ECONOMIC HIGHLIGHTS
Advance Estimates of National Income - 2009-10
(a) Estimates at constant (2004-05) prices
Gross Domestic Product (GDP)
GDP at factor cost at constant (2004-05) prices in the year 2009-10 is estimated at US$ 961.89 billion (Rs. 44,64,081 crore) showing a growth rate of 7.4 percent over the Quick Estimates of GDP for the year 2008-09 of US$ 889.91 billion (Rs. 41,54,973 crore).The upward revision in the GDP growth rate is mainly on account of higher performance in ‘agriculture, forestry and fishing’, ‘mining and quarrying’ and ‘manufacturing’, than anticipated.
In the case of ‘mining and quarrying’, the Index of Industrial Production of Mining (IIPMining) registered a growth rate of 9.7 per cent during 2009-10, as against the growth rate of 8.3 percent during April-November, 2009, which was used in the Advance Estimates. Due to this increase in the IIP-Mining, the growth rate in GDP is now estimated at 10.6 percent, as
against the advance estimate growth rate of 8.7 percent.
Similarly, the IIP of manufacturing registered a growth rate of 10.9 percent during 2009-10, as against the growth rate of 7.7 percent during April-November,2009. Due to this increase in the IIP, the GDP of ‘manufacturing’ sector is now estimated at 10.8 percent,as against the Advance estimate growth rate of 8.9 percent.
The sectors which showed growth rates of 5 percent or more, are ‘mining and quarrying’ (10.6 percent), ‘manufacturing’(10.8 percent), ‘electricity, gas and water supply’(6.5 per cent)'construction’(6.5 percent),'trade, hotels,transport and communication'(9.3 per cent),'financing, insurance, real estate and business services' (9.7 percent), and 'community,
social and personal services' (5.6 percent). The ‘agriculture, forestry and fishing’ sector, however registered a growth rate of 0.2 percent.
Gross National Income
The gross national income (GNI) at factor cost at 2004-05 prices is now estimated at US$ 890.29 billion (Rs. 44,39,072 crore) during 2009-10, as against the previous year’s Quick Estimate of US$ 886.69 billion (Rs. 41,38,174 crore). In terms of growth rates, the gross national income is estimated to rise by 7.3 percent during 2009-10, in comparison to the growth rate of 6.8 percent in 2008-09.
Per Capita Net National Income
The per capita net national income in real terms (at 2004-05 prices) during 2009-10 is estimated to attain a level of US$ 720.23 (Rs. 33,588) as compared to the Quick Estimates for the year 2008-09 of US$ 682.40 (Rs. 31,821).The growth rate in per capita income is estimated at 5.6 percent during 2009-10.
(b) Estimates at current prices
Gross Domestic Product
GDP at factor cost at current prices in the year 2009-10 is estimated at US$ 1,257.41 billion (Rs. 58,68,331 crore),showing a growth rate of 12.2 percent over the Quick Estimates of GDP for the year 2008-09 of US$ 1,120.46 billion (Rs. 52,28,650 crore).
Gross National Income
The GNI at factor cost at current prices is now estimated at US$ 1,250.40 billion (Rs. 58,35,493 crore) during 2009-10, as compared to US$ 1,115.84 billion (Rs. 52,07,534 crore) during 2008-09, showing a rise of 12.1 percent.
Per Capita Net National Income
The per capita income at current prices during 2009-10 is estimated to attain a level of US$ 950.87 (Rs. 44,345) as compared to the Quick Estimates for the year 2008-09 of US$ 860.73 ( Rs. 40,141), showing a rise of 10.5 percent.
Quarterly Estimates of GDP For Q4 (January-March), 2009-10
(a) Estimates at constant (2004-05) prices
GDP at factor cost at constant (2004-05) prices in Q4 of 2009-10 is estimated at US$ 259.69 billion (Rs. 12,05,119 crore), as against US$ 238.01 billion (Rs. 11,10,041 crore) in Q4 of 2008-09, showing a growth rate of 8.6 per cent.
