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.
In the July-August 2014 Issue of Economy Matters, we track the economic developments in US and China in Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on IIP, Inflation, Fiscal, Trade & Monetary Policy. The Sectoral spotlight for this issue is on the Implications of Jobless Growth. In Focus of the Month, the spotlight is on Textiles Sector. Special Feature discusses the importance of Hospitality Sector in India.
Industrial production growth continues to remain tepid, thus necessitating the need for urgent redressal steps from the government in the form of expediting execution of approved projects and providing a competitive market for coal and mining sectors. Global headwinds have not receded fully, with growth in Euro Area expected to remain lackadaisical for few more quarters. Japan and China are passing through a phase of below potential growth too. Under this backdrop of subdued global growth, policymakers need to announce more policy actions like 'Make in India' initiative and flexible labour policy to help lift domestic growth to a higher trajectory.
In the current issue of Economy Matters, we cover the latest IMF’s World Economic Outlook and the issue of deflation facing many advanced economies in the Section on Global Trends. In Domestic Trends, we analyse the trends emanating out of the recent releases on IIP, Inflation, Monetary Policy and Trade. We also discuss the Corporate performance for Q2FY15 in this section. The Sectoral spotlight for this issue is on the MSME sector. In Focus of the Month, sectoral experts provide their insightful viewpoints on the topic ‘Coal: Challenges and Way Forward’.
In the current issue of Economy Matters, we discuss China’s GDP release for Q2:2016, policy stance of Bank of England and IMF’s latest global growth forecast in the section on Global Trends. In Domestic Trends, we present analysis of the trends emanating out of the recent releases on Monsoon progress, IIP, Inflation, Trade and CII’s Business Outlook Survey Results for Q1FY17. In Policy Focus, we present the highlights of the key policy documents released during June-July 2016. In Focus of the Month,the topic ‘Transforming Healthcare in India' has been covered.
UK economy is on the mend. We cover this in the section on Global Trends in this month’s issue of Economy Matters. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation, monetary policy, Fiscal & BoP Scenario. In Corporate Performance, we analyse the latest data for 4QFY14. The Sectoral spotlight for this issue is on Ease of Doing Business in India. In Focus of the Month, the spotlight is on Reviving Growth.
The world's second largest economy, China, is slowly recovering. Even more importantly, the latest forecasts by the World Bank suggest that high-income economies appear to be finally turning the corner. We cover this in the section on Global Trends in this month’s issue of Economy Matters.
In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation, trade, and monetary policy.
The Sectoral spotlight for this issue is on Manufacturing, which remains an important sector for realizing the higher growth potential of the economy.
The section on Taxation dwells on BEPS and carries an interview with Mr. Akhilesh Ranjan, Joint Secretary, Ministry of Finance, Government of India on some critical international taxation issues.
In the Special Article, we provide a snapshot of Central Government’s fiscal health along with a detailed Q&A of Mr. R. Seshasayee, Past President & Chairman Economic Policy Council, CII, on the subject.
The section on Special Feature carries an article titled “The Tradeoffs for Policy Makers in India Today”, by Dr. Pronab Sen, Chairman, National Statistical Commission, Government of India.
Index of Industrial Production (IIP), on the domestic front, moved into the positive territory in November 2014, signalling improvement in growth momentum. We hope that going forward, the incipient signs of revival would transform into a firm recovery especially as there is some progress in investment intentions and business confidence is on the ascendant. On the global front, slowing growth in Japan and Euro Area has increased the uncertainties in global growth.
In the current issue of Economy Matters, we analyse the economic data coming out of Japanese and Euro Area economies, in the section on Global Trends. In Domestic Trends, we analyse the trends emanating out of the recent releases on IIP, Inflation, and Balance of Payments. The Sectoral Spotlight for this issue is on the topic “Enabling 'Make in India' Through Effective Tax Reforms”. In Focus of the Month, we look at the year gone by and list out the challenges which await us in 2015.
Appended below is the link to download the November-December 2014 of Economy Matters for your ready reference:
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
This is an analysis and brief overview document on the Survey
In the July-August 2014 Issue of Economy Matters, we track the economic developments in US and China in Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on IIP, Inflation, Fiscal, Trade & Monetary Policy. The Sectoral spotlight for this issue is on the Implications of Jobless Growth. In Focus of the Month, the spotlight is on Textiles Sector. Special Feature discusses the importance of Hospitality Sector in India.
Industrial production growth continues to remain tepid, thus necessitating the need for urgent redressal steps from the government in the form of expediting execution of approved projects and providing a competitive market for coal and mining sectors. Global headwinds have not receded fully, with growth in Euro Area expected to remain lackadaisical for few more quarters. Japan and China are passing through a phase of below potential growth too. Under this backdrop of subdued global growth, policymakers need to announce more policy actions like 'Make in India' initiative and flexible labour policy to help lift domestic growth to a higher trajectory.
In the current issue of Economy Matters, we cover the latest IMF’s World Economic Outlook and the issue of deflation facing many advanced economies in the Section on Global Trends. In Domestic Trends, we analyse the trends emanating out of the recent releases on IIP, Inflation, Monetary Policy and Trade. We also discuss the Corporate performance for Q2FY15 in this section. The Sectoral spotlight for this issue is on the MSME sector. In Focus of the Month, sectoral experts provide their insightful viewpoints on the topic ‘Coal: Challenges and Way Forward’.
