ECONOMY ANALYSIS

Presented by-
Atanu Goswami
Neena Lakhmani
Priyabadan kr. Jha
 AGENDA

• International macro-economic
development

• Macroeconomic Factors

• Economic Industry Linkages

• Financial and Capital Markets

• Outlook
 International macro-economic
development
GROWTH RATE OF GDP OF DEVELOPED
COUNTRIES

 World GDP dips from 3.1% in 2008 to 4

3

-1.4% 2
1
0
-1 2007 2008 2009 2010(P)

%
-2
-3
-4

 World Growth Rate is 2.7% in April -5

-6

2009 -7
USA UK Japan

BRIC's GDP

15

 BRIC nations take the lead to achieve

10

Russia
the level 5
India

% 0
China
Brazil
2007 2008 2009 2010(P)
-5

-10

Source:-IMF
 Macro economic Indicators

o GDP, IIP & External Trade

o Inflation & Monetary Policy

o Fiscal Policies
 GDP DECLINES

o GDP is 6.7% in 2008-09 compared

to 9% in 2007-08
INDIAN GDP
12

% OF GROWTH RATE
10
o Decrease in GDP due to Global 8
6
Economy and Domestic slowdown 4
in Industry and Service Sector 2
0
2005 2006 2007 2008 2009

Source:-mospi
 COMPOSITION OF GDP
 The growth in agriculture & allied Components of GDP
activity decelerated from 4.9% in
2007-08 to 1.6% in 2008-09 Agariculture
, 18%

 Decrease due to fall in production Services,

Industry,
55%
of non food crop including oil seed, 27%

sugarcane & jute, and high base

effects

 Industrial Growth has declined Compoents Of GDP

to 6.8% in 2008-09 from 10.6% 14
in 2007-08 12
10
8
6

 Service sector has reached a 4

2
0
growth of 9.7% in 2008-09 from 11.2% -2

2007-08
AMJ07 JAS07 OND07 JFM08 AMJ08 JAS08 OND08 JFM09

Agriculture Industry Services

Source:-RBI
 AGRICULTURE
• Agriculture accounted for FOODGRAIN PRODUC TION

17.8% of GDP in 08-09 in 230

comparison to 21.7% in
225
220

2007-08 215

Mn Tone s
210
205
200
195
• It accounts for 52% 190
185
employment in 2008-09 180

2003-04

2004-05

2006-07

2007-08

2008-09
2005-06
• 8.8% is produced for
exports in 2008-09
Source:-fciweb.nic.in
 • Rainfall RAINFALL

250
200
150
Cumulative rainfall during june

mm

100
2009 was- 52.8mm 50
0

JULY'08

AUG'08

JAN'09

FEB'09

MAR'09
DEC'08
SEPT'08

NOV'08

APR'09
OCT'08
 Having a negative deviation of
54% from normal rainfall in 2008-
month
09
Source:-agicoop.nic.in
 It effects food grain production,
inflation, water reserves and
temperature stock of foodgrain(million ton)
40

• Stock of food grain 35

30

million ton
25
20
15
 Total food grain production during 10
5
2008-09 is placed at 227.9mm tonnes 0
as compare to 230.8mm tonnes in

OND'08
JFM'08

AMJ'08

JAS'08

JFM'09
2007-08

Source:fci
 IIP and Core Sector Growth

Monthly trend in IIP

o IIP declines to 2.7% level in the 8

Yr 2008-09 from previous year 4.8% 6

2 growth

%
o Mainly due to deceleration in the 0

May-08

Sep-08

Jan-09

Mar-09

May-09
Jul-08

Nov-08
-2
Manufacturing sector -4

o Mining-10.47%, manufacturing-
MONTHLY GROWTH RATE OF IIP
79.36% & electricity-10.17% 20 COMPONENTS

Rise in excise duty 15

10
20000

15000 5
excise duty

10000 0

JAN'09

FEB'09
5000
MAY'08

AUG'08

NOV'08

MAR'09
JULY'08

DEC'08
JUNE'08

OCT'08
SEPT'08

APRIL'09
-5
0
nov

feb
june

aug
sep
month

jan

march
april
oct
may

july

dec

MINING MANUFACTURING ELECTRICITY

Source: mospi
 Core Industries
Cumulative Growth rate in Produc tion-Sector
 Core Industries registered a growth 10
wise

of 3.9% in May 2009 against 2.7% of the 8

corresponding year. 6

4
%
2
 Accelerated growth due to positive growth
in Coal, Steel and Cement 0

FINISH
COAL

OVERALL
STEEL
PETROLEUM

CEMENT
CRUDE OIL

ELECTRICITY
production -2

-4
2007-08 2008-09

 Electricity generation also contributes Source:-mospi.nic.in

 Declining in Manufacturing Division
 Basic goods declined 3.8%,
capital goods declined 3.6%
monthly trend of manufactring components
while intermediate goods
were up by 6.1% in Yr 2008-09 30
20
10
 Consumer durables recorded

