Indian Economy

Current State Of Indian Economy December 2008

Federation of Indian Chambers of Commerce and Industry New Delhi

Recent Trends in Indian Economy : •

During the phase of demand contraction in the global market industrial growth is bound to suffer. Acute moderation in industrial growth started in September 2008, and although in November 2008 growth picked up but it was half of what was recorded in the same month of previous year. Growth in output of all the three main sectors namely manufacturing, mining and electricity slowed compared to the previous year. The stimulus packages brought out from time to time have shown some impact on the industrial climate. Yet, it is still early days to comment on how the stimulus measures would work on the ground. It seems that the industry will take some more time to absorb the feeders. Going by the use based classification we see negative growth being posted by the capital goods segment. The remaining segments, the basic and intermediate were saw growth decelerating in November 2008. Growth in the consumer durables segment surpassed the growth rate recorded in the previous year. Higher growth in production could be on account of higher expected sales during the approaching festive season. Few sectors that posted a surge in output were food products, beverages and tobacco, jute, textiles, rubber, non metallic items, and basic metals sectors .

•

In 2008-09 the food grain production may fall short of the target 233 MT for 2008-09 , as the received rainfall is 32% below the normal (cumulatively, Oct 2008 to December 2008 ) during the North-east monsoon season. Further, rainfall received during the south west monsoon season too has been moderate.

•

The laggards among the six core infrastructure industries in November 2008 included finished steel, crude petroleum, petroleum refinery and power. Growth was seen to accelerate in November 2008 in the coal sector compared to the corresponding period of previous year.

•

The headline inflation rate dropped to an average of 6.5% in December 2008 compared to 8.66% posted in the same month of previous year. The falling oil prices mainly contributed to softening of inflation.

2

However the concern over rising prices still remain with prices of some articles such as food, textiles, wood products, paper products and basic metals getting dearer. •

In y-o-y terms (growth calculated from April- December 2008 over the same period of previous year ) an upward revision in the (M3) money supply was done to 19% and data for December shows M3 exceeding the target. In December 2008 money supply expanded by 10.6% compared to that of 11.7% (calculated December 2008 over March 2008 ) in the same month of previous year. The expansion in M3 in December was lower but close to previous year’s growth.. Government borrowings and credit received by the commercial sector grew substantially compared to the previous year. Our foreign exchange assets have begun to decline. Aggregate deposits have slowed in comparison to the growth in the previous year, however, investments were seen to scale up in the government and approved securities.

•

The stock markets and the prices of the scrips are at the all time low. On one hand the when the investors mainly the FIIs are shying away from the markets there is another category of investors that maintained the investment tempo as they viewed investments during weakness in the market an opportunity for greater returns in future. There has been a slight increase by 5 percentage points in the sensex in December 2008..

•

Revenue collections from the tax sources slowed to 9.6% as against the collection rate of 27% recorded in the previous year. The percentage share of direct and indirect taxes remain intact, however, the rate of collection was observed to decline in both the segments. Perhaps the months in the last quarter of 2008-09 will see some surge in rate of collection.

•

By the end of 8 months the fiscal deficit got even worse. The were some off budget liabilities on account of fertilizer, food and oil, along with some other unbudgeted liabilities due to loan waiver, announced schemes and six pay commission, could amount to 8% of the GDP in 2008-09. By November 2008 the revenue collection was 62% of the target compared to 73% achieved in the same period of previous year and expenditures were found to be much ahead of the target.

•

Data on Indian exports show merchandise exports in the de-growth mode as a result of financial crises leading to a demand crunch world over. In USD terms, October and November 2008 witnessed negative growth while in Rupee terms exports growth suffered a slowdown compared to the previous year.

3

•

The impact of the global economic turmoil is also seen in India’s long term investments. Data on foreign direct investments shows gradually falling direct investments with inflows received being quite low in November 2008 at USD 1083 million.

•

There has been more than US$ 60 bn drain out in forex reserves from its peak of US$ 315 bn reserves primarily due to efforts of RBI to aid Rupee from declining further against the other major currencies and also due to feed the forex-starved Indian banks overseas.

