CII Economy Matters - July 2013 Issue

2,315 views

Published on

China’s economy is besieged with several problems currently, which have had adverse repercussions for the global growth too. The rebalancing towards domestic consumption from an export and investment-led growth path has not been as successful as was planned. Elsewhere, in the last few months, Central Banks of three emerging economies viz. Indonesia, Turkey and Brazil have gone against the tide in raising interest rates to support their currencies and curb inflationary pressures. We discuss this in detail in the section on Global Trends in this month’s issue of Economy Matters.

In the section on Domestic Trends, we discuss the progress of the monsoons so far, given its importance in shaping the domestic growth outlook. Additionally, the fiscal situation in the first-half of the current fiscal is also scrutinized.

In Corporate Performance, we examine the financial performance of firms in the first quarter of the current year, in order to decipher the evolving trends.

The Sectoral spotlight for this issue is on Textiles, one of the leading sectors of the Indian economy. It contributes significantly to the industrial output, employment generation and foreign exchange earnings in India. However, currently, the sector is facing challenges due to various issues related to FTAs, technology, labour and power that are crucial for its growth. We discuss the sector’s challenges and suggest measures to bolster its output.

In the Special Article, we discuss the benefits and concerns emanating from the promulgation of an ordinance on National Food Security by the government. The ordinance provides a legal entitlement to persons belonging to specified households to receive specific quantities of food grains at subsidised prices from the state. If implemented properly, the ordinance will address the concerns on hunger and malnutrition. However, there are some serious challenges to its implementation. Some of the challenges are in terms of distribution and logistics, rising food subsidy outgo, and increasing food inflation. How well the government is able to address these challenges will be critical in scripting the success of the National Food Security Ordinance.

Published in: Business, Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,315
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
27
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

CII Economy Matters - July 2013 Issue

  1. 1. ECONOMYMATTERSVolume 01 No. 07July 2013 Inside This Issue The National Food Security Ordinance – Benefits and Concerns Cover Story Foreword 01 Executive Summary 02 Growth Outlook: 2013-14 03 Global Trends 04 Domestic Trends 9 Corporate Performance 15 Sector in Focus: Textiles 19 Special Article: The National 25 Food Security Ordinance Economy Monitor 30
  2. 2. China'seconomyisbesiegedwithseveralproblemscurrently,whichhavehad adverse repercussions for the global growth too. The rebalancing towards domestic consumption from an export and investment-led growth path has not been as successful as was planned. Add to this the rising concerns over banking sector's asset quality and slowing macroeconomic parameters and you got a perfect recipe for an imminent loss of economic momentum. However, the policy makers still seem comfortable with allowing growth to cool to "sustainable levels". Elsewhere, in the last few months, Central Banks globallyhavebeenparinginterestratesinordertocushionfallinggrowth,but three emerging economies viz. Indonesia, Turkey and Brazil have gone against the tide in raising interest rates to support their currencies and curb inflationary pressures. India too could be added to that list, given that RBI responded aggressively to curb the exchange rate volatility by announcing slewofliquiditytighteningmeasuresinthelastmonth. On the domestic front, there is some good news finally. The progress of South-Westmonsoonhasbeengoodsofar,withtheoverallcountryreceiving 17 per cent rainfall above LPA till end of July 2013. Consequently, the sowing pattern has also remained robust so far, raising hopes for another year of bumper harvest of food-grains. As regards to the fiscal situation, however, things are not as rosy. The fiscal deficit in the first quarter has already reached almost half of the budgeted target for the entire 2013-14 due to sluggish revenuegrowtheventhoughthegovernmentspendinghasremainedrobust. The Finance Minister has reaffirmed his commitment to curb the fiscal deficit around the budgeted levels in the current year too. However, it shouldn't happen at the cost of curtailing government expenditure on plan/capital heads, which, along with removal of structural impediments, is critical for crowding in private investment to pull the economy out of the current slowdown. The promulgation of an ordinance on National Food Security by the government is indeed a historic development. It provides a legal entitlement to persons belonging to specified households to receive specific quantities of food grain at subsidised prices from the state. If implemented properly, there is no doubt that the ordinance will address the concerns on hunger and malnutrition. However, there are some serious challenges to its implementation. Some of the challenges are in terms of distribution and logistics, rising food subsidy, lack of crop diversification and increasing food inflation. How well the government is able to address these challenges will be criticalinscriptingNFSO'ssuccess. FOREWORD 1 JULY 2013 Chandrajit Banerjee Director-General, CII
  3. 3. 2 EXECUTIVE SUMMARY GlobalTrends DomesticTrends CorporatePerformance Chinese economy in the first-half of the current year witnessed a generally stable growth. However, the economy is still faced with grim and complicated economic situation. The rebalancing towards domestic consumption from an export and investment-led growth path has not been as successful as was planned. The policymakers in China have indicated that they will continue to maintain proactive fiscal policy and a prudent monetary policy in 2013 in order to lift the economic growth to 7.5 per cent for the year. Elsewhere, in the last few months, Central Banks globally have been paring interest rates in order to cushion falling growth, but three emerging economies viz. Indonesia, Turkey and Brazil have gone against the tide in raising interest rates to support their currencies andcurbinflationarypressures. TheprogressofSouth-Westmonsoonhasbeengoodso far,withtheoverallcountryreceiving17percentrainfall above LPA till end of July 2013. However, the skewed spatial pattern of rainfall cannot be missed as we have seen excess rains causing floods in states such as Uttarakhand, while below normal rains in states such as Assam, Haryana, West Bengal etc. have created problems. Notwithstanding this uneven distribution of rainfall, the sowing of major kharif crops has remained robust so far, raising hopes for another year of bumper harvest of food-grains. On the fiscal front, the situation has not been sound as fiscal deficit in the first-quarter 2013-14 was almost half of the budgeted target for the entire year mainly due to sluggish revenue growth even thoughgovernmentspendingremainedrobust. Firms remained plagued by stagnant net sales and poor domestic demand, in the face of headwinds such as sliding rupee, weak export growth and high retail inflation in the first quarter of the current fiscal. While revenues plummeted sharply, corporate sector continued to pull expenses down against the backdrop of a clouded economic outlook. In face of dwindling net sales growth, rise in profitability came as the much needed respite, attributable mainly to moderation in expenditure costs. Margins, both net and gross saw an improvement in the quarter too, reflecting the improved profitability. Our analysis is based on the financial performance of balanced panel of 524 firms (extractedonJuly31,2013). The textile and clothing (T&C) industry is one of the leading sectors of the Indian economy and constitutes major part of the industrial sector. It contributes significantly to the industrial output, employment generation and foreign exchange earnings in India. It is also the second largest provider of employment, after theagriculturalsector.India'spositionintheglobalT&C scenario is indeed praiseworthy as it remains the world's second largest producer of textiles after China. Currently,theIndiantextileindustryisfacingchallenges due to various issues related to FTAs, technology, labour and power that are crucial for its growth. The sector needs an enabling policy environment, fiscal and export incentives, market access, raw material securitizationandinfrastructuresupport. In keeping with the UPA's entitlement based approach, the government recently promulgated an ordinance on National Food Security. It provides a legal entitlement topersonsbelongingtospecifiedhouseholdstoreceive specific quantities of food grain at subsidised prices from the state. One of the expected benefits from the new legislation is that it moves the PDS away from the APL-BPL system, which was fraught with problems of identification. Further, the prices proposed under the new legislation are highly subsidised so that it is expected to leave additional income in the hands of beneficiaries. The ordinance has a special focus on nutritional support to women and children, which is not limited to food rations. If implemented properly, there isnodoubtthattheordinancewilladdresstheconcerns on hunger and malnutrition. However, there are some serious challenges to its implementation. One of the real challenge is in terms of distribution and logistics, while rising food subsidy, lack of crop diversification andincreasingfoodinflationareitsotherdrawbacks. SectorinFocus:Textiles SpecialArticle ECONOMY MATTERS
  4. 4. 33 JULY 2013 REVISED GROWTH OUTLOOK: 2013-14 2012-13 2013-14 Rationale GDPGrowth 5.0% 5.3-5.8% 5.3-5.8 per cent for the current fiscal as compared to 6.0-6.4 per cent forecasted earlier on the back of higher-than- expected demand compression in the wake of intensification of global uncertainities coupled with fragile domestic situation. The recent weakening in the Rupee too has also reduced the probability of faster reduction in interest rates, which is also expected to impinge on growth. The only silver lining visible at the current juncture seems to be the advent of normal monsoons which is expected to cushiongrowthtosomeextent. Agriculture 1.9% 3.0-3.5% The progress of monsoons so far has been satisfactory, reflected also in the robust sowing patterns of the kharif crop. Aided by the low base and normal monsoons, agriculture is expected to grow at an above-trend rate of 3.5 per cent in the current fiscal. Consequently, we have scaled up the growth forecast of agriculture GDP to a range of 3.0- 3.5percentfrom2.5-3.5percentforecastedearlier. Industry 2.1% 3.5-4.0% IndustryGDPgrowthhasbeenscaleddowntoarangeof3.5- 4.0percentascomparedtoanearlierestimateof5.0-5.5per cent. The main reasons for this growth downgrade of the industrial sector is the continued poor performance by the sector in the wake of depressed global demand, reduced chances of RBI cutting interest rates at a fast pace, general risk aversion amongst investors and mining sector de- growth amongst other reasons. In order to lift industrial growth, its pivotal to sort out issues related to mining, and optforspeedyclearancesofprojects. Services 7.1% 6.5-7.0% ServicessectorGDPgrowthtoohasbeen revised downward to a range of 6.5-7.0 per cent as compared to an earlier estimate of 7.2-7.5 per cent. The spillovers from lower industrial growth are expected to adversely impact services sector growth in the current fiscal. However, the upside to our services sector forecast emerges from the rise in rural incomes due to better-than-expected farm sector growth and increased government spending owing to a pre-election year. WPIInflation 7.3% 5.5-6.0% We have not revised our WPI inflation forecast for the current year, despite a sharp depreciation seen in the Rupee and some firming up of crude prices owing to two main reasons: firstly, normal monsoons in the current year will help in keeping food inflation in check and secondly, slower GDP growth will help in further cooling down of demand- side pressures on inflation. However, the timing and magnitude of administered price revisions, particularly of electricity and coal, will impact the evolution of inflation trajectoryduring theyear. We have scaled down our growth forecast to a range of
