Current state of Indian Economy

May 2010

Federation of Indian Chambers of Commerce and Industry

New Delhi
Indian Economy: Highlights – May 2010

India’s GDP growth released for the last quarter of 2009-10 turned out to be robust, it showed a
record growth of 8.6 percent as compared to the growth of 5.8 percent in the same quarter of
previous year. For the fiscal 2009-10 India's economy grew by 7.4 percent which is an upward
revision from earlier estimates of 7.2 percent due to higher-than-anticipated growth in agriculture,
mining and manufacturing sectors.

The IIP numbers in April 2010 continue to rise, it grew by 17.6 percent which was higher than the
rate of 13.5 percent increase recorded a month ago. This is mainly led by the notable growth seen
across all sectors. The industrial growth was just 1.1 percent a year ago, i.e. in April 2009.

In the opening month of 2010-11, growth came from the three sectors, mining, manufacturing and
electricity. As per the use-based classification, growth numbers were also found to be remarkable;
especially, the capital goods sector, this achieved a growth of 72.8 percent indicating a rise in
investment sentiments in the economy. The consumer goods sector appeared to have performed
well as it posted growth of 14.4 percent in April 2010. This growth is mainly fuelled by high growth
in consumer durables, registering an increase of 37 percent in April 2010. Fifteen (15) out of the
seventeen (17) industry sectors witnessed positive growth in the first month of the present fiscal
(2010-11) as compared to the growth numbers in the same month of previous year.

Growth in six core infrastructure industries accelerated by 5.1 percent in April 2010 as compared to
3.7 percent in April 2009. This growth is attributed to high performance in the sectors such as
finished steel, crude petroleum, and petroleum refinery.

The overall inflation averaged for the month of April 2010 stood at 9.6 percent as compared to the
inflation of 1.3 percent seen in the same month of previous year. This rise in price index is on
account of dearer food articles and fuel products.

The broad money supply increased by 0.8 percent in April 2010 compared to growth of 2.6 percent
in the same month of 2009. The growth in bank credit to commercial sector was seen to decelerate
by (-) 0.8 percent.

The aggregate deposits expanded by 1.6 percent in April 2010 , calculated over March 2009
numbers . This expansion in aggregate deposits, was however, marginally higher in the same month
of previous year.

The rising indices show that strong sentiments among the investors. Investment sentiments in the
Indian stock market BSE Sensex was maintained above 17K in April 2010, whereas NSE index NIFTY
rose to stay above 5K points.

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There has been a decline by 0.3 percent in the fiscal deficit in the opening month of the current
financial year 2010-11 as the deficit has stepped down from Rs 54158 crore in April 2009 to Rs
53993 crores in April 2010.

The growth in gross tax revenue was observed to enter the positive quadrant during the month of
April 2010. This is mainly on account of strong revival in the collection of indirect taxes and partly on
account of collection in direct taxes.

India’s merchandise trade growth numbers show improvement since November 2009. The role of
low base in the high growth cannot be denied, but one cannot also ignore the rise in demand in the
international market. Latest figure available for April 2010 showed growth in exports by 36.2
percent as against the negative 33.2 percent observed in same month of last year.

The total foreign investments attracted in 2009-10 amounted to USD 66.5 billion compared to USD
21.3 billion during 2008-09. However, the numbers were almost same when foreign direct
investment for both the years were being compared.

Foreign exchange reserves stood at USD 279.6 billion in April 2010 from USD 251.7 billion April
2009. This increase is subject to the recent surge in the foreign investments inflows.

