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Economy - News & Views
Our Opinion

 April 04, 2014

RBI's present stand expected; hawkish stance a worry-...As expected, the RBI kept key policy rates unchanged in the central bank’s first bi-monthly monetary policy announcement. RBI retained the repo rate, the rate at which it provides overnight funds to banks, at 8 per cent. The CRR, which determines the amount of cash that banks have to park with the RBI, has also been left unchanged at 4 per cent of deposits. The RBI has reduced the quantum of overnight funds that banks can borrow from it, while commensurately expanding their access to term money of seven and 14 days duration; the main objective of this move being to improve the transmission of monetary policy impulses across he interest-rate spectrum.

 March 17, 2013

A Responsible Budget within a Restricted Space albeit some Worries on the Expenditure-Revenue Math...The Indian Union Budget for fiscal year 2013-14 has been termed as a responsible budget under difficult circumstances, but a disappointment to those who were expecting extraordinary measures to jump-start the economy. Fiscal deficit in the current financial year has been contained to 5.2 per cent of GDP; this averts any immediate crisis in terms of a sovereign rating downgrade, but has led to a decade low quarterly GDP of 4.5% in the final quarter of 2012, with plan expenditure meant for developmental projects slashed by over rupees 90 thousand crore. With very little room for fiscal stimulus, the Budget has concentrated on infrastructure development and inclusive growth, the most demanding issues at present. Pressing issues like stimulating domestic savings and channeling those to the capital market have also been addressed within the Budget.

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Indian Economy Global Economy

GDP growth slows marginally to 5.3% in July-September 2014 GDP growth slipped to 5.3% in the quarter ended 30 September as compared with 5.7% in the preceding quarter, and 5.2% in the corresponding quarter of 2013-14. Growth was dragged down by the poor performance of the manufacturing sector which nearly came to a grinding halt. The manufacturing sector, which has been one of the biggest drags on the economy, grew just 0.1% in the quarter after expanding 3.5% in the previous one following four consecutive quarters of contraction. Farm sector growth slipped marginally to 3.2% from 3.8% in the previous quarter. Mining and quarrying growth slowed to 1.9% from 2.1%. Electricity, gas and water supply growth was down to 8.7% from 10.2%. In the services sector, community services and trade, hotels and transport grew 9.6% and 3.8%, respectively. Growth in financial services eased to 9.5% during Q2 from 10.4% in Q1. Growth in government consumption expenditure slipped to 11.7% from 13.4% in the April-June quarter. GDP growth for the first half of the year, April-September, stands at 5.5% as against 4.9% in the corresponding period last year.

Industrial production growth recovers to five-months high of 3.8% in November 2014 After contracting sharply in October, industrial production increased at a five-month high of 3.8 per cent in November. Factory output, as measured by the IIP contracted by 4.2% in October, the sharpest decline in at least two years, driven by the manufacturing sector and dip in the output of capital as well as consumer goods. Manufacturing output, which constitutes over 75% of the index, registered growth of 3.4 per cent in November, after a contraction of 7.4% in October. Capital goods, a barometer of demand, which had declined by 2.3% in October, expanded 6.5 per cent in November. After contracting 35.15 per cent in October, output in the consumer durables segment declined 14.5 per cent in November, showing high interest rates had led to a fall in demand. In November 2013, this segment had contracted 21.7 per cent. In November, 16 of the 22 groups in the manufacturing segment saw growth, against as many categories recording contraction in October.
Some of the important items which showed high negative growth are: ‘Telephone Instruments (incl. Mobile Phones & Accessories)’ at -67.3%. The cumulative growth for the period April-November 2014-15 over the corresponding period of the previous year stands at 2.2%, compared with zero growth in the corresponding period of previous year. The cumulative growth in the Mining, Manufacturing and Electricity sectors during April-November 2014-15 over the corresponding period of 2013-14 has been 2.5%, 1.1% and 10.7% respectively. However, the output of consumer goods dipped 5.7% in April-November 2014-15, in addition to 2.7% fall recorded in the previous fiscal, as the output of consumer non-durable rose 1.8%, but that of consumer durables dipped 15.9%.