  5. 5. 4ECONOMY MATTERS GLOBAL TRENDS China's Economy in the First Half of 2013: Stable and Moderate Growth the 2008 financial crisis had provided a welcome boost to global demand, and substantial progress has been made in rebalancing China's external accounts. However, it warned that the pattern of economic activity in the world's second largest economy has become too reliant on investment and credit, resulting in rising domestic vulnerabilities in the financial sector, local government finances, and real estate. Further, the report says that in addition to the Chinese authorities announcing broad range of reforms and policy objectives for 2013 to contain risks and balance growth, priority should now be focused on devising specific actionplansandimplementingthemswiftly. Further, in an interesting observation by the report, China is at the dawn of a demographic shift as the economy will soon start to be weighed down by a shrinking workforce and aging population. The working age (15-64) population will start to fall in less than a decade due to declining fertility, reflecting the one-child policy. The cohort of 25-39 year olds-the core industrial workers-will shrink even faster, with implications for the pattern of growth reliant on building new factories and finding a ready supply of workers. These demographic changes imply that China will reach a point when the supply of plentiful low-cost labor is exhausted-toward the end of the decade. As the surplus labor dwindles, labor cost will rise, which would affect prices, incomes, and corporate profits in China and would have implications for trade, employment, and price In the first half of 2013, faced with the complicated and volatileeconomicenvironmentat home and abroad,the Chinese economy performed moderately well. According to the preliminary estimation, the gross domestic product (GDP) of China in the first half of this year was 24,801 billion yuan, recording a year-on-year increase of 7.6 per cent as compared to 7.9 per cent during the same period last year. However, policy makers still seem comfortable with allowing growth to cool to "sustainable levels". Consequently, even in the face of apparent slowing growth, the Central Bank has resorted to credit tightening, giving precedence to concerns over banking sector's asset quality. Specifically, the authorities have mentioned property sector controls and new rules to curb misuse of public funds as being responsible for lower growth in the short term. They seem confident of growth meeting the officialtargetof7.5percentfortheentireyear. Growth of the first quarter was 7.7 per cent, and 7.5 per cent for the second quarter. Primary industry was up by 3.0 per cent, while secondary industry grew by 7.6 per cent in the first-half of the current fiscal. Tertiary sector has performed well, growing by a robust 8.3 per cent duringthecomparableperiod. As per the latest country assessment report published by the International Monetary Fund (IMF), China's economy is expected to grow by 7.75 per cent in the current year- broadly the same pace as last year. The report said that the resilience of China's economy since
  6. 6. 5 able to reap this economic advantage, its investment climate needs to improve, in addition to mending its governanceandrelaxingpolicyrequirements. developments in key trading partners. India is widely expected to be a key beneficiary of this demographic change in China as manufacturing activity is likely to shiftinthewakeofrisinglabourcosts.ButforIndiatobe CPIInflationintheFirst-Half In the first half, the consumer price went up by 2.4 percentyear-on-year,maintainingthesamelevelasthat in the first quarter and 0.9 percentage point lower than that in the same period of 2012. Specifically, the price went up by 2.4 per cent in cities and 2.5 per cent in rural areas. Grouped by commodity categories, prices for food rose most to the tune of 4.0 per cent, while housing prices were up 2.9 per cent in the first-half 2013. In terms of food prices, grain grew up by 5.1 per cent, oil up by 3.3 per cent, pork down by 3.7 per cent and fresh vegetablesupby2.3percentinthereportingperiod. As far as investments are concerned, in the first half, the investment in fixed assets (excluding rural households) was 18,132 billion yuan, recording a year-on-year growth of 20.1 per cent, which was 0.3 percentage point lower than that in the same period of 2012. Of this total, investment in the state-owned and state holding enterprises reached 5,734 billion yuan, an increase of 17.5 per cent; private investment reached 11,558 billion yuan, up by 23.4 per cent. Total retail sales of consumer goods registered an increase of 12.7 per cent in the first- halfof2013, whichwas 1.7percentagepointslowerthan thesameperiodlastyear. JULY 2013 1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 8.0 7.5 7.0 7.6 7.4 7.9 7.7 7.5 y-o-y% China's GDP Growth is Moderating Source: National Bureau of Statistics Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-12 Feb-13 Mar-13 Apr-13 May-13 Jun-13 5 4 3 2 1 4.5 2.7 y-o-y% CPI Inflation in China Source: National Bureau of Statistics
  7. 7. 6ECONOMY MATTERS as was planned. The policymakers in China have indicated that they will continue to maintain proactive fiscal policy and a prudent monetary policy in 2013 in order to lift the economic growth to 7.5 per cent for the year. China adopted a proactive fiscal policy and a moderately easy monetary policy to stimulate the economy due to the impact of the global financial crisis in2009and2010,whichmarkedashiftfromtheprudent fiscal policy and tight monetary policy implemented in 2008 for the purpose of bringing down inflation. To implementtheproactivefiscalpolicyinthecurrentyear, the government is expected to increase the deficit and government debt in combination with tax reform and structural tax cuts, as well as optimize government spending and improve management over local governmentborrowing. Firm recovery in China is very critical for the global economic prospects. The policy makers in the world's second largest economy would need to adopt unconventional policy measures to sustain the high economicgrowth,whichthecountryhasseeninthelast many years. The rebalancing of economic growth in favorofdomesticconsumptionwillbecrucialinorderto achievethis. However, despite subdued inflationary pressures, monetary authority in China (People's Bank of China, PBoC) stood pat and refrained from infusing easy liquidity as the PBoC wanted to encourage banks to be more prudent. Specifically, PBoC was concerned that banks were taking greater risks and increasing their off- balance sheet assets. Recent statements of PBoC officials and other Government figures seem to suggest that authorities are determined to curb off-balance sheetlendingbybanksandseemwillingtoevensacrifice a bit of growth in order to improve the banking sector's health. By the end of June, the balance of broad money (M2) was 105 trillion yuan, a year-on-year growth of 14.0 per cent, which was 1.8 percentage points lower than that in the previous month or 0.2 percentage points higherthanthatattheendofthepreviousyear. As a whole, the first half of 2013 witnessed a generally stable growth of overall economy with major indicators falling within the rational range of annual expectation. However, the economy is still faced with grim and complicated economic situation. The rebalancing towards domestic consumption from an export and investment-led growth path has not been as successful Intherecentmonths,CentralBanksofmajoreconomies have stepped up their expansionary monetary policies to deal with global growth slowdown. Considering the continued downward trends in inflation and stagnant growth, policies have been primarily aimed at monetary easing. In April 2013, Bank of Japan outlined an aggressive monetary easing framework aimed at ending deflation. In contrast, several economies across the globe have witnessed a surge in interest rates in their attempts to stem capital outflows and combat inflation. Emerging economies such as Brazil, Indonesia and Turkey are the economies that have raised interest rates as policy makers in these economies have attempted to take steps to stem capital outflows sparked by the concern that the US Federal Reserve will start to scale back liquidity injections. Reserve Bank of India also announced several liquidity tightening measures in July 2013 in order to arrest the fall in Rupee. Additionally, these economies have been also plagued with high inflation along with declining purchasing power, low consumer confidence, falling sales and slow Some Central Banks Turn the Tide; Raise Interest Rates growth. In this article, we will discuss the economic scenario prevailing in these economies, which led the respective Central Banks to raise interest rates in the past few months, as opposed to the general trend of paringrateswitnessedacrossmostglobaleconomies. Brazil is raising borrowing costs this year as above- target inflation undercuts months of government stimulus by curbing retail sales growth. In July 2013, the central bank of Brazil raised the benchmark policy rate a third consecutive time to 8.5 per cent since April 2013 amidst inflation concerns. The central bank targets inflation at 4.5 percent, plus or minus two percentage points. According to the latest data available, Brazil consumer prices increased by 6.7 per cent in June 2013 as compared to same period last year, the fastest pace since October 2011. High inflation has thus started to erode the purchasing power and consumption. As a result, retail sales, the harbinger of Brazil's economic Brazil
  8. 8. 7 JULY 2013 have recorded the steepest declines. Noteworthy, the hike in interest rates in Brazil have come on the back of slowing growth indicators including the decline of GDP forthefirstquarterofthecurrentyearto0.5percent. expansion in recent years, have continued to decline. Sales in the articles of personal and domestic use category as well as in the fuels and lubricants category Monetary Policy Changes (%) 14 12 10 8 6 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 8 6 4 2 0 6.2 6.7 Source: Banco Central Do Brasil CPI Inflation in Brazil 3.5-5.5 per cent for 2013. Inflationary pressures have exacerbated mainly on account of the recent decision by the government of Indonesia to increase prices of subsided fuel. In addition, the hike was also aimed to provide much-needed support to the flagging Rupiah, which has tumbled against the dollar owing to huge outflows of capital. In 2012, the Rupiah was the worst performing currency amongst emerging Asia, shedding 6percentagainstthedollar. Indonesia Apart from Brazil, Indonesia is another major emerging economy which has seen rise in interest rates in the past few months. Followed by the first hike in March this year, the benchmark policy rate was raised again by 50 basis points to 6.50 per cent in July 2013, mainly to combat rising inflation which rose to a high of 8.6 per cent in July 2013 as against the inflation target range of 10 9 8 7 6 5 0 01-Jan-08 01-Dec-08 01-Nov-09 01-Oct-10 01-Sep-11 01-Aug-12 01-Jul-13 6.50% Monetary Policy Changes (%) Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 10 8 6 4 2 0 8.6 y-o-y% CPI Inflation in Indonesia Source: Bank Indonesia (y-o-y%)
  9. 9. 8ECONOMY MATTERS Turkey in June 2013 stood at 8.3 percent, which is higher than the estimated course of inflation. This has been mainly attributed to the developments in the unprocessed food prices. In addition, the Turkish Lira has depreciated by 7.4 per cent this year making it weakest among emerging market currencies in Africa, Europe and the Middle-East. Hence, the central bank deemed it necessary to adopt a flexible monetary policy framework for combating inflation and stemming the declineinLira. Turkey Recently, the Central Bank of Turkey too raised the key lending rates for the first time in nearly two years, as it joined a growing list of emerging-market central banks forced to tighten policy after weeks of market pressure. The bank's Monetary Policy Committee raised its overnight lending rate by 0.75 percentage point to 7.25 per cent and signaled that it could tighten further in order to prevent inflation from rising further. Inflation in To conclude, we have seen that three emerging economies have gone against the tide in raising interest rates to support their currencies after a huge sell off sparked by signals from the Federal Reserve's that it might start to taper its multibillion-dollar bond buying program in addition to arresting the inflationary pressures in their respective economies. Their decision has also underscored the dilemma facing developing economies currently whether to focus on inflation or growth. Investors too have largely welcomed this step as the strong policy signals will not only help banks regain their credibility but also encourage market confidence. Dec-11 Sep-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 7.25 8.75 14 12 10 8 6 Monetary Policy Changes (%) Source: Central Bank of Turkey OtherGlobalDevelopmentsDuringtheMonth v v v v InUS,non-farmpayrolls(NFP)increasedby162KinJuly2013,lowerthanmarketexpectationsofanincreaseof 185K. Total job addition for May 2013 was revised lower to 176K from 195K earlier, while that for June 2013 was revised to 188K from 195K. As per the household survey, the unemployment rate fell by 20 bps to 7.4 per cent inJuly2013,thelowestlevelsinceDecember2008. BoththeEuropeanCentralBank(ECB)andBankofEngland(BoE)kepttheirkeypolicyrateunchangedat0.50 percentintheirlatestmonetarypolicyreviewsheldonAugust1,2013. Meanwhile, the Reserve Bank of Australia (RBA) reduced the benchmark rate by 25 bps to 2.5 per cent in its meetingheldonAugust6,2013.Theratecutwasprecipitatedduetobelowtrenddomesticgrowthalongwith inflationremainingwithinthetargetlevels. UK construction PMI leapt to 57.0 in July 2013, up from 51.0 in June and its strongest level since June 2010, led by a surge in residential building. Meanwhile, China's non-manufacturing PMI rebounded to 54.1 in July 2013, up from 53.9 in June 2013, after falling for three consecutive months. US manufacturing sector PMI too increasedby4.5pointsinJulyto55.4,itshighestlevelintwoyears.