•

Despite the intervention of the central bank it was a struggle to maintain the level of Indian Rupee value against the major foreign currencies within a certain range. In December 2008 the exchange rate between Indian Rupee and USD remains steady within the range 49-50 against the US dollar.

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Contents

Title

Page

1

Industrial Growth

7

2

Core Infrastructure Industries

9

3

Trends in Inflation

11

4

Monetary Indicators

13

5

Stock Market Trends

17

6

Fiscal Management

19

7

Foreign Trade

21

8

Capital Inflows

22

9

Foreign Exchange Reserves

23

10

Trends in Exchange Rates

24

5

LIST OF TABLES ` Table-1.1

Growth of industry

8

Table-2.1 Table-2.2

Growth in six core infrastructure industries-1 Growth in six core infrastructure industries-2

9 10

Table-3.1 Table-3.2

Monthly trends in Wholesale Price Index Monthly trends in consumer prices

11 12

Table-4.1

Monetary indicators

Table-5.1

Month trends in major stock market indices

17

Table-6.1 Table-6.2

Trends in tax collections of central government Trends in central government finances

19 20

Table-7.1

Monthly trends in growth of merchandize trade

21

Table-8.1

Monthly trends in foreign investments

22

Table-9.1

Monthly trends in foreign exchange reserves

23

Graph-10.1

Monthly trends in exchange rate of Rupee

24

]

13-16

6

1.

Overall Economy and Industrial Growth :

Industrial production continues to post a conservative growth rate of 2.5% in November 2008 growth as against the growth of 4.9% a year ago. The growth in the month of November 2008 surpassed the negative growth posted in the previous month of the same year. It is however important to note that the fiscal expansionary steps taken by the government will take some more time to show their impact on the growth of overall production. . Despite the liquidity infusions in the economy from time to time the banks are taking time to make necessary adjustments. This is perhaps because of the unfavorable experience lending institutions have had in the past. Economies world over have adopted monetary measures that include interest rate cuts and liquidity infusions. However, the measures have failed to invoke demand in the markets. It is reported that the lending institutions are loaded with funds but they are more hesitant than ever before. In India about 60% of the GDP is dependent on the domestic market and now the demand in the domestic market is seen to be loosing steam. Growths in all the three main sectors of the overall industry were observed to decelerate as compared to that of the previous year. In November 2008 the mining sector posted 0.5% growth, while the manufacturing sector clocked 2.4% growth and electricity grew by 3.1% as compared to the growth of 6.3%, 4.7% and 5.8% respectively in the corresponding month of previous year. On going by the use based classification we see intermediate goods posting negative growth of 2.3% compared to 24.2% registered in the previous year. The basic and capital goods were seen to slow from 5.2% and 5.5% in November 2007 to 2.3% and 2.6 % in same month of 2008 respectively There was however, sharp acceleration in the consumer goods segment in November 2008 by 4.4% , the growth came from the consumer durables segment that recorded a 7.3% increase. Production for the non durables declined further. In November 2008 among the 17 industry sectors production was seen to slid i.e. negative growth in seven sectors. These were cotton textiles, wool, silk and man made fibres, leather, fur products, basic chemicals, metal products, transport equipments and other manufacturing industries. In November 2008 growth in the case of wood, paper and machinery goods slowed compared to the growth numbers in November of the previous year. The only sectors that have been able to post a

7

higher growth were food products, beverages and tobacco, jute , textiles, rubber, non metallic items, and basic metals sectors.

1.1: Growth Of Industry: Recent Trends (in percentage)

100 10.2 79.4 10.5

Nov 2007-08 4.9 6.3 4.7 5.8

Nov 2008-09 2.4 0.5 2.4 3.1

35.6 26.5 9.3 28.7 23.3 5.4

5.2 5.5 24.5 -2.9 -5.5 -2

2.3 2.6 -2.3 4.4 -4.2 7.3

9.1 2.4 5.5 2.3

-15.3 12.7 -3.6 -4.3

3.8 14.5 -0.1 -11.4

0.6 2.5

-3.4 0.3

5.1 6.0

2.7

37.2

8.7

2.6 1.1

2.6 9.3

0.2 -13.1

14.0 5.7 4.4 7.5

7.7 5.4 -0.5 5.1

-2.1 30.7 2.3 5.6

2.8

-5.9

-8.7

Weights Industry Mining Manufacturing Electricity Use Based Classification Basic Intermediate Capital Consumer Goods Consumer non Durables Consumer Durables