%
0
growth of 12.4% while non -10
-20
durables were at 2.3% in 2008-

Mar,09
July,08

Aug,08

Nov,08
Oct,08

Jan,09

Feb,09
Sep,08

Dec,08
June,08
09
Basic Goods Capital Goods
Intermediate Goods consumers good
 Economy is recovering slowly &
demand is going to high Source:-mospi.nic.in

 Manufacturing, Electricity &

Construction sector decelerated
to 2.4%,3.4%,7.2%respectively
during 2008-09
from8.2%,5.3%,&10.1%respectiv
 Key Service Sectors
Indicators
GROWTH RATE OF OVERALL SERVICE SECTOR

•Service sector contributes 8

54% of GDP 6

%
2
•It is growing at 10% 0
approximately in 2008-09, JAS'07 OND'07 JFM'08 AMJ'08 JAS'08 OND'08 JFM'09 AMJ'09

despite the economic trade,hotels transport&presentation financing, insurance

slowdown in the current community,social&personal services total services

scenario Source:mospi
 Slowdown in Aviation Industry
o Volume of air traffic increased
two fold during 2004-2007
Aircraft Movement

300
o Slowdown seen from Sep 2008 till now
200

oDomestic cargo shows growth of 14.55% 100

in 2008-09 compared to 2007-08 0

Mar-08 Jun-08 Sep-08 Dec-08

o No. of Domestic Passenger decline by 5% Aircraft movement international

Aircraft movement domestic
in 2008-09

Freight Domestic
Passenger Domestic

146 25
144
20
142
15
mn tonnes

140
lakh
138 10
136 5
Freight Domestic
134
0
132 Mar- Apr- M Jun- Jul- Aug- Sep- Oct- Nov- Dec-
130 08 08 ay- 08 08 08 08 08 08 08
128 08
Nov-08
Jun-08
Jul-08
Apr-08
May-08

Aug-08
Sep-08
Oct-08
Mar-08

Dec-08

Passenger Domestic

Source-AAI
 Banking-Slowdown in lending to
industry

o Credit demand sluggish, CD ratio fell CD & ID Ratio

below 70% in 2008-09 33 76
32.5 75
32 74
31.5 73
31 72

o ID ratio in an increasing trend %

30.5
30
71
70
%

29.5 69
29 68
28.5 67
28 66
27.5 65

Jul'08

Nov'08

Mar'09

Apr'09
Aug'08

Sep'08

Jan'09

Feb'09

May'09
Dec'08

June'09
Oct'08
o Banks park huge funds in reverse
repo and SLR Investment-Deposit Ratio Credit-Deposit Ratio

TOTAL BANK FINANCE TO INDUSTRY

o Bank lending money to industry at a
growth only 2.1% in MAM’09 compare
10.00%
8.00%
to 5.31% in DJF’09 6.00%
%
4.00%
2.00%
0.00%

TOTAL BANK FINANCE TO INDUSTRY

 Slowdown in Construction
C ONSTRUC TION C OMPANY'S GROWTH
RATE
• Construction company
contributes 6% of GDP 20

15

% 10
• It is the 2nd largest employer
5
after agriculture
0
2004-05 2005-06 2006-07 2007-08 2008-09

• Government decreases its

investment by Rs3306cr at a
BANK CREDITS TOWARDS C ONSTRUC TION
decreasing growth rate of COMPANIES
8.65% on may’09 compared
50000
with Feb’09 40000
30000
Rs. cr
20000
10000
0

FEB,08

FEB,09
MAY,08

MAY,09
NOV,07

NOV,08
AUG,07

AUG,08
Source: RBI
 Financial services- Mutual funds
GROWTH RATE OF FINANCIAL SECTOR

15
• Total size of this industry 10

%
5
Rs670937cr 0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

• The industry is growing at GROWTH RATE

approximately 19% in 2008-09
SOURCE:FINMIN

• Total 35 players engaged in Asset Under Management

this sector including- 800000 20.00%
 Bank sponsor-4 700000
15.00%
 Institution-1 600000
500000
 Private players-30
10.00%
Rs. cr AUM
400000
5.00% %change
300000
200000
0.00%
100000
0 -5.00%
Sep-09 Dec-09 Mar-09 Jun-09