In the current issue of Economy Matters, we discuss China’s GDP release for Q2:2016, policy stance of Bank of England and IMF’s latest global growth forecast in the section on Global Trends. In Domestic Trends, we present analysis of the trends emanating out of the recent releases on Monsoon progress, IIP, Inflation, Trade and CII’s Business Outlook Survey Results for Q1FY17. In Policy Focus, we present the highlights of the key policy documents released during June-July 2016. In Focus of the Month,the topic ‘Transforming Healthcare in India' has been covered.
UK economy is on the mend. We cover this in the section on Global Trends in this month’s issue of Economy Matters. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation, monetary policy, Fiscal & BoP Scenario. In Corporate Performance, we analyse the latest data for 4QFY14. The Sectoral spotlight for this issue is on Ease of Doing Business in India. In Focus of the Month, the spotlight is on Reviving Growth.
The world's second largest economy, China, is slowly recovering. Even more importantly, the latest forecasts by the World Bank suggest that high-income economies appear to be finally turning the corner. We cover this in the section on Global Trends in this month’s issue of Economy Matters.
In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation, trade, and monetary policy.
The Sectoral spotlight for this issue is on Manufacturing, which remains an important sector for realizing the higher growth potential of the economy.
The section on Taxation dwells on BEPS and carries an interview with Mr. Akhilesh Ranjan, Joint Secretary, Ministry of Finance, Government of India on some critical international taxation issues.
In the Special Article, we provide a snapshot of Central Government’s fiscal health along with a detailed Q&A of Mr. R. Seshasayee, Past President & Chairman Economic Policy Council, CII, on the subject.
The section on Special Feature carries an article titled “The Tradeoffs for Policy Makers in India Today”, by Dr. Pronab Sen, Chairman, National Statistical Commission, Government of India.
Index of Industrial Production (IIP), on the domestic front, moved into the positive territory in November 2014, signalling improvement in growth momentum. We hope that going forward, the incipient signs of revival would transform into a firm recovery especially as there is some progress in investment intentions and business confidence is on the ascendant. On the global front, slowing growth in Japan and Euro Area has increased the uncertainties in global growth.
In the current issue of Economy Matters, we analyse the economic data coming out of Japanese and Euro Area economies, in the section on Global Trends. In Domestic Trends, we analyse the trends emanating out of the recent releases on IIP, Inflation, and Balance of Payments. The Sectoral Spotlight for this issue is on the topic “Enabling 'Make in India' Through Effective Tax Reforms”. In Focus of the Month, we look at the year gone by and list out the challenges which await us in 2015.
Appended below is the link to download the November-December 2014 of Economy Matters for your ready reference:
The Union Finance Minister Shri Arun Jaitley tabled the Economic Survey 2016-17 today, the first day of the Budget Session of the Parliament. The Economic Survey says that the adverse impact of demonetisation on GDP growth will be transitional and the economy will recover with remonetisation. The Survey states that once the cash supply is replenished, which is likely to be achieved by end of March 2017, the economy would revert to normal. The GDP growth in 2017-18, as per the survey, is projected to be in the range of 6¾-7½ percent.
The Survey suggests a few measures to maximise long-term benefits and minimise short-term costs. One, fast remonetisation and early elimination of withdrawal limits. This would reduce GDP growth deceleration and cash hoarding. Two, continued impetus to digitalisation while ensuring that this transition is gradual and inclusive, and appropriately balances the costs and benefits of cash versus digitalisation. Three, following up demonetisation by bringing land and real estate into the GST. Four, reducing tax rates and stamp duties.
This is an analysis and brief overview document on the Survey
It gives me a pleasure to present the summary and analysis of Union Budget 2016.
While you may have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2016 on You, Your company and Your sector.
Hope you find this analysis useful in taking business decisions and align your company's strategy with over all economic climate for the upcoming financial year.
Would love to hear your feedback on the usefulness of the same.
Thanks a lot.
In this issue of Economy Matters, we analyse the recent Fed rate hike and Euro Zone economic prospects, in the section on Global Trends. We have covered data trends in GDP, IIP, Inflation, Monetary Policy and Trade in the Domestic Trends section. Find out the results of 2QFY16 In Corporate Performance section. Taxation section covers the views of Sumit Dutt Mazumder, former Chairman of CBEC on GST. The Sectoral Spotlight for this issue is on Financial Conditions Index for 3QFY16. Read Focus of the Month, to know about ‘Skilling India’, wherein experts from diverse areas present their views.
In the June / July 2014 issue of Economy Matters, we track the economic developments in the major advanced economies in Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on IIP, Inflation and Monsoon. Additionally, the recent Economic Survey and Railway Budget are also covered. The Sectoral spotlight for this issue is on the Warehousing Industry. In Focus of the Month, the spotlight is on Union Budget 2014-15. Special Feature discusses the importance of Chemical Industry for economic growth.
In the current issue of Economy Matters, we analyse the growth trends emanating out of China, Japan and US, in the section on Global Trends. In Domestic Trends, data trends in IIP, inflation and trade are analysed. The Sectoral Spotlight for this issue is on ‘Employment Potential of the Road Transport Sector’. In Focus of the Month, we evaluate the three recently released reports by DIPP, World Bank and World Economic Forum on State of Competitiveness in India.
FICCI's latest Economic Outlook Survey puts across the GDP growth estimate for the year 2014-15 at 5.3%, with a minimum and a maximum range of 4.9% and 5.8%. This is a tad lower than the 5.5% growth estimate put out by the economists in the previous survey round and is mainly on account of bleak prospects for performance of the agriculture sector due to sub-par monsoon forecast.
Regarding the performance of the industrial sector this year. The median forecast for industrial growth for 2014-15 is pegged at 3.1% and for agricultural sector at 2.1%. Further, services sector growth is expected at 7.0% this year and is only marginally higher than 6.8% growth recorded in 2013-14.