The sectors which registered significant growth rates in Q4 of 2009-10 over Q4 of 2008-09 are ‘mining and quarrying’ at 14.0 per cent, ‘manufacturing’ at 16.3 per cent, ‘electricity, gas and water supply’ at 7.1 per cent, ‘construction’ at 8.7 per cent, 'trade, hotels, transport and communication' at 12.4 per cent, and 'financing, insurance, real estate and business services' at 7.9 per cent.
(b) Estimates at current prices
GDP at factor cost at current prices in Q4 of 2009-10 is estimated at US$ 349.43 billion ( Rs. 16,21,812 crore), as against US$ 292.02 billion (Rs. 13,61,871 crore) in Q4 of 2008-09, showing a rise of 19.1 per cent.
Monthly Economic Report
- Food grains (rice and wheat) stocks held by FCI and State agencies were 42.84 milliontonnes as on April 1, 2010.
- Overall growth in the Index of Industrial Production was 17.6 per cent during April 2010 as compared to 1.1 per cent in April 2009. During 2009-10, IIP growth was 10.4 per cent compared to 2.8 per cent during 2008-09.
- Core infrastructure-supportive sectors grew by 5.1 per cent in April 2010 compared to a growth of 3.7 per cent in April 2009. During 2009-10, these sectors grew at 5.5 per cent as compared to 3.0 per cent during 2008-09.
- During the financial year 2010-11 (up to May 21, 2010), broad money (M3) increased by 1.7 per cent, compared to 3.7 per cent during the corresponding period of the last year.
- Exports, in US dollar terms increased by 36.2 per cent and imports increased by 43.3 per cent, during April 2010.
- Foreign exchange reserves (excluding gold, SDRs and reserve tranche position in the IMF) stood at US $ 248.2 billion at end-May 2010, compared to US $ 251.7 billion at end-May 2009.
- Rupee appreciated against Pound Sterling, and Euro and depreciated against US dollar and Japanese Yen in the month of May 2010 over April 2010.
- Year-on-year inflation in terms of Wholesale Price Index was 10.16 per cent for the month of May 2010 as compared to 1.38 per cent in May 2009.
- Tax revenue (net to Centre) during April-March, 2009-10 recorded a growth of 3.6 per cent compared with corresponding period of 2008-09.
Agriculture
- The third advance estimates of crop production released by the Ministry of Agriculture showed an upward revision as compared to their second advance estimates in the production of rice (89.31 million tonnes from 87.56 million tones), wheat (80.98 million tones from 79.06 million tones), cotton (228.34 from 223.18 lakh bales of 170 kg. each) and sugarcane (274.66 million tones from 251.27 million tones) during 2009-10. Due to this upward revision in the production, the growth rate in ‘agriculture, forestry and fishing’sector in 2009-10 has shown a growth rate of 0.2 percent,as against the growth rate of (-) 0.2 percent in the Advance estimates.
- The Centre increased the minimum support price of jute by over 14 percent to US$ 33.77 (Rs 1575) per quintal for 2010-11. The decision to hike the minimum support price (MSP) for the TD-5 grade (ex-Assam) variety of jute was taken at the meeting of the Cabinet Committee on Economic Affairs (CCEA). "The increase in the MSP of raw jute is expected to encourage the farmers to step up investment in jute cultivation and thereby production and productivity of Jute in the country," the official statement said.Jute MSP was at US$ 29.48 (Rs 1,375) per quintal last year. The government also said that the Jute Corporation of India (JCI) would continue to act as the Nodal Agency to buy jute at the MSP level. Jute production is estimated to be 96.98 lakh bales during 2009-10 season, compared with 96.34 lakh bales in a year-ago period. One bale is 180 kgs. Major jute producing states in the country are West Bengal, Bihar, Assam, Orissa, Andhra Pradesh and Tripura.
