MR of Indian Economy

8/6/2019 MR of Indian Economy

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Economic Intelligence Service

CMIE

Monthly Review

of the Indian Economy

December

2009


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Economic Intelligence Service

CENTREFORMONITORINGINDIANECONOMYPVTLTD

CMIE

Monthly Review of the Indian EconomyDecember 2009

Website: www.cmie.com

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Tel: 022 - 3088 0099 Fax: 022 - 2687 0696 E-mail: [email protected]


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Centre for Monitoring Indian Economy Pvt. Ltd., 2009

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ii Contents

1. Executive Summary 1

2. Annual Indicators 3

3. Monthly Indicators 8

4. GDP Growth

GDP growth revised upward to 6.7% 11

PFCE growth revised upward to 5% 15

GDP forecasts guarded but optimistic 16

5. Inflation 17

6. Interest Rates & Debt Market

Liquidity 22

Short Term Interest Rates 23

Long Term Interest Rates 25

7. Balance of Payments

Exchange Rate 26

Current Account Balance 28

Capital Account Balance 29

8. Public Finance

Central Government Finance 31

Government Debt Floatations 36

10. Agriculture

Progress of Agriculture 37

Reservoir Levels 41

11. Energy

Coal 42Crude Oil 43

Electricity 45

12. Infrastructure

Railways 46

Ports & Shipping 47

Civil Aviation 48

Telecommunications 49

13. Industry

Industrial Production 50

Food Products 53

Textiles 54

Chemicals 55

Cement 56

Steel 57

Capital Goods 58Consumer Durables 59

Transport Equipment 60

14. Investment 62

15. Corporate Sector

Financial Performance 63

Corporate Debt 67

Mergers & Acquisitions 68

16. Capital Markets

Primary Capital Market 70

Secondary Capital Markets 71

Derivative Markets 73

Institutional Activity 74

Perceptions on Markets 75

Mutual Funds 76

17. Money & Banking

Money Supply 77

Scheduled Commercial Banks 80

18. Foreign Trade 84

19. World Economy 87

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Executive Summary 1

GDP Growth

Real GDP growth for 2009-10 is revised upwards to

6.7 per cent from a 6.2 per cent projected earlier.This revision was warranted because of less dam-age to the smaller crops than anticipated earlier.Performance of the industrial sector too has furtherimproved in September 2009 and is expected to re-main healthy in the remaining months of 2009-10.Performance of railways also turned out to be betterthan expectations.

In the first half of 2009-10, the real GDP grew by abetter-than-expected seven per cent, as compared tothe 5.8 per cent growth recorded during the second

half of 2008-09. The growth in the current year,however, was lower than the 7.8 per cent growthrecorded in the first half of 2008-09.

Inflation

Inflation, measured by the WPI, during April-October 2009 was 0.4 per cent, as compared to 11per cent in the same period of 2008. In the remain-

ing five months of the current fiscal year, averageinflation is expected to go up to 4.5 per cent. Thus,the average inflation for 2009-10 works out to 2.1per cent. This will be significantly lower than the8.4 per cent recorded in the previous fiscal year.Inflation as measured by the consumer price indexfor industrial workers (CPI-IW) came down betweenJuly 2009 and October 2009. It peaked at 11.9 percent in July 2009, before gradually falling to 11.5per cent in October 2009. Average inflation duringApril-October 2009 was higher at 10.5 per cent, as

compared to 8.7 per cent in the same period of 2008.

Interest Rates

Interest rates continue to witness downward pres-sure due to the very slow credit growth, the com-paratively much faster deposit mobilisation and theconsequent abundant liquidity in the banking sys-tem. The weighted average benchmark PLR ofbanks remained at 12.60 per cent by the end of

November 2009.

Movement in short term interest rates of up toone year exhibited a mixed trend in November2009. While yields on 91-day treasury bills and onovernight rates inched up, those on 182-day and 364-day T-bills eased a little. Any sharp upward move-ment is unlikely during the remaining months of thecurrent financial year.

Money Supply and Banking

Money supply is expected to end financial year 2009-10 with a 17 per cent growth compared to a 18.6per cent growth in 2008-09. The slower growth inmoney supply in 2009-10 is on account of slower

credit growth. We expect credit growth to be 12per cent in 2009-10 compared to 17.5 per cent in2008-09. Some of the effect of the sharp slowdownin credit growth on money supply will be offset bythe very high government borrowing. Total gov-ernment borrowing, central and state, is scheduledto be much higher at Rs.5.8 lakh crore for 2009-10compared to Rs.3.8 lakh crore in 2008-09.

Public Finance

Gross tax revenue was down by 7.6 per cent duringApril-October 2009, as against an impressive 20.3per cent increase recorded in the same period of2008. Expenditure was up by 31.5 per cent. Grossfiscal deficit reached Rs.2.45 lakh crore during April-October 2009, doubling from the Rs.1.17 lakh crorerecorded in the same period a year ago. The dropin revenue receipts and surge in revenue expenditureled to a higher Rs.2.06 lakh crore deficit on revenueaccount.

Agriculture

Rabi acreage increased by 1.5 per cent by 26 Novem-ber 2009. Rabi sowings began late this season askharif harvesting was delayed. Rabi acreage is likelyto rise further. Rabi foodgrain production is pro-

jected to rise by 1.3 per cent whereas kharif food-grain production is slated to fall by 19 per cent. To-tal foodgrain production is expected to decline by

9.7 per cent in 2009-10. Production of sugarcane,

Monthly Review of the Indian Economy, Centre for Monitoring Indian Economy December 2009


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2 Executive Summary

cotton and oilseeds is also slated to fall. In 2009-10,production of major agricultural crops is expectedto decline by 7.5 per cent. However, output of mi-nor crops is projected to increase by two per cent.Consequently, total agricultural crop production isexpected to fall by 3.9 per cent in 2009-10.

As crop production is projected to fall less sharplythan anticipated, the GDP forecast of agriculturaland allied products stands revised. We expect farmincomes to fall by 1.4 per cent against our earlierestimate of 3.7 per cent decline.

Industry & Investments

The Indian industry has recovered swiftly from theshock of the Global Liquidity Crisis. This is evidentfrom the 6.5 per cent rise in the IIP in the first halfof 2009-10. The manufacturing companies have alsostarted building inventories in anticipation of a risein demand. Looking at the healthy trend in the in-dustrial activity so far, we have scaled up forecastfor industrial growth in 2009-10 to 7.7 per cent from7.2 per cent.

While the consumption demand that got affected fora brief period last year has revived, the investmentdemand always remained healthy. Since the GLChit India in October 2008, India saw high fresh an-nouncements of projects worth Rs.20.8 lakh crore.Projects went under implementation at an acceler-ated pace too. Projects worth Rs.1.8 lakh crore werecommissioned in the second half of 2008-09 and an-other Rs.1.9 lakh crore during April-November 2009.Projects worth Rs.2.6 lakh crore are scheduled forcompletion during December-March 2009-10.

Corporate Sector

Corporate sales declined by 5.8 per cent in thefirst half of 2009-10. This was a reflection of thefall in prices of commodities, particularly that ofpetroleum products. However, the Indian corpo-rates strengthened their PAT by 27.9 per cent byretaining the partial benefits of the fall in commod-

ity prices, cut in excise duty and softening of interestrates.

We expect the corporate profit growth to remain ro-

bust at 43.4 per cent in the December 2009 quarter.However, PAT will fall by 6.3 per cent in the March2010 quarter as profits of the petroleum productssector are expected to fall steeply. During 2009-10,corporate profits will rise by a robust 20.3 per cent.Sales will grow by a healthy 15.6 per cent in the sec-ond half of 2009-10 and the growth will average atfour per cent for the entire year.

Capital Market

The CMIE Overall Share Price Index (COSPI) roseby 7.6 per cent in November 2009. The highestgainer during the month was the CMIE mineralsindex, which rose by 33.8 per cent. Total AssetsUnder Management (AUM) of the mutual fund in-dustry swelled to Rs.7.7 lakh crore in October 2009,the highest since April 2004.

External Sector

Exports declined by 6.6 per cent in October 2009,the lowest decline since April 2009. Imports also de-clined less sharply by 15 per cent. As a result, tradedeficit contracted to USD 8.8 billion in October 2009from USD 11.7 billion in October 2008.

The exchange rate of the Indian currency is expectedto average Rs. 47.7 for the year as a whole. It av-eraged Rs.48.11 during the first eight months of theyear. It is expected to average Rs.47 per dollar dur-ing the remaining four months of 2009-10.

The current account of the balance of payments islikely to see a deficit of USD 8.9 billion during Oc-tober 2009-March 2010, marginally higher than theUSD 8.3 billion during October 2008-March 2009.This is because although net invisibles earningswould be higher by USD 5.8 billion during October2009-March 2010, the trade deficit would be higherby USD 6.4 billion during this period. Capital in-flows to the tune of USD 20.4 billion are expectedto take place during October 2009-March 2010.



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Indicators: Annual 3

Units 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Population & National IncomePopulation (as on 1 Oct) mln. nos 1,040 1,056 1,072 1,089 1,106 1,122 1,138 1,154

GNP at current market prices Rs. bln. 22,589 24,379 27,339 31,270 35,606 40,994 46,996GDP at current market prices Rs. bln. 22,790 24,546 27,546 31,494 35,867 41,292 47,234 53,218GDP at factor cost (current prices) Rs. bln. 20,977 22,614 25,382 28,777 32,824 37,794 43,209 49,332GDP at factor cost (const. prices) % change 5.8 3.8 8.5 7.5 9.5 9.7 9.0 6.7 6.7

GNP: Per capita (current prices) Rupees 21,720 23,086 25,503 28,715 32,194 36,537 41,297GDP: Per capita (current prices) Rupees 21,913 23,244 25,696 28,920 32,430 36,802 41,506 46,116GDP: Per capita (const. prices) Rupees 20,545 20,996 22,413 23,894 25,723 27,808 29,901 31,278GDP: Per capita (const. prices) % change 3.1 2.2 6.8 6.6 7.7 8.1 7.5 4.6

Savings, Capital Formation & Consumption (current prices)Gross domestic savings % of GDP 23.5 26.3 29.8 31.7 34.2 35.7 37.7Gross domestic capital formation % of GDP 24.2 25.2 26.8 31.6 34.8 36.4 38.7 39.7

Pvt capital formation % of GDP 17.3 19.1 20.5 24.7 27.2 28.4 29.6

Public sector capital formation % of GDP 6.9 6.1 6.3 6.9 7.6 8.0 9.1Consumption Expenditure % of GDP 76.7 75.1 73.0 69.2 67.8 66.1 65.1 66.3Pvt. final cons. exp. % of GDP 64.4 63.2 61.7 58.4 57.4 55.9 55.0 54.7Govt. final cons. exp. % of GDP 12.4 11.9 11.3 10.7 10.5 10.2 10.1 11.6

Per capita pvt. final cons. exp. Rupees 14,138 14,703 15,891 16,971 18,665 20,676 22,899