On Inflation, the El Nino effect is expected to fuel inflationary pressure going ahead.
Union Budget- MACRO-ECONOMIC FRAMEWORK STATEMENT 2020-21
Highlights & Key features of budget 2020-21 pdf. Presented by Hon FM Nirmala Sitharaman
Sources: https://www.indiabudget.gov.in/doc/frbm1.pdf
Global growth continues to remain tepid. In US, new data releases are pointing towards a mild recovery, but not compelling enough to force the Federal Reserve to change its monetary policy stance. Labour market is recovering slowly and unemployment rate has continued to decline. On the domestic front, inflation has continued to remain subdued. Given the downward trajectory of inflation and limited upside risks in the wake of benign global commodity prices, the Central Bank chose to cut interest rates by 50 bps in end-September 2015.
In the current issue of Economy Matters, we analyse the growth prospects of Euro Area economies and US economy, in the section on Global Trends. In Domestic Trends, data trends in IIP, inflation, trade and monetary policy are analysed. Corporate Performance section analyses the corporate results for 1QFY16. The Sectoral Spotlight for this issue is on ‘Make in India and the Potential for Job Creation’. In Focus of the Month, the important issue of ‘Financial Inclusion’ has been covered.
CII’s flagship monthly publication Economy Watch has been now revamped and rechristened as ‘Economy Matters’. Apart from encompassing all the key features of the old version, the new issue also carries a new section on Corporate Profitability to keep readers abreast about the latest trends in corporate performance. The ‘Economy Matters’ brought out by CII Research seeks to provide an in-depth update on current trends in the domestic and international economy and helps in tracking policy developments and understanding industry dynamics.
M&A dealscape highlights the M&A deal activity in India over the last 4 quarters (July 2017 to June 2018), together with insights on macro-economic scenario and key deal rationales by sector.
In August-September, 2014 issue of Economy Matters, we analyse the recently held G20 Summit; movement in oil prices and Ukraine situation in the section on Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation and Trade. In the section on Taxation, the urgency of implementing GST in India is discussed. The Sectoral spotlight for this issue is on the Food Processing Industry. In Focus of the Month, the spotlight is on improving investment in Infrastructure.
Underlying risks in the global economy have not abated and there is still good reason to be worried about the future growth prospects of large economies. This was the clear message from IMF’s second bi-annual outlook released in October 2013. We cover this in the section on Global Trends in this month’s issue of Economy Matters.
In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on Current Account, IIP and Inflation during the month of October 2013.
The Sectoral spotlight for this issue is on Food Processing, which has shown robust performance in the recent years owing to factors such as growing per capita income, large availability of raw materials, changing lifestyles, and conducive government policies.
In the Special Article, we discuss the key drivers and reasons behind high food inflation plaguing the economy currently.
The Feb2016 issue of Economy Matters focuses on Union Budget 2016-17. The Global Trends section analyses the prospects of the BRICS economies and oil movement. In the Domestic Trends section, get insights to the Indian GDP, IIP, Inflation, Trade, Economic Survey and Railway Budget.
It gives me a pleasure to present the summary and analysis of Union Budget 2016.
While you may have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2016 on You, Your company and Your sector.
Hope you find this analysis useful in taking business decisions and align your company's strategy with over all economic climate for the upcoming financial year.
Would love to hear your feedback on the usefulness of the same.
Thanks a lot.
In this issue of Economy Matters, we analyse the recent Fed rate hike and Euro Zone economic prospects, in the section on Global Trends. We have covered data trends in GDP, IIP, Inflation, Monetary Policy and Trade in the Domestic Trends section. Find out the results of 2QFY16 In Corporate Performance section. Taxation section covers the views of Sumit Dutt Mazumder, former Chairman of CBEC on GST. The Sectoral Spotlight for this issue is on Financial Conditions Index for 3QFY16. Read Focus of the Month, to know about ‘Skilling India’, wherein experts from diverse areas present their views.
In the June / July 2014 issue of Economy Matters, we track the economic developments in the major advanced economies in Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on IIP, Inflation and Monsoon. Additionally, the recent Economic Survey and Railway Budget are also covered. The Sectoral spotlight for this issue is on the Warehousing Industry. In Focus of the Month, the spotlight is on Union Budget 2014-15. Special Feature discusses the importance of Chemical Industry for economic growth.
In the current issue of Economy Matters, we analyse the growth trends emanating out of China, Japan and US, in the section on Global Trends. In Domestic Trends, data trends in IIP, inflation and trade are analysed. The Sectoral Spotlight for this issue is on ‘Employment Potential of the Road Transport Sector’. In Focus of the Month, we evaluate the three recently released reports by DIPP, World Bank and World Economic Forum on State of Competitiveness in India.
FICCI's latest Economic Outlook Survey puts across the GDP growth estimate for the year 2014-15 at 5.3%, with a minimum and a maximum range of 4.9% and 5.8%. This is a tad lower than the 5.5% growth estimate put out by the economists in the previous survey round and is mainly on account of bleak prospects for performance of the agriculture sector due to sub-par monsoon forecast.
Regarding the performance of the industrial sector this year. The median forecast for industrial growth for 2014-15 is pegged at 3.1% and for agricultural sector at 2.1%. Further, services sector growth is expected at 7.0% this year and is only marginally higher than 6.8% growth recorded in 2013-14.
On Inflation, the El Nino effect is expected to fuel inflationary pressure going ahead.