  10. 10. DOMESTIC TRENDS Monsoon Update: So Far So Good September. The below graph captures the rain gap, defined as the percentage deviation from the long- period average (LPA) vis-à-vis the agriculture growth in the last decade. 2002-03, 2004-05 and 2009-10 were particularlybadyearsintermsofannualrainfallreceived hence agricultural growth remained subdued during those years. Last year, the rainfall gap was 8 per cent below the LPA resulting in an anemic 1.9 per cent growthforthefarmsector. With the Indian agriculture continuing to be driven by the vagaries of monsoons, there is no gainsaying the importance of normal monsoons for the agricultural growth. Indian economy still remains a gamble on the monsoons, as Lord Curzon once famously remarked. Originating from the southern parts of the Indian Ocean, the monsoons in India typically begin in end May/early June and last for about four months till end- Percentage growth in Agriculture % monsoon deviation from LPA 15 10 5 0 -5 -10 -15 -20 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Source: Indian Meteorological Department (IMD) Note: Highlighted years were the drought years India's Rainfall Gap (%) 9 JULY 2013
  11. 11. deficiency as "below normal". Anything lower, or less than81cm,usuallyportendsdroughtconditions. The cumulative rainfall in the first two months of South- Westmonsoons(June-July)washealthy,at16.7percent above LPA as compared to 19 per cent below LPA in the sameperiodlastyearforthecountryasawhole.Rainfall was excess/normal in 30 and deficient/scanty in 6 out of 36 meteorological sub-divisions. However, the spatial distribution of the monsoon has been little skewed so far, with east and north-eastern states, Haryana and TamilNadureceivingdeficientrainfallsofartillJuly2013. Maximum deficiency in rainfall was seen in Assam at 40 per cent below LPA, followed by Bihar and Haryana. In fact, the Delhi-Haryana-Chandigarh sub-division is facing 25 per cent rainfall deficiency, which provides the sole exception to the otherwise good rainfall in the north-west India region, which has recorded 25 per cent surplus rain. In contrast, states such as Uttarakhand have been ravaged by devastating floods, which saw thousandsofpeoplelosingtheirlives. Though the occurrence of normal monsoon is pivotal in supporting the growth rate of the farm sector every year, this fiscal it assumes greater importance in the context of the macroeconomic challenges facing the economy. As rainfall is the main source of irrigation for 55 per cent of arable land, normal rainfall received so far has alleviated to some extent the fear of exacerbating inflationary pressures. As for the current fiscal, as per the Indian Meteorological Department's (IMD) initial forecast released in April 2013, normal monsoon was expected this year at 98 per cent of the LPA of 89 cm, with a model error of plus or minus five per cent. This was certainly a good piece of news for the economy devoid of any silver linings in the past few quarters. Adding to this good news was the recently released IMD's mid-season long range forecast (LRF) for 2013 South-West monsoons, forecasting normal rainfall for August and September. The meteorological department classifies rainfall within a 4 per cent window of 89 cm as normal and a 5-15 per cent 100 80 60 20 0 -20 -40 -60 -80 June 1- July 31, 2012 June 1- July 31, 2013 Assam Bihar Haryana TamilNadu WestBengal Punjab J&K Himachal AllIndia Orissa AndhraPradesh Karanataka Rajasthan UttarPradesh Gujarat Karala Uttranchal Maharashtra MadhyaPradesh % Source: IMD & CII calculations State-Wise Rainfall Deviation from LPA Cooperation reported that the sowing of kharif crops in the country has touched 819.9 lakh hectares (lh) as on 02 August 2013, higher when compared to 734.5 lh sown duringthesame periodlastyear.Sowingofall themajor kharif crops was higher so far as compared to the previous fiscal except for sugarcane. The sowing of rice, the main kharif crop, stood at 238.8 lh, up 3.2 per cent fromthepreviousyear.Overthesameperiod,sowingof pulses was up by 26.2 per cent and of oilseeds by 19.6 percent. Concomitant with relatively strong progress in monsoons, kharif crop production in the country is expected to hit a record this year on higher than expected rains followed by record sowing. Kharif sowing starts with the onset of June and crop is harvested during September-October. Past experience has shown that July rainfall is critical since most sowing takes place by July, although late sowing continues well into August. Department of Agriculture and 10ECONOMY MATTERS
  12. 12. positiveimplicationsforthedomesticpoultryindustry. Kharif crop output touched an all-time high of 131.3 million tonnes in 2011-12. But kharif production had fallen in 2012-13 because of the drought in Karnataka, Maharashtra, Gujarat and Rajasthan. Timely sowing this year will ensure crops get adequate time to mature. The higher kharif output this year is expected to cool food inflationaswell. The area under cotton, another important kharif crop, hassurgedby7.3percentto108.5lh,andthisbodeswell for the textile industry. In 2012-13, domestic cotton output had declined four per cent to 34 million bales owing to a drought in the main cotton producing states of Gujarat and Maharashtra. This had also impacted cottonexportslastyear.Further,thecoverageofcoarse cereals went up by 20.1 per cent to 163.1 lh. This has 11 JULY 2013 Crop Areasownin2013-14(lakhhectares) Areasownin2012-13(lakhhectres) y-o-y%Change Rice 238.9 231.4 3.2 Pulses 79.5 63.0 26.2 CoarseCereals 163.1 135.8 20.1 Oilseeds 173.2 144.9 19.6 Sugarcane 48.5 50.1 -3.1 Cotton 108.5 101.1 7.3 Jute&Mesta 8.3 8.4 -0.7 Total 820.0 734.6 11.6 Source: Ministry of Agriculture Trend in Sowing of Kharif Crops (As on August 2, 2013) Outlook The progress of South-West monsoon has been good so far, with the overall country receiving 17 per cent rainfall above LPA till end of July 2013. However, the skewed spatial pattern of rainfall cannot be missed as we have seen excess rains causing floods in states such as Uttarakhand, while below normal rains in states such as Assam, Haryana, West Bengal etc have created problems. Notwithstanding this uneven distribution of rainfall, the sowing of major kharif crops has remained robust so far, raising hopes for another year of bumper harvest of food grains. Thisnewsofabovenormalmonsoonhascomeasasilverliningfortheotherwisebeleagueredeconomyandshould in all probability have a positive impact on the overall growth prospects of the economy, in addition to cooling of foodinflation.