Consumer Price inflation slows to a record low in November Retail inflation eased for a fourth successive month in November to its lowest level since the government started releasing the data in January 2012. CPI inflation was 4.4% in November, far below the 11.2% recorded in November 2013. The corresponding inflation rates for rural and urban areas are 4.09% and 4.69%. While the dramatic decline in crude oil prices clearly played a role, both directly and indirectly, through its impact on input costs, the real dampener was from food prices. Food inflation was 15.4% in November 2013; a year later it was down to 3.1%. This was largely the result of two significant trends; the rate of increase in cereal prices was down significantly and vegetable prices actually declined by over 10% from the level that prevailed a year ago. Other food items saw prices increasing, but, with the exception of milk and dairy products, which increased by 10%, the rates of increase were relatively muted. The combined inflation rate for food and beverages stood at 3.50% for November, while for rural and urban areas the rates stood at 3.62% and 3.19% respectively. While, combined inflation rate for fuel and light stood at 3.27% for November, fuel and light inflation rates for rural and urban areas stood at 3.59% and 2.74% respectively.

WPI inflation near-zero in December after remaining stagnant in November WPI based inflation fell to 0.11 percent in December 2014 from 6.40 percent in the corresponding month of 2013. Food inflation in the month under review eased to 5.20 percent from an increase of 13.73 percent recorded in the corresponding month of 2013. Prices of major food articles like wheat, potatoes, onions, egg, fish and meat fell drastically. Potatoes prices came down from an increase of 56.78 percent in December 2013, to a negative 4.78 percent; onion prices contracted by 18.54 percent compared with an increase of 38.30 percent; egg, fish and meat inflation stood at 0.68 percent from a rise of 11.68 percent in December, 2013. Fuel and power inflation declined to 7.82 percent from an appreciation of 10.87 percent during December, 2013.
The wholesale price index was unchanged from November last year, after recording a 5-year low of 1.77% yoy in October. November’s WPI fell 1.3% month-on-month recording, a zero% yoy growth, its lowest level since July 2009, as overall food inflation was 0.6%, as compared with 19.7% last year. In the Indian context, manufacturing inflation below 2.5-3% should be considered deflationary, according to the Chairman of the National Statistical Commission. This is a cause for serious concern as it indicates low pricing power for companies, eroding their profits, and forcing them to lay off employees.

RBI reduces key policy rates The central bank, announcing its first rate cut since May 2013, cut its benchmark repo rate, at which it lends to banks, by 25 basis points (bps) to 7.75% from the current 8%, citing easing pressure on prices, weak demand and lower inflation expectations of households providing headroom for a shift in the monetary policy stance”. RBI said further easing would depend on data that confirm disinflationary pressures, “high-quality” fiscal consolidation and moves to ease supply of power, land, minerals and infrastructure.
In its Fifth Bi-Monthly Monetary Policy Statement, 2014-15, On the basis of an assessment of the current and evolving macroeconomic situation, RBI decided to: keep the policy repo rate under the LAF unchanged at 8.0% (consequently, the reverse repo rate under the LAF will remain unchanged at 7.0%, and the MSF rate and the Bank Rate at 9.0%); keep the CRR of scheduled banks unchanged at 4.0% of NDTL; continue to provide liquidity under overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system through auctions; and continue with daily one-day term repos and reverse repos to smooth liquidity. The RBI had reduced the liquidity provided under the ECR facility from 50% of eligible export credit outstanding to 32%. However, it had introduced a special term repo facility of 0.25% of NDTL to compensate fully for the reduction in access to liquidity under the ECR.
The central estimate of projected growth for 2014-15 has been retained at 5.5%. According to the RBI, the risks to the January 2016 target of 6% inflation appeared evenly balanced under the current policy stance. RBI had announced that a change in the monetary policy stance at the current juncture is premature. However, if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.