Source:amfi
 Insurance growth turns to negative

 Insurance companies divided into growth rate of insurance company

two parts- Life insurance and Non-
Life insurance 10.00%
 LIC and 17 private players present 8.00%
this industry 6.00%
4.00%
 Its premium collection is growing 2.00%
above 15% in 2007-08 but dips in

%
2008-09
0.00%
-2.00% JAS08 OND08 JFM09 AM09
 In Non-Life segment, 4 government -4.00%
players and 10 private players are -6.00%
operating
-8.00%
Its premium collection is growing
above 10% annually but it also dips growth rate of insurance company
in 2008-09
Source:-IRDA
 Increasing the Logistics sector
CARGO HANDLED BY AIRLINES

1600

• Indian Logistic industry is 1400

1200

('000TONS)
expected to reach a market size 1000
800
of $125bn in the year 2010 600
400
200
0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

('000TONS)

• This industry is growing 15% to Source:finmin

20% annually CARGO HANDLE BY INDIAN PORTS

600000
• It includes cargo handling, 500000

('000tons)
railways, air cargos and road 400000
300000
transport 200000
100000
0
• 110 logistic parks spread 3500 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

acres at an estimated cost of ('000TONS)

$1bn and are expected to be
Ministry of shipping
operational within 2012 Growth rate of railway
SOURCE:MINISTRY OF SHIPPING freight

10.00%

8.00%

6.00%
Growth rate of
railway freight
4.00%

2.00%
2 0 0 4 -0 5

2 0 0 5 -0 6

2 0 0 6 -0 7

2 0 0 7 -0 8

2 0 0 8 -0 9
0.00%

Source: Indian railway

 TELECOM INDUSTRY INCREASING

• It’s the fastest growing industry ARPU VS New Subscribers

at a growth rate of 21% in the
Yr May 2009
700 600

• 500
Telephone 650
subscriber(w&L)452.91mn in 400
600
2008-09

Revenue/User

subscribers(Mn)
300
550
200
• Cell phone subscribers- 500 100
415.25mn in 2008-09
450 0
JFM 08 AMJ 08 JAS 08 OND 08 JFM 09
• Land line subscribers-37.75mn
in 2008-09 ARPU(Rs/sub/month No of subscriber added (monthly)

Source: trai
• Currently, Teledensity reached
38.88%, in May 2009
 Slowdown in Tourism

• It is contributing 6.8% of
GDP growth rate of tourist

15
10
5
• Currently, it employed 0

%
more than 41mn people -5
-10
-15
-20
•

mar'09
100% FDI is allowed in this

may'09
jan'09
july'08

sep'08

nov'08
segment
growth rate of tourist
• Due to terrorist & political
crisis this industry is
Source:aai
showing negative trend
 INDIAN BOP INCREASES
INDIAN EXPORT & IMPORT
 Reported lower growth rate of
6.4% in 2008-09from 28.4% in 35000
30000
25000

2007-08 last year 20000

15000
10000

$ mn
5000
0

JUNE'08

SEPT'O8

OCT'08

DEC'08

FEB'09

APRIL'09
JULY'08

AUG'08

MAR'09
NOV'08

JAN'09
Merchandise trade deficit increase

MAY'09
to $113.8 billion in 2008-09 from IMPORT EXPORT

$82.2billion in 2007-08
TRADE DEFICIT
indian balance of payments
14000
200000 12000
10000
150000
8000
$ mn
6000
($ million)

100000
4000
50000 2000
0
0

JAN'09

FEB'09

MAY'09
AUG'08

MAR'09
JULY'08

DEC'08
NOV'08
JUNE'08

OCT'08
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

SEPT'O8

APRIL'09
-50000

net current a/c capital account

Source:- Department of commerce

SOURCE:FINMIN
 Crude Oil Increase POL Imports

Imports- POL & NON_POL

• Growth rate declines for POL
as oil prices gradually falls
33000 33000
29000 29000
25000 25000

$ mn

$ mn
21000 21000
17000 17000
13000 13000
9000 9000
• Non-POL increases as 5000 5000

