Economic Intelligence Unit
Baroda Corporate Center
Bank of Baroda
Mumbai
eiu.bcc@bankofbaroda.com
November 21, 2015
Weekly Macro Perspectives
-------------------------------------------------------------------------------------------------------------------------------------Indian Economic Briefs
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Wholesale Price Index (WPI) inflation for Oct-15 stood at (-)3.81% vis-a-vis
( -)4.54% in Sep-15, which is the twelfth consecutive month of negative reading.
India’s imports for Apr-Oct 2015 stood at USD 232.05 billion, down by 15.17% yearon-year (y-o-y), while exports fell by a sharper 17.62% (y-o-y) coming in at USD
154.29 billion. Consequently, trade deficit for fiscal year so far stood at USD 77.76
billion vis-a-vis USD 86.27 billion in corresponding period last year.
The cumulative indirect tax collections rose 35.9 per cent, to ₹3,82,860 crore in AprOct 2015. This amounts to 59.2 per cent of the targeted ₹6,46,267 crore from indirect
taxes in Budget 2015-16. The sharpest rise was in excise duty collections that grew
68.6 per cent to ₹1,47,685 crore during the period. Customs duty collections rose
16.8 per cent to ₹1,22,448 crore, while service tax receipts increased 26.1 per cent to
₹1,12,727 crore.
The Government has wound up the Board for Reconstruction of Public Sector
Enterprises (BRPSE) as part of its new strategy to revive and disinvest sick public
sector units. The Board for Reconstruction of Public Sector Enterprises (BRPSE)
under the Department of Public Enterprises was set up over a decade ago in 2004 as
an advisory body to address the task of strengthening, modernisation, reviving, and
restructuring. The Government has decided to wind up BRPSE to streamline the
multiple mechanisms for the revival of sick Central Public Sector Enterprises
The Seventh Pay Commission has recommended a 23.55% rise in overall salaries and
pensions of government employees, effective from January 2016. The total financial
impact in the FY 2016-17 is likely to be ₹1,02,100 crore. Historically, past pay
commissions have been seen to boost consumption, raise inflation and add to the
fiscal burden. The government’s commitment to its fiscal consolidation target despite
this implies a cut in capital expenditure and higher taxes and disinvestments in the
FY17 budget.
A study of the performance of 2,074 companies by CARE Ratings showed that net
sales declined by 5.3% in H1-FY16 as against growth of 7.0% in H1-FY15. Net profit
witnessed a positive growth of 4.1% which was however lower compared with 24.8%
growth in H1-FY15. The negative growth in net sales is largely attributed to weakness
in demand and pricing power. Despite negative producer’s inflation as measured by
the WPI signaling also lower raw material costs, growth in profits do not appear to be
satisfactory.
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The Cabinet Committee on Economic Affairs approved a 10 per cent disinvestment in
Coal India, the third government stake sale in the company's history. The
government is expected to get around Rs.20,000 crore from the disinvestment.
The Cabinet today approved the interest subvention scheme that would allow small
and medium sectors exporters to avail of loans from banks at a 3 percent lower rate.
The government has provided for Rs 2700 crore, the amount the interest subvention
scheme will cost the exchequer.
The Reserve Bank of India (RBI) issued revised directions necessitating prior
approval for acquisition of shares or voting rights in private sector banks. Any
individual or company acquiring five per cent or more in a private bank through
convertible bonds, in addition to a direct purchase of shares, will need to take prior
approval from the RBI.
According to data released by the Telecom Regulatory Authority of India (TRAI), the
country’s telecom subscriber base grew by 8.43 million in September 2015. While the
wireless subscriber base grew by 8.49 million, the wire-line subscriber base declined
by 0.06 million. The total subscriber base stood at 1.02 billion at the end of
September 2015.
As of October 30, 2015, the aggregate deposits of scheduled commercial banks (SCBs)
grew at 11.1% on year on year basis as against 11.2% in the corresponding period last
year. The credit growth was at 9.0% as on October 30, 2015 as against 10.7% in the
same period last year.
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
Sep-15
Oct-15
3.4
2.5
4.4
4.2
6.3
3.6
-0.4
4.4
3.0
1.1
2.6
3.2
5.5
2.2
-2.1
10.6
21.4
10.5
2.8
-2.1
7.7
0.88
5.9
0.6
4.9
5.0
5.4
3.7
3.7
4.4
5.0
-2.4
-2.2
-2.1
-4.1
-5.0
-4.5
-3.8
-14.8
-20.5
-14.0
-10.3
-20.7
-24.3
-17.5
-7.9
-16.3
-13.8
-10.7
-9.9
-25.4
-21.2
CPI is for combined index
Source: CSO, Office of economic Advisor and Department of Commerce
Agriculture Updates
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The Andhra Pradesh Government has sought ₹1,000 crore from the Centre as
immediate financial assistance, to take up relief and rehabilitation measures in the
rain-ravaged parts of the State.
Total area sown for Rabi crops touched 12.3 million hectares by 13 November 2015.
This was 22.6 per cent lower compared to the same period last year. On a y-o-y basis,
area sown under pulses rose by 13 per cent to 3.9 million hectares by 13 November
2015. Also, area sown for coarse cereals rose by 24.5 per cent to 3.5 million hectares.
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But, area sown for wheat fell by 56.5 per cent to 1.9 million hectares on a y-o-y basis.
