Current state of Indian Economy

June 2010

















Federation of Indian Chambers of Commerce and Industry
New Delhi



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Highlights June 2010

The Indian economy continues to ride on the path of high growth as a result of return in
demand in the domestic and international market. The overall industrial output rose to 11.5 per
cent in May this fiscal, registering a double-digit growth for the eighth month in a row. The
growth was seen to mainly come from the manufacturing sector.

GDP growth in the last quarter of the year 2009-10 was 8.6 percent compared to 5.8 percent
growth during the same period of 2008-09. The CSO also came up with the revised GDP growth
estimates of 7.4 percent for the year 2009-10, this was up from the earlier estimated number of
7.2 percent. The government expects GDP growth to grow by 8.5 percent in 2010-11 and 9.0
percent in 2011-12.

Despite high growth in the economy concerns over growing imbalances due to niggardly
performance in agriculture for the second year in succession have risen. Low growth in
agriculture was seen mainly on account of poor monsoon in 2009, when the overall GDP growth
in 2009-10 was 7.4 percent and agricultural growth was just 0.2 percent.

Merchandise trade numbers show both exports and imports back again in the positive growth
zone. Besides, there has been a palpable return in the confidence amongst investors with both
foreign and domestic investments in the Indian market rising. However, some concerns with
regard to the Euro zone remains due to the crisis in Greece and also as the Indian Rupee has
gained sharply against the USD.


Among the other observations were rising inflation that was felt across sectors, starting from
food and extending to manufacturing.

This overall inflation was by and large due to increase in food prices and as a result we also saw
rise in the wages and other costs. The issue of rise in food inflation can be checked only by
addressing the supply side constraints - both at production and distribution / logistics fronts.

The Centre has projected the headline inflation, which is currently running at 10 percent to ease
to around 6 per cent by December this year. The RBI projected headline inflation to fall to 5.5
per cent at end-March 2011. As a baby step to tide over inflation, the RBI has made a move with
a hike in the key policy rates on July 2, 2010.

The central bank has also introduced the base rate system from July 1, 2010 replacing the
existing Benchmark Prime Lending Rate (BPLR). The banks will from now on price the loans with
reference to the base rate. The introduction of the base rate was aimed to enhance
transparency in lending rates of banks, however, there is less excitement among the highly rated
corporates as their fear that funds may come costlier than before. Small companies on the other
hand may be in a position to negotiate rates to their advantage.




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Contents

Title Page



1 Industrial Growth 5

2 Core Infrastructure Industries 7

3 Trends in Inflation 9

4 Monetary Indicators 11

5 Stock Market Trends 12

6 Fiscal Management 13

7 Foreign Trade 15

8 Capital Inflows 16

9 Foreign Exchange Reserves 17























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List of Tables and Graphs

Table- 1.1: Growth of Industry: Recent Trends (in percentage) 6
Table -1.2: Growth in 17 Industry sectors 6
Table-1.3: Growth in six-core infrastructure industries (% change) 7
Table-1.4: Growth in six-core infrastructure industries (% change) 8
Table-1.5. Monthly trends in Wholesale price index- monthly average (% change) 9
Table-1.6: Monthly trends in consumer prices (% change) 10
Table-1.7: Monetary sector indicators 11
Table-1.8: Monthly trends in stock market indices 12
Table-1.9: Trends in cumulative tax collections of central government (%) 13
Table-1.10: Service Tax 14
Table-1.11: Trends in central government finances: 14
Table-1.12: Monthly trends in growth of merchandize trade (% change) 15
Table-1.13: Monthly trends in foreign investments ($ million) 16
Table-1.14: Monthly trends in foreign exchange reserves ($ billion) 17

























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1. Industrial growth
The IIP data released by CSO for May 2010 indicated strong performance in the industrial sector, for the
eight month in a row, beginning October 2009. The industrial growth was 11.5 percent in May 2010,
which was significantly higher than the meager growth of 2.1 percent recorded in May 2009.
The manufacturing segment constituting 80 percent of the index of industrial production (IIP) grew by
12.3 per cent in the second month of the current fiscal as compared to the growth of 1.8 per cent in
same month of previous year. The other two sectors, mining and electricity expanded by 8.7 per cent
and 6.4 per cent respectively in May 2010 as against the growth rates of 3.4 per cent and 3 per cent in
the same month of 2009.