JUNE'08

JULY'08

AUG'08

SEPT'O8

NOV'08

JAN'09

FEB'09

MAR'09

APRIL'09

MAY'09
OCT'08

DEC'08
exchange rate made imports
more expensive
IMPORTS POL NON-POL

• Import growth was subdued at

14.4% with growth in both POL SOURCE:MINISTRY OF COMMERCE

& NON-POL imports moderating

to 16.9%& 13.2% in 2008-09
 INDIAN SOCIAL SERVICE SECTOR
GROWING

o Indian social sector growth rate of social services

Compromises with
10
Four sectors Pension
fund, Provident fund, 5

%
Defense & NGO 0
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

growth rate
o It is growing 9.3%
Source:mospi
in 2008-09 compared
with 6.8% in 2007-08
 Indian forex reserve
decreases
INDIAN FOREX RESERVE
o Indian forex reserve has
declined to $240bn on June 340
320
2009 from $300bn in 2007-08 300
280
260

$m
240
220
200
o FII pulled out a huge amount 180
of money from capital market

JAN'09

FEB'09
FEB'08

JUN'08

SEP'08

APR'09
APR'08

MAY'08

AUG'08

MAR'09
MAR'08

NOV'08
JULY'08

OCT'08

DEC'08
SOURCE:RBI
 Inflation Goes Negative
7 INFLATION RATE OF INDIA

5
o On YOY intra year peak of 12.9% on 3

% 0F GROWTH
AUG2,2008 to 0.8% by 1
MARCH28,2009
-1

-3

o For week ended 20th June -5

5-Jun
2-Jan
9-Jan

6-Feb

3-Apr

12-Jun
6-Mar
16-Jan

30-Jan

1-May
8-May
23-Jan

13-Feb

10-Apr
17-Apr
24-Apr
20-Feb
27-Feb

13-Mar
20-Mar
27-Mar

15-May
22-May
29-May
2009,YOY inflation was -1.3% vs.
11.91% last year during the
corresponding week.
CPI
o Mainly due to decrease in crude
oil prices from its highest levels 12

Of $150/ Barrel to $40/ barrel 10

8

o Current inflation rate is -1.2% 6

4

2
0

oct'08

dec'08

jan'09

feb'09
july'08

nov'08
april'08

may'08

aug'08

mar'09

april'09

may'09
june'08

sept'08

Source:mospi
 Indian Crude oil prices
Crude prices volatality at NYMEX
200
o Indian Crude basket has given 150
$/Barrel

weight 68% to middle east

$/barrel
100

price and NYMEX price 32% 50

0
in 2008-09 Jul- A S Oct- N D Jan- F M Apr- M Jun- Jul-
08 ug- ep- 08 ov- ec- 09 eb- ar- 09 ay- 09 09
08 08 08 08Months 09 09 09
Source (NYMEX)

oCurrently crude is trading at

$64.05/barrel in international CORRELATION

Market 140
120
100

$/bbl
80
60
40
20
0

April

July
June
May

August

March
December
September

November

January

February
October
MONTH
Indian Basket Price Brent Crude

Source:-www.opec.org
 Monetary policy
Reserve ratios and interest rates

•CRR currently is 5% in 2008-09

PLR
12.3
• RBI decreased CRR from its 9% 12.2
12.1
12
level to increase liquidity in the 11.9
11.8

%
system 11.7
11.6
11.5
11.4

2 7 -M a r

2 9 -M a y
1 7 -A p r
1 3 -Fe b
2 3 -Ja n

1 9 -Ju n
6 -M a r

8 -M a y
11.3

2 -Ja n
• Current PLR rate is 13.25%
2009
PLR
• Current SLR is 24%

LAF TREND OF INDIAN C RR

5.75
60000 5.5
40000
% 5.25
Rs in crores

20000
5
0
-20000 Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- 4.75

Mar-09

Mar-09
Jan-09

Jan-09

Feb-09

Feb-09

Apr-09
Jan-09

Apr-09

May-09

May-09

Jun-09

Jun-09
08 08 08 08 08 08 08 08 08 09 09 09
-40000
-60000
2009
C RR
Source:Rbi
Source:-ccilindia.com
 Trend of money market rate

•Govt. borrow more from the

Trend of money market rate
market
3.50
3.00
• Fiscal deficit is going to widen 2.50
2.00
%
1.50

• Interest rates are going up 1.00

0.50
0.00

2-Jul

5-Jul

8-Jul

11-Jul
17-Jun

26-Jun

14-Jul
20-Jun

23-Jun

29-Jun
• Capital market not performing
well 2009
Repo-Wtd Avg Call-Wtd Avg CBLO-Wtd Avg

• Money market is in an
uptrend Sources:rbi
MSS issued by RBI and exchange rates
BONDS ISSUED UNDER MSS
300000

250000
• Outstanding MSS Bonds as on
200000
2008-09 is Rs148889cr

Rs. Cr.
150000

100000
• MSS is issued due to excessive 50000
inflow of foreign currency 0

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09
• Currently Rs/$ rate is 48.43
MSS Limit

Net FII Investment

Rs./$

4000
53
52 3000
51 2000
50
49 1000
Rs.

