ECONOMIC OVERVIEW - DEA · Review & Outlook of Indian Economy Executive Summary World eonomy is at...
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ECONOMIC OVERVIEW Review & Outlook of Indian Economy
Executive Summary
World economy is at crossroads and 2016 in all probability it will not be the most pleasant year.
All indicators are pointing towards a correction in asset markets. The contraction in China’s GDP
due to its rebalancing will accentuate this trend. Rebalancing will impact the GDP of many econo-
mies who relied on exporting raw materials to China.
The Indian economy continued to exhibit resilience and strength of its domestic absorption to
register a growth of 7.2% during H1 FY16. Global deflation need not lead to depression in the
Indian context because causes of deflation are not debt induced as is the case in Europe and US.
In particular, economy, especially industrial activity should see an upswing in 2016, pulling up
the services sector alongside. If the US remains strong, capital flows to emerging economies par-
ticularly India, will increase. Liberalisation of key sectors, should increase fund flows for financing
infrastructure investment.
The outlook for inflation is conditional on international prices and the state of domestic demand.
Oil prices are likely to remain depressed. Commodity prices too will remain quiescent. In
particular, the speed with which alternative energy technologies are developing and combining
with technological improvements in shale oil extraction will ensure that there is almost minimal
chance of oil prices breaking through the $50 barrier.
India’s public debt remains sustainable given manageable interest rate costs and expected
recovery in the economy’s growth rate. The captive domestic investor base is likely to mitigate
the impact of any real interest rate shocks.
India’s financial system remains stable and the relatively stronger macroeconomic fundamentals
lend resilience to face the still prevailing uncertainty and emerging risks in the global economy
and financial markets.
The effects of some of the major steps taken by Government like activation of some of the
auction allocated coal blocks and some other mines, road contracts awarded through EPC and
hybrid annuity schemes, power transmission contracts, urban infrastructure projects, etc. will
start showing visible results over the next few months.
Economic Research Department, State Bank of India, Mumbai February 2016
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 2
GLOBAL ECONOMY
Global Growth
“The financial history of the last century shows a
steady increase in the amount of public indebtedness.
Nobody believes that the states will eternally drag the
burden of these interest payments. It is obvious that
sooner or later all these debts will be liquidated in
some way or other, but certainly not by payment of
interest and principal according to the terms of the
contract.”
Ludwig Von Mises (Human Action)
Global economic growth for the calendar year
2016 and 2017 is expected to see only a gradual
pick up. As per the latest World Bank forecast, the
global growth for 2016 is projected at 2.9%.
The developing countries may see a contraction
as prices of commodities are unlikely to recover
due to appreciation in dollar post Fed hike. Devel-
oped countries are reeling under unresolved post
crisis problems namely continued build up of pub-
lic debt, debt induced deflation and unemploy-
ment and social unrest. Labour market slack is
perhaps more extensive than suggested by claim-
ant-based unemployment rates alone. Broader
measures of unemployment, incorporating part-
time workers and inactive persons wanting to
work, remain well above pre-crisis norms in many
economies.
The global debt levels over the last seven years
have magnified. The expansion in central bank
balance sheet has not entirely met the desired
outcome namely inflation and credit expansion.
Many countries—US, EU and China—are witness-
ing across the board fall in prices. This trend may
continue in future as easy money that was the
cause of debt build up cannot cure the malice it
has created.
China deserves a special focus not only due to its
sheer size and connectivity but also due to its
conscious strategy to rebalance the economy to-
wards consumption—the New Normal.
Graph 1: Growth of international bank credit
Source: Bank of International Settlement
Table 2: Global debt issuances by issuers ($ trillion)
General Govern-
ment
Financial Corpora-
tions
Non-financial Corpora-
tions
House-hold
Interna-tional
Organiza-tions
Total
Mar-10 35.2 41.1 8.4 0.3 0.8 85.8
Mar-11 41.5 42.3 9.3 0.3 1.0 94.3
Mar-12 44.2 41.4 10.0 0.3 1.3 97.1
Mar-13 45.0 40.1 11.1 0.2 1.3 97.8
Mar-14 46.8 40.6 12.0 0.2 1.6 101.2
Jun-14 47.6 41.1 12.4 0.2 1.6 102.9
Sep-14 46.0 39.8 12.3 0.2 1.5 99.9
Dec-14 45.1 39.3 12.3 0.2 1.5 98.5
Mar-15 44.2 38.2 12.3 0.2 1.4 96.4
Com-pounded annual growth
4.34% -1.40% 7.45% -3.23% 10.49% 2.22%
Percent in total (Mar 15)
45.9 39.6 12.8 0.2 1.5 100.0
Source: Bank of International Settlement
2013 2014 2015 2016 (F) 2017 (F)
World 2.4 2.60 2.40 2.90 3.10
High income 1.2 1.70 1.60 2.10 2.10
United States 1.5 2.40 2.50 2.70 2.40
EU -0.2 0.90 1.50 1.70 1.70
Japan 1.6 -0.10 0.80 1.30 0.90
Russ ia 1.3 0.60 -3.80 -0.70 1.30
Developing countries 5.3 4.90 4.30 4.80 5.30
China 7.7 7.30 6.90 6.70 6.50
India 6.9 7.30 7.30 7.80 7.90
Table 1: Global Growth Forecast (%)
Source: World Bank
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 3
GLOBAL ECONOMY
The ongoing structural slowdown in China has de-
pressed the demand for oil, iron ore and oth-
er commodities, thereby dragging down growth in
Brazil, Australia and other commodity suppliers.
Recent correction in Chinese stocks may have no
direct impact on consumption as China’s house-
hold exposure to stock is around 16%. However, it
is the drop in collateral value of stocks that may
indirectly impact its banking system thus creating a
broader systemic risk. With over 60% of the house-
hold savings parked in bank deposits the impact on
real economy (viz. consumption) through the
banking channel far outweighs the loss in con-
sumption due to negative wealth effects of declin-
ing equity prices.
Three major conflicts hogged most of the lime light
in 2015 and will decide the course in 2016 and
2017. These include the Ukraine crisis, the South
China Sea Crisis and the Middle East Crisis. If the
trends continue the ongoing cost of maintaining
peace will escalate in lackluster growth environ-
ment.
After rising by around 150% between Jun’14 and
Jun’15, China's Shanghai Composite index plunged
sharply but it is still above the level it had reached
in Jul’14.
With the Chinese economy undergoing structural
adjustment, the devaluation of the Yuan was natu-
ral. Though this has caused financial turbulence,
this might prove to be a blessing in disguise for
India in the context of overvalued exchange rate of
China. Such nominal effective appreciation of the
Yuan over the years may have reduced China’s
growth, that in turn has translated into a drop of
GDP growth in poor countries. The weaker Yuan
would help make China’s exports more competi-
tive, boosting the nation’s economy and eventually
prompt a recovery in economies from where China
imports. Interestingly, Chinese exports defied ex-
pectations in Dec’15 to rise 2.3% from a year ago
in yuan-denominated terms. The jump in exports
was the first since Jun’14 .
Graph 2: Thomson Reuters CRB Index & Crude Prices
Source: Bloomberg
Graph 3: Trends in GDP of China
Source: National Bureau of Statistics of China
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Graph 4: Inflation and industrial production China
Source: National Bureau of Statistics of China
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Industrial Production Inflation (RHS)
Graph 5: Shanghai Composite Index
Source: National Bureau of Statistics of China
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Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 4
Domestic Growth
The Indian economy has continued to exhibit resil-
ience and the strength of its domestic absorption
to register a growth of 7.2% during H1 FY16. That
this has been attained, despite the highly tentative
global economic environment that has not shown
credible signs of improvement and despite sub-par
monsoon rains that for the second year in succes-
sion resulted in low growth in agriculture sector, is
indeed an encouraging development.
In addition to robust growth, the year thus far has
witnessed macro-economic stability aided by fa-
vourable factors such as comforting inflation indi-
cators, benign fiscal situation and improving exter-
nal current account balance. All these factors have
resulted in India emerging as the fastest growing
economy among the large economies, and, most
international organisations predict that it will con-
tinue to remain so in the medium term. Further,
India’s growth will surpass China in 2016.
Expenditure Side
Growth in consumption expenditure, particularly
in private final consumption expenditure (PFCE)
has been the major driver of the overall real GDP
growth in the last few quarters. However, the
most visible change on the demand side is the pick
-up in the growth of the gross fixed capital for-
mation (GFCF) at constant prices. This indicates
that the ensuing growth is likely to be more invest-
ment-driven and that the reliance of economic
growth on purely a consumption buoyancy may
gradually diminish.
INDIAN ECONOMY: OUTPUT
Outlook
It would suffice to say that global deflation need not lead to depression in general in Indian context because
causes are not debt induced as is the case in Europe and US. In particular, economy, especially industrial
activity should see an upswing in 2016, pulling up the services sector alongside. If the US remains strong,
capital flows to emerging economies particularly India, will increase significantly. Liberalisation of key
sectors, should increase fund flows for financing infrastructure investment. Inflation should be largely under
control.
Graph 7: GDP growth projection for India & China
Source: Various Reports; SBI Research
Graph 8: Growth in PFCE & GFCF (%)-constant prices
Source: CSO; SBI Research
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2.4
6.8
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-3.0
-1.0
1.0
3.0
5.0
7.0
9.0
11.0
13.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2012-13 2013-14 2014-15 2015-16
Private final consumption expenditure (%) Gross fixed capital formation (%)
7.5 6.3
7.8 6.7
7.8 6.7
7.3 6.5
7.5 6.5
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 5
GLOBAL ECONOMY
Graph 6: US Unemployment Rate (%)
Source: BLS; SBI Research
Trade forecast
World merchandise trade volume is expected to
rise 2.8% in 2015, down from the previous
estimate of 3.3%, as slowing import demand in
China, Brazil and other emerging economies
will reduce exports of trading partners.
Trade growth in 2016 should pick up to 3.9%,
down slightly from the last estimate of 4.0% but
still below the average for the last 20 years (1995
- 2015) of 5%.
Risks to the forecast are firmly on the downside,
the most prominent being a further slowing of
economic activity in developing economies and
financial instability stemming from eventual
interest rate raises in the United States.
US Unemployment Rate (%)
The US introduced the smallest dose of austerity,
and it has enjoyed the best economic perfor-
mance. But even in the US, there are roughly
434,000 fewer public-sector employees than
there were before the crisis.
The number of persons working part-time invol-
untarily also remains unusually high suggesting
still not so strong labor market conditions. When
the involuntary part-time workers are added to
the unemployed pool the level exceeds 8%.
Table 3: Merchandise trade volume and real GDP,
2014-2016* (%)
2014 2015P 2016P
Volume of world
merchandise trade 2.5 2.8 3.9
EX IM EX IM EX IM
Developed econo-
mies 2.0 2.9 3.0 3.1 3.9 3.2
Developing econo-
mies 3.1 1.8 2.4 2.5 3.8 5.2
North America 4.2 4.6 4.4 6.4 3.9 5.2
South and Central
America -1.3 -2.4 0.5 -5.6 3.1 5.7
Europe 1.6 2.3 2.8 3.2 3.7 3.4
Asia 4.7 3.4 3.1 2.6 5.4 4.3
Other regions** -0.4 -1.4 0.5 -1.5 0.5 0.5
* Figures for 2015 and 2016 are projections
** Other regions comprise the Africa, CIS and Middle East
Source: SBI Research, WTO
Global Outlook for 2016 and implications for India
World economy is at crossroads and 2016 in all probability will not be the most pleasant year. All indicators
are pointing towards a correction in asset markets. The contraction in China’s GDP due to its rebalancing will
accentuate this trend. Rebalancing will impact the GDP of many economies who relied on exporting raw ma-
terial to China.
There will be trends towards decoupling in many economies. The build up of dollar denominated external
debt originating from non-financial corporations has been the fastest growing. The servicing of this debt after
a hike in Federal Funds rate will be the focus for banks in 2016.
The good news is that rate of growth of MSCI Emerging Markets Index capturing trends in large and mid-cap
companies across 23 emerging markets, has increased over the years, exhibiting better prospects. However,
this has been accompanied by increased dispersion in emerging market returns indicating higher uncertainty
in the global financial system. India with its much better macros stands to gain significantly from such positive
market volatility in the coming days.
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5Unemployment rate (%) Unemployment rate excluding part-time workers (%)
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 6
Inflation under control
On retail inflation side, CPI rose by 5.61% on yoy
basis in Dec’15 compared to 5.41% in the previous
month. Overall in H2 2015, the average CPI stood
at 4.64% vis-à-vis 5.18% in H1 2015.
Increase in food prices, however, has outliers. For
example, excluding pulses, CPI inflation was at
4.64% in Dec’15, much lower than the RBI inflation
target of 5% as on March 2017.