Union Budget- MACRO-ECONOMIC FRAMEWORK STATEMENT 2020-21
Highlights & Key features of budget 2020-21 pdf. Presented by Hon FM Nirmala Sitharaman
Sources: https://www.indiabudget.gov.in/doc/frbm1.pdf
Global growth continues to remain tepid. In US, new data releases are pointing towards a mild recovery, but not compelling enough to force the Federal Reserve to change its monetary policy stance. Labour market is recovering slowly and unemployment rate has continued to decline. On the domestic front, inflation has continued to remain subdued. Given the downward trajectory of inflation and limited upside risks in the wake of benign global commodity prices, the Central Bank chose to cut interest rates by 50 bps in end-September 2015.
In the current issue of Economy Matters, we analyse the growth prospects of Euro Area economies and US economy, in the section on Global Trends. In Domestic Trends, data trends in IIP, inflation, trade and monetary policy are analysed. Corporate Performance section analyses the corporate results for 1QFY16. The Sectoral Spotlight for this issue is on ‘Make in India and the Potential for Job Creation’. In Focus of the Month, the important issue of ‘Financial Inclusion’ has been covered.
CII’s flagship monthly publication Economy Watch has been now revamped and rechristened as ‘Economy Matters’. Apart from encompassing all the key features of the old version, the new issue also carries a new section on Corporate Profitability to keep readers abreast about the latest trends in corporate performance. The ‘Economy Matters’ brought out by CII Research seeks to provide an in-depth update on current trends in the domestic and international economy and helps in tracking policy developments and understanding industry dynamics.
M&A dealscape highlights the M&A deal activity in India over the last 4 quarters (July 2017 to June 2018), together with insights on macro-economic scenario and key deal rationales by sector.
In August-September, 2014 issue of Economy Matters, we analyse the recently held G20 Summit; movement in oil prices and Ukraine situation in the section on Global Trends. In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, IIP, Inflation and Trade. In the section on Taxation, the urgency of implementing GST in India is discussed. The Sectoral spotlight for this issue is on the Food Processing Industry. In Focus of the Month, the spotlight is on improving investment in Infrastructure.
Underlying risks in the global economy have not abated and there is still good reason to be worried about the future growth prospects of large economies. This was the clear message from IMF’s second bi-annual outlook released in October 2013. We cover this in the section on Global Trends in this month’s issue of Economy Matters.
In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on Current Account, IIP and Inflation during the month of October 2013.
The Sectoral spotlight for this issue is on Food Processing, which has shown robust performance in the recent years owing to factors such as growing per capita income, large availability of raw materials, changing lifestyles, and conducive government policies.
In the Special Article, we discuss the key drivers and reasons behind high food inflation plaguing the economy currently.
The Feb2016 issue of Economy Matters focuses on Union Budget 2016-17. The Global Trends section analyses the prospects of the BRICS economies and oil movement. In the Domestic Trends section, get insights to the Indian GDP, IIP, Inflation, Trade, Economic Survey and Railway Budget.
Zinavo Technologies is a one-stop destination for all web related services including Web Designing, website development, Ecommerce Development, Mobile application, Web Hosting, Domain Registration and much more.
Prism is CII's Bi-Monthly Journal on India – Gulf & MEWANA Bilateral Ties. This is the latest issue of this newsletter giving news, views and business opportunities from Gulf and MEWANA area.
One of the biggest challenges for the resurgent Indian economy is the exponentially growing demand for energy. With the country's oil import bill for last financial year touching a staggering $150 billion and per capita consumption of electricity languishing at a paltry 917.2kWh, as against 3298 kWh in China and 12346 kWh in the US, energy is clearly a critical focus area for the new NDA Government.
The Government has decided to tackle this challenge proactively by focusing on the three As – access, availability and affordability – as the primary drivers to reach the goal of sustainable energy for all. Landmark reforms are being planned for energy sector policies, and some, such as the new bill for the coal sector, has improved upon a 40-year legacy with one bold stroke. The Government has also set very ambitious targets for the renewable energy sector, with 100GW of solar energy installed capacity envisioned by 2020, entailing investments to the tune of USD 100bn.
Given the significant developments underway in this sector, the November issue of Policy Watch reached out to industry leaders across the power, hydrocarbons and renewable energy sectors, to capture their views on the policy reforms being proposed by the Government, and their recommendations to ensure a sustainable and energy-secure future for the country
The agriculture sector continues to be the backbone of the Indian economy with around 50 per cent of population earning its livelihood from it. Contributing significantly to inclusive growth, the sector plays a vital role in India’s development journey. Despite this, agriculture is plagued by multifarious challenges. Some of the problems relate to the stagnation of yields, rising input costs, un-remunerative prices to farmers, among others. Hence it is pivotal that a turnaround is scripted in the agriculture sector which will be crucial for achieving inclusive growth. In this context, the distinctive and revolutionary vision enunciated by the Prime Minister of doubling farmer incomes by 2022 is undoubtedly praiseworthy and provides a remarkable opportunity to take the performance of Indian agriculture to a new level.
In the current issue of Economy Matters, the Focus of the Month is on “Reforming Agriculture Sector”. In Domestic Trends, we present an Economy Overview along with analysis of the latest data on Monsoon progress, IIP, Inflation, Monetary policy & Trade performance. In Policy Focus, the highlights of the key policies announced by the Government/RBI during July-August 2017. Global growth prospects and US fed policy stance is covered in Global Trends.
