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1. Economic Outlook – November 2015
SEBI Registered - Research Analyst
Economic OutlookNovember2015
Dec 2, 2015
Gradually improving macro-economic scenario
The latest release of IIP & CPI Inflation numbers indicate some weakness in Indian
economy with the IIP growth dropping to a 4-month low in September’15 and the retail
inflation inching to its 4-month high in October’15. While high prices of food products
drove the headline inflation, slower growth in manufacturing sector weighed on factory
output. However, on cumulative bases, there is an improvement in output growth across
sectors with consumer durable expanding by significant 7.6% in H1FY16 compared to
(-)12.5% in H1FY15 indicating a revival in the demand. The positive impact of easing
interest rate trend and low inflation has started reflecting in demand. Investment
scenario is also improving as output of capital goods sector expanded by 14.2% in
Q2FY16 compared to 0.2% in Q1FY15. Moderation in inflation and upward revision in
minimum wages would continue to support urban consumption demand, while the
impact of below normal monsoon for second successive year and decline in rabi crop
sowing area so far this season suggest that sluggishness in rural sentiment and demand
would persist over coming months. Overall, easing interest rate scenario, soft inflation
and enhanced government spending on infrastructure development will positively reflect
in industrial output growth going forward. Food inflation is likely to remain soft in coming
months as kharif harvests start to flood the markets. Given prevailing low crude and
commodity prices, RBI’s inflation target of 6% by January 2016 is likely to be achieved.
As the subsidy burden has declined and fiscal health improved, the government focus
has shifted from deficit reduction to capital expenditure. The government has budgeted
for a 25% rise in capex spending in FY16 increasing public (central government) capex
from 1.5% of GDP to 1.7% of GDP. Most of the increase in public capex spending is
expected to be in infrastructure sectors, particularly roads and railways. Going forward,
the implementation of seventh pay commission is expected to spur demand in the
coming fiscal, however this will also put additional burden on government exchequer
and thus to meet the fiscal deficit target of 3.9% of GDP in FY16, 3.5% of GDP by FY17
and to support a sharp growth in capital expenditure to remain a challenge for it. Private
sector front, weak asset quality of Indian banking industry & high leverage levels of
various corporates are likely to check private sector investments plans. Meanwhile,
policy environment on both monetary and fiscal policies has turned more supportive for
economic growth. As the private sector focuses on improving capacity utilization and
deleveraging, increase in public capex is likely to improve the economic situation. We are
of the view that improving macro-economic fundamental (low inflation + declining
interest rate scenario), increasing disposable income of people and favorable
government initiatives for developing infrastructure and improving business sentiments
to drive the economic growth in coming fiscals.
Monthly macro-economic indicator releases :
 Indian Economy grows at 7.4% in Q2FY16; manufacturing grows at robust 9.3%
 RBI keeps repo rate unchanged at 6.75%
 IIP growth eases to 3.6% in September
 CPI Inflation rises to four month high of 5% in October
 October trade deficit narrows to lowest in eight months
Satish Kumar Sharma
Research Analyst
[T] 91-022-6707 9999; Ext: 974
1
Exp. Indian Economic Growth Forecast
Base Yr. (2011-12) FY15 FY16P FY17P
Fitch 7.3% 7.8% 8.1%
IMF 7.3% 7.3% 7.5%
ADB 7.3% 7.4% 8.2%
RBI 7.3% 7.4% -
World Bank 7.3% 7.5% 7.9%
S&P 7.3% 7.9% 8.2%
Average 7.3% 7.6% 7.9%
Key Macro Indicators
YoY(%) Oct'15 Sep'15 Aug'15
CPI 5.0% 4.4% 3.7%
Core CPI 4.4% 4.3% 4.1%
IIP - 3.9% 6.3%
Manufac. - 2.6% 6.9%
Core
sector
3.2% 3.2% 2.6%
Repo Rate 6.75% 6.75% 7.25%
CRR 4% 4% 4%
Bank Rate 7.75% 7.75% 8.25%
Trade Def.
($ bn)
-9.8 -10.5 -12.5
YoY(%) Q2FY16 Q1FY16 Q4FY15
GDP 7.4% 7% 7.5%
CAD - 1.2% 0.2%
IIP 4.7% 3.2% 3.4%
Core
sector
2.3% 2.3% 1.0%
YoY(%) FY16E FY15 FY14
GDP 7.6% 7.3% 6.9%
CAD 1.2% 1.3% 1.7%
Fiscal Def. 3.9% 4.0% 4.4%