Core CPI stood at 4.73%. WPI, though still in nega-
tive territory (-0.73% in Dec’15) is also on rising
trend. Core WPI inflation printed at negative
1.99%.
Divergence between Headline & Core
Interestingly, trend inflation indicates that head-
line and core inflation are moving in opposite di-
rection.
Since Aug’15, WPI is showing a rising trend but
core WPI is indicating a declining trend. This is pri-
marily due to rise in food prices inflation.
In CPI and Core CPI, the divergence is also mainly
due to rise in food inflation.
Further, Core CPI remained flat in 2015. CPI has
also remained flat in 2015.
Stability of Core CPI
The distribution of core CPI over the last 14
months indicates a nicely shaped Bell curve, with
mean CPI at 4.4%. Interestingly, if we look at 95%
confidence interval, all the CPI numbers are within
that range, indicating that core CPI has nicely
settled in the sub 4.5% range, with little or no neg-
ative surprises.
This also substantiates that RBI has done a com-
mendable job in delinking inflationary expecta-
tions spilling over from food to becoming broad-
based over the last one year. Thus, even as food
prices rose, core CPI has largely been under con-
trol.
INDIAN ECONOMY: INFLATION
Graph 9: Divergence between WPI & Core WPI (%)
Source: Office of EA; SBI Research
Graph 10: CPI Weighted Contribution
Source: MOSPI; SBI Research
Table 4: Retail & Wholesale Inflation
Aug-15 Sep-15 Oct-15 Nov-15 Dec-15
CPI Inflation
CPI Inflation 3.74 4.41 5.00 5.41 5.61
Core CPI 4.15 4.32 4.42 4.62 4.73
CPI Ex Pulses 3.23 3.82 4.12 4.45 4.64
CPI Food 2.92 4.29 5.34 6.08 6.31
WPI Inflation
WPI Inflation -5.06 -4.59 -3.7 -1.99 -0.73
Core WPI -1.92 -1.93 -2.10 -1.95 -1.99
WPI Food -1.02 0.84 3.33 5.20 8.17 Source: MOSPI, Office of the Economic Adviser & SBI Research
Graph 11: Distribution Curve of Core CPI
Source: MOSPI, SBI Research
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µ + 2* δ = 4.9
µ = 4.4
µ - 2*δ = 4.0
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 7
CPI and PPI Difference: Challenge for Monetary Policy
Worldwide
Country-wise recent data indicates that in most of
the countries, both CPI and PPI (Producer Price
Index) are showing a diverging trend. While CPI is
in positive territory, PPI is in negative territory in
most of the countries under review.
This will continue to pose challenge for monetary
policy worldwide, though we believe there is still
enough room for accommodative domestic mone-
tary policy, at least in India.
Crude Oil Dynamics in 2016
Global petroleum and other liquid production
(supply) continues to outpace consumption
(demand), leading to inventory builds throughout
the 2016.
Global oil inventory builds in the Q3 2015 aver-
aged 1.8 million barrels per day (mbd), down from
2.0 mbd in the Q2, which had the largest inventory
builds since the Q4 2008.
The pace of inventory builds has slowed in the
fourth quarter to roughly 1.4 mbd. In 2016, inven-
tory builds are expected to slow further to an aver-
age of 0.6 mbd, but still enough to hit oil prices on
the downside.
INDIAN ECONOMY: INFLATION
Outlook
The outlook for inflation would of course depend on international prices and the state of domestic demand.
Oil prices are likely to remain depressed. Commodity prices too will remain quiescent.
In particular, the speed with which alternative energy technologies are developing and combining with tech-
nological improvements in shale oil extraction will ensure that there is almost minimal chance of oil prices
breaking through the $50 barrier. It is more likely that prices will remain at $30 levels or so, especially in view
of the Chinese economy showing significant strain and India pursuing an alternate energy policy with much
rigor. Additionally, Iran’s supply of oil to India is good news as the sour oil from Iran is better suited for our
refineries thus increasing the life of those assets.
Further, the outlook for prices will also depend on the output gap or the slack in the economy that will act as
a buffer against price increases. Declining nominal GDP growth as well as capacity under- utilization in im-
portant sectors suggest that the output gap has not narrowed significantly. This should serve to moderate
future price increases.
Graph 12: Crude Oil Demand & Supply (million barrels per day)
Source: EIA; SBI Research
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2016
Excess Demand (-)/Supply (+) Supply_RHS Demand_RHS
Table 5: Cross Country Analysis of CPI & PPI
Country Month CPI (%) PPI (%) Difference
US Nov-15 0.5 -0.9 1.4
Euro Area Dec-15 0.2 -2.2 2.4
China Dec-15 1.6 -5.9 7.5
Japan Nov-15 0.3 -3.2 3.5
Germany Dec-15 0.3 -2.5 2.8
UK Nov-15 0.1 -1.5 1.6
France Dec-15 0.2 -2.4 2.6
Brazil Dec-15 10.7 11.3 -0.6
Italy Dec-15 0.1 -3.3 3.4
India* Dec-15 5.6 -1.4 7.0
Russia Dec-15 12.9 13.9 -1.0
Canada Nov-15 1.4 -0.2 1.6
South Korea Dec-15 1.3 -4.6 5.9
Spain Dec-15 0 -2.6 2.6
Mexico Dec-15 2.1 1.3 0.8
Indonesia Dec-15 3.4 9.1 -5.8
Source: SBI Research * Manufacturing WPI
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 8
INDIAN ECONOMY: PUBLIC FINANCE
Target Vs. Utilisation
The budget estimate of the fiscal deficit and
revenue deficit for FY16 are 3.9% and 2.8%
respectively.
Already 74% of the budgeted fiscal deficit has
been utilised. Revenue deficit as a percentage of
gross fiscal deficit stands at 70%.
Debt Management
Internal debt of the Central Government
constituted 92.9 % of public debt for FY15 (RE).
93% of the Government’s public debt is internal,
reflecting stable and adequate domestic sources of
financing. The share of Center and State liabilities
as percentage of GDP has declined to 67% in FY15
from its peak of 83% in FY04.
Weighted average coupon rate of outstanding
stocks has remained broadly stable and has grown
to 8.09% in FY15 from 7.81% in FY11.
RBI is also following a strategy of elongating the
maturity profile of outstanding debt to limit
rollover risk . Average time to maturity increased
to 10.23 years on end-March 2015 indicating low /
very modest rollover risk.
With the entry of co-operative banks, regional
rural banks, pension funds, mutual funds and
non-banking finance companies, the institutional
investor base for public debt has been reasonably
diversified and the markets have deepened.
7th Pay Commission Impact
The recommendations of Pay Commission in the
past have led to significant increase in steel and
cement production. Post 5th Pay Commission,
steel and cement production spiked during 1999-
2000 and increased by 15.0% and 14.6%, respec-
tively.
Post 6th Pay Commission the impact was more
prolonged and both steel and cement production
increased for next 2-3 years.
Going by this trend, the current set of recommen-
dations may act as an enabler for steel and ce-
ment sectors and construction sector which is
highly employment elastic.
Graph 13: Maturity Profile of Outstanding Central G-Sec as on Mar 15
Source: RBI, SBI Research
Graph 14: Redemption profile of the Central Government’s market debt
(Rs Cr)
Source: RBI, SBI Research
0
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4%
25%
30%
28%
13% Less than 1 year
1-5 Years
5-10 Years
10-20 Years
20 years and above
Graph 15: Central and State Government Securities Holding Pattern
Source: RBI, SBI Research
8%
60%
21%
2% 1% 5% 3%
March-09 RBI
Schedule CommercialBanks
Insurance Cos
Financial Institutions
Mutual Funds
Provident Funds
Others
10%
43%
3%
24%
2%
2%9%
1%
3%
3%
March-15 RBI
Schedule Commercial Banks
Co-operative Banks
Insurance Cos
Financial Institutions
Mutual Funds
Provident Funds
Corporates
FIIs
Others
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 9
INDIAN ECONOMY: PUBLIC FINANCE
Fiscal Deficit: Budgeted vis-à-vis Actual
During the global financial crisis fiscal policy
responded with counter-cyclical measures
including tax cuts and increases in expenditures.
The post-crisis recovery of the Indian economy is
witnessing a correction of the fiscal policy path
towards a regime of prudence.
However, India has an extremely good track rec-
ord of undershooting the budgeted fiscal deficit in
the past decade on a consistent basis.
Except the two years with exceptional
circumstances, the actual budget deficit as % of
GDP has always stayed well within the budgeted
deficit.
IT e-filing
E-filing of returns, refund banker scheme and the
newly introduced e-verification of income-tax re-
turns for the assessment year 2015-16 are some of
the key initiatives undertaken by the Department
for making filing of returns simple and easy for the
common taxpayer.
The e-filing of income tax returns has already
crossed the 3 crore mark this fiscal (till Dec’15),
with a growth of 27% compared to same period
last year. During FY15, a total of 3.41 crore returns
were e-filed, 15% more than the FY14 level.
As per income range-wise, most of the returns
filed were income upto 5 lakh range, with a
growth of 31% during Apr-Dec’15. A noticeable
growth is also visible in the income range of more
than 1 crore, where 1-lakh mark crossed in Apr-
Dec period, with a growth of 19%.
IT Refunds
Direct tax refunds have increased by 6.3% to Rs
89,060 crore during FY14. As on 07.09.2015 Cen-
tral Processing Centre issued refunds to 22.14 lakh
taxpayers for the A.Y.2015-16 (FY14) compared to
a total of 25.7 lakh in entire FY14.
Through a special drive, 18.3 lakh refunds involv-
ing a sum of Rs 1,793 crore have been issued be-
tween 01 Dec’15 and 10 Jan’16 for claims below Rs
50,000.
Graph 17: e-filing of IT Returns
Source: incometaxindiaefiling.gov.in; SBI Research
21.7
48.3 50.7
90.5
164.3
214.7
296.8
341.7
243.3
309.5
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY15(till Dec)
FY16(till Dec)
15%
27%
% yoy growth
Graph 18: Income range wise e-filing of IT Returns
Source: incometaxindiaefiling.gov.in; SBI Research
0
1
2
3
4
5
6
7
20
03
-20
04
20
04
-20
05
20
05
-20
06
20
06
-20
07
20
07
-20
08
20
08
-20
09
20
09
-20
10
20
10
-20
11
20
11
-20
12
20
12
-20
13
20
13
-20
14
20
14
-20
15
20
15
-20
16
Bugeted Deficit as % of GDP Actual Deficit as % of GDP
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Ove
rsh
ot
Un
der
sho
t
Ove
rsh
ot
Un
der
sho
t
Graph 16: Budgeted and Actual
Source: incometaxindiaefiling.gov.in; SBI Research
Graph 19: Direct Tax Refund (Number in Lakh)
Source: CAG; SBI Research
180.0
55.8
5.4 1.2 0.9
235.3
65.4
6.2 1.4 1.10
50
100
150
200
250
300
upto 5 Lakh 5-20 Lakh 20-50 Lakh 50 Lakh to 1Crore
More than 1Crore
FY15 (Apr-Dec)
FY16 (Apr-Dec)
31%
17%
15% 17% 19%
28.6
40.4 40.3
27.625.7
22.1
FY10 FY11 FY12 FY13 FY14 FY15 (upto 7Sep15)
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 10
INDIAN ECONOMY: PUBLIC FINANCE
Fiscal Deficit: Composition and Quality
The capital expenditure is growing at a steady
pace and grabbing a higher pie in the fiscal deficit
share, after declining from a high of 42% in FY11.
As per FY16 budget estimates the capital
expenditure is expected to breach the FY11 mark.
As compared to Apr-Nov 14, when the capital
expenditure as a % of fiscal deficit stood at 23%,
the ratio for Apr-Nov 15 stands at 33% showing a
change in favour of capital expenditure in the
quality of fiscal consolidation.
In broad terms, public investment is complemen-
tary to private investment if it is related to infra-
structure, as historical evidence in several coun-
tries, including developed ones like US suggests.
Public investment of this type can enhance the
possibility for private investment and raise the
productivity of capital, increase the demand for
private output and augment overall resources
through an increase in aggregate output and sav-
ings. Interestingly, even in years prior to crisis, a
large part of India’s investment boom was also led
by public sector.
Goods and Services Tax (GST)
GST has been commonly accepted in the world
and around 166 countries have acknowledged the
same. In India, the GST aims at smoothing tax
structure and increasing inter-state trade.
Implementing the GST will be an important
milestone in the streamlining and simplifying the
application, management and governance of
indirect taxes going forward .
Outlook
India’s public debt remains sustainable given manageable interest rate costs and expected recovery in the
economy’s growth rate. The captive domestic investor base is likely to mitigate the impact of any real
interest rate shocks.