  13. 13. On the expenditure front, the non-plan expenditure was at Rs 2,674 billion in the April-June 2013 quarter, which is 24 per cent of the BE of Rs 11,099.8 billion. This was 23.2 per cent in the corresponding period last year. Also, the plan expenditure was higher than what it was in June 2012. The Centre's plan expenditure was Rs 1,148.3 billion in the first quarter of the current fiscal which was 20.7 per cent of the BE of Rs 5,553 billion. The upside risk to non-plan expenditure has increased significantly in the wake of expected implementation of the Food Security Bill. Additionally, the recent weakeningoftheRupeehasraisedtheupsiderisktothe oilimportbill,whichwouldpulluptheoilsubsidestoo. Owing to the slow growth witnessed currently, growth in revenue receipts has at best remained tepid. In the first quarter of the current fiscal, the revenue receipt stoodatRs1172.3billionwhichis11.1percentoftheBEof Rs 10,563.3 billion, against 12.7 per cent in April-June 2012 quarter. Tax collections have also remained muted. Tax revenue stood at only Rs 1,019.1 billion which was 11.5 per cent of the BE of Rs 8840.8 billion in the first- quarter. However, there was a surge in corporate tax collection as Rs 507.3 billion was collected till June, two per cent higher than Rs 494.1 billion collected in the corresponding period last year. Non-tax revenue receiptsontheotherhand stood at Rs 153.2 billion in the reporting quarter, which was 8.9 per cent of the BE as compared to 8.6 per cent in same period of last year. Disinvestment proceeds so far have also remained under Rs 10 billion, against the target of Rs 400 billion fortheyear. The government was able to deftly trim the fiscal deficit for2012-13at4.9 percentofGDP,waybelowtherevised estimates of 5.2 per cent, mainly due to significant expenditure compression coupled with higher mop-up by the way of non-tax revenue collection. In order to meet the current year target of 4.8 per cent of GDP, government needs to take major initiatives to prop up both tax and non tax revenues, so that the onus does not entirely fall on expenditure moderation. As per the government's fiscal consolidation plan, fiscal deficit is expectedtodeclineby0.6percentagepointseveryyear toreach3.0percentofGDPin2016-17. As per the latest numbers released by the Controller General of Accounts (CGA), Centre's fiscal deficit during thefirstquarterjumpedtoRs2,628billionoralmosthalf of the budgeted target for the entire 2013-14 as comparedto37percentinthesameperiodoflastfiscal. ThemainreasonforthehighfiscalgapduringApril-June was the sluggish revenue growth even though government spending remained robust. While total expenditure in the April-June quarter in the current year stood at 23 per cent of the budget estimate (BE) as compared to 20.9 per cent in the corresponding period last year, total receipts have come down from 12.4 per cent of the BE to 10.6 per cent of the BE in the first quarter of the current fiscal. Grim revenue growth is attributable to the sluggish economic growth. Further, net government market borrowings in the first-quarter stood at Rs 1,763 billion, which was 35 per cent of the budgetedlevelsfortheyear. 12ECONOMY MATTERS First Quarter Fiscal Deficit Hits a Record High (Rsbillion) BudgetEstimates(BE) April-June(Actual) PercentagetoBudgetEstimates 2013-14 2013-14 2012-13 2013-14 1. RevenueReceipts(i+ii) 10563.3 1172.3 12.7% 11.1% (i)TaxRevenue(net) 8840.8 1019.1 13.6% 11.5% (ii)Non-TaxRevenue 1722.5 153.2 8.6% 8.9% 2.Non-PlanExpenditure 11099.8 2674.0 23.2% 24.1% 3.PlanExpenditure 5553.2 1148.3 16.5% 20.7% 6.TotalExpenditure 16653.0 3822.3 20.9% 23.0% 7.RevenueDeficit 3798.4 2104.8 43.6% 55.4% 9.GrossFiscalDeficit 5425.0 2628.2 37.1% 48.4% Fiscal Trends in the First Quarter of 2013-14 Source: Controller General of Accounts (CGA)
  14. 14. to 0.5 per cent of the NDTL of the banking system, reckoned at Rs 375 billion for this purpose. The allocation to individual banks will be made in proportion to their bids, subject to the overall ceiling. This change in LAF came into effect from July24,2013. The Reserve Bank will conduct Open Market Sales of Government of India Securities of Rs 120 billion onJuly18,2013.Detailsofthesecuritiesincludedfor the OMO sale auction will be announced through a separatepressreleasetomorrow. The RBI also raised the daily balance requirement for the Cash Reserve Ratio to 99 per cent from 70 th percent,effectiveJuly27 ,2013. Additionally,theRBIwillalsoauctionRs60billionof CashManagementBills. n n n (A). Monetary Tightening Measures Announced by the RBI n n In the month of July 2013, the Reserve Bank of India (RBI) announced policy measures to support the Rupee that has been has been witnessing heavy depreciation pressure over the last 2 months. Against this backdrop, thefollowingmeasureshavebeenannounced: The Marginal Standing Facility (MSF) rate was recalibrated with immediate effect to be 300 basis points above the policy repo rate under the Liquidity Adjustment Facility (LAF). Consequently, the MSF rate will now be 10.25 per cent. Accordingly, the Bank Rate also stands adjusted to 10.25percentwithimmediateeffect. TheoverallallocationoffundsundertheLAFlimited 13 JULY2013 Outlook Given the current trends, significant shortfall in tax revenues is likely in the current fiscal. Realisation of budgeted disinvestment proceeds crucially hinges on market conditions. It should, however, be kept in mind that the fiscal consolidation should not happen at the cost of curtailing government expenditure on plan/capital heads, which, alongwithremovalofstructuralimpediments,iscriticalforcrowdinginprivateinvestmenttopulltheeconomyout ofthecurrentslowdown. Key Policy Developments During the Month CIIView With these measures, the RBI's intention is to tighten the liquidity scenario further and shift the operating interest rate from repo (i.e. 7.25 per cent) previously to Marginal Standing Facility (i.e. 10.25 per cent) now. With the advent of tighter liquidity conditions in the system, cost of funding for financial institutions is likely to go up. Along with this, tighter liquidity also means that interest rates across the board will witness an uptick, which is a negative for growth.Sincethiskindoftighteningofliquidityiseffectivelyareversalintheaccommodativemonetarypolicy,this islikelytohaveadversegrowthconcernsgiventhefactthatourrecoveryisnownascentatbest. Cabinet on July 16th and August 2nd, 2013 approved the proposal for reviewing FDI (Foreign Direct Investment) caps and routes across various sectors, which are summedupbelow. (B). Relaxation of FDI Norms for Some Sectors In order to relax foreign investment norms, the Union
  15. 15. 14ECONOMY MATTERS Sector Cap Route 1. Petroleum and Natural Gas and Refining 49% Automatic 2. Commodity Exchanges 49% Automatic 3. Power Exchanges 49% Automatic 4. Stock Exchanges, Depositories, Corporation 49% Automatic 5. Asset Reconstruction companies Upto 49% Automatic 49% to 100% FIPB 6. Credit Information companies 74% Automatic 7. Single Brand Retail trading Upto 49% Automatic 49% to 100% FIPB 8. Basic and Cellular Services, etc. Upto 49% Automatic 49% to 100% FIPB 9. Courier Services 100% Automatic 10. Defence Production CCS may approve proposals on case to case basis beyond 26% which are likely to result in access to modern and state of the art technology in the country. 11. Telecom Services Upto 49% Automatic 49% to 74% FIPB Source: Press Information Bureau (PIB) Government Relaxes FDI Norms for Some Sectors CIIView CII welcomes the decision of the Cabinet to endorse the announcements of the government on raising caps on FDI for a wide array of sectors and also for moving sectors into the automatic route. This is a commentary on the commitment of the government to taking reforms forward at a time when the economy is in need of many such measures. The present situation on the current account deficit front necessitates greater foreign funds flow and therefore, CII hopes that we shall see FDI interests in these sectors soon, keeping with the medium-term promise thatIndiapresents.