- The Cabinet Committee on Economic Affairs (CCEA) approved US$ 0.13 billion (Rs 632 crore) for the National Horticulture Board to implement its existing schemes and promote 25,000 integrated commercial horticulture projects in the 11th plan period ending 2012."It is expected that with the budgetary support during the 11th Five Year Plan, additional infrastructure for post-harvest, cold-chain and primary processing would be created to handle about 25 lakh tonnes of horticultural produce," said an official statement.An investment of US$ 0.11 billion (Rs 495.61 crore) by the board through back-ended subsidy for hi-tech commercial horticulture and cold chain infrastructure is expected to attract US$ 0.53 billion (Rs 2,500 crore)-US$ 0.64 billion (Rs 3,000 crore) investment in the sector, it said.
- India's cotton production may increase by over six per cent to a record 25 million bales in 2010-11 season if the country receives normal monsoon this year, the US Department of Agriculture has forecast. Cotton output is pegged at 23.5 million bales (one bale equals 170 kg) in 2009-10 marketing season (August-July)."Assuming normal 2010 monsoon, cotton production in India's marketing year 2010-11 is forecast to increase to a record 25 million bales on expected record planting and improved yields," the USDA said in a report.The Department noted that the area under cotton is forecast to increase marginally to a record 10.3 million hectares from 10.26 million hectares provided there is "timely and well distributed monsoon at the time of planting".
- Agricultural cooperative major National Agricultural Cooperative Marketing Federation of India (NAFED) is eyeing the markets in the Gulf and Europe with food products aimed primarily at the Indian diaspora."There have been demands in the last several years from Indians in the Gulf and Europe to make our products available for them. We have now decided to source India-specific products, process and package them and export them to the Gulf and Europe. The prices will be competitive," NAFED managing director C.V. Ananda Bose said.The NAFED move will be a boon for the huge Indian population in the Gulf and European cities like London. For the Gulf market, NAFED, the largest farmers' cooperative in the country, will ship Kerala-specific products because of the large presence of workers from the state.
- The first of the genetically modified seed varieties developed in India will make it to the market soon as the government has registered two such wheat varieties developed by Mahyco, an Indian seeds company. This will create competition in the market dominated by multinational companies and thereby help lower seed prices. The Protection of Plant Varieties and Farmers’ Rights Authority (PPV&FR Authority) has registered two hybrid wheat varieties.Mahyco is engaged in the research, production, processing and marketing of 115 products in 30 crop species including cereals, oilseeds, fibre and vegetables.
- The Government is contemplating to enhance milk production to 180 million tonnes by 2021-22 through the National Dairy Plan which is a strategic plan prepared by the National Dairy Development Board (NDDB). The Plan has three major components, namely, enhancing milk production through increased productivity, substantially strengthening and expanding the infrastructure for procurement, processing, marketing and quality assurance through existing institutional structures and by promoting new ones, and human resource development.According to the Basic Animal Husbandry Statistics 2008, the average daily milk production was 2.09 Kgs per indigenous cow and 6.52 Kgs per crossbred cow in 2007-08.
Capital Market
- According to The Centre for Monitoring Indian Economy (CMIE), total floatations stood at US$ 7.74 billion (Rs.36,096.3 crore) in March 2010, the highest collected since July 2009. While domestic floatations stood at US$ 7.64 billion ( Rs.35,637.9 crore) in March 2010, overseas floatations stood at US$ 0.09 billion (Rs. 458.4 crore). The private placement of debt and equity was the most sought after route to raising funds in March 2010. More than US$ 4.29 billion (Rs. 20,000 crore) was raised via this route.
- Market regulator SEBI proposed to reduce the time between public issue closure and listing to 12 days from the existing (up to) 22 days. This would be applicable to public issues opening on or after May 1, 2010.The regulator also said that the ASBA (Application Supported by Blocked Amount) process would undergo suitable modification to make it consistent with the new timelines. SEBI said the new rule was aimed at making the existing public issue process more efficient.Market participants said that reducing the listing time to 12 days was a good move.Investors who borrowed funds to invest in IPOs would stand to gain from a reduction in interest costs.
