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ECONOMY ANALYSISECONOMY ANALYSIS
Presented by-
Atanu Goswami
Neena Lakhmani
Priyabadan kr. Jha
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AGENDAAGENDA
International macro-economicdevelopment
Macroeconomic Factors
Economic Industry Linkages
Financial and Capital Markets
Outlook
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International macroInternational macro--economiceconomicdevelopmentdevelopment
GROWTH RATE OF GDP OF DEVELOPED
COUNTRIES
-7
-6
-5-4
-3
-2
-1
0
1
2
3
4
2007 2008 2009 2010(
)%
US
UK
apan
BRIC's GDP
-10
-5
0
5
10
15
2007 2008 2009 2010(P)
%
Russia
India
China
Brazil
World GDP dips from . in to- .
World Growth Rate is . in April
BRIC nations take the lead to achievethe level
ource:-IMF
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Macro economic IndicatorsMacro economic Indicators
o GDP, IIP & External Trade
o Inflation & Monetary Policy
o Fiscal Policies
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GDPGDP DECLINEDECLINE
INDIAN GDP
0
2
4
6
8
10
12
2005 2006 2007 2008 2009
%O
FGRO
THRA
TE
o GDPis 6. % in 2008-09 comparedto 9% in 2007-08
o Decreasein GDPdueto GlobalEconomyandDomesticslowdowninIndustryand Service Sector
Source:-mospi
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Components of GDP
Agariculture
, 18%
Services,
55%Industry,
27%
The growth in agriculture & alliedactivity decelerated from .9 in2007-08 to .6 in 2008-09
Decrease due to fall in productionof non food crop including oil seed,
sugarcane & jute, and high baseeffects
Industrial Growth has declined
to 6.8 in 2008-09 from 0.6 in 2007-08
Service sector has reached a
growth of9.7 in 2008-09 from .22007-08
Source:-RBI
COMPOSITION OF GDPCOMPOSITION OF GDP
Compoent Of
-2
0
2
4
68
10
12
14
AMJ07 JAS07 OND07 JFM08 AMJ08 JAS08 OND08 JFM09
Agr
r
r
Ser
es
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AGRIC LTUREAGRICULTURE Agriculture accounted for
7.8 of GDP in 08-09 incomparison to 21.7 in2007-08
It accounts for 2 employment in 2008-09
8.8 is produced forexports in 2008-09
DGRAI PR DUC TI
180
185
190
195
200
205
210
215
220
225
230
2003-04
2004-05
2005-0
200
-07
2007-08
2008-09
M
nTone
Source:-fciweb.nic.in
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Rainfall
Cumulative rainfall during june2009 was- 52.8mm
Having a negative deviation of5 from normal rainfall in
2008-09
It effects food grain production,inflation, water reserves andtemperature
R!
I " #!
$ $
0
50
% 00
%50
200
250
JULY'08
&U
'
'08
(
)
P0'08
1CT'08
N
1V'08
D
)
C'08
J&N'09
2
)
B'09
3
&R'09
&PR'09
mont 4
mm
ource:-agicoop.nic.in
tock of food grain Total food grain production during
2008-09 is placed at 227.9mm tonnesas compare to 2 0.8mm tonnes in2007-08
stock o oodgrain( illion ton)
051015202530
3540
JFM'08
AMJ'08
JAS'08
OND'08
JFM'09
illionton
Source:fci
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MONTHLY GROWTH RATE OF IIP
COMPONENTS
-5
0
5
10
15
20
MAY'08
JUNE'08
JULY'08
AUG'08
SEPT'08
OCT'08
NOV'08
DEC'08
JAN'09
FEB'09
MAR'09
APRIL'09
%
MINING MANUFACTURING ELECTRICITY
M ont 5 6 7 t 8 9 nd in IIP
-4
-2
0
2
4
6
8
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
% growt@
o I IP declines to 2 .7% level in t eYr 2 0 0 8 -0 9 from previous year 4.8 %
o M ainly due to deceleration in t eM anufacturing sector
o M ining-1 0 .47% ,manufacturing-79 . 6% &electricity-10 .1 7%
IIP and Core Sector G rowtIIP and Core Sector G rowt
S ource:mospi
Ri in x i duty
0
5000
10000
15000
20000
month
may
june
july
aug
sep
oct
nov
dec
jan
feb
march
april
ex
AiBe
duty
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Cumulative Growth rate in Production-Sector
wise
-4
-2
0
2
4
6
8
10
CRUDE
OIL
PETROLEUM
COAL
ELECTRICITY
CEMENT
FINISH
STEEL
OVERALL
%
2007-08 2008-09
Core Industries registered a growthof3.9% in May 2009 against 2.7% ofthecorrespondingyear.
