Economy Analysis

Presented By :

Neha Gupta Chetan Bansal Anurag Kumar Pramod Yadav

: 6010020816084 : 6010020740337 : 6010010832293 : 6010020715601

Global Scenario Considering Indian Scenario Economy Outlook

It is effected by world GDP . And by world Inflation Trends.

Due to high flow of FDI & FII in emerging economy. Emerging economy are attracted by advanced economy as vast opportunity are available in emerging market. i.e. a. Recruiting talent. b. Developing Joint Ventures. c. Deploying talent to the emerging market. d. Abundance of natural resources. e. Demand has increased.

Global GDP Scenario

8

-2

-4
2008 2009 2010 (E)

World GDP

Advanced

Emerging Economies

Source: CYGNUS RESEARCH

Inflation infuses liquidity in the market & will help in growth. 10 Emerging economies 8 taking precaution. Speculation is not played 6 4 in the economies. Sustainable development.2 Protecting business 0 downfall. -2
% 2008m1 2008m3 2008m5

World inflation trend

2010m1

2008m7

2008m9

2009m1

2009m3

2009m5

2009m7

2009m9

2010m3

2008m11

World

Advanced economies Emerging economies Source: CYGNUS RESEARCH

2009m11

2010m5

I. II. III. IV. V. VI.

GDP ( Gross Domestic Product ) IIP ( Index of Industrial Product ) Trade Inflation Monetary & Fiscal Policy Economy Industry Linkage

Uptrend's in GDP due to improve in production of Agriculture, Fishing, mining & manufacturing than as anticipated. Growth in Infrastructure. Gross Income rose to 7.4% from 6.8%. Stability in government policies. Increase in labor productivity.

GDP Growth Rate

10 9 8 7 6 % 5

4
3 2 1 0 AMJ08 JAS08 OND08 JFM09 AMJ09 JAS09 OND09 JFM10
Source: CYGNUS RESEARCH

Service sector contribution to GDP is major. i.e. 57%. Service sector was affected by the global recession. Drastic growth in Industries as compared to previous year due to improve in production. Contribution of agrosector has declined due to conversion of agro land into real estate , and Sez .
Cost of Labor.

Components of GDP JFM2010

Agriculture 14%

Services 57%

Industry 29%

16 14 12 10 8 6 4 2 0 -2 -4

Components of GDP growth

AMJ08 JAS08 OND08 JFM09 AMJ09 JAS09 OND09 JFM10 Agriculture Industry Services
Source: CYGNUS RESEARCH

Low base effect. Low interest rate. Reduction in taxes. High growth in production of mineral & iron ore. Growth in textile ,Gems & Jewel , Engineering goods.

Core Industries performance

10 9 8 7 6 % 5 4 3 2 1 0

WCL disbursed by bank.

Source: CYGNUS RESEARCH

Increased in duty has slacked growth in logistics. Fluctuating in exchange rate. Freight handling by railway has increased. Revenue from tourism has increased. Increase in inter-state growth. Reduction in fares. New players have entered. New route has been launched. Morning & Evening flights

LOGISTICS SEGMENT GROWTH

25 20 15 % 10 5 0 2007-08 2008-09 2009-10 AMJ 10 Cargo handled at major ports## Railway revenue earning freight traffic

Logistics- Airlines
50 40 30 20 % 10 0 2007-08 -10 2008-09 2009-10 Int Psr AMJ 10 Dom Psr Export cargo handled##

Source: CYGNUS RESEARCH

Gap between urban & rural area & Sale of CV increase

90

TELEPHONE SUBSCRIBERS

Cut & Throat competition exist due to a large number of player. Lack of network-depth in rural region. Urban market has saturated. Reduction in tariffs.

80 70 60 % 50 40 30 20 10 0 2007-08 2008-09 2009-10 AMJ 10

SALE OF CV
Lower interest rate. Due to third party logistics / hub & spoke model. Due to demand for bulk transportation. Better Infrastructure.
70 60 50 40 30 20 10 0 -10 -20 -30 2007-08 2008-09 2009-10 AMJ 10 SALE OF CV
Source: CYGNUS RESEARCH

Increase in IIP has the consequent effect on GDP as it is rising. Strong growth of mineral, ironore, mining. Infrastructure has developed. Production of steel , Power & cement has increased. Growth in production of textile , & engineering goods .