Value Added (Constant prices)Agriculture % change 6.3 -7.2 10.0 5.8 4.0 4.9 1.6 -1.4Industry (incl. construction) % change 2.7 7.1 7.4 10.3 10.2 11.0 8.1 3.9 7.8Service % change 7.2 7.5 8.5 9.1 10.6 11.2 10.9 9.7 8.6

GDP (PPP)

bln. 2,375 2,574 2,773 2,930Per capita GDP (PPP)

2,420 2,580 2,730 2,840

IndustryIndex of industrial production % change 2.6 5.8 7.0 8.4 8.2 11.5 8.5 2.6 7.7

Mining & quarrying % change 0.5 5.8 5.3 4.4 1.0 5.3 5.1 2.6 10.6Electricity % change 3.1 3.2 5.0 5.2 5.2 7.3 6.3 2.8 5.9Manufacturing % change 2.9 6.0 7.4 9.1 9.1 12.5 9.0 2.6 7.5

Fertilisers % change -0.8 -1.0 -1.0 7.5 -1.4 6.5 -9.2 -2.2 10.0Finished Steel % change 4.7 9.9 9.8 11.8 7.4 13.1 6.2 0.4 6.5Cement % change 9.4 8.7 5.5 8.6 11.2 9.8 8.1 7.8 13.0Automobiles % change 5.2 9.0 19.7 15.1 10.2 10.4 7.2 2.6 9.7

Basic goods % change 2.4 4.8 5.5 5.5 6.7 10.3 7.0 2.6Capital goods % change -3.4 10.5 13.6 13.9 15.7 18.2 18.0 7.0Consumer goods % change 6.0 7.1 7.2 11.7 12.0 10.1 6.1 4.6Intermediate goods % change 1.6 3.9 6.4 6.1 2.5 12.0 8.9 -2.0

Value of Output(Organised sector) Rs. bln. 10,759 12,000 13,701 15,947 18,051 21,485 24,598Gross value added: Factory sector Rs. bln. 2,137 2,357 2,653 3,126 3,604 4,285 4,886Gross value added: Non-Fact. sector R s. bln. 1,016 1,103 1,232 1,410 1,593 1,891 2,166

TransportRailways: freight traffic mln. tns. 492.5 518.7 557.4 602.1 666.5 727.8 793.9 850.0 922.3Cargo handled at ma jor ports mln. tns. 287.6 313.5 344.8 383.7 423.6 463.8 519.3 530.4 558.0

(Continued. . . )



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4 Indicators: Annual

Units 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

EnergyCommercial energy production % change 3.1 3.8 5.0 4.9 4.4 5.2 3.7Commercial energy availability % change 2.3 4.2 5.1 5.5 5.3 5.9

Coal Production (excl. lignite) mln. tns 327.8 341.3 361.2 382.6 407.0 430.8 457.1 487.3 527.7Coal imports mln. tns 20.5 23.3 21.7 29.0 38.6 43.1 49.8Power capacity MW 1,05,046 1,07,877 1,12,684 1,18,426 1,24,287 1,23,572 1,30,557Electricity generation (Pub Ut.) bln. KwH 517.4 532.7 565.1 594.5 623.8 662.5 704.5 719.3 761.7

Thermal & nuclear bln. KwH 439.9 468.7 489.9 505.3 515.7 546.1 575.8Hydel bln. KwH 73.1 64.0 75.2 84.6 101.5 113.4 123.4

T & D losses per cent 32.5 32.5 31.3 30.4Crude oil production mln. tns. 32.0 33.0 33.4 34.0 32.2 34.0 34.1 33.5 34.8Crude oil imports mln. tns. 78.7 82.0 90.4 95.9 99.4 111.5 121.7Petroleum products imports mln. tns. 7.0 7.2 8.0 8.8 11.7 17.7 22.7Consumption of p etro. pro ducts mln. tns. 107.7 111.8 116.0 120.2 122.4 131.7 128.9 133.4Consumption of petro. products % change 0.7 3.8 3.8 3.6 1.8 7.6 -2.1 3.5Natural gas gross production bln cu. mtrs 29.7 31.4 32.0 31.8 32.2 31.7 32.4 32.8 47.5Natural gas net production bln cu. mtrs 28.0 30.0 30.9 30.8 31.3 30.8 31.4

AgricultureProduction

Foodgrain mln. tns. 212.9 174.8 213.2 198.4 208.6 217.3 230.8 233.9 213.4Rice mln. tns. 93.3 71.8 88.5 83.1 91.8 93.4 96.7 99.2 81.0Wheat mln. tns. 72.8 65.8 72.2 68.6 69.4 75.8 78.6 80.6 81.5Cereals mln. tns. 199.5 163.6 198.3 185.2 195.2 203.1 216.0 219.2 198.2Pulses mln. tns. 13.4 11.1 14.9 13.1 13.4 14.2 14.8 14.7 15.0Kharif foodgrains mln. tns. 112.1 87.2 117.0 103.3 109.9 110.6 121.0 117.7Rabi foodgrains mln. tns. 100.8 87.5 96.2 95.1 98.7 106.7 109.8 116.2Oilseeds mln. tns. 20.7 14.8 25.2 24.4 28.0 24.3 29.8 28.2 25.8Sugar cane mln. tns. 297.2 287.4 233.9 237.1 281.2 355.5 348.2 273.9 251.6

Gross Irrigated Area/ gross crop area p er cent 41.5 41.9 41.0 41.8 42.9Fertilizer consumption Kg/hectares 91.5 91.7 88.4 96.2 105.6 111.8

YieldFoodgrain kg/hectare 1734 1535 1727 1652 1716 1756 1860Kharif foodgrains kg/hectare 1510 1272 1551 1430 1511 1522 1644Rabi foodgrains kg/hectare 2076 1933 2003 1988 2020 2091 2174

Agricultural production % change 8.0 -16.3 22.0 -3.1 7.6 3.5 6.7 -1.5 -7.5Foodgrain % change 8.9 -18.6 22.5 -7.0 5.9 3.9 5.6 1.4 -9.7Non-Foodgrain % change 6.7 -12.6 21.4 2.6 9.8 2.9 8.1 -5.1 -4.6Per capita availability of f oodgrain kg/p.a. 151.9 180.4 159.7 168.9 154.2 162.2

VOP Agriculture Rs. bln. 4,062 3,865 4,525 4,581 5,241 5,744 6,538VOP Livestock Rs. bln. 1,472 1,541 1,630 1,802 1,964 2,140 2,406VOP Fishing Rs. bln. 274 300 317 322 369 392 422VOP Forestry Rs. bln. 232 234 249 259 294 310 323

Employment (Organised)Public sector mln. nos. 18.8 18.6 18.2 18.0 18.2Private sector mln. nos. 8.4 8.4 8.2 8.4 8.8Registered jobseekers mln. nos. 41.6 40.7 40.9 39.7 40.0 41.4 38.9

(Continued. . . )



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Units 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Corporate Sector (Non-financial Cos.)Sales % change 2.49 10.29 15.23 20.11 16.88 22.84 17.33 14.40

Public Sector % change 2.65 12.28 13.22 15.78 16.82 16.76 11.74 15.49

Private Sector % change 2.39 8.78 16.76 23.27 16.92 27.22 20.85 13.77Gross Fixed Assets % change 9.92 8.22 8.00 10.15 11.42 14.20 12.92 13.30

Public Sector % change 8.86 9.67 8.23 10.60 6.16 8.79 8.46 5.08Private Sector % change 10.78 6.97 7.78 9.75 16.10 18.80 16.32 18.78

PBDIT % change 4.79 16.73 18.11 21.30 15.50 30.66 21.18 -2.39Public Sector % change 11.68 22.04 14.34 15.41 7.81 15.03 9.77 -2.32Private Sector % change -0.45 11.94 21.81 26.70 21.96 42.51 28.05 -2.43

Profit after tax % change -8.52 88.53 78.92 59.43 24.27 40.10 21.35 -16.41Public Sector % change 36.94 75.29 48.24 41.97 7.17 14.42 2.15 -13.81Private Sector % change -49.38 114.52 129.55 79.09 40.03 58.63 31.60 -17.58

PBDIT/Sales % change 13.49 14.19 14.62 14.82 14.76 15.66 16.44 14.22Public Sector % change 14.97 16.05 16.52 16.60 15.36 14.93 15.20 13.29Private Sector % change 12.44 12.74 13.23 13.61 14.35 16.14 17.16 14.75

PAT/Sales % change 1.80 2.57 4.21 5.52 6.04 6.92 7.35 5.50Public Sector % change 3.07 3.61 5.12 6.40 6.10 5.95 5.85 4.78Private Sector % change 0.90 1.76 3.54 4.91 6.00 7.56 8.22 5.92

Debt/Equity % change 1.17 1.13 1.01 0.92 0.85 0.81 0.73 0.76

Public Sector % change 1.06 1.04 0.88 0.82 0.79 0.73 0.62 0.61Private Sector % change 1.24 1.21 1.12 1.01 0.90 0.87 0.78 0.84

VOP/GFA % change 1.28 1.27 1.36 1.47 1.55 1.66 1.67 1.67Public Sector % change 1.18 1.16 1.20 1.24 1.37 1.47 1.44 1.58Private Sector % change 1.36 1.36 1.50 1.68 1.71 1.82 1.84 1.73

Capital MarketsCapital Issues Rs. bln. 494.0 446.1 541.7 635.2 812.3 1238.4 1820.0 1068.3

Public Sector Rs. bln. 314.3 309.0 401.3 323.4 472.8 424.3 637.2 372.3Private Sector Rs. bln. 174.6 136.2 140.4 311.8 339.4 814.2 1182.8 695.9Equity Rs. bln. 97.8 103.8 235.1 321.0 345.9 802.8 1344.6 321.8Debt Rs. bln. 396.2 342.3 306.6 314.2 466.4 435.7 461.9 537.7

GDRs/ADRs/ECBs/(floatations) mln. 494.9 188.3 993.2 3 406.4 9 028.4 2 334.2 7 921.8 288.4GDRs/ADRs mln. 494.9 188.3 271.4 826.0 3565.4 794.4 7910.6 288.4ECBs/FRNs mln. 721.9 2569.0 4882.9 1539.8

Secondary Market

No. of companies listed Number 5756 5643 5536 4792 4852 4908 4992 5044Market cap. all listed companies Rs. bln. 7421 7241 13764 18775 32142 36909 52972 32240Market Capitalisation % of GDP 32.6 29.5 50.0 59.6 89.6 89.4 112.1 60.6

Returns on the CMIE OverallShare Price Index per cent 8.8 5.4 115.7 28.1 71.2 10.2 30.1 -41.2

Trading volumes on BSE Rs. bln. 3049 3136 5033 5185 8159 9497 15786 10993Trading volumes on NSE Rs. bln. 5132 6180 10995 11401 15696 19453 35510 27520

Public Finance (Centre, State & UTs)Government receipts Rs. bln. 6154 7220 8159 9727 10566 12185Government expenditure Rs. bln. 6809 7251 8033 8961 10740 12153Plan outlay Rs. bln. 1863 2102 2248 1931 2472 3135

