The cumulative seasonal rainfall for the country till 22 July was 18 per cent below the Long Period Average (LPA). Out of 36 meteorological sub-divisions, rainfall was excess/normal in 18 and deficient/scanty in 18 other meteorological sub-divisions. Cumulative rainfall scenario over 5 meteorological sub-divisions (West Rajasthan, East Rajasthan, West Madhya Pradesh, East Madhya Pradesh and Gujarat region) changed from deficient to normal category during the week that ended 22 July.
In the meantime, the 4th Advance Estimate of Production of Major Crops Grown in the Country has placed total food grain production in 2008-09 at 233.88 million tonnes. This is about 3 million tonnes higher than 230.78 MT reached in 2007-08.
Infra industries grow 6.5% in June
Production index of six core industries, a sub-set with 26.7 per cent share in broader Index of Industrial Production (IIP) registered 6.5 per cent increase in June 2009, against 5.1 per cent a year ago. The feat also marked an improvement over 2.8 per cent in May and 5 per cent in April, which has been revised upward from 4.3 per cent put out earlier, following much better finished (carbon) steel output and power generation. Cumulative growth in the infra industries works out to a relatively healthy 4.8 per cent over Q1 of the current fiscal, as compared to 3.6 per cent average in H1, and half this rate in H2 of the preceding fiscal.
Electricity that comprises nearly two-fifths in the weight of six infra industries continued to perform robustly, having increased by 7 per cent in June and 5.8 per cent over Q1, three times the pace a year ago. Coal production expanded at double-digits for the third straight month and clocked 12.7 per cent average rise over the quarter. Domestic crude oil production was in positive territory in June, but over the quarter it sank deeper. Petroleum refinery output that expanded 4.5 per cent till October, retarded to less than one per cent in next five months of 2008-09 and degenerated into 4.1 per cent decline in Q1 of the current fiscal.
Cement and steel, the two major indicators on construction in particular and project investment in general fared very well, implying thereby that project implementation could have picked up during the quarter. Here, cement is a clearer pointer. In fact, defying general slack, after slowing to 6 per cent in H1 of 2008-09, from 7.5 per cent in H2 of the preceding fiscal, cement production rebounded with 8.7 per cent mount in H2, and speed quickened to 12.1 per cent in Q1 of the current fiscal.
Finished steel (carbon) production, a critical input to infrastructure investment and capital goods industry including automobiles, rose 5.3 per cent in June. Though this was half the rate a year ago, the pace reflected a consolidation, compared to 2.1 average in previous two months, stagnation during January-March and 4.5 per cent decline during October-December 2008.
IIP rises 2.7% in 1.9 per cent in April-May
The factory output as measured by index of industrial production (IIP) was up by 2.7 per cent in May, against 1.2 per cent in April and a decline in March. The average growth for the first two months of the current fiscal works out to a much lower 1.9 per cent (5.3 per cent). Manufacturing that accounts for around four-fifths of IIP grew 2.5 per cent in May and 1.5 per cent during April-May and was a drag, with mining and electricity, the other two segments recording, better feat. What is of concern, capital goods production, a surrogate indicator for projects investment, declined for the third successive month, though the pace came down to 3.6 per cent from 7.4 per cent in April and 8.4 per cent in March. The first revision for the sector for April puts y-o-y decline at 7.3 per cent, against 1.3 per cent as per quick estimates put out earlier. Consumer goods, mirroring consumption demand, also declined 1.2 per cent over April-May.
Among the major industry groups, seven posted y-o-y declines in the first two months of the current fiscal, which included food products (-27 per cent), cotton textiles (-1.7 per cent) and leather & leather products (-8.5 per cent). Rubber, plastic, petroleum and coal products (11 per cent), non-metallic mineral products (7.9 per cent), basic metal & alloy industries (5.2 per cent), transport equipment & parts (4.7 per cent) and electrical, non-electrical machinery (3.2 per cent) were among the industries which posted positive growth.
By the way, the second and final revision has placed the IIP growth for February in positive territory, against a decline, which means that industry had suffered declines in December and March only, against five months, all falling during the second half of 2008-09, as per quick estimates.