2. Indian Economy grows at 7.4% in Q2FY16; manufacturing grows at robust 9.3%
India’s GDP at constant 2011-12 prices expanded by 7.4% YoY in Q2FY16 as compared to 7.0%
in the previous quarter and 8.4% in the same quarter of previous fiscal. The latest quarter GDP
data came slightly above consensus estimate of a 7.3% growth driven by improved
consumption and rising industrial production.
Sector wise, agriculture sector gross value added (GVA) stood at Rs2.99 lakh crore in Q2FY16,
which is 2.4% higher from Q1FY15. Agriculture sector growth was also higher from previous
quarter expansion of 1.9% driven by 6% growth in livestock products, forestry and fisheries,
which account for 51.0% of the GVA of this sector. GVA of industry sector increased by 6.0% to
Rs8.03 lakh crore in Q2FY16 as compared to Rs7.55 lakh crore in Q2FY15. Within industry, the
sub-sector that witnessed a sterling growth was manufacturing, where the output rose 9.3% as
against 7.2% a year ago. The output of electricity sub-sector rose by 6.7% while mining
recorded a muted growth of 3.2% in the reported quarter. Services sector remained the best
performing sector among the three broad sectors of the economy as the sector’s GVA rose by
9% to Rs14.78 lakh crore in Q2FY16 as compared to Rs13.78 lakh crore in the same quarter of
previous fiscal. Trade, repair and hotel segment of services sector grew by 10.6%, while
financial, real estate and public administration & defence segments grew by 9.7% and 4.7% in
the quarter under review.
Government capital expenditure rising at higher growth
Growth rates of Gross Fixed Capital Formation (GFCF) improved to five month high by 6.8% in
Q2FY16 as compared to 3.8% during Q2FY15 and 4.9% in Q1FY16 driven by robust growth of
the Union Government's capital spending. Private Final Consumption Expenditure (PFCE)
dipped 6.8% during Q2FY16 as compared to 7.1% during Q2FY15 and from 7.4% in Q1FY16,
indicating adverse impact of unfavorable monsoon on rural income which weighed on rural
consumption growth. Government Final Consumption Expenditure (GFCE) grew by 5.2%
respectively during Q2FY16 as compared to 8.9 % respectively during Q2FY15 and 1.2% in
Q1FY16.
India’s GDP at constant
2011-12 prices expanded by
7.4%YoY in Q2FY16 as
compared to 7.0% in the
previous quarter and 8.4% in
the same quarter of previous
fiscal
2
Outlook: India's economy picked up pace in the second quarter of the current fiscal with
manufacturing sector growing at significant 9.3%. The positive impact of low inflation and
declining interest rates has started reflecting on demand scenario. We are of the view that
improving macro-economic fundamental (low inflation + declining interest rate scenario),
increasing disposable income of people and favorable government initiatives to drive the
economic growth in coming fiscals.
Source: MOSPI
Growth rates of Gross Fixed
Capital Formation (GFCF)
improved to five month high
by 6.8% in Q2FY16 as
compared to 3.8% during
Q2FY15 and 4.9% in Q1FY16
driven by robust growth of
the Union Government's
capital spending
Economic Outlook – Nov’15
At constant 2011-12 prices (Rs lakh cr) Q2FY16 Q2FY15 YoY Q1FY16 (Gr. YoY)
Agriculture, forestry and fishing 2.99 2.92 2.4% 1.9%
Industry
Mining and quarrying 0.64 0.62 3.2% 4.0%
Manufacturing 4.77 4.36 9.3% 7.2%
Electricity, gas, water supply, uty.services 0.62 0.58 6.7% 3.2%
Construction 2.00 1.95 2.6% 6.9%
Services
Trade, repair, hotels and restaurants 5.04 4.56 10.6% 12.8%
Financial, real estate & profess. Services 6.34 5.78 9.7% 8.9%
Public adm., defence and Other Services 3.39 3.24 4.7% 2.7%
GVA at Basic Price 25.79 24.02 7.4% 7.1%
GDP 27.57 25.66 7.4% 7.0%
Source: MOSPI