In May 2010, the basic and the intermediate goods registered a negligible growth of 3.8 percent and 6.6
percent respectively as compared to the growth of 7.9 percent and 10.2 percent in 2009. Tremendous
growth was seen in capital goods sector that recorded 34.3 percent increase in May 2010 as against
negative growth of 3.6 percent in the same month of previous year.

Consumer goods sector is back on the growth track on account of high growth in output in the consumer
durables category during the second month of this fiscal. The consumer durables segment observed a
growth of 23.7 percent in May 2010 as compared to the growth of 13.2 percent seen in same month of
last year.

At the disaggregated level, in May this year fifteen (15) out of the seventeen (17) industry sectors
observed growth momentum. Growth came mainly from food products, cotton textiles, wool, silk,
manmade fibre textiles, paper products, leather products, rubber, plastic, petroleum and coal products,
metal products, basic metal, machinery and transport equipments.


















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

Weights May
2009
May
2010
Industry 100 2.1 11.5
Mining 10.2 3.4 8.7
Manufacturing 79.4 1.8 12.3
Electricity 10.5 3.0 6.4
Use Based Classification
Basic 35.6 3.8 7.9
Intermediate 26.5 6.6 10.2
Capital 9.3 -3.6 34.3
Consumer Goods 28.7 -1.1 8.2
Consumer non Durables 23.3 -5.5 2.4
Consumer Durables 5.4 13.2 23.7



Table- 1.2: Growth in 17 Industry sectors

17 industry sectors
Food Products 9.1 -9.7 5.7
Beverages, Tobacco and Related Products 2.4 -10.1 -3.0
Cotton Textiles 5.5 -3.6 5.6
Wool, Silk and man-made fiber textiles 2.3 -10.7 7.0
Jute and other vegetable fiber Textiles (except
cotton)
0.6 -20.3 26.9
Textile Products (including Wearing Apparel) 2.5 3.9 1.7
Wood and Wood Products; Furniture and Fixtures 2.7 16.4 -5.7
Paper & Paper Products and Printing, Publishing &
Allied Industries
2.6 1.4 6.1
Leather and Leather & Fur Products 1.1 -10.9 12.9
Basic Chemicals & Chemical Products (except products of
Petroleum & Coal)
14.0 2.1 7.5
Rubber, Plastic, Petroleum and Coal Products 5.7 17.4 15.4
Non-Metallic Mineral Products 4.4 6.0 5.5
Basic Metal and Alloy Industries 7.5 5.5 9.4
Metal Products and Parts, except Machinery
and Equipment
2.8 -3.0 39.8
Machinery and Equipment other than Transport
Equipment
9.6 2.9 24.8
Transport Equipment and Parts 4.0 2.0 25.2
Other Manufacturing Industries 2.5 16.2 27.6
Source: Central Statistical Organization












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2. Core sector growth

The overall index of six core infrastructure industries saw growth of 5.0 percent in May 2010. This was
higher than the growth of 3.2 percent recorded in May last year. However, the growth was marginally
lower than the growth registered in the previous month of this year. Out of the six segments, only two
sectors i.e. finished steel and cement were observed to show slight weakness in performance during
May 2010 compared to the performance recorded in the previous year. In the second month of the
current fiscal growth numbers were 2.5 percent and 8.6 percent for finished steel and cement
respectively as against the growth of 2.8 percent and 11.8 percent seen in May 2009.
The coal sector grew by 0.1 percent in May 2010; this was significantly lower corresponding to the
growth of 10.4 percent registered in same month of 2009.


