Economy grows at 10-Q low rate
The Indian economy grew by 7.9 per cent in Q1 of 2008-09, retarding from the 9.3 per cent average in the first two quarters and 8.8 per cent in the following two quarters of the preceding fiscal, according statistics released by the Central Statistical Organisation. Infact, the growth rate in the current quarter is the slowest in comparison to previous 10 quarters. Inflation and more particularly the restrictive monetary measures are biting into the growth machine.
Gross domestic product (GDP) at market prices is placed at Rs.12.33 trillion for the quarter, indicating a 16 per cent rise at current prices.
Industry & Services: Industry expanded 6.9 per cent - a sharp repress from 9.1 per cent in Q1 of 2007-08, mainly due to Manufacturing that increased by 5.6 per cent, indicating a further slowdown from 5.8 per cent in the preceding quarter and the slowest pace over past 23-24 quarters. Electricity too rotted at 2.6 per cent, one-third the pace a year ago. Construction did better by rising at a double digit, bettering also the year ago feat by a wide margin. However, Fixed Capital Investment, where construction is supposed to reflect, expanded at 9 per cent, signifying a consistent retard from 16.7 per cent in Q2, 14.3 per cent in Q3 and 11.2 per cent in Q4 of the preceding fiscal.
Services escaped with a nominal slowdown with 10 per cent (11 per cent). Among the services, net tonne kilometers and passenger kilometers in Railways showed growth rates of 9.3 per cent and 7 per cent, respectively. Production of commercial vehicles (9.1 per cent), cargo handled at major ports (8.8 per cent), cargo handled (8.3 per cent) and passengers handled (4.4 per cent) by civil aviation, and the total stock of telephone connections (including WLL and cellular) (44.8 per cent) registered increases. Bank deposits and bank credits also showed quarter-over-quarter growth rates of 21.1 per cent and 25.8 per cent.
Agriculture & Forestry: Farming incomes increased by 3 per cent, lower compared to 4.4 per cent a year ago. Production of rice (3.3 per cent), wheat (3.4 per cent), pulses (8.6 per cent) and cotton (14 per cent), increased during the Rabi season that ended in June, 2008, however production of oilseeds (12.6 per cent), coarse cereals (8.6 per cent), pulses (7.9 per cent) and sugarcane (4.2 per cent) showed declines, relative to their respective year-ago levels.
Gross Fixed Capital Formation (GFCF): The GFCF is estimated at Rs.4,212 billion at current prices. In terms of GDP at market prices, the rates of GFCF at current and constant prices are estimated at 34.2 per cent and 32.3 per cent, respectively.
Southwest monsoon
Cumulative rainfall from June 01 to September 18 in south-west monsoon was placed 2 per cent below normal. A five-year high of 34 out of 36 meteorological sub-divisions recorded excess/normal rains. East Madhya Pradesh, Nagaland, Manipur, Mizoram & Tripura were among the regions that were rain deficient.
Total Kharif food grain production for 2008-09 has been placed at 195.33 million tonne under the 1st Advance Estimates. Of this, rice production will be 83.25 million tonne and coarse cereals output 27.36 million tonne.
IIP: End of slack
Index of Industrial Production (IIP) increased by 7.1 per cent in July, recovering from 5.4 per cent in June and 4.1 per cent in May, and Capital Goods by 21.9 per cent, nearly three times that in the preceding month and six times of the value two months ago. Going by these numbers, it will seem that the industry has quickened the recovery from the trough it had touched in May, which had seen the Y-o-Y expansion in IIP crash to less than a half that of the past three months and Capital Goods drop to 3.4 per cent after 18 months of solid double-digit bulge.
Machinery & Equipment (other than transport equipment) (16 per cent), Basic Metal and Alloy Industries (9.2 per cent) and Transport Equipment & Parts (18.7 per cent), put up a vastly better show in July, which helped lift their respective cumulative mount, markedly. Consumer goods grew less in July due to heavy weight non-durables growing at 6.1 per cent, the slowest pace in the current fiscal. Consumer durables grew 11.1 per cent, three times the average pace in the preceding three months. At two-digit levels, Cotton Textiles and Textile products (including wearing apparel) sank further and Basic Chemicals and Chemical Products grew 4 per cent, one-third the speed in the earlier three months. Among the major inputs to Construction, finished (carbon) steel retarded to 1.9 per cent, from 5.2 per cent in May and 4.4 per cent in June, though Cement production was up by 8.8 per cent, improving from 3.8 per cent and 6.5 in the preceding two months.