3. RBI keeps repo rate unchanged at 6.75%
In line with the market expectations, the Reserve Bank of India (RBI), in its fifth Bi-monthly
Monetary Policy Statement, 2015-16, kept the key policy repo rate unchanged at 6.75%.
Consequently, the reverse repo rate under the liquidity adjustment facility (LAF) remains at
5.75%. Marginal standing facility (MSF) rate, determined at a spread of 100 basis points above
repo rate, stands at 7.75%, while bank rate also remains at 7.75%. Cash reserve ratio (CRR)
kept unchanged at 4.00% of net demand and time liabilities (NDTL) of bank.
Central bank in its policy document has stated that it will continue to provide liquidity under
overnight repos at 0.25% of bank-wise NDTL at the LAF repo rate and liquidity under 14-day
term repos as well as longer term repos of up to 0.75% of NDTL of the banking system through
auctions. The RBI will continue with daily variable rate repos and reverse repos to smooth
liquidity.
In line with the market
expectations, the Reserve
Bank of India (RBI) kept the
key policy repo rate
unchanged at 6.75%.
3
Policy Backdrop:
After reducing interest rate to 4-1/2 year low of 6.75%, apex bank decided to keep policy rate
unchanged amid some concerns over inflation and expected US fed interest rate hike. CPI
inflation rose to four month high at 5% in October. Keeping inflation battle at the top of its
agenda, the RBI is of the view that inflation is likely to rise in the coming two months. However,
seasonal moderation in the prices of vegetables and fruits and prevailing low prices of oil and
commodities are expected to provide some respite and the RBI’s inflation target of 6% by
January 2016 is likely to meet. The US Fed rate hike, demand pressure arising from the
implementation of 7th pay commission and progress on rabi sowing in the country are the key
events which the RBI will consider before making any decision of interest rate cut.
On economic growth front, the central bank highlighted that the outlook of agriculture sector
is subdued as the below normal monsoon for second successive year is likely to impact rabi and
kharif crops production. However, manufacturing and services sectors are showing a sign of
robust recovery. Increase in public capital spending and the easing stance of monetary policy
provide the enabling environment for a revival in private investment demand, supported by
easing input prices and improving ease of doing business conditions. The RBI has kept FY16
GDP growth projection unchanged at 7.4%.
The RBI also warrants full transmission of 125 basis points cut from commercial banks for
lending rates. Since the rate reduction cycle that commenced in January, banks have cut
lending rate only by 60 bps. The Reserve Bank will shortly finalise the methodology for
determining the base rate based on the marginal cost of funds, which all banks will implement.
Furthermore, the government is examining linking small savings interest rates to market
interest rates. These moves will help transmission of policy rates into lending rates.
Source: RBI
The RBI has set a 5% inflation
target by March 2017 and
indicated a possibility of
further easing of interest
rate going forward if the
inflation will remain below
the target level
Economic Outlook – Nov’15
7.25%
6.75% 6.75%
6.25% 5.75% 5.75%
4% 4% 4%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
RBI's Monetary Policy Stance
Repo Rate Reverse Repo Rate CRR

4. IIP growth eases in September; manufacturing, consumer non-durable dip
Driven by poor performance of manufacturing and consumer non-durables, Index of Industrial
Production (IIP) moderated to a four-month low in September of 3.6% (provisional) compared
with the revised 6.3% in the previous month. Raising a question mark on the steadiness of
industrial recovery, India’s factory output expansion surprisingly slowed in the reported month
ahead of the festive season. However, during the first half of current fiscal, industrial
production improved to 4% as compared to 2.9% growth in the corresponding period in
previous fiscal.
India’s factory output
expansion surprisingly
slowed in the reported
month ahead of the festive
season
4
Sectoral Performance:
The growth in domestic manufacturing sector, which represent around 75.5% of IIP, declined
to 2.6% in September as compared to 6.6% in August. In terms of industries, 11 out of the 22
industry groups in the manufacturing sector have shown positive growth during the month
with industry group ‘furniture; manufacturing’ showing the highest positive growth of 69.9%,
while industry group ‘publishing, printing & reproduction of recorded media’ recording the
highest negative growth of (-) 13.3% during the month under review. Meanwhile,
manufacturing sector during the first half of FY16 has recorded noteworthy improvements in
its growth rates growing at 4.2%in H1FY16, compared to the 2.2% growth in H1FY15. Growth in
mining sector also eased to 3% in the reported month from 4.2% in August due to the lower
production of crude oil and natural gas. However, the output of electricity sector improved to
11.4% from 5.6% in August. Production growth for electricity sector remained sluggish so far
this fiscal at 4.5% compared to 10.4% in H1FY16 due to poor demand India Inc. Furthermore
growth in thermal electricity generation is impacting by unfavorable base effect while,
expansion in hydro electricity generation has eased due to decline water level in the country
due to below normal monsoon for the second successive year.
YoY Sectoral Performance
IIP Mining Manufacturing Electricity
Index Weight 100.0% 14.2% 75.5% 10.3%
Sep'15 3.6% 3.0% 2.6% 11.4%
Aug'15 6.3% 4.2% 6.6% 5.6%
Sep'14 2.6% 0.1% 2.7% 3.9%
Cumulative Growth
Apr-Sep FY16 4.0% 1.5% 4.2% 4.5%
Apr-Sep FY15 2.9% 1.7% 2.2% 10.4%
Source: MOSPI
Source: MOSPI
In terms of industries, 11 out
of the 22 industry groups in
the manufacturing sector
have shown positive growth
during the month
Economic Outlook – Nov’15
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
IIP and Core sector growth trend
IIP Core Sector