India has a good track record of undershooting the budgeted fiscal deficit in the past decade on a consistent
basis and thus fiscal consolidation is not a cause for worry. India has also made rapid strides in associated
fiscal infrastructure for the convenience of tax payers and this is likely to continue.
Graph 21: Peak Rate of GST in Select Economies (%)
Source: EY; SBI Research: India: Under Discussion
27
25
25
24
24
23
23
23
23
22
21
21
21
21
20
20
20
20
19
18
15
10
Hu
ng
ary
De
nm
ark
Swe
de
n
Fin
lan
d
Ro
ma
nia
Ire
lan
d
Po
rtu
ga
l
Gre
ece
Po
lan
d
Ita
ly
Ne
the
rla
nd
s
Be
lgiu
m
Spa
in
Cze
ch R
ep
ub
lic
Fra
nce
Au
stri
a
Un
ite
d K
ing
do
m
Bu
lga
ria
Ge
rma
ny
Ind
ia
Ne
w Z
ea
lan
d
Au
stra
lia
-15.0
-5.0
5.0
15.0
25.0
35.0
45.0
55.0
65.0
75.0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5 (
RE)
FY1
6 (
BE)
Recoveries of loans + other receipts (disinvestment) as % of FD
Capital Expenditure as % FD
Revenue Deficit as % of FD
Graph 20: Quality of fiscal consolidation (FD)
Source: MOSPI; SBI Research
Year Private Sector Public sector
2005-06 45.0 17.2
2006-07 19.1 14.9
2007-08 32.8 18.0
2008-09 -29.5 12.3
2009-10 19.0 4.8
2010-11 21.1 3.9
2011-12 -12.5 -0.4
2012-13 -3.2 9.4
Table 6: Growth Rate of Gross Capital Formation
(Constant Prices)
Source: SBI Research, MOSPI
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 11
INDIAN ECONOMY: MONEY , BANKING & FINANCIAL MARKETS
Monetary Policy Stance
RBI shifted its monetary policy stance on 15 Jan’15
to accommodative in view of significant waning of
inflationary pressures.
Repo rate has been cut by 125 bps in 2015 (25 bps
each on 15 Jan’15, 04 Mar’15 and 02 Jun’15 and
another 50 bps to 6.75% on 29 Sep’15).
Consequent to that almost all the banks have rea-
ligned their interest rates to pass the benefits to
the customers. On an average, there has been a
decline in median base lending rate of banks by 63
basis points.
RBI has moved to marginal cost of funding for de-
termining bank base rates from Apr’16. The new
methodology will be dynamic in nature.
Banking Businesses
The business growth of the All Scheduled
Commercial Banks (ASCB) remained muted in the
period Apr-Sep’15. Post Oct’15, banking business
has picked up. Aggregate deposits of the ASCB
grew by 11.5% for the fortnight ended 11 Dec’15,
compared to last year (12 Dec’14) growth of 9.9%.
Meanwhile, credit off-take (YoY) has shown smart
improvement and is at 11.5%, compared to last
year growth of 10.4%.
The smart pick up in credit growth after Sep’15,
has been mostly due to the personal loan seg-
ment, especially housing, reflecting resilience of
consumer demand.
Though, the banking system has remained resili-
ent, asset quality of the banks remains under pres-
sure. The banks have been tackling this problem
aggressively and the resolution rate will pick up
more pace as expectations of sellers of assets be-
come more realistic and valuations given by buy-
ers also are better, sensing an imminent recovery.
With Government striving to bring in enabling
laws, a proper bankruptcy law and digitization of
the DRT process with ensuring time bound resolu-
tions will also provide succor to the banks.
Graph 22: Transmission of Policy Rate
Source: RBI
Graph 23: Movement of Deposits & Advances Growth
Source: RBI
6.5
7
7.5
8
8.5
9
9.5
10
10.5
Jan.
2, 2
015
Jan.
16,
201
5
Jan.
30,
201
5
Feb.
13,
201
5
Feb.
27,
201
5
Mar
. 13,
201
5
Mar
. 27,
201
5
Apr
. 17,
201
5
May
1, 2
015
May
15,
201
5
May
29,
201
5
Jun.
12,
201
5
Jun.
26,
201
5
Jul.
10, 2
015
Jul.
24, 2
015
Aug
. 7, 2
015
Au
g. 2
1, 2
015
Sep.
4, 2
015
Sep.
18,
201
5
Oct
. 2, 2
015
Oct
. 16,
201
5
Oct
. 30,
201
5
Nov
. 13,
201
5
Nov
. 27,
201
5
Dec
. 11,
201
5
Dec
. 25,
201
5
RBI Repo Rate Base Rate (Major Banks) Term Deposit Rate >1 Yr
Call Rate (Weighted Average) 10-Yr Gsec Yield
PeriodRBI Repo
RateBase Rate
Incrementa
l Credit (Rs
Crore)
Credit
Demand
Index
Jan-Dec-2014 8.00% 10%-10.25% 605360 100
Jan-Sep-2015 7.25% 9.35%-10.0% 359351 77
Oct-Nov-2015 6.75% 9.30%-9.70% 161869 145
Interest Rate vs Incremental Credit Growth of ASCB
Graph 24: Sectoral Deployment of Credit Growth (Apr-Nov)
Source: RBI
Note: Credit Index is calculated based on the incremental credit and refinance percentage
11.0
1.0 0.8
9.5
7.9
0.4
1.9
11.9
Agriculture &Allied
Industry Services Personal Loans
FY 14 FY 15
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 12
INDIAN ECONOMY: MONEY , BANKING & FINANCIAL MARKETS
Recapitalization of Banks
Although Indian banks are reasonably capitalized to
meet the Basel III norms, still more capital is re-
quired on account of stress in corporate assets.
Empirical evidence suggests that there are scale
economies in banking when recapitalization is in-
troduced. Banks that receive sufficiently large re-
capitalization increase lending, raise additional
funding and clean up their balance sheets. In con-
trast, banks that receive small recapitalization rela-
tive to their capital shortfall reduce lending, shrink
their risk weighted assets and suffer a drop in de-
posits and interbank borrowing.
As per the limited information in public domain,
China had injected $127 billion into the banking
system during 2004-07, while the US Fed injected
$2.27 trillion following the 2008 crisis.
Government has estimated capital requirement
(excluding internal generated profit) for the next
four years (till FY19) at about Rs 1,80,000 crore.
Out of the total requirement, the Government pro-
poses to infuse Rs 70,000 crores out of budgetary
allocations during the current and next three finan-
cial years.
Table 8: Capital Infusion in Banks: Cross Country
Country Period Amount
($ Bn)
India 2011-2016 13
China 2004-2007 127
US After 2008 2,270
Ireland 2010 11
Russia 2015 15
Portugal 2013 7
Greece 2013 63
Spain 2012-2014 51
Source: SBI Research
Table 9: Basel III Capital Norms: Selected Countries (%)
Jurisdiction Minimum Common
Equity Ratio Minimum Tier 1 Capital
Ratio Minimum Total Capital
Ratio
Basel III (BCBS) 4.5 6.0 8.0
India 5.5 7.0 9.0
Singapore 6.5 8.0 10.0
South Africa 6.0 8.3 11.5
China 5.0 6.0 8.5
China (D-SIBs) 6.0 7.0 9.0
Russia 5.0 6.0 10.0
Brazil - - 11.5 till 2019
Switzerland 4.5-10 6.0-13.0 8.0-19.0
Source: BCBS
Graph 25: Recapitalisation of Banks
Source: India Budget
5 0
100
19 12
201
120 125140
69.979.4
12.3
14.5
12.7
11
12
13
14
15
0
50
100
150
200
250
FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16BE
(Sep)Recapitalisation of PSBs (Rs bn) CRAR (%) RHS
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 13
Equity Risk Premium
Indian markets are a relatively attractive place to
invest, despite the recent decline in Sensex. The
equity risk premium (ERP) may be viewed as ‘risk
compensation’ for investing in equity markets as
against assets that are relatively risk-free. Though
ERP is showing a declining trend in India, it is still
much above the level it had reached in Jan’12.
Private Equity and FII Inflows
Private equity investors poured about $4.2 billion
between May to December 2015, despite the fact
that during the same period FII outflows worth $4.5
billion occurred. This indicates their confidence in
India’s potential.
Domestic Investors are Bullish
The fall in Sensex would have been much more, if it
was not supported by huge inflows by Domestic
institutional investors (DIIs). This indicates that do-
mestic investors are confident about the state of
Indian economy. In Aug’15 when Sensex crashed by
around 1900 points, DIIs poured a net of Rs 15,770
crore into stocks, their highest monthly investment
in more than six years.
Even in Jan’15, when Sensex plunged by around
1700 points (between 15 Dec to 01 Jan), DIIs
infused a net of `6741 crore. During the same peri-
od ,FII outflows were `7604 crore.
Resource Flow to Commercial Sector
Total resource flow to commercial sector in the
current fiscal has been significantly higher than like
period in the previous year.
INDIAN ECONOMY: MONEY , BANKING & FINANCIAL MARKETS
Graph 26: Equity Risk Premium
Source: SBI Research, estimated as the excess over risk free rate
Graph 27: Private equity and FII ($ Million)
Source: SBI Research
-3000
-2000
-1000
0
1000
2000
3000
4000
May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15
Private Equity ($ Mn) FII ($ Mn)
Graph 28: DII vs BSE Sensex
Source: SBI Research
20000
21000
22000
23000
24000
25000
26000
27000
28000
29000
30000
-3000
-2000
-1000
0
1000
2000
3000
4000
5000
01-A
pr-1
5
16-A
pr-1
5
28-A
pr-1
5
12-M
ay-1
5
26-M
ay-1
5
05-J
un-1
5
17-J
un-1
5
29-J
un-1
5
10-J
ul-1
5
22-J
ul-1
5
06-A
ug-1
5
18-A
ug-1
5
28-A
ug-1
5
09-S
ep-1
5
22-S
ep-1
5
06-O
ct-1
5
19-O
ct-1
5
30-O
ct-1
5
11-N
ov-1
5
24-N
ov-1
5
08-D
ec-1
5
18-D
ec-1
5
31-D
ec-1
5
12-J
an-1
6
DII_Net Purchase/Sales (Rs Crore) Sensex
Table 10: Funds Flow to Corporate Sector (Rs Lakh Crore)
Source Period 2015 2014
Debt Raised By Companies Apr-Nov 2.55 2.47
Equity Apr-Nov 0.82 0.38
ECBs Apr-Nov 0.89 1.01
FDI Apr-Nov 1.07 0.88
Incremental NF Credit Apr-Dec 3.79 1.68
Incremental CPs Apr-Dec 1.15 1.02
Total 10.27 7.44 Source: RBI, CMIE, SBI Research
-80
-60
-40
-20
0
20
40
60
80
Jan-
09
Apr-
09
Jul-0
9
Oct
-09
Jan-
10
Apr-
10
Jul-1
0
Oct
-10
Jan-
11
Apr-
11
Jul-1
1
Oct
-11
Jan-
12
Apr-
12
Jul-1
2
Oct
-12
Jan-
13
Apr-
13
Jul-1
3
Oct
-13
Jan-
14
Apr-
14
Jul-1
4
Oct
-14
Jan-
15
Apr-
15
Jul-1
5
Oct
-15
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 14
INDIAN ECONOMY: MONEY , BANKING & FINANCIAL MARKETS
Jan Dhan to Jan Suraksha
Pradhan Mantri Jan Dhan Yojana (PMJDY)
The biggest financial inclusion initiative in the
world was announced by the Hon’ble Prime Minis-
ter on 15th Aug’14 and Mega launch was done on
28th Aug’14 across the country. The programme
aims to open at least one account per household
with an objective to bring all the unbanked house-
holds into the banking ambit.
The success of the PMJDY had shown the potential
of the enormous role that the financial inclusion
program can play in the rise of the economy. At
present more than 20 crore bank accounts have
been opened under PMJDY and the people have
deposited more than Rs.29,809 crore in these ac-
counts.
The trend of ‘zero balance a/cs’ share in total is
declining, implying people have started doing trans-
actions in their a/cs. Interestingly, the share of Ru-
ral A/cs in total is at 64.5%.
Additionally, deposits in the Jan Dhan a/cs is
around 4.0% of the ‘Demand Deposits’ of ASCB,
which is a positive signs for banks to boost their
CASA.
Jan Suraksha
Consequent to the Union Budget 2015-16 an-
nouncement, the Prime Minister launched three
new social security schemes under Jan Suraksha
initiative on 09 May 2015.