While the industry performance rot seems to have at least halted, the cumulative mount in the first four months of the current fiscal is substantially less than that in April-July 2007. Thus, the 5.7 per cent rise in overall IIP, 6.1 per cent in Manufacturing and 11.3 per cent in Capital Goods during the first four months of the current fiscal, are about of three-fifths of their respective rates in the corresponding period of the preceding fiscal. Electricity also paled to 2.6 per cent (8.1 per cent), though mining put up a relatively better show with 4.5 per cent (2.5 per cent). Coal production increased by 7.6 per cent (0.8 per cent), though crude oil continued to sink.
Money supply
The restrictive stance in monetary policy seems to have faced some blocks. Thus, broad money (M3) which had increased by 4.3 per cent till 01 August was up 5.2 per cent by 29 August in the current fiscal, as against a slowdown in the pace from 5.3 per cent to 5.1 per cent over the corresponding period a year ago. The Y-o-Y growth also worked out higher to 21 per cent (20.3 per cent). Net Bank Credit to government (7.4 per cent) and to Commercial sector (4.2 per cent) grew faster. Net forex assets of the Banking sector rose 4.2 per cent, less compared to 5.9 per cent a year ago. The Y-o-Y growth in reserve money too was running 27.2 per cent high (25.1 per cent) as on 12 September.
Bank deposits & credit
Aggregate deposits with SCB were up by 6.1 per cent in the first five months of the current fiscal, marginally lower compared to 6.3 per cent a year ago. The annual rise in deposits worked out less to 22.1 per cent (23.1 per cent). Bank credit increased by Rs.964.20 billion, three times that of Rs.311.20 billion in the corresponding period of 2007-08. The Y-o-Y mount worked out to 25.3 per cent (22.9 per cent). Non-food credit increased by Rs.964.76 billion (Rs.391.51 billion).
Interest rates
Overnight inter-bank call money rates ranged 6.14 -14.48 per cent in the first 24 days of September, hardening markedly from 5.98-9.71 per cent in July. The reverse repo rate was at 6 per cent and the repo rate 9 per cent. The cut-off yields on 91 days and 364 days T-bills were at 8.73 per cent and 8.86 per cent at the auction on 10 September. Discount rates on Commercial Papers (CP) ranged 9.54-12.5 per cent on CP issued in the first fortnight of August, against 9.6-12 per cent in the second half of July. Yields to Maturity (YTM) on longer-term Government of India securities were at 8.27-9.84 per cent in the week ended 12 September. Prime lending rates of major banks ranged 13.25-14 per cent in the week ended 05 September. Deposit rates were at around 8.75-10 per cent (8-9.5 per cent). Cash Reserve Ratio (CRR) was 9 per cent.
Rupee was traded at 45.76/77 per USD on 12 September. Rupee depreciated annually by around 12 per cent against US$ and 13-17 per cent against Euro and Yen. However, the Indian currency appreciated by 2 per cent against Pound Sterling.
Central government finance
The Central government finances indicated a Gross Fiscal Deficit (GFD) of Rs.1.16 trillion in the first four months of 2008-09, lower compared to Rs.1.29 trillion of a year ago. Revenue deficit of Rs.1 trillion was however, more than Rs.0.82 trillion in the corresponding period of the preceding fiscal.
Cumulative gross tax receipt for the period increased by 26 per cent and valued at Rs.1.53 trillion. Corporate tax, personal income-tax, customs duty and service tax maintained healthy growth. Excise duty receipt, which had shown decline till June, exceeded year ago receipt by July-end, following markedly higher receipt in July. The healthier excise collection in July bears testimony to recovery in industrial production during the month. Total expenditure worked out 3 per cent higher during April-July 2008. Plan expenditure was up by 27 per cent, while non-plan disbursements showed 6 per cent decline, relative to their year ago levels.
Exports & Imports
Exports increased by 26 per cent to US$59.2 billion during April-July 2008, according to DGCI&S data. With rupee back on slide vis-à-vis US Dollar, the mount in rupee terms worked out higher to 28 per cent.
Total imports were up by 34 per cent to US$100.4 billion. Oil imports were US$ 35 billion (+55 per cent) and non-oil imports US$65.4 billion (+25 per cent).
Trade deficit
The trade deficit was estimated at US$41.2 billion (US$27.4 billion).
Inflation
Annual inflation as measured by the overall Wholesale Price Index (WPI) was at 12.14 per cent by 13 September 2008. The WPI of primary articles and manufactured products rose 11-12 per cent and that of fuel & power rose 17 per cent. Consumer price indices for industrial workers ran 8.3 per cent higher in July and those of agricultural/rural workers around 10.3 per cent in August. The composite ERIL Index of Cost of Project Inputs showed 12.2 per cent escalation. The WPI of iron & steel sub-group shot up 30 per cent.
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