Global economies are witnessing two-speed recovery with the US economy showing firm signs of recovery, while growth in Euro Area still languishing in sub-optimal territory. Among the Asian economies, growth in Japan and China too continues to remain tepid. 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 analyze that the economic condition in the present scenario is in greater disarray than it was during the breakout of the global financial crisis of 2008-09, when both government as well as the RBI were quick to respond to the challenges and brought the economy back to recovery path within no time. In Corporate Performance, we examine the sectoral performance in the last fiscal in order to find the sectors which were badly hit in the wake of the current bout of economic crisis. The Sectoral spotlight for this issue is on Agriculture, a traditionally important sector of the Indian economy because of its enormous contribution in being the provider of basic source of livelihood to the most of the population in India. However in the recent past various challenges such as low agricultural yield, declining share of public investment, and lack of technological advancements have plagued the sector. We discuss the sector’s challenges and suggest measures to bolster its output. In the Special Article, we discuss India's deteriorating external position in the last few years, manifesting itself in a steady deterioration in the current account which slipped from a surplus at the start of the last decade to a huge deficit of 4.8 per cent in 2012-13. Bulk of the deterioration in current account is attributable to the sharp rise in merchandise trade deficit over the last decade. Ultimately, for India to contain its current account deficit at a more sustainable level of 2.0-2.5 per cent of GDP, it is essential that we ensure competitiveness of our goods and services, so that our imports are contained and exports boosted.
Euro Area is recovering slowly, with its major member countries registering lower-than-expected growth rates in the third quarter. Major Asian economies have shown diverse growth trends in the last few quarters. We cover this in the section on Global Trends in this month’s issue of Economy Matters.
In the section on Domestic Trends, we discuss the trends emanating out of the recent releases on GDP, Current Account, IIP and Inflation data during the month of December 2013.
The Sectoral spotlight for this issue is on Electricity, which remains an important contributor to GDP growth. We evaluate the impact of the Electricity Act, 2003 on the sector’s performance.
In the Special Article, we provide a snapshot of India’s exports sector along with analyzing the important sectors in exports such as services and tourism.
In the current issue of Economy Matters, we analyse the economic prospects of US economy and the India-Mauritius tax pact in the section on Global Trends. In Domestic Trends, we analyse the trends emanating out of the recent releases on IIP, Inflation, Trade and Currency. Sector in Focus section discusses the prospects of e-commerce industry in India. In Focus of the Month, we discuss the impact of monsoons on the Indian economy. Special Feature carries an article on growth and job creation by Ms. A. Srija, Director, NITI Aayog.
US GDP growth slowed down once again in first quarter of 2016 amid signs of a global economic slowdown. Both consumers and businesses cut back on spending and US exports were hurt by economic weakness in overseas markets. Continued economic weakness, subpar inflation and global pressures are likely to cause the Federal Reserve to slow its pace of rate hikes this year from what had been expected. Closer home, in a significant move, India and Mauritius signed a landmark tax pact, aimed at tackling black money. The government expects the Protocol to tackle treaty abuse and round tripping of funds, curb revenue loss, prevent double non-taxation, streamline the flow of investment and stimulate the flow of exchange of information between India and Mauritius.
Current State of the Indian EconomyCautious optimism for the.docxfaithxdunce63732
Current State of the Indian Economy
Cautious optimism for the future
February 2013
www.deloitte.com/in
2
The Big Picture
The Indian Economy has experienced
its worst slowdown in nearly a decade
on the back of global contractionary
headwinds, domestic macro-economic
imbalances and policy reversals on the
fiscal front, 2012 has been a challenging
year for the economy. The year started
with news that the previous fiscal’s
fourth quarter GDP had dropped to
5.5%. That coupled with low growth,
macro-economic issues such as high
fiscal deficit, expansionary subsidies and
worsening current account balance has
added to the slowdown.
The 2011-12 Budget had proposed
to amend the 1961 income tax
law by introducing retrospective
tax adjustments and General Anti-
Avoidance Rules (GAAR). These steps
were viewed negatively by foreign
investors. Subsequent downgrading
of the Indian economic outlook from
‘stable’ to ‘negative’ by a major rating
agency, led to continued downward
pressure on the investment climate.
Additionally, as fiscal conditions
worsened over the year, export
numbers were revised in light of data
discrepancies leading to a widening of
the current account deficit.
In the second half of the fiscal, the
Government proactively intervened
with phased reforms to stabilize the
economy. Measures were taken to
reduce subsidies (oil, fertilizers) which
would in turn lower the fiscal deficit.
The Government also took concrete
actions to attract foreign direct
investment (FDI) and strengthen the
rupee. However, the impact of these
policy reforms remains uncertain in
the short term. Concerns continue
to exist over the current account
deficit scenario, prevailing supply side
constraints, inadequate infrastructure
investments and long term policy
directions.
In face of a perceivably weak macro-
economic climate, a well-planned
economic revival policy is required to
steer the Indian Economy back on the
growth path. Even though the long
term prospects of the economy look
promising, cautious optimism is the
tone in the short to medium term.
Global Linkages
Performances of advanced economies
continue to weigh on India’s growth
story.
The World Economic Forum’s annual
meeting for 2013 was held in Davos,
Switzerland in January 2013, bringing
together more than 2,000 top business
leaders, international political leaders,
Current State of the Indian Economy Cautious optimism for the future 3
Economic opportunity is dwindling. While reforms have
been initiated, further action to create infrastructure, boost
savings and generate growth will be welcome
selected intellectuals and journalists to
discuss the most pressing issues facing
the world. The IMF, in its update of
World Economic Outlook, lowered the
world GDP growth projections by 0.1%
each for 2013 & 2014 as compared to
the October 2012 projections. This is on
account of downside risks that continue
in light of renewed s.