5. Manufacturing growth revived during current fiscal
During the first half of current fiscal, manufacturing growth revived to 4.2% compared to
2.2% in year ago period, while mining and electricity sector witnessed lower expansion of
1.5% and 4.5% as against 1.7% and 10.4% growth in year ago period.
During the first half of
current fiscal, manufacturing
growth revived to 4.2%
5
YoY Use-Based Classification
IIP Basic Capital Intermediate Durables Non-Durables
Index Weight 100.0% 45.7% 8.8% 15.7% 8.5% 21.4%
Sep'15 3.6% 4.0% 10.5% 2.1% 8.4% -4.6%
Aug'15 6.3% 3.5% 21.4% 3.1% 17.0% -1.0%
Sep'14 0.5% 5.0% 12.3% 2.0% -11.1% 1.3%
Cumulative Growth
Apr-Sep FY16 4.0% 4.4% 7.9% 2.0% 7.6% -0.9%
Apr-Sep FY15 2.9% 7.8% 6.0% 2.3% -12.5% 1.9%
Source: MOSPI
Source: MOSPI
The output of capital goods
sector, a measure of
investment activities in
economy, grew by 10.5% in
the reported month
compared to 21.4% growth
in the previous month
Economic Outlook – Nov’15
Use-Based Classification:
Under use based classification, except basic goods all sectors recorded low growth compared
to a month ago period. The output of capital goods sector, a measure of investment activities
in economy, grew by 10.5% in the reported month compared to 21.4% growth in the
previous month. During Apr-Sep FY16, capital goods sector expanded by 7.9% as against 6.0%
in the April-Sep FY15, showing an improvement in investments scenario in the country. The
output of consumer durables grew by 8.4% in September, though lower than 17% growth in
previous month, but it was the fifth expansion in past six months. This expansion indicates
that the demand in the economy is improving, however, part of this growth was due to the
low base effect of 11.1% contraction in September 2014.
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Sep'14
Oct'14
Nov'14
Dec'14
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
July'15
Aug'15
Sep'15
Indian Industrial Production
Mining Manufacturing
Electricity IIP
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Quarterly trend in IIP

6. Use-Based Classification:
6
Source: MOSPI
Cumulative bases, there is an
improvement in output
growth across sectors
Economic Outlook – Nov’15
IIP Outlook
Factory output growth slowed down to 3.6% in September from three year high level of 6.3%
in August, raising concern on the steadiness of industrial recovery. However, on cumulative
bases, there is an improvement in output growth across sectors with consumer durable
expanded by significant 7.6% in H1FY16 compared to (-)12.5% in H1FY15 indicating a revival
in the demand. We are of the view the industry production in coming month is likely to show
good growth driven by strong festival demand which has already reflected in high auto sales
number in October. Easing interest rate scenario, soft inflation and enhanced government
spending on infrastructure development will positively reflect in industrial output growth
going forward.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16
Quarterly Trend
Capital Goods Consumer Durables
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
Sep'14
Oct'14
Nov'14
Dec'14
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
July'15
Aug'15
Sep'15
Monthly Trend
Consumer Durables Core Sector

7. CPI Inflation rises to four month high of 5% in October
Consumer Price Index (CPI)-based inflation or retail inflation accelerated to 5% (provisional) in
October from 4.4% (final) in September, marking the fourth consecutive month of inflation
quickening. Inflation during October also came higher than the expectation of 4.8% and can
be attributed to rise in prices of food items and waning of favorable base effect.
Inflation during October also
came higher than
expectation of 4.8% and can
be attributed to rise in prices
of food items and waning of
favorable base effect
7
Source: MOSPI
Food and beverages, which
accounts for 46% of the CPI
basket, firmed up to 5.3% in
October from 4.3% in
September and high prices
of pulses and onion
remained the largest
contributor to the high food
inflation
Economic Outlook – Nov’15
High prices of pulses, onions spiked food inflation
Food and beverages, which accounts for 46% of the CPI basket, firmed up to 5.3% in October
from 4.3% in September and high prices of pulses and onion remained the largest contributor
to the high food inflation. Pulses continued to witness elevated inflation and in October its
prices rose by record 42% as unfavorable weather conditions such as untimely rains has
impacted the pulses production in the country. Prices of fruits and vegetables also rose at
four month high rate in the month under review. The rising trend in food inflation is
attributable to the second consecutive year of deficit monsoons, however, despite the
unfavorable weather conditions, the rise in food inflation has been contained at 4.5% during
the first seven months of FY16 as against the 7.6% for the corresponding period last year.
Core-CPI inflation (excluding food & beverages and fuel & light) rose slightly to 4.4% in
October from 4.3% in September.
Snapshot of CPI Inflation
% (YoY) Oct’15 Sep’15 Aug’15 Jul’15 Jun’15
Food, beverages 5.3 4.3 2.9 2.8 5.7
Cereals and products 1.5 1.4 1.2 1.1 2.0
Pulses and products 42.2 29.8 25.8 22.9 22.2
Meat and Fish 5.0 5.6 5.8 6.9 7.0
Milk and milk products 4.8 5.1 5.3 6.1 7.2
Fruits 2.0 0.9 1.0 1.5 3.5
Vegetables 2.4 0.1 -6.4 -7.9 5.4
Non-alcoholic beverages 4.3 4.2 4.4 4.4 4.8
Sugar and Confectionary -10.5 -12.9 -13.3 -12.3 -8.6
Clothing and footwear 5.6 5.9 5.8 5.9 6.3
Housing 4.9 4.7 4.7 4.4 4.5
Fuel and light 5.3 5.3 5.7 5.4 5.8
Pan, tobc. and intoxicants 9.5 9.3 9.3 9.8 9.7
CPI 5.0 4.4 3.7 3.7 5.4
CFPI 5.3 3.9 2.2 2.2 5.5
Source: MOSPI

