INDIAN ECONOMY REVIEW Company: Mint Money Advisory Date: 05th June 2012 Presented by: Mr. Gaurav Agarwal
BRIEF _____________________________________________________________________ 3India Balance of Trade _______________________________________________________ 4India Business Confidence ____________________________________________________ 4India Consumer Confidence ___________________________________________________ 5USDINR - Indian Rupee Exchange rate __________________________________________ 6India Current Account _______________________________________________________ 6India Current Account to GDP _________________________________________________ 7India Exports _______________________________________________________________ 8India GDP _________________________________________________________________ 8India GDP Annual Growth Rate ________________________________________________ 9India GDP Growth Rate _____________________________________________________ 10India GDP per capita _______________________________________________________ 10India GDP per capita PPP ____________________________________________________ 11India Government Bond 10Y _________________________________________________ 12India Government Budget ___________________________________________________ 12India Government Debt To GDP_______________________________________________ 13India Imports _____________________________________________________________ 14India Industrial Production __________________________________________________ 14India Inflation Rate ________________________________________________________ 15India Interest Rate _________________________________________________________ 16Present Scenario of the Indian Economy ________________________________________ 16Disclaimer ________________________________________________________________ 17
BRIEFThe Indian Prime Minister Manmohan Singh is proved to be incapable of handling thecomplex and difficult situations in his government. The Singhs governmentcomprising different parties with almost contrarian to his views. With executivepowers - the top commander of the Indian Government has been under intensepressure. His ruling coalition federal government has failed to commence theimportant economic reforms, which took a considerable toll on the economy.Assembly elections specifically in Uttar Pradesh was the key event which changed thepolitical theatre. The losing ground of two major political parties of the country, theCongress and the BharatiyaJanata Party (BJP), would definitely make India abattleground in 2014 LokSabha elections and is gain for anti-capitalist and anti-socialist regional political parties, which is not favorable for India economy. In 2011,the Indian government faced every month with disapproval from the people, comingout on street in amass protesting against the governments inactivity on corruptionand irregularities in the system. Economic Policies has predicted the alarming levels of fiscal deficit last year in itsEconomic Review report. Even though RBI has reduced its policy rates by 50 bps, Thecurrent fall in inflation is largely driven by change in base year and the key index forRBI - manufacturing index is restless. RBI is giving full concentration on the inflationproblem, which is undermining the fragile economic growth and revised the policyrates by number of times to contain the rising risk of inflation in the economy. As perour observation, RBI, alongside inflation concern, would think about the economicexpansion of the country since the liquidity situation could get distressed and will putIndias economic growth at risk. Moreover, the higher cost of credit will certainlyhave an impact in the corporate balance sheet, which will prevent the short termforeign inflows (i.e. FII inflow) in the country to finance the current account (CA)deficit. RBI might not be concerned about the CA deficit.Despite the rising risk of political and economic policies, the overall economicoutlook of India in the long run is still intact. There could be a greater risk of highfiscal deficit followed by the increase in current account deficit due to sharp declinein Indian Rupee and rise in oil prices, which will increase reduce the revenue to thegovernment. Tighter monetary policy and a modest reduction in the deficit will helpcool demand somewhat. After moderating towards the end of 2010, inflation hasveered up again and remains high. Moreover, inflationary pressures have becomemore generalized, with non-food prices accelerating.
India Balance of TradeIndia reported a trade deficit equivalent to 13486 Million USD in April of 2012.Historically, from 1994 until 2012, India Balance of Trade averaged -3601.8 MillionUSD reaching an all-time high of 491.3 Million USD in November of 2001 and a recordlow of -19644.0 Million USD in October of 2011. India is leading exporter of gems andjewelry, textiles, engineering goods, chemicals, leather manufactures and services.India is poor in oil resources and is currently heavily dependent on coal and foreignoil imports for its energy needs.India Business ConfidenceIn India, business confidence declined to 125.2 in January of 2012 from 125.4 inOctober of 2011. Historically, from 1995 until 2012, India Business Confidenceaveraged 129.1300 reaching an all-time high of 162.1000 in October of 2010 and arecord low of 68.3000 in June of 1998. In India, the NCAER (National Council ofApplied Economic Research) - MasterCard Worldwide Index of Business Confidencemeasures the level of optimism that people who run companies have about theperformance of the economy and how they feel about their organizations’ prospects.Survey incorporates four indicators: overall economic conditions six months fromnow, financial position of firms six months from now, investment climate andcapacity utilization level. Data is collected through personal interviews andquestionnaires sent to a diverse range of businesses across various regions in India.