- The SEBI also extended the ASBA facility to institutional investors in public issues.This would be applicable for issues opening on or after 1 May 2010.Currently,only individuals could apply through ASBA. Last month SEBI made it compulsory for institutional investors to pay 100 pe cent money upfront for public issues as against 10 per cent currently.
- CMIE Overall Share Price Index (COSPI) rose by 4.2 percent in March 2010 after two consecutive months of decline in January 2010 and February 2010. The rise was seen across all large, mid-and small- sized companies. While the index started off on a positive note, it fell marginally in the first half of March 2010, before notching up gains in the latter half of the month. The NSE Nifty also rose by 6.6 per cent in March 2010 and its average daily trading volumes increased by 11.2 per cent to US$ 2.92 billion (Rs. 13,631 crore) during the month.The largest gainer among the major CMIE sectoral indices in March 2010 was the CMIE castings & forgings index which rose by 14.6 per cent compared to the previous month.
- As per CMIE,March 2010 Nifty futures expired (on 25 March 2010) on a positive note with strong long roll-overs in Nifty April 2010 futures. A similar trend was witnessed in key stocks like Infosys Technologies, L&T, HDFC Bank, Bharati Airtel and Reliance Industries. Rollovers in derivative contracts require the open interest in the expiring series (near-month) to be transferred to the next month. The long roll-overs in future contracts indicate that the traders are bullish on the underlying index or stocks.
- Accordig to CMIE,Foreign Institutional Investor (FII) buying on the bourses surged during the month of March in 2010. They brought in US$ 4.03 billion (Rs.18,833.8 crore) after withdrawing US$ 0.24 billion (Rs.1,136.8 crore) in January 2010 and injecting a mere US$ 0.45 billion (Rs. 2,113.8 crore) in February 2010. Net investments in equities remained positive throughout the month.
- In March 2010, market regulator, the Securities & Exchange Board of India (SEBI) issued a circular to all mutual funds. According to the circular:
- The present maximum limit of the new fund offer (NFO) period of 30 days in case of open ended schemes and 45 days of close ended schemes shall be reduced to 15 days (except ELSS schemes).
- Mutual funds shall use the NFO proceeds only on or after the closure of the NFO period.
- The mutual fund should allot units, refund money and dispatch statement of accounts within five business days from the closure of the NFO.
- All the schemes (except ELSS) shall be available for ongoing repurchase, sale, trading within five business days of allotment.
- Mutual funds have to compulsorily provide ASBA facility to the investors of all NFOs launched on or after 1 July 2010.
- When units of an open-ended scheme are sold, and sale price is higher than the face value of the unit, part of the sale proceeds that represents unrealised gains shall be credited to a separate account (Unit Premium Reserve) and the same shall not be utilised for the determination of distributable surplus. Henceforth, mutual funds will pay dividends only from realise gains. Mutual funds oppose this move as they feel it will turn fund managers into traders. They will be forced to churn their portfolios regularly in order to pay dividends to their investors.
- SEBI barred mutual funds from entering into any revenue sharing agreements with offshore funds for investments made on behalf of fund-of-fund schemes, which invest in other funds as this would create a conflict of interest. Any commission or brokerage received from the underlying fund shall be credited into the concerned scheme's account.
- The present maximum limit of the new fund offer (NFO) period of 30 days in case of open ended schemes and 45 days of close ended schemes shall be reduced to 15 days (except ELSS schemes).
Money and Banking
- As per CMIE,the rate of growth in money supply is expected to improve in 2010-11 due to better economic growth, healthy deposit growth and higher capital inflows. The Country's economy is expected to expand by 9.2 per cent in 2010-11 compared to an estimated 7.1 per cent in 2009-10. Foreign exchange reserves are expected to increase by nearly USD 43 billion compared to nearly USD 26 billion in 2009-10. Deposit mobilisation is expected to improve to 20 per cent from around 18 per cent in 2009-10.