48 0
47
46
-1000
45 -2000
44
-3000
2-Jan

5-Jun

19-Jun
16-Jan

30-Jan

13-Feb

27-Feb

8-May
13-Mar

27-Mar

22-May
10-Apr

24-Apr

-4000
J '08 A '08 S '08 O '08 N '08 D '08 J '09 F '09 M A '09 M J '09
2009 Rs./$ '09 '09
Net FII Investment
 Strong Rise in Fiscal Deficit
INDIAN FISCAL DEFICIT

• Revenue deficits stands at 300000

250000
4.4% of GDP in 2008-09 200000

which is 3.4% higher than 150000

RS CRORE
100000
of budgeted estimate 50000
0
-50000

JAS'08
JAS'07

JFM'07

JFM'09
AMJ'08
AMJ'07

OND'07

OND'08
-100000
• Fiscal deficit stands at -150000

6.5% of GDP in 2008-09 FISCAL DEFICIT REVENU DEFICIT PRIMARY DEFICIT

from budgeted deficit of

2.5% in 2007-08 TAX REVENUE

160000
140000
R S IN C R OR E 120000
100000
80000
60000
40000
20000
0

O N D '07

ON D '08
A M J'07

A M J'08

JF M '09
JA S '07

JA S '08
JF M 08
Source:cga
 E-I-C Linkage

• Lead Indicator- Cement, Steel and Automobile

Production

• Lag Indicator- Interest rate, Inflation

• Concurrent indicator- GDP, Capacity Utilization,

Unemployment rate
 Financial markets
IPO s Issued

•IPO issues falls due to poor condition 1400

1200
of the capital market 1000

Rs in cr
800
600
• Earning decreases, due to which PE 400
ratio decrease, and the market 200
0
capitalization falls by 45% approximately

Nov-08
Jun-08

Jul-08

Jan-09
Oct-08

Mar-09
May-08

Aug-08

Sep-08

Dec-08

Feb-09
• Currently companies are raising money
through QIPs and private placement route Source:sebi

MC/GDP
P/E
120
25
100
20
80
15
60
10
40
5
20
0
0
2005-06 2006-07 2007-08 2008-09
2006-07 2007-08 2008-09
P/E
MC/GDP
Business Confidence, Political Outlook
& Future Outlook
BCI

•BCI lost 28.5 in Jan 2009 over 140

its October 2008 level 120

100
80
60

•Impact of Global downturn is the

40
20

main driver of the growth

0

process in the Indian economy

Expectations Assesment

Business Confidence Index

Organization Period Index Growth over Growth over
year ago period
NCEAR Nov08-Jan08 BCI -40.60% -23.8%

CII Oct08-Mar08 BCI -15.10% -7.7%

D&B Apr08-Jun08 BCI -39% -2%

Source: rbi
 Budget Impact
STEPS TAKEN BY GOVERNMENT: IMPACT OF THE BUDGET

• 1.Allocation to NHAI has increased by 23% over B.E2008-09 in B.E2009-10 NHAI decided to build road 20k.m per day basis. That's
•
Why increase of steel, cement & others goods demand
2.Allocation for railway increased from 10800cr in interim budget 2009-10 to
15800cr in B.E2009-10 will be very high
• 3.Allocation under JNNURM has increased by 87% to 12887cr in B.E2009-10
over B.E2008-09
Railway decides to complete the dedicated freight
• 4.APDRP has increased by 160% to 2080cr in B.E2009-10 over B.E2008-09 corridor project as early as possible and set up
• Target for agriculture credit flow set up at Rs325000crore for the year 2009- new high technology engine factory
10 vs. Rs287000cr in 2008-09

• Allocation increased by 114% to Rs391400cr in year 2009-10 vs. 2008-09

To build the urban infrastructure at the
international level

The power companies set a target to increase the

power capacity of India about 65000mw with in
2012

Agriculture product production is increasing

because the farmers are interested to cultivate
 Economic Outlook

• Economy is now in the last phase of recession

• The US economy is recovering

• The expected world GDP has been forecasted

2.4% from 1.9%

• BRIC countries are moving at a higher growth rate

• Gradually demand is increasing in the economy

Thank you