Finances of Central Govt.Revenue receipts Rs. bln. 2013 2308 2638 3060 3471 4344 5419 5622 6096

Tax receipt Rs. bln. 1871 2163 2543 3050 3662 4735 5931 6279 6713Direct Tax Rs. bln. 691 829 1050 1320 1573 2195 2956 3446 3796

(% of GDP) 3.0 3.4 3.8 4.2 4.4 5.3 6.3Indirect Tax Rs. bln. 1180 1333 1494 1729 2088 2540 2976 2833 2917

(% of GDP) 5.2 5.4 5.4 5.5 5.8 6.2 6.3

(Continued. . . )



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6 Indicators: Annual

Units 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Expenditure Rs. bln. 3623 4132 4712 4983 5057 5834 7127 9010 9532

(% of GDP) 15.9 16.8 17.1 15.8 14.1 14.1 15.1Plan expenditure Rs. bln. 1012 1115 1223 1323 1406 1699 2051 2830 2851

% of Exp. 27.9 27.0 26.0 26.6 27.8 29.1 28.8 31.4 29.9

Non-plan expenditure Rs. bln. 2611 3018 3489 3660 3651 4135 5076 6180 6681% of Exp. 72.1 73.0 74.0 73.4 72.2 70.9 71.2 68.6 70.1Subsidies Rs. bln. 312 435 443 460 475 571 709 1292 1009

(% of Exp) 8.6 10.5 9.4 9.2 9.4 9.8 10.0 14.3 10.6Defence Rs. bln. 543 557 601 759 805 855 917 1711 1417

(% of Exp) 15.0 13.5 12.7 15.2 15.9 14.7 12.9 19.0 14.9Interest Rs. bln. 1075 1178 1241 1269 1326 1503 1710 1927 2255

(% of Exp) 29.7 28.5 26.3 25.5 26.2 25.8 24.0 21.4 23.7

Budget Deficit Rs.Bln. -15Revenue Deficit Rs.Bln. 1002 1079 983 783 923 802 526 2413 2385Gross Fiscal Deficit Rs.Bln. 1410 1451 1233 1258 1464 1426 1269 3265 3328

(% of GDP) 6.2 5.9 4.5 4.0 4.1 3.5 2.7Outstanding internal debt Rs. bln. 9131 10207 11417 12759 13897 15450 18441 19725

% of GDP 40.0 41.4 41.4 40.5 38.8 37.3

Money, Banking & Interest RatesMoney supply (M3) % change 14.1 14.7 16.7 12.3 21.2 21.5 21.2 18.6 18.0SCBs Deposits Rs. bln. 11,034 13,118 15,423 17,086 21,090 26,119 31,969 38,341

% change 11.5 18.9 17.6 10.8 23.4 23.8 22.4 19.9SCBs Credit Rs. bln. 5,897 7,464 8,656 10,920 15,071 19,312 23,619 27,755

% change 11.4 26.6 16.0 26.2 38.0 28.1 22.3 17.5 20.0Nonfood credit Rs. bln. 5,357 6,970 8,291 10,505 14,664 18,847 23,175 27,293

% change 9.4 30.1 18.9 26.7 39.6 28.5 23.0 17.8 16.0

Bank rate (March-end) per cent 6.5 6.3 6.0 6.0 6.0 6.0 6.0 6.0Interest on deposits (maximum) per cent 8.5 6.3 5.5 6.3 7.0 9.0 9.0 8.8Prime lending rates (maximum) per cent 12.0 11.5 11.0 10.8 10.8 12.5 12.8 12.5

Prices (Annual Averages)Wholesale price index

All Commodities % change 3.7 3.4 5.4 6.4 4.4 5.4 4.7 8.3 2.1Primary Articles % change 3.7 3.3 4.2 3.7 2.9 7.8 7.7 10.0 8.5Fuel, Power & Lubricant % change 9.1 5.6 6.3 10.0 9.5 5.6 1.0 7.4 -2.9Manufactured Products % change 1.9 2.7 5.6 6.3 3.1 4.4 5.0 8.0 1.1

Prices (Annual Averages)Consumer price index

IW-General Index % change 4.3 4.0 3.9 3.8 4.4 6.7 6.2 9.1 10.9AL-General Index % change 1.1 3.2 3.9 2.4 4.0 7.8 7.5 10.2UNME-General Index % change 5.1 3.8 3.7 3.6 4.7 6.6 5.9 8.9

External TransactionsExports mln. 43,958 52,823 63,886 83,502 1,03,075 1,26,276 1,62,988 1,82,922 1,63,000

% change -0.4 20.2 20.9 30.7 23.4 22.5 29.1 12.2 -11.0Agro products mln. 5,919 6,723 7,538 8,471 1 0,212 1 2,675 1 8,442 17,562Ores & minerals mln. 1,266 2,000 2,370 5,076 6,163 6,998 9,124 7,812Manufactured goods mln. 33,469 40,324 48,525 60,706 72,552 84,863 1,03,032 1,23,008

Imports mln. 51,567 61,533 78,203 1,11,472 1,49,144 1,85,081 2,49,791 2,90,667 2,67,000% change 3.0 19.3 27.1 42.5 33.8 24.1 35.0 16.4 -8.2

POL

mln. 14,042 17,674 20,584 29,832 43,957 57,068 79,659 91,328 72,000NonPOL mln. 37,525 43,859 57,619 81,640 1,05,187 1,28,014 1,70,132 1,99,339 1,95,000

Trade balance: DGCI&S mln. -7,609 -8,710 -14,317 -27,970 -46,069 -58,805 -86,803 -1,07,745 -1,04,000Trade balance: RBI mln. -11,574 -10,690 -13,718 -33,702 -51,904 -61,782 -91,626 -1,19,403

Gross invisible earnings mln. 36,737 41,925 53,508 69,533 89,687 1,14,558 1,48,604 1,62,556Net invisibles

mln. 14,974 17,035 27,801 31,232 42,002 52,217 74,592 89,586 90427Current account balance mln. 3,400 6,345 14,083 -2,470 -9,902 -9,565 -17,034 -29,817 -16260

(Continued. . . )



11/94


Units 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10Exports % of GDP 9.2 10.4 10.6 11.9 12.7 13.8 13.9 15.8Imports % of GDP 10.8 12.1 13.0 15.9 18.4 20.3 21.3 25.1Current account balance % of GDP 0.7 1.2 2.3 -0.4 -1.2 -1.1 -1.5 -2.5 -1.3Tourist arrivals mln. nos. 2.38 2.45 2.93 3.60 4.10 4.67 5.27 5.13

Foreign Capital Inflow (net) mln. 8,551 10,840 16,736 28,022 25,470 45,203 1,07,993 9,146 35766Foreign aid (net) mln. 1,117 -3,128 -2,858 1,923 1,702 1,775 2,114 2,638 3,185External comm. borrowings (net)

mln. -1,585 -1,692 -2,925 5,194 2,508 16,103 22,633 8,158 1644NRI deposits (net) mln. 2,754 2,978 3,642 -964 2,789 4,321 179 4,290 5017FDI mln. 6,125 5,036 4,322 5,987 8,901 22,739 34,236 34,982Portfolio investments mln. 2,021 979 11,356 9,311 12,494 7,004 29,394 -13,855Others mln. -1,881 6,667 3,199 6,571 -2,924 -6,739 1 9,437 - 27,067

Debt servicing

mln. 11,115 15,239 19,165 9,155 19,560 11,404 14,946 15,430Repayments

mln. 6,776 11,530 14,614 6,117 14,341 5,936 8,339 8,912Interest payments mln. 4,339 3,709 4,551 3,038 5,219 5,468 6,607 6,518

Outstanding external debt mln. 98,843 1,04,914 1,11,645 1,32,973 1,38,133 1,71,331 2,23,312 2,23,953% of GDP 21.2 20.3 17.8 18.5 17.2 18.1 18.9 21.4

Debt service ratio per cent 13.70 16.00 16.10 6.10 10.10 4.70 4.80 4.60

Foreign exchange reserves (excl. goldand SDRs): March-end mln. 51,049 71,890 1,07,448 1,35,571 1,45,108 1,91,924 2,99,230 2,41,426

Rupee exchange rate Rs/dollar 47.55 48.30 45.92 44.95 44.28 45.28 40.24 45.92



12/94

8 Indicators: Monthly

Units

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

O

ct

Nov

2008

2008

2009

2009

2009

2009

2009

2009

2009

2009

2009

20

09

2009

Agriculture

Actualrainfall

mm

13.7

21.8

10.9

10.8

8.4

29.7

45.4

60.9

302.4

163.3

177.1

70.0

54.5

variationfromnormal

per

cent

-53.9

5.3

-39.8

-52.8

-70.2

-32.0

-17.3

-51.4

-6.1

-33.3

-15.7

-5.9

81.1

Stockoffoodgrain

mln

.tns.

35.2

35.8

37.0

%c

hange(yoy)

91.1

93.4

0.0

Energy/Infrastructure

Coalproduction

mln

.tns.

43.0

46.8

48.3

46.5

55.7

39.6

40.0

39.2

35.9

37.7

36.8

42.5

%c

hange(yoy)

9.6

9.4

6.3

6.0

5.2

13.2

10.2

14.7

9.8

13.0

6.5

5.0

Crudeoilproduction

mln

.tns.

2.84

2.87

2.66

2.56

2.86

2.73

2.78

2.75

2.79

2.77

2.77

2.85

%c

hange(yoy)

0.5

-0.3

-8.1

-6.2

-2.3

-3.1

-4.3

4.0

-0.4

-2.6

-0.5

-2.2

Powergeneration

bln.unit

58.4

60.0

62.0

56.8

65.1

63.0

62.8

63.3

63.5

66.1

%c

hange(yoy)

2.8

1.3

2.7

-0.2

6.3

7.1

1.3

8.1

4.3

10.4

Railways:freighttraffic

mln

.tns.

