Economic Intelligence Unit
Baroda Corporate Center
Bank of Baroda
Mumbai
eiu.bcc@bankofbaroda.com
April 9, 2016
Weekly Macro Perspectives
-------------------------------------------------------------------------------------------------------------------------------------Indian Economic Briefs
In its first financial review, the RBI reduced Repo Rate by 25 bps to 6.50%. The LAF
corridor was narrowed to +/- 50 bps from +/- 100 bps. Accordingly, the Reverse
Repo rate and Marginal Standing Facility rate was at 6% and 7%, respectively. The
minimum daily CRR maintenance was reduced from 95% of limit to 90%. Moreover,
the Policy expressed intent to move the system from liquidity deficit of 1% of NDTL to
neutral mode. On the forward guidance front, RBI maintained its ‘accommodative’
stance with incoming developments on monsoons, inflation and transmission of
policy action serving for further monetary easing.
The government is set to capture the contribution of the rising e-commerce sector to
the economy through a variety of measures, including the proposed Annual Survey of
Services. The Annual Survey of Services is likely to be launched next year and will
help the government capture performance of the sector better. At present, the
government does not have any analogous detailed data for the sector, unlike the
manufacturing activities, which are captured in the Annual Survey of Industries. A
recent Morgan Stanley report estimated that India’s e-commerce market would grow
to $119 billion by 2020 from $102 billion. It also expects the number of online
shoppers in India to rise to 320 million by 2020 from 50 million in 2015.
In the first meeting of Banks Board Bureau, the discussions pertained to
recapitalisation and consolidation of public sector banks, stressed assets and current
vacancies.
As per data from VC Circle, the deal values (private equity and venture capital) in this
period halved compared with the first three months of 2015. Venture capital
investments plunged from $1,789 million in the first quarter of 2015, to $334 million
in 2016. The number of deals fell 36 per cent to 88 in the same period.
Global brokerage firm HSBC said it is ‘underweight’ on Indian equities and sees risk
of earnings downgrades going forward as the market is trading at a significant
premium. According to HSBC, though progress has been made on structural reforms
across sectors, equities are not likely to benefit from this as they are trading at a
significant premium. On the positives, it said, the incremental reforms via executive
action have been more successful. A strong partnership between the government and
the central bank is culminating in reforms in the banking sector.
1
As per the RBI study State Budgets, at the consolidated level, states budgeted for a
turnaround in fiscal performance during 2015-16 from the deterioration that set in
during the earlier two years. The projected improvement in key fiscal indicators was
premised on cutbacks in revenue expenditure with a marginal decline in capital
outlay.
Monthly Data for Indian Economy (growth y-o-y in per cent)
Month
IIP
Core
Sector
Capital
goods
Consumer
goods
CPI
WPI
Exports
Imports
Apr-15
May-15
Jun-15
Jul-15
Aug-15
3.4
2.5
4.4
4.2
6.3
-0.4
4.4
3.0
1.1
2.6
5.5
2.2
-2.1
10.6
21.4
2.8
-2.1
7.7
0.88
5.9
4.9
5.0
5.4
3.7
3.7
-2.4
-2.2
-2.1
-4.1
-5.0
-14.8
-20.5
-14.0
-10.3
-20.7
-7.9
-16.3
-13.8
-10.7
-9.9
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
3.7
9.9
-3.4
-1.2
-1.5
3.2
3.2
-1.3
0.9
2.9
5.7
10.1
16.5
-24.5
-19.1
-20.4
1.2
18.3
1.0
3.0
0.0
4.4
5.0
5.4
5.6
5.7
5.2
-4.5
-3.7
-2.0
-1.1
-0.9
-0.9
-24.3
-17.5
-24.4
-14.7
-13.6
-5.7
-25.4
-21.2
-30.3
-3.9
-11.0
-5.0
CPI is for combined index
Source: CSO, Office of economic Advisor and Department of Commerce
Agriculture Updates
The Centre has asked State governments to stock up pulses, especially tur and urad,
from the Central buffer system to avert price spikes in the coming months as the
retail prices of pulses are still ruling high at ₹160-170 per kg. The Centre has created a
buffer stock of 50,000 tonnes of tur and urad procured in the 2015 kharif season and
is also in the process of buying rabi pulses.
Equity Markets
The domestic stock markets fell during the week on global concerns about growth
and RBI effecting a 25 bps cut in the repo rate as against an expectation of a higher
rate cut. The BSE sensex fell by 2.4% over the previous week.
Government and Bond Markets
The G-sec market was buoyant following the 25 bps cut on benchmark repo rate
while maintaining accommodative stance. However, the liquidity measures caused
some uncertainty in the market.
The 10 year 7.59% GS 2026 slipped to 7.45 per cent on April 7, 2016 as against 7.46
per cent in the previous week.