The schemes include: (i) Pradhan Mantri Suraksha
Bima Yojana (PMSBY) covering accidental death risk
of Rs 2 lakh at a premium of Rs 12 per year i.e. Re 1
per month; (ii) Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJJBY) covering both natural and acci-
dental death risk of Rs 2 lakh. The premium will be
Rs 330 per year, or less than Re 1 per day, for the
age group of 18-50 Year; and (iii) Atal Pension Yoja-
na (APY).
The Jan Suraksha scheme has till now enrolled
around 12.4 crore people. The aim of the scheme
was to increase insurance and pension penetration
in the country.
Table 11: Progress of PMJDY Scheme*
Total No of Accounts (in crore) 20.02
No Of Rupay Debit Cards (in crore) 16.91
Balance in A/c (Rs crore) 29809
No of Zero Balance A/Cs (in crore) 6.3
Balance Per A/C (Rs) 2175
Source: PMJDY Website * as on 06 Jan'16
Graph 29: Trend and Progress of PMJDY Accounts
Source: PMJDY
Graph 30: Monthly Trend of Avg A/C Balance (in Rs) of
PMJDY A/Cs
Source: RBI
Table 12: Progress of Jan Suraksha Schemes*
PMJJBY PMSBY APY Total
Total Number of
Policies (in lakh) 293.00 930.55 18.60 1,242
Per Policy Premium
(Rs) 330.0 12.0 577.0 -
Total Premium Col-
lected (Rs lakh) 96688.7 11166.6 10732.1 118587.4
Claim Paid (Rs lakh) 18251 2550.00 - -
Source: Jan Suraksha *07 Jan'16
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 15
Insurance Penetration
The Indian insurance sector has developed in many
aspects of insurance, compared to the developed
countries like US, UK and France but lags in terms
of Insurance Penetration (ratio of premium volume
to GDP ) and Density (ratio of gross premium vol-
ume to total population in a country ).
As on 2014, the insurance penetration in India is
only at 3.3% and density at USD 55 only, compared
with the world average of 6.2% and USD 662 re-
spectively. With the increase in distribution of Jan
Suraksha schemes, we expect that insurance pene-
tration will increase to 3.5% in 2015 (SBI Research).
Life Insurance Industry
The Life Insurance Sector First Year Premium regis-
tered a YoY growth of 17.03% to Rs 74,550.96 crore
as on 30th November 2015. LIC mobilized Rs
52291.75 crore with a growth of 14.15% whereas
Private Sector procured Rs 22259.21 crore posting
a growth of 24.38%.
Private sector experienced a growth in both Indi-
vidual New Business (NB) and Group NB whereas
LIC shown a growth in Group NB and decline in In-
dividual NB. It is indeed good news that ULIP busi-
ness growth is picking up, which was declining in
the last 2-3 years.
INDIAN ECONOMY: MONEY , BANKING & FINANCIAL MARKETS
Outlook
India’s financial system remains stable and the relatively stronger macroeconomic fundamentals lend resili-
ence to face the still prevailing uncertainty and emerging risks in the global economy and financial markets.
However, policy makers and stakeholders will need to remain watchful about the potential adverse impact of
developments in the global scenario, particularly increased volatility in financial markets and further slow-
down in global trade.
Going forward, banking sector will have an improved outlook with risk tilting towards lower side. There are
many factors responsible for this outlook. Firstly, the uncertainty with regard to direction of growth may clear
off helping banks in extending credit. Secondly, the enabling legislation for asset recovery will accrue benefits.
As the investment cycle gathers momentum, we do believe that credit demand will pick-up further. It is diffi-
cult to ascertain the direction of credit flows at this time. Some sectors like personal loans, housing may re-
main buoyant. There may be increased credit flow to sectors like Renewable Energy, Roads, Aviation, Power
and so on.
The future of insurance industry looks promising with several changes in regulatory framework which will
lead to further change in the way the industry conducts its business and engages with its customers.
Graph 31: Insurance Penetration in India
Source: IRDA, SBI Research
Graph 32: First Yr Premium Growth: LIC Vs Private Insurers
Source: Life Council, SBI Research
24.38
14.15
17.03
10
12
14
16
18
20
22
24
0
10000
20000
30000
40000
50000
60000
70000
80000
Private LIC Industry
Apr-Nov'15 Apr-Nov'14 YoY %_RHS2
.2
2.6
2.3 2
.5
2.5
4.1
4.0
4.0
4.6
4.4
3.4
3.2
3.1
2.6 2.7
0.6 0.7
0.6 0.6
0.6
0.6
0.6
0.6
0.6 0.7
0.7 0.8
0.8
0.7 0.8
2.7
3.32.9
3.2 3.1
4.8 4.7 4.6
5.25.1
4.1
4.0 3.9
3.33.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015(P)
Life Non-Life Industry
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 16
Foodgrain Production
India’s foodgrain production is estimated (4th ad-
vance estimate) to have declined 4.7% to 252.68
million tonnes in FY15 crop year due to poor mon-
soon and unseasonal rains in Feb-Mar’15.
MGNREGA
MGNREGA for the past five months (Aug-Dec’15)
shows that 5.78 crore households were provided
work ,compared to 3.56 crore households provid-
ed work in corresponding period last year, an in-
crease of 62%. This increase is despite the fact that
in Jun-Dec every year, the demand for work is low,
as most of the workers are busy in agricultural
field work.
Crop Insurance
Government has cleared new crop insurance
scheme, Pradhan Mantri Fasal Bima Yojana which
is to be rolled out from the kharif season this year
aiming to reduce the premium burden on farmers
and ensuring early settlement of claim for the full
sum insured. There will be a uniform premium of
only 2% to be paid by farmers for all Kharif crops
and 1.5% for all Rabi crops. In case of annual
commercial and horticultural crops, the premium
to be paid by farmers will be only 5%. The
premium rates to be paid by farmers are very low
and balance premium will be paid by the
Government to provide full insured amount to the
farmers against crop loss on account of natural
calamities.
Besides lower premium, the Ministry has proposed
there will not be a cap on the premium and
reduction of the sum insured, 25% of the likely
claim will be settled directly on farmers account,
there will be one insurance company for the entire
state, and farm level assessment of loss for
localised risks and post harvest loss.
INDIAN ECONOMY: AGRICULTURE & RURAL DEMAND
Outlook
The monsoon season 2015 ended with a 14.3% deficit, making it the weakest monsoon since 2009. Howev-
er, better food management by the Government will ensure that food prices remain largely under control.
Going forward, the new crop insurance scheme will act as a buffer as against any adverse monsoon. The
increased payouts under MGNREGA will also act as an enabler for rural demand.
Graph 33: Foodgrain Production (Million Tonnes)
Source: Ministry of Agriculture; SBI Research
200210220230240250260270
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
11
-12
20
12
-13
20
13
-14
20
14
-15
Graph 34: Household Provided Work (% YoY growth)
Source: CMIE; SBI Research
-1 -1
1623
-10
-27
-41 -43-51
-57
-44-32
-27-17 -17
-1
40
63
82
68 64
-80
-60
-40
-20
0
20
40
60
80
100
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Sep-
14
Oct
-14
Nov
-14
Dec
-14
Jan-
15
Feb-
15
Mar
-15
Apr
-15
May
-15
Jun-
15
Jul-1
5
Aug
-15
Sep-
15
Oct
-15
Nov
-15
Dec
-15
Features NAIS MNAIS PM Crop Insurance Scheme
Premium rateLow (3.5%
kharif crops)High (2-15%)
Lower than even NAIS (2% kharif
crops, 1.5% rabi crops, 5% fruits
and horiculture crops)
one season - one premium Yes No Yes
Insurance Amount cover Full Capped Full
On account Payment No Yes Yes
Localised Risk coverage NoHail storm, Land
Slide
Hail storm, Land Slide,
Inundation
Post Harvest Losses coverage NoCoastal areas- for
cyclonic rain
All India- for cyclonic and
unseasonal rain
Prevented Sowing Coverage No Yes Yes
Use of Technology No Intended Mandatory
States covererd 14 6 All India
Awareness No NoYes (target to double coverage to
50% in 3 years up from 23%)
Table 13: Insurance Schemes- Comparison
Source: SBI Research, PIB
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 17
Industrial Growth
The contraction in November Index of Industrial
Production (IIP), at a four-year low of negative
3.2%, compared with 9.9% jump in the previous
month, is on account of seasonal factors and base
effect.
On a moving average basis, average growth during
Sep–Nov’ 15 was at 3.5%, compared to 1.7% for
the 3 months in FY15 (and 0.1% in FY14).
At a disaggregated basis, only 7 out of 22 industry
groups in the manufacturing segment showed
negative growth compared to 10 industry groups
in the corresponding period of the previous year.
However, there is visible threat to core sectors like
steel and aluminum in the face of dumping from
China. We need to carefully watch the emerging
trends for such sectors.
INDIAN ECONOMY: INDUSTRY
Graph 36: SBI Index and IIP Manufacturing
Source: MOSPI; SBI Research; DOC: Date of Commencement
Graph 35: IIP - 3-month Moving Average (%)
Source: MOSPI; SBI Research; DOC: Date of Commencement
-10
-5
0
5
10
15
20
Jan
-12
Ap
r-1
2
Jul-
12
Oct
-12
Jan
-13
Ap
r-1
3
Jul-
13
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
SBI Composite Index (YoY %) IIP Manufacturing (YoY %)
-5
-3
-1
1
3
5
7
9
11
13
15
No
v-13
Jan-
14
Mar
-14
May
-14
Jul-
14
Sep-
14
No
v-14
Jan-
15
Mar
-15
May
-15
Jul-
15
Sep-
15
No
v-15
Mining Manufacturing Electricity General
Wt in
IIP FY09 FY10 FY11 FY12 FY13 FY14 FY15 Apr-Oct FY15 Apr-Oct FY16
Food products and beverages 7.3 -8.2 -1.4 7.0 15.4 2.9 -1.1 4.5 7.1 -6.2
Tobacco products 1.6 4.4 -0.6 2.0 5.4 -0.4 0.8 1.0 3.4 -3.1
Texti les 6.2 -3.6 6.1 6.7 -1.3 5.9 4.4 2.7 2.0 2.9
Wearing apparel ; dress ing and dyeing of fur 2.8 -10.2 1.9 3.7 -8.5 10.4 19.5 5.4 -4.9 11.6
Leather and leather products 0.6 -5.1 1.3 8.1 3.7 7.3 5.2 9.6 8.2 5.4
Wood and wood products 1.1 4.9 3.1 -2.2 1.8 -7.1 -2.2 4.5 0.0 10.2
Paper and paper products 1.0 4.8 2.6 8.6 5.0 0.5 -0.1 2.7 2.1 2.5
Publ ishing, printing 1.1 1.6 -6.0 11.2 29.6 -5.1 0.3 -4.2 -5.8 -8.2
Coke, refined petroleum products & nuclear fuel 6.7 3.2 -1.3 -0.2 3.5 8.5 5.2 0.7 -1.1 4.8
Chemicals and chemical products 10.1 -2.9 5.0 2.0 -0.4 3.8 8.9 -0.2 -1.9 6.1
Rubber and plastics products 2.0 5.1 17.4 10.6 -0.3 0.2 -2.1 4.6 2.6 1.7
Other non-metal l ic minera l products 4.3 3.3 7.8 4.1 4.8 1.9 1.1 2.6 5.2 -0.8
Bas ic metals 11.3 1.7 2.1 8.8 8.7 1.9 0.3 12.7 14.1 4.1
Fabricated metal products 3.1 0.1 10.2 15.3 11.2 -4.7 -7.0 -0.8 -0.9 3.0
Machinery and equipment 3.8 -7.6 15.8 29.4 -5.8 -4.7 -4.7 3.6 3.0 4.3
Accounting & computing machinery 0.3 -9.7 3.8 -5.3 1.6 -13.9 -15.7 -38.0 -39.2 -3.1
Electrica l machinery & apparatus 2.0 42.3 -13.5 2.8 -22.2 0.6 14.5 21.0 21.9 14.7
Radio, TV and communication equipment & apparatus 1.0 20.3 11.3 12.7 4.3 5.6 -27.3 -54.3 -52.6 -7.2Medica l , precis ion & optica l instruments , watches and
clocks0.6 7.5 -15.8 6.8 10.9 -2.0 -5.1 -2.2 -1.7 -6.9
Motor vehicles 4.1 -8.7 29.8 30.2 10.8 -5.3 -9.6 2.4 -2.9 9.2
Other transport equipment 1.8 3.8 27.7 23.2 11.9 -0.1 5.9 6.4 10.5 1.6
Furniture; manufacturing 3.0 7.4 7.1 -7.5 -1.8 -5.1 -13.9 7.4 -2.8 59.1
Overall Manufacturing 75.5 2.5 4.8 9.0 3.0 1.3 -0.8 2.3 1.0 5.1
Table 14: Manufacturing Growth by Sub-Sector
Source: CSO'< 0% Red; 0-4% Yel low; >4% Green
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 18
Status of Projects (Rs 150 crore & above)
As of Sep’15, out of 783 projects (Rs 150 crore and
above), 7 projects are ahead of schedule, 146 pro-
jects are on schedule and 220 projects are de-
layed. 410 projects do not have fixed dates of
commissioning.
