ECONOMY ANALYSIS

Prepared by: Priyanka Arun Ritesh

AGENDA

1. WORLD ECONOMY WATCH

2. INDIAN ECONOMY

WORLD ECONOMY
World GDP expected to decline by 0.5% World GDP growth rate projected on a low tide by IMF. Advanced economies growth affected most by the global slowdown. Emerging economies had a lesser impact.
World GDP rate
10 8 6 4 2 0 -2 -4 2005 2006 2007 Advanced economies World economies 2008 2009 2010 Emerging economies

WORLD ECONOMY
Global growth projections for 2009 have been marked down to 3% by IMF. Root cause for the quick decelerating growth rate is The US subprime crisis. Financial markets remain under stress. Financial crisis pushes the advanced economics into recession. Emerging economics have to a great extent remained silent to the global financial turmoil.

2. INDIAN ECONOMY
A. B. GDP,IIP, & External Trade. Inflation & Interest rates.

C.

Fiscal Policy.

A. GDP,IIP, & External Trade

GDP growth rate goes down for Q3 2008-09. Agriculture sector on a downturn. Manufacturing and construction industries decelerating. Service sector playing safe. Industrial growth turned negative for the second time in the first nine months of the current fiscal.
Sectorial divison of GDP
27%

55% 18%

Service

Agriculture

Industry

Indian GDP declines after a steady growth

GDP declined to 5.3% in OND08. Agriculture sector had the major decline of -2.2% in OND08. Industry sector registered at 2.4% in OND08 which was much lower than JAS08 which was 6.1%. Service sector grew at 10.7%.
Gradual decline in the GDP growth rate 10 8 6 4 2 0 GDP growth rate

AMJ07

AMJ08

JAS07

OND07

JAS08

Sector wise divison

12 8 4 0 -4 Q1 2006/07 Q1 Q2 Q3 Q4 Q1 Q2 2008/09 Industry Service Q3 2007/08

Agriculture,Forestry&Fishing

OND08

JFM07

JFM08

IIP goes on the negative side

Manufacturing sector the having the major part fell by 1.5%. Capital goods sector growth rate drastically slowed down to 3.1% in October over the 20.9% a year ago.
IIP growth in % 10 8 6 4 2 0 -2

Mar 08-09

Apr 08-09

Oct 08-09

Jun 08-09

Jan 08-09

Jul 08-09

May 08-09

Aug 08-09

Feb 08-09

Nov 08-09

IIP growth in %

MONTHLY GROWTH RATE IIP C OMPONENTS 10

6 2 -2

Feb-08

Apr-08

Jun-08

Aug08

dec,08

Oct-08

Dec07

Mining Growth % Electricity Growth %

Manufacturing Growth %

9-Feb

Dec 08-09

Sep 08-09

Jan 09-10

Manufacturing hits bad-Decline in capital goods

Slowing output in the consumer durables. Steep increase in the lending rates. Spiraling inflation increases raw material rates.
IIP divison
25 20 15 10 5 0 -5 -10

Apr May Jun

Basic goods

Jul Aug Sep Oct Nov Dec

intermediate goods

Capital goods

Global slowdown slows Exports of India

Exports declining at a constant level from Aug 08.
Monthly export & import
35000 30000 25000 20000 $ mn 15000 10000 5000 Export Import

Contribution of Petroleum highest at 30.9%.

ct , N 07 ov , D 07 ec ,0 Ja 7 n, Fe 08 b, M 08 ar , A 08 pr , M 08 ay Ju ,08 ne , Ju 08 ly , A 08 ug , S 08 ep ,0 O 8 ct , N 08 ov , D 08 ec ,0 Ja 8 n, Fe 09 b, 09

Exports of India

30.90% 39.00%

4.10% 7.50% Petroleum Machinery

9% 8.80% Gold Other goods

Electornic goods Gem & Jewellery

FDI
Policy rationalization and liberalization measures taken by the Government have resulted in increased inflows of FDI. Major contributor : Service sector, telecom and construction industry.
Amount of FDI inflows (In US$ million) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 20022003 20032004 20042005 Amount of FDI inflows (In US$ million)

(US$mn)

2005- 20062006 2007

20072008

20082009

% of Total Inflows
#other:Automobile,Pow er, Metallurgical,Petroleum,Cehmic al 47% 11% 22%

8% 6% Service Telecommunication C onstruction Activities 6% C omputerSoftware&Hardware Housing&Realestate Others

B. INFLATION & INTEREST RATES

Fall in oil price leads to fall in inflation

Fall in crude price.
140

Monthly Oil Baskt Price

May-08

Nov-08

Aug-08

Sep-08

Jun-08

Feb-09

Mar-09

Apr-08

Dec-08

Apr-09

Jul-08

Jan-09

Oct-08

Wholesale prices are rising at their slowest pace.

US $/b

100 60 20

Driver of the economy bus

Banks are making new plans to up bring the economy.
Rs in cr.

Total bank finace to Industry

2700000 2600000 2500000 2400000 2300000 2200000 2100000 Rs in cr

Lowering the lending rates.

N ov

Ja n

Ju n

M ay

Ju l A ug S ep

Fe b

ct

ec

pr

CONTROLS BY RBI
To infuse liquidity banks reduced the lending rates. RBI cuts down CRR & Repo rates. RBI to buy-back the MSS issued.
Trend of Bond issued by RBI uder MSS
50

Decline in CRR
14 12

C RR %

10 % 8 6

4 2

Jun-08

Jan-08

Jul-08

Oct-08

May-08

Nov-08

Mar-08

Jan-09

Aug-08

Sep-08

Mar-09
Mar-09

Apr-08

Dec-08

Monthly Rates

Rs.in(cr)

200000 160000 120000 80000 40000 0

%

40 30 20 10 0

Jul-08

May-08

Aug-08

Oct-08

Nov-08

Dec-08

Apr-08

Sep-08

May.08

Feb.08

Nov.08

July.08

Aug.08

Sep.08

Jun.08

Mar.08

Oct.08

Jan.08

Dec.2008

April.08

C BLO

C all

Repo

Apr-09

Jun-08

Jan-09

Feb-09

Apr-09

Feb-08

Feb-09

C. FISCAL POLICY

Increase in Deficit
There is an increase in Deficit since October 2008. Government aims to reduce the deficit without affecting the growth of India.
Increase in Deficit 350000 250000
INR Cr

150000 50000
Jun-08 Jul-08 Oct-08 May-08 Nov-08 Mar-08 Aug-08 Sep-08 Apr-08 Dec-08 Feb-08 Jan-09 Feb-09

-50000 -150000

Revenue Deficit

Fiscal Deficit

Primary deicit

Growth of M Cap to GDP

25.00 20.00 15.00 10.00
07 08 07 07 08 JF M ND 08 JA S O AM J AM J JA S ND 08

M C ap/GDP

BCI & PCI

Q3-Q4 shows BCI at -5.6% as per the report by RBI. Global economic outlook, high cost of funds and credit crunch could be the reasons for future decline of BCI. An increase in PCI by 24% is expected from the Government.

OUTLOOK

Though India has been less effected by the world global slow down but the future of India has to be remain on the front foot. India should explore more industrial opportunities.

THANK YOU.