66.6

72.2

74.6

70.0

81.7

69.9

71.7

71.5

71.7

73.2

69.8

73.5

%c

hange(yoy)

1.3

3.0

2.9

-0.9

4.1

3.1

2.4

9.6

5.8

12.2

6.0

11.2

Industry

IndustrialProductionIndex

199

3-94=100

267.6

284.0

284.8

276.8

305.9

269.3

280.3

291.6

290.9

293.7

301.4

%c

hange(yoy)

2.5

-0.2

1.0

0.2

0.3

1.1

2.1

8.3

7.2

11.0

9.1

Basicgoods

199

3-94=100

225.6

234.6

233.6

226.2

251.1

231.3

239.2

244.1

239.0

247.7

239.9

%c

hange(yoy)

2.2

2.0

-0.7

-0.1

1.9

4.5

3.8

10.7

4.7

9.6

6.7

Capitalgoods

199

3-94=100

394.0

448.1

394.2

398.9

508.9

294.4

336.5

438.0

380.8

404.2

530.6

%c

hange(yoy)

0.5

6.6

15.9

11.8

-6.3

-5.9

-3.6

13.4

1.7

8.7

12.8

Intermediategoods

199

3-94=100

245.7

247.5

247.5

251.6

284.5

277.2

286.9

288.5

298.6

295.0

286.1

%c

hange(yoy)

-3.9

-8.9

-7.2

-3.0

1.9

7.9

6.6

7.9

9.8

14.2

10.8

Consumerdurables

199

3-94=100

369.5

338.9

391.3

412.9

442.9

415.0

442.5

435.0

485.7

482.6

544.7

%c

hange(yoy)

0.3

-4.2

2.1

6.0

8.4

17.6

13.2

16.2

21.3

22.3

22.2

Consumernon-durables

199

3-94=100

283.0

323.2

337.1

302.7

301.7

274.8

275.7

276.5

280.9

274.9

265.4

%c

hange(yoy)

12.4

3.2

4.0

-3.4

-1.0

-10.5

-5.5

0.7

5.8

6.4

2.6

IndustrialProduction

IndustrialProductionIndex

%c

hange(yoy)

2.5

-0.2

1.0

0.2

0.3

1.1

2.1

8.3

7.2

11.0

9.1

Mining&quarrying

%c

hange(yoy)

0.7

2.2

0.7

-0.2

1.9

3.4

3.4

14.2

9.0

11.0

8.6

Electricity

%c

hange(yoy)

2.6

1.6

1.8

0.7

6.3

7.1

3.3

8.0

4.2

10.6

7.9

Manufacturing

%c

hange(yoy)

2.7

-0.6

1.0

0.2

-0.3

0.4

1.8

8.0

7.4

11.0

9.3

Cement

Lak

htonnes

143.4

158.2

161.3

160.0

181.1

168.4

167.0

165.9

162.5

155.2

148.3

155.8

%c

hange(yoy)

9.0

11.9

8.5

8.6

10.5

12.1

12.2

13.0

9.9

17.8

6.7

5.6

Fertilisers

000tonnes

1,378.2

1,276.1

1,095.5

985.6

1,095.4

1,033.3

1,303.21

,412.1

1,417.8

1,438.1

1,399.8

%c

hange(yoy)

5.3

-7.0

-11.4

-15.0

19.6

9.1

6.0

22.2

12.6

10.5

10.4

FinishedSteel

000tonnes

4,323.0

4,334.0

4,477.0

4,398.0

4,736.0

4,300.0

4,496.04

,527.0

4,544.0

4,588.0

4,795.0

%c

hange(yoy)

-2.5

-6.0

1.6

-0.5

-3.0

2.8

1.3

5.1

5.4

0.2

-1.7

Automobiles

%c

hange

2.0

-17.2

-10.3

3.7

5.5

12.7

9.5

14.3

14.0

17.2

15.8

15.9

42.8

(Continued...)



13/94


14/94

10 Indicators: Monthly

Units

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

O

ct

Nov

2008

2008

2009

2009

2009

2009

2009

2009

2009

2009

2009

20

09

2009

Prices

Wholesalepriceindex

AllCommodities

199

394=100

234.2

229.7

228.9

227.6

228.2

231.5

234.3

235.0

238.4

240.6

242.7

242.1

%c

hange(yoy)

8.5

6.2

4.9

3.5

1.2

1.3

1.4

-1.0

-0.7

-0.3

0.5

1.3

PrimaryArticles

199

394=100

250.9

247.3

248.6

246.4

248.2

254.4

257.2

259.8

266.6

269.2

273.4

273.4

%c

hange(yoy)

12.1

11.2

10.7

6.9

5.2

6.6

6.3

6.5

7.2

8.0

8.4

8.7

Fuel,Power&Lubricant

199

394=100

348.0

331.0

328.8

323.9

321.0

323.4

325.7

327.5

338.2

342.9

344.6

345.0

%c

hange(yoy)

6.4

-0.2

-1.7

-3.4

-6.0

-5.7

-6.1

-12.5

-10.3

-9.3

-8.2

-6.6

ManufacturedProducts

199

394=100

203.0

201.1

199.9

199.5

200.6

203.0

205.9

205.8

206.4

207.9

208.6

208.3

%c

hange(yoy)

7.8

6.6

5.2

4.8

2.3

1.8

2.2

0.6

0.0

0.0

0.3

1.3

Consumerpriceindex

IW-GeneralIndex

200

1=100

148.0

147.0

148.0

148.0

148.0

150.0

151.0

153.0

160.0

162.0

163.0

165.0

%c

hange(yoy)

10.4

9.7

10.4

9.6

8.0

8.7

8.6

9.3

11.9

11.7

11.6

11.5

AL-GeneralIndex

198

687=100

460.0

459.0

461.0

462.0

463.0

468.0

475.0

484.0

499.0

508.0

515.0

522.0

%c

hange(yoy)

11.1

11.1

11.6

10.8

9.5

9.1

10.2

11.5

12.9

12.9

13.2

13.7

UNME-GeneralIndex

198

485=100

575.0

569.0

574.0

575.0

577.0

583.0

589.0

595.0

624.0

631.0

635.0

%c

hange(yoy)

10.8

9.8

10.4

9.9

9.3

8.8

9.7

9.6

13.0

12.9

12.4

RL-GeneralIndex

198

687=100

460.0

459.0

461.0

462.0

464.0

468.0

475.0

484.0

498.0

507.0

514.0

521.0

%c

hange(yoy)

11.1

11.1

11.4

10.8

9.7

9.1

10.2

11.3

12.7

12.7

13.0

13.5



15/94

GDP Growth 11

GDP growth revised upward to 6.7%

Real GDP growth for 2009-10 is revised upwards to6.7 per cent, from a 6.2 per cent growth projected inthe previous month. This sharp revision was war-ranted because of less damage to the smaller cropsthan anticipated earlier. Performance of the indus-trial sector too has further improved in September2009 and is expected to remain healthy in the re-maining months of 2009-10. Performance of railwaysalso turned out to be better than expectations.

The industrial sector (including construction) is pro-jected to grow by 7.8 per cent and the services sectorby 8.6 per cent. The agricultural and allied sector

is projected to shrink by 1.4 per cent. All thesegrowth numbers are revised compared to our earlierprojections.

In the first half of 2009-10, the real GDP grew by abetter-than-expected seven per cent, as compared tothe 5.8 per cent growth recorded during the secondhalf of 2008-09. The growth in the current year,however, was lower than the 7.8 per cent growthrecorded in the first half of 2008-09.

The performance of the economy in the first half of2009-10 shows that the economy has overcome theeffect of the GLC. The export sector was one of themajor segments of the economy to be hit badly bythe GLC. This segment too has shown signs of re-covery. The rate of decline in exports shrank to 13.8per cent in September 2009 and further to 6.6 per

cent in October 2009, from a 20-30 per cent declinerecorded in each month from April 2009 to August2009.

Table 4.1 Growth in Real Gross Domestic Product at factor cost (%): By economic activity

2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10CMIE pro-

jections

Agriculture, forestry & fishing 10.0 0.0 5.8 4.0 4.9 1.6 -1.4Agriculture 10.8 0.1 6.0 4.1 5.0 1.4 -1.8Forestry & logging -1.1 2.1 1.3 2.4 2.1 2.0 2.0

Fishing 3.6 -2.0 7.3 3.0 4.6 6.0 4.0Industry 7.4 10.3 10.2 11.0 8.1 3.9 7.8

Mining & quarrying 3.1 8.2 4.9 8.8 3.3 3.6 10.6

Manufacturing 6.6 8.7 9.1 11.8 8.2 2.4 7.5Electricity, gas & water supply 4.8 7.9 5.1 5.3 5.3 3.4 6.5Construction 12.0 16.1 16.2 11.8 10.1 7.2 8.0

Service 8.5 9.1 10.6 11.2 10.9 9.7 8.6Trade, hotels, transp., storage & commun 12.0 10.7 12.1 12.8 12.4 9.0 8.6

Trade, hotels & restaurants 10.1 7.7 10.3 10.4 10.1 6.5 4.4Trade 10.2 7.3 9.8 9.9 10.0 6.8 4.0Hotels & restaurants 8.6 11.4 14.6 15.9 11.5 4.5 8.0

Transport, storage & communication 15.3 15.6 14.9 16.3 15.5 12.4 13.8

Railways 5.9 7.3 8.8 10.0 9.3 5.5 8.5

Transport by other means 11.9 12.1 8.3 8.8 7.7 5.4 5.0Storage 5.1 13.5 1.2 3.1 -1.4 5.0 5.0

Communication 26.1 24.5 26.8 27.7 25.6 20.3 22.0Fin., insur., real est.& business serv. 5.6 8.7 11.4 13.8 11.7 7.8 8.5

Banking & insurance 2.2 8.8 14.2 20.3 15.4 11.2 9.0Real est., ownership of dwellings & businessservices 8.3 8.6 9.2 8.6 8.5 4.6 8.0

Community, social & personal services 5.4 6.8 7.1 5.7 6.8 13.1 8.9Public administration & defence 2.6 6.5 4.9 4.0 4.2 24.7 10.0Other community & personal services 7.6 7.1 8.6 6.9 8.5 5.5 8.0

Gross domestic product at factor cost 8.5 7.5 9.5 9.7 9.0 6.7 6.7



16/94

12 GDP Growth

Industrial sector recovers from the GLC

The industrial sector has recovered from the shock

of the Global Liquidity Crisis. The IIP of the manu-facturing sector grew by a healthy 9.2 per cent dur-ing July-September 2009. The sector had grown bya meagre 0.5 per cent and 0.3 per cent in the quar-ters ended December 2008 and March 2009, respec-tively. We expect the growth in the IIP to gainfurther momentum in the second half of the currentfiscal year. The IIP is projected to grow by nine percent in the second half, as compared to 6.5 per centgrowth clocked in the first half and 0.3 per cent inthe second half of 2008-09.

The expected strong growth in cement and steel pro-duction suggests that growth in the constructionsector will be better at eight per cent in 2009-10than the 7.2 per cent recorded in 2008-09. In thefirst half of 2009-10, the construction sector grewby 6.8 per cent. The construction activities are ex-pected to remain robust in the second half. Projectsworth Rs.1.9 lakh crore have been commissioned inthe first eight months of 2009-10 and Rs.2.6 lakhcrore will be commissioned in the remaining monthsof the year. As a result, we expect growth in theconstruction sector to accelerate to 9.8 per cent inthe second half of the year.

Growth in bank credit to the commercial sector isvery slow in the current fiscal year. But corporatesare not facing any liquidity problem. They havebeen able to raise resources directly from the mar-kets. Their profit was high in the first half of the

year and is projected to remain healthy in the secondhalf. This itself provides corporates with liquidityin the form of internal accruals.

The real GDP from the industrial sector includingconstruction is now projected to grow by 7.8 percent, as against 7.4 per cent projected earlier. Thegrowth in 2009-10 will be much higher than the 3.9per cent increase recorded in 2008-09.

Agricultural and allied sector to dip by1.4%

We have carried out a major revision in our pro-jected growth of the agricultural and allied sector for2009-10; from -3.7 per cent to -1.4 per cent. Thisrevision is largely because of less-than-anticipateddamage occurred to the smaller crops including sev-eral horticulture crops, straw & stalks, etc in the

just concluded kharif season and an expected goodrabi season.

