Indian Economy-Executive Summary, April 2013

GDP Growth
Indian economy to grow by 6.3% in 2013-14 The Indian economy is expected to be back on its growth trajectory in 2013-14. Its inflation-adjusted gross domestic product (GDP) is expected to grow by 6.3 per cent, after witnessing a sharp slowdown in the last two years. The GDP growth had decelerated to 6.2 per cent in 2011-12 from around nine per cent in the preceding two years. The growth is estimated to have slowed down even further to five per cent in 2012-13. Easing supply constraints, higher farm income, lower inflation, softening interest rates, fast-tracking of investment projects and a consequent rise in employment are expected to accelerate growth. On the external front, however, the economy is not expected to get any relief, as the global economic conditions remain subdued. All three segments of the economy - agriculture, industry and services are expected to see an improvement in their performance in 2013-14. The growth of the agricultural sector is expected to accelerate to 2.8 per cent from 1.7 per cent in 2012-13, that of the industrial sector to 4.2 per cent from 2.5 per cent and the services sector to 8.0 per cent from 6.9 per cent.

Inflation
Wholesale price inflation to fall to 5.4% in April 2013 Wholesale price inflation is expected to fall to 5.4 per cent in April 2013 from six per cent in the preceding month. This will be the first month since November 2009 when inflation will be in the comfort zone of the Reserve Bank of Indias (RBI). The RBI has mentioned 5-5.5 per cent as
1 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

its comfort zone for inflation in many of its reports. Inflation had ruled in the range of 7 to 11 per cent during December 2009-September 2012. It started falling rapidly there onwards. From 8.1 per cent in September 2012, it fell to 7.3 per cent in January 2013 and further to six per cent in March 2013. The fall in inflation will be seen mainly in primary articles and fuel. Inflation in primary articles is expected to fall to 6.1 per cent in April 2013 from 7.6 per cent in March 2013. The fall will be led by lower inflation in primary food articles. Inflation in primary foods articles is expected to come down as prices of cereals and pulses remained almost unchanged in April 2013 compared to their month-ago levels. Prices of fruits and vegetables are also likely to have risen at a slower pace in April 2013 compared to the month-on-month rise seen in April 2012. Inflation in fuel & power group is expected to fall to nine per cent in April 2013 from 10.2 per cent in March 2013. The fall will reflect the cut in petrol prices (Rs.3 per litre) in April 2013 and fall in prices of other non-administered crude-derivatives such as aviation turbine fuel (ATF). Inflation in coal is expected remain virtually nil and that in electricity is expected to remain unchanged at 13.2 per cent. Inflation in the manufacturing group, however, is expected to remain steady at around 4.1 per cent, due to the sticky nature of manufactured product prices.

Balance of Payment
Indias service export earnings fell by 0.3 per cent in March 2013 to USD 12.3 billion compared to the preceding month. This was as per the provisional aggregate monthly data on Indias international trade in services released by the Reserve Bank of India (RBI).
2 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

Payments for Indias import of services rose by 7.2 per cent in March 2013 to USD 6.8 billion compared to the preceding month.

Industry
The index of industrial production (IIP) is expected to rise by 3.1 per cent in March 2013, as against the 2.9 per cent fall witnessed in the same month of the preceding year. This will be the highest growth registered by the index in the last five months. The industrial activity is unlikely to have picked up in March 2013. The acceleration in the year-on-year growth in the IIP will be purely a reflection of the low base effect. Due to seasonality in production, the IIP rises by around 12 per cent in March compared to February. However, in 2012, it rose by only 7.1 per cent. This year, we expect the IIP to rise by 9.8 per cent in March compared to February. Thus, the month-on-month rise expected in IIP in March 2013 will be lower than the average 12 per cent recorded between 2006 and 2011. Output of the manufacturing sector is expected to grow by 3.7 per cent in March 2013 compared to the year-ago level. Electricity generation too is expected to grow by 3.4 per cent. Output of mined products, however, is expected to fall for the sixth consecutive month. The fall will be to the tune of 1.7 per cent.

Agriculture
Indias foodgrain production is projected to increase by 1.5 per cent in 2013-14. This will come over an estimated decline of 2.3 per cent in 2012-13. We expect higher production of rice, coarse cereals and pulses to drive the growth in output.

3 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

Rice production is projected to scale up by 1.4 per cent to 102.3 million tonnes in 2013-14. This will come over a fall of 3.4 per cent in the preceding fiscal. Poor progress of rice sowings during the kharif and rabi season are largely responsible for the fall in rice output in 2012-13. We expect sowings of rice to recover in 2013-14. Similarly, bajra production is projected to grow by 27.5 per cent to exceed 9.2 million tonnes in 2013-14. Sowings of bajra had taken a toll during the 2012 kharif season. Rajasthan - the largest cultivator of the crop witnessed a steep dip in bajra acreage. This, limited bajra production to an estimated 7.2 million tonnes in 2012-13. In 2013-14, we expect sowings of the crop to pick pace and drive growth in production.

Corporate Sector
Corporate India is poised to see a smart acceleration in profit growth to 25 per cent in 2013-14 from an expected 14.5 per cent in 2012-13. Its net profit margin is also expected to expand to 7.8 per cent in 2013-14 from an expected 6.8 per cent in 2012-13. Softening input prices, appreciation of rupee and consequent absence of forex losses are expected to boost profits and profitability. International prices of crude oil are expected to fall by 2.9 per cent in 2013-14. This, coupled with a 4.1 per cent appreciation in the Indian rupee is expected to bring down the cost of crude oil imports substantially. The petroleum products sector is expected to be the major beneficiary of this. High landed cost of crude oil imports has led to its raw material expenses as a proportion of sales shoot up to 91.7 per cent in 2012-13, which are expected to come down to 88.4 per cent in 201314.