16 industry sectors Food Products Beverages, Tobacco and Related Products Cotton Textiles Wool, Silk and man-made fibre textiles Jute and other vegetable fibre Textiles (except cotton) Textile Products (including Wearing Apparel) Wood and Wood Products; Furniture and Fixtures Paper & Paper Products and Printing, Publishing & Allied Industries Leather and Leather & Fur Products Basic Chemicals & Chemical Products (except products of Petroleum & Coal) Rubber, Plastic, Petroleum and Coal Products Non-Metallic Mineral Products Basic Metal and Alloy Industries Metal Products and Parts, except Machinery and Equipment Machinery and Equipment other than Transport equipment Transport Equipment and Parts Other Manufacturing Industries

9.6 4.0 2.5

9.2 5.5 -0.7 -8.9 44.2 -16.9 Source: Central Statistical Organization

8

2. Core infrastructure industries

Among the six core infrastructure industries the sectors that were the low performers in the 2008 were finished steel, crude petroleum, petroleum refinery and power. During the April-November period of 2008 the above mentioned sectors grew at 3.3%, -0.6%, 3.8% and 2.8% respectively. Cement too slowed but only for 4 months during the eight-month period of 2008, and the cumulatively from AprilNovember the growth rate stood at 6.4% as against 8.1% in the previous year. The growth was only higher in the coal sector compared to the previous year. Table-2.1: Growth in six-core infrastructure industries (% change) All infrastructure industries

April May June July August September October November December January February March April- Nov

2007-08 5.9 7.8 5.3 7.2 9.0 5.8 4.5 5.3 3.2 4.2 8.7 9.6 6.4

2008-09 3.6 3.5 3.4 4.3 2.7 5.1 3.4 1.8

3.6

Finished steel 2007-08 2.7 8.4 5.6 10.8 9.6 9.5 5.2 4.8 1.8 5.5 8.2 21.8 7.0

2008-09 4.0 5.2 4.4 1.9 5.5 5.8 -0.5 -2.7

3.3

Cement 2007-08 5.8 9.9 6.0 9.4 16.7 5.4 7.5 5.2 4.4 5.2 12.4 9.3 8.1

Crude petroleum

200809 6.9 3.8 6.5 8.8 1.9 7.9 6.2 8.7

6.4

200708 1.4 -1.6 -0.7 0.9 6.4 -0.7 -0.1 0.3 -1.5 -0.2 2.3 -0.3 0.6

200809 0.9 3.2 -4.7 -3.0 -1.0 0.4 -0.3 0.5

-0.6

Source: Ministry of Industry

9

Table-2.2: Growth in six-core infrastructure industries (% change) Petroleum refinery April May June July August September October November December January February March April- Nov