8. Rural area witnessed high CPI inflation than urban region
Area wise, rural area witnessed high inflation compared to urban area in October. Retail
inflation for rural area came at 5.5% as against 4.3% inflation in urban region. However,
Consumer Food Price Index (CFPI) inflation at 5.2% in rural area was lower than 5.5% in urban
area.
8
Food inflation is likely to
remain soft in coming
months as kharif harvests
start to flood the markets
Economic Outlook – Nov’15
Source: MOSPI
Inflation Outlook
CPI inflation rose to four month high of 5% on account of costlier food items and
unfavorable base effect. Though food inflation was mainly driven by high pulses and onion
prices, inflation in other food products has been remained under control so far this fiscal.
Food inflation is likely to remain soft in coming months as kharif harvests start to flood the
markets. Furthermore, the arrival of imports of pulses and relaxation of stockholding limits
for importers in Maharashtra will help to increase supplies and check prices in next few
months. We are of the view that despite the unfavorable base effect, CPI inflation to remain
low owing to prevailing low crude and commodity prices, likelihood of soft food inflation.
Overall, RBI’s inflation target of 6% by January 2016 is likely to be achieved. The factors like
uncertainty over effectiveness of food management, inflationary pressure due to upcoming
pay revision for Government employees and forthcoming rate hike by the US Federal
Reserve lessens the probability of monetary easing by the RBI in its upcoming policy review.
2.0%
3.0%
4.0%
5.0%
6.0% Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
Oct'15
Core CPI trend
Core CPI Headline CPI
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
Oct'15
Urban, rural and CFPI inflation
Rural CPI Urban CPI CFPI

9. WPI inflation records at (-)3.8% in October
Deflation pressure eased a bit in month of October with Wholesale Price Index (WPI) based
inflation firming up to -3.81% (provisional) in October from -4.54% (provisional) in September
on account of high prices of food articles. Though WPI inflation remained in the negative
territory for the 12th consecutive month driven by a high-base effect, muted commodity
prices and oil prices globally. Besides muted commodity prices, the latest WPI data is also
reflective of persisting weak demand conditions in the economy. An uptick in inflation
number was mainly because of the rate of price rise in food items, which constitute around
14% of the WPI, rose to 2.4% in the reported month as against 0.7% in a month ago. Though
inflation in most of food articles remained soft, 86% increase in onion prices and 53% rise in
pulses prices has driven the food inflation to high level. October was the second successive
month under which food inflation remained in positive territory. Inflation in non-food articles
increased substantially to 5.1% in October 2015 from 2.6% in September 2015, partly led by
higher price of soyabean, raw jute and cotton seed. Overall inflation in primary articles
recorded at (-)0.4% in October as compared to (-)2.1% in the previous month.
Build up inflation rate stands at 0.3%
On inflation revised front, August inflation figure was revised to (-)5.1% as compared to
(-)4.95% reported earlier. Build up inflation rate in the financial year so far was 0.3%
compared to a build up rate of 1.9% in the corresponding period of the previous year.
Deflationary trend in WPI
persisted for 11th month in a
row
9
August inflation figure was
revised to (-)4% as compared
to (-)4.05% reported earlier
Inflation in fuel and power
declined by 18% in the
reported month
Economic Outlook – Nov’15
Prices of fuel and power group further declines in October
Deflation trend continued in fuel and power group with the rate at (-)16.3% in the month
under review compared to (-)17.7% in September owing to the lower price of bitumen,
furnace oil and LPG. Given the sluggish demand conditions and oversupply in the global
market, oil prices are likely to remain soft in the coming months.
Source: Commerce Ministry
Snapshot of WPI Inflation
% (YoY) Oct'15 Sep'15 Aug'15 Jul'15 Jun'15
PRIMARY ARTICLES -0.4 -2.1 -3.7 -4.0 -0.5
Food Articles 2.4 0.7 -1.1 -1.2 3.1
Vegetables 2.6 -9.5 -21.2 -24.5 -6.8
Fruits -4.8 -5.3 -1.3 -4.5 7.6
Non-Food Articles 5.1 2.6 -0.7 -0.5 1.2
FUEL & POWER -16.3 -17.7 -16.5 -11.6 -8.9
Petrol -13.2 -14.8 -13.3 -11.1 -7.1
High speed diesel -26.2 -28.1 -24.5 -15.9 -9.9
MANUFACTURED PRODUCTS -1.7 -1.7 -1.9 -1.5 -0.8
Machine Tools 0.0 0.0 0.2 0.3 0.5
Chemical Products -1.7 -1.8 -1.8 -1.7 -1.2
Metals Alloys -7.5 -6.7 -7.6 -6.3 -4.9
Cement & Lime 0.2 0.5 1.9 2.5 5.0
WPI Inflation -3.8 -4.5 -5.1 -4.0 -2.1