20

Monthly YOY Growth rate IIP

18
16 14 12 10 8 6 4 2 0

May-09

Mar-10

Apr-09

Jul-09

Aug-09

Sep-09

Nov-09

Dec-09

Source: CYGNUS RESEARCH

Feb-10

Jun-09

Jan-10

Apr-10

Oct-09

Rise in the production due to increase in the capital investment. IIP of mining & quarrying witnessed higher growth. Withdrawal of stimulus package. Increase in production of capital goods.
25 20 15 % 10

25 20 15 10 5 0 May-09 %

Components of IIP

Mar-10

Apr-09

Jul-09

Nov-09

Aug-09

Sep-09

Dec-09

Electricity

mfg

Mining

IIP Goods wise index

Components of IIP on goods

80 70 60 50 40 30 20 10 0 -10 % Mar-10 Apr-10 25.00 20.00 15.00 10.00 % 5.00 0.00 -5.00 -10.00 May-09 80.00 70.00 60.00 50.00 30.00 20.00 10.00 0.00 -10.00 % 40.00

5
0 -5 -10 May-09 Apr-09 Jul-09 Oct-09 Aug-09 Sep-09 Nov-09 Dec-09 Feb-10 Jun-09 Jan-10

Mar-10

Apr-09

Oct-09

Jul-09

Aug-09

Sep-09

Nov-09

Dec-09

Consumer goods(LHS) Intermediate(LHS)

Basics(LHS)

Basic goods(LHS)

intermediate goods(LHS)
Source: CYGNUS RESEARCH

Capital(RHS)

Feb-10

Jun-09

Jan-10

Apr-10

Feb-10

Jun-09

Jan-10

Apr-10

Oct-09

 Low base effect. Due to sustainable increase in the requirement of importable items, to expand industry product. Production & export of goods has not increased in subsequent period. Increase in oil price. Depreciation of rupee. Import of defense equipments & machineries.

Monthly trend of Trade balance

0

-2000

-4000 US$mn

-6000

-8000

-10000

-12000

Source: CYGNUS RESEARCH

 Low base effect.

Low cost of Production. Increase in productive capacity. Decreased in the Excise duty. Foreign economies are recovering.
US$mn

25000 20000 15000 10000 5000 0

Export trend and Its growth 60

50 40 30 20 10 0 -10 -20 -30 EXPORTS(LHS)

30000

Import trend and its growth

80 60 40 20 0 -20 -40 %

Price of oil has risen significantly. Depreciation in rupee. Unplanned expenditure. Production capacity has increased.

25000 20000 US$mn 15000 10000 5000 0

IMPORTS(LHS)

Growth rate (RHS)

Source: CYGNUS RESEARCH

Rising global commodity prices. on the inflation is also

WPI INFLATION
12 10 8 6

Demand side effect

posing a strong threat Lack of dams , Storage. Unplanned expenditure. Increase in oil prices. Supply side effect.

%
4 2 0 -2 MONTHS

Source: CYGNUS RESEARCH

Excessive flow of money. Balance growth. Protect economy from sudden downfall. To attract more global & local investor. Rise in the rate i.e. CRR , Repo , Reverse Repo

Trend of CRR , Repo and Reverse Repo

10 9 8 7 6 5 4 3 2 1 0 26-Apr-08 10-May-08 24-May-08 12-Jun-08 25-Jun-08 5-Jul-08 19-Jul-08 30-Jul-08 30-Aug-08 11-Oct-08 20-Oct-08 25-Oct-08 3-Nov-08 8-Nov-08 8-Dec-08 5-Jan-09 17-Jan-09 4-Mar-09 21-Apr-09 13-Feb-10 27-Feb-10 19-Mar-10 20-Apr-10 24-Apr-10 Reverse Repo Rate Repo Rate Cash Reserve Ratio
Source: CYGNUS RESEARCH

Jun-

Jan-

Nov

Dec

Aug

Sep

Mar

Feb

Apr-

Apr-

May

Trend of FII - Equity and Debt

Increased rise in No. of IPOs Investments in Mutual funds . Easy registration form of FII. Favorable regulatory norms. Widening Fiscal deficit attracts more FIIs in country.