Money supply
Broad money (M3) expanded 4.7 per cent till 3 July, speeding from 3.4 per cent in the corresponding period of 2008-09. The source of growth has shifted from forex assets to banks' credit to government which shot up 10 per cent, against 1.2 per cent decline in forex assets with banks.
Bank credit enters positive phase
Non-food credit by scheduled commercial banks that showed Rs 51,071 crore decline till 22 May, posted Rs 15,643 crore average rise in next two fortnights and twice this number in the later fortnight that ended 3 July. Still, at Rs 11,735 crore, total non-food credit till the date in the current fiscal was less than one-third of Rs 37.364 crore in the corresponding period of the preceding year. Food credit expanded Rs 11,463 crore (Rs. 6,322 crore).
Interest rates
Weighted call money rates in call money market ranged 2.63-3.25 during the first 23 days of July, against 3.07-3.27 per cent in June and 5.60-9.67 in this month a year ago.
Untitled Document
Weighted Call Money Rates: July 2008-09 |
|
Range (%) |
8-Jul |
5.60-9.67 |
8-Aug |
5.98-9.71 |
8-Sep |
6.14-14.81 |
8-Oct |
5.57-17.89 |
8-Nov |
4.25-17.54 |
8-Dec |
5.26-6.56 |
9-Jan |
2.32-4.65 |
9-Feb |
2.77-4.23 |
9-Mar |
2.42-4.98 |
9-Apr |
1.87-4.58 |
9-May |
2.59-3.24 |
9-Jun |
3.07-3.27 |
July (Up to 23 July) |
2.63-3.25 |
The cut-off rate for 91 days T-bills worked out to 3.28 per cent in its auction on 22 July, while the similar rate for 182 days T-bills was assessed at 3.47 per cent. The implicit discount rates on commercial papers floated in the second half of May ranged 3.32-9 per cent, against 2.83-9.90 per cent in the first fortnight. The longer term GoI securities were traded at 6.32-8 per cent YTM in the secondary market in the week ended 17 July.
Prime lending rates of five major banks ranged 11-12 per cent by 10 July, against 12.75-13.25 per cent a year ago. Deposit rates were 6.5-8 per cent, against 8.75-9.5 per cent a year ago. Bank rate was 6 per cent, reverse repo 3.25 per cent, repo rate 4.75 per cent and CRR 5 per cent.
Rupee was traded at 48.68/69 per USD on 17 July. Rupee depreciated annually by around 12 per cent against US$, 21 per cent against Yen and 1 per cent against Euro, but appreciated by 8 per cent against Pound Sterling.
Foreign Trade
The declining phase in export continued for the 8th month in May 2009, the longest lean period in recent years, due to downturn in world markets. Side-by-side, mirroring slowing economy, imports dropped annually for the fifth straight month. Oil import was 60 per cent lower in April-May and non-oil import 25 per cent. Trade deficit for the month was 53 per cent lower, against 44 per cent last month.
Balance of Payment: 2008-09
The country's external sector current account turned $4.75 billion surplus during January-March 2009, a turnaround from a deficit of $9 billion in Q1 that worsened to $12.5 billion in Q2 and $13 billion in Q3. The improvement followed steep reduction in import on the one hand and some rise in export from the third quarter on the other. Thus, the trade deficit in merchandise was less than a half of that in the previous quarter and two-thirds of that in Q4 of 2007-08. The development was, nevertheless, uninspiring as it reflected more of a sagging economy that required lesser inputs. Invisibles continued to wilt: it got truncated to $19.3 billion, from $21.7 billion in Q3 and $26.2 billion in Q2. Capital account remained negative as in Q3 and against a massive $26 billion inflow during the last quarter of 2007-08. Overall, BoP was in surplus nominally over the quarter, against $22.6 billion deficit during July-December 2008.
Invisibles
At $10.7 billion, software export was broadly at around the same level as in preceding three quarters, though as compared to the same quarter in 2007-08, it was 11 per cent less. All other services like travel, insurance financial, engineering, consultancy and communication services together netted insignificant amount. Investment income as usual meant more repatriation than receipt. Workers' remittances gave 29 per cent less in Q4.
