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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.

Our November-2014 issue of E-UpDates has already been published.

October 2014 issue as a sample copy

Indian Economy Global Economy

GDP grew 5.7% in April-June 2014 India’s economy expanded at its fastest pace in more than two years as GDP grew at a nine-quarter high of 5.7 per cent in the first quarter of 2014-15, compared with 4.6 per cent in the previous quarter, and 4.7% in the the corresponding quarter of 2013-14. The country's manufacturing sector, which had been one of the biggest drags on the economy, expanded 3.5 per cent following four consecutive quarters of contraction. In the previous quarter, manufacturing contracted 1.4 per cent, while the decline in the corresponding quarter of 2013-14 was 1.2 per cent. Construction expanded 4.8 per cent in the quarter, against only 0.7 per cent in the previous one and 1.1 per cent in the corresponding period a year-ago. Electricity generation rose 10.2 per cent, against 3.8 per cent in the first quarter of the previous year and 7.2 per cent in the previous quarter. Agriculture expanded 3.8 per cent, against 6.3 per cent in the previous quarter and 4 per cent in the corresponding period of 2013-14. Services, the largest sector of the Indian economy, rose 6.8 per cent, slightly higher than 6.4 per cent in the previous quarter, but lower than the 7.2 per cent growth seen in April-June, 2013-14. Demand in the economy didn’t pick up much, as private final consumption expenditure growth was 5.6 per cent, the same as in the corresponding quarter last year. Growth in gross fixed capital formation, a proxy for investment, was however, higher at 7 per cent against a fall of 2.8 per cent in the corresponding period of last year.

Industrial production growth recorded at 2. 5 per cent in September  IIP grew by 2.5 per cent in September 2014 after slowing down to 0.4 per cent in August and 0.5 per cent in July. Mining, Manufacturing and Electricity sectors grew 0.7%, 2.5% and 3.9% and the cumulative growth in the three sectors during April-September 2014-15 over the corresponding period of 2013-14 was 2.1%, 2.0% and 10.4%, respectively. 15 of the 22 industry groups in the manufacturing sector showed positive growth during September 2014 as compared to the corresponding month of the previous year, with the industry group ‘Electrical machinery & apparatus n.e.c.’ showing the highest positive growth of 29.9%. Basic goods grew by 5.1%, % Capital goods by 11.6% and Intermediate goods by 1.8%. Consumer goods contracted by 4.0% with durables and non-durables recording de-growth of 11.3% and 1.5%, respectively. Among individual items Telephone Instruments (incl. Mobile Phones & Accessories)’ contracted sharply by 53.6%.

Consumer Price inflation slows to a record low in October Retail inflation eased for a third successive month in October to its lowest level since the government started releasing the data in January 2012. CPI rose 5.52 percent annually following 6.46 percent increase in September, as general indices for rural areas rose by 5.,52 per cent and by 5.55 per cent for urban areas. Food Price Inflation (CFPI), which has a 42.71% weightage in CPI, eased to 5.59% from 7.67% in September and 12.93% in October last year. CFPI for October 2014 for rural areas was estimated at 5.77 per cent and at 5.14 per cent for the urban areas. Most of the food-sub groups showed a fall in prices in October, as vegetable prices recorded the biggest drop with prices actually falling by 1.45%, compared to a rise of 8.59% in September. Eggs, fish and meat products, and oils and fats, did not show any month-on-month change in inflation.

WPI inflation at 5-year low in October WPI inflation plunged to a five-year low of 1.77 per cent in October after easing for the fifth consecutive month; this compares with 2.38 per cent inflation in the previous month and 7.24 per cent in October 2013. The build up inflation rate in the financial year so far was 2.00% compared to a build up rate of 6.23% in the corresponding period of the previous year. The decline in inflation was seen across all the broad segments food and other primary articles, fuel and related items and manufactured products. Food inflation during the month hit its lowest level since January 2012; food inflation moved down to 2.70 per cent in October from 3.52 per cent in the previous month and 18.34% in October 2013. The inflation rate for Fuel & Power came down from 10.54% in October 2013 and 1.33% this September to 0.43 per cent, the lowest rate since October 2009.

RBI’s Fourth Bi-Monthly Monetary Policy Statement In its Fourth Bi-Monthly Monetary Policy Statement, 2014-15, the RBI decided to: keep the policy repo rate under the LAF unchanged at 8.0 per cent; keep the CRR of scheduled banks unchanged at 4.0 per cent of their NDTL; reduce the liquidity provided under the export credit refinance (ECR) facility from 32 per cent of eligible export credit outstanding to 15 per cent with effect from October 10, 2014; continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions; and continue with daily one-day term repos and reverse repos to smooth liquidity. Consequently, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the Bank Rate at 9.0 per cent. In the Second Bi-Monthly Monetary Policy Statement RBI had reduced the SLR of SCBs by 50 basis points from 23.0% to 22.5% of their NDTL with effect from the fortnight beginning June 14. The RBI had also reduced the liquidity provided under the ECR facility from 50% of eligible export credit outstanding to 32% with immediate effect. 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 with immediate effect. The apex bank had also decided to continue to provide liquidity under 7-day and 14-day term repos of up to 0.75% of NDTL of the banking system.

