Industrial production as measured by index of industrial production (IIP) declined by 0.4 per cent in October. This was the first decline after over 15 years. Obviously, the global downturn has reached the Indian shores. While Mining and Electricity remained positive, the annual growth in Manufacturing turned negative. The cumulative growth in IIP worked out to 4.1 per cent, with Manufacturing rising only a shade better by 4.2 per cent - barely exceeding Mining (3.7 per cent) and Electricity (2.8 per cent).
Manufacturing, that was driving broader IIP over past four fiscals, appears to be beset with several sector-specific and industry-retarding global and domestic problems, in the current fiscal. Thus, 10 out of 17 two-digit groups recorded lower output in October and seven over the first seven months of the current fiscal. The list showing overall decline included Food Products, all segments of Textiles, Rubber, Plastic, Coal and Petroleum Products and Leather & Leather Products. In Mining, crude oil declined by 0.7 per cent, but coal production was up by 8.4 per cent (3.7 per cent).
Capital goods hold on
With at least November did not fare any better going by available indicators, the situation looks gloomy. However, all does not seem to have been lost. Thus, the composite production index of capital goods escaped a decline in October and mounted 9 per cent over April-October, which, though half of the pace a year ago, was twice the speed in overall Manufacturing. The feat reflected strong 8+per cent growth in Electrical and Non-Electrical Machinery and 9+ per cent in Transport Equipment and Parts, even after machinery production stagnated and transport equipment declined in October. In fact, reflecting fluid conditions, capital goods’ production recorded double-digit rise in three out of seven months, with average growth placed at around 16 per cent, with downturns in the other four months where the average mount was one-fourth of this rate.
Cement also bettered the overall Manufacturing in the first seven months of the current year, in pace. Production did not suffer any erosion in October and its average growth worked out to 6 per cent (8.5 per cent). Finished (carbon) steel production though marginally lower during the month, expanded 4.2 per cent (7.3 per cent), cumulatively.
Among the other subgroups of IIP, consumer goods production that mirrors consumption demand expanded by 6.3 per cent over April-October, which notwithstanding a dip in October was only a few basis points lower than 6.7 per cent a year ago. The feat shows resilience of the sector when viewed against more than halving of growth rate in overall manufacturing.
Money supply
The Y-o-Y growth in M3 worked out to 20 per cent by 05 December, lower than 21.5 per cent a year ago. Net forex assets of Banking sector grew 12 per cent, one-third the pace a year ago.
Bank deposits & credit
Aggregate deposits with SCB were up by 11 per cent till 05 December, slowing from 12 per cent in the similar period of 2007-08. Bank credit increased by 12 per cent, one and a half times that of 8 per cent last year. Credit-deposit ratio worked out to 74.32 per cent. Food credit was up by Rs.6,862 crore (decline of Rs.7,311 crore). SLR investment increased by 14 per cent (21 per cent). Reflecting steep decline in CRR, bank balances with RBI declined by Rs.50,937 crore, as against Rs.64,939 crore bulge in the similar period a year ago.
Interest rates
Overnight inter-bank call money rates moved relatively orderly, ranging 5.26-6.56 per cent in the first 23 days of December, as against 4.2-17.54 per cent in November and 5.57-17.89 per cent in October. The Reverse Repo Rate was at 5 per cent and the Repo Rate 6.5 per cent. The cut-off yields on 91-days and 364-days T-bills were at 5.45 per cent and 5.35 per cent, respectively, at the auction on 17 December. Discount rates on Commercial Papers (CP) ranged 9-15.5 per cent on CP issued in the second fortnight of November, against 11.5-15.5 per cent in the first fortnight. Yields to Maturity (YTM) on longer-term Government of India securities were at 5.46-7.89 per cent in the week ended 19 December. Prime lending rates of major banks ranged 12.5-13.25 per cent in the week ended 12 December. Deposit rates were at around 8.5-10 per cent. Cash Reserve Ratio (CRR) was 5.5 per cent.