  16. 16. 15 Prospects Sink as Firms Struggle to Shield Their Bottom Line extracted from the Ace Equity database as on July 31, 2013. Growth in net sales, on an aggregate basis, dropped to 5.0 per cent in the first quarter of 2013-14, as compared to 19.3 per cent in the first quarter of the previous fiscal. As a result of depressed domestic demand as well as weak export growth, this downward trend in growth of net sales has been persistent for more than ten quarters now.Whilethenetsalesgrowthinmanufacturingsector plunged to 0.6 per cent in the first quarter of the current fiscal, as compared to a growth of 14.6 per cent in the comparable quarter last year, the growth in net sales in the service sector moderated sharply to 11.0 per cent as comparedto26.1percentinthefirstquarterof2012-13. Indian firms remain plagued by stagnant net sales and poordomesticdemand,inthefaceofheadwindssuchas sliding rupee, weak export growth and high retail inflation in the first quarter of the current fiscal. While revenues have been plummeting sharply, corporate sector continues to pull expenses down against the backdrop of a clouded economic outlook. In face of dwindling net sales growth, rise in profitability came as the much needed respite, attributable mainly to moderationinexpenditurecosts. Theanalysisofthecorporateinthissectionfactorsinthe financial performance during the first quarter of 2013-14 and uses a balanced panel of 358 manufacturing companies (excluding oil & gas) and 166 services firms CORPORATE PERFORMANCE JULY 2013 Growth in Net Sales (y-o-y%) 0 5 10 15 20 25 30 Manufacturing Services Aggregate 14.6 0.6 26.1 11.0 19.3 5.0 FY14Q1 FY13Q1 Source: Ace Equity database & CII calculations
  17. 17. 16ECONOMY MATTERS The cost of services and raw materials component displayed a de-growth to the tune of 4.7 per cent in the first quarter of 2013-14 as compared to a growth of 13.7 per cent in the corresponding quarter last year. Similarly, salaries & wages too showed a deceleration in growth which stood at 15.4 per cent in the reporting quarter as compared to a growth of 20.9 per cent same period last year. This could be an early indication of slowdown impacting the growth in income, even as the retail inflation continues to hover around the double- digitmark. The expenditure costs of the firms, on an aggregate basis, witnessed moderation to 3.1 per cent in the reporting quarter, as compared to 20.1 per cent in the comparable time period last year. This came as a breatherandfairlycushionedthesevereimpactoflower net sales growth during the quarter. The decline in growth of expenditure costs was driven largely by a decline in the growth of interest cost, which stood at 8.4 per cent in the first quarter of 2013-14 as compared 30.1 per cent in the same period last year. This mirrors the reduction in interest rates by the RBI in the recent monthsandalsotheslowdowninnewprojects. Growth in Expenditure (y-o-y%) -4.7 20.9 13.7 15.4 25.1 16.4 FY13Q1 FY13Q2 FY13Q3 FY13Q4 FY14Q1 FY13Q1 FY13Q2 FY13Q3 FY13Q4 FY14Q1 FY13Q1 FY13Q2 FY13Q3 FY13Q4 FY14Q1 Services & Raw Materials Wages & Salaries Interest Source: Ace Equity database & CII calculations firms, PAT growth moderated to 14.0 per cent as compared to a growth of 18.8 per cent in the first quarterofpreviousyear. Growthinoperatingprofits(profitsearnedfromafirm's corebusinessoperationsexcludinginvestmentsandthe effects of depreciation, interest and taxes) on an aggregate basis saw a slight moderation to 12.1 per cent in the April-June, 2013 quarter as compared to a growth 13.9 per cent in the first quarter of last year. PAT growth decelerated at a much faster rate than growth in operating profits due to high interest rates prevailing in theeconomy. Encouraging signs were displayed by an improvement in thebottomlinegrowthacrossthefirmsonanaggregate basis, despite a dip in Profit after Tax (PAT) growth in service sector, attributable to the improvement in profitability in the manufacturing sector. The growth in profitabilityonanaggregatebasisstoodatahealthy12.4 per cent in the reporting quarter as compared to a growth of 5.7 per cent in the comparable quarter of previous fiscal. This was driven by an improved PAT growth to the tune of 10.9 per cent in the manufacturing sector against a contraction of 4.0 per cent in the first quarter of 2012-13. However, across the service sector
  18. 18. 17 JULY 2013 Growth in PAT (y-o-y%) Source: Ace Equity database & CII calculations Growth in PBDIT (y-o-y%) -10 -5 0 5 10 15 20 -4.0 10.9 18.8 14.0 5.7 12.4 FY14Q1 FY13Q1 Manufacturing Services Aggregate Manufacturing Services Aggregate FY14Q1 FY13Q1 0 5 10 15 20 25 4.9 1.5 22.5 20.6 13.9 12.1 profitability, despite falling net sales, has been possible only since the contraction in outlays has surpassed contraction in net sales. Consequently, ignoring the anomalous data for the third quarter of 2012-13, the growth in PAT has shown an upward trend since the decline in growth of expenditure costs has exceeded thedeclineingrowthofnetsales. Forovertwopreviousfinancialyears,growthinnetsales has shown a consistent decline. Interest rate cuts, moderation in cost of services and raw materials and cost efficient measures employed by the firms in order to mitigate the poor demand scenario, have yielded in simultaneous stable reduction in expenditure costs. However, the growth of profitability has displayed varying trends. Our analysis reveals that a rise in Growth on Aggregate Basis (y-o-y%) 0 10 20 30 40 -10 -30 -20 22.8 5.7 12.4 FY12Q1 FY12Q2 FY12Q3 FY12Q4 FY13Q1 FY13Q2 FY13Q3 FY13Q4 FY14Q1 Net Sales Expenditure PAT Source: Ace Equity database & CII calculations quarter as compared with corresponding quarter in the previous year. The betterment in margins mirrored the improvedprofitabilityinthereportingquarter. Both net margin (ratio of PAT to net sales) and gross margins (ratio of operating profits to net sales) saw an improvement across manufacturing as well as service firms, and thus also on aggregate basis in the reporting
  19. 19. 18ECONOMY MATTERS Simultaneously, there are also expectations of some more economic reforms from the policymakers that would elevate the economy, help pick-up sales and boost the infrastructure and profitability for the Indian corporateinthemonthstocome. Struck with lackluster demand in the economy, diminishing balance of trade, burgeoning trade deficit, weak sales, efforts are in force by firms to improve their own production efficiencies and employ cost effective measures to tide over the current difficult times. Manufacturing Services Aggregate 0 5 10 15 20 FY14Q1 FY13Q1 11.7 12.8 14.1 14.5 12.7 13.6 Source: Ace Equity database & CII calculations Gross Margin (%) Net Margin (%) Manufacturing Services Aggregate 0 10 20 30 40 18.8 19.0 30.9 33.6 24.0 25.7 FY14Q1 FY13Q1
  20. 20. The textile and clothing (T&C) industry is one of the leading sectors of the Indian economy and constitutes major part of the industrial sector. It contributes significantly to the industrial output, employment generation and foreign exchange earnings in India. About 14 per cent of industrial production, 4 per cent of GDP, 9 per cent of excise collections and 11 per cent of the country's export earnings are contributed by the T&C sector. It is also the second largest provider of employment, after the agricultural sector, with direct employment of over 35 million people (another 50 million are engaged in allied activities), which includes a substantial number of SC/ST, women, and economically weaker section of population. India's position in the global T&C scenario is indeed praiseworthy as it remains the world's second largest producer of textiles after China. It is also the world's largest producer of jute, secondlargestproducerofsilk, thirdlargestproducerof cotton-after China and the US. In the man-made fibre sector, India is the third largest producer of Cellulosic Fibre/YarnandfifthlargestproducerofSyntheticFibres. However the sector faced severe headwinds from the global financial crisis of 2008-09, only to recover in the subsequent years but once again face the heat from the current bout of slowdown. Exports especially faced the major brunt of the slowdown, with T&C exports declining by over 4 per cent in 2008-09. Due to the stimulus doled out by the government, exports picked up in the subsequent years, growing by a massive 57 per cent by 2011-12. However, during the calendar year 2012, the volatility in the EU market severely affected India's SECTOR IN FOCUS Textiles T&C exports to EU, resulting in a US$1.3 billion shortfall of India's T&C exports to EU. In 2012-13, textiles exports fell by 4.8 per cent over the previous year. Thus, the textile sector is still facing headwinds, due to weak demandinglobalmarkets,mainlyfromUSandEurope. The major sub-sectors of the textiles sector are cotton industry, the jute & jute textiles industry, the man-made fibre / filament yarn industry, the wool & woolen textiles industry, the sericulture & silk textiles industry, and the handlooms & handicrafts. These segments have all registered positive growth in output post the Multi- Fibre Agreement (MFA) regime, which expired on January 1, 2005. Under the MFA regime, India and other developing countries had faced restrictions on exports ofyarn,textilesandapparelsfromthedevelopedworld. Cotton textiles continue to form the predominant base of the Indian textile industry, though other types of fabric have gained share in recent years. It is one of the principal crops of India and plays a vital role in the country's economic growth by providing substantial employment and making significant contributions to export earnings. There has been a significant yield improvement in India since the adoption of genetically modified (GM) and hybrid cotton (BT) varieties in 2003- 04. Consequent to the introduction of these new and superior varieties of cotton, the sector was able to TrendsinProduction Cotton 19 JULY 2013
  21. 21. 20ECONOMY MATTERS production levels in the last fiscal, the increase in cotton production over the past years has shifted India from beingasmallnetimporterofcottonintheearly2000sto being a substantial net exporter in recent years. Currently, India is the second largest exporter of cotton behindtheUS. increase its production levels over the years. However, in the financial year 2012-13, cotton production is expected to moderate to 334 lakh Bales as compared to 353 lakh bales in 2011-12, mainly due to lower cotton prices leading to lower cultivation area and slower global demand. Notwithstanding the decline in Source: Based on reports of Ministry of Textiles and Cotton Advisory Board (2012-13) Production of Cotton estimated world production. Bulk of the manufactured jute goods is predominantly being used in packaging purposes in domestic market. Between 2008-09 and 2012-13, jute production shrank by 2.6 per cent. Further, Bangladesh has emerged as a significant competitor to the traditional jute industry in India. Thus, in years to come it is imperative that concerted efforts are taken by the government to improve the sectors output. FurtheringoftheNationalJutePolicyannouncedin2005 isanimportantstepinthisdirection. Jute The Jute industry occupies an important place in the national economy of India. It is one of the major industries in the eastern region, particularly in West Bengal and Raw jute crop is an important cash crop to the farmers. Cultivation of raw jute crop provides not only fibre which has industrial use, but jute stick which is used as fuel and building material by the farming community. India is the leading jute goods producing countryintheworld,accountingforabout70percentof Trends in Production of Jute Goods Source: Office of the Jute Commissioner, MoT Lakh Bales 400 300 200 Production of Cotton 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Qty. in 000' M.tons 2000 1800 1600 1400 1200 1000 Total Production