All
infrastructure
industries
Finished steel Cement Crude
petroleum

08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 4.6 3.7 5.4 7.5 -1.3 4.7 6.9 11.9 8.7 1.0 -3.1 5.2
May 4.4 3.2 5.0 8.3 2.8 2.5 3.8 11.8 8.6 3.2 -4.3 5.8
June 4.4 6.3 8.1 3.6 6.6 12.8 -4.7 4.0
July 5.2 3.3 6.3 4.0 5.5 14.0 -3.0 -0.4
August 2.0 6.5 3.3 0.3 1.9 17.6 -1.0 -2.6
September 4.1 4.5 2.3 0.8 8.1 6.5 -0.4 -0.5
October 2.4 3.8 -3.8 2.5 6.2 5.2 -0.2 -2.2
November 0.8 6.0 -6.3 11.7 8.7 9.0 0.5 -1.5
December 0.7 6.4 -8.0 9.6 11.6 11.0 -0.3 1.1
January 2.2 9.4 3.2 16.2 8.3 12.4 -8.1 9.7
February 1.9 4.5 2.4 0.9 8.3 5.8 -6.2 4.0
March 3.3 7.2 -1.8 9.2 10.1 7.8 -2.3 3.5
Source: Ministry of Industry






















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Table-1.4: Growth in six-core infrastructure industries (% change)

Petroleum
refinery
Coal Power
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 4.3 -4.5 5.3 10.4 13.2 -2.3 1.4 6.7 6.9
May 0.1 -4.3 7.7 8.8 10.4 0.1 2.0 3.0 6.4
June 5.6 -3.8 6.1 14.7 2.6 8.0
July 11.8 -14.4 5.5 9.7 4.5 4.2
August 2.5 3 1 5.9 12.9 0.8 10.6
September 2.8 3.4 11.2 6.5 4.4 7.9
October 5.0 7.2 10.6 5.0 4.4 4.7
November -1.1 4.9 9.7 4.6 2.6 3.3
December 3.0 0.8 11.2 2.5 1.5 6.7
January -1.3 3.8 6.7 6.0 1.8 5.6
February 0.5 0.8 6.0 6.8 0.6 7.3
March 3.3 -0.4 5.2 7.8 6.3 7.8

Source: Ministry of Industry






























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3. Inflation

The rate of Inflation that touched double digit in April continued in May 2010. This was much higher
than the inflation rate recorded in the same month of 2009. Price of Fuel and food articles and some
non food articles were observed to get dearer, these mainly accounted for the rise in overall wholesale
price index.

While the WPI based inflation index still remains a major cause of concern, the inflation based on
consumer price index has also been confronted with a sustained threat of price rise; namely industrial
workforce, rural workforce and agriculture workforce. According to the latest data available for April
2010, the growth in consumer price index for industrial workers is 13.3 percent corresponding to 8.7
percent in same month of last year. The indices for agricultural labourers and rural Labour commonly
stood at 13.3 percent for April 2010 while these were same at 9.1 percent in April 2009.

Table-1.5. Monthly trends in Wholesale price index- monthly average (% change)

2009 2010
April May April May
All Commodities 1.3 1.4 11.2 10.2
I Primary Article
6.6 6.3 17.1 16.6
(A) Food Articles
8.6 8.4 16.7 16.5
(B) Non-Food Articles
1.9 3.0 21.8 18.6
II Fuel Power Light & Lubricants
-5.7 -6.1 12.9 13.0
III Manufactured Products
1.8 2.2 8.2 6.4
(A) Food Products
12.5 13.9 8.4 5.7
(B) Beverages, Tobacco & Tobacco Products
5.9 5.6 6.3 7.5
(C) Textiles
10.5 8.5 15.6 15.1
(D) Wood & Wood Products
10.1 3.6 14.6 8.8
(E) Paper & Paper Products
4.0 3.3 1.2 1.1
(F) Leather & Leather Products
-0.2 -0.2 -1.1 -0.1
(G) Rubber & Plastic Products
2.8 3.9 4.9 4.5
(H) Chemicals & Chemical Products
3.2 4.6 7.9 3.0
(I) Non-Metallic Mineral Products
2.5 2.3 4.4 2.4
(J) Basic Metals Alloys & Metals Products
-14.3 -13.3 12.2 12.1
(K) Machinery & Machine Tools
0.3 -1.0 3.8 3.8
(L) Transport Equipment & Parts
1.0 0.5 2.5 1.7
Source: Reserve Bank of India