Area sown under oilseeds fell by 42.5 per cent to 3.1 million hectares and that under
rice fell by 52.8 per cent by 13 November 2015 on a y-o-y basis.
Equity Markets
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Global markets delivered a strong performance this week. Sentiment improved
significantly after the minutes of the US Fed meeting last month were made public.
These showed that the pace of rate hikes would be gradual.
Given the positive sentiments, the Indian benchmark stock indices gained during the
week under review.
Government and Bond Markets
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The markets remained range bound during the week on the back of 7th Pay
commissions report and increased possibility of US fed rate hike in December 2015.
The 10 year benchmark 7.72% GS 2025 closed at 7.70% as on November 20, 2015 as
against 7.65% as on November 13, 2015.
GoI, 10 yrs bond yield(7.72% 2025)
8.00
7.90
7.89
7.80
7.70
7.7
7.60
7.72
7.54
7.56
7.50
7.56
7.40
7.30
GoI, 10 yrs bond yield(7.72% 2025)
Foreign Exchange Markets
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During the week, the rupee depreciated from Rs 66.1 on November 13, 2015 to Rs
66.48 on November 23, 2015.
India’s forex reserves rose by USD 780.9 million to USD 352.5 billion during the
week ended 13 November 2015
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Crude Oil Prices
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Weekly data from Baker Hughes showed that the number of US oil-drilling rigs fell by
10 to 564 as of November 20, 2015. Natural gas rigs were unchanged at 193 but the
fall in oil rigs helped shave the total rig-count number down to 757 rigs for the week.
A reduction of rigs offers some promising signs that a glut of supply from US shale
producers might abate.
Global News
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The European Central Bank lowered the cap on emergency liquidity assistance Greek
banks can draw from the domestic central bank by €300 million to €85.7 billion. The
move reflected an improvement in liquidity conditions in Greece's banking sector,
amid a reduction of uncertainty and the stabilisation of private sector deposit flows.
Greek banks have relied on the emergency liquidity assistance (ELA) since February
after being cut off from the ECB's funding window.
The US Fed minutes signaled that the officials expect to start raising rates at the
December 15-16 FOMC meeting, noting ‘some participants thought that the
conditions for beginning the policy normalization process had already been met.
Most participants anticipated that, based on their assessment of the current
economic situation and their outlook for economic activity, the labor market, and
inflation, these conditions could well be met by the time of the next meeting.
Japan’s economy contracted in the third quarter as business investment fell. The
nation fell into its second recession since Prime Minister Shinzo Abe took office in
December 2012. Gross domestic product declined an annualized 0.8 percent in the
three months ended Sept. 30, following a revised 0.7 percent drop in the second
quarter, meeting the common definition of a recession.
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Annexure 1
Macro Indicators (Annual)
2012-13
2013-14
GDP and Related Indicators
2014-15
GVA at Basic Prices (current prices)
(in ₹ Trillion)
92.5
104.8
115.5
GVA at Basic Prices (2011-12 prices)
(in ₹Trillion)
86
92
98
Growth of GVA at Basic Prices
(2011-12 prices) (%)
Saving Rate(% of GDP)
Capital Formation (% of GDP)
4.9
31.8
36.6
6.6
30.6
32.3
7.2
na
na
Production
Food Grains (Million Tonnes)
257.1
265.6
251.12
1.1
6.5
-0.1
4.2
2.8
3.6
7.4
10.27
6.0
10.2
2.0
5.93
292
300
490
-190
107
304.2
315
449
-134
115
328.7
309
447
-138
116
-4.79
-1.73
-1.34
Scheduled Commercial Bank Credit
(% change)
14.1
13.9
12.6
Fiscal Indicators (Centre)
Gross Fiscal Deficit (% of GDP)
4.8
4.5
4.0
Index of Industrial Production
(growth %)
Eight Core Industries (growth %)
Inflation
Inflation (WPI) (y-o-y)
Inflation (CPI) (y-o-y)
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
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Annexure 2
Macro Indicators (Quarterly)
Q1 FY14 Q1 FY15
GDP and Related
Indicators
GVA at Basic Prices
29.36
29.08
(current prices)
(in ₹ Trillion)
GVA at Basic Prices
22.43
24.09
(2011-12 prices)
[in ₹ Trillion]
Growth of GVA at Basic
7.2
7.4
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)
External Sector
Foreign Exchange
Reserves (US$ billion)
Exports (US$ billion)
Imports (US$ billion)
Trade Balance
(US$ billion)
Current Account deficit
% of GDP
Money and Credit
Scheduled Commercial
Bank Credit (% y-o-y)
Q1 FY16
Q2 FY16
30.3
25.8
7.1
-1.0
4.45
3.2
4.6
3.67
5.97
2.37
2.29
4.8
9.88
5.8
7.85
-2.3
5.09
-4.5
3.95
284.6
315.7
355
72.3
119.7
-47.5
79.7
113.2
-33.5
66.5
98.7
-32.2
4.8
1.6
1.2
13.68
13.01
9.01
Source: CMIE
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66.1
101.7
-35.5
9.12
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