India Consumer ConfidenceIn India, consumer confidence improved to 81.2 in the second half of 2011 from 62.8in the first half of 2011. Historically, from 1995 until 2011, India ConsumerConfidence averaged 63.7800 reaching an all-time high of 86.6000 in December of2007 and a record low of 34.3000 in December of 1997. In India, the twice annualMasterCard Index of Consumer Confidence analyzes prevailing consumer perceptionsof economic conditions for the next six-months. Generally consumer confidence ishigh when the unemployment rate is low and GDP growth is high. Measures ofaverage consumer confidence can be useful indicators of how much consumers arelikely to spend.
USDINR - Indian Rupee Exchange rateThe USDINR spot exchange rate appreciated 1.9600 or 3.67 percent during the last30 days. Historically, from 1973 until 2012, the USDINR averaged 30.6600 reachingan all-time high of 56.2400 in May of 2012 and a record low of 7.1900 in March of1973. The USDINR spot exchange rate specifies how much one currency, the USD, iscurrently worth in terms of the other, the INR. While the USDINR spot exchange rateis quoted and exchanged in the same day, the USDINR forward rate is quoted todaybut for delivery and payment on a specific future date.India Current AccountIndia reported a current account deficit equivalent to 19.6 Billion USD in the fourthquarter of 2011. Historically, from 1949 until 2011, India Current Account averaged -1.0800 Billion USD reaching an all-time high of 7.3600 Billion USD in March of 2004and a record low of -19.6000 Billion USD in December of 2011. Current Account is thesum of the balance of trade (exports minus imports of goods and services), net factorincome (such as interest and dividends) and net transfer payments (such as foreignaid).
India Current Account to GDPIndia reported a Current Account deficit of 3.70 percent of the countrys GrossDomestic Product in 2011. Historically, from 1980 until 2011, India Current Accountto GDP averaged -1.3300 Percent reaching an all-time high of 1.5000 Percent inDecember of 2003 and a record low of -3.7000 Percent in December of 2011. TheCurrent account balance as a percent of GDP provides an indication on the level ofinternational competitiveness of a country. Usually, countries recording a strongcurrent account surplus have an economy heavily dependent on exports revenues,with high savings ratings but weak domestic demand. On the other hand, countriesrecording a current account deficit have strong imports, a low saving rates and highpersonal consumption rates as a percentage of disposable incomes.
India ExportsIndia exports were worth 24455 Million USD in April of 2012. Historically, from 1994until 2012, India Exports averaged 8192.1 Million USD reaching an all-time high of30418.0 Million USD in March of 2011 and a record low of 1805.0 Million USD in Mayof 1994. Exports amount to 22% of India’s GDP. Gems and jewelry constitute thesingle largest export item, accounting for 16 percent of exports. India is also leadingexporter of textile goods, engineering goods, chemicals, leather manufactures andservices. India’s main export partners are European Union, United States, UnitedArab Emirates and China.India GDPThe Gross Domestic Product (GDP) in India was worth 1729.01 billion US dollars in2010, according to a report published by the World Bank. The GDP value of India isroughly equivalent to 2.79 percent of the world economy. Historically, from 1960until 2010, India GDP averaged 339.8400 billion USD reaching an all time high of1729.0100 billion USD in December of 2010 and a record low of 36.6100 billion USDin December of 1960. The gross domestic product (GDP) measures of nationalincome and output for a given countrys economy. The gross domestic product (GDP)
is equal to the total expenditures for all final goods and services produced within thecountry in a stipulated period of time.India GDP Annual Growth RateThe Gross Domestic Product (GDP) in India expanded 5.3 percent in the first quarterof 2012 over the same quarter of the previous year. Historically, from 2004 until2011, India GDP Annual Growth Rate averaged 8.3 Percent reaching an all-time highof 10.1 Percent in September of 2006 and a record low of 5.5 Percent in December of2004. The annual growth rate in Gross Domestic Product measures the increase invalue of the goods and services produced by an economy over the period of a year.Therefore, unlike the commonly used quarterly GDP growth rate the annual GDPgrowth rate takes into account a full year of economic activity, thus avoiding theneed to make any type of seasonal adjustment.
