THE GLOBAL SCENARIO Global Growth: Modest signs of recovery
(Growth in per cent) |
|
Jan-09 |
Apr-09 |
July-09 |
Aug-09 |
Oct-09 |
Global |
2009 |
0.5 |
-1.3 |
-1.4 |
-1.3 |
-1.1 |
2010 |
3.0 |
1.9 |
2.5 |
2.9 |
3.1 |
Advanced Economies |
2009 |
-2.0 |
-3.8 |
-3.8 |
-3.7 |
-3.4 |
2010 |
1.1 |
0.0 |
0.6 |
1.0 |
1.3 |
Emerging and Developing Economies |
2009 |
3.3 |
1.6 |
1.5 |
1.5 |
1.7 |
2010 |
5.0 |
4.0 |
4.7 |
5.0 |
5.1 |
India |
2009 |
5.1 |
4.5 |
5.4 |
5.3 |
5.4 |
2010 |
6.5 |
5.6 |
6.5 |
6.5 |
6.4 |
| Source: International Monetary Fund. |
Global Inflation: Asymmetric patterns
Y-o-Y Per cent |
|
Nov-08 |
Mar-09 |
Nov-09 |
Developed Economies |
US |
1.1 |
-0.4 |
1.8 |
UK |
4.1 |
2.9 |
1.9 |
Euro Area |
2.1 |
0.6 |
0.5 |
Japan^ |
1.7 |
-0.3 |
-2.5 |
Canada^ |
2.6 |
1.2 |
0.1 |
Australia |
5.0* |
2.5 |
1.3* |
Developing Economies |
China^ |
4.0 |
-1.2 |
-0.5 |
Korea |
4.5 |
3.9 |
2.4 |
Thailand |
2.2 |
-0.2 |
1.9 |
Malaysia^ |
7.6 |
3.5 |
-1.6 |
India (Industrial Workers)^ |
10.4 |
8.0 |
11.5 |
India (Agricultural Labourers) |
11.1 |
9.5 |
15.7 |
Indonesia |
11.7 |
7.9 |
2.4 |
Philippines |
9.9 |
6.4 |
2.8 |
Brazil |
6.4 |
5.6 |
4.2 |
Israel^ |
5.5 |
3.6 |
2.9 |
Russia |
12.2 |
14.0 |
9.1 |
South Africa^ |
12.1 |
8.5 |
5.9 |
^: October* : Quarterly figures for Q3. |
THE DOMESTIC SCENARIO Growth: Sectoral Contributions Reverting to “Normal”
Growth: Govt. Expenditure dominates, but slight pick-up in private spending
Industrial Production: Driven by Durables
(Growth rate in per cent) |
Sector |
Weight in IIP |
2007-08 |
2008-09 |
April-October |
2008-09 |
2009-10 |
IIP |
100 |
8.5 |
2.7 |
4.3 |
7.1 |
Basic Goods |
35.6 |
7.0 |
2.6 |
3.8 |
6.4 |
Capital Goods |
9.3 |
18.0 |
7.3 |
9.7 |
6.3 |
Intermediate Goods |
26.5 |
8.9 |
-1.9 |
-0.3 |
10.2 |
Consumer Goods |
28.7 |
6.1 |
4.7 |
6.4 |
5.5 |
i) Consumer Durables |
5.4 |
-1.0 |
4.5 |
5.8 |
19.4 |
ii) Consumer Non- |
23.3 |
8.5 |
4.8 |
6.6 |
0.8 |
Industrial Production: Asymmetric recovery
Inflation: Food-driven but signs of spread
Inflation: Asymmetric impact on consumers
Credit Growth: Recovering, but slowly
| Sector/Industry |
Outstanding October 2009 |
Year-on-Year Variation |
| (%) Oct-08 |
Oct-09 |
| (Rs. crore) |
Per cent |
Per cent |
1 |
2 |
4 |
6 |
Non-Food Bank Credit (1 to 4) |
26,87,002 |
29.4 |
9.9 |
1.Agri. & Allied Activities |
3,37,416 |
23.4 |
19.9 |
2.Industry |
11,45,142 |
37.4 |
14.8 |
3.Personal Loans |
5,62,754 |
15.0 |
-0.1 |
of which: Housing |
2,88,770 |
11.0 |
6.2 |
4. Services |
6,41,690 |
35.5 |
6.3 |
of which: Trade |
1,53,463 |
20.7 |
14.4 |
Real Estate |
88,288 |
44.2 |
21.2 |
NBFC |
1,04,658 |
60.5 |
20.8 |
Interest Rates: Sticky despite sluggish pvt. spending
Liquidity: Comfortable, at an aggregate level
Drivers of Recovery: Monetary Policy
Policy Measure |
Change |
Reverse repo rate |
-275 bps |
Repo rate |
-425 bps |
CRR |
-400 bps |
SLR SLR |
100 b -100 bps |
| Actual/potential liquidity – CRR, MSS, special facilities |
Rs.5617 billion (9% of GDP)(9% of GDP) |
Other measures: |
Relaxation in prudential norms, Restructuring,
Relaxation in ECB norms,
Higher ceilings for NRI deposits |
Drivers of Recovery: Fiscal Policy
| |
% to GDP |
Item |
2008-09 |
2009-10 |
Tax reductions |
0.2 |
0.4 |
Investment |
0.8 |
0.1 |
Pay Commission Impact |
0.5 |
0.3 |
Other Expenditure |
0.9 |
1.0 |
Total |
2.4 |
1.8 |
| Debt waiver |
0.3 |
- |
BoP: In Balance
| |
2007-08 |
2008-09 |
2008-09 |
2009-10 |
Item |
US$ billion |
(% to GDP) |
US$ billion |
(% to GDP) |
April-June
(US$ billion) |
Exports |
166 |
14.2 |
175 |
15.1 |
49 |
39 |
Imports |
258 |
22.0 |
295 |
25.5 |
81 |
65 |
Trade Balance |
-92 |
-7.8 |
-119 |
-10.3 |
-31 |
-26 |
Invisibles |
75 |
6.4 |
90 |
7.7 |
22 |
20 |
Current A/c |
-17 |
-1.5 |
-30 |
-2.6 |
-9 |
-6 |
Capital A/c |
108 |
9.2 |
9 |
0.8 |
11 |
7 |
Overall Balance * |
92 |
7.9 |
-20 |
-1.7 |
2 |
0 |
*: Including errors and omissions. |
Drivers, Risks and Policy Considerations Drivers
Risks Growth pattern is skewed
Food inflation racing ahead
- As capacity constraints emerge, dangers of an expectations-induced spiral
High interest rates – restraining credit flows? Potential surge in capital inflows
- Global liquidity and domestic recovery
Policy Considerations From “Managing Crisis” to “Managing Recovery”
- Shift from predominant growth focus to balance between growth and inflation in Oct 2009 announcement
Inflation Risks
- As growth accelerates, supply-side drivers could translate into wider pressures
Maintenance of Adequate Liquidity
- Supporting the recovery by ensuring that liquidity does not become a constraint
Thank You |