2007-08 15.1 14.9 9.8 4.6 8.2 6.9 2.8 5.2 3.2 5.3 5.8 0.0 8.3

2008-09 4.3 0.1 5.6 11.8 2.5 2.6 5.0 -1.1

3.8

Coal 2007-08 0.6 0.5 0.9 1.1 8.0 6.2 8.9 7.7 8.4 4.8 11.7 9.3 4.3

Power 2008-09 10.3 8.3 6.2 5.5 5.9 10.7 10.9 9.6

8.6

2007-08 8.7 9.3 6.8 7.5 9.2 4.3 4.2 5.8 3.8 3.3 9.6 3.6 7.0

2008-09 1.4 2.0 2.6 4.5 0.8 4.4 4.4 2.6

2.8

Source: Ministry of Industry

10

3. Inflation Trends

In December 2008 the WPI based inflation rate recorded was almost double (6.5%) the rate of previous year (3.8%). The overall inflation rate dropped to an average of 6.5% in December 2008 compared to 8.66% posted in November of the same year. Apart from the softening prices of fuel, oil and lubricants, some other items were also observed to slow in December 2008 compared to the previous month of the same year. These articles include food products, non metallic minerals, rubber, basic metals and transport items. On comparing the prices of articles with that of the previous year, we found prices of some articles still increasing, among these are the food articles, textiles, wood products, paper products and basic metals. Table-3.1. Monthly trends in Wholesale price index- monthly average (% change) 2007-08 All Commodities I Primary Article (A) Food Articles (B) Non-Food Articles II Fuel Power Light & Lubricants III Manufactured Products (A) Food Products (B) Beverages, Tobacco & Tobacco Products (C) Textiles (D) Wood & Wood Products (E) Paper & Paper Products (F) Leather & Leather Products (G) Rubber & Plastic Products (H) Chemicals & Chemical Products (I) Non-Metallic Mineral Products (J) Basic Metals Alloys & Metals Products (K) Machinery & Machine Tools (L) Transport Equipment & Parts

2008-09

Nov

Dec

Nov

Dec

3.25 4.64 2.61 11.58 0.12 3.95 2.33 10.43 -1.65 7.15 1.35 5.02 5.57 5.73 9.28 3.72 7.05 1.81

3.8 4.5 2.4 10.5 2.9 3.9 3.2 8.7 -2.9 1.7 1.3 2.6 7.0 6.6 8.6 2.8 5.7 4.6

8.66 11.63 9.70 11.61 7.20 8.02 5.10 8.33 7.61 9.77 4.81 0.60 4.57 9.26 3.71 15.06 5.43 6.47

6.5 11.7 10.1 11.3 -0.1 6.9 3.8 9.0 10.2 9.8 5.7 0.6 3.5 6.5 2.9 12.8 5.5 3.6 Source: RBI

11

Table-3.2: Monthly trends in consumer prices (% change)

April May June July August September October November December January February March

CPI-IW 2007-08 2008-09 6.7 7.8 6.6 7.8 5.7 7.7 6.5 8.3 7.3 9.0 6.4 9.8 5.5 10.4 5.5 10.4 5.5 5.5 5.5 7.9

CPI-UNME 2007-08 2008-09 7.7 7.0 6.8 6.8 6.1 7.3 6.9 7.4 6.4 8.5 5.7 9.5 5.5 10.4 5.1 5.1 5.1 6.0 -

CPI-AL 2007-08 2008-09 9.4 8.9 8.2 9.1 7.4 8.8 8.6 9.4 10.3 8.8 7.9 11.0 7.0 11.1 6.2 11.1 5.9 5.6 6.4 7.9

CPI-RL 2007-08 2008-09 9.1 8.6 7.9 8.8 7.5 8.8 8.0 9.4 8.5

10.3

7.6 6.7 5.9 5.6 5.9 6.1 7.6

11.0 11.1 11.1

Source: Ministry of Labor, Center for Monitoring Indian Economy

12

4. Monetary Indicators:

In December 2008 money supply expanded by 10.6% compared to that of the 11.7% in the same month of previous year. The expansion in M3 in December was lower but close to the growth in the previous year. Credit off-take by the government grew by 21% in December 2008 as against 0.9% in the same month of previous year. Commercial sector borrowings also increased from 9.5% in December previous year to 11.6% in the same month of 2008-09. Since November 2008 the net foreign exchange assets to banks were observed to shrink. In December 2008 net foreign exchange assets dropped by 6.3% as against a rise of 21% in the previous year. Liabilities (non monetary) were reported to drop during the month of December 2008 compared to the corresponding month of the previous year. Growth in the aggregate deposits stood at 11.6% in the end of third quarter of 200809 as against the growth of 13.1% recorded in the corresponding period a year ago. Investments in the government and approved securities rose substantially, however, step up in investments seem to be lower than the rise seen in the same period of previous year. The increase in total credit was found to be on account of both food and non food credit. Table-4.1: Monetary sector indicators – up to December (December 2008-09 over March 2007-08)

April May June July August September October November December January February March