Earlier we had projected a 7.5 per cent decline in theoverall crop production in 2009-10 because of poorrainfall. The behaviour of prices of several horticul-tural crops indicated that the damage to the hor-ticultural crop was minimum as compared to the

bigger kharif crops such as cereal, sugarcane, fibresand major vegetables & fruits. Most of the kharifcrop production is estimated to have fallen sharplyin the range of 5-18 per cent on account of the poorrainfall in the southwest monsoon season. We ex-pect rabi foodgrain crop to grow by 1.3 per cent.As a result, production of major crops will be downby 7.5 per cent in 2009-10.

Figure 4.1 Industrial sector (including construc-tion): Annual real GDP growth (%)

(CMIE projection)

2.7

7.1 7.4

10.3 10.211.0

8.1

3.9

7.8

2000-01 2002-03 2004-05 2006-07 2009-100

2

4

6

8

10

12

Figure 4.2 Industrial sector (including construc-tion): Quarterly y-o-y real GDP growth (%)

(CMIE Forecast)

9.2 9.1

8.2

6.2 6.0 6.1

2.31.4

5.0

8.38.7

9.4

J07 S07 D07 M08 J08 S08 D08 M09 J09 S09 D09 M100

2

4

6

8

10

12



17/94

GDP Growth 13

Production of the horticultural and other smallercrops is projected to grow by two per cent in 2009-10. This growth will be sharply lower than an es-timated 5.3 per cent increase recorded in 2008-09.These crops together account for 35-38 per cent ofthe total crop production. Thus, the overall cropproduction will see a lower 3.9 per cent decline in2009-10, as against a 7.5 per cent decline projectedearlier. The fall in total crop production will bepartly compensated by growth in livestock, forestry& logging and fishing. In 2009-10, the livestock sec-tor is projected to grow by four per cent, while theothers will grow by two per cent.

The entire sector, agricultural and allied activities,

is now projected to shrink by only 1.4 per cent asagainst a 3.7 per cent decline projected earlier. Thisrevision will push up the GDP growth by 40 basispoints.

Services sector to grow by 8.6%

For 2009-10, the growth in the banking and insur-ance segment has been scaled down to nine per centfrom 12 per cent projected earlier. This downward

revision reflects an expected fall in income of thebanking sector. The performance of the railwayssector has improved. Volume of goods carried bythe Indian Railway was up by 7.2 per cent duringApril-October 2009. This growth rate is expectedto improve in the second half of the year. There-fore, growth in GDP from railways is also revisedupwards to 8.5 per cent from seven per cent. The

telecommunication sector has been growing at closeto 40 per cent each month on a year-on-year basis.The GDP from this sector is also revised upward.

The net impact of all the above revisions will leadto a 0.1 percentage point rise in the growth rateof the services sector as a whole. The services sec-tor is therefore projected to grow by 8.6 per centin 2009-10. This will however be the lowest growthsince 2002-03. Of the three major segments of theservices sector, the finance, insurance, real estate &business services segment will be the only one togrow at a higher rate of 8.5 per cent in 2009-10, ascompared to 7.8 per cent in 2008-09.

Growth in transport other than railways is expectedto remain fractionally lower at five per cent thanthe 5.4 per cent recorded in 2008-09. The impres-sive turnaround in industrial activities will increaserailways freight movement and cargo movement inports in the second half.

The outlook for international trade is poor and agri-culture crop production is projected to fall. As aresult, we expect the growth in trade to fall to fourper cent from an estimated 6.8 per cent in 2008-

09 and the 9.4 per cent per annum in the preced-ing five years. Trade accounts for 14 per cent ofIndias GDP. As a result, the trade-hotel-transport-communication segment of the services sector is pro-

jected to grow by a lower 8.6 per cent in 2009-10,as compared to a nine per cent growth achieved in2008-09. These growth rates are well below the 12per cent recorded between 2003-04 and 2007-08.

Figure 4.3 Quarterly y-o-y growth in agriculturaland allied sector (%)

(CMIE Forecast)4.3 3.9

8.1

2.23.0 2.7

-0.8

2.7 2.4

0.9

-5.1

-2.4

J07 S07 D07 M08 J08 S08 D08 M09 J09 S09 D09 M10

-6

-4

-2

0

2

4

6

8

Figure 4.4 Quarterly y-o-y growth in services sec-tor (%)

(CMIE Forecast)10.810.3 10.3

11.8

10.29.8

10.2

8.67.8

9.38.5

8.9

J07 S07 D07 M08 J08 S08 D08 M09 J09 S09 D09 M100

2

4

6

8

10

12



18/94

14 GDP Growth

GDP grows by an impressive 7.9%

Indias real GDP grew by an impressive 7.9 percent in the September 2009 quarter, according todata released by the Central Statistical Organisation(CSO). This is the fastest GDP growth recorded inthe last six quarters. The growth in quarterly GDPhad dropped in the third quarter of the financialyear 2008-09; from 7.8 per cent in the September2008 quarter to 5.8 per cent in the December 2008quarter. It remained at that level in the followingquarter, too.

The major contributor to the GDP growth was themanufacturing sector. The CSO pegged manufac-

turing growth at 9.2 per cent, as compared to -1.4to 3.4 per cent growth recorded during each of thepreceding three quarters. In the June 2009 quarter,the manufacturing sector had grown by 3.4 per centwhile in March 2009 quarter it had recorded a 1.4per cent decline.

In the quarters ended December 2008 and March2009, the manufacturing sector had suffered becauseof the Global Liquidity Crisis. RBI followed an easymonetary policy to neutralise the adverse impact ofthe GLC on liquidity. By November 2008, RBI hadpumped huge liquidity into the system. As result,liquidity remained comfortable in the first half of2009-10.

Some segments of the manufacturing sector grew ata rapid pace in the recent quarter. These includetextiles, chemicals, cement, steel, automobiles andmachinery & equipment.

The industrial sector (including construction) grewby 8.3 per cent in the quarter ended September 2009.This was the highest growth in the last eight quar-ters.

To a great extent, the growth in the second quarterwas aided by an increase in government spending.This is reflected in a 27 per cent increase in thegovernment final consumption expenditure duringthe quarter ended September 2009. This is also re-

flected (on the supply side) in the community, socialand personal services, which grew by 12.7 per centduring the September 2009 quarter. This enabledthe services sector to grow by a higher 9.3 per cent,as compared to the 7.8-8.6 per cent growth recordedin each of the preceding two quarters.

The agriculture and allied sector grew by a lower0.9 per cent in the quarter ended September 2009,as compared to 3.9 per cent a year ago. It registereda positive growth in spite of an expected sharp fallin kharif production on account of drought. Accord-ing to the CSO, this happened because only a verysmall portion of the anticipated kharif crop produc-tion accrues between July and September.

Table 4.2 Sectoral Real GDP at factor cost: Quarterly y-o-y growth (%)

Agri- Industry Mining, Manu- Elec., Cons- Service Trade, Fin., Comm GDP atculture quarry- factur- gas & truc- hotels, insur., social, factor

ing ing water tion transp., real perso. costcomm. est. serv

Oct-Dec 06 4.2 10.5 9.2 11.1 7.2 10.4 11.0 12.6 14.5 4.2 9.3Jan-Mar 07 5.3 11.8 11.4 12.6 5.1 12.2 10.7 13.0 13.4 3.9 10.0Apr-Jun 07 4.3 9.2 0.1 10.0 6.9 11.0 10.8 13.1 12.6 4.5 9.2

Jul-Sep 07 3.9 9.1 3.8 8.2 5.9 13.4 10.3 10.9 12.4 7.1 9.0Oct-Dec 07 8.1 8.2 4.2 8.6 3.8 9.7 10.3 11.7 11.9 5.5 9.3Jan-Mar 08 2.2 6.2 4.7 6.3 4.6 6.9 11.8 13.8 10.3 9.5 8.6

Apr-Jun 08 3.0 6.0 4.6 5.5 2.7 8.4 10.2 13.0 6.9 8.2 7.8Jul-Sep 08 2.7 6.1 3.7 5.1 3.8 9.6 9.8 12.1 6.4 9.0 7.7

Oct-Dec 08 -0.8 2.3 4.9 0.9 3.5 4.2 10.2 5.9 8.3 22.5 5.8Jan-Mar 09 2.7 1.4 1.6 -1.4 3.6 6.8 8.6 6.3 9.5 12.5 5.8Apr-Jun 09 2.4 5.0 7.9 3.4 6.2 7.1 7.8 8.1 8.1 6.8 6.1Jul-Sep 09 0.9 8.3 9.5 9.2 7.4 6.5 9.3 8.5 7.7 12.7 7.9

Apr-Sep 08 2.9 6.1 4.2 5.3 3.3 9.0 10.0 12.5 6.6 8.6 7.8Apr-Sep 09 1.7 6.7 8.7 6.3 6.8 6.8 8.5 8.3 7.9 9.9 7.0



19/94

GDP Growth 15

PFCE growth revised upward to 5%

Consumer spending has bounced back strongly. Af-

ter growing by a meagre 1.6 per cent in the quar-ter ended June 2009, it grew by 5.6 per cent inthe September 2009 quarter. This was the high-est growth in the last six quarters. The consumerswillingness to spend was hurt in 2008-09 becauseof the Global Liquidity Crisis (GLC). During thatyear, the PFCE was up by 2.9 per cent, as against5-8 per cent from 2003-04 to 2007-08.

The quarterly results of companies engaged in au-tomobiles, retail, fast moving consumer goods andconsumer durables confirm this. IIP data also re-

veals strong growth in the production of consumerdurables in the first half of the current fiscal year.During this period, the production index of con-sumer durables was up by 19 per cent, as comparedto 7.2 per cent in the same period of 2008-09.

In the remaining two quarters of the current fiscalyear, we expect real PFCE to grow by 6.1 per centand 6.7 per cent, respectively. As a result, we haverevised our PFCE growth projection to five per centin real terms in 2009-10, from 4.5 per cent.

Interest rates, vagaries of the monsoon and the con-sumer inflation are the three major factors that caninfluence demand. Liquidity will remain comfort-

able; so the interest rates are unlikely to go up inthe near future. The fall in income from the agricul-tural sector on account of a decline in crop produc-tion is expected to be compensated by the increasein wages and salaries in the public and private sec-tors. The adverse impact of the Global LiquidityCrisis has almost become history. The fear of lay-offs has diminished discernibly.

GFCF grows by 7.3%

In the quarter ended September 2009, gross fixedcapital formation (GFCF) grew by 7.3 per cent.This is the highest growth in the last four quar-ters. We expect real growth in GFCF to accelerate

in the second half of the current fiscal year to 6.4per cent. Our close monitoring of capital expendi-ture through CMIEs CapEx service reveals that in-vestments worth Rs.2.6 lakh crore are scheduled forcommissioning between December 2009 and March2010, as compared to Rs.1.9 lakh crore in the firsteight months of the fiscal.

The encouraging signs of revival in investments arereflected in our projected 15 per cent growth in realGFCF during 2009-10. After growing in the range

of 14-18 per cent between 2003-04 and 2007-08, thegrowth in GFCF dropped to 8.2 per cent in 2008-09,reflecting the adverse impact of the GLC on invest-ments.