India GDP Growth RateThe Gross Domestic Product (GDP) in India expanded expanded 5.3 percent in thefirst quarter of 2012 over the same quarter of the previous year. Historically, from2000 until 2011, India GDP Growth Rate averaged 7.4 Percent reaching an all-timehigh of 11.8 Percent in December of 2003 and a record low of 1.6 Percent inDecember of 2002. The Gross Domestic Product (GDP) growth rate provides anaggregated measure of changes in value of the goods and services produced by aneconomy. Indias diverse economy encompasses traditional village farming, modernagriculture, handicrafts, a wide range of modern industries, and a multitude ofservices. Services are the major source of economic growth, accounting for morethan half of Indias output with less than one third of its labor force. The economyhas posted an average growth rate of more than 7% in the decade since 1997,reducing poverty by about 10 percentage points.India GDP per capitaThe Gross Domestic Product per capita in India was last reported at 822.76 US dollarsin 2010, according to a report published by the World Bank. The GDP per Capita inIndia is equivalent to 7 percent of the worlds average. Historically, from 1960 until2010, India GDP per capita averaged 335.0500 USD reaching an all-time high of822.7600 USD in December of 2010 and a record low of 180.8600 USD in Decemberof 1960. The GDP per capita is obtained by dividing the country’s gross domesticproduct, adjusted by inflation, by the total population.
India GDP per capita PPPThe Gross Domestic Product per capita in India was last reported at 3582.48 USdollars in 2010, when adjusted by purchasing power parity (PPP), according to areport published by the World Bank. The GDP per Capita, in India, when adjusted byPurchasing Power Parity is equivalent to 16 percent of the worlds average.Historically, from 1980 until 2010, India GDP per capita PPP averaged 1413.4300 USDreaching an all-time high of 3582.4800 USD in December of 2010 and a record low of415.3000 USD in December of 1980. The GDP per capita PPP is obtained by dividingthe country’s gross domestic product, adjusted by purchasing power parity, by thetotal population.
India Government Bond 10YIndias Government Bond Yield for 10 Year Notes declined 25 basis points during thelast 30 days which means it became less expensive for India to borrow money frominvestors. During the last 12 months, India government bond yield advanced 0.09percent. Historically, from 1998 until 2012, India Government Bond 10Y averaged 8.0Percent reaching an all-time high of 12.3 Percent in February of 1999 and a recordlow of 5.0 Percent in October of 2003. Generally, a government bond is issued by anational government and is denominated in the country`s own currency. Bondsissued by national governments in foreign currencies are normally referred to assovereign bonds. The yield required by investors to loan funds to governmentsreflects inflation expectations and the likelihood that the debt will be repaid.India Government BudgetIndia reported a Government Budget deficit equal to 4.60 percent of the countrysGross Domestic Product in 2011. Historically, from 1990 until 2011, IndiaGovernment Budget averaged -3.7400 Percent of GDP reaching an all-time high of -2.0400 Percent of GDP in December of 1996 and a record low of -7.8000 Percent ofGDP in December of 2008. Government Budget is an itemized accounting of thepayments received by government (taxes and other fees) and the payments made bygovernment (purchases and transfer payments). A budget deficit occurs when angovernment spends more money than it takes in. The opposite of a budget deficit is abudget surplus.