Variation in M3 (Rs crore) 2007-08 2008-09 549 18342 13565 75113 73824 84387 141021 140700 168534 208571 272933 264364 301059 331450 364660 374193 389273 423509 546563 555364 682794 Variation in net bank credit to government (Rs crore)

Variation in M3 (%) 2007-08 2008-09 0.5 0.4 1.9 2.2 2.1 4.3 3.5 5.1 5.2 8.2 6.6 9.1 8.3 11.1 9.3 11.7 10.6 16.5 16.8 20.6 Variation in net bank credit to government (%)

13

April May June July August September October November December January February March

April May June July August September October November December January February March

April May June July August September October November December January February March

2007-08 2008-09 30617 -7763 24085 14613 28117 32597 80964 69352 47656 66866 43734 61550 20115 79275 32887 144131 7241 192566 24888 17399 9350 Variation in bank credit to commercial sector (Rs crore)

2007-08 2008-09 3.7 -0.9 2.9 1.6 3.4 3.6 9.7 7.6 5.7 7.4 5.2 6.8 2.4 8.7 3.9 15.9 0.9 21.2 3.0 2.1 1.1 Variation in bank credit to commercial sector (%)

2007-08 2008-09 -40585 -18293 -46798 18626 -30547 42252 -12151 57878 37019 106693 114895 196248 103108 266620 150784 285691 201772 298809 292883 341060 432664 Variation in net foreign exchange assets of banks (Rs crore) 2007-08 2008-09 -28024 18732 -35519 113765 -17945 103932 12534 75552 54117 54821 100304 77194 152762 12706 192930 -46375 194508 -82201 267735 318273 354704 Variation in non-monetary liabilities of banks (Rs crore) 2007-08 2008-09

2007-08 2008-09 -1.9 -0.7 -2.2 0.7 -1.4 1.6 -0.6 2.3 1.7 4.2 5.4 7.6 4.8 10.4 7.1 11.1 9.5 11.6 13.8 16.1 20.3 Variation in net foreign exchange assets of banks (%) 2007-08 2008-09 -3.0 1.5 -3.9 9.0 2.0 8.0 1.4 5.8 5.9 4.2 11.0 6.0 16.7 1.0 21.1 -3.6 21.4 -6.3 29.3 34.9 38.8 Variation in non-monetary liabilities of banks (%) 2007-08 2008-09

14

April May June July August September October November December January February March

April May June July August September October November December January February March

April May June July August September October November December January February March

-38474 -71601 -94033 -59345 -29287 -13480 -24478 12707 14981 39506 121932 114893

-25665 71891 94555 62244 19970 70928 27452 9554 -13871

-6.7 -12.9 -16.5 -10.4 -5.1 -2.4 -4.3 2.2 2.6 6.9 21.3 20.1

-3.5 9.7 12.2 8.0 2.6 9.2 3.5 1.2 -1.8

Variation of aggregate deposits of SCB (Rs crore) 2007-08 2008-09 5857 51 31436 56760 54791 52837 162203 115943 164956 194522 261801 245198 301563 318500 340016 452567 341729 372413 481231 472550 580208 Variation in investments of SCB (Rs crore) 2007-08 2008-09 15950 41554 26938 34147 49683 36233 80461 20135 112277 46723 117638 15526 155283 34216 170128 127431 128842 118304 160158 196420 181222

Variation in aggregate deposits of SCB (%) 2007-08 2008-09 0.2 1.2 1.8 2.1 1.7 6.2 3.6 6.3 6.1 10.0 7.7 11.5 10 14.2 13.0 11.6 13.1 18.4 18.1 22.2 Variation in investments of SCB (%) 2007-08 2008-09 2.0 4.3 3.4 3.5 6.3 3.7 10.2 2.1 14.2 4.8 14.9 1.6 19.6 3.5 21.5 13.1 16.3 12.2 20.3 24.8 22.9

Variation in total credit of SCB (Rs crore) 2007-08

Variation in total credit of SCB (%) 2007-08

15

April May June July August September October November December January February March

April May June July August September October November December January February March