Accelerated growth due to positive growthin Coal, Steel and Cementproduction
Electricitygeneration also contributes
Core Industries
Source:-mospi.nic.in
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Declining inDeclining in Manufacturing DivisionManufacturing Division
Basic goods declined 3.8 ,capital goods declined 3.6 while intermediate goodswere up by 6.1 in Yr 2008-09
Consumer durables recorded
growth of12. while nondurables were at 2.3 in 2008-09
Economy is recovering slowly &demand is going to high
Manufacturing, Electricity &Construction sector deceleratedto 2. ,3. ,7.2 respectivelyduring 2008-09from8.2 ,5.3 ,&10.1 respectiv
ely in 2007-08.
Source:-mospi.nic.in
monthly tr nd of manufactring compon nts
-20
-10
0
10
20
30
June,0
8
July,0
8
Aug,0
8
Sep,0
8
Oct,08
Nov,0
8
Dec,0
8
Jan,0
9
Feb,0
9
Mar,09
%
Basic Goods Capital Goods
Intermediate Goods consumers good
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Key Service SectorsKey Service SectorsIndicatorsIndicators
Service sector contributes5
of GDP
It is growing at 10 approximately in 2008-09,despite the economic
slowdown in the currentscenario
Source:mospi
GROWTH RATE OF OVERALL SERVICE SECTOR
0
2
4
6
8
JAS'07 OND'07 JFM'08 AMJ'08 JAS'08 OND'08 JFM'09 AMJ'09
%
trade,hotels transport&presentation financing, insurance
community,social&personal services total services
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Slowdown in Aviation IndustrySlowdown in Aviation Industry
128
130
132
134
136
138
140
142
144
146
mntonnes
Mar-08
C
pr-08
M
ay-08
Jun-08
Ju
D
-08
C
ug-08
E
ep-08
Oc
F
-08
Nov-08
D
ec-08
FreGg
H
I
DomesI
Gc
Fre G g HI
DomesI
Gc
0
100
200
300
Mar-08 Jun-08 Sep-08 Dec-08
Aircraft Movement
Aircraft movement international
Aircraft movement domestic
o Volume of air traffic increasedtwo fold during 2004-2007
o Slowdown seen from Sep 2008 till now
oDomestic cargo shows growth of 14.55
in 2008-09 compared to 2007-08
o No. of Domestic Passenger decline by5 in 2008-09
Source-AAI
0
5
10
15
20
25
lakh
MP
r-
08
Q
pr-
08
MP
R
-
08
Jun-
08
Jul-
08
Q
ug-
08
S
ep-
08
Oct-
08
T
U
v-
08
V ec-
08
PP
ssenger DomestW
c
PP
ssenger DomestW
c
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BankingBanking--Slowdown in lending toSlowdown in lending toindustryindustry
CD & ID Ratio
27.5
28
28.5
29
29.5
30
30.5
31
31.5
32
32.5
33
Jul'08
Aug'08
Se
X
'08
Y
ct'08
`
oa
'08
Dec'08
Jan'09
b
ec
'09
d
ar'09
AX
r'09
d
ay'09
June'09
%
65
66
6768
69
70
71
72
73
74
75
76
%
Investmentef
eposit Ratio Credit ef
eposit Ratio
o Credit demand sluggish, CD ratio fellbelow 70 in 2008-09
o ID ratio in an increasing trend
o Banks park huge funds in reverserepo and SLR
o Bank lending money to industry at a
growth only 2.1 in MAM09 compareto 5.31 in DJF09
SOURCE: RBI
TOTAL BANK FINANCE TO INDUSTRY
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
NOV,07
FEB,08
MAY
,08
AUG
,08
NOV,08
FEB,09
MAY
,09
%
TOTAL BANK FINANCE TO INDUSTRY
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Slowdown in ConstructionSlowdown in Construction
Construction companycontributes 6 of GDP
It is the 2nd largest employerafter agriculture
Government decreases itsinvestment by Rs3306cr at adecreasing growth rate of
8.65 on may09 compared
with Feb09
C g h Si
RUCi
I g h C g p PA h q 'S GRg Wi
r RA
i
s
0
5
t0
t5
20
200u-05 2005-06 2006-0
v200
v-08 2008-09
w
x A y K CR DI
S