Table 4.3 Real GDP by expenditure: Quarterly growth (%) and projection for 2009-10

Private Govt. Total Gross Change Valu- Exports Imports Disce- GDPfinal final fixed in ables pency at

consumption consumption capital stocks marketexpenditure expenditure formation prices

Apr-Jun 07 8.4 -2.4 6.6 13.6 54.1 -8.0 -4.0 -0.7 9.2Jul-Sep 07 7.5 10.0 7.8 16.0 51.7 1.4 -4.8 -3.6 -52.4 8.8Oct-Dec 07 8.9 2.0 8.0 14.1 52.2 16.5 6.1 6.7 -25.2 9.4

Jan-Mar 08 5.7 19.5 8.0 9.3 62.0 0.4 12.6 27.2 105.5 9.0Apr-Jun 08 4.5 -0.2 3.8 9.2 6.0 14.8 25.6 27.4 8.2

Jul-Sep 08 2.1 2.2 2.1 12.5 5.6 35.0 24.3 35.3 263.4 7.8Oct-Dec 08 2.3 56.6 9.0 5.1 1.4 33.9 7.1 21.7 18.9 4.8Jan-Mar 09 2.7 21.5 6.1 6.4 -0.9 23.7 -0.8 -5.7 -57.2 4.1

Apr-Jun 09 1.6 10.2 2.8 4.2 3.2 18.4 -10.9 -21.2 6.0Jul-Sep 09 5.6 26.9 8.4 7.3 -45.4 -23.0 -15.0 -29.8 -70.7 6.7

Apr-Sep 08 3.3 0.9 3.0 10.9 5.8 25.5 25.1 31.4 8.0

Apr-Sep 09 3.6 18.1 5.6 5.8 -21.3 -5.1 -12.6 -25.7 6.4

2008-09 2.9 20.2 5.4 8.2 2.9 27.5 12.8 17.9 81.8 6.12009-10 5.0 7.0 5.3 15.0 1.5 1.0 -18.0 -25.0 6.3



20/94

16 GDP Growth

GDP forecasts guarded but optimistic

In November 2009, the OECD, in its outlook revised

Indias GDP growth to 6.1 per cent during 2009-10from 5.9 per cent projected earlier. The outlooksays that the Indian economy has weathered theglobal downturn relatively well. After slowing downsharply in late 2008, growth recovered during thefirst half of 2009 and recent high-frequency indica-tors suggest that the momentum is strengthening.In the near term, the ongoing recovery will be onlymodestly hampered by the poor monsoon in 2009.Growth is projected to reach over 7.3 per cent in2010-11 and 7.6 per cent in 2011-12.

On 1 December 2009, the chairman of the PrimeMinisters Economic Advisory Council said that theIndian economy might grow close to seven per centthis fiscal riding on the back of a good showing inmanufacturing and services sectors. In October, thecouncil had pegged its GDP growth forecast for thecurrent fiscal at 6.5 per cent.

In October 2009, the RBI has retained its growthprojection for GDP for 2009-10 at six per cent withan upward bias. It assumed there would be a mod-

est decline in agricultural production and a fasterrecovery in industrial production. Earlier, the Re-serve Bank of India in its policy statement of 28 July2008 had estimated economic growth in 2009-10 atsix per cent with an upward bias.

In November 2009, the National Council of AppliedEconomic Research (NCAER) lowered the economicgrowth projection to 6.9 per cent for the current fis-cal from its earlier estimate of 7.2 per cent. Thisis mainly on account of lower farm output. While

agricultural Gross Domestic Product (GDP) is projected to decrease by 1.5 per cent, industrial GDP(inclusive of construction) is projected to increaseby 6.9 per cent.

Members of CIIs National Council, at a meetingheld in Mumbai on 13 November 2009, felt that de-mand is picking up across sectors and the economyis getting back on track. According to the CEO snappoll conducted at the meeting, over 70 per cent of

members felt that GDP growth will exceed six percent in 2009-10.

According to the report, while industry and services

have recovered on the back of the governments stim-ulus package, the performance of agriculture is caus-ing concern. Economic indicators are looking up, in-dustrial production has shown a significant upturn,business confidence has surged, financial marketshave stabilised and capital inflows have returned.Despite these upside prospects, the performance ofagriculture is likely to pose some downside risks tothe growth outlook for Indian economy in 2009-10.

According to financial services firm Nomura, the In-dian economy is likely to grow by eight per cent in2010-11, propelled by domestic demand. The fun-damental drivers of domestic demand are falling intoplace. We expect growth to rebound to eight percent in FY11, Nomura said in a report. It furthersaid that there is an upside risk to its six per centGDP forecast for the current fiscal.

HSBC has retained its India GDP growth forecastof 6.2 per cent in FY10 but hiked the outlook forthe next fiscal by 0.5 per cent to 8.5 per cent.

Table 4.4 Indias GDP growth (%): Projections ofother organisations

Release Year ending Marchmonth 2010 20112009

CMIE December 6.7OECD November 6.1 7.2NCAER November 6.9EAC to PM October 6.5RBI October 6.0

Morgan Stanley October 6.4 8.0Citigroup October 5.8

IMF@ October 5.4 6.4ADB September 6.0 7.0Planning Commission S eptember 6.3 8.0Nomura September 6.0 7.5Assocham August 4.7-5.6

Standard & Poors August 5.8-6.3 6.8-7.3Moodys August 6.4Bank of America-ML July 7.3World Bank@ June 5.1 8.0

Barclays Capital June 7.2 7.5

@ = Year ended December of the previous year



21/94

Inflation 17

Inflation likely at 2.1% in 2009-10

Inflation, measured by the WPI, during April-October 2009 was 0.4 per cent, as compared to 11per cent in the same period of 2008. In the remain-ing five months of the current fiscal year, averageinflation is expected to go up to 4.5 per cent. Thus,the average inflation for 2009-10 works out to 2.1 percent. This will be significantly lower than the 8.4 percent recorded in the previous fiscal year. Inflationis expected to inch up to five per cent in January2010 and will remain fractionally above this level inFebruary and March 2010.

Commodity wise inflation reveals that the overall

inflation is not as benign as it appears. Inflation infood articles is expected to remain high at 13.4 percent in the current fiscal year, on top of the eightper cent recorded in the previous fiscal year. Ex-cluding food-related items, inflation during April-October 2009 works out to a negative 2.2 per cent,as against a 0.4 per cent for all commodities.

Inflation in primary articles will be 9.9 per cent be-tween November 2009 and March 2010, as comparedto the 7.5 per cent recorded during April-October2009. Prices of the fuel group are projected to riseby 5.2 per cent year-on-year during November 2009to March 2010, as against an 8.6 per cent decline

recorded during April-October 2009. Prices of man-ufactured goods are projected to rise by 1.4 percent, as against 0.9 per cent recorded during April-October 2009.

In fiscal 2009-10, the commodity groups beside fuelwhere inflation will be negative, include leather &leather products (-1 per cent), basic metal alloys &metal products (-10.2 per cent) and machinery &machine tools (-1.4 per cent). Within the manufac-tured goods sector, manufactured food products willbe the only segment which will see a higher 13.5 percent inflation during 2009-10, as compared to 10 percent in the previous year.

Figure 5.1 Inflation to decline sharply (%)

(CMIE Forecast)

7.1

3.73.4

5.4

6.4

4.4

5.4

4.7

8.4

2.1

00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-100.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Table 5.1 Changes in wholesale price index by major product groups (% change)

Weight 200607 200708 200809 200910(%) CMIE proj.

Primary articles 22.03 7.8 7.6 10.1 8.5Fuel, power, light & lubricant 14.23 5.6 1.0 7.4 -2.9

Manufactured products 63.75 4.4 5.0 8.1 1.1Food products 11.54 3.2 4.3 10.0 13.5

Beverages tobacco & tobacco products 1.34 7.4 10.2 9.5 4.5

Textiles 9.80 2.2 -1.1 6.0 3.2Wood & wood products 0.17 6.1 4.7 8.3 1.6Paper & paper products 2.04 6.9 1.8 4.4 1.2Leather & leather products 1.02 -4.4 4.2 1.1 -1.0Rubber & plastic products 2.39 6.6 7.2 4.7 2.7Chemicals & chemical products 11.93 3.0 5.6 7.2 3.5Non-metallic mineral products 2.52 12.9 8.9 3.8 3.4Basic metals alloys & metals products 8.34 6.7 6.9 14.4 -10.2

Machinery & machine tools 8.36 5.6 7.1 4.7 -1.4Transport equipment & parts 4.29 1.6 2.7 5.2 0.1

All commodities 100.00 5.4 4.7 8.4 2.1



22/94

18 Inflation

Inflation reaches 1.3% in October

The Ministry of Industry has discontinued the re-lease of weekly inflation data from October 2009.The latest available monthly inflation data is forthe month of October 2009, which was released inNovember 2009. In October 2009, inflation as mea-sured by the change in wholesale price index (WPI)was 1.3 per cent. After remaining negative fromJune to August, the WPI inflation turned positiveto 0.5 per cent in September 2009.

This turnaround was partly because of an erosion

of the higher base-year values and a surge in pricesof food products. The recent increase is also on ac-count of a hike in the prices of petrol and diesel(effective 2 July 2009), and an increase in pricesof freely priced products under the fuel group anddrugs & medicines. The decline in fuel prices hascome down to 6.6 per cent in October 2009 from12.5 per cent in June 2009. Inflation in drugs &medicines was also high in the range of 19-21 percent from May 2009 to October 2009, as against 1.9per cent in the entire fiscal 2008-09.

The supply constraints in commodities is the singlebiggest factor responsible for the surge in inflationin the current year. The main culprit is the sharpdrop in foodgrain production. Sugar production hasbeen low too, causing higher inflation in sugar pricesand therefore in the inflation in manufactured foodproducts.

Some of the inflation (such as in sugar) can be tack-led through prudent supply management. Importscan be used effectively to augment the supply in thedomestic market.

Figure 5.2 Monthly Changes in Overall WPI (%)

2008-09 2009-10

Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar-2

0

2

4

6

8

10

12

14

Table 5.2 Changes in Wholesale Price Index (%): Broad Groups

All All Primary Primary Fuel Fuel Mfd. Mfd.Commo dities Commo dities Articles Articles group group pro ducts products(avg. index) (% chg.) (avg. index) (% chg.) (avg. index) (% chg.) (avg. index) (% chg.)