43352 -19427 -40435 10455 -36348 30534 -16675 44520 31120 96420 106290 180554 132037 289611 165818 359819 218096 283501 278399 322300 417304 Variation in food credit of SCB (Rs crore) 2007-08 2008-09 3366 -3375 -3079 3980 -2564 5748 -5462 -508 -8031 -56 -9512 776 -9800 7074 -7554 5995 -5509 8724 -5329 -2209 -2121

-2.2 -0.8 -2.1 0.4 -1.9 1.3 -0.9 1.9 1.6 4.1 5.5 7.6 6.8 12.3 8.6 15.2 11.3 12.0 14.4 16.7 21.6 Variation in non-food credit of SCB (Rs crore) 2007-08 2008-09 -46718 -16052 -37356 6474 -33784 24786 -11213 45029 39151 96476 115802 179777 141837 282537 173372 353824 223605 274777 283728 324509 419426 Source: Reserve Bank of India

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5.

Stock Market Trends

A slight indication of revival in investment sentiments was witnessed by the end of December 2008 when the 30-stock index Sensex increased to 5.5 percentage points after four months of slippage. The Sensex stood at 9328 points in December end 2008 and the Nifty too was seen to bounce by 6.5 percentage points to 2857 points. Table-5.1: Monthly trends in stock market indices (beginning of month figures) Date 1.1.05 1.2.05 1.3.05 1.4.05 1.5.05 1.6.05 1.7.05 1.8.05 1.9.05 1.10.05 1.11.05 1.12.05 2.01.06 1.02.06 1.03.06 3.04.06 1.05.06 1.06.06 3.07.06 1.08.06 1.09.06 3.10.06 1.11.06 1.12.06 2.01.07 1.02.07 1.03.07 2.04.07 3.05.07 1.06.07 2.07.07 1.08.07 3.09.07 1.10.07 1.11.07 1.12.07

BSE Sensex 6679 6552 6651 6605 6195 6730 7210 7669 7876 8492 7944 8944 9390 9859 10566 11564 12128 10071 10695 10751 11778 12366 13033 13844 13942 14267 13159 12455 14078 14570 14664 14935 15422 17328 19724 19363

% Change 7.2 -1.9 1.5 -0.7 -6.2 8.6 7.1 6.4 2.7 7.8 -6.5 12.5 5.0 5.0 7.7 9.4 4.9 -17.0 6.1 0.5 9.5 5.0 5.4 6.2 0.7 2.3 -7.7 -5.3 13.0 3.5 0.6 1.8 3.2 12.3 15.7 -1.8

S&P CNX NIFTY 2115 2058 2084 2068 1917 2088 2211 2318 2406 2574 2387 2699 2835 2971 3123 3473 3605 2962 3150 3147 3435 3569 3767 3997 4007 4137 3811 3633 4150 4297 4313 4345 4474 5068 5866 5762

% Change 7.8 -2.7 1.3 -0.8 -7.3 8.9 5.9 4.8 3.8 6.9 -7.3 4.8 5.0 4.8 5.1 11.2 3.8 -17.8 6.3 -0.1 9.1 3.9 5.5 6.1 0.3 3.2 -7.8 -4.7 14.2 3.5 0.4 0.7 2.9 13.2 13.8 -1.8

17

1.01.08 1.02.08 3.03.08 1.04.08 2.05.08 2.06.08 1.07.08 1.08.08 1.09.08 1.10.08 3.11.08 1.12.08 26.12.08