10. Prices of manufactured products declined by 1.7%
Inflation in manufactured products declined by (-)1.7% in the month under review as
compared to (-)1.71% contraction in the previous month. Sustained decline in manufacturing
products inflation is also reflecting a weaken demand condition in the economy. Core
inflation remained at sub-zero levels for the eighth consecutive month, printing at a
series-low -2.1% in the reported month October as against -1.9% in September. Prices of
leather, rubber, cotton, chemical and metal products declined in the reported month, while
the prices of transport equipment, cement and wood products increased marginally in the
reported month.
Low manufactured products
prices also deepened the
pace of defaltion in non-food
manufactured products
10
Source: Commerce Ministry
Trade deficit during
Apr-Oct FY16 contracted to
$77.8 billion as compared
to $86.3 billion in the same
period of previous fiscal
Economic Outlook – Nov’15
October trade deficit narrows to lowest in eight months
India’s trade deficit narrowed to $9.77 billion in October as compared to $10.5 billion in the
previous month and $13.6 billion in the same month of previous year. Despite contraction
in exports, trade deficit contracted as imports also declined at higher pace. Trade deficit
during Apr-Oct FY16 contracted to $77.8 billion as compared to $86.3 billion in the same
period of previous fiscal.
Source: Commerce Ministry
2.4
0.7
-1.1-1.2
3.1
-16.3
-17.7
-16.5
-11.6
-8.9
-1.7-1.7-1.9-1.5
-0.8
-3.8
-4.5-5.1
-4.0
-2.1
Oct'15Sep'15Aug'15Jul'15Jun'15
WPI inflation trend (%)
Food Articles FUEL & POWER
MANUFACTURED PRODUCTS WPI Inflation
-20.0
0.0
20.0
40.0
60.0
$billion
Trends in Merchandise Trade
Exports Imports
Oil Imports Trade Deficit
(-)273.6
(-)232.1
(+)187.3
(+)154.3
0
100
200
300
400
500
Apr-Oct'FY15 Apr-Oct'FY16
$billion
Imports Exports
TD - $86.3 b
TD - $77.8 b