- According to CMIE, Scheduled commercial bank credit is expected to grow by 16 per cent in 2010-11. Banks are expected to disburse Rs. 5.2 lakh crore as credit during the year. This is much higher compared to the Rs 4.6 lakh crore estimated for 2009-10.
- CMIE expects higher credit offtake in 2010-11 on the back of a sustained growth in industrial production and substantial capacity expansion plans of corporate India. Industrial production is expected to grow by more than nine per cent for the second consecutive year. This will call for higher working capital credit requirements from companies. To enable this high production growth, corporate India will significantly expand capacities in 2010-11. Compared to estimated Rs 4 lakh crore worth of investment projects getting completed in 2009-10, we expect projects worth Rs.6.5 lakh crore to get completed in 2010-11. Credit growth would be even higher had it not been for the recent trend of corporates increasingly resorting to non-banking sources of funds.
- According to M V Nair, chairman and managing director of Union Bank of India and chairman of the Indian Banks Association, the general expectation is that the GDP will grow by 8.5 per cent and credit and deposit growth will hover in the range of 20-22 percent.
- Bank of Baroda expects bank credit to grow by 18-19 per cent in 2010-11. It recorded a growth of 25 per cent in its retail portfolio in 2009-10 and it expects the trend to continue. IDBI grew its home loan portfolio by 30 per cent in 2009-10. It expects the same to grow by 25 per cent in 2010-11. State Bank of India is expecting to grow its loan portfolio by 20 per cent in 2010-11.
- Indian Bank is expecting a credit growth of 20 per cent. ICICI Bank is expecting its advances to grow by 15 per cent in 2010-11. It expects its "home loans, car loans and project and working capital finance businesses" to together grow by 20-22 per cent.
- According to R Gopalan, secretary, financial services division of the ministry of finance, the Government set public sector banks a target of 20 per cent for credit and deposit growth for fiscal 2010-11. According to him, the government was of the view that the economy would grow at 8.5 per cent next fiscal and it would require a systemic credit growth of 20 per cent.
- According to CMIE,growth in deposits of scheduled commercial banks is expected to improve from 17 per cent in 2009-10 to at least 20 per cent in 2010-11. This growth will be primarily driven by higher overseas inflows. We expect overseas inflows to improve from an estimated US$ 16.09 billion (Rs. 75,135 crore) in 2009-10 to US$ 39.88 billion (Rs. 1,86,273 crore) in 2010-11 on the back of continuing strong foreign investment inflows and higher external commercial borrowings. On a net basis, foreign exchange reserves of the country are expected to grow by nearly US$ 43 billion in 2010-11.
- As per CMIE,Improvement in deposit rates, faster growth in money supply and much higher overseas inflows together are expected in an improvement in the rate of growth in deposits to 20 per cent in 2010-11 from 17 per cent in 2009-10.
- According to CMIE,demand for funds by corporates grew by about 34 per cent during 2009-10, funds supply by banks through non-food credit was higher by only 12 per cent. Non-bank sources of funds, on the other hand, rose by a whopping 72 per cent. As a result, corporates ended up sourcing 47 per cent of their funds or Rs. 4.1 lakh crore through non-bank sources in 2009-10 compared to 37 per cent in the preceding year.
- Resilient Indian banks have improved their brand value rapidly amidst global recession. There are 20 Indian banks in the Brand Finance® Global Banking 500, an annual international ranking by UK-based Brand Finance Plc, this year. The State Bank of India (SBI) became the first Indian bank to break into the world’s Top 50 list, according to the Brand Finance study that saw HSBC retain its top slot for the third year in a row. The number of Indian banks in the global list had more than tripled last year to 19 from six in 2007. Differentiation through strong brand and customer base value is becoming a key economic lever for Indian banks. This is as true in financial services as in consumer products. The study notes that global banking sector has begun to show tangible signs of recovery, with the world’s 500 most valuable banking groups growing by 62% in terms of market capitalisation and their brand values cumulatively increasing by 49%. “This year’s BrandFinance® Global Banking 500 shows how significant the recovery of global banking brands has been,” said David Haigh, CEO of Brand Finance plc. The total brand value of the Top 500 banks stands at $716 billion, up 49% over 2009 and 4% higher than in 2008, prior to the crisis.