Interestingly between Mar’15 and Sep’15, number
of projects that are delayed declined significantly
from 328 to 220.
Total original cost of implementation of the 783
projects was Rs 10.3 lakh crore and their anticipat-
ed completion cost is likely to be Rs 12.5 lakh
crore, which reflects overall cost overruns of Rs
2.1 lakh crore (20.3% of original cost).
Status of Mega Projects (Rs 1,000 crore & above)
As of Sep’15, out of 269 projects, 2 projects were
ahead of schedule, 59 projects were on schedule,
114 projects were delayed with respect to the
original schedule of completion. However, the
number of delayed projects decreases to 96 if de-
lay is calculated on the basis of the latest sched-
ules of completion. Further, for 94 projects antici-
pated date of completion is not available.
The original cost of these 269 projects was report-
ed to be Rs 8.9 lakh crore and the anticipated cost
of these projects was Rs 10.8 lakh crore implying a
cost overrun of 22.0%. Out of 114 delayed pro-
jects, three sectors viz. Power (45), Petroleum (22)
and Railways (21) comprise of 88 projects.
Factors responsible for time overruns: delay in
clearances, lack of supporting infrastructure facili-
ties, change in scope, delay in municipal permis-
sion, delay in shifting of utilities, delay in prepar-
edness of the pre-project activities, delay in supply
of equipment/services, funds constraint, etc.
INDIAN ECONOMY: INVESTMENT
Outlook
The effects of some of the major steps taken by Government like activation of some of the auction allocated
coal blocks and some other mines, road contracts awarded through EPC and hybrid annuity schemes, power
transmission contracts, urban infrastructure projects, etc, will start showing visible results over the next few
months.
Graph 37: Projects Status (Rs 150 crore & above)
Source: MOSPI; SBI Research; DOC: Date of Commencement
123 146
328 220
297 410
Mar-15 Sep-15
On schedule Delayed Ahead of schedule Without DoC
751 783
Delayed projects declined
significantly
Graph 38: Projects Status (Rs 1,000 crore & above)
Source: MOSPI; SBI Research; DOC: Date of Commencement
50 59
144 114
67 94
Mar-15 Sep-15
On schedule Delayed Ahead of schedule Without DoC
262 269
Delayed projects declined
significantly
No. of
Projects
Cost
Overrun (%)
No. of
Projects
Time Overrun
(months)
Atomic Energy 4 28.4 4 17-84 100%
Civi l Aviation 6 5.9 3 6-80 50%
Coal 81 1.2 44 8-104 54%
Ferti l i sers 1 0.0 0 - 0%
Mines 1 0.0 0 - 0%
Steel 24 6.3 9 6-36 38%
Petrochemica ls 1 80.1 1 44-44 100%
Petroleum 64 8.2 37 1-71 58%
Power 106 14.7 59 4-123 56%
Heavy Industry 1 122.8 1 75-75 100%
Rai lways 296 72.8 31 3-261 10%
Road Transport &
Highways160 2.1 16 6-105 10%
Shipping & Ports 6 9.6 3 61-117 50%
Telecommunications 2 0.0 1 61-61 50%
Urban Development 30 3.8 11 2-34 37%
Total 783 20.3 220 - 28%Source: MOSPI; SBI Research
Table 15: Sector-wise Cost and Time Overrun of Projects (Rs 150 crore &
above)Projects On time Projects Delayed % of
delayed
projects
Sectors
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 19
Infrastructure: Demand & Supply
The total investment in infrastructure sector in the
Twelfth Plan is estimated to be at Rs 56.3 lakh
crore (136% more than 11th plan), which is rough-
ly one trillion dollars at prevailing exchange rates.
The share of private investment in the total invest-
ment in infrastructure rose from 22% in the Tenth
Plan to 38% in the Eleventh Plan. It will have to
increase to about 48% during the Twelfth Plan if
the infrastructure investment target is to be met.
Funding Gap: The total requirement of debt by
the public and private sectors is likely to be Rs 27.7
lakh crore. However, the availability of debt fi-
nancing for infrastructure during the Twelfth Plan
is estimated at Rs 22.6 lakh crore. There is a likely
funding gap of about Rs 5.1 lakh crore for the debt
component. Measures would have to be taken for
addressing this gap.
INDIAN ECONOMY: INFRASTRUCTURE
Table 16: Infrastructure Investment & Financing during the 12th Five Year Plan
Items Amount (Rs Cr)
% of Total
Total Infrastructure Investment (C+F) 55,74,663 100%
Govt (Central/State) Budget and Inter-nal generation (A)
19,73,732 35%
Private -Internal Accruals / Equity (B) 8,25,291 15%
Sub-Total / C =(A+B) 27,99,023 50%
Borrowing
Govt PSU (D) 9,17,092 16%
Private (E) 18,58,549 33%
Sub-Total (F=D+E)) 27,75,641 50%
Availability of Borrowing
Domestic Bank Credit 11,64,646 21%
NBFCs 6,18,462 11%
Pension/Insurance funds 1,50,248 3%
External Commercial Borrowings 3,31,834 6%
Likely Total Borrowing (G) 22,65,171 41%
Gap between Estimates and Likely Requirement (G-F)
5,10,470 9%
Source: Planning Commission 2013; SBI Research
Table 17: FDI Easing in Sectors
Sectors Revised Policy Earlier Policy
Broadcasting
Teleports, DTH, Big Cable Networks, Mobile TV & HITS
100% (Automatic: ≤49% and Govt Approval: Beyond 49%)
74% (Automatic: ≤49% and Govt Approval: 49-74%)
Small Cable Networks 100% 49%
Broadcasting Content Services
FM Radio 49% (Govt Route) 26% (Govt Route)
Uplinking of News Channels
Uplinking of Non-News Channels 100% (Automatic) 100% (Govt Route)
Downloading TV Channels 100% (Automatic) 100% (Govt Route)
Other Sectors
Private Banks 74% (all sub-limits removed) 74% with sub-limits
Civil Aviation 100% (for non-scheduled air transport); 49% (for
regional air transport) 74% New Category of Aviation
Defence Automatic: ≤49% and FIPB Approval: Beyond 49%;
Portfolio & Venture capital up to 49% Govt Approved: ≤49%; Portfolio Invest-ment and Foreign Venture Capital: 24%
Plantations 100% in Coffee, Rubber, Cardamom, Palm Oil Planta-
tions 100% in Tea Only
Retail -Single Branded 30% Local Sourcing Rule Relaxed Local Sourcing Rule Applied
Source: PIB; SBI Research
FDI Easing to Send positive signal for Make in India
The relaxation in FDI norms by Government would give crucial fillip to its ‘Make in India’ campaign at least
in four major sectors viz. Construction, Aviation, Defence and Broadcasting. In all these sectors there are
ample opportunities and currently a lot of foreign investors are planning to invest in these sectors. In par-
ticular, the relaxation in construction would help in realizing dream of 100 smart cities while increase in FDI
to 100% in aviation will lead to building of strong air-network in India.
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 20
Corporates Credit Rating performance
After a lull in H113, there is a positive trend in up-
grades to downgrades ratio. As expected, firms
with low leverage have traditionally enjoyed a
better upgrade to downgrade ratio.
Credit quality has improved for firms that are
largely dependent on consumption and exports.
Such firms invariably, are generally found to be
low leveraged.
Critical performance parameters such as operating
profit, EBITDA, net profit and interest coverage
ratio for corporates showed improvement in the
Q2FY16.
Industry Outlook
The Government is promoting start-up funds and
also encouraging brick & mortar companies. Gen-
eration of thermal & renewable power, waterways
and railways are some of the key sectors that will
see action in the road ahead. These sectors are
vital cog in the progress in the economy and im-
proving this is expected to lend impetus to sup-
porting sectors that are likely to benefit the pri-
vate sector too.
In railways, the World Bank would be the anchor
investor in the new formed Railway Development
Fund, which would be used to fund modernisation.
In power generation, NTPC has been undertaking a
good amount of capacity utilization.
It is expected to add 16,330 mw generation capac-
ity by March 2018. Nearly 95% of this capacity is in
the thermal power segment. NTPC is also foraying
into hydel power generation by setting up plants
at Uttarakhand and Himachal Pradesh.
In railway infrastructure, most segments in subur-
ban rail, metro rail, locomotive and rolling stock,
manufacturing and maintenance, signaling and
electric works and dedicated freight lines have
been allowed 100% investment. The Ministry en-
visages US$142 billion in this space to boost Indian
transportation and lend fillip to Make in India initi-
ative.
INDIAN ECONOMY: CORPORATE SECTOR
Graph 39: Ratio of Upgrade to Downgrade
Source: Crisil; SBI Research
0.66 0.62
0.87
0.73
1.64
1.75
2.13
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
H1 FY13 H2 FY13 H1 FY14 H2 FY14 H1 FY15 H2 FY15 H1 FY16
Table 18: Ratio of Upgrade to Downgrade on Size and Leverage
Firm Size/ Leverage
Low Medium High
H1 FY16
Small 6.3 2.4 1.0
Medium 3.9 3.1 0.9
Large 6.8 0.2 0.1
FY15
Small 3.1 2.8 0.7
Medium 4.8 5.7 1.1
Large 4.4 2.6 0.3
Source: CRISIL; SBI Research; Small - Revenue up to Rs.100 cr, Medium - above Rs. 100-500 cr and Large - above Rs. 500 cr
Table 19: State-wise break-up of generation capacity to be added by NTPC during 2015-18
State Capacity (MW)
Madhya Pradesh 4,740
Maharashtra 2.64
Karnataka 2,400
Bihar 1,980
Chhattisgarh 1,600
Odisha 800
Assam 750
Uttarakhand 520
Uttar Pradesh 500
Himachal Pradesh 400
Source: SBI Research
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 21
INDIAN ECONOMY: EXTERNAL SECTOR
Merchandise Trade
Amidst weaker global economy, exports have
been on a declining trend with negative growth
rate since Dec’14. After declining around 1.7% in
FY15, exports have performed poorly this fiscal
with around 18.1% contraction so far.
The decline in Indian exports is also on account of
fall in commodity prices and consequent weak de-
mand in commodity exporting countries. Also de-
pressed commodity prices is hurting exports of
primary items such as cotton and iron ore from
India .
Interestingly, a look at the value and volume index
of exports reveals decline in the value index only
in 2015 but accompanied by continuous increase
in volume index, indicating price effect is higher
than volume effect.
Meanwhile, soft commodity prices have
enabled a reduction in imports with 17.2%
decline during Apr-Nov’15. Oil imports which
account for greater reduction in import bill
witnessed 42.4% decline. Crude oil prices have
declined substantially in H22014 (around 50%) and
continued to slide thereafter.
Trade Diversification
India has diversified its export destinations, in-
creasing exports to the developing countries, sug-
gesting strengthening South-South relations.
If we look at the direction of Indian exports, there
was a clear discerning trend as Indian exports to
Asia and Africa during FY 15 touched US$ 183.8
billion, accounting for around 60% of our total
export basket.
Production networks have been the significant
feature of Asian regional trade and commerce
with goods being processed and value being added
in multiple countries that are part of the chain.
Value added exports including pharmaceuticals,
textiles (excluding readymade garments) and
engineering goods accounted for around 33% of
the total export basket in FY15.
Graph 40: Latest Month Exports Growth of Select
Economies (yoy %)
Source: SBI Research
Graph 41: Exports: Value and Volume Index
(1999-2000 = 100)
Source: SBI Research, CEIC
196
223
268
284
312300
264
304
331
357
378397
20
10
20
11
20
12
20
13
20
14
20
15
Value Index Volume Index
Table 20: India's Exports ($ million)
Destination
Countries 1991-92 2014-15
No of times
increase
China 48.7 11964.7 246X
Saudi
Arabia 353.8 11119.6 31X
Sri Lanka 175.5 6711.8 38X
Vietnam 13.0 6240.8 480X
Bangladesh 326.3 6236.4 19X
Brazil 17.4 5943.0 342X
Malaysia 203.9 5824.2 29X
Turkey 53.5 5356.5 100X
South Africa 1.0 5290.0 5290X
South Korea 246.2 4593.8 19X
Nepal 77.7 4456.3 57X
Iran 123.4 4175.0 34X
Kenya 42.1 4112.5 98X
Indonesia 149.5 4035.0 27X
Thailand 200.1 3458.3 17X
Source: SBI Research, CEIC
-44.0
-17.6-14.8
-11.5 -10.8 -10.4 -10.2
-6.8-4.1 -3.3
-1.6 -0.9
Ru
ssia
Ind
on
esia
Ind
ia
Bra
zil
Ph
ilip
pin
es
Ch
ile
Turk
ey
Ch
ina
Mex
ico
Jap
an UK
US
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 22
INDIAN ECONOMY: EXTERNAL SECTOR
Balance of Payment
After peaking to 4.8% of GDP in FY13, Current ac-
count deficit has narrowed down significantly
thereafter. Restriction on imports, especially gold
and low crude oil prices, enabled India to post a
comfortable CAD in FY14 and FY15.