Capital account
Foreign direct investment (FDI) into the country, which had declined to $6.3 billion in October-December 2008, from $8.8 billion during July-September and $11.8 billion during April-June, recovered partially to $8 billion during January-March 2009. FDI overseas of $4.8 billion by India Inc was lower compared to the earlier quarter as also the same quarter a year ago. FII's portfolio investment remained negative, though $2.6 billion they pulled out was less than a half of that in the preceding quarter. ADR and GDR floatations continued to be minuscule and external commercial borrowings aggregated around one-fifth of that in the last quarter of 2007-08. Short-term trade credit and banking capital (including NRI deposits) saw net outflow of around $8.8 billion as in the preceding quarter.
Trends for 2008-09
The country recorded the current account deficit (CAD) of $29.8 billion during 2008-09, deepening from $9.7 billion average during 2005-06 and 2006-07 and $17 billion in 2007-08. Merchandise trade deficit shot up 30 per cent over the year, whereas invisibles grew 20 per cent. CAD as ratio of GDP at market prices shot up to 2.8 per cent from 1.7 per cent in 2007-08. The deficit, implying an equivalent amount of foreign capital inflow, supplements domestic savings to finance domestic fixed capital investment. Among the services, software exports grew 19 per cent to $44.2 billion, slowing from 28 per cent in 2007-08 and 23 per cent in 2006-07. The retard was mainly due to underperformance in the last quarter. Among the non-software exports, business and financial services which netted $2 billion during 2008-09 are slowly gaining strength. However, what should cause a concern is that the growth in private transfers (mainly workers' remittances) fell to 6 per cent single digit to $44 billion, against 40 per cent in 2007-08 and 20 per cent in 2006-07. Incidentally, around a half of the inflow on this count is actual remittance for family maintenance, etc, while the other half mirrors local withdrawal/redemption of NRI deposits.
In capital account, FDI into the country remained at the preceding year's level of $34-35 billion. FDI abroad declined 7 per cent to $17.5 billion, the first retard in recent years in the segment that had enjoyed 25 per cent rise in 2007-08 and a one-and-a-half times jump in the earlier year. FII investment in the country's bourses witnessed net withdrawal of $15 billion, against a record $20 billion investment in 2007-08. GDR/ADR floatations yielded only around $1.1 billion, one-seventh of the amount mobilized in 2007-08 and external commercial borrowing of $8.2 billion was just one-third of that raised in 2007-08.
Central Govt. finance
Central government finances showed some improvement in May 2009. Gross fiscal deficit declined 9 per cent annually to Rs 36,600 crore in May, reflecting a turnaround from 64 per cent shoot-up in the preceding month. Cumulative deficit of Rs 90,758 crore for the first two months of the current fiscal still ran at uncomfortably high of 24 per cent. Revenue deficit too was lower in May, but cumulatively it worked out to 20 per cent high. Total expenditure was down 10 per cent in May, but because of 43 per cent splurge in the preceding month, it was 12 per cent higher cumulatively. Axe fell on plan expenditure which was down 17 per cent in May and 3 per cent over April-May, as non-Plan disbursements shot up 21 per cent over these two months. Gross tax receipt was 8 per cent lower in May, half of the decay in April. Cumulatively, tax receipt was 12 per cent lower. Corporate and income tax receipts were more over April-May. Customs duty was 38 per cent lower and excise duty 24 per cent; though both showed lower declines in May, relative to the same in April.
Prices
The WPI based annual inflation remained in the negative zone for the fifth week that ended 11 July. However, against an annual decline of 1.17 per cent, the WPI works out 3.54 per cent higher in the current fiscal (till 11 July). While the WPI of power & fuel subgroup declined 1 per cent, those of primary articles and manufactured products showed escalations of 4.54 per cent and 4.25 per cent, respectively till 11 July.
ERIL Index of Cost of Project Inputs was running 6.9 per cent lower by 6 June on annual basis and 0.1 per cent since March 2009.
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