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Table-1.6: Monthly trends in consumer prices (% change)

CPI-IW CPI-UNME CPI-AL CPI-RL
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 7.8 8.7 13.3 7.0 8.8 14.4 8.9 9.1 15.0 8.6 9.1 15.0
May 7.8 8.6 13.9 6.8 9.7 9.1 10.2 13.7 8.8 10.2 13.7
June 7.7 9.3 7.3 9.6 8.8 11.5 8.8 11.3
July 8.3 11.9 7.4 13.0 9.4 12.9 9.4 12.7
August 9.0 11.7 8.5 12.9 10.3 12.9 10.3 12.7
September 9.8 11.6 9.5 12.4 11.0 13.2 11.0 13.0
October 10.4 11.5 10.4 12.0 11.1 13.7 11.1 13.5
November 10.4 13.5 10.8 13.9 11.1 15.7 11.1 15.7
December 9.7 15.0 9.8 15.5 11.1 17.2 11.1 17.0
January 10.4 16.2 10.4 16.9 11.4 17.6 11.1 17.4
February 9.6 14.9 9.9 15.8 10.8 16.5 10.8 16.5
March 8.0 14.9 9.3 14.9 9.5 15.8 9.7 15.5
Source: Ministry of Labor, CMIE







































11 : Page
4. Monetary indicators
The broad money expanded by 1.7 percent in May this year as compared to the expansion seen of 3.6
percent registered in the corresponding month of previous year. The variation, from May 2010 over
March 2010 does not show sizable increase in credit to the government and to the commercial sector.
Aggregate deposits and investments were too seen to be on the lower side.

Table-1.7: Monetary sector indicators up to May (variation - May 2010-11 over end of March 2009-10)

Variation in M3 (Rs
crore)
Variation in M3 (%)
08-09 09-10 10-11 08-09 09-10 10-11
April 22235 124682 42384 0.6 2.6 0.8
May 73398 172709 92656 1.9 3.6 1.7
June 89283 172702 2.2 3.6
July 169734 259720 4.2 5.5
August 208571 280313 5.2 5.9
September 264364 331793 6.6 7.0
October 331450 391310 8.3 8.2
November 374193 431266 9.3 9.1
December 423509 521426 10.6 10.9
January 508078 575387 12.7 12.1
February 635810 652944 15.9 13.7
March 740332

806190

18.4 16.9

Source: Reserve Bank of India




























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5. Stock market trends
The movement in the India stock market indices in the past few months show an improvement and
investors confidence in the Indian market. The BSE Sensex is observed above 17K level and Nifty above
5K points. However in the month of May this year we have seen outflow of FII from the Indian and other
markets as a result of crisis in Europe.

Table-1.8: Monthly trends in stock market indices (beginning of month figures)

Date BSE
Sensex
% Change S&P CNX
NIFTY
%
Change
1.01.08 20300 4.8 6144 6.6
1.02.08 18242 -10.1 5317 -13.5
3.03.08 16677 -8.5 4953 -6.8
1.04.08 15626 -6.3 4739 -4.3
2.05.08 17600 12.6 5228 10.3
2.06.08 16063 -8.7 4739 -9.3
1.07.08 12961 -19.3 3896 -17.8
1.08.08 14656 13.1 4413 13.3
1.09.08 14498 -1.1 4447 0.8
1.10.08 13055 -9.9 3950 -11.1
3.11.08 10337 -20.8 3043 -23.0
1.12.08 8839 -14.5 2682 -11.9
26.12.08 9328 5.5 2857 6.5
30.01.09 9424 1.0 2874 0.5
02.03.09 8607 -8.7 2674 -7.0
31.03.09 9708 12.8 3020 12.9
29.04.09 11403 17.5 3473 15.0
01.06.09 14840 30.1 4529 30.4
01.07.09 14645 -1.31 4340 -4.1
03.08.09
01.09.09
15924
15551
8.7
-2.3
4711
4625
8.5
-1.8
01.10.09 17134 10.2 5083 9.9
03.11.09 15405 -10.1 4564 -10.2
01.12.09 17198 11.6 5122 12.2
04.01.10
01.02.10
02.03.10
01.04.10
03.05.10
17558
16356
16773
17693
17386
2.1
-6.8
2.5
5.5
-1.7
5232
4900
5017
5291
5223
2.1
-6.4
2.4
5.5
-1.3
Source: Reserve Bank of India











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6. Fiscal Management

Revenue collected from tax sources (both direct and indirect ) increased by 22 percent in May 2010 , as
against the negative collection in taxes seen in the previous year. The positive movement started just a
month before May. The increase in tax collection during the first two months of this fiscal was observed
to be partly on account of increase in the collection of income tax, customs and excise duties and partly
due to the effect of low base in the previous year.