20300 18242 16677 15626 17600 16063 12961 14656 14498 13055 10337 8839 9328

4.8 -10.1 -8.5 -6.3 12.6 -8.7 -19.3 13.1 -1.1 -9.9 -20.8 -14.5 5.5

6144 5317 4953 4739 5228 4739 3896 4413 4447 3950 3043 2682 2857

6.6 -13.5 -6.8 -4.3 10.3 -9.3 -17.8 13.3 0.8 -11.1 -23.0 -11.9 6.5

Source: Reserve Bank of India

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6

Fiscal Management

Data on revenues from taxes upto December 2008 shows growth in gross tax revenue to slow to 9.6% as against 27% recorded in the previous year. Although the share of the direct taxes in total tax collected was maintained at 50%, nevertheless the rate of collection was observed to decline. The remaining half of the total revenue was accounted by the indirect revenue sources, like customs contributing 19%, excise 18%, service 9% and other taxes 2% ( other taxes include securities transaction tax, banking cash transaction tax, fringe benefit tax, wealth tax etc.) . The rate of collection from indirect taxes slowed. By the end of the 8 months period the fiscal deficit got even worse. The current fiscal deficit target ( including the off budgeted items ) has been revised from 2.5% to 8 % of the GDP in 08-09. It has been observed that the revenue collection achieved has only been 62% of the target compared to 73% achieved in the same period of previous year. Total expenditures are ahead of the target. Growth in total receipts was found to be running behind the growth achieved by this time last fiscal. Perhaps it is the low rate of revenue receipts that may be the reason for high deficits. Table-6.1: Trends in cumulative tax collections of central government (%) Gross tax revenue 2007-08 2008-09 April May June July August September October November December January February March

5.4 35.0 28.1 25.7 24.1 24.5 25.8 25.2 27.0 26.1 26.7 24.8

52.2 36.1 28.4 26.2 25.0 25.3 20.3 17.5 9.6

Customs 2007-08 2008-09 April May June July August September

30.1 23.1 19.8 19.6 18.6 15.8

25.0 24.1 19.9 19.2 17.0 16.8

Corporation tax 2007-08 2008-09 -36.2 231.8 48.2 49.3 46.1 38.6 43.0 41.7 37.1 36.6 37.1 31.3

55.0 58.1 43.4 41.6 45.9 38.2 30.3 26.4 11.9

Excise duties 2007-08 2008-09 29.6 13.5 11.3 6.3 4.9 3.4

-28.3 1.3 -0.9 4.0 6.5 6.6

Income tax 2007-08 2008-09 -4.1 22.1 25.6 32.4 34.4 35.3 34.5 37.8 42.7 42.2 42.4 40.7

127.7 76.0 50.0 42.0 35.7 30.7 21.9 19.0 6.8

Other taxes 2007-08 2008-09 29.6 37.1 43.5 32.1 33.9 40.2

9.04 26.7 26.0 24.7 17.4 30.7

19

October November December January February March

18.2 16.6 16.9 18.0 19.1 19.1

Service Tax April May June July August September October November December January February March

14.4 13.7 11.1

3.8 4.3 5.1 4.8 6.0 4.8

6.3 5.1 2.1

37.4 37.0 44.3 39.9 41.0 38.9

31.8 30.2 25.4

2008-09 62.3 40.7 26.0 24.7 28.6 31.6 16.3 6.2 -2.6

Source: Controller General of Accounts Table-6.2 Trends in central government finances: November Actual to budget estimates ( in Rs crores) Revenue receipts Tax revenue Non tax revenue Non debt capital receipts Recovery of loans Total receipts Non plan expenditure On revenue account On capital account Plan expenditure On revenue account On capital account Total expenditure Fiscal deficit Revenue deficit Primary deficit

2007-08

2008-09

355646 295994 59652 41029 3304 396675 337090 280050 57040 137163 114806 22357 474253 77578 39210 -34186

375937 309927 66010 3017 2974 378954 426419 403758 22661 170797 146009 24788 597216 218262 173830 94527 Source: Controller General of Accounts

20

7

Foreign Trade

Growth numbers on Indian merchandise exports show exports in a phase of de-growth. Indian exports performance has been grim October 2008 onwards in USD terms. Growth in exports recorded in December 2008 was negative 1.1% as against 16% recorded in the previous year. Imports too were impacted due to the global financial crisis, it registered 8.8% growth in December 2008-09 in contrast to 18% percent in 2007-08. The trade numbers in Rs crores terms also show a slowdown in Indian trade compared to the previous year. Table-7.1: Monthly trends in growth of merchandize trade (% change) up to December

April May June July August September October November December January February March April-Dec

Exports 2007200808 09 23.0 31.5 18.0 12.9 14.0 23.5 18.5 31.2 18.9 19.2 10.4 35.6 -12.1 26.8 -9.9 16.0 -1.1 20.4 35.2 26.5 21.7 17.1