Micro Small and Medium Enterprise Funding - Opportunities and ChallengesResurgent India
What are MSMEs, Why are they Important, What is their role in the Economy and What are the Opportunities and Challenges related to Funding in the Sector? This Research Report from Resurgent India highlights the Opportunities and Challenges along with Suggestions for MSME Funding.
This monthly briefing highlights that the world economy is expected to improve in 2014; that unemployment rates remain a major challenge; and downside risks to the baseline scenario persist.
For more information:
http://www.un.org/en/development/desa/policy/wesp/wesp_mb.shtml
It gives me a pleasure to present the summary of India Budget Synthesis 2014.
While you may already have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2014 on You, Your Company and Your Sector.
Hope you find this analysis useful in taking clearer business decisions and align your company's strategy with the overall economic climate in the balance part of financial year 2014-15.
Would love to hear your feedback on the usefulness of the same.
Dear Friends,
It gives us a pleasure to present the summary of India Budget Synthesis 2014.
While you may already have the snapshot, here is a document which will not only give you crisp highlights, but would also decode the impact of Budget 2014 on You, Your Company and Your Sector.
Hope you find this analysis useful in taking clearer business decisions and align your company's strategy with the overall economic climate in the balance part of financial year 2014-15.
Would love to hear your feedback on the usefulness of the same."
Regards,
Vishal Thakkar | Group Head - Corporate Relations | Synthesis Group
Hand Phone: 91 9320007891 | Boardline: 91 22 24093737 | Fax: 91 22 24093737
Similar to CII Economy Matters - July 2013 Issue (20)
The May edition of the Multilateral Newsletter highlights the key deliberations from the Forum and provides the key recommendations made by the OECD stakeholders. In addition, the edition covers major happenings at the World Bank, Asian Development Bank (ADB), B20 and International Labour Organisation (ILO).
Micro, Small and Medium Enterprises (MSMEs) sector is the backbone of the national economic structure and has acted as the bulwark for the Indian economy, providing it resilience to fend off global economic shocks and adversities. The development of the sector is extremely critical to meet the national imperatives of financial inclusion and generation of significant levels of employment across urban, rurban and rural areas and to catalyse socio-economic transformation.
Easy access to credit and finance remains one of the many challenges faced by the sector. Hence, in view of the sector's importance in the overall economic landscape, it is critical the MSME sector develops through the concerted efforts of various stakeholders, including banks and financial institutions, equity funds, industry majors and MNCs, regulators across various ministries at the Center and in the States, and trade associations, together, to create a forward-looking framework and ecosystem. The competitiveness of the MSME sector is critical for sustaining economic growth.
It’s a matter of concern that 600 million people in India face high to extreme water stress in the country. About three-fourths of the households in the country do not have drinking water at their premise. With nearly 70% of water being contaminated, India is placed at 120th amongst 122 countries in the water quality index. It’s a fact that water is a State subject and its optimal utilization and management lies predominantly within the domain of the States. This index is an attempt to budge States and UTs towards
efficient and optimal utilization of water and recycling thereof with a sense of urgency.
GST, the single taxation regime, was implemented a year back and though there were some initial implementation issues, as is the case with any system for the first time, it is safe to say that the GST has been the biggest tax reform of Independent India.
Cyberspace is rapidly transforming our lives – how we live, interact, govern and create value. With the JAM (Jan Dhan, Aadhaar and Mobile) trinity, India is at the forefront of global digital transformation. “Digital India” is being hailed as the world's largest technology led programme of its kind.
While internet, smartphones and modern information and
communication devices have been great force multipliers, endless connectivity and proliferation of IoT devices is giving rise to vulnerabilities, risks and concerns. Cyber security is today ranked among top threats by governments and corporates. Heightened concerns about data security and privacy have resulted in a spate of regulations in India and across the world. India is in the process of discussing and enacting its own comprehensive data security and privacy regulation, as well as vertical specific ones. Cyber security is an ecosystem where laws, organisations, skills, cooperation and
technical implementation would need to be in harmony to be
effective.
Overall, a robust regulatory framework based on global and
country-specific regulations, development of a holistic cyber
security eco-system (academia and industry as well as
entrepreneurial) and a coordinated global approach through
proactive cyber diplomacy would help to secure cyber space and promote confidence and trust of key stakeholders including
citizens, businesses, political and security leaders.
CII has been actively working in the cyber security space. The CII Task Force on Public Private Partnership for Security of the Cyber Space has been set up to bring about improvements in the legal framework to strengthen and maintain a safe cyberspace ecosystem by capacity building through education and training programmes. We would facilitate collaboration and cooperation between Government and Industry in the area of cyber security in general and protection of critical information infrastructure in particular, covering cyber threats, vulnerabilities, breaches, potential protective measures, and adoption of best practices.
Delhi, the capital of India, has emerged as a major commercial capital and industrial hub of India. It is home to a wide range of industries including textiles, electrical and electronics, IT &ITeS services, hotel and tourism, which have contributed immensely to the economic and industrial growth of the country. Nearly 88% of the SMEs in Delhi revealed that this cluster is as an attractive destination for conducting business. Delhi has become an attractive business and tourist destination. This is driven by its improved infrastructure, good connectivity with other Asian and western regions, ease of access to market and availability of skilled labor among others. Consequently, it has emerged as
one of the most preferred investment and business destinations.
The state government of Maharashtra has been at the forefront in creating a conducive business environment that fosters globally competitive firms. Business reforms introduced both by the Central as well as the state government have played a critical role in India’s 30 spots improvement in the Doing Business ranking for 2018.