The improving momentum persisted in FY16 with
CAD declining to -1.2% in Q1.
FY15 recorded a huge surge in net foreign
investment (178% yoy hike) with both direct and
portfolio investment rising. While net FDI reached
an all time high $32.6 billion, net portfolio
investment also peaked to $40.9 billion.
Rising foreign investment has enabled accretion of
comfortable level of forex reserves amounting to
10.3 months of imports in Q2 FY16.
Interest rate differential between Repo and Fed
Funds rate has attracted portfolio inflows in India.
Though the interest rate differential has declined
with increase in US Fed funds rate, it still remains
favorable for India.
External Debt
India’s external debt is at $483.2 billion as on 30
Sep’15, recording an increase of $8.0 billion (1.7%)
over the level at end-March 2015. The rise in ex-
ternal debt during the period was due to long-
term external debt particularly commercial bor-
rowings and NRI deposits.
Meanwhile, the share of short-term debt to total
external debt also continues to slide to 17.8% in
Q2 FY16 from 20.4% in FY11.
However, External Debt to GDP has increased
from 18.2% in FY11 to 23.7% in FY15, but it re-
mains at a comfortable level.
Graph 42: CAD to GDP (%)
Source: SBI Research
-4.9
-1.2-0.9
-0.3
-1.7-2.0
-1.6
-0.2
-1.2-1.6
-3.0
-4.5-4.8
-1.7-1.3
Q1
FY1
4
Q2
FY1
4
Q3
FY1
4
Q4
FY1
4
Q1
FY1
5
Q2
FY1
5
Q3
FY1
5
Q4
FY1
5
Q1
FY1
6
Q2
FY1
6
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
Graph 43: Import Cover (in month) & Forex Reserves
Source: SBI Research
6.7
8.0
10.010.4 10.3
FY1
3
FY1
4
FY1
5
Q1
Q2
FY16
293 304 342 355 351FX Reserves ($ Bn)
Graph 44: Interest Rate Differential & Portfolio Inflows
Source: SBI Research, Bloomberg
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
-7000
-2000
3000
8000
13000
18000
20
08
:Q1
20
08
:Q3
20
09
:Q1
20
09
:Q3
20
10
:Q1
20
10
:Q3
20
11
:Q1
20
11
:Q3
20
12
:Q1
20
12
:Q3
20
13
:Q1
20
13
:Q3
20
14
:Q1
20
14
:Q3
20
15
:Q1
20
15
:Q3
20
16
:Q1
20
16
:Q3
Portfolio Inflows India-US Interest Rate Differential
Outlook
Given weak global economic prospects, exports are expected to remain benign. Furthermore, trade balance will
continue to improve on the back of weak oil prices leading to further reduction in imports in value terms. But
fall in oil prices may impact our exports to Middle-East, especially construction project exports.
Current account deficit will continue to moderate against the backdrop of low commodity prices. Meanwhile,
India will continue to be attractive destination for foreign investment.
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 23
ANNEXURE
Startup India, Standup India
The Prime Minister, Shri Narendra Modi, recently launched the ‘Startup India, Standup India’ movement to
boost start-up businesses, offering them a corpus of Rs 10,000 crore.
Profits earned by start-ups will be exempt from payment of income tax during the first three years of busi-
ness. To boost financing, a 20% tax on capital gains made on investments by entrepreneurs after selling own
assets as well as government-recognised venture capitalists will also be exempt.
Further, an unencumbered easy exit option will be provided under the bankruptcy Act so that start-ups can
exit within 90 days.
PM has also announced a self-certification scheme in respect of nine labour and environment laws and said
there will be no inspection during the first three years of launch of the venture. Also, a liberalised patent re-
gime is being brought to help start-up businesses register patents, for which the fee will be slashed by 80%.
India, which has the third-largest number of start-ups globally, will also support the ventures by removing
the criteria of experience and turnover for bagging government procurement contracts.
Make in India
Government 'Make in India' campaign aims at transforming the country into a global manufacturing hub and
has already made a "tremendous" impact on the investment climate. The initiative was launched in
September 2014 to invigorate the country's manufacturing sector. India received $33.09 billion FDI during
October 2014 to September 2015, a growth of 21% compared to the corresponding period last year.
The notable sectors that received huge inflows are Computer Software & Hardware ($4.9 billion, growth of
285%), Construction Activities ($1.7 billion, growth of 316%) and Automobile Industry ($3.1 billion, growth
of 71%).
Table 21: Impact of Make in India: FDI Inflows in various Sectors (Rs Crore)
Sectors Oct'13 to Sep'14 Oct'14 to Sep'15 % Growth
Fertilizers 1.2 224.4 18445
Sugar 4.1 124.9 2962
Boilers & Steam Generating Plants 1.3 26.1 1861
Paper & Pulp (Including Paper Products) 21.0 144.4 587
Ports 0.3 1.9 494
Construction (Infrastructure) Activities 415.0 1725.4 316
Computer Software & Hardware 1280.6 4931.7 285
Glass 13.9 52.3 276
Information & Broadcasting (Including Print Media) 140.5 514.5 266
Sea Transport 150.4 477.5 218
Earth-Moving Machinery 32.4 86.2 166
Agricultural Machinery 28.2 57.2 102
Miscellaneous Industries 388.9 698.4 80
Miscellaneous Mechanical & Engineering Industries 160.0 283.0 77
Automobile Industry 1842.8 3155.3 71
Hospital & Diagnostic Centres 437.7 711.9 63
Mining 466.2 744.2 60
Leather, Leather Goods & Pickers 17.2 26.2 53
Total 27395.3 33089.7 21
Source: DIPP; SBI Research
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 24
INDIA’S REFORM PROCESS
Sector Reform
Banking, Finance &
Insurance
Plan to Revamp Public Sector Banks (PSB) under ‘Indradhanush’
Allowed PSBs to raise capital from public markets through FPO or QIP by diluting Government holding upto 52% in a phased manner
Payment and Settlement Systems (Amendment) Bill 2014 for establishing a legal framework for regulation of trade repositories and legal entity identifier issuer
FDI limit in Insurance increased to 49%
Social Security Schemes; Jan Dhan to Jan Suraksha
MUDRA Bank to bring finance to 5.7 crore small entrepreneurs
Payment Banks for better financial inclusion through digital technology
Small Finance Banks for sustainable credit flow to priority sectors, small and medium enterprises
Gold monetization schemes to reduce government borrowing cost and use latent sav-ings in gold
Creation of Infrastructure Debt Fund and National Investment and Infrastructure Fund to kick start investment cycle
Notification of Investment Pattern for Non-Government Provident Funds, Superannu-ation Funds and Gratuity Funds to create additional demand for equity funds
Ease of Doing Business Amendment in Companies Act 2013
New de-licensing and de-regulation measures in reducing complexity and significantly
increasing speed and transparency
Major components of Defence products’ list excluded from industrial licensing
Process of obtaining environmental clearances made online
Withdrawing excise and customs duty exemptions presently available to goods
manufactured and supplied to Ministry of Defence by Ordinance Factory Board and
Defence PSUs
FDI in New Sectors India’s high-value industrial sectors - Defence, Construction and Railways - are now
open to global participation
FDI in Defence cap raised from 26% to 49%. Portfolio investment in Defence
permitted upto 24%
100% FDI under automatic route permitted in construction, operation and
maintenance in specified Rail Infrastructure
Upto 100% FDI under the automatic route allowed for port development projects
Manufacturing Make in India programme
Scheme on "Enhancement of Competitiveness in the Indian Capital Goods Sector
launched
National Portal for Online Registration of MSMEs (Udyog Aadhaar) launched
Funds to create additional demand for equity funds
Foreign Trade Policy 2015-
2020
FTP for 2015-20 based on principles such as encouraging the export of labour inten-
sive products, agricultural products, high tech products with high export earning po-
tential and eco-friendly and green products
FTP for 2015-20 has introduced two new schemes: (i) Merchandise Exports from India
Scheme (MEIS) and (ii) Services Exports from India Scheme (SEIS)
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 25
INDIA’S REFORM PROCESS
Sector Reform
Industrial Corridor GOI is building a pentagon of corridors across the country to boost manufacturing as a
Global Manufacturing destination of the world
Delhi-Mumbai Industrial Corridor (DMIC)
24 manufacturing cities envisaged in the DMIC project
Bengaluru-Mumbai Economic Corridor (BMEC), Amritsar-Kolkata Industrial
Development Corridor (AKIC), Chennai-Bengaluru Industrial Corridor (CBIC), East
Coast Economic Corridor (ECEC) with Chennai Vizag Industrial Corridor (CVIC)
Coal Renovation, Modernization and Life Extension of old thermal power generating units
in phased manner is being undertaken
Policy on automatic transfer of linkage in case of scrapping of old units and replacing
them with new supercritical plants
Doubling coal cess from Rs.100 per tonne to Rs.200 per tonne for funding projects
under National Clean Energy Fund
Policy for swapping of coal between State Utilities and Central Power Utilities
1 Billion Tonnes production program of CIL by 2019-20 has been finalized
Coal block auction and allotment under the Coal Mines (Special Provisions) Act, 2015
Online Coal Project Monitoring Portal (CPMP)
Agriculture Pradhan Mantri Fasal Bima Yojana
Initiated process to establish two new Agricultural Universities in Andhra Pradesh and
Rajasthan and two new Horticultural Universities in Telangana and Haryana
Mera Gaon, Mera Gaurav, Krishi Dak
Input subsidy for farmers if 33% or more of their crop is damaged
National Dairy Development Board (NDDB)
Launch of a farmer centric TV channel DD Kisan
Soil Health Card
Adoption of a four-year “Peace Clause” at WTO sanctions to protect India’s agriculture
as India transitions to a new system of food security
Communications & Infor-
mation Technology
Digital India programme—BharatNet in 11 states and Next Generation Network (NGN)
MyGov.in implemented as a platform for citizen engagement in Governance
Swachh Bharat Mission (SBM) Mobile app
e-Sign framework
Online Registration System (ORS)
National Scholarships Portal
Digitize India Platform (DIP)
Electronics Development Fund (EDF) Policy
National Centre for Flexible Electronics (NCFlexE)
Jeevan Pramaan portal for pensioners to submit life certificate
Government of India cloud (GI Cloud) services
Trading in spectrum permitted
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 26
INDIA’S REFORM PROCESS
Sector Reform
Labour Shram Suvidha Portal
Random inspection Scheme
Universal Account number
Apprentice Protsahan Yojana
Revamped Rashtriya Swasthya Bima Yojana
The Labour Law (exemption from furnishing Returns and Maintaining Registers by
Certain Establishments) Act, 2014
The Small Factories (Regulation of Employment & Condition of Service) Bill 2014
Urban Development National Declaration on Housing for All by 2022
100 Smart Cities
Atal Mission for Rejuvenation and Urban Transformation
Swachh Bharat
Deen Dayal Antyodaya Yojana
Tax Reforms Tax rebates given to tax payers by raising the income tax limit
Incentives on both savings and housing investments
MSME A scheme for Promoting Innovation, Entrepreneurship and Agro Industry (ASPIRE)
Introduction of Micro, Small and Medium Enterprises Development (Amendment) Bill,
2015
Export Credit The Government has announced the Interest Equalisation Scheme on Pre and Post
Shipment Rupee Export Credit to eligible exporters, w.e.f. Apr 01, 2015 for five years.
The scheme is available to all exports of MSME and 416 tariff lines. However, the
scheme is not available to merchant exporters.