WARDS C y S
RUC
I y
C PA y I S
0
0000
20000
30000
0000
50000
AUG
0
,0
F
,08
A
,08
AUG,08
,08
F
,09
A
,09
Rs.cr
Source: R I
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Financial servicesFinancial services-- Mutual fundsMutual funds
Asset Under anagement
0
100000
200000
300000
400000
500000
600000
700000
800000
ep-09 e
-09 Mar-09 un-09
Rs.cr
-5.00
0.00
5.00
10.00
15.00
20.00
UM%
hange
Total size of this industryRs670937cr
The industry is growing at
approximately 19 in 2008-09
Total 35 players engaged inthis sector including-
Bank sponsor-4 Institution-1
Private players-30
Source:amfi
G OWTH ATE OF FINANCIAL SECTO
0
5
10
15
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
GROWTH RATE
SOURCE:FINMIN
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Insurance companies divided into
two parts- Life insurance and Non-Life insurance
LIC and 17 private players presentthis industry
Its premium collection is growingabove 15 in 2007-08 but dips in2008-09
In Non-Life segment, 4 governmentplayers and 10 private players are
operating
Its premium collection is growingabove 10 annually but it also dipsin 2008-09
Source:-IRDA
I sur ce rowthtur s to e tive
growth rate of insurance company
-8.00%-6.00%
-4.00%
-2.00%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
JAS08 OND08 JFM09 AM09
%
growth rate of insurance company
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Increasing the Logistics sectorIncreasing the Logistics sector
Indian Logistic industry isexpected to reach a market sizeof $125bn in the year 2010
This industry is growing 15 to20 annually
It includes cargo handling,railways, air cargos and roadtransport
110 logistic parks spread 3500acres at an estimated cost of$1bn and are expected to be
operational within 2012
CARGOHANDLED BYAIRLINES
0
200
400
600
800
1000
12001400
1600
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
('000TONS)
('000TONS)
ARGO HAN BY IN IAN ORTS
0
100000
200000
300000
400000
500000
600000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
('000tons)
('000TONS)
SOURCE:MINISTRY OF SHIPPINGGrowth rate of railway freight
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
Growth rate of
railway freight
Ministry of shipping
Source:finmin
Source: Indian railway
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Its the fastest growing industryat a growth rate of21 in theYr May 2009
Telephone
subscriber w&L 452.91mn in2008-09
Cell phone subscribers-415.25mn in 2008-09
Land line subscribers-37.75mn
in 2008-09
Currently, Teledensity reached
38.88 , in May 2009
ARPU VS New Subscribers
450
500
550
600
650
700
JFM 08 AMJ 08 JAS 08 OND 08 JFM 09
Revenue/User
0
100
200
300
400
500
600
subscribersMn
ARPU(Rs/sub/month No of subscriber added (monthly)
TELECOM IND STRY INCREASING
Source: trai
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Slowdown in TourismSlowdown in Tourism
It is contributing 6.8 ofGDP
Currently, it employedmore than 41mn people
100 FDI is allowed in thissegment
Due to terrorist & politicalcrisis this industry isshowing negative trend
growth rate of tourist
-20-15-10
-505
1015
july'08
s
ep'08
n
ov'08
jan'09
m
ar'09
m
ay'09
%
growth rate of touris t
Source:aai
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INDIAN BOP INCREASESINDIAN BOP INCREASESI
I
XP
jRT & IMP
jRT
0
5000
10000
15000
20000
25000
30000
35000
JUNE'08
JULY'08