Oct 2008 239.0 11.1 251.5 12.4 369.2 14.1 205.7 9.4

Nov 2008 234.2 8.5 250.9 12.1 348.0 6.4 203.0 7.8Dec 2008 229.7 6.1 247.3 11.1 331.0 -0.2 201.1 6.6

Jan 2009 228.9 5.0 248.6 10.7 328.8 -1.7 199.9 5.3Feb 2009 227.6 3.5 246.4 6.9 323.9 -3.4 199.5 4.8

Mar 2009 228.2 1.2 248.2 5.2 321.0 -6.0 200.6 2.3

Apr 2009 231.5 1.3 254.4 6.6 323.4 -5.7 203.0 1.8May 2009 234.3 1.4 257.2 6.3 325.7 -6.1 205.9 2.2Jun 2009 235.0 -1.0 259.8 6.5 327.5 -12.5 205.8 0.6Jul 2009 238.4 -0.7 266.6 7.2 338.2 -10.3 206.4 0.0Aug 2009 240.8 -0.2 269.2 8.0 342.9 -9.3 208.1 0.1Sep 2009 242.7 0.5 275.8 9.4 344.6 -8.2 208.6 0.3

Oct 2009 242.2 1.3 273.4 8.7 345.0 -6.6 208.5 1.4

Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct

2008-09 237.0 11.0 246.6 10.7 366.3 13.7 204.8 10.12009-10 237.8 0.4 265.2 7.5 335.3 -8.4 206.6 0.9

Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar

2008-09 233.9 8.4 247.3 10.1 351.4 7.4 203.1 8.1



23/94

Inflation 19

Inflation in primary articles drops

Inflation in the primary articles group was 8.7 per

cent in October 2009. This was lower than the 9.4per cent in the preceding month and 12.4 per centa year go. This drop was on account of softeningof inflation in the foodgrain and vegetables groups.Inflation in foodgrains came down to 13.3 per centin October 2009 from 14.2 per cent in September2009. In the case of vegetables, it dropped to 11.1per cent from 44.9 per cent.

In the current fiscal year, till October 2009, thesharp rise in prices of pulses has been one of themajor sources of inflation in primary articles. Dur-

ing April-October 2009, inflation in pulses was 19.4per cent, as compared to 2.6 per cent a year ago.

During the one year period ending October 2009,inflation in pulses has more-than-doubled from 8.9per cent in October 2008 to 22.8 per cent in Oc-tober 2009. Demand for pulses has gone up in therecent years because of various employment gener-ation schemes, while production stagnated in therange of 14-15 million tonnes in a year.

In addition, a decline in production of other agricul-tural crops in 2008-09 and 2009-10 because of poormonsoon and a hike in minimum support prices areresponsible for higher inflation in food articles. Dur-

ing April-October 2009. the WPI of vegetables roseby 28.6 per cent year-on-year, as against a four percent rise a year ago. Prices of other primary foodsrose by 20.1 per cent year-on-year, on top of a 30 percent rise recorded a year ago. The reduced supplyof vegetables also pushed up prices of eggs, meat &fish by 14 per cent during April-October 2009, ascompared to 3.7 per cent a year ago.

To rein in the food inflation, supply of food arti-cles will have to be augmented. This can be donethrough utilisation of foodgrain stocks and imports.The large stock of foodgrain with the public agen-cies should help mitigate any adverse impact due tosupply constraint.

The Economic Advisory Council to the Prime Minis-ter has pointed out in its Outlook for 2009-10, In-flationary pressure on food front will continue tobe a major problem for policy formulation for therest of 2009-10 and up to the beginning of the nextmonsoon season. The supply response will have tobe a more co-ordinated release of stocks through thepublic distribution system combined with some openmarket sales of public stocks if the need is felt. Pre-cautionary arrangements for importing some rice toreplenish public stocks must be considered. Consid-erable attention needs to be paid to the rabi seasonto try and ensure a strong harvest which will be thesurest antidote to food price pressures.

Table 5.3 Inflation as measured by Wholesale Price Index: Primary articles (Per cent)

Weight Apr08 Jul08 Oct08 Jan09 Apr09 Jul09 Sep Oct-Jun08 -Sep08 -Dec08 -Mar09 -Jun09 -Sep09 2009 2009

15.40 Food articles 5.7 6.9 10.1 9.3 9.3 14.4 15.7 13.35.01 Food grain 5.9 6.6 9.7 12.0 13.5 14.0 14.2 13.3

2.92 Fruits & vegetables 3.3 4.7 15.2 9.4 10.5 17.5 24.6 11.14.37 Milk 8.4 7.0 7.1 7.6 6.5 9.6 9.7 10.02.21 Eggs, meat & fish 1.7 5.7 6.5 4.9 2.6 20.9 18.4 23.1

0.66 Condiments & spices 9.7 14.9 12.5 10.2 9.9 10.0 13.7 14.90.24 Other food articles 25.4 35.7 40.6 26.1 26.3 13.6 7.3 4.96.14 Non-food articles 14.0 17.0 11.7 2.6 1.7 -3.1 -3.2 -0.81.52 Fibres 22.2 32.1 23.2 8.6 -0.7 -10.9 -13.0 -7.6

2.67 Oil seeds 19.5 17.7 14.0 1.2 1.5 -1.2 1.0 0.61.95 Other non-food articles 2.5 6.7 1.9 0.7 3.6 0.3 -1.6 2.30.48 Minerals 46.0 48.3 42.2 10.6 -3.8 -10.2 -6.4 -3.7

0.30 Metallic minerals 49.6 51.6 45.2 12.3 -3.0 -9.6 -5.1 -1.90.19 Other minerals 16.0 21.7 18.6 -6.6 -11.8 -15.4 -18.3 -19.8

22.03 Primary articles 9.6 11.3 11.9 7.5 6.5 8.2 9.4 8.7



24/94

20 Inflation

Inflation in manufactured goods rises to1.6%

The Ministry of Industry has discontinued the re-lease of weekly inflation data for manufacturedgoods. The latest data available is for the monthof October 2009. In this month, inflation in manu-factured goods was 1.4 per cent. This is a sharp riseafter remaining less than one per cent between June2009 and September 2009. This rise is largely be-cause of higher inflation in manufactured food prod-ucts and textile items.

In October 2009, inflation in food products spiked to16.6 per cent from 1.2 per cent in the quarter ended

September 2009. The WPI of textile products roseby 3.1 per cent in October 2009, as compared to a0.9 per cent during July-September 2009 quarter.

Average inflation in manufactured goods was 0.9per cent during April-October 2009, as compared to10.1 per cent in the corresponding period of 2008.Food products and textiles were the only segmentsof the manufacturing sector which recorded higherinflation during April-October 2009. Inflation inmanufactured food products was 12.5 per cent dur-ing April-October 2009, fractionally higher than the12.3 per cent in the same period a year ago. Higherinflation in food products was on account of a spurtin prices of sugar, khandsari & gur, fish and tea. In-flation in these items was in the range of 22-48 percent during April-October 2009.

In the textile segment, inflation was higher at fourper cent, compared to 3.8 per cent a year ago. TheWPI of the remaining 10 segments of manufacturedgoods has either declined or risen by a significantlylower rate.

Sugar prices are expected to remain high on accountof lower production in 2008-09 and an expected fallin production in 2009-10. This will keep inflationin manufactured goods high in the second half of2009-10. Inflation in manufactured food products isexpected to spurt from 12.2 per cent in September2009 to 20 per cent in December 2009. The October-December period is the festival season, when de-

mand for goods remains high.

Figure 5.3 Inflation in manufactured goods ex-pected to rise in the last quarters of 2009-10 (%)

(CMIE Projection)

9.2

11.2

7.9

3.9

1.6

0.11.0

2.7

Jun08 Sep08 Dec08 Mar09 Jun09 Sep09 Dec09 Mar100

2

4

6

8

10

12

Table 5.4 Inflation as measured by Wholesale Price Index: Manufactured goods (Per cent)

Weight Apr08 Jul08 Oct08 Jan09 Apr09 Jul09 Sep Oct-Jun08 -Sep08 -Dec08 -Mar09 -Jun09 -Sep09 2009 2009

11.54 Food products 11.7 14.2 6.1 8.4 12.6 11.2 12.2 16.6

1.34 Beverages tobacco & tobacco products 8.9 10.7 9.1 9.4 5.8 4.5 3.1 4.49.80 Textiles -0.7 7.4 8.2 9.3 7.8 0.9 1.3 3.10.17 Wood & wood products 5.3 9.8 9.8 8.5 4.5 0.3 0.3 0.3

2.04 Paper & paper products 2.8 4.0 5.9 4.9 3.3 0.9 0.1 -0.81.02 Leather & leather products 1.3 0.6 0.6 1.7 -0.5 -1.2 -1.2 -1.22.39 Rubber & plastic products 5.7 6.8 4.0 2.3 3.3 1.5 0.4 0.211.93 Chemicals & chemical products 8.4 10.2 7.9 2.4 3.3 2.4 2.0 2.32.52 Non-metallic mineral products 5.5 4.1 3.4 2.1 2.6 4.3 3.3 3.08.34 Basic metals alloys & metals products 21.1 22.4 15.6 -0.4 -13.9 -14.1 -13.3 -13.08.36 Machinery & machine tools 5.7 5.7 4.9 2.7 -1.0 -2.0 -1.9 -1.54.29 Transport equipment & parts 6.2 6.6 5.5 2.7 0.7 0.0 -0.5 -0.8

63.75 Manufactures products 9.2 11.2 7.9 4.1 1.5 0.1 0.3 1.4



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Inflation 21

CPI-IW-based inflation continues to drop

Inflation as measured by the consumer price index

for industrial workers (CPI-IW) came down betweenJuly 2009 and October 2009. It peaked at 11.9 percent in July 2009, before gradually falling to 11.5 percent in October 2009. Data available till Septemberfor major commodity groups showed that inflationin food products dropped to 13.5 per cent in Septem-ber 2009 from 14.7 per cent in July 2009. Inflationin pulses, meat, fish & eggs, condiments & spicesand vegetables & fruits also declined between July2009 and September 2009.

Average inflation during April-October 2009 washigher at 10.5 per cent, as compared to 8.7 per centin the same period of 2008. Commodity-wise datarevealed that inflation in pulses surged to 36.7 percent during April-September 2009, as against 10 percent in the corresponding period of 2008. Inflationalso remained high in vegetables & fruits (22 percent), condiment & spices (14.7 per cent) and hous-ing (14.1 per cent). A year ago, inflation in thesegroups was 2.5 per cent, 1.2 per cent and 4.3 percent, respectively. The sharp rise in the CPI-IW forhousing was on account of a revision of imputed rent

for rent-free accommodation, reflecting the impactof the Sixth Pay Commission award on CPI infla-tion. The housing index in CPI is compiled once inevery six months in January and July. The indexwould, therefore, remain at the elevated level in themonths to come.

For 2009-10, we have maintained our forecast thatCPI-IW will rise by 10.9 per cent. The CPI-IW in-flation is projected to remained at 12.1 per cent and11.1 per cent, respectively, in the third and fourthquarters.

