Every Monday, Mint’s Plain Facts section features key data releases and events to look out for over the coming week. India will release retail inflation data for the month of March following tectonic shifts in the global geopolitical scenario with the Russian-Ukrainian war. Tata Consultancy Services (TCS) and Infosys will announce their quarterly results ending in March and the European Central Bank is expected to make a decision on monetary policy as inflation soars in Europe. Here’s more:
1. Inflation in India
Inflation data based on India’s consumer price index for March will be released on Tuesday. Retail price inflation hit 6.07% in February, breaking the Reserve Bank of India’s upper tolerance limit of 6% for the second consecutive month. Relief is unlikely to be imminent: upside risks emanating from the war in Ukraine last week forced the RBI to significantly raise its inflation forecast for 2022-23.
Analysts are wary of the war’s impact on accelerating retail inflation, since India imports 80% of its crude oil needs. Volatility in global markets could have a wider impact on consumer goods prices in India. In February, inflationary pressures were visible in foodstuffs, driven by soaring oil and fat prices as India relied on imported edible oils, analysts said.
2. Neighborhood Updates
Pakistan’s month-long political unrest could finally come to an end this week when the National Assembly convenes to elect a new prime minister after Imran Khan lost a no-confidence motion tabled against him by the opposition. Shehbaz Sharif, the president of the Pakistan Muslim League (Nawaz), is said to be the favourite.
A total of 174 of 342 members voted against Khan, making him the first prime minister to be removed by a vote of no confidence. No Pakistani prime minister has ever completed a full term. Prior to the vote, Khan had dramatically alleged a “foreign plot” to overthrow his government.
The crisis in India’s other neighbour, Sri Lanka, continues. The country is experiencing massive protests demanding the resignation of President Gotabaya Rajapaksa. Sri Lanka is facing its worst economic collapse since independence, with shortages of food, fuel and other essentials, driven by a balance of payments crisis. It is expected that he will continue to seek help from international bodies.
3. IT revenue
Two of India’s largest information technology companies, Tata Consultancy Services (TCS) and Infosys, will announce their results for the quarter ended March and the latest fiscal year this week. In the first three quarters of FY22, TCS net sales increased approximately 3% sequentially, while Infosys net sales increased approximately 6%. Brokerages expect revenue growth to continue in the March quarter in some moderation due to the high base effect, not just for the two giants but for the entire industry.
Market research firm Prabhudas Lilladher expects revenue for both companies to rise 2.6% sequentially, while ICICI Direct pegs it at 3-3.5%. Robust demand coupled with technological transformation is leading the growth of the sector. However, margins are expected to hold steady or even decline due to supply-side pressures, as well as aggressive hiring, blowbacks and wage increases.
4. US inflation
US retail price inflation continues to break records, hitting a new 40-year high of 7.9% in February. Soaring demand and the effects of the Russian-Ukrainian war sent the consumer price index soaring. However, some respite may be in sight: the Union of Swiss Banks has predicted that US inflation may have peaked at 8.5% in March before starting to ease.
The Fed raised interest rates last month for the first time in three years. Further increases are expected in the coming months. However, analysts believe the Fed is at a delicate point where it must control inflation without risking a downturn by suddenly raising interest rates amid continued wartime uncertainty. The Fed has agreed to cut up to $95 billion a month from its assets to further fight inflation.
CPI figures for March are due on Wednesday.
5. ECB interest rates
The war in Ukraine has sent Europe’s inflation challenge into dire straits, prompting some commentators to even project a recession later this year. As the war challenges both inflation and growth, the European Central Bank finds itself in a sticky spot when it revises its monetary policy on Thursday. Economic sanctions against Russia have hurt Europeans no less: inflation hit a record high of 7.5% in March by a quick estimate, with food and energy prices reaching sky-high levels. While raising interest rates to control inflation is not likely until growth stabilises, the war has only sparked rumors of a further easing of monetary policy by the ECB. The central bank denies risks of stagflation, but 21 of 38 economists polled by Reuters saw a high or very high probability over the next two years.
All of this means that the ECB’s press reading on the current situation will have glued markets.
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