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Charts & Analysis

Macro: Money Supply Growth Slows, Dollar Rises

A few macro charts for you:

Broad and Narrow Money Supply are slowing

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M0 growth (reserve money) would fall as bank reserve requirements have fallen 1.25% this year (nearly 80,000 cr. less will be required which is quite a drop since reserve money is about 14 lakh crore or Rs. 14 trillion).

M3 – or broad money growth – has slowed down to 13% which is where the worry is. My theory is that much of our GDP growth is related to the growth of broad money supply (okay, it also depends on things like velocity, churn and measurement anomalies, but that is another discusion entirely). The lower M3 Growth will reflect on how GDP growth will look like.

(Just to meet budget estimates, the economy has to grow 16% in rupee terms).

Credit Growth at 16.4%

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Bank credit is at 44.07 trillion (lakh cr.). This has slowed to 16.4% from being as high as 25% recently (which was on a lower base, but still). Bank credit usually grows higher than the GDP rates, and you can see how much higher it has been in our glory days.

The Dollar’s Moving Up Again

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At just about 51, the rupee has depreciated about 5% from the levels of 48.6 in February. This will hurt our problems with oil prices by that much more (oil has appreciated about 5% since Feb)

Overall, these look like bearish signals for the economy. Markets, on the other hand, continue to float in the ether, unaffected by economics in the short term, so don’t go around selling your portfolio just yet, let the price give you signals.