Oil imports 2007200808 09 11.4 46.2 2.9 50.8 9.8 53.4 8.7 69.3 19.5 7.9 57.1 14.5 22 16.7 11.9 23.7 30.9 60.8 39.5 76.6 11.6 44.8

Non-oil imports 2007200808 09 54.2 32.3 41.5 17.4 52.2 13.9 25.8 38.7 39.5 0.1 36.2 28.8 5.5 35.3 3.4 15.3 31.9 65.0 26.3 18.7 32.9 25.3

Total imports 2007200808 09 40.6 36.6 26.3 27.1 36.6 25.9 20.4 48.1 32.6 2.3 43.3 24.2 10.6 29.2 6.1 18.0 8.8 63.5 30.5 35.2 25.9 31.5

Source: Ministry of Commerce

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8. Capital Inflows

The foreign direct investment inflows received in November this fiscal has been the lowest, USD 1083 million. Total foreign investments are hit due to huge outflows in the foreign institutional investments turning the portfolio investments negative at US$ 574 million. Total foreign investments for April- November 2008-09 appeared even worse, down from USD 41 billion received in 2007-08 to USD 12 billion of investments this fiscal. It seems that investment sentiments in the past 7 months have weakened whether long or short term. Cumulatively the foreign direct investment received which is long term in nature was USD 23.3 billion compared to USD 13.7 billion received in the previous year, much lower than the set target for the current fiscal. Table-8.1: Monthly trends in foreign investments ($ million) Foreign direct investments April May June July August September October November December January February March April-Nov

2007-08 1551 2120 1238 705 831 713 2027 1864 1558 1767 5670 4438 13783

2008-09 3749 3932 2392 2247 2328 2562 1497 1083

23331

Portfolio investments 2007-08 1974 1852 3571 6713 -2747 7081 9564 -107 5294 6739 -8904 -1600 27858

2008-09 -880 -288 -3010 -492 593 -1403 -5243 -574

-11297

Total foreign investments 2007-08 3525 3972 4809 7418 -1916 7794 117591 1757 6852 8506 -3234 2838 41641

2008-09 2869 3644 -618 1775 2921 1159 -3746 509

12034

Source: Reserve Bank of India

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9. Foreign Exchange Reserves

There could be many reasons that can be attributed to the fall in forex reserves that touched $ 315 bn, Two reasons were support extended by the RBI to resist Rupee value from further weakening and second, was to feed the drained Indian banks overseas. In December 2008 the forex reserves went slightly below USD 250 billion but were enough to cover 10 months of imports. Table-9.1: Monthly trends in foreign exchange reserves ($ billion)

April May June July August September October November December January February March

200506

% Change

200607

% Change

200708

% Change

200809

% Change

141.8 138.9 138.4 140.5 143.8 143.0 143.7 142.1 137.2 139.5 143.1 151.6

0.3 -2.9 -0.5 2.1 3.3 -0.6 0.5 -1.1 -3.4 1.7 2.5 5.9

160.6 164.5 162.9 164.0 166.4 165.3 167.1 175.5 177.2 180.0 194.6 199.1

5.9 2.4 -0.9 0.6 1.4 -0.6 1.1 5.0 1.0 1.6 8.1 2.3

204.1 208.3 213.4 229.3 228.8 247.7 262.4 273.5 275.9 288.3 301.2 309.7

2.5 2.0 2.4 7.4 -0.2 8.2 5.9 4.2 0.8 4.4 4.4 2.8

314.5 312.5 312.0 306.1 295.3 286.3 252.8 247.6

1.5 -0.6 -0.1 -1.8 -3.5 -3.0 -11.7 -2.0

Source: Reserve Bank of India

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10. Trends in the Exchange Rates

The exchange rate between Indian Rupee and USD remains steady within the range 49-50 against the US dollar in December 2008. Graph 10.1: Exchange rate of Rupee (per unit of other currencies).

60

40 30

10 0

2007-08

200607

2008-09

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

20

USD

Re/Euro

Re/USD

50

80 70 60 50 40 30 20 10 0

Euro

24