India Government Debt To GDPIndia recorded a Government Debt to GDP of 68.05 percent of the countrys GrossDomestic Product in 2011. Historically, from 1991 until 2011, India Government DebtTo GDP averaged 74.9000 Percent reaching an all-time high of 84.3000 Percent inDecember of 2003 and a record low of 67.6200 Percent in December of 1997.Generally, Government debt as a percent of GDP is used by investors to measure acountry ability to make future payments on its debt, thus affecting the countryborrowing costs and government bond yields.
India ImportsIndia imports were worth 37942 Million USD in April of 2012. Historically, from 1994until 2012, India Imports averaged 11653.9 Million USD reaching an all-time high of40906.0 Million USD in May of 2011 and a record low of 1924.0 Million USD in Mayof 1994. India is poor in oil resources and is currently heavily dependent on coal andforeign oil imports for its energy needs. Other imported products are: machinery,gems, fertilizers and chemicals. Main import partners are European Union, SaudiArabia and United States.India Industrial ProductionIndustrial Production in India decreased 3.50 percent in March of 2012. Historically,from 1994 until 2012, India Industrial Production averaged 7.4100 Percent reachingan all-time high of 20.0000 Percent in November of 2006 and a record low of -7.2000Percent in February of 2009. Industrial production measures changes in output forthe industrial sector of the economy which includes manufacturing, mining, andutilities. Industrial Production is an important indicator for economic forecasting andis often used to measure inflation pressures as high levels of industrial productioncan lead to sudden changes in prices.
India Inflation RateThe inflation rate in India was recorded at 7.23 percent in April of 2012. Historically,from 1969 until 2012, India Inflation Rate averaged 8.0300 Percent reaching an all-time high of 34.6800 Percent in September of 1974 and a record low of -11.3100Percent in May of 1976. Inflation rate refers to a general rise in prices measuredagainst a standard level of purchasing power. The most well-known measures ofInflation are the CPI which measures consumer prices, and the GDP deflator, whichmeasures inflation in the whole of the domestic economy.
India Interest RateThe benchmark interest rate in India was last reported at 8.00 percent. Historically,from 2000 until 2012, India Interest Rate averaged 6.4700 Percent reaching an all-time high of 14.5000 Percent in August of 2000 and a record low of 4.2500 Percent inApril of 2009. In India, interest rate decisions are taken by the Reserve Bank of IndiasCentral Board of Directors. The official interest rate is the benchmark repurchaserate.Present Scenario of the Indian EconomySince the economic crisis of 1991, sustained economic liberalization has steered thecountry towards a more globally integrated and market-based economy. This twinstrategy of economic reforms and encouragement to foreign and private capitalresulted in the economy beginning to register high growth rates in the first decade ofthe 21st century. By 2008, India had established itself as the world’s second-fastestgrowing economy after China.It was the financial crisis of 2007–2010 that emerged as a major setback for oureconomy. The poor monsoon too worsened the situation as India’s Gross DomesticProduct (GDP) growth rate significantly slowed to 6.7 per cent in 2008–09, butsubsequently recovered to 7.2 per cent in 2009–10, while the fiscal deficit rose from5.9 per cent to a high 6.5 per cent during the same period. India’s current account
deficit surged to 4.1 per cent of GDP during Q2 FY11 against 3.2 per cent theprevious quarter. The unemployment rate for 2009–2010, according to the StateLabour Bureau, was 9.4 per cent nationwide, rising to 10.1 per cent in rural areas,where two-thirds of the 1.2 billion population live. Finally, the Central StatisticalOrganization’s recently released estimate of GDP growth of 8.6 per cent for 2010-11is consistent with the Reserve Bank’s projection set out in the Third Quarter ReviewDisclaimerInformation, charts or examples contained in this mail is for illustration andeducational purposes only. It should not be considered as advice or an endorsementto purchase or sell any security or its financial instrument until you are wellconversant and confident about the movement.Mintmoney Advisory : its owner and moderators do not take any responsibility forthe views expressed in the forum and any consequences including financial, legal orotherwise resulting from actions based on such views