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 Contents

Title Page

1 Industrial Growth 6

2 Core Infrastructure Industries 8

3 Trends in Inflation 9

4 Monetary Indicators 11

5 Stock Market Trends 12

6 Fiscal Management 13

7 Foreign Trade 15

8 Capital Inflows 16

9 Foreign Exchange Reserves 17

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List of Tables and Graphs

Table- 1.1: Growth of Industry: Recent Trends (in percentage) 6

Table -1.2: Growth in 17 Industry sectors 7
Table-1.3: Growth in six-core infrastructure industries (% change) 8
Table-1.4: Growth in six-core infrastructure industries (% change) 8
Table-1.5. Monthly trends in Wholesale price index- monthly average (% change) 9
Table-1.6: Monthly trends in consumer prices (% change) 10
Table-1.7: Monetary sector indicators 11
Table-1.8: Monthly trends in stock market indices 12
Table-1.9: Trends in cumulative tax collections of central government (%) 13
Table-1.10: Service Tax 14
Table-1.11: Trends in central government finances: 14
Table-1.12: Monthly trends in growth of merchandize trade (% change) 15
Table-1.13: Monthly trends in foreign investments ($ million) 16
Table-1.14: Monthly trends in foreign exchange reserves ($ billion) 17

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 1. Industrial growth

Industrial output continued to post double-digit growth for the seventh consecutive month. The index of
industrial production stood at 316.7 for April 2010 surging by 17.6 percent. This growth is notably higher
than the growth of 1.1 percent observed in same month of last year. All the three sectors i.e. mining,
manufacturing and electricity witnessed a stunning growth of 11.4 percent, 19.4 percent and 6.0
percent respectively as compared to the growth of 3.4 percent, 0.4 percent and 6.7 percent registered
in same month of 2009. Industrial growth posted in April 2010 rose sharply compared to the increase, a
month ago i.e. in March 2010.

As per use-based classification, basic goods posted a growth of 8.8 percent in April 2010, 72.8 percent
growth was posted by the capital goods segment and 10.8 percent growth by intermediate goods. It is
interesting to note that, growth was primarily led by capital goods sector in April this year, compared
with negative growth of 5.9 percent in same month of previous year.

Consumer goods sector clocked 14.5 percent growth in April 2010 as against the negative growth in
corresponding month of previous year. The growth in consumer sector was mainly fuelled by the
massive growth in consumer durables; proliferating an increase of 37.1 percent in April 2010, compared
to 17.6 percent increase posted in same month of previous year. However, non-durable segment of
consumer goods experienced a satisfactory growth of 6.6 percent as against negative growth in April
2009.

Fifteen (15) out of the seventeen (17) industry sectors conveyed strong growth in the month of April
2010 as compared with the numbers in the previous year. The industry sectors namely ‘machinery and
equipment and other than transport equipment’ have shown the highest growth of 55.6 percent
followed by the growth of 51.9 percent by ‘metal products and parts. In contrast, the industry groups
like ‘wood and wood products have shown a negative growth of 16.6 percent followed by 2.7 percent
registered by ‘beverages, tobacco and related products’ in April 2010.

Tables

1.1: Growth of Industry: Recent Trends (in percenta

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Table-1.6: Monthly trends in consumer prices (% change)

CPI-IW CPI-UNME CPI-AL CPI-RL

08-09 09-10 10-11 08-09 09-10 08-09 09-10 10-11 08-09 09-10 10-11
April 7.8 8.7 13.3 7.0 8.8 8.9 9.1 15.0 8.6 9.1 15.0
May 7.8 8.6 6.8 9.7 9.1 10.2 8.8 10.2
June 7.7 9.3 7.3 9.6 8.8 11.5 8.8 11.3
July 8.3 11.9 7.4 13.0 9.4 12.9 9.4 12.7
August 9.0 11.7 8.5 12.9 10.3 12.9 10.3 12.7
September 9.8 11.6 9.5 12.4 11.0 13.2 11.0 13.0
October 10.4 11.5 10.4 12.0 11.1 13.7 11.1 13.5
November 10.4 13.5 10.8 13.9 11.1 15.7 11.1 15.7
December 9.7 15.0 9.8 15.5 11.1 17.2 11.1 17.0
January 10.4 16.2 10.4 16.9 11.4 17.6 11.1 17.4
February 9.6 14.9 9.9 15.8 10.8 16.5 10.8 16.5
March 8.0 14.9 9.3 14.9 9.5 15.8 9.7 15.5
Source: Ministry of Labor, CMIE

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4. Monetary indicators

With a trivial augmentation by only 0.8 percent, the broad money supply has expanded to Rs 42384
crores in April 2010. This growth has been marginally lower than the growth of 2.6 percent recorded in
the same month of previous year. The net bank credit to the government has increased by 1.4 percent
which was 4.8 percent in the same month of 2009-10. The growth in bank credit to commercial sector
has declined by (-) 0.8 percent, this was marginally higher than the negative growth of 1.3 percent
posted in April 2009.

