Growth in Fixedline subs, Slowdown in aviation, weak FDI and more...
This Week In Data #54
In this edition of This Week In Data, we discuss:
Continued strong growth in fixed-line telecom subscribers
Slowdown in domestic aviation growth
Decline in FDI and the increase in repatriation of FDI
Recovery in outflows under LRS
December was another strong month for fixed-line telecom operators. They added just under 300k subscribers on a net basis. And that means for the full year 2023, they added a total of 4.4 million subscribers. This is the highest in a long, long time. Over the past 3 years, the fixed-line operators have added 12 million subscribers taking the current fixed-line user base to over 30 million. The total fixed-line user base is now the highest since 2012.
In absolute terms of course the number of wireless subscribers remains very large relative to fixed-line subscribers. On an all-India basis, the fixed-line subscriber base is less than 3% of the wireless subscriber base. But in urban areas, and specifically some of the metro regions the share is much higher. In Mumbai for instance it is in double digits and in Delhi, it is in high single digits.
Given that a household will typically have multiple wireless connections but mostly a single fixed-line connection, the effective reach of fixed-line connections, on a household basis, is possibly almost 20-30% of wireless in these regions. And growing fast. Thanks to OTTs and all…
The aviation sector is seeing a slowdown. In January the number of passengers carried by domestic airlines (on domestic routes) grew just 4% YoY, down from 8% growth in December and double-digit growth before that. The aviation sector was the last to normalise post Covid and hence the growth rates were distorted through the first half of last year as well.
But even when compared to pre-Covid, the growth in January was just 3% higher than in January 2020. And in the previous quarter also (Oct-Dec 2023), growth was just under 3% relative to the same period of 2019. But during the middle of last year, growth was almost 10% higher than the pre-pandemic period. So growth has slowed down.
After 5 consecutive months of increase in FDI, December saw an almost 30% decline in gross FDI inflows. In absolute terms, the FDI inflow at US$4.5bn was the lowest since November 2023. More importantly, December also saw over US$6bn of prior FDI being repatriated from India and this meant that for the month, there was net negative FDI – more money flew out of India than it came in. This is the first time this has happened since RBI began reporting monthly data from 2011 onwards.
The bigger picture though is that while December saw a spike in repatriation of FDI, over time the level of repatriation has trended up from an average of US$1.7bn per month in 2019 to over US$3bn per month in 2023 – almost 2x increase in the last 4 years. So, we will need to attract more FDI, just to keep pace with the repatriation and keep the net inflow of FDI unchanged. A case of a bit of a red queen effect!
Unless of course, the increase in repatriation reverses – which is also possible since the current surge in repatriation is probably being driven partly by the PE/VC inflows just before and during Covid.
The government increased the tax collection at source (TCS) on outflows under the RBI’s Liberalised Remittance Scheme (LRS) in last year’s budget. It was widely expected that the higher rates would deter outflows. But that has not been the case. In December, outflows rose 16% YoY. Overseas travel continues to be the key driver of LRS. LRS for overseas travel grew by 36% YoY in December and totalled US$1.5bn. If we extrapolate the growth of the last 3 months, LRS outflows for overseas travel will exceed US$20bn in the current year (2024)!
LRS for overseas investments (financial investments as well as real estate) have declined and perhaps that is a direct result of the higher tax rates since the ticket sizes here would most likely be above ₹7 lakhs at which level the 20% TCS gets attracted.
That’s it for this week. A whole set of GDP data awaits us next week (quarterly, revision to last year’s annual data, detailed investment and savings data and more). So till then, it is adios amigos!