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Indian Economy Overview

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Indian Economy Overview

December, 2010

The Centre for Monitoring Indian Economy (CMIE) has estimated India’s gross domestic product (GDP) to expand at 9.2 per cent in 2010-11 as compared to the growth of 7.4 per cent in 2009-10. Overall growth in industrial output was 10.8 per cent year-on-year (y-o-y) in October 2010. The growth in the industrial sector is expected to increase at 9.4 per cent in 2010-11, as compared to 9.2 per cent in 2009-10. According to a survey by the Confederation of Indian Industry (CII) and ASCON, around 50 segments (out of 127) in the manufacturing sector grew by 39 per cent, entering the 'excellent growth' category, during April-December 2010-11 compared to 29 sectors (22.9 per cent) in April-December 2009 which shows a marked improvement. Also, services sector is projected to expand by 10 per cent as compared to 8.6 per cent last year, led by the trade and transport segment. The major turnaround is expected from the agriculture and allied sector, which is being projected to grow by 5.7 per cent in 2010-11.

As per Use-based classification, the Sectoral growth rates in October 2010 over October 2009 are 7.7 per cent in Basic goods, 22 per cent in Capital goods and 9.5 per cent in Intermediate goods. The Consumer durables and Consumer non-durables have expanded by 31 per cent and 0.1 per cent respectively in the reported month.

The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y) in October 2010. Among the three major constituents of the IIP, manufacturing and electricity recorded higher growth rates of 11.3 per cent and 8.8 per cent in October as against their corresponding levels of 10.8 per cent and 4 per cent for the corresponding month in 2009. The third constituent mining index registered 6.5 per cent in October 2010.

The Economic scenario

Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost 25 per cent of the total inflows in the stock market registered so far in 2010. The net foreign fund investment crossed the US$ 100 billion mark on November 8 2010, since the liberalization policy was implemented in 1992. As per the data given by SEBI, the total figure stood at US$100.9 billion, wherein US$ 4.78 billion were infused in November itself. The humungous increase in investment mirrors the foreign investors’ faith in the Indian markets. FIIs have made investments worth US$ 4.11 billion in equities and poured US$ 667.71 million into the debt market.

Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of registered sub-accounts rose to 5,592 as of November 10, 2010.

As on December 17, 2010, India's foreign exchange reserves totalled US$ 294.60 billion, an increase of US$ 11.13 billion over the same period last year, according to the Reserve Bank of India's (RBI) Weekly Statistical Supplement.

Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39 billion during April-October, 2010-11, taking the cumulative amount of FDI inflows during April 2000 - October 2010 to US$ 179.45 billion, according to the Department of Industrial Policy and Promotion (DIPP).

The services sector comprising financial and non-financial services attracted 21 per cent of the total FDI equity inflow into India, with FDI worth US$ 2,163 million during April-October 2010, while telecommunications including radio paging, cellular mobile and basic telephone services attracted second largest amount of FDI worth US$ 1,062 million during the same period. Metallurgical industries were the third highest sector attracting FDI worth US$ 920 million followed by power sector which garnered US$ 729 million during the financial year April-October 2010.

  • Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to touch US$ 18.9 billion in November 2010, urging the Government to exude confidence that overall shipments in 2010-11 may touch US$ 215 billion. For the April-November 2010 period, exports have grown by 26.7 per cent to US$ 140.3 billion, while imports totaled up to US$ 222 billion, expanding 24 per cent.
  • India's logistics sector is witnessing increased activity. According to the Indian Shipping ministry, the country's major ports handled 44.4 million tones of cargo during September 2010, 4.5 per cent higher as compared to 5.9 per cent growth in September 2009. Leading consultants Frost&Sullivan, as cited by The Economic Times, are expecting traffic to boost at Indian ports from 814.1 million tones (MT) to 1,373.1 MT from 2010 to 2015 at a CAGR of 11 per cent. The study group has underlined three key trends in the sector, namely, increase in containerized cargo, increased private sector participation and traffic diversion toward minor ports.
  • Foreign Tourist Arrivals (FTA) in India during the period of January- November 2010 were 4.93 million as compared to the FTAs of 4.46 million during the same period of 2009, showing a growth of 10.4 per cent. The Foreign Exchange Earnings (FEE) during the period of January-November 2010 were US$ 12.88 billion as compared to US$ 10.67 billion during the same period of 2009, registering a growth rate of 20.7 per cent, according to data released by the Ministry of Tourism.
  • The total telephone subscriber base in the country reached 742.12 million as on October 31, 2010, taking the overall tele-density to 62.51, according to the figures released by the Telecom Regulatory Authority of India (TRAI). Also the wireless subscriber base increased to 706.69 million.
  • The average assets under management of the mutual fund industry stood at US$ 160.44 billion for the month of September 2010, according to the data released by Association of Mutual Funds in India (AMFI).
  • As per NASSCOM’s Strategic Review 2010, the Indian IT-BPO sector continues to be the fastest growing segment of the industry and is estimated to aggregate revenues of USD 73.1 billion in FY2010, with the IT software and services industry accounting for USD 63.7 billion of revenues.
  • The cumulative production of vehicles in India grew by 32.4 per cent upto August 2010 as compared to the same period in 2009, Mr B S Meena, Secretary, Ministry of Heavy Industry, reported. Passenger vehicles, commercial vehicles and two-wheeler segments had all recorded impressive growth rates of 32 per cent, 49 per cent and 31 per cent, respectively during the period upto August 2010.
  • According to the Gem and Jewellery Export Promotion Council, jewellery shipments were worth US$ 23.57 billion in April-November 2010, registering a rise of 38.25 per cent as compared to US$ 17.05 billion in the corresponding period of 2009.
  • According to the Ministry of Civil Aviation, passengers carried by domestic airlines from January-November, 2010 were 46.81 million as against 39.35 million in the corresponding period of year 2009, thereby registering a growth of 18.9 per cent.
  • According to Ernst & Young (E&Y), a global consultancy firm, India is expected to receive more than US$ 7 billion in private equity (PE) investments in 2010, on the back of robust economic growth. According to research firm VCCEdge, mergers and acquisition (M&A) deals worth US$ 54.6 billion have been signed till December 15, 2010, significantly more than the previous high of US$ 42 billion achieved in 2007.
  • The HSBC Markit Business Activity Index, which measures business activity among Indian services companies, based on a survey of 400 firms, rose to 60.1 in November 2010 from 56.2 in October 2010.