April 2010 data showed growth in aggregate deposits to slow to 1.6 percent from 3.0 percent attained in
the previous year. Bank investments in government and other approved securities swelled by 3.0
percent which were considerably lower than the growth seen in the previous year. The total bank credit
was seen to remain in the negative zone.

Table-1.7: Monetary sector indicators – up to April (April 2010-11 over March 2009-10)

Variation in M3 (Rs Variation in M3 (%)

crore)
08-09 09-10 10-11 08-09 09-10 10-11
April 22235 124682 42384 0.6 2.6 0.8
May 73398 172709 1.9 3.6
June 89283 172702 2.2 3.6
July 169734 259720 4.2 5.5
August 208571 280313 5.2 5.9
September 264364 331793 6.6 7.0
October 331450 391310 8.3 8.2
November 374193 431266 9.3 9.1
December 423509 521426 10.6 10.9
January 508078 575387 12.7 12.1
February 635810 652944 15.9 13.7
March 740332 806190 18.4 16.9

Source: Reserve Bank of India

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5. Stock market trends

The positive sentiments in Indian stock market continued to remain. The directional change in the
movements of large capital inflows towards India due to Euro zone turmoil has added much impetus to
the Sensex figures in both BSE and NIFTY indices. As a result BSE Sensex was observed to rise upto the
level of 17693 points in April 2010 from 16773 points, traded in the previous month. Whereas NSE index
NIFTY rose sharply from 5027 points in March 2010 to 5291 points in April 2010.

Table-1.8: Monthly trends in stock market indices (beginning of month figures)

Date BSE % Change S&P CNX %

Sensex NIFTY Change
1.01.08 20300 4.8 6144 6.6
1.02.08 18242 -10.1 5317 -13.5
3.03.08 16677 -8.5 4953 -6.8
1.04.08 15626 -6.3 4739 -4.3
2.05.08 17600 12.6 5228 10.3
2.06.08 16063 -8.7 4739 -9.3
1.07.08 12961 -19.3 3896 -17.8
1.08.08 14656 13.1 4413 13.3
1.09.08 14498 -1.1 4447 0.8
1.10.08 13055 -9.9 3950 -11.1
3.11.08 10337 -20.8 3043 -23.0
1.12.08 8839 -14.5 2682 -11.9
26.12.08 9328 5.5 2857 6.5
30.01.09 9424 1.0 2874 0.5
02.03.09 8607 -8.7 2674 -7.0
31.03.09 9708 12.8 3020 12.9
29.04.09 11403 17.5 3473 15.0
01.06.09 14840 30.1 4529 30.4
01.07.09 14645 -1.31 4340 -4.1
03.08.09 15924 8.7 4711 8.5
01.09.09 15551 -2.3 4625 -1.8
01.10.09 17134 10.2 5083 9.9
03.11.09 15405 -10.1 4564 -10.2
01.12.09 17198 11.6 5122 12.2
04.01.10 17558 2.1 5232 2.1
01.02.10 16356 -6.8 4900 -6.4
02.03.10 16773 2.5 5017 2.4
01.04.10 17693 5.5 5291 5.5
Source: Reserve Bank of India

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 6. Fiscal Management

The total expenditure incurred by the government has amounted to be Rs 67226 crores in the opening
month of 2010-11 showing an increase of 1.5 percent from the growth numbers attained previously. On
the revenue side, the numbers are quite encouraging, it has registered an impressive growth of 9.6
percent in April 2010. In absolute terms, revenue receipt increased from Rs 11846 crore in April 2009-10
to Rs 12979 crore in April 2010-11. As a consequence, the level of fiscal deficit has actually come down
from Rs 54158 crore in April 2009 to Rs 53993 crores in the same month of 2010 .