4 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

The government has not been regular in announcement and disbursal of oil subsidies. This has pushed the petroleum products industry into losses in many a quarters and has also led to a sharp increase in its interest burden. The partial deregulation of diesel prices announced earlier this month is expected to reduce the reliance of the petroleum products industry on subsidies and aid its bottomline. Thus, net profits of the petroleum products industry are expected to climb up to 4.4 per cent of income in 2013-14 from an expected 2.2 per cent in 2012-13. The petroleum products industry accounts for 10-15 per cent of total corporate profits and hence its profit growth has a strong bearing on the overall profit performance of Corporate India.Industries engaged in manufacture of other crude oil derivatives such as chemicals, polymers, plastics and paints are also expected to reap the benefits of around seven per cent fall in landed cost of crude oil imports in 2013-14. Other industries that depend on imports for meeting their raw material requirement such as edible oils, fertilisers, steel and tyres will also benefit from the weakness in international commodity prices and strengthening of rupee. Industries like LNG storage & distribution and aviation stand to gain from softening of international crude oil and natural gas prices and appreciation of rupee.

Prices of metals - steel and copper - are also expected to rise by only 23 per cent in 2013-14, after rising by 7-8 per cent in 2012-13. The slower rise in prices is expected to ease pressure on profit margins of major metal consuming industries such as machinery, electronics, automobiles and construction. A slower four per cent rise in cement prices compared to the seven per cent rise in 2012-13 will also help the construction industry increase its profits.
5 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

The Indian rupee is expected to appreciate in 2013-14, after suffering a sharp depreciation in 2012-13. We expect the appreciation to be gradual unlike the volatile movements witnessed by the currency in 2012-13. The rupee had depreciated very sharply by 9.1 per cent in the June 2012 quarter and by 3.8 per cent in the December 2012 quarter.

This brought substantial amount of forex losses to the companies having short-term forex liabilities. Such losses are not expected in 2013-14. Hence, other expenses of Corporate India (under which the forex losses are accounted for) are expected rise at a slower pace of eight per cent than the 11 per cent increase expected in 2012-13. Besides, some forex gains will be made because of appreciation of rupee which will directly add to net profits.

6 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

INDIA'S MACROECONOMIC INDICATORS
Indicator
GDP Growth (at constant prices, %) Agriculture & allied activities Industry Services

2007-08
9.32 5.8 9.67 10.27

2008-09
6.72 0.09 4.44 9.98

2009-10
8.39 1.04 8.4 10.45

2010-11
8.39 7.03 7.16 9.35

2011-12
6.48 2.76 3.38 8.91

Index of industrial production 2004-05 series (wt 1000) IIP: Mining & Quarrying 2004-05 series (wt 141.57) IIP: Manufacturing 2004-05 series (wt 755.27) IIP: Electricity 2004-05 series (wt 103.16) IIP: Basic goods 2004-05 series (wt 456.82) IIP: Capital goods 2004-05 series (wt 88.25) IIP: Intermediate goods 2004-05 series (wt 156.86) IIP: Consumer goods 2004-05 series (wt 298.08)

15.53 4.61 18.4 6.35 8.93 48.47 7.31 17.59

2.52 2.56 2.46 2.76 1.71 11.3 0.05 0.9

5.28 7.91 4.84 6.07 4.75 0.99 6.03 7.65

8.23 5.23 8.95 5.56 5.98 14.75 7.39 8.57

2.89 -1.97 3 8.16 5.48 -3.97 -0.62 4.37

WPI of All commodities(wt 100.0000) WPI of Primary articles(wt 20.1182) WPI of Fuel & power(wt 14.9102) WPI of Manufactured products(wt 64.9716)

4.74 8.33 0.03 4.78

8.05 11.05 11.57 6.16

3.8 12.66 -2.11 2.22

9.56 17.75 12.28 5.7

8.94 9.8 13.96 7.26

7 Source : CMIE, Economic outlook

Indian Economy-Executive Summary, April 2013

Indicator
Gross Fiscal Deficit (% of GDP)

2007-08
2.5

2008-09
6

2009-10
6.5

2010-11
4.9

2011-12
5.9

Exports ($ mln.) % change Imports ($ mln.) % change Trade balance: DGCI&S ($ mln.) Trade balance: RBI ($ mln.)

1,62,988 29.1 2,49,791 35 -86,803 -91,467 -15,737

-1.3 13.5 20.9

1,83,091 12.3 2,99,311 19.8 -1,16,220 -1,19,519 -27,914

-2.3 15.6 25.4

1,78,345 -2.6 2,87,647 -3.9 -1,09,302 -1,18,203 -38,181

-2.8 13.2 21.8

2,50,806 40.6 3,69,424 28.4 -1,18,619 -1,30,593 -45,945

-2.7 14.9 22.6

3,04,334 21.3 4,89,254 32.4 -1,84,920 -1,89,759 -78,155

-4.2 16.8 27.1

Current Account Balance ($ mln.) CAB as percentage of GDP (%) Exports % of GDP Imports % of GDP Tourist arrivals(mln. nos.)

5.17

5.09

5.39

5.95

6.46

Foreign exchange reserves (excl. gold and SDRs): March-end) ($ mln.) Debt Service Ratio (%) FDI ($ mln.) GDRs/ADRs ($ mln.) Rupee exch rate (Rs./dollar)

2,99,230 4.8 15,893 7,652.70 40.24

2,41,426 4.4 19,816 298.4 45.99

2,54,685 5.5 17,901 3,930.30 47.41

2,74,330 4.2 9,359 1,775.50 45.57

2,60,069

22,060 381.6 47.96

8 Source : CMIE, Economic outlook