IMF Outlook The growth forecast for the world economy has been revised downward by the IMF to 3.3 percent for this year due to weaker-than-expected global activity in the first half of 2014; this is 0.4 percentage point lower than the projections in the April 2014 WEO. Downside risks have increased since the spring. Short-term risks include a worsening of geopolitical tensions and a reversal of recent risk spread and volatility compression in financial markets. Medium-term risks include stagnation and low potential growth in advanced economies and a decline in potential growth in emerging markets. Among advanced economies, growth is projected to pick up, but is slower in the euro area and Japan and generally faster in the United States and elsewhere. Among major emerging markets, growth is projected to remain high in emerging Asia, with a modest slowdown in China and a pickup in India, but to stay subdued in Brazil and Russia.

OECD Outlook Global GDP growth is projected to reach a 3.3% rate in 2014 before accelerating to 3.7% in 2015, according to the OECD’s latest Economic Outlook. This pace is slightly lower than the last OECD forecast in September. Among the major advanced economies, recovery remains robust in the United States, which is projected to grow by 2.2% in 2014 and around 3% in 2015. Growth in the euro area is expected to pick up slowly, from 0.8% in 2014 to 1.1% in 2015. In Japan, growth will continue to be impacted by consumption tax hikes, and is expected to be 0.9% in 2014 and 1.1% in 2015. Large emerging economies are also projected to show diverging performance over the coming years. China is rebalancing its economy while trying to achieve a controlled slowdown to more sustainable growth rates, and is projected to grow at around 7% over the 2015-16 period, down slightly from 7.4% in 2014. Growth will strengthen in India as investment picks up, from a 5.4% rate in 2014 to 6.4% in 2015. Growth in Brazil has slumped, with the economy set to expand by only 0.3% in 2014, before a recovery to 1.5% in 2015. The Russian economy, hit by lower oil prices and weakening trade, will expand by only 0.7% this year, and growth is expected to fall to zero in 2015 before recovering in 2016.‌

U.S. GDP grew by a strong 5% (SAAR) in the third quarter, up from the second quarter’s 4.6% growth. Consumer spending growing by 3.2% made a large contribution to gains, according to the revised estimates. Exports, fixed investment, and federal government spending also contributed to growth, while Imports, which are a subtraction in the calculation of GDP, decreased. Inventories were also revised higher; the change in private inventories subtracted 0.03 percentage point from the third-quarter change in real GDP after adding 1.42 percentage points to the second-quarter change. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6 percent in November after gaining 0.3 percent in October. Inflation decelerated in the quarter, led by food and energy prices. Excluding food and energy prices, the price index for gross domestic purchases increased 1.6 percent in the third quarter, compared with an increase of 1.7 percent.
Industrial production fell 0.1% in December the first decline in four months.
The gains in manufacturing and mining were not enough to compensate for a sharp 7.3 percent drop in utilities output. U.S. manufacturing output rose modestly in December, slowing from the gains registered a month earlier but still signaling that American industry is weathering the impact of a strong dollar and weaker overseas markets. Factory output rose 0.3 percent, marking the fourth straight month of growth although the pace was slower than the revised 1.3 percent expansion in November.
U.S. consumer prices recorded their biggest decline in six years in December and underlying inflation pressures were benign. CPI inflation fell 0.4%, the largest drop since December 2008, after sliding 0.3% in November. In the 12 months through December, CPI increased 0.8%.Core CPI, which excludes food and energy, was flat in December. Existing home sales rose 1.5 percent in October to an annual rate of 5.26 million units, the highest rate since September 2013, a sign that the housing market continued to regain strength.

