Weekly Economic Update

In the local economic news, while long-term government bond yields rose immediately, following Union Budget 2021, Reserve Bank of India (RBI) felt that the yields above 6 per cent mark were too high and hence, decided to cancel two bond auctions on February 5 as it was not comfortable accepting the bids at a higher cut-off yield offered by the primary dealers.  State Bank of India (SBI) also revised its estimates for growth in FY21, higher to a contraction of 7 per cent for the fiscal year as compared to the previously expected contraction of 7.4 per cent on the expectations of better Q3FY21 growth of a positive 0.3 per cent.

On the global front, Congressional Budget Office (CBO) has projected that the US Budget deficit will be $2.3 trillion for the fiscal year 2021. This number does not take into account the $1.9 trillion in stimulus that is proposed by Joe Biden Government. CBO also expects the US economy to grow by 3.7 per cent in 2021 after contracting 3.5 per cent in 2020. US Central Bank Head Jerome Powell also indicated this week that the interest rates will stay low and policy shall remain accommodative to address the high unemployment level in the US.