11. Exports decline 17.5% YoY in October owing to low global demand
Marking the 11th consecutive month of decline, India’s merchandise exports declined 17.5%
YoY in the month of October to $21.4 billion from $25.9 billion in the same month of previous
fiscal. Subdued global demand as well as falling commodity prices weighed on the overseas
shipments growth. The decline in exports was mainly driven by 57.1% fall in shipments of
petroleum products to $2.5 billion due to low price in the global market. Furthermore, other
exports orientated sectors also witnessed contraction in overseas shipments. Domestic iron
ore exports sharply declined by 85.5% to $2.95 million, engineering products shipments
witnessed 11.7% knock at $4.57 billion and gems and jewellery exports declined 12.8% to
$3.5 billion in the month under review. During the first seven months of current fiscal,
exports declined by 17.6% to $154.3 billion as against $187.3 billion. We are of the view that
Indian exports is likely to remain subdued given prevailing sluggish global demand and low
commodity prices. In order to boost the exports, the government is taking various measures
and has sent a Cabinet note on the long-pending interest subsidy scheme for providing rupee
credit to exporters at a subsidised interest rate. In its new foreign trade policy (2015-2020),
the government has set an ambitious export target goods and services to $900 billion by FY20
from $470 billion in FY15. If the target is achieved, India would grab a share of 3.5% of world
exports, up from 2% in FY14.
The decline in exports was
mainly driven by 57.1% fall in
shipments of petroleum
products to $2.5 billion
11
Source: Commerce Ministry
Indian imports declined by
21.2% to $31.1 billion in
October from $39.5 billion in
October 2014 driven by
lower oil imports
Domestic inward shipments
declined 15.2% YoY to
$232.1 billion over Apr-Oct
FY16
Economic Outlook – Nov’15
Imports fall 21.2% YoY in October
Indian imports declined by 21.2% to $31.1 billion in October from $39.5 billion in October
2014 driven by lower oil imports valuing at $6.8 billion, which was 45.3% lower on YoY
basis. Domestic oil imports continue to witness declining trend owing to the tumbling global
oil prices which declined significantly from year ago period of around $80 per barrel and
currently hovering at around $45-$50 per barrel. Non-oil imports also declined 9.9% to
$24.3 billion in October as compared to $26.9 billion in the corresponding month of
previous year because of sharp contraction in the gold imports. Gold imports declined by
59.5% YoY to $1.70 billion in the reported month. Non -oil, non-gold imports also remained
sluggish reflects the prevailing sluggish demand condition in the country. Among the 30
major import sectors, only 10 showed positive growth which include electrical and
non-electrical machinery (4.45% growth to $2.3 billion), transport equipment (30% to $1.5
billion), pearls and precious stones (14% to $1.5 billion) and electronic goods (13.6% to $3.8
billion). Domestic inward shipments declined 15.2% YoY to $232.1 billion over Apr-Oct
FY16. We expect a further contraction in Indian imports in coming months given the low
global oil and commodity prices.
20%
20%
13%10%
5%
5%
27%
Top Exports orientated
sectors
Engineering goods Petroleum products
Gems and jewellery Textiles
Pharma Prouducts Chemicals
Others
-4.3%
5.5%
-3.6%
-10.7%
-16.3%
-19.0%
-14.2%
-20.4%
-15.8%
-10.5%
-20.6%
-24.3%
-17.5%
-30.0%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
$billion
Trend in exports growth
Exports Growth

12. Trade deficit to remain under check driven by low imports
Indian export is likely to remain subdued owing to prevailing global economic slowdown.
However, trade deficit is expected to remain under check due to lower imports.
12
Source: Commerce Ministry
The seasonally adjusted
Nikkei Services Business
Activity Index, based on the
survey of around 350 private
service sector companies,
rose to 53.2 in October from
51.3 in September
Economic Outlook – Nov’15
Services sector PMI at eight-month high in October
Growth in India's services sector, which accounts for around 60% of country’s GDP, rose to
eight month high level, however the improvement was driven more by discounts offered by
firms, which helped demand to pick up. The seasonally adjusted Nikkei Services Business
Activity Index, based on the survey of around 350 private service sector companies, rose to
53.2 in October from 51.3 in September. The survey indicated a improvement in demand
condition in October as new business expanded at a solid pace since February. The Nikkei
India Composite Output Index, comprising both of manufacturing and services, increased to
52.6 in October from 51.5 in September.
Business activity improved in 3 out of the 6 monitored sub-sectors led by Post &
Telecommunication. There was no change in employment level, unfinished business levels
in the service sector also remained unchanged. The survey further highlighted that input
cost costs faced by service providers rose in October as higher prices paid for petrol and
food. However, the rate of increase was relatively muted in the context of historical data.
4.3%
26.6%
-4.5% -12.1%
-16.0%
-11.0%
-7.3%
-16.4%
-13.4%
-10.2%-10.0%
-25.4%
-21.2%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
$billion
Trend in imports growth
Imports Growth
Indian export is likely to
remain subdued owing to
prevailing global economic
slowdown