4500 4000 3500 3000 2500 2000 1500

1000
500 0

US$mn

Jul-09

Equity

Debt

Source: CYGNUS RESEARCH

May

Oct-

Shows increase because of strong economic growth . Untapped Market. Strong natural resources. There is lack of export opportunities in other part of world.

4,000 3,500 3,000 US$Mn

Monthly FDI Trends

2,500
2,000 1,500 1,000

500
0

Components of Taxes 2009-10

Strong Growth is seen on revenue side in Corporate and income tax. Corporate tax increased because of the base effect. Income tax shows growth because of rise in salaries, increase in no. of people under tax net. Excise duty and Custom duty grows because of cut in duties as a part of stimulus package.
Fiscal deficit falls due to unplanned expenditures. a. Subsidy b. Social Service employments . c. Defense d. Elections
Fiscal Deficit and growth
70000 60000 50000

Others Service 2% 9%

ED 17%

Corp Tax 39%

Customs 13% 300000 250000 200000 150000

IT 20%

Components of Tax and growth

40000
30000 20000 10000 0 April May June July August September October November December January February March

250 200 150 100 50 0 -50 -100 -150 -200 -250

100000
50000 0

20.00 15.00 10.00 5.00 0.00 -5.00 -10.00 -15.00 -20.00 -25.00 %

Rs Cr

% Rs cr

Amount (LHS)

Growth(RHS)

Fiscal Deficit(LHS)

Growth(RHS)
Source: CYGNUS RESEARCH

 Types of Linkage

These can be a) Stock Prices b) Unemployment c) Personal Income Linkage Indicators I. Repo , Reverse Repo , Bank Rate II. CRR (Cash Reserve Ratio) III. SLR ( Statutory liquidity Ratio) IV. Bank Rate V. Business Confidence VI. Employment Rate VII. Inflation Rate

Presentation give depth idea over economic condition of India. Higher growth signifies the sectoral improvement but trade balance is still negative as we have not improved our export . Industrial & Corporate sector is reviewed along with the investment climate. Fiscal Policy is eased but tight monetary policy is executed to control inflation or help to achieve sustainable growth

8.8 8.7 8.6 8.5 8.4 8.3 8.2 8.1 8 7.9 7.8 Q1

Real GDP Growth

Q2 E L

Q3

Q4

Source: CYGNUS RESEARCH

Cont

Economy Outlook

Domestic economy witnessed growth & GDP has increased. Infrastructure continue to be among the performing sectors. Increase in operational efficiencies and decrease in input costs. Market have experienced a strong rebound. Inflation based on WPI focused on Growth , Fiscal Deficit,& Capital Outflow. Market slowdown with political instability has led most players in the market to be cautious and conservative in their investments.
Cont

Economy Outlook
Economy is doing well and FIIs , FDI are promoting growth. A lot of IPO with vast opportunity are expanding the market. Despite of different policy Inflation is rising continuously & so price . Government is liberalizing its policy. Growth of agriculture is falling continuously as fertile land are used for expansion of industry.

Revenue has increased continuously as income has increased & so tax slab.
Cont

Economy Outlook
Unplanned expenditure i.e. subsidy , election , sixth pay commission , waiving of loan has adverse impact on growth . Investment opportunity has increased as cut down of entry loan in mutual fund & more favorable regulatory norms. SEZ has increased output of industry .

The exchange rate of Indian Rupee/ US dollar appreciates when there is large capital inflows and depreciates when capital inflows decreases. Due to the volatility in Exchange rates of two currencies speculation rises and economy gets affected. RBI should consider controlling the volatility of the currencies because it effects every sector in Indian economy. India can prove sustainable growth only if the exchange rates fluctuate minimal .

Cont

Should RBI control RS/USD volatility ?

Depreciation of rupee increases the export & vice-versa. To protect domestic industry government depreciate rupees. Volatility effect economic growth and development of the economy through its effect on investor's confidence and risk taking ability.

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