Untitled Document
Weighted Call Money Rates: Dec 2007-08 |
| |
Range (%) |
| Dec-07 |
4.52-7.95 |
| Jan-08 |
5.55-7.67 |
| Feb-08 |
4.82-8.54 |
| Mar-08 |
5.71-9.32 |
| Apr-08 |
4.07-7.34 |
| May-08 |
5.86-7.96 |
| Jun-08 |
5.71-8.98 |
| Jul-08 |
5.60-9.67 |
| Aug-08 |
5.98-9.71 |
| Sep-08 |
6.14-14.81 |
| Oct-08 |
5.57-17.89 |
| Nov-08 |
4.25-17.54 |
| December-08 (up to 23 Dec) |
5.26 - 6.56 |
Rupee was traded at 47.05/06 per USD on 19 December. Rupee depreciated annually, by around 16 per cent against US$, 15 per cent against Euro and 34 per cent against Yen, but appreciated by 12 per cent against Pound Sterling.
Central government finance
Reflecting the fiscal part of stimulus package, settling of food/fertilizer subsidies, etc., on 18 December, the government released the second batch of supplementary demand for grants involving additional expenditure of Rs.55,605 crore and net cash outgo of Rs.42,480 crore. This was in addition to Rs.1.05 trillion cash outgo of the first batch of demands cleared in October. Mid-Year Review 2008-09 issued by the Finance Ministry on 23 December acknowledges that it may be difficult to adhere to the FRBM targets for the current fiscal year, with the additional fiscal stimulus already around 2 per cent of GDP.
In the meantime, Central government finance indicated a gross fiscal deficit (GFD) of Rs.1.17 trillion and revenue deficit of Rs.0.87 trillion in the first seven months of the current fiscal, showing annual escalation of 42 per cent and 51 per cent, respectively. The cumulative fiscal deficit was 88 per cent, while revenue deficit was 1.6 times the budgeted amount for the year.
Total expenditure was up by 11 per cent, while non-debt receipt improved less than 2 per cent. Plan expenditure rose by a sharper 21 per cent and non-plan disbursements by 7 per cent. Overall, 49 per cent of the budgeted plan spend took place during April-October.
Ministries of rural development and urban development spent over 70 per cent of annual allocation. But Ministry of Power spent 28 per cent and Ministry of Coal only 8 per cent. Ministry of Shipping, Road Transport and Highways disbursed 49 per cent of the annual allowance.
Cumulative gross tax receipt over April-October increased by 20 per cent to Rs.3.23 trillion. Corporate tax increased by 30 per cent, personal income-tax 22 per cent, service tax 32 per cent, customs duty 14 per cent and excise duty by only 6 per cent.
Exports & Imports
Exports declined by 12 per cent in October, which brought down the cumulative growth to 24 per cent from 31 per cent in H1, according to DGCI&S data.
Total imports were up by 11 per cent in October and 36 per cent over the first seven months of the current fiscal. Oil imports were US$ 66 billion (+60 per cent) and non-oil imports $115 billion (+25 per cent).
Trade deficit
The trade deficit shot up from $46 billion to $73 billion.
Inflation
Annual inflation as measured by the overall Wholesale Price Index (WPI) fell to 6.61 per cent by 13 December 2008, from a recent high of over 12 per cent in mid-September. In the first eight and half months of the current fiscal, while the WPI of Fuel & Power subgroup fell 0.8 per cent, Manufactured Products recorded 2.1 per cent and Primary Articles 5.2 per cent rise, with the aggregate WPI-based mount placed at 1.84 per cent. Consumer Price Index (CPI) for industrial workers and urban non-manual workers ran 10.4 per cent high in October. CPI of agricultural/rural workers worked out 11 per cent higher in November.
Project cost escalation as measured by the ERIL Index of Cost of Project Inputs stagnated in the first eight and half months of the current fiscal, as against 3 per cent in the similar period of 2007-08. While the WPI of Iron & Steel fell 8.6 per cent and that of Cement rose anemically (0.3 per cent), the WPI of Machinery & Machine Tools was up by 5.4 per cent, over the period.
Projects investment
Engineering Goods’ export shot up by 51 per cent to $15 billion during April-July. Machinery import also escalated by 45 per cent to $12.5 billion, over the period.
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