Balance of Payment in surplus in the first quarter of 2014-15 CAD narrowed sharply to US$7.8 billion (1.7 per cent of GDP) in Q1 of 2014-15 from US$21.8 billion (4.8 per cent of GDP) in Q1 of 2013-14. However, it was higher than US$1.2 billion (0.2 per cent of GDP) in Q4 of 2013-14. The lower CAD was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports. Merchandise exports at US$81.7 billion increased by 10.6 per cent in Q1 of 2014-15 as against a decline of 1.5 per cent in Q1 of 2013-14. On the other hand, merchandise imports at US$116.4 billion moderated by 6.5 per cent in Q1 of 2014-15 as against an increase of 4.7 per cent in Q1 of 2013-14. Decline in imports was primarily led by a steep decline of 57.2 per cent in gold imports, which amounted to US$7.0 billion, significantly lower than US$16.5 billion in Q1 of 2013-14. Notably, non-gold imports recorded a modest rise of 1.3 per cent as against decline of 0.6 per cent in corresponding quarter of last year. Merchandise trade deficit contracted by about 31.4 per cent to US$34.6 billion in Q1 of 2014-15 from US$50.5 billion in the corresponding quarter a year ago. Net services receipts improved marginally in Q1 of 2014-15 on account of higher exports of services. Net services at US$17.1 billion recorded a growth of 1.2 per cent in Q1 of 2014-15. Both FDI and portfolio investment recorded inflows in Q1 of 2014-15. While net inflow on account of portfolio investment was US$12.4 billion as against an outflow of US$0.2 billion in Q1 of 2013-14, net FDI inflow was at US$8.2 billion compared with US$6.5 billion in Q1 of 2013-14. There was a net accretion of US$11.2 billion to India’s foreign exchange reserves in Q1 of 2014-15 as against a drawdown of US$0.3 billion in Q1 of 2013-14.

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 3.5% (SAAR) in the third quarter, though below the second quarter’s 4.6% growth. Consumer spending made a large contribution to gains, despite slowing from the second quarter. Exports, fixed investment, and federal government spending also contributed to growth, while inventories were a major drag. Inflation decelerated in the quarter, led by food and energy prices. Real disposable income growth slowed. Industrial production fell 0.1% in October following a downwardly revised 0.8% increase in September. Utility and mining output fell in the month contributing to the decline, while factory production increased by only 0.2%. Production of motor vehicles and parts fell 1.2% in October while non-auto manufacturing output rose 0.2%. Mining output fell 0.9% in October after a 1.6% gain in September. Utilities’ production decreased 0.7% in the month, following September’s 4.2% surge. Underlying inflation pressures rose in October, even as falling gasoline prices kept overall U.S. consumer prices in check. Core CPI, which excludes food and energy, increased 0.2 percent in October, the largest increase in five months, after nudging up 0.1 percent in September. 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. The U.S. manufacturing sector slowed in November according to the Markit flash U.S. Manufacturing PMI, which fell to 54.7 from October's final reading of 55.9. The index was at its lowest level since January, as was the new orders subindex. Output fell from 57.8 in October to 55.6, also at its lowest since January.

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 rose just 0.4 percent in the euro zone in October, well below the ECB's target of close to but below 2 percent and deep in what it terms the danger zone for deflation. 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. Markit's Composite Flash PMI for November, based on surveys of thousands of companies, fell to 51.4; the service industry PMI also undershot all forecasts by falling to 51.3, while the factory PMI's dip to 50.4 also missed consensus expectations. Though all three readings held above the 50 mark that separates growth from contraction, forward-looking indicators suggest the situation is unlikely to improve anytime soon with the composite new orders index falling below 50 for the first time since July 2013.

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. 

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Economy - Indicators

Indian Economy

5.30% - Q2, 2014-15
5.70% - Q1, 2014-15
4.70% - 2013-14
4.50% -


Revised All-India IIP
2.5% (September, 2014)
0.5% (August, 2013) Revised
#:Base 2004-05=100

WPI Inflation(%)

All Commodty:1.77%(Oct. 2014)
All Commodty:
2.38%(Sep. 2014)
All Commodty:3.74% (Aug, 2014)

CPI Inflation(%)
5.59% (All India); 5.77% (Rural Areas); 5.14% (Urban Areas)
(October, 2014)
Interest Rates
CRR: 4.00% p.a (wef  9 February, 2013)
MSF Rate: 9.00% p.a. (wef 28 Jan, 2014)

Reverse Repo Rate: 7.00%
(wef  28 Jan, 2014)
Repo Rate: 8.00%
(wef  28 Jan, 2014)
: 7.92/ 8.13 (June 26,  2014)
Exchange Rate
61.91  (Dollar), 77.04 (Euro),
97.24 (Pound) , 52.49 (Yen) [November 24, 2014 to November 28, 2014, weekly average]
Updated on 04 December, 2014
See Terminology section for explanations and notes.
 Global Indicators on 15 November, 2014

Global Economy


Sep 2014

Oct 2014

4.1 Q2-2014
Updated on 15 November, 2014
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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