The State, under the Business Reforms Action Plan (BRAP) 2016, has implemented over 90 per cent reforms in 7 out of 10 parameters, including labour registration, utility connections, single window system, environment registration, among others. These policy reforms have significantly helped in the reduction in time and cost of doing business for the industry, thereby
establishing Maharashtra as one of the top investment destinations in the country.
This report provides the key highlights of the select initiatives on ease of doing reforms in Maharashtra. With a view to provide on-ground impact of these initiatives, the Report also captures industry views on various aspects of business reforms.
The March-April edition of the Multilateral Newsletter gives insights on the key happenings at the various multilateral institutions and highlights the key discussions and deliberations at the informal WTO Ministerial Meeting held in New Delhi.
WTO plays a vital role by bringing stability and predictability to the multilateral trading system. It is a collective responsibility of WTO members to address the challenges faced by the system and putting the economies back on steady and meaningful way forward.
Several proposals and initiatives on investment facilitation were tabled at the WTO in the run-up to the 11th Ministerial Conference. The proponents advocated discussions on Investment Facilitation within the WTO framework. However, there was no consensus on initiating negotiations, or even establishing a Work Programme, on Investment Facilitation. A clear need of more work to look at all aspects of a potential multilateral rules on Investment, particularly on its impact on domestic policy space was stated.
In order to deepen the understanding between the member it is important that an open, transparent and inclusive approach of decision making for the various interventions. The informal WTO Ministerial gathering in New Delhi saw convergence of around 53 members representing a broad spectrum of the WTO membership.
CII, as an Industry Institution is cognizant of the need for India to engage constructively in some of the new issues being discussed under the WTO framework.
Businesses are gradually recognizing that ethics means good business. It is believed that well-run and trustworthy
companies are more likely to attract greater investment opportunities, which enables them to innovate and expand, and
generate wealth and jobs. Good corporate governance practices are regarded as providing an 'extra' edge to companies
to enhance their image and stay ahead in an intensely competitive business environment. This would help them imbibe
universally accepted values of ethics and good governance—accountability, transparency, responsibility and
responsiveness to stake holders. Besides, it would also mean looking beyond achieving mere economic sustainability to
include social and environmental sustainability as well. Many corporates are adhering to sustainable business practices
and many more are likely to follow suit in the time to come.
On the domestic front, CII expects economic growth to bounce back to 7.3-7.7 per cent in FY19 from the estimated 6.6
per cent in FY18. The prognosis of improved rural consumption and a recovery in private investment will support
growth, even as the debilitating effects of demonetisation and GSTimplementation will fade away
The Commuique May 2018 edition discusses the cover story
on 'Resolving Insolvency in India'
The Insolvency and Bankruptcy Code (IBC) 2016, is one of
the biggest regulatory reforms corporate India has witnessed
in recent times.
It also features 'UK-India CEO Forum Meeting ', 'CII CEOs Delegation to 11th Commonwealth Business Forum 2018', 'Four Transformations of the Global Energy Market', Economy pieces on 'The Innovation Paradox' & 'Can the Lion Conquer the Forest?' along with a piece on 'India-Africa Economic Partnership'.
The government of India has, in the past few years, accorded an utmost priority to the Ease of Doing Business (EoDB). The accent is on simplification of regulations and use of technology to make the compliance more efficient for businesses. Apart from the Centre, the States are also being encouraged to implement business reforms in the spirit of competitive federalism, to foster reforms at the sub-national level. The measures are aimed at creating a conducive business environment, which is a key to facilitating growth and creating jobs. Thanks to these measures, India’s EoDB ranking, captured by the World Bank, has improved by 42 spots since 2014 to touch the 100th position now. The Prime Minister envisions India among the top 50 nations in the next couple of years.
While business reforms are being undertaken at a rapid pace and large scale, cutting across Central as well as state levels, it is imperative that awareness about these developments is created among stakeholders and regular feedback is generated to address the gaps in the implementation of reforms. Identification of pending issues and suggesting possible solutions are equally vital. It is also important to identify the best practices within and outside the country, which are considered for implementation by the needy states.
The report reflects on the role of broadband connectivity and the multiplier effect it has on the larger ecosystem. India is ripe for a Digital rethink, with both government and industry aligning their efforts toward a broadband powered Digital India. Broadband has the power to enable the gigabit society that is always connected. Broadband connectivity has changed the way people
communicate, socialise, create, sell, shop and work. India’s digital consumption patterns highlights the evolution. On an average Indians spend 200 minutes on mobile every day, with the second highest app downloads globally. Almost 79% of the web traffic in India is on mobile.
To realise the Digital India dream, there is a need to strengthen the broadband backbone, which forms a key pillar of this transformation. This report highlights the need for future ready and robust broadband infrastructure and the requisite efforts for expediting its reach.
South Africa and India share a rich past and bright future. India has transitioned from being South Africa’s political ally to being a vibrant economic partner. Despite challenges, the opportunity for increasing the value of bilateral trade between the two countries is growing exponentially each year.
South Africa and India have nurtured a bilateral relationship since the 1860s, when the first Indians arrived in South Africa. India was one of the first countries that rallied at the United Nations in support of the anti apartheid movement in South Africa. The strong bond established between the two countries during the struggle for democracy in South Africa became further entrenched in post-apartheid South Africa.
Most global businesses recognise South Africa as the most favourable destination in Africa for making long-term investments. The country offers a stable political and economic environment with established institutions. Policies and procedures are well articulated and consistent, and it offers a free and competitive environment with open-minded consumers. South Africa provides the most stable and technologically viable environment for Indian companies wishing to establish a base from which to expand across the continent. As a gateway to Africa, it is renowned for its infrastructure, skills pool and expertise.