Let us now assess the performance of different components of tax revenue of the central government
during this month. With the commencement of new financial year 2010-11, the collection of gross tax
revenue indicated positive movement after many months. The overall tax revenue registered a growth
of 27 percent in April 2010. This significant increase in overall tax collection is mainly corroborated with
the strong revival in the collection of indirect taxes. The outstanding growth figures were mainly
inculcated in the area of customs (106.4 percent) and excise duties (314.1 percent). The collection in
direct taxes also remained buoyant in April 2010, where the corporate tax revenue registered a growth
of 23.4 percent as against the negative growth of 8.4 percent in April 2009. Growth in the income tax
collection has somehow slowed down from 20 percent in April 2009 to 8.3 percent in the same month of
the current fiscal year.

Table-1.9: Trends in cumulative tax collections of central government (%)

Gross tax revenue Corporation tax Income tax

08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 52.2 -16.9 27.0 55.0 -8.4 23.4 127.7 20.0 8.3
May 36.1 -11.8 58.1 10.1 76.0 11.7
June 28.4 -11.4 43.4 1.8 50.0 7.1
July 26.2 -11.1 41.6 4.7 42.0 5.9
August 25.0 -11.5 45.9 2.4 35.7 8.1
September 25.3 -7.6 38.2 7.7 30.7 7.2
October 20.3 -7.5 30.3 6.5 21.9 10.5
November 17.5 -7.8 26.4 6.6 19.0 9.8
December 9.6 -2.5 11.9 16.8 6.8 12.2
January 7.2 -1.2 11.9 16.5 5.4 13.3
February 6.9 -1.6 17.9 10.9 7.5 11.4
March 2.7 10.8 7.1
Customs Excise duties Other taxes
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 25.0 -52..6 106.4 -28.3 --114.2 314.1 9.04 -5.4 -43.2
May 24.1 -38.2 1.3 -23.3 26.7 -18.7
June 19.9 -37.3 -0.9 -23.7 26.0 -9.5
July 19.2 -34.7 4.0 -26.6 24.7 -3.87
August 17.0 -34.0 6.5 -24.5 17.4 -1.97
September 16.8 -32.9 6.6 -22.9 30.7 -20.5
October 14.4 -31.7 6.3 -21.7 16.2 -17.2
November 13.7 -31.2 5.1 -20.0 6.1 -15.0
December 11.1 -29.2 2.1 -18.2 -2.6 -24.2
January 6.4 -25.2 -2.6 -14.5 -6.4 -21.8
February 1.7 -21.8 -7.1 -10.2 -10.0 -19.8
March -4.1 -12.0 -11.5

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Table-1.10: Service Tax

Service Tax 08-09 09-10 10-11

April 62.3 -0.04 -6.0
May 40.7 -2.60
June 34.2 -2.85
July 29.7 -1.46
August 28.6 -2.29
September 31.8 -3.7
October 31.8 -5.3
November 30.2 -6.2
December 25.4 -5.9
January 24.6 -6.2
February 22.2 -5.9
March 18.6
Source: Controller General of Accounts

Table-1.11 Trends in central government finances: April 2010

Actual to budget estimates

( in Rs crores)
09-10 10-11
Revenue receipts 11846 12979
Tax revenue 7462 10062
Non tax revenue 4384 2917
Total receipts 12059 13233
Non plan expenditure 46632 48206
On revenue account 44203 47496
On capital account 2429 710
Plan expenditure 19585 19020
On revenue account 18002 16121
On capital account 1583 2899
Total expenditure 66217 67226
Fiscal deficit 54158 53993
Source: Controller General of Accounts

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 7. Merchandise trade

India’s merchandise trade grew persistently since November 2009. The merchandise exports grew by
36.2 percent in the opening month of this fiscal as against the negative growth of 33.2 percent observed
in the same month of previous year. India’s merchandise imports registered a satisfactory growth of
43.3 percent in April 2010 as compared to negative 36.6 percent in same month of 2009.