Gross tax revenue Corporation tax Income tax
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 52.2 -16.9 27.0 55.0 -8.4 23.4 127.7 20.0 8.3
May 36.1 -11.8 22.0 58.1 10.1 -1.8 76.0 11.7 13.0
June 28.4 -11.4 43.4 1.8 50.0 7.1
July 26.2 -11.1 41.6 4.7 42.0 5.9
August 25.0 -11.5 45.9 2.4 35.7 8.1
September 25.3 -7.6 38.2 7.7 30.7 7.2
October 20.3 -7.5 30.3 6.5 21.9 10.5
November 17.5 -7.8 26.4 6.6 19.0 9.8
December 9.6 -2.5 11.9 16.8 6.8 12.2
January 7.2 -1.2 11.9 16.5 5.4 13.3
February 6.9 -1.6 17.9 10.9 7.5 11.4
March 2.7 10.8 7.1
Customs Excise duties Other taxes
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 25.0 -52..6 106.4 -28.3 --114.2 314.1 9.04 -5.4 -43.2
May 24.1 -38.2 56.6 1.3 -23.3 49.3 26.7 -18.7 -11.7
June 19.9 -37.3 -0.9 -23.7 26.0 -9.5
July 19.2 -34.7 4.0 -26.6 24.7 -3.87
August 17.0 -34.0 6.5 -24.5 17.4 -1.97
September 16.8 -32.9 6.6 -22.9 30.7 -20.5
October 14.4 -31.7 6.3 -21.7 16.2 -17.2
November 13.7 -31.2 5.1 -20.0 6.1 -15.0
December 11.1 -29.2 2.1 -18.2 -2.6 -24.2
January 6.4 -25.2 -2.6 -14.5 -6.4 -21.8
February 1.7 -21.8 -7.1 -10.2 -10.0 -19.8
March -4.1 -12.0 -11.5


Table-1.10: Service Tax

Service Tax 08-09 09-10 10-11
April 62.3 -0.04 -6.0
May 40.7 -2.60 1.6
June 34.2 -2.85
July 29.7 -1.46
August 28.6 -2.29
September 31.8 -3.7
October 31.8 -5.3
November 30.2 -6.2
December 25.4 -5.9
January 24.6 -6.2
February 22.2 -5.9
March 18.6
Source: Controller General of Accounts

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Table-1.11 Trends in central government finances: May 2010

Actual to budget estimates
( in Rs crores)
09-10 10-11
Revenue receipts 32178 44657
Tax revenue 26152 31896
Non tax revenue 6026 12761
Total receipts 32409 46002
Non plan expenditure 86242 100101
On revenue account 80025 86813
On capital account 6217 13288
Plan expenditure 36925 46808
On revenue account 33116 39064
On capital account 3809 7744
Total expenditure 123167 146909
Fiscal deficit 90758 100907
Source: Controller General of Accounts






































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7. Merchandise trade
Indias merchandise exports continued to remain high after months of contraction seen before
November 2009. The increase in exports was as a result of demand in the international market
that began to rise with the western economies resorting to relief measures to combat their
internal crisis. We have seen industrial activity picking up and so the growth in trade numbers
(exports and imports) which substantiated a return in consumption demand, both in the
domestic and international market.
In May 2010, the exports expanded by 35.1 percent amounting to USD 16145 million as against
the negative growth of 30 percent during the corresponding month of the previous fiscal.
Indias merchandise imports grew even faster, 38.5 percent in May 2010 as compared to
negative 39.2 percent witnessed in the same month of last year. However concerns over the
Greece crisis and its impact on the Euro markets remain.