Our world is changing at an unprecedented pace, driven by a new digital economy. Companies across sectors are keen to become more efficient, disruptive, and differentiated, by using new technologies and supported by an ecosystem of customers, partners, and technology leaders. New-age technologies such as Artificial Intelligence (AI), Augmented Reality (AR), Blockchain, Machine Learning, 3D printing, and IoT are gaining more and more importance and acceptance.
India has all the ingredients in place to leverage this innovation and technological advantage in the long run, including university graduates, public institutes and corporates. However, India’s gross expenditure on R&D as a proportion of GDP (GERD) is less than 0.7% as of 2014-15 and within this, the share of industry is just 30%. Further, the vast SME sector needs to scale up technology infusion for higher productivity.
This is the fifth edition of the Grant Thornton India meets Britain Tracker, developed in collaboration with the Confederation of Indian Industry. The India Tracker identifies the fastest-growing Indian companies in the UK, as well as the top Indian employers. It provides insight into the evolving scale, business activities, locations and performance of the Indian-owned companies who are making the biggest impact in the UK.
This year, our research identified approximately 800 Indian companies operating in the UK, with combined revenues of £46.4 billion (£47.5 billion in 2017). Together, they paid £360 million in corporation tax (£275.7 million in 2017) and employed 104,932 people (105,268 in 2017). This shows the continued importance of the contribution that Indian companies make to the UK economy.
The Make in India initiative of the government which lays emphasis on domestic manufacturing, indigenization and import substitution, is expected to pave the way for making the Indian defence sector self-sufficient.Encouragingly, the Indian industry is now actively engagedand is partnering with the government in building a modern and best-in-class defence systems, equipment and components which should strengthen our forces and make the country more self-reliant. The formation of the Society of Indian Defence Manufacturers (SIDM) as an apex body of the Indian defence industry is critical in this regard. SIDM is expected to play a proactive role as an advocate, catalyst and facilitator for building the growth and capability of the defence industry in India. Given the rising importance of buttressing the Make in India programme for expanding the capacity of the Indian defence sector, in this issue of Economy Matters, a few SIDM office bearers and defence experts present their insights into this crucial topic.
As India integrates deeper into the global economy, it is becoming increasingly clear that the country needs to focus both on meeting international competition and its own developmental challenges.
The Government launched several initiatives last year, such as Make in India, Skill India, and Digital India, among others, towards make the vision of integrated inclusive development a reality.
For industry, grappling with the challenges of disruptive technologies, restrictive trade laws, environmental responsibilities and more demanding and discerning customers, the imperative is for sharper focus on producing excellent goods and services, along with building skills, generating jobs, and mainstreaming the marginalized.
Personal and freight mobility are important aspects of economic development and therefore create a significant footprint on the natural environment, especially on the ambient air quality. Vehicular emissions have been identified as one of the sources of air pollutants, specially PM 2.5, as per source apportionment study of IIT-Kanpur commissioned by Government of NCT of Delhi in the year 2015 (Sharma and Dikshit, 2016). Although there are other contributors to air pollution but the vehicular pollution remains a major non-point source. Efforts are needed for reducing the overall impact of the same. Another distinguishing feature of Delhi’s transportation system is the medium and heavy commercial vehicles (MHCVs) which are 2.5% of the total vehicular population but are responsible for over 65% of the total vehicular pollution as well as fuel consumption.
Under CII-NITI Aayog 'Cleaner Air Better Life Initiative', the task force on clean transportation has undertaken a consultative process to identify seven areas of action towards mitigation of air pollution in Delhi and National Capital Region (NCR). To begin with, it proposes mobility reforms to induce a more fundamental change from private vehicle towards sustainable means of transportation such as public and shared transportation. Further, limiting high-mileage polluting vehicles, strengthening Pollution-Under-Control (PUC) regime, allowing retailing of bio-fuels, promoting electric-mobility, decongesting traffic hotspots and retrofitting solutions are recommended by the task force, as elaborated.
Confederation of Indian Industry (CII) takes immense pleasure in presenting the third edition of Annual CSR Tracker 2017. Similar to the last two editions, this is the most comprehensive analysis of CSR disclosures of Bombay Stock Exchange (BSE-listed) companies obligated to practice CSR as per the Companies Act, 2013.
The Annual CSR Tracker 2017 is based on disclosures of 1,522 companies as compared to 1,270 companies in 2016 and 1,181 in 2015. Disclosures are broken into approximately, 41 indicators spread across six aspects of CSR legislation: governance, policy, financials, spends as per Schedule VII, spend channels, and spend locations. Also included is beneficiary data that companies voluntarily disclose in their annual reports.
At CII Indian Women Network, we are driven by the imperative that Indian women become a core critical mass of the workforce to bring about the transformational change in attitude and behavior. We have also recognized the importance of some amazing women role models who can inspire the future generation into believing that there are no limits to what a woman can achieve. One critical aspect is our own self-belief and innermost conviction that will ultimately help us triumph in our relentless struggle for gender equality. It is a pleasure to share this comprehensive report with you that captures the universe of several variables that will impact our future progress.
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CII Economy Matters - July 2013 Issue
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.
3. 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
4. 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
5. 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
6. 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
7. 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
8. 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
9. 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%)
10. 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.
11. 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
12. 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
13. 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.
14. 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)
15. 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
16. 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.
17. 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
18. 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
19. 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
20. 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
21. 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
22. 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
23. 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
24. 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)
25. 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
26. 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
27. 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
28. 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
29. 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)
30. 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
31. 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.
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