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FY10 8.4 1.0 8.4 10.5 8.1 7.0 14.3 15.6 6.8
FY11 8.4 7.0 7.2 9.3 8.1 8.1 7.8 11.1 7.5
FY12 6.5 2.8 3.4 8.9 5.4 5.5 5.1 5.5 5.6
FY13E 6.4 3.0 4.1 8.3 5.8 6.0 5.0 5.4 5.5
Source: Citigroup
Fiscal Deficit
The slippage in fiscal deficit can be attributed to cut in tax rates and increase in subsidies since the financial crisis.
Fuel subsidies have increased from 0.1% in FY08 to 0.8% of GDP in FY12
Given that the crude prices have fallen, still assuming crude @ $100 and govt share of losses at 45%, it amounts to nearly 0.5% of GDP (Rs 500 bn)
Tax revenue collections are achievable provided growth holds up Non Tax revenue includes Rs 400 bn from telecom Non Debt Capital receipts include disinvestment of Rs 300 bn dependent on market conditions Expenditure involves capping of subsidies at 2%. Difficult to achieve unless painful prices increases are implemented
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M ar -0 Ju 8 n0 Se 8 p0 D 8 ec -0 M 8 ar -0 Ju 9 n0 Se 9 p0 D 9 ec -0 M 9 ar -1 Ju 0 n1 Se 0 p1 D 0 ec -1 M 0 ar -1 Ju 1 n1 Se 1 p1 D 1 ec -1 M 1 ar -1 Ju 2 n12
Source: Bloomberg
Source: RBI
Extension beyond vertical line reflects the base effect going forward till Aug 12
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Commodities/Crude Oil:
Slowdown in global/Chinese economy helping in keeping soft outlook Suppressed inflation in mineral oil group assuming full pass through (3.54%)
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Depreciating INR
60.0 55.0 50.0 45.0 115.0 40.0 35.0 30.0 120.0 125.0 130.0 INR (LHS) JPMREER (RHS) 95.0 100.0 105.0 110.0
De Fec-0 M b- 07 ay 8 Ju -08 Se l-0 8 Nop- 0 8 Ja v-0 8 Apn-0 9 Ju r- 0 9 Au n-0 9 O g- 0 c 9 De t- 0 9 M c-0 M ar- 19 ay 0 Ju -10 Se l-1 0 Nop- 1 0 Ja v-1 0 Apn-1 1 Ju r- 1 Au n-11 1 O g- 1 c 1 De t- 1 1 M c-1 M ar- 11 ay 2 -1 2
INR-Indian Rupee, JPMREER- JP Morgan Real Effective Exchange Return Source: Bloomberg
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FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 -0.6 0.7 1.3 2.3 -0.3 -1.2 -1.0 -1.3 -2.3 -2.8 -2.6 0.3 0.3 0.2 0.5 0.9 0.5 0.6 0.4 0.8 1.2 1.9 3.0 2.5 3.0 2.8 3.2 3.9 4.0 4.1 5.4 4.1 4.1 9.2 11.3 15.0 18.8 19.6 18.2 21.0 25.0 20.6 20.5 18.0 22.0 20.7 20.7 18.8 18.6 16.7 18.2 18.1 18.3 19.2 18.1
Avg. prices FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 Gold price ($ per troy oz.) 272.1 277.7 325.5 377.6 413.9 476.6 628.4 765.8 867.2 1023.0 1293.5 1634.7 Oil ($/bbl) - Brent 24.9 25.0 28.5 38.0 55.3 66.1 72.7 98.5 62.7 80.3 110.9 118.8
Bulk of the deterioration in current account deficit is on account of gold imports.
Source: BofA-ML
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Dollar bond issuance targeted at NRIs like RIB (in 1998) and IMD (in 2000)
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10.0
4.0
5.0
6.0
7.0
8.0
9.0
Source: Bloomberg
10 yr yld (%)
Ju nD 02 ec Ju 02 nD 03 ec -0 Ju 3 nD 04 ec Ju 04 nD 05 ec -0 Ju 5 nD 06 ec -0 Ju 6 nD 07 ec Ju 07 nD 08 ec -0 Ju 8 nD 09 ec -0 Ju 9 nD 10 ec Ju 10 nD 11 ec -1 Ju 1 n12
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Outlook in Summary
Inflation to be range bound going forward. Core inflation expected to fall gradually. Fiscal consolidation going to be challenging RBI to continue with OMOs and expect further rate cuts in the current fiscal Both long term and short yields should fall in the next six months
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Thank you
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