boost Revenue
Govt Launches National Monetisation Plan to Boost Revenue
OLM Desk - 24 August 2021

To crowd in private investment, the government has unveiled a National Monetisation Plan (NMP) of brownfield assets, to generate upfront revenue of Rs 6 trillion between FY22-25. This proposal covers the asset handling of roads, railways, airports, stadiums, power transmission lines, and gas pipelines. Under this plan, assets will be monetised through a "structured contractual partnership". Notably, it involves monetisation of rights and not ownership. This is likely to ease the financial burden of the government (4.5 per cent fiscal deficit target by FY26).

Flash PMIs for the US (61.2 in Aug'21 versus 63.4 in July 2021), UK (60.1 versus 60.4) and Eurozone (61.5 versus 62.8) showed that manufacturing activity eased across regions in August 2021. A severe shortage of raw material impacted activity in the US and UK. In the US, the increased cost burden and spread of the Delta variant also impacted activity. The services sector too showed a similar trend with activity slowing across the board. Labour shortage remained a key concern for all.

US existing home sales rose by 2 per cent in July 2021, up from 1.6 per cent in June 2021. This was led by a dip in mortgage rates in July 2021 (after remaining steady in May 2021 and June 2021) and an increased supply of homes. Inventory of homes rose to 2.5 months versus 2.3 months in June 2021. Increased supply led to a marginal dip in median home prices (17.8 per cent year-on-year in July 2021 versus 23.2 per cent on June 21). The reopening of the economy and stronger economic outlook has also helped the real estate sector.

Markets

Bonds: Except US (stable), global yields closed higher. China’s 10Y yield rose by 2bps (2.87 per cent) as moderation was seen in Covid-19 cases. Investors are also eyeing Fed Chair’s comments at the upcoming Jackson Hole meeting. Crude prices rose by 5.5 per cent (US dollars 69/bbl) after the FDA’s full approval of the Covid-19 vaccine. India’s 10Y yield rose by 1bps (6.24 per cent). It is trading at 6.25 per cent today.

Currency: Global currencies closed higher against the dollar. DXY fell by 0.6 per cent after soaring to a 9-month high last week, as US (flash) manufacturing slipped further in August 2021. AUD rose the most by 1.1 per cent, followed by GBP which rose by 0.7 per cent. Rupee rose by 0.2 per cent supported by global cues and FII inflows. It is trading further higher today in line with other Asian currencies.

Equity: Global indices ended higher as US FDA gave full approval to Pfizer/BioNtech’s Covid-19 vaccine. Receding expectations of Fed tapering amidst a dip in US manufacturing activity also supported investor sentiments. Asian stocks advanced the most led by Nikkei (1.8 per cent). Sensex rose by 0.4 per cent led by technology and oil and gas stocks. It is trading further higher today in line with other Asian stocks.

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