Table-1.12: Monthly trends in growth of merchandize trade (% change) up to May 2010

Exports Oil imports Non-oil imports Total imports
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 31.5 -33.2 36.2 46.2 -58.5 70.5 32.3 -24.6 34.3 36.6 -36.6 43.3
May 12.9 -29.2 35.1 50.8 -60.6 66.7 17.4 -25.4 28.2 27.1 -39.2 38.5
June 23.5 -27.7 53.4 -50.6 13.9 -16.5 25.9 -29.3
July 31.2 -28.4 69.3 -55.5 38.7 -24.5 48.1 -37.1
August 26.9 -19.4 76.7 -45.5 39.6 -25.5 51.2 -32.4
September 10.4 -13.8 57.1 -33.5 36.2 -30.4 43.3 -31.3
October -12.1 -6.6 22 -9.3 5.5 -17.2 10.6 -15.0
November -9.9 18.2 11.9 7.3 3.4 -5.9 6.1 -2.6
December -1.1 9.3 -30.9 42.8 31.9 22.4 8.8 27.2
January -15.9 11.5 -47.5 56.0 -0.5 28.8 -18.2 35.5
February -21.7 34.8 -47.5 97.4 -10.2 55.6 -23.3 66.4
March -33.3 54.1 -58.1 85.2 -18.9 61.0 -34.0 67.1

Source: Ministry of Commerce

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8. Foreign investment
The numbers on foreign investment inflows showed inflows at USD 5.5 billion in April 2010
as against USD 4.6 billion in April 2009. The FDI inflows in the month of April 2010 stood at
USD 2.2 billion which was marginally lower than the investments in the previous year.
However, the element that led to the fall in total foreign investments was pullout of foreign
investments from the Indian market as a result of crisis in Europe, which eventually brought
down the portfolio investments. This not only impacted the short term investments in India
but also investments in other major stock markets.


Table-1.13: Monthly trends in foreign investments ($ millions)

Foreign direct
investments
Portfolio investments Total foreign
investments

08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 3749 2339 2179 -880 2278 3315 2869 4617 5494
May 3932 2095 2213 -288 5639 -364 3644 7734 1849
June 2392 2582 -3010 353 -618 2935
July 2247 3476 -492 2077 1775 6508
August 2328 3268 593 926 2921 4194
September 2562 1512 -1403 4999 1159 6511
October 1497 2332 -5243 2922 -3746 5254
November 1083 1722 -574 1274 509 2996
December 1362 1542 30 1533 1392 3075
January 2733 2042 -614 3139 2119 5181
February 1466 1717 -1085 230 381 1947
March 1956 1209 -889 5306 1067 6515
Source: Reserve Bank of India










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9. Foreign exchange reserves
Foreign exchange reserves recorded in April 2010 was USD 279.6 billion. However, the outflow of
foreign institutional investments in May 2010 brought down total forex to USD 272 billion in the
subsequent weeks of this fiscal. The present forex is enough to cover 9 months of Indian imports.

Table-1.14: Monthly trends in foreign exchange reserves ($ billion)

07-08 % Change 08-09 % Change 09-10 % Change 10-11 % Change
April 204.1 2.5 314.5 1.5 251.7 0.0 279.6 0.18
May 208.3 2.0 312.5 -0.6 262.3 4.2 271.9 -2.70
June 213.4 2.4 312.0 -0.1 265.1 1.0 272.4 0.16
July 229.3 7.4 306.1 -1.8 271.6 2.4
August 228.8 -0.2 295.3 -3.5 276.4 1.8
September 247.7 8.2 286.3 -3.0 281.2 1.7
October 262.4 5.9 252.8 -11.7 284.3 1.1
November 273.5 4.2 247.6 -2.0 288.1 1.3
December 275.9 0.8 255.9 3.3 283.4 -1.6
January 288.3 4.4 248.6 -2.8 280.9 -0.9
February 301.2 4.4 249.2 0.2 278.4 -0.9
March 309.7 2.8 251.7 1.0 279.1 0.3
Source: Reserve Bank of India