Table-1.12: Monthly trends in growth of merchandize trade (% change) up to April 2010

Exports Oil imports Non-oil imports Total imports

08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 31.5 -33.2 36.2 46.2 -58.5 70.5 32.3 -24.6 34.3 36.6 -36.6 43.3
May 12.9 -29.2 50.8 -60.6 17.4 -25.4 27.1 -39.2
June 23.5 -27.7 53.4 -50.6 13.9 -16.5 25.9 -29.3
July 31.2 -28.4 69.3 -55.5 38.7 -24.5 48.1 -37.1
August 26.9 -19.4 76.7 -45.5 39.6 -25.5 51.2 -32.4
September 10.4 -13.8 57.1 -33.5 36.2 -30.4 43.3 -31.3
October -12.1 -6.6 22 -9.3 5.5 -17.2 10.6 -15.0
November -9.9 18.2 11.9 7.3 3.4 -5.9 6.1 -2.6
December -1.1 9.3 -30.9 42.8 31.9 22.4 8.8 27.2
January -15.9 11.5 -47.5 56.0 -0.5 28.8 -18.2 35.5
February -21.7 34.8 -47.5 97.4 -10.2 55.6 -23.3 66.4
March -33.3 54.1 -58.1 85.2 -18.9 61.0 -34.0 67.1

Source: Ministry of Commerce

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8. Foreign investment

The latest available data on FDI showed an investment of USD 6.5 billion in March 2010. This
was much higher as compared to the investment received in the previous year. Out of these
investments, foreign direct investment (FDI) amounted to USD 1.2 billion in March 2010 which
was slightly lower than the amount of USD 2.0 billion received a year ago. In the portfolio
category, investments inflow was USD 5.3 billion in April this year as compared reversal in
investments by the FIIs.

Table-1.13: Monthly trends in foreign investments ($ millions)

Foreign direct Portfolio Total foreign

investments investments investments
08-09 09-10 08-09 09-10 08-09 09-10
April 3749 2339 -880 2278 2869 4617
May 3932 2095 -288 5639 3644 7734
June 2392 2582 -3010 353 -618 2935
July 2247 3476 -492 2077 1775 6508
August 2328 3268 593 926 2921 4194
September 2562 1512 -1403 4999 1159 6511
October 1497 2332 -5243 2922 -3746 5254
November 1083 1722 -574 1274 509 2996
December 1362 1542 30 1533 1392 3075
January 2733 2042 -614 3139 2119 5181
February 1466 1717 -1085 230 381 1947
March 1956 1209 -889 5306 1067 6515
Apr-March 35180 34167 -13855 32375 21325 66542

Source: Reserve Bank of India

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 9. Foreign exchange reserves

India’s foreign exchange reserves is maintained at the level USD 280 billion in April 2010-11. It is
interesting to note that, from USD 250 billion in April 2009 the reserves swelled gradually adding
almost USD 28 billion in a year’s time.

Table-1.14: Monthly trends in foreign exchange reserves ($ billion)

07-08 % Change 08-09 % Change 09-10 % Change 10-11 % Change

April 204.1 2.5 314.5 1.5 251.7 0.0 279.6 0.18

May 208.3 2.0 312.5 -0.6 262.3 4.2
June 213.4 2.4 312.0 -0.1 265.1 1.0
July 229.3 7.4 306.1 -1.8 271.6 2.4
August 228.8 -0.2 295.3 -3.5 276.4 1.8
September 247.7 8.2 286.3 -3.0 281.2 1.7
October 262.4 5.9 252.8 -11.7 284.3 1.1
November 273.5 4.2 247.6 -2.0 288.1 1.3
December 275.9 0.8 255.9 3.3 283.4 -1.6
January 288.3 4.4 248.6 -2.8 280.9 -0.9
February 301.2 4.4 249.2 0.2 278.4 -0.9
March 309.7 2.8 251.7 1.0 279.1 0.3
Source: Reserve Bank of India

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