  22. 22. 21 which muga with its golden yellow glitter is unique and prerogative of India. During 2012-13 (April- Jan'13), raw silk production in the country was 17,887 MT compared to 17,483 MT in 2011-12 recording an increase of 2.3 per cent. Weak demand due to growth slowdown, weakeningofIndianRupee,higherproductioncostsand toughcompetitionfromChinaaresomeoftheproblems th plaguing the sector currently. The 12 Five year plan has taken some important steps to address these problems such as inclusion of sericulture industry as agriculture & alliedactivityunderRashtriyaKrishiVikasYojana(RKVY). Sericulture&Silk India is the second largest producer of silk in the world and has 17.5 per cent share in global raw silk production, only next to China. It is also the largest consumer of raw silk in the world. But as production lags behind consumption, the balance is imported from China. India has the unique distinction of being the only country producing all the five known commercial silks, namely, mulberry, tropical tasar, oak tasar, eri and muga, of Rajasthan, Punjab, Jammu & Kashmir, Karnataka, Gujarat, Uttar Pradesh, Uttaranchal, Andhra Pradesh, Maharashtra and Haryana. India is the seventh-largest producer of wool and accounts for nearly 2 per cent of totalworldproduction. Wool The woolen sector is a highly organized and decentralized sector and major part of this industry is rural based. The main wool producing states of India are theorganizedmillsandthedecentralizedhosierysector is very limited, India depends largely on import; Australia and New Zealand being the major suppliers. The production trends of this industry have been largely inconsistent over the last few years. Since the indigenous production of fine quality wool required by JULY 2013 Production of Raw Silk Source: Central Silk Board MT 25000 20000 15000 Total Raw Silk Produce 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 The Woollen Industry in India Broadly Falls Under Two Sectors: OrganisedSector DecentralizedSector CompositeMills HosieryandKnitting Combingunits Powerlooms Worstedandnonworstedspinningunits HandKnottedCarpets,DruggetsandNamdahs KnitwearandWovenGarmentsUnits Independentdyeingprocesshouses Machinemadecarpetsmanufacturingunits
  23. 23. 22ECONOMY MATTERS th Total Production declined marginally at the end of 11 Five Year Plan (2011-12) to 44.7 million kg from 45.1 th million kg in the 10 Five Year Plan (2006-07). At present, the main problems plaguing the woolen sector are the high import duty structure, presence of long chain of intermediaries and availability of wool in desired quality andquantity,whichhaveallpreventedtheindustryfrom improvingitscost-competitiveness. Handloom The handloom sector is the second highest employer in the country after agriculture. The sector accounts for 13 per cent of the total cloth produced in the country, excluding wool, silk and handspun yarn. The richness and diversity in this sector has been kept alive by skilled weavers engaged in the age old tradition of weaving. The sector is weighed down by several problems such as obsolete technology and unorganised production system. The economic downturn in 2008 had left all the sectors badly hit and the handloom sector was no exception. However, with revised policies and increased allocation of funds, the production increased to 6.9 million sq. meters in 2012-13, up from 6.6 billion sq. metersin2008-09. Fabric&Yarn Indiaisamongthetopproducersofyarns&fabricsinthe world and accounts for 12 per cent of the world's production of textile fibres & yarn. Man-made yarn has driven much of this, showing a robust growth of 4.3 per cent in the last five years. Spun yarn production has also shown a steady growth, increasing by over 17 per cent between 2007-08 and 2011-12. In 2012-13, the production of spun yarn stood at 4850 mn kgs. During this period, fabric production increased by over 4 per cent, driven primarily by small scale, decentralized power loom sector. Production of Indigenous Wool Source: Dept. of Animal Husbandry, Ministry of Agriculture Million Kg 45 44 43 42 Production Quantity 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Production of Yarn Source: Office of the Textile Commissioner Note: P- Provisional Million Kgs 5000 4000 3000 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(P) Total Spun Yarn Production Production of Fabrics Million Sq. Mtrs. 64000 62000 60000 58000 56000 54000 52000 50000 Total Fabric Production 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(P)
  24. 24. 23 TrendsinExports In the global exports of Textiles, India has been ranked as the third largest exporter, trailing EU-27 and China whileintheglobalexportsofClothing,Indiaisrankedas the fifth largest exporter as per latest WTO data (2011). T&Cexportshavecomealongwaywiththeirtotalvalue rising from US$17.52 billion in 2004-05 to US$31.7 billion in 2012-13, thus recording a massive growth of more than 80 per cent. However, as per the provisional data, textile exports in 2012-13 came lower than the target of US$40.5 billion for the year and registered a decline of 4.8percentoverthepreviousyear. Government has been continually supporting the textiles exports through various policy initiatives to enable the sector to increase market share in the global textiles markets. Some of the measures have been introduced in the Union Budget 2013-14 and in the annual supplement to the Foreign Trade Policy 2009-14. These measures include schemes such as incentives under Focus Market Scheme and Focus Product Scheme; enhancing the coverage of Market Linked Focus Product Scheme for textile products and extension of Market Linked Focus Product Scheme etc. to increase India's share in various countries amongst othermeasures. The USA and the EU account for about two-thirds of India's textiles & clothing exports. Exports to the US have further increased since 2005, post the termination of the MFA. The other major export destinations include China, U.A.E., Sri Lanka, Saudi Arabia, Republic of Korea, Bangladesh, Turkey, Pakistan,Brazil,Hong-Kong,CanadaandEgyptetc. FinancialPerformance OverallfinancialperformanceoftheIndianT&Cindustry was robust in the last fiscal year. Net sales saw an upsurge from Rs 640.8 billion in 2008-09 to Rs 1211.4 billion in 2012-13, thus growing by an astronomical 89 per cent during the four year period. Analysis reveals that during 2009-10 and 2012-13, net sales recorded a high growth primarily due to growth in the domestic market, along with overall rise in exports. Profit after Tax (PAT), in general, exhibited a robust performance after 2010, growing by over a 1000 per cent in 2012-13 over the previous year. The rise in PAT could be credited to the fall in the growth of raw materials costs, accompaniedbyafallingrowthofinterestcosts. JULY 2013 Source: Ministry of Textiles, GoI Note: The years are calendar years Top 10 Exports Destinations for India's T&C (US$ million) 2011 2012 % Change US 5779 5994 3.7 China 2928 3907 33.5 UAE 2162 2172 0.5 UK 2087 2080 -0.4 Germany 1959 1567 -20.0 Bangladesh 1101 1659 50.7 Italy 1030 774 -24.8 France 1017 823 -19.1 Spain 814 732 -10.0 Turkey 731 659 -9.9 Netherlands 728 626 -14.0
  25. 25. 24ECONOMY MATTERS Source: Ace equity database & CII calculations Financial Performance of the Textiles Industry Net Sales (Rs billion) 640.8 750.7 963.9 1070.5 1211.4 Net sales growth (%) 8.5 17.2 28.4 11.1 13.2 Operating profit growth (%) -8.8 57.2 37.4 -13.6 30.3 PAT growth (%) -184.5 -253.6 102.5 -95.8 1088.5 Cost of raw materials and services 5.6 16.9 35.0 16.1 6.9 growth (%) Cost of interest growth (%) 45.7 9.6 15.7 41.3 13.6 2008-09 2009-10 2010-11 2011-12 2012-13 stakeholders in the entire textile value chain with varied expectations and work to reduce the fragmentationthathasimpactedthesector. A reduced duty structure is a common suggestion. Also, there is a need to reduce excise duty on man- madefibres. Create new textiles cities in the proposed Mumbai - Delhi Industrial corridor and the new Mumbai - BangaloreIndustrialcorridor. As the garment industry will drive growth in the textile sector, it has to play the lead role ahead. The industry needs to move into rural areas and work closelywithStateGovernmentsforthis. Policy measures should encourage the development of the synthetic industry. We need to look at multi- fibre and work on a fibre neutral policy. Therefore, there is an urgent need to announce the National Fibre Policy to address all the areas relating to raw material. There is an urgent need to create a "Made in India" Brand in Textiles to dictate the Indian story worldwide. There is large potential in the international market. Further disruption of textiles production in Bangladesh and the subsequent fall in the foreign demand of its products has given India a comparativeadvantage. In the end, industry has to come up with a code of conduct as industry is fragmented. There is a need for the creation of one national level apex body that can be the nodal organization to work towards a larger cause / common goals. This body can help in the revamping of various sectoral and regional textilepromotioncouncils. n n n n n n The government announced several measures to support the textiles sector in the Union Budget 2013-14, like extending the term of the Technology Up gradation th Fund Scheme (TUFS) to the 12 Plan period with an investment target of Rs. 1,51,000 crore, allocation of Rs. 50 crore to the Ministry of Textile to incentivize setting up of Apparel Parks within the SITPs, a new scheme with an outlay of Rs. 500 crore called the Integrated Processing Development Scheme proposed to be th implemented in the 12 Plan to address the environmental concerns of the textile industry and extending concessional loans to the distressed handloom sector, amongst other measures. Further, in the Foreign Trade Policy for 2013-14, some more welcome steps were announced by the sector like extension of the 2 per cent Interest Subvention Scheme applicable to specific textile sectors such as handlooms, readymade garments, carpets etc by one more year, i.e., st up to 31 March, 2014. However, it is important that these measures are supplemented by some 'out of the box' steps too. Some of the measures which CII recommendsinthisregardareenumeratedbelow: ILO allows 50 hours overtime per month while Indian law allows 50 hours overtime per quarter. The Ministry of Textiles needs to work with the Labour ministry to resolve this issue. The issue of time flexibilityalsoneedstobeaddressed. Textile industry has been power intensive and since, power cost constitutes a significant part of the total conversion cost in textile industry, we need to work on a Government - industry sharing model on power generation. The existing textile policy was announced in the year 2000 needs a major revamp. The comprehensive policy should recognize the multitude of n n n
  26. 26. 25 JULY2013 The National Food Security Ordinance (NFSO) provides a legal entitlement to persons belonging to specified households to receive specific quantities of foodgrain at subsidised prices from the state. The specifics of the entitlementaregivenbelow: Entitlement:5kgperpersonpermonth Price:Rs3perkgforrice,Rs2perkgforwheatandRs1perkgforcoarsegrains Coverage: 75 per cent of the rural population and 50 per cent of the urban population, amounting to about two- thirdofapopulationof1.2billionpeople(or800millionpeople) The poorest of poor households (who are currently covered under the Antyodaya Anna Yajna) would continue to receive35kgfoodgrainsperhouseholdpermonthatthesubsidizedpricesofRs3,Rs2andRs1. Parliament had begun debating the Bill in the last few days of the Budget session, it could not be passed. While thegovernmenthaspassedanordinance,thelawwillbe debated in the monsoon session of Parliament which th began on August 5 . This note will highlight the key features of the law and its expected welfare benefits as wellasconcernsexpressedbydifferentstakeholders. In keeping with the UPA's entitlement based approach, the government recently promulgated an ordinance on National Food Security. The ordinance route has been chosen by the government even though the monsoon th session of Parliament began on August 5 , 2013. The Bill was originally introduced in Parliament in December 2011 and the standing committee has submitted its recommendations. However, although members of The National Food Security Ordinance – Benefits and Concerns SPECIAL ARTICLE NFSO, 67 per cent of the population will be entitled tosupportwithoutanycategorisation. Second, the AAY and BPL households are allocated 35 kg foodgrains per month while allocation to APL households is subject to availability of food grains. Under the NFSO, only AAY households will continue n Three critical differences with the existing targeted publicdistributionsystem(TPDS)maybepointedout. One, in the existing TPDS, there are two categories of beneficiaries: below poverty line (BPL) including the poorest beneficiaries under Antyodaya Anna Yojana (AAY) and above poverty line (APL). Under n Key Features of the Ordinance