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 27
ANNEXURE TABLES: GLOBAL ECONOMY
Overview of Global Economy
Real GDP (% Growth) 2016
P 2015
P 2014 2013 2012 2011 2010 2009 2008 2007
World GDP 3.5 3.1 3.4 3.3 3.4 4.2 5.4 0.0 3.1 5.7
Advanced Economies 2.2 2.0 1.8 1.1 1.2 1.7 3.1 -3.4 0.2 2.8
United States 2.8 2.6 2.4 1.5 2.3 1.6 2.5 -2.8 -0.3 1.8
Euro 1.6 1.5 0.9 -0.3 -0.8 1.6 2.0 -4.5 0.5 3.0
Japan 1.0 0.6 -0.1 1.6 1.8 -0.5 4.7 -5.5 -1.0 2.2
United Kingdom 2.2 2.5 3.0 1.7 0.7 1.6 1.9 -4.3 -0.3 2.6
Emerging & Developing Economies 4.5 4.0 4.6 5.0 5.2 6.2 7.4 3.1 5.8 8.7
Russia -0.6 -3.8 0.6 1.3 3.4 4.3 4.5 -7.8 5.2 8.5
China 6.3 6.8 7.3 7.7 7.8 9.3 10.4 9.2 9.6 14.2
India 7.5 7.3 7.3 6.9 5.1 6.6 10.3 8.5 3.9 9.8
Brazil -1.0 -3.0 0.1 2.7 1.8 3.9 7.6 -0.2 5.0 6.0
South Africa 1.3 1.4 1.5 2.2 2.2 3.2 3.0 -1.5 3.2 5.4
Average Consumer Prices (% Growth)
World 3.4 3.3 3.5 3.9 4.2 5.2 3.8 2.8 6.4 4.4
Advanced Economies 1.2 0.3 1.4 1.4 2.0 2.7 1.5 0.1 3.4 2.2
United States 1.1 0.1 1.6 1.5 2.1 3.1 1.6 -0.3 3.8 2.9
Euro 1.0 0.2 0.4 1.3 2.5 2.7 1.6 0.3 3.3 2.2
Japan 0.4 0.7 2.7 0.4 0.0 -0.3 -0.7 -1.3 1.4 0.1
United Kingdom 1.5 0.1 1.5 2.6 2.8 4.5 3.3 2.2 3.6 2.3
Emerging & Developing Economies 5.1 5.6 5.1 5.8 6.1 7.3 5.9 5.3 9.4 6.6
Russia 8.6 15.8 7.8 6.8 5.1 8.4 6.9 11.7 14.1 9.0
China 1.8 1.5 2.0 2.6 2.6 5.4 3.3 -0.7 5.9 4.8
India 5.5 5.4 5.9 10.0 10.2 9.4 9.5 10.6 9.2 5.9
Brazil 6.3 8.9 6.3 6.2 5.4 6.6 5.0 4.9 5.7 3.6
South Africa 5.9 4.8 6.1 5.8 5.7 5.0 4.3 7.1 11.5 7.1
Current Account Balance (% of GDP)
Advanced Economies 0.3 0.5 0.4 0.4 0.0 -0.1 0.0 -0.2 -1.3 -0.9
United States -3.0 -2.6 -2.2 -2.3 -2.8 -3.0 -3.0 -2.6 -4.7 -5.0
Euro 3.0 3.2 2.0 1.8 1.2 0.1 0.1 -0.2 -1.6 0.1
Japan 3.0 3.0 0.5 0.8 1.0 2.2 4.0 2.9 2.9 4.9
United Kingdom -4.3 -4.7 -5.9 -4.5 -3.7 -1.7 -2.6 -2.8 -3.7 -2.7
Emerging & Developing Economies -0.2 -0.1 0.5 0.6 1.3 1.5 1.2 1.3 3.5 3.8
Russia 5.4 5.0 3.2 1.6 3.5 5.1 4.4 4.1 6.3 5.5
China 2.8 3.1 2.1 1.6 2.5 1.8 3.9 4.8 9.2 10.1
India -1.6 -1.4 -1.3 -1.7 -4.8 -4.2 -2.8 -2.8 -2.3 -1.3
Brazil -3.8 -4.0 -4.4 -3.8 -3.5 -2.8 -3.5 -1.5 -1.7 0.1
South Africa -4.5 -4.3 -5.4 -5.8 -5.0 -2.2 -1.5 -2.7 -5.5 -5.4
Gross National Savings (% of GDP)
Advanced Economies 21.2 21.5 21.7 21.4 21.2 20.8 20.3 19.2 21.1 22.5
United States 17.7 18.2 18.8 18.2 17.7 15.7 15.0 14.3 15.4 17.3
Euro 23.0 22.9 22.7 22.3 22.2 22.3 21.5 20.8 22.9 24.3
Japan 24.3 24.8 22.4 22.0 21.9 22.4 23.8 22.6 25.9 27.8
United Kingdom 13.4 12.8 11.9 12.5 12.6 14.6 13.7 12.3 14.3 16.3
Emerging & Developing Economies 31.7 31.9 32.1 32.0 32.8 33.0 32.3 31.3 33.4 32.8
Russia 23.5 23.7 23.1 23.3 27.2 29.5 26.1 21.3 30.3 30.9
China 45.9 47.4 48.5 48.2 49.1 48.8 50.9 50.6 51.9 50.9
India 29.0 29.3 30.2 30.8 31.5 34.7 33.7 33.7 32.0 36.8
Brazil 12.9 14.0 15.6 17.2 16.8 19.0 18.3 17.5 20.1 20.1
South Africa 15.3 15.6 14.9 14.4 15.1 17.0 18.0 18.0 17.6 15.6
Source: IMF WEO Oct'15, SBI Research
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 28
ANNEXURE TABLES: INDIAN ECONOMY
Macro-Economic Indicators FY15 FY14 FY13 FY12 FY11 FY10 FY09 FY08 FY07 FY06 FY05
I. National Income (Growth %)
GDP 7.3@ 6.9@ 5.1@ 6.7 8.9 8.6 6.7 9.3 9.6 9.5 7.0
Agriculture 1.1$ 3.8$ 1.7$ 5.0 8.6 0.8 0.1 5.8 4.2 5.1 0.2
Food grains (Million Tonnes) 257.1 264.4 257.1 259.3 244.8 218.1 234.5 230.8 217.3 208.6 198.4
Industry# 6.0$ 5.1$ 5.0$ 6.7 8.3 10.2 4.1 9.2 12.9 8.5 7.5
Services# 10.0$ 8.1$ 5.9$ 7.1 9.2 10.0 9.4 10.3 10.1 11.1 9.1
Saving (% of GDP) … 30.0* 31.1* 33.0* 33.7 33.7 32.0 36.8 34.6 33.4 32.4
Investment (% of GDP) … 32.3 36.6 38.2 36.5 36.5 34.3 38.1 35.7 34.7 32.8
II. Inflation (%YoY)
All commodities 2.0 5.9 7.4 8.9 9.6 3.8 8.1 4.7 6.6 4.4 6.5
Primary articles 3.0 9.9 9.8 9.8 17.7 12.7 11.0 8.3 9.6 4.3 3.6
Fuel & Power -1.0 10.1 10.3 14.0 12.3 -2.1 11.6 0.0 6.5 13.5 10.1
Manufactured products 2.4 2.9 5.4 7.3 5.7 2.2 6.2 4.8 5.7 2.4 6.3
CPI-IW 6.3 9.7 10.4 8.4 10.5 12.2 9.1 6.2 6.7 4.4 3.8
CPI All India 5.9 9.4 9.9 … … … … … … … …
III. Fiscal Situation (as % of GDP)
Total receipts 13.3 14.0 13.9 14.5 15.3 15.8 14.9 14.8 13.5 14.3 15.6
Direct tax 5.5 5.6 5.5 5.4 5.8 5.8 5.9 6.3 5.4 4.5 4.1
Indirect tax 4.3 4.6 4.7 4.3 4.5 3.8 4.8 5.6 5.7 5.5 5.3
Total expenditure 13.3 13.8 13.9 14.5 15.6 15.9 15.7 14.3 13.6 13.7 15.4
Subsidies 2.1 2.3 2.5 2.4 2.3 2.2 2.3 1.4 1.3 1.3 1.4
Fiscal deficit 4.0 4.6 4.8 5.8 4.9 6.5 6.0 2.5 3.3 4.0 3.9
Revenue deficit 2.9 3.2 3.6 4.4 3.3 5.2 4.5 1.1 1.9 2.5 2.4
IV. Money and Banking (%YoY)
Reserve Money (M0) 11.3 14.4 6.2 3.6 19.1 17.0 6.4 31.0 23.9 16.9 12.1
Money Supply (M3) 11.1 13.3 13.9 13.2 16.1 16.9 19.3 21.4 21.7 21.1 12.0
Aggregate Deposits 10.7 14.1 14.2 13.5 15.9 17.2 19.9 22.4 23.8 24.0 13.0
Demand Deposits 12.5 7.8 5.9 -2.6 -0.6 23.4 -0.2 22.0 17.9 47.0 10.2
Time Deposits 11.3 15.3 15.2 15.7 18.7 16.2 23.9 22.5 25.1 20.1 13.5
Bank credit 9.0 13.9 14.1 17.0 21.5 16.9 17.5 22.3 28.1 37.0 30.9
V. External Sector (in $ billion)
Exports 316.7 318.6 306.6 309.8 250.5 182.4 189.0 166.2 128.9 105.2 85.2
% YoY -0.6 3.9 -1.0 23.7 37.3 -3.5 13.7 28.9 22.5 23.5 28.5
Imports 460.9 466.2 502.2 499.5 381.1 300.6 308.5 257.6 190.7 157.1 118.9
% YoY -1.1 -7.2 0.5 31.1 26.8 -2.6 19.8 35.1 21.4 32.1 48.6
Trade Balance -144.2 -147.6 -195.7 -189.8 -130.6 -118.2 -119.5 -91.5 -61.8 -51.9 -33.7
Invisibles 116.4 115.2 107.5 111.6 84.6 80.0 91.6 75.7 52.2 42.0 31.2
Current Account Balance -27.5 -32.4 -87.8 -78.2 -45.9 -38.2 -27.9 -15.7 -9.6 -9.9 -2.5
Net FDI 32.6 21.6 19.8 22.1 9.4 18.0 22.4 15.9 7.7 3.0 3.7
Forex Reserves 341.4 304.2 292.0 294.4 304.8 279.1 252.0 309.7 199.2 151.6 141.5
External Debt 475.8 446.3 409.4 360.8 317.9 260.9 224.5 224.4 172.4 139.1 134.0
(As % of GDP)
Exports 15.4 17.0 16.8 16.8 14.9 13.4 15.4 13.4 13.6 13.0 12.1
Imports 22.5 24.8 27.5 27.0 22.6 22.1 25.2 20.8 20.1 19.4 16.9
Trade Balance -6.6 -7.8 -10.7 -10.2 -7.7 -8.7 -9.8 -7.4 -6.5 -6.4 -4.8
Invisibles 5.7 6.1 5.9 6.0 5.0 5.9 7.5 6.1 5.5 5.2 4.4
Current Account Balance -1.3 -1.7 -4.8 -4.2 -2.7 -2.8 -2.3 -1.3 -1.0 -1.2 -0.4
VI. Financial Markets (Avg %)
Call rate 7.7 8.1 8.0 8.0 5.8 3.2 7.1 6.1 7.2 5.6 4.7
1-yr AAA corporate bond 8.6 9.4 9.2 9.6 8.1 6.1 9.8 9.3 8.5 6.7 5.5
Yield on 10-yr G-sec (%) 8.3 8.3 8.2 8.4 7.9 7.3 7.6 7.9 7.8 7.2 6.3
Exchange Rate (INR/USD) 61.2 57.5 54.4 47.9 45.6 47.4 45.9 40.2 45.3 44.3 44.9
BSE Sensex return 24.9 18.4 8.2 -10.5 10.9 80.5 -37.9 19.7 15.9 73.7 16.1
Oil price (Indian Basket, US$/bbl.) 84.0 105.5 107.7 111.6 84.6 69.1 83.1 78.8 62.1 55.5 38.6
Source: RBI, MOSPI, SBI Research, #RBI Classification, *Gross Saving to GNDI,$ GVA at Basic Prices & @ GDP at 2011-12 Prices
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 29
ANNEXURE TABLES: INDIAN ECONOMY
Macro-Economic Indicators
Quarterly Sep-15 Jun-15 Mar-15 Dec-14 Sep-14 Jun-14 Mar-14 Dec-13 Sep-13 Jun-13
I. National Income (Growth %)
GVA at Basic Prices 7.4 7.1 6.1 6.8 8.4 7.4 5.3 6.6 7.5 7.2
Agriculture 2.2 1.9 -1.4 -1.1 2.1 2.6 4.4 3.8 3.6 2.7
Industry* 8.3 6.4 7.2 3.8 7.2 8.1 5.5 5.5 4.2 5.9
Services * 8.0 8.6 8.0 11.1 10.2 8.4 5.6 8.3 9.7 8.9
II. External Sector ($ billion)
Exports 67.6 68.0 70.8 79.0 85.3 81.7 83.7 79.8 81.2 73.9
Imports 105.0 102.2 102.5 118.2 123.8 116.4 114.3 112.9 114.5 124.4
Trade Balance -37.4 -34.2 -31.7 -39.2 -38.6 -34.6 -30.7 -33.2 -33.3 -50.5
Invisibles 29.2 28.0 30.2 30.9 28.5 26.8 29.3 29.1 28.1 28.7
Net FDI 6.6 10.2 9.6 7.4 8.5 8.3 0.9 6.1 6.9 6.5