Europe The euro zone’s economy stagnated in the third quarter, after growing 0.2% q/q in the previous quarter. Among the euro zone economies, Germany contracted, Italy fell back to recession, and real GDP remained unchanged in France. Economic growth in Spain and Portugal, however, gained pace. Euro zone industrial production rose 0.6% m/m in September, following a revised 1.4% contraction in the previous month. The euro zone’s disappointing performance fuelled uncertainty about global economic recovery and fears about the threat of deflation in the region. Waning business sentiment across the region on the back of the intensifying political dispute with Russia poses a further risk to the outlook. Prices declined by 0.2% yoy in December, partly driven by sluggish growth and a drop in crude oil prices of about 50 percent in the past year. This is the first decline post 2009 and takes the euro zone deep in what it terms the danger zone for deflation. Energy prices fell 6.3 percent in December; while, core inflation, which strips out volatile items such as energy, food, tobacco and alcohol, increased to 0.8 percent in December. To keep the euro zone from slipping into deflation, the ECB has been pumping money into the banking system by buying covered bonds and offering long-term loans.

JapanThe Japanese economy is in recession as third quarter GDP fell 0.4% q/q (an annualised 1.6 percent ) according to the initial estimate, with a sharp fall in residential investment and a decline in capital expenditure. Capital expenditure fell 0.2 percent. Private consumption recovered modestly following the contraction in the previous quarter. Private consumption, which accounts for about 60 percent of the economy, rose a less-than-expected 0.4 percent from the previous quarter, as the April tax increase and unusually cold summer weather hurt household spending. The April tax hike to 8 percent from 5 percent led to a revised 7.3 percent economic contraction in the second quarter, which was the biggest decline since the global financial crisis. Industrial production grew a better than expected 2.7% m/m in September, as production of consumer durables surged over the month, confirming the upbeat retail sales numbers. The Markit/JMMA PMI was mixed; while the headline index edged down to 52.1 in November, from 52.4 in October, output expanded at its fastest pace in eight months. Firms may have been responding to better offshore demand as exports soared, reflecting a weaker yen.

China China's annual growth slowed to 7.3 percent in the third quarter, leaving 2014 on track to be the slowest in 24 years. The HSBC/Markit manufacturing PMI reading showed a drop to a six-month low of 50.0 in November as the factory output sub-index fell to 49.5, its first contraction since May. 

China Economy News

Economy - Indicators

Indian Economy

7.5% - Q4, 2014-15
6.7% -
Q3, 2014-15

5.70% - Q1, 2014-15
4.70% - 2013-14
4.50% -


Revised All-India IIP
-3.2% (November, 2015)
9.8% (October, 2015)
3.6% (September, 2015)
  #:Base 2004-05=100

WPI Inflation(%)

All Commodity: -1.99%(Nov, '15)
All Commodity: -3.81%(Oct, '15)
All Commodity:
-4.54%(Sep, '15)

CPI Inflation(%)
5.41% (All India); 5.95% (Rural Areas); 4.71% (Urban Areas)
(November, 2015)
Interest Rates
CRR: 4.00% p.a (wef  9 February, 2013)
MSF Rate: 8.25% p.a.

Reverse Repo Rate: 5.75%
(wef  29 September, 2015)
Repo Rate: 6.75%
(wef  29 September, 2015)
: 7.92/ 8.13 (June 26,  2014)
Exchange Rate
66.72 (Dollar), 72.27 (Euro),
97.79 (Pound) , 56.34 (Yen) [January 4, 2016 to January 8,  2016, weekly average]
Updated on 12 January, 2016
See Terminology section for explanations and notes.
 Global Indicators on 12 January, 2016

Global Economy




4.1 Q3-2015
Updated on 12 January, 2016
Emp : Unemployment Rate

IMF World Economic Outlook October 2014
World Bank World Development Report 2014
ADB Asian Development Outlook 2014
UN World Economic Situation and Prospects 2014
RBI Fourth Bi-monthly Moneteraty Policy Statement 2014-15
Development in India's Balance of Payments during April-June 2014-15

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