  27. 27. 26ECONOMY MATTERS to get 35 kg while all others will have a 5 kg per personentitlement. Third, different prices are charged to different categories of households. Currently, the per kg Central Issue Prices of wheat / rice are Rs 2/3 for AAY, Rs.4.15/ 5.65 for BPL households and Rs.6.10/ 8.30 for APL households respectively. Under the new scheme, all categories will be charged a uniformprice. One of the expected benefits from the new legislation is that it moves the PDS away from the APL-BPL system, whichwasfraughtwithproblemsofidentification.Ithas beennoticedinrecentsurveysthatstateswhichgaveup the targeting principle and made the PDS as universal as possible have been able to reduce leakages more successfully. Currently, although all BPL households are entitled to subsidised food grain from the PDS, much more than half do not access the system due to lack of proper identification. The new system will be based on excluding the top 33 per cent of the population rather thanidentifyingthepoor.Itwill,therefore,alsoincludea large number of people who may be above the poverty linebutstillneedadequatenutrition. Further, the prices proposed under the new legislation are highly subsidised so that it is expected to leave additionalincomeinthehandsofbeneficiaries.Theprice that was earlier applicable only to AAY households will now be applicable to all beneficiaries. CRISIL Research has estimated that the NFSO could generate additional annual savings of about Rs 4,400 for every BPL household that purchases subsidised food grain, enabling them to allocate more to other areas such as health,educationandnutritiousfood. The Ordinance has a special focus on nutritional support to women and children, which is not limited to food rations. Pregnant women and lactating mothers will be entitled to nutritious meals as per the prescribed nutritional norms and also receive maternity benefit of at least of Rs 6,000. Children in the age group of 6 monthsto14yearswillbeentitledtotakehomerationor hot cooked food as per prescribed nutritional norms. n ExpectedBenefits Children suffering from malnutrition will be entitled to mealsthroughthelocalanganwadi. If implemented properly, there is no doubt that the NFSO will address the concerns on hunger and malnutrition. However, there are some serious challenges to its implementation. The main issue is that food distribution continues to be dependent on the existing PDS, which is known for its inefficiency and leakages. The NFSO will require a significant increase in the scale of procurement and distribution of grains, creating huge pressure on the existing infrastructure which is already considered inadequate. Several unintended macroeconomic consequences such as rising food subsidy, lack of crop diversification and increasing food inflation may also follow. We examine theseinthefollowingsection. The food subsidy bill under NFSO is expected to increase substantiallyonaccountoftheincreaseinthenumberof beneficiaries, lower price to beneficiaries envisaged under the new scheme together with the need to increase MSP to farmers to incentivise them to increase production. The government has estimated the annual food grain requirement under NFSO at 612.3 lakh tons and the corresponding food subsidy at Rs 124,724 crore for 2013-14 costs. This is higher than the estimated food subsidy of Rs 90,000 crore in the Budget for 2013-14 and is clearly an indication that subsidies can be expected to riseinthecomingyears. The graph below shows that food subsidy has already been on a rising trend, having more than doubled in the last five years and increased five times in the last ten. Record procurements in recent years, increasing cost of handling grains and widening difference between the procurement cost of grains and the central issue price have been the major factors leading to the ballooning food subsidy. The food security legislation will substantially increase this burden, contrary to the Finance Ministry's intention of getting subsidies under control. CausesforConcern 1. RisingFoodSubsidy
  28. 28. 27 JULY 2013 While committing such a large amount of resources (likelytobeabout1percentofGDP)tofoodsecurity,the government would need to ensure an efficient delivery mechanism. While some states have done well in targeting beneficiaries, current data suggests that there are substantial leakages from the PDS. For example, while the off-take of rice and wheat under PDS was 42.4 million tons in 2009-10, NSS data shows that only 25.3 million tons of PDS grains were actually consumed. This suggests a leakage of 40.3 per cent. Although the Ordinance contains provisions for application of ICT and use of Aadhar, implementation on the ground remains a challenge. MSP of Paddy and Wheat (Rs per quintal) 2000-01 510 540 550 2001-02 530 560 580 2002-03 550 580 610 2003-04 550 580 620(+Rs.10asdroughtrelief) 2004-05 560 590 630 2005-06 570 600 640 2006-07 580(+Rs.40bonus) 610(+Rs.40bonus) 650(+Rs.50asbonus) 2007-08 645(+Rs.100bonus) 675(+Rs.100bonus) Rs.750(+Rs.100asbonus) 2008-09 850(+Rs.50bonus) 880(+Rs.50bonus) 1000 2009-10 950(+Rs.50bonus) 980(+Rs.50bonus) 1080 2010-11 1000 1030 1100 2011-12 1080 1110 Rs.1120(+Rs.50asbonus) 2012-13 1250 1280 1285 2013-14 1350 Paddy-common Paddy-GradeA Wheat 2. LackofCropDiversification A related concern is that food security defined purely in terms of cereal availability will require the government to provide incentives to farmers to keep producing adequate quantities of grain to the detriment of other crops. Already, this has been the trend, with the government increasing minimum support prices (MSP) of wheat and rice year after year (see below table). Even so, there has not been any spectacular increase in the productionoffoodgrain(seegraphonthenextpage). Rising Food Subsidy Under NFSO 1,40,000 1,20,000 1,00,000 80,000 60,000 40,000 20,000 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2012-13RE 2013-14BE2013-14NFSO 2011-12 Rs crores Source: Ministry of Finance, Ministry of Consumer Affairs, Food and Public Distribution Note: BE- Budget Estimates, RE- Revised Estimates Source: Food Cooperation of India (FCI)
  29. 29. 28ECONOMY MATTERS JUNE 2013 Production of Food grains Million Tones 270 250 230 210 190 170 150 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2000-01 Creals Foodgrain Source: Ministry of Agriculture While current production of cereals is just adequate to meet the demands of the NFSO, future production will have to keep increasing to meet the increasing entitlements under the law. With the government providingincentivesbyincreasingtheMSPofwheatand rice, production of non-cereal crops as well as diversification into farm-related activities such as dairy, horticultureandpoultrymaysuffer. What is required is a strategy to encourage crop diversification that would match the increasing demand for non-cereal food items such as fruits and vegetables, pulses, edible oils and protein-based foods. NSS data shows that while per capita consumption of cereals is falling, the reverse is true for non-cereal food items. This change in dietary pattern is in line with the overall rise in percapitaincomesandisexpectedtocontinue.Without adequate diversification into non-cereals, we may not be able to meet the nutritional needs of our growing population. For the last few years, the country has been plagued by the problem of food inflation, which has hurt the poor. Inflation has been particularly acute in non-cereal items where demand has exceeded supply. The WPI data shows a high level of volatility in food categories such as fruits, vegetables, eggs, meat and fish. The graph shows that any permanent reduction in food inflation has not been achieved, despite some moderation from time to time. The NFSO could potentially aggravate this problem by further moving resources away from non- cereals. Thus while the poor would get access to cheaper food grain, they would have to pay more for non-grainitems. 3.RiseinFoodInflation Food Inflation – WPI & CPI Source: Ministry of Commerce and Ministry of Statistics y-o-y% 0 -5 5 10 15 20 25 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 WPI - Primary Food articles CPI - Food, Beverages and Tobacco
  30. 30. 29 JULY 2013 4. Possibility of Triggering Imports Conclusion Since there will now be a legal entitlement to food, the government will be forced to import grains if there is a shortfallindomesticproduction.Ofcourse,thisisnotan immediate concern since food grain stocks are now more than adequate to meet the requirement. The Ministry has estimated an annual requirement of 61.2 million tons for food security while the FCI is currently carrying a stock of over 70 million tons. The government is currently procuring almost one-third of total production, amounting to about 65 million tons every year. However, given the high level of dependence of Indian agriculture on the monsoon, the possibility of a decline in production in a drought year is quite high. As we have experienced earlier, when India enters the global market for either rice or wheat, it has an adverse impactontheprice. Implementation of the NFSO will be a real challenge in terms of distribution and logistics. Currently, the government is not able to distribute all the grain that it procures, resulting in a large pile up of stocks with the FoodCorporationofIndia(FCI).Asagainstabufferstock norm of 31.9 million tons of grain (rice & wheat) on 31 Julyofeachyear,totalstockwiththeFCIwas73.9million tons as on 31 July 2013. This excess stock of over 40 million tons has resulted in higher carrying cost for the FCI and a higher outgo on food subsidy. The FCI is also facing an acute shortage of storage space, resulting in high level of wastage. Investment in storage and warehousing facilities has not kept up with the requirement. Given the difficulties in efficiently moving large quantities of grain, this would have been a good time to move away from physical distribution of food to income transfers in the form of either conditional cash transfers orfoodcoupons.WiththerolloutoftheUniqueIdentity/ Aadhar Numbers, the government could have introduced direct transfer of income to beneficiaries rather than move ahead with an enlargement of the current procurement and distribution of grain. Such experiments have proved to be successful in other parts of the world, such as Latin America and East Asia, while pilot projects in India have shown a reduction in leakages. The managementof the food economy over the last few years has had its consequences for the entire economy. With food inflation remaining high, the central bank has refused to ease monetary policy and industry has had to pay a price. The process of growth has slowed down, takingatollonjobcreationandincomegeneration.Even as GDP growth slowed down to a decadal low of 5.0 per cent in 2012-13 with industrial growth at 2.0 per cent, inflation remained high due to the existence of supply- sidebottlenecksintheagriculturalsector. Thefailuretoreformagricultureisnowhavinganimpact on the entire economy. It is likely that the poor have been hit the hardest by the rise in prices of essential commodities together with a failure to create adequate workopportunities.