- There has been a sharp increase in the use of IT in banking services. With the cellular user base expected to touch 600 million by 2010, the volume of pre-paid card recharging alone could exceed the US$ 4 billion mark. Bharti Airtel launched its mobile payment services in June 2008 and has already got one million registered users. “mCommerce will be one of the top three services offered over mobile in the future,” said an Airtel spokesperson. International remittance is another service that operators are piloting in India.“With the Reserve Bank of India’s new mobile payment guidelines, banks and merchants are fast adopting our open-platform to build a thriving eco-system and a compelling suite of services for consumers,” says Mr Sanjay Swamy, CEO of mChek, a mobile payment service provider.So far, 19 banks have obtained permission from the RBI to provide mobile payment facilities to their customers.
- JP Morgan Chase is set to enter the corporate banking space in India, offering a suite of services such as providing working capital, cash management solutions, foreign exchange and hedging tools. There will also be an element of retail operations, though liability-led, and financial inclusion.“A key initiative for JPMorgan in 2010 in India is the launch of global corporate banking as a part of the global launch of the same in high growth countries like China and Brazil. This initiative is driven by the bank's continuing dialogue with clients around the world who have expressed a desire for expanded global banking operations from us,” says Madhav Kalyan, chief executive officer, JPMorgan Chase Bank, and head of corporate banking operations in India.
Infrastructure
The Index of Six core industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) with base 1993-94 stood at 266.9 (provisional) in May 2010 and registered a growth of 5.0% (provisional) compared to 3.2% registered in May 2009. During April-May 2010-11, six core industries registered a growth of 5.1% (provisional) as against 3.5% during the corresponding period of the previous year.
Crude Oil
Crude Oil production (weight of 4.17% in the IIP) registered a growth of 5.8% (provisional) in May 2010 compared to a growth rate of (-)4.3% in May 2009. The Crude Oil production registered a growth of 5.5 (provisional) during April-May 2010-11 compared to (-)3.7% during the same period of 2009-10.
Petroleum Refinery Products
Petroleum refinery production (weight of 2.00% in the IIP) registered a growth of 7.7% (provisional) in May 2010 compared to growth of (-)4.3% in May 2009. The Petroleum refinery production registered a growth of 6.5% (provisional) during April-May 2010-11 compared to (-)4.4% during the same period of 2009-10.
Coal
Coal production (weight of 3.2% in the IIP) registered a growth of (-)2.3% (provisional) in April 2010 compared to growth rate of 14.2% in April 2009. Coal production grew by 8.2% (provisional) during April-March 2009-10 compared to an increase of 8% during the same period of 2008-09.
Electricity
Electricity generation (weight of 10.17% in the IIP) registered a growth of 6.4 % (provisional) in May 2010 compared to a growth rate of 3.0% in May 2009. Electricity generation grew by 6.6% (provisional) during April-May 2010-11 compared to 4.8% during the same period of 2009-10.
Cement
Cement production (weight of 1.99% in the IIP) registered a growth of 8.6% (provisional) in May 2010 compared to 11.8% in May 2009. Cement Production grew by 8.7% (provisional) during April-May 2010-11 compared to an increase of 11.8% during the same period of 2009-10.
Finished (carbon) steel
Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 2.5% (provisional) in May 2010 compared to 2.8% (estimated) in May 2009. Finished (carbon) Steel production grew by 3.6% (provisional) during April-May 2010-11 compared to an increase of 0.8% during the same period of 2009-10.