AUG'08
SEPT'O8
OCT'08
NOV'08
k
EC'08
JAN'09
l
EB'09
MAR'09
APRIL'09
MAY'09
$mn
IMPORT EXPORT
TRADE DEFICIT
0
2000
4000
6000
8000
10000
12000
14000
JUNE'08
JULY'08
AUG'08
SEPT'O8
OCT'08
NOV'08
DEC'08
JAN'09
FEB'09
MAR'09
APRIL'09
MAY'09
$mn
Reported lower growth rate of
6.4% in 2008-09from 28.4% in2007-08 last year
Merchandise trade deficit increaseto $113.8 billion in 2008-09 from
$82
.2billion in
2007-08
Source:- Department of commerce
indian balanceofpay ents
-50000
0
50000
100000
150000
200000
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
m$
million)
net current a/c capital account
SOURCE:FINMIN
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Crude Oil Increase POL ImportsCrude Oil Increase POL Imports
Imports- POL & NON_POL
n o o o
o o o
o o o
o o o
o o o
n o o o
o o o
o o o
'
z
L{'
z
|
}
'
z
~
P'O
z
OC
'
z
OV'
z
C'
z
|
'
'
|
'
|
PIL'
|
{
'
$mn
n o o o
o o o
o o o
o o o
o o o
n o o o
o o o
o o o
$mn
I PO
POL O POL
rowth rate declines for POLas oil prices gradually falls
on POL increases asexchange rate made importsmore expensive
Import growth was subdued at4.4% with growth in both POL
& O POL imports moderatingto 6. %& . % in
O C : I I
O CO C
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INDIAN SOCIAL SERVICE SECTORINDIAN SOCIAL SERVICE SECTORGROWINGGROWING
growth rate of social services
0
5
10
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
growth rate
o Indian social sectorCompromises withFour sectors Pension
fund, Provident fund,Defense & NGO
o It is growing 9.3%in 2008-09 comparedwith 6.8% in 2007-08
Source:mospi
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Indian forex reserveIndian forex reservedecreasesdecreases
INDIAN FOREX RESERVE
-
-
o Indian forex reserve hasdeclined to bn on une
fro bn in 7-
o II pulled out a huge a ountof oney fro capital arket
: I
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Reserve ratios and interest ratesReserve ratios and interest rates
R
RS T U
OV
W T U W A
T
XRR
4.75
5
5.25
5.5
5.75
Jan
Y
09
Jan
Y
09
Jan
Y
09
`ea
Y
09
`ea
Y
09
Mar
Y
09
Mar
Y
09
Ab
rY
09
Ab
rY
09
May
Y
09
May
Y
09
Jun
Y
09
Jun
Y
09
2009
%
CRR
c dR
e e . fe e
. 4e e . 5e e
.g
e e. 7
e e . he e
.i
e 2
e 2 . ee
2 . 2e
2 .f
2
p
Jan
2
q
p
Jan
r
q
p
s
e
t
u
p
M
ar
27
p
Mar
r
7
p
A
v
r
w
pM
ay
29
p
May
r
x
p
Jun
2 0 0 9
%
PLR
CRR currently is 5% in 200 09
RB decreased CRR from its %level to increase liquidity in thesystem
Current PLR rate is .25%
Current SLR is 24%
Source: y ccilindia.com
Monetary olicy
LAF
-60000
-40000
-20000
0
20000
40000
60000
Apr-
08
May-
08
Jun-
08
Jul-
08
Aug-
08
Sep-
08
Oct-
08
Nov-
08
Dec-
08
Jan-
09
Feb-
09
Mar-
09Rsincrores
Source:Rbi
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Trend of money market rateTrend of money market rate
Trend of money market rate
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
17
Jun
20
Jun
23
Jun
26
Jun
29
Jun
2
Jul
5
Jul
8
Jul
11
Jul
14
Jul
2009
epo
td Avg
all
td Avg
td Avg
Govt. borrow more from themarket
Fiscal deficit is going to widen
Interest rates are goingup
apital market not performingwell
Money market is in anuptrend
Sources:rbi
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MSS issued by RBI and exchange ratesMSS issued by RBI and exchange ratesB S ISSUE UNDER MSS
0
50000
100000
150000
200000
250000
300000
Apr
0
8
un
0
8
Aug
0
8
ct
0
8
Dec
0
8
Feb
0
9
Rs.Cr.