  31. 31. 30ECONOMY MATTERS ECONOMY MONITOR GLOBAL GDP (y-o-y%) DOMESTIC GDP GROWTH (y-o-y%) WPI INFLATION (y-o-y%) INDEX OF INDUSTRIAL PRODUCTION (IIP) (y-o-y%) US GDP Growth Japan GDP Growth IndustryOverall GDP Overall -0.1 -0.5 -0.7 -0.9 -1.1 1Q12 2Q12 3Q12 4Q12 1Q13 Euro Area GDP Growth 3.2 3.9 0.2 0.4 0.4 1Q12 2Q12 3Q12 4Q12 1Q13 China GDP Growth 5.1 5.4 5.2 4.7 4.8 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 2.0 2.9 1.7 1.8 1.4 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Agriculture 2.1 1.8 1.3 2.5 2.7 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 7.3 7.7 7.6 6.7 6.6 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Services Primary Fuel Manufacturing General Manufacturing Electricity Mining -2.2 3.4 1.9 Feb-13 Mar-13 Apr-13 Jun-13May-13 Feb-13 Mar-13 Apr-13 Jun-13May-13 Feb-13 Mar-13 Apr-13 Jun-13May-13 Feb-13 Mar-13 Apr-13 Jun-13May-13 2.1 4.3 2.3 -3.6 -3.2 3.5 4.2 6.2 -7.7 -2.1 -3.3 -4.1 -5.9 2.8 3.1 2.0 1.3 1.4 2Q12 3Q12 4Q12 1Q13 2Q13 7.6 7.4 7.9 7.7 7.5 2Q12 3Q12 4Q12 1Q13 2Q13 7.3 5.7 4.8 4.7 4.9 Feb-13 Mar-13 Apr-13 May-13 Jun-13 10.5 7.4 5.1 6.7 8.1 Feb-13 Mar-13 Apr-13 May-13 Jun-13Feb-13 Mar-13 Apr-13 May-13 Jun-13 10.6 7.8 8.3 7.3 7.1 4.8 4.3 3.7 3.1 2.8 Feb-13 Mar-13 Apr-13 May-13 Jun-13 0.6 -1.6 -2.2 0.0
  32. 32. 31 JULY 2013 10.3 17.8 20.1 12.3 12.2 Exports (%) Imports (%) Trade Deficit (US$ Bn) 21.7 17.1 21.1 31.8 18.2 4QFY12 1QFY13 2QFY13 3QFY13 4QFY13 Current Account Deficit (US$ Bn) Avg Exchange Rate (Rs/US$) EXTERNAL ACCOUNT Source: RBI, CSO, SEBI, Office of Economic Advisor, Bureau of Economic Analysis, Euro Stat, Bank of Japan, National Bureau of Statistics MONETARY VARIABLES CAPITAL FLOWS (US$ billion) OTHER IMPORTANT INDICATORS (y-o-y%) Feb-13 Mar-13 Apr-13 Jun-13May-13 Non-Food Credit Growth (y-o-y%) M3 Growth (y-o-y%) Repo Rate (%) Cash Reserve Ratio (%) 4.00 4.00 4.00 4.00 Net FII Flows Net FDI Flows Forex Reserves ECB flows 2.3 0.5 1.0 2.8 4QFY12 2QFY13 3QFY13 4.00 4.2 4QFY131QFY13 Core Sector Growth Cement Production Growth Steel Production Growth Commercial Vehicles Production Growth -2.4 6.9 1.7 -1.1 -2.9 11.0 6.9 Mar-13 Apr-13 May-13 Jul-13Jun-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 16.1 14.0 14.7 15.5 14.6 Apr-13 Jun-13May-13Feb-13 Mar-13 12.4 12.5 12.1 12.8 12.5 Apr-13 Jul-13Jun-13May-13Mar-13 7.50 7.25 7.25 7.25 7.25 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 2.7 2.0 5.2 -7.5 -3.0 Mar-13 Apr-13 May-13 Jun-13 Jul-13 2.6 1.3 2.8 2.12.0 292.6 296.4 287.9 284.6 277.2 Mar-13 Apr-13 May-13 Jun-13 Jul-13 3.2 2.3 2.3 0.1 Feb-13 Mar-13 Apr-13 May-13 Jun-13 3.1 8.3 5.2 2.4 2.3 Feb-13 Mar-13 Apr-13 May-13 Jun-13 0.5 6.6 1.9 4.0 3.4 Feb-13 Mar-13 Apr-13 May-13 Jun-13 -23.6 -7.8 11.5 2.5 -15.4 Feb-13 Mar-13 Apr-13 May-13 Jun-13 54.4 54.4 55.0 58.4 59.8 -4.6 -0.4 11.6 -6.2
  33. 33. DISCLAIMER Copyright©2013byConfederationofIndianIndustry(CII),Allrightsreserved. No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of information presented in this document. However, neither CII nor any of its office bearers or analysts or employees can be held responsible for any financial consequences arising out of the use of information provided herein. However, in case of any discrepancy, error, etc., same may please be brought to thenoticeofCIIforappropriatecorrections. Published by Confederation of Indian Industry (CII), The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi- 110003(INDIA), Tel:+91-11-24629994-7,Fax:+91-11-24626149;Email:info@cii.in;Web:www.cii.in
  34. 34. Notes
  35. 35. Economic Research Services CII's Economic Research Wing provides customised, comprehensive and in-depth research and analysis through its team of reputed and experienced economists. Capable of efficiently catering to wide ranging research needs of various stakeholders including; industries, business houses, government and international organizations. Services Portfolio Research Fields Economy CII conducts research by industry /region/ state to offer - Macroeconomic perspective on the economy Inputs for policy formulation Forecasting of trends v v v International CII works with international organisations to offer - Analysis of global economic trends Analysis of business trends Management strategies v v v CII works in over 50 sectors and offers - Sector reports Comprehensive business & market research Surveys v v v Industry Society & Living CII analyses socio-economic indicators to offer - Research and analysis on public policy Social security and public management systems v v CII Economic Research Advantages Wide presence within India v v 63 offices in India 10 centers of excellence Large global footprint v v 7 overseas offices Institutional partnership with 224 counterpart organizations in 90 countries v v Access to over 7100 direct and 90,000 indirect members (including SMEs and MNCs) Liason with government & international organizations A reference point for Indian Industry Highly experienced team vWell established team of economists with expertise in handling diverse topics and sectors Research Projects Business Research & Consulting Customised Reports Industry Surveys Regular Publications For CII Economic Research Services, please contact Dr. Danish A. Hashim, Director- Economic Research 23, Institutional Area, Lodi Road, New Delhi- 110 003, India, T: +91-11-2462 9994-7, Extn: 409, F: +91 -11-2462 6149, M: 9650446625, E: danish.hashim@cii.in
  36. 36. ECONOMYMATTERS n n n Keeps readers abreast of global & domestic economic developments Monthly Journal of top management of 8000 companies Read by CII Members, Thought Leaders, Diplomats, Policy Makers, MPs and other decision makers The Facts n n n n n n Domestic Trends Corporate Performance Sector in Focus Special Article Economy Monitor Global Trends The Coverage CII invites full-page* Advertisements for this flagship document at an attractive rate of Rs 50,000 per issue and Rs 5 lakh for 12 issues. For 6 issues at Rs 2,70,000 * Full page size : 11.75 inch (Height) by 8.25 inch (Width) For more details, Please Contact: Confederation of Indian Industry The Mantosh Sondhi Centre, 23, Institutional Area, Lodi Road, New Delhi- 110003 (INDIA) Tel : +91-011-24629994-7, Fax: +91-011-24626149; Email: Ecoresearch@cii.in Dr. Danish A. Hashim, Director- Economic Research
  37. 37. v v
  38. 38. The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil society, through advisory and consultative processes. CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India's development process. Founded over 118 years ago, India's premier business association has over 7100 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over90,000enterprisesfromaround257nationalandregionalsectoralindustrybodies. CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key issues. Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship programmes. Partnerships with civil society organizations carry forward corporate initiatives for integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversitymanagement,skilldevelopment,empowermentofwomen,andwater,tonameafew. The CII Theme for 2013-14 is Accelerating Economic Growth through Innovation, Transformation, Inclusion and Governance.Towardsthis,CIIadvocacywillaccordtopprioritytosteppingupthegrowthtrajectoryofthenation, while retaining a strong focus on accountability, transparency and measurement in the corporate and social eco- system, building a knowledge economy, and broad-basing development to help deliver the fruits of progress to all. With 63 offices, including 10 Centres of Excellence, in India, and 7 overseas offices in Australia, China, Egypt, France, Singapore, UK, and USA, as well as institutional partnerships with 224 counterpart organizations in 90 countries,CIIservesasareferencepointforIndianindustryandtheinternationalbusinesscommunity. ABOUT CII Research The CII Research team regularly tracks economic, political and business developments within India and abroad to comment on the emerging economic scenario for the Indian corporate sector. It tracks policy developments, offers comprehensive analysis of industries and comments on and analyzes the economic climate through its regularpublications–EconomyMatters,BusinessOutlookSurveyand,FortnightlyEconomicUpdates. We have in-house expertise in providing the most comprehensive, in-depth, unbiased and incisive analysis and forecasts on the Indian economy and various sectors. CII Research is also well versed and well equipped to offer customized research based consultancy services on any theme. It has been catering to the needs of various stakeholders including industries, business houses and government providing meaningful insights about the prevailing trends, outlook on likely future trends, factors behind these trends, existing government policies and policyrecommendationswith an objectiveto help stakeholders in better understandingof the issues at hand.The objective of CII Research is to assist stakeholders in taking more informed and strategic decisions with due focus ontheattainmentofshorttermaswellaslongtermgoals. Formoredetailsandtoadvertiseinourproducts,write tousatecoresearch@cii.in

×