Forex Reserves 350 355 341 320 314 316 299 296 276 285
CAD -8.2 -6.2 -1.5 -8.4 -10.1 -7.9 -1.3 -4.1 -5.2 -21.8
Source: RBI, SBI Research, *As per RBI Classification, GDP at 2011-12 Base Year
Macro-Economic Indicators
Monthly Dec-15 Nov-15 Oct-15 Sep-15 Aug-15 Jul-15 Jun-15 May-15 Apr-15 Mar-15 Feb-15 Jan-15 Dec-14
I. Industry and inflation (%YoY)
SBI Composite Index 52.0 54.5 53.5 53.9 53.4 49.7 53.2 56.5 58.5 54.6 53.4 51.8 52.9
IIP … -3.2 9.9 3.8 6.3 4.3 4.2 2.5 3.0 2.5 4.8 2.8 3.6
Core Sector … -1.3 3.2 3.2 2.6 1.1 3.0 4.4 -0.4 -0.1 1.4 1.8 2.4
Markit PMI (Manufacturing) 49.1 50.3 50.7 51.2 52.3 52.7 51.3 52.6 51.3 52.1 51.2 52.9 54.5
Overall WPI -0.7 -2.0 -3.7 -4.6 -5.1 -4.0 -2.1 -2.20 -2.4 -2.3 -2.2 -0.9 -0.5
Primary articles 5.5 2.3 -0.4 -2.3 -4.2 -4.0 -0.5 -1.1 0.5 -0.2 1.0 1.4 0.3
Fuel & power -9.1 -11.1 -16.3 -17.7 -16.2 -11.6 -8.9 -9.4 -13.0 -12.2 -14.8 -11.0 -7.8
Manf. products -1.4 -1.4 -1.7 -1.7 -2.0 -1.5 -0.8 -0.5 -0.5 -0.2 0.3 1.0 1.4
Core WPI -2.0 -1.9 -2.1 -1.9 -1.9 -1.5 -0.8 -0.57 -0.41 -0.4 0.1 0.9 1.4
Imported Inflation -4.1 -5.4 -7.9 -8.9 -8.8 -6.7 -4.8 -5.2 -6.8 -6.7 -7.5 -5.9 -4.5
Corporate Pricing Power Index -0.3 -0.6 -0.9 -1.1 -1.1 -0.7 0.1 0.0 -0.1 -0.1 0.2 1.0 1.5
Pass-through Index -8.4 -11.9 -18.4 -21.3 -20.3 -15.2 -11.4 -12.7 -17.3 -16.8 -19.8 -16.4 -12.5
CPI-IW … 6.7 6.3 5.1 4.4 4.4 6.1 5.7 5.8 6.3 6.3 7.2 5.9
CPI (Combined) 5.6 5.4 5.0 4.4 3.7 3.7 5.4 5.0 4.9 5.3 5.4 5.2 4.3
CPI-Rural 6.3 5.9 5.5 5.0 4.5 4.4 6.1 5.5 5.3 5.7 5.8 5.3 4.2
CPI-Urban 4.7 4.7 4.3 3.6 2.8 2.9 4.6 4.4 4.4 4.7 5.0 5.0 4.5
Vehicle sales (Commercial) 13.6 7.0 12.3 9.8 10.6 10.0 3.5 7.3 8.1 2.3 7.8 6.5 9.9
Car sales (Domestic) 12.9 10.4 21.8 9.5 6.1 17.5 1.5 7.7 18.1 2.6 6.9 3.1 15.3
II. Money and Banking (%)
Repo Rate 6.75 6.75 6.75 6.75 7.25 7.25 7.25 7.50 7.50 7.50 7.75 7.75 8.00
MSF 7.75 7.75 7.75 7.75 8.25 8.25 8.25 8.50 8.50 8.50 8.75 8.75 9.00
CRR 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
SLR 21.50 21.50 21.50 21.50 21.50 21.50 21.50 21.50 21.50 21.50 21.50 22.00 22.00
Base Rate (Range) 9.30-
9.70
9.30-
9.70
9.30-
9.70
9.70-
10.00
9.70-
10.00
9.70-
10.00
9.70-
10.00
9.75-
10.00
9.75-
10.25
10.00-
10.25
10.00-
10.25
10.00-
10.25
10.00-
10.25
Term deposit rate > 1 Year 7.00-
7.90
7.00-
7.90
7.00-
7.90
7.25-
8.00
7.25-
8.00
7.75-
8.25
8.00-
8.50
8.00-
8.50
8.00-
8.50
8.00-
8.75
8.00-
8.75
8.00-
8.75
8.00-
9.00
Reserve Money (M0) 14.2 13.2 11.2 12.0 8.3 10.2 10.3 11.2 11.9 7.7 10.8 10.3 9.4
(%YoY)
Money Supply (M3) 11.0 10.7 10.9 11.0 11.3 11.5 11.1 11.0 11.0 11.1 11.5 11.2 10.7
(%YoY)
Bank Credit (%YoY) 11.1 9.8 9.0 9.6 9.5 9.4 9.8 9.8 9.8 9.5 10.4 10.7 10.1
Agg. Deposits (%YoY) 10.9 10.4 11.1 11.2 11.9 11.8 11.7 11.5 11.4 11.4 11.9 11.6 10.8
Average LAF (Rs Bn) -194.1 -203.9 -59.4 -11.2 -107.5 -206 -26.0 -251.7 -116.8 -74.0 -239.2 -265.2 -305.4
Source: RBI, CGA, SBI Research
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 30
ANNEXURE TABLES: INDIAN ECONOMY
Macro-Economic Indicators
Dec-15 Nov-15 Oct-15 Sep-15 Aug-15 Jul-15 Jun-15 May-15 Apr-15 Mar-15 Feb-15 Jan-15 Dec-14
III. Financial Markets (Avg %)
Call rate 6.4 6.5 6.7 7.0 7.0 7.0 6.8 7.1 7.1 7.3 7.9 7.2 7.9
91-day T-bill 7.2 7.1 7.1 7.4 7.4 7.5 7.7 7.7 7.9 8.3 8.3 8.3 8.3
Yield on 10-yr G-sec 7.8 7.7 7.6 7.7 7.8 7.8 7.8 7.9 7.8 7.8 7.7 7.8 7.9
SBI Base Rate 9.30 9.30 9.30 9.30 9.70 9.70 9.70 9.85 9.85 10.00 10.0 10.0 10.0
CP-3 month 7.8 7.7 7.6 7.9 7.8 8.0 8.15 8.5 8.5 9.0 9.1 8.8 8.6
CD-1 year 7.4 7.3 7.2 7.5 7.5 8.5 8.7 8.9 8.8 9.0 9.1 9.0 9.0
AAA corporate spread – 10 yr
(in bps) 45.4 30.2 37.1 76.7 53.5 64.5 58.1 69.6 32.2 47.8 51.9 50.0 58.1
BSE Sensex Return -0.1 -1.9 1.9 -0.5 -6.5 1.2 -0.2 3.0 -3.4 -4.8 0.6 6.1 -4.2
IV. External Sector
Exports ($ billion) 22.3 20.0 21.4 21.8 21.3 23.1 22.3 22.3 22.1 24.0 21.5 23.9 26.2
Exports (%YoY) -14.7 -24.4 -17.5 -24.3 -20.7 -10.3 -15.8 -20.2 -14.0 -21.1 -15.0 -11.2 -0.9
Imports ($ billion) 34.0 29.8 31.1 32.2 33.7 35.9 33.1 32.8 33.0 35.7 28.4 32.2 35.3
Imports (%YoY) -3.9 -30.3 -21.2 -25.4 -9.9 -10.3 -13.4 -16.5 -7.5 -13.4 -15.7 -11.4 -3.4
Trade Deficit ($ billion) -11.7 -9.8 -9.8 -10.5 -12.5 -12.8 -10.8 -10.4 -11 -11.8 -6.8 -8.3 -9.2
FDI ($ Million) … 2701 4912 2773 2226 1735 1681 3751 3306 1714 3793 4687 3459
FII ($ Million) -1243 -1641 3444 -874 -2645 842 -250 -2235 2441 3337 3966 5453 1998
Equity -419 -1071 1023 -978 -2549 840 -521 -904 1870 1948 1852 2104 192
Debt -824 -570 2421 105 -96 2 272 -1331 570 1389 2113 3349 1807
NRI Deposits Outstanding
($ billion) … 121.2 122.5 121.8 119.4 120.6 119.9 118.5 116.4 115.2 114.4 113.6 110.0
Forex Reserves ($ billion) 352 351.6 353.6 350 351.9 353.5 355.2 352.5 344.6 341.4 338.1 328 320
REER (Base: 2004-05) 124.7 125.3 124.9 122.2 123.9 125.5 123.7 123.4 125.7 126.0 124.3 123.0 119.7
Exchange Rate (INR/USD) 66.58 66.14 65.04 66.2 65.08 63.65 63.84 63.79 62.76 62.48 62.03 62.24 62.74
Oil (Indian basket, USD / bbl) 35.8 42.7 46.8 46.1 47.2 56.3 61.8 63.6 59.2 55.6 57.5 46.4 61.2
V. Fiscal situation (as % of
budgeted) Nov-15 Oct-15 Sep-15 Aug-15 Jul-15 Jun-15 May-15 Apr-15 Mar-15 Feb-15 Jan-15 Dec-14 Nov-14
Total receipts 53.9 50.0 43.5 21.7 17.7 11.8 4.4 2.2 97.8 73.3 60.9 55.7 43.4
of which tax revenue 50.5 46.6 40.2 19 16.7 11.1 2.2 -0.3 99.3 71.7 60.9 55.8 42.3
Corporation Tax 43.3 42.1 38.8 17.3 14.1 11.1 0.2 -0.9 95.1 66.9 63.8 61.6 41.8
Taxes on Income 48.1 44.4 38.2 26.0 19.3 14.0 9.9 6.2 90.9 70.2 64.1 58.6 49.3
Customs 66.7 58.5 49.7 40.9 31.9 22.6 14.4 6.9 93.2 83.0 75.2 67.2 59.6
Union Excise Duties 63.7 53.7 44.8 34.9 25.3 16.3 5.9 -1.2 91.3 67.8 57.0 49.2 41.5
Total Expenditure 64.3 57.5 51.2 37.5 33.8 24.2 14.8 8.7 97.8 86.8 74.6 68.9 59.8
Non-plan Expenditure 64.3 57.2 50 40.6 33.8 24.1 15.3 9.1 98.2 87.2 79.4 72.4 64.0
Revenue Account 64.9 57.8 50.7 40.9 33.9 23.9 15.0 8.6 98.1 87.1 80.8 73.0 64.7
Capital Account 57.6 50.3 42.7 37.4 32.4 26 18.2 14.3 99.5 88.8 64.1 67.0 56.3
Plan Expenditure 64.1 58.2 54.6 30.9 33.9 24.7 13.4 7.6 96.9 85.8 64.3 61.3 51.1
Revenue Account 60.7 54.8 51.8 30.8 32.2 25.4 13.3 7.3 97.4 87.9 64.8 62.2 51.0
Capital Account 72.3 66.5 61.2 31.4 38.2 23 13.6 8.2 95.1 78.1 62.7 57.9 51.2
Fiscal Deficit 87.0 74.0 68.1 74.9 69.3 51.6 37.5 23 97.9 117.5 107 100.2 98.9
Revenue Deficit 87.5 72.9 68.2 85.8 77.6 58.6 43.8 26.1 98.8 133.3 116.7 106.2 108.6
Source: RBI, CGA, FIMMDA, SBI Research
Prepared By Economic Research Department, State Bank of India, Corporate Centre, Mumbai 31
Contact Details
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Mumbai - 400 021
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Email: [email protected]
Disclaimer: The report is not a priced publication of the Bank. The opinions expressed in the
publication, are that of the Research Team and not necessarily reflect those of the Bank or its
subsidiaries. The contents can be reproduced with proper acknowledgement. The write-up on Economic
& Financial Developments is based on information & data procured from various sources and no
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Economic Research Team
Name Designation Email
Dr. Soumya Kanti Ghosh Chief Economic Advisor [email protected]
Disha Kheterpal Economist [email protected]
Saket Hishikar Economist [email protected]
Shambhavi Sharma Economist [email protected]
Sumit Jain Economist [email protected]
Tapas Kumar Parida Economist [email protected]
Poonam Sharma Statistician [email protected]