13. Services sector outlook remains positive for coming 12 months
As per the survey, services business sentiment regarding the 12-month outlook for activity
remained positive in October and the degree of confidence signaled was the strongest since
July. Among tracked sub-sectors, ‘Other Services’ and Hotels & Restaurants categories
recorded strongest levels of confidence.
As per the survey, services
business sentiment
regarding the 12-month
outlook for activity remained
positive in October
13
Source: Commerce Ministry
Nikkei India Manufacturing
Purchasing Managers’ Index
(PMI) slipped to 22-month
low of 50.7 in October from
51.2 in September
Economic Outlook – Nov’15
India's manufacturing PMI hits 22-month low in October
The output growth in Indian manufacturing sector eased in October on the back of a slower
increase in new orders. Nikkei India Manufacturing Purchasing Managers’ Index (PMI), a
headline index designed to measure the overall health of the manufacturing sector, slipped
to 22-month low of 50.7 in October from 51.2 in September. Although the rate of
expansion eased in October, the latest reading signaled expansion in business conditions as
the index remained above the crucial 50 mark for the twenty-fourth consecutive month
that separates growth from contraction.
Manufactures indicated challenging economic conditions and a reluctance among clients to
commit to new projects and thus the rates of expansion in both production and order
books were the weakest in their current 24-month sequences of growth. Among the three
tracked sub-sectors, consumer goods was the best performing category in October, while
operating conditions was also improved for intermediate goods. As per the survey,
business conditions for capital goods sector deteriorate in October as output and new
orders declined for the first time since September 2014 and August 2014 respectively. New
business order from abroad continued its rising trend for the twenty-fifth straight month in
October.
Inflationary pressures built on manufactures in October due to higher metal, paper and
food prices. Meanwhile, manufactures passed part of the additional cost burden to clients
which could build inflationary pressure in country.
Source: Markiteconomics
44
46
48
50
52
54
56
Jan'14
Feb'14
Mar'14
Apr'14
May'14
Jun'14
Jul'14
Aug'14
Sep'14
Oct'14
Nov'14
Dec'14
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
Oct'15
Nikkei Purchasing Managers' Index
Manufacturing Services Neutral line
Stocks of purchases were
broadly unchanged whereas
holdings of finished goods
fell further in October

14. Manufactures expects increase in demand in coming months
Despite the slowdown in new order growth and mentioning challenging economic condition,
manufacturers hired additional workers in October. Increase in employment level was first
time since January and this move indicated that companies are expecting pick-up in demand
in coming months.
Increase in employment
level was first time since
January and the move
indicated that companies are
expecting pick-up in demand
in coming months
14
The Organisation for
Economic Cooperation and
Development (OECD)
expects India to witness firm
growth
Economic Outlook – Nov’15
Growth momentum building in Indian economy: OECD
As per the Organisation for Economic Cooperation and Development (OECD), growth
momentum is building in India. Composite leading indicators (CLIs), designed to anticipate
turning points in economic activity relative to trend, increased to 100.1 in September 2015
from 100.0 in the previous month. CLI for India rose by 1.11% in September from a year
earlier and showed a marginal 0.10% rise from the previous month, indicating firming
growth. India's CLI has been on the rise since October 2014 and indicated that the
momentum is building gradually in the economy. The OECD CLIs are composite indicators
with components that measure early stages of production, respond rapidly to changes in
economic activity, are sensitive to expectations of future activity or are control variables
that measure policy stance.
Source: OECD
Source: Markiteconomics
45
46
47
48
49
50
51
52
53
54
Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Oct'15
PMI (Quarterly View)
Manufacturing Services Neutral line
97.6
98
98.4
98.8
99.2
99.6
100
100.4
Aug'13
Sep'13
Oct'13
Nov'13
Dec'13
Jan'14
Feb'14
Mar'14
Apr'14
May'14
Jun'14
Jul'14
Aug'14
Sep'14
Oct'14
Nov'14
Dec'14
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
OECD Leading Indicators (CLIs)

15. 15
Macro – Chart Bulletin
31.4%
29.4%
28.7%
27.00%
28.00%
29.00%
30.00%
31.00%
32.00%
FY13 FY14 FY15
Gross Fixed Capital Formation (% of
GDP)
Source: NSDL Source: SEBI Source: SIAM
Source: MOSPISource: MOSPISource: RBI
Source: RBI Source: MOSPISource: BSE
Economic Outlook – Nov’15
300
310
320
330
340
350
360
Forex Reserves ($ billion)
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
Auto Sales Growth
2.8%
4.9%
2.5%
3.4%
2.5%
4.4%
4.1%
6.3%
3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
IIP Trend
56
58
60
62
64
66
68
Exchange Rate (USD/INR)
24,000
25,000
26,000
27,000
28,000
29,000
30,000
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
Oct'15
Nov'15
S&P BSE Sensex
-20,000
-10,000
0
10,000
20,000
30,000
40,000
Net FIIs/FPIs Inflows in Equity (Rs cr)
6.7%
8.4%
6.6%
7.5%
7.0%
7.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Indian GDP Growth (%)
6.80%
7.00%
7.20%
7.40%
7.60%
7.80%
8.00%
8.20%
Jan'15
Feb'15
Mar'15
Apr'15
May'15
Jun'15
Jul'15
Aug'15
Sep'15
Oct'15
Nov'15
10 year GSec yield % (monthly avg.)

16. Satish Kumar Sharma
Research Analyst
satish.kumar@choiceindia.com
[T] 91-022-6707 9999; Ext: 913
_________________________________________________________________________________________
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