MSS i it
Rs.
44
45
46
47
48
49
50
51
52
53
2-Jan
16-Jan
30-Jan
13-Feb
27-Feb
13-Mar
27-Mar
10-Apr
24-Apr
8-May
22-May
5-Jun
19-Jun
2009
Rs.
Rs./$
Outstanding MSS Bonds as on2008-09 is Rs148889cr
MSS is issued due to excessiveinflow of foreign currency
Currently Rs/$ rate is 48.43
Net FII Investment
-4000
-3000
-2000
-1000
0
10002000
3000
4000
J '08 A '08 S '08 O '08 N '08 D '08 J '09 F '09 M
'09
A '09 M
'09
J '09
Net FII Investment
Source:rbi
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Strong Rise in Fiscal DeficitStrong Rise in Fiscal Deficit
Revenue deficits stands at4.4% of GDP in 2008-09which is 3.4% higher thanof budgeted estimate
Fiscal deficit stands at6.5% of GDP in 2008-09from budgeted deficit of2.5% in 2007-08
I
DI
FISC
D
FICI
- 50000
- 00000-50000
0
50000
00000
50000
200000
250000
300000
j
k
l07k
Sl07
m
n
Dl07
k
Fj
l07
j
k
l08k
Sl08
m
n
Dl08
k
Fj
l09
RSCR
m
Ro
FISC
DFICI
R
DFICI
PRI
R
DFICI
TAX REVENUE
0
20000
40000
60000
80000
100000
120000140000
160000
AMJ'07
JAS'07
OND'07
JFM08
AMJ'08
JAS'08
OND'08
JFM'09
RS
INC
RO
Source:cga
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EE--II--C LinkageC Linkage
Lead Indicator- Cement, Steel and AutomobileProduction
Lag Indicator- Interest rate, Inflation
Concurrent indicator- GDP, Capacity Utilization,Unemployment rate
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Financial marketsFinancial marketsIPOsIssued
0
200
400
600
800
1000
1200
1400
May
-08
un
-08
u
l-08
Aug
-08
Sep
-08
Oct-08
ov-08
ec
-08
an
-09
Feb
-09
Mar-09
Rsi
nc
r
MC/GDP
0
20
40
60
80
100
120
2006-07 2007-08 2008-09
MC/GDP
P/E
0
5
10
15
20
25
2005-06 2006-07 2007-08 2008-09
P/E
IPO issues falls due to poor conditionof the capital market
Earning decreases, due to which PEratio decrease, and the marketcapitalization falls by 45% approximately
Currently companies are raising moneythrough QIPs and private placement route Source:sebi
Source:rbi and mos i
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Business Confidence, Political OutlookBusiness Confidence, Political Outlook& Future Outlook& Future Outlook
Organizati n Per i d Index Growt er
yearago
Growt er
peri dNCEAR Nov08- an08 BCI -40.60% -23.8%
CII Oct08-Mar08 BCI -15.10% -7.7%
D&B Apr08- n08 BCI -39% -2%
BCI lost 28.5 in Jan 2009 overits October 2008 level
Impact of Global downturn is the
main driver of the growthprocess in the Indian economy
Business Confidence Index
Source: rbi
BCI
0
20
40
60
80
100
120
140
Expectations Assesment
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Economic OutlookEconomic Outlook
Economy is now in the last phase of recession
The US economy is recovering
The expected world GDP has been forecasted2.4% from 1.9%
BRIC countries are moving at a higher growth
rate
Gradually demand is increasing in the economy
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Thank you