Figure 5.4 Changes in CPI-IW (%)

(CMIE Projection)

3.84.3 4.0 3.9 3.8

4.4

6.76.2

9.1

10.9

00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-100

2

4

6

8

10

Table 5.5 Inflation as measured by changes in Consumer Price Indices

CPI-IW CPI-IW CPI-AL CPI-AL CPI-RL CPI-RL CPI-UNME CPI-UNME(Index base (% change) (Index base (% change) (Index base (% change) (Index base (% change)

2001) 86-87) 86-87) 84-85)

Oct 2008 148 10.4 459 11.1 459 11.1 574 10.4Nov 2008 148 10.4 460 11.1 460 11.1 575 10.8Dec 2008 147 9.7 459 11.1 459 11.1 569 9.8Jan 2009 148 10.4 461 11.6 461 11.4 574 10.4Feb 2009 148 9.6 462 10.8 462 10.8 575 9.9Mar 2009 148 8.0 463 9.5 464 9.7 577 9.3

Apr 2009 150 8.7 468 9.1 468 9.1 583 8.8May 2009 151 8.6 475 10.2 475 10.2 589 9.7Jun 2009 153 9.3 484 11.5 484 11.3 595 9.6

Jul 2009 160 11.9 499 12.9 498 12.7 624 13.0Aug 2009 162 11.7 508 12.9 507 12.7 631 12.9

Sep 2009 163 11.6 515 13.2 514 13.0 635 12.4Oct 2009 165 11.5 522 13.7 521 13.5

Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Oct Apr-Sep Apr-Sep

2008-09 143 8.7 443 9.8 443 9.7 549 7.82009-10 158 10.5 496 12.0 495 11.8 610 11.1

Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar Apr-Mar

2008-09 145 9.1 450 10.2 451 10.2 561 8.9



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22 Interest Rates & Debt Market: Liquidity

Liquidity conditions to remain verycomfortable

Liquidity conditions will remain very comfortableduring the remaining months of the current finan-cial year. Two factors will be mainly responsible forthis.

The front-loaded government borrow-

ing: The Central Government and the stategovernments have completed 77 per cent oftheir scheduled borrowing in the first eightmonths of the year itself. Their borrowingduring December 2008-March 2009 will be

much lower, thereby increasing the funds atthe disposal of banks.

Slow credit growth: Growth in bank creditat less than 10 per cent is far behind the paceof deposit mobilisation. Banks are growing de-posits at around 19 per cent. This is increasingthe liquidity in the banking system.

The abundant liquidity conditions in the bankingsystem are reflected in the Rs.88,680 crore parkedby banks with the liquidity adjustment facility ofthe RBI. It is also reflected in the easing of yieldssince mid-October 2009. The yield on the bench-mark 10-year government paper eased to 7.19 per

cent by the end of November 2009 compared to 7.30per cent at the beginning of that month.

Net of cash reserve ratio, we expect the banking sys-

tem to mobilise Rs.6.6 lakh crore during 2009-10.By 11 November 2009, it had mobilised Rs.3.2 lakhcrore. It will mobilise Rs.3.4 lakh crore during theremaining period of the year. Similarly, we expectbank credit to top Rs.3.3 lakh crore for the year as awhole. Till 11 November 2009, banks had doled outRs.1.2 lakh crore. They will disburse Rs.2.2 lakhcrore during the remaining period of the year. Thedifference in itself is more than sufficient to coverthe balance government borrowing.

Table 6.1 Liquidity scenario: 2009-10 (Rs.crore)Apr 09- Dec 09- 2009-10Nov 09 Mar 10

Liquidity demandCG Borrowing 3,54,000 97,193 4,51,193SG Borrowing 87,453 38,547 1,26,000

Incremental credit 1,23,221 2,09,796 3,33,017

Total demand 5,64,674 3,45,536 9,10,210

Liquidity supply

Deposit mobilisation 3,34,223 3,21,410 6,55,633Maturing Gsecs 36,580 16,576 53,156Net LAF surplus 2,515 88,680 2,515MSS balance 69,304 18,773 88,077OMO infusion 57,487 22,513 80,000Overseas inflow 42,745 45,875 88,620

Total supply 5,42,854 5,13,827 9,68,001

Table 6.2 Net liquidity of the banking system blocked with the RBI (Rs.crore)

Month End Deposits under Central govt. Reverse repo: Repo: ostd Net liquidity RBIs NetMSS deposits with ostd blocked with Purchase of

RBI RBI USD

Nov 2008 1,32,531 101 7,710 16,550 1,23,792 -15,195Dec 2008 1,20,050 101 47,665 6,600 1,61,216 -1,546

Jan 2009 1,08,764 100 56,510 620 1,64,754 -141Feb 2009 1,01,991 101 62,550 1,700 1,62,942 1,132Mar 2009 88,077 101 16,845 14,330 90,693 -17,357Apr 2009 70,216 101 89,350 90 1,59,577 -12,450May 2009 39,890 101 1,11,165 0 1,51,156 -6,974Jun 2009 22,890 101 88,335 300 1,11,026 4,987Jul 2009 21,063 10,413 1,40,460 300 1,71,636 -266

Aug 2009 18,773 31,462 1,21,365 50 1,71,550 874Sep 2009 18,773 30,875 60,760 2,000 1,08,408 387

Oct 2009 18,773 19,491 84,570 0 1,22,834Nov 2009 18,773 4,909 88,680 0 1,12,362



27/94

Interest Rates & Debt Market: Short Term Interest Rates 23

Mixed movement in short term rates inNovember

Movement in short term interest rates of up to oneyear exhibited a mixed trend in November 2009.While yields on 91-day T-bills and on overnightrates inched up, those on 182-day and 364-day T-bills eased a little.

Yields on 91-day T-bills inched up from 3.23 percent at the end of October 2009 to 3.27 per cent inNovember 2009. The weighted average inter-bankcall money rate inched up to 3.23 per cent from 3.12per cent in the preceding month. The weighted av-erage CBLO rate too inched up from 2.42 per cent

to 2.73 per cent. The notice money rate range edgedup from 1.50-3.32 per cent in October to 1.50-3.35per cent in November 2009.

On the other hand, interest rates on instruments ofslightly longer duration eased a tad. The 182-day T-bill auctions closed November 2009 at 3.73 per centcompared to 4.04 per cent at the end of October.The yield contraction in the 364-day T-bill auctionswas a tad less. Yields on this one-year paper moveddown from 4.53 per cent at end-October to 4.44 percent at end-November.

The remaining months of the current year are ex-pected to see the banking system remain flush withliquidity. As a result, short term yields are unlikelyto see any significant rise at least till the end of thecurrent financial year. Liquidity conditions in the

financial markets even outside the banking systemare reflected in further lowering of coupon rates oncommercial papers (CPs).

Figure 6.1 Overnight rates: Nov. 2008-09 (%)

Call rate Reverse Repo Repo

Nov08 Jan09 Apr09 Jul09 Oct09 Nov090.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Figure 6.2 Overnight rates: Nov. 2009 (%)

Call rate Reverse Repo Repo

03 Nov 09 13 Nov 09 25 Nov 09 30 Nov 093.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

4.8

Table 6.3 Yields on treasury bills (%)

91-day T-bills auction 182-day T-bills auction 364-day T-bills auction1st 2nd 3rd 4th 5th 1st 2nd 3rd 1st 2nd 3rd

Nov 2008 7.37 7.33 7.29 7.12 7.19 7.04 7.35 7.07Dec 2008 6.59 5.64 5.43 5.02 5.59 5.09 6.28 5.34

Jan 2009 4.69 4.69 4.57 4.65 4.78 4.62 4.54 4.77 4.49 4.58Feb 2009 4.82 4.37 4.74 4.74 4.69 4.71 4.57 4.64Mar 2009 4.65 4.57 4.86 4.94 4.60 5.09 4.98 5.49

Apr 2009 4.49 4.08 3.80 3.35 3.31 4.69 4.06 3.54 4.38 3.75May 2009 3.14 3.27 3.27 3.31 3.48 3.58 3.49 3.67Jun 2009 3.35 3.35 3.35 3.31 3.58 3.52 3.99 3.98Jul 2009 3.10 3.23 3.27 3.27 3.23 3.42 3.46 3.80 3.68 3.79

Aug 2009 3.27 3.35 3.35 3.39 3.75 3.92 4.16 4.33Sep 2009 3.39 3.39 3.39 3.39 3.98 4.02 4.59 4.32Oct 2009 3.14 3.23 3.23 3.23 3.23 3.79 4.04 3.96 4.58 4.53

Nov 2009 3.27 3.27 3.27 3.27 3.81 3.73 4.52 4.44



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24 Interest Rates & Debt Market: Short Term Interest Rates

Corporates raised CPs at 2.98-9.00 per cent in Octo-ber 2009 compared to 3.20-9.05 per cent in Septem-ber 2009. Investors were also willing to accept lowerinterest rates on deposits parked with banks. This

was reflected in the easing of coupon rates on cer-tificates of deposits issued by banks. The rate rangefurther eased a tad to 3.70-6.05 per cent in Novem-ber 2009 from 3.70-6.51 per cent in October 2009.

Table 6.4 Short term interest rates on instruments of less than one year tenure(%)

Call money rates CBLO Repo market MIBOR Term Notice CP CDLow High Wtd Low High Wtd Mkt. Rev. Repo money money

avg. avg. repo repo

Nov 2008 4.00 19.00 7.10 0.50 7.90 5.71 6.55 6.00 7.50 6.82 7.40-12.10 3.00-21.00 9.00-15.50 8.80-11.75Dec 2008 3.00 7.00 5.91 0.25 6.75 4.84 5.33 5.00 6.50 5.27 6.30-11.00 3.05-6.70 10.40-16.00 7.00-11.50Jan 2009 2.00 10.00 4.07 0.50 5.25 3.56 4.07 4.00 5.50 4.23 4.47-9.25 2.10-6.00 6.75-14.00 5.25-11.50

Feb 2009 2.00 4.50 3.95 2.00 6.00 3.68 3.85 4.00 5.50 4.16 4.20-8.70 2.00-5.54 5.25-12.50 5.40-11.50Mar 2009 2.00 5.75 4.12 0.49 5.25 3.36 3.59 3.50 5.00 5.02 4.30-9.50 2.00-5.25 6.40-12.50 6.00-11.50

Apr 2009 1.20 4.90 3.13 0.01 5.00 2.07 2.26 3.25 4.75 3.31 3.30-7.50 1.75-4.90 3.30-12.50 3.90-11.50May 2009 0.50 3.75 3.11 0.01 3.75 1.99 2.34 3.25 4.75 3.30 3.45-7.25 1.00-3.35 2.83-9.90 3.65-7.60

Jun 2009 1.00 3.40 3.22 0.20 5.85 2.51 2.59 3.25 4.75 3.30 2.60-6.75 1.00-3.40 3.20-12.00 3.60-8.00Jul 2009 1.25 3.35 3.19 0.02 3.50 2.66 2.81 3.25 4.75 3.28 3.35-6.75 1.25-3.35 3.04-8.90 3.34-8.25Aug 2009 1.25 3.45 3.20 0.01 4.00 2.44 2.59 3.25 4.75 3.29 3.35-6.90 1.00-4.00 3.05-9.35 3.60-8.00

Sep 2009 1.50 4.30 3.23 0.15 4.00 2.59 2.72 3.25 4.75 3.33 2.90-7.05 1.75-4.00 3.20-9.05 3.70-6.51Oct 2009 1.50 4.40 3.12 0.01 5.00 2.42 2.57 3.25 4.75 3.30 2.75-6.95 1.50-3.32

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