2
GoI, 10 yrs bond yield(7.59% 2026)
7.861
7.9
7.8
7.654
7.7
7.6
7.52
7.45
7.5
7.4
7.3
7.2
06-04-2016
31-03-2016
28-03-2016
21-03-2016
16-03-2016
11-03-2016
08-03-2016
02-03-2016
26-02-2016
23-02-2016
17-02-2016
12-02-2016
09-02-2016
04-02-2016
01-02-2016
27-01-2016
21-01-2016
18-01-2016
13-01-2016
08-01-2016
7.1
GoI, 10 yrs bond yield(7.59% 2026)
Foreign Exchange Markets
During the week, the rupee depreciated to Rs 66.47 on April 7, 2016 as against Rs
66.25 on March 31, 2016.
India’s forex reserves increased by USD 3.5 billion to USD 335.6 billion during the
week ended April 1, 2016.
Crude Oil Prices
During the week, Oil prices surged on expectations of better global economy and a
deal from global exporters to cap production can smooth the path for oil to rebound.
Global News
The World Bank trimmed its 2016 and 2017 economic growth forecasts for
developing East Asia and Pacific, to grow 6.3 per cent in 2016 and 6.2 per cent in
2017, slowing from 6.5 per cent growth in 2015. Its previous forecast in October was
6.4 per cent growth in 2016 and 6.3 per cent in 2017.
The minutes of US Fed meeting of March 15-16 showed that policymakers debated
whether they might hike rates in April but “a number” of them argued headwinds to
growth would probably persist, with many arguing they should be cautious about
raising rates. The participants generally saw global economic and financial
developments as continuing to pose risks.
3
Annexure 1
Macro Indicators (Annual)
2012-13
2013-14
GDP and Related Indicators
2014-15
2015-16
GVA at Basic Prices (current prices)
(in ₹ Trillion)
92.3
98.4
105.5
113.5
GVA at Basic Prices (2011-12 prices)
(in ₹ Trillion)
85.4
90.8
97.2
104.3
Growth of GVA at Basic Prices
(2011-12 prices) (%)
Saving Rate(% of GDP)
Capital Formation (% of GDP)
5.4
33.8
38.6
6.3
33.0
34.7
7.1
33.0
34.2
7.3
na
Na
Production
Food Grains (Million Tonnes)
257.1
265.0
250.0
253.2
Index of Industrial Production
(growth %)
Eight Core Industries (growth %)
1.1
6.5
-0.1
4.2
2.8
3.6
na
na
Inflation
Inflation (WPI) (y-o-y)
Inflation (CPI) (y-o-y)
7.4
10.2
6.0
9.5
2.0
5.9
na
na
292.0
300
490
-190
107
304.2
315
449
-134
115
341.6
309
447
-138
116
332.1
na
na
na
na
-4.79
-1.73
-1.34
na
Scheduled Commercial Bank Credit
(% change)
14.1
13.9
12.6
11.3
Fiscal Indicators (Centre)
Gross Fiscal Deficit (% of GDP)
4.8
4.5
4.0
3.9
External Sector
Foreign Exchange Reserves
(US$ billion)
Exports (US$ billion)
Imports (US$ billion)
Trade Balance (US$ billion)
Invisibles (US$ billion)
Current Account Balance as % of
GDP
Money and Credit
Source: RBI, CSO, Department of Commerce, Office of Economic Advisor
4
Annexure 2
Macro Indicators (Quarterly)
Q1 FY16
Q2
Q3,
FY16
FY16
GDP and Related
Indicators
GDP at current prices
(in ₹ Trillion)
GVA at Basic Prices (201112 prices)
[in ₹ Trillion]
Growth of GVA at Basic
Prices (2011-12 prices) (%)
Production
Index of Industrial
Production (growth) %
Eight Core Industries
(growth %)
Inflation
Inflation (WPI) (y-o-y)
Inflation (CPI) (y-o-y)
Q3,
FY15
31.6
32.4
34.8
31.8
25.5
25.6
26.4
24.6
7.2
7.5
7.1
6.7
3.2
4.7
1.6
2.0
2.37
2.29
-2.3
5.09
-4.5
3.95
-2.3
5.3
0.3
4.1
External Sector
Foreign Exchange
Reserves (US$ billion)
Exports (US$ billion)
Imports (US$ billion)
Trade Balance
(US$ billion)
Current Account deficit %
of GDP
355
350
352
319
66.5
98.7
-32.2
66.1
101.7
-35.5
63.1
94.6
-31.5
78.4
117.3
-26.4
1.2
1.6
1.6
Money and Credit
Scheduled Commercial
Bank Non food Credit (%
y-o-y)
9.01
8.99
10.74
Source: CMIE
5
10.32
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