assocham economic review - july 31 2011

8/3/2019 Assocham Economic Review - July 31 2011

1/19

ASSOCHAMEconomicReview

For the Week Ended

July 31, 2011

Prepared by:

ASSOCHAM Research Bureau


2/19

SectionECONOMY

India's core industries output growth up 5.2 percent in June

Fiscal deficit surges four-fold in April-June, 2011

Food inflation moderation trend continued for yet another week

India- UK Reaffirms their Commitment to Strengthen their Economic and

Financial Relations

POLICY

First Quarter Review of Monetary Policy 2011-12: RBI

REPORT

Rising prices hurt Asia's growth - ADB

2010 Global FDI Inflows up 5%; India slips to 14th spot: UNCTAD

INTERNATIONAL

UK economy slows to 0.2% growth

Australia's inflation accelerates on rising food prices

US recovery has slowed, says FedS&P further downgrades Greece credit rating into junk status

China wealth fund sees nearly 12% return

MARKETS


3/19

ECONOMYIndia's core industries output growth up 5.2 percent in June

The Index of Eight core industries having a combined weight of 37.90 per cent inthe Index of Industrial Production (IIP) with base 2004-05 registered a growth of5.2 per cent in June 2011 as compared to 4.4 per cent in the same period last year.However, the growth of eight key infrastructure industries is less than the 5.3 percent growth achieved in May. Also, for the first quarter of current financial year,the Index of eight core industries grew by only 5.0 per cent as compared to 6.8per cent during the corresponding period of previous fiscal year.

Despite the unfavorable environment of growth, such as high inflation rate andincreasing interest rates, the production of eight core industries has more or lessbeen able to maintain its pace of growth. Also, the high global commodity priceshave acted as a barrier to the industrys faster expansion.

The government has added two more sectors - natural gas and fertilisers to theexisting six industry segments. With the inclusion of these two sectors, the coreindustries now cover the sectors such as crude oil, petroleum refinery products,natural gas, fertilisers, coal, electricity, cement and steel. Also, its weightage nowaccount for 37.9 percent in the overall index of industrial production, ascompared to 26.7 percent earlier.

According to provisional data released by the Ministry of Commerce & Industryon July 29, production of steel, electricity, crude oil and petroleum refineryproducts, saw positive growth in the month of June, 2011. On the other hand, theremaining sectors such as natural gas, coal, fertilizers and cement saw a negativegrowth.


4/19

Steel production registered a growth of 12.5% in June 2011 compared to 4.3% inJune 2010. In addition to Steel, the remaining three sectors also reported bettergrowth during the month. Electricity generation registered a growth of 8.2% inJune 2011 compared to a growth of 3.8% in June 2010. The growth in Crude oil

production expanded by 7.7% in June 2011 compared 6.8% percent expansion inthe corresponding period of 2010. Also, the Petroleum refinery productionshowed an improved output growth of 4.7% as against the growth of 2.9% inJune 2010.

Among the sectors, which experienced contraction in growth, Natural Gasproduction registered the worst growth of (-) 11.7% in June 2011 compared to25.4% expansion in June 2010. Coal production growth also slowed down to (-)3.3% during the month under review, compared to growth of 0.8% in June lastyear. Similarly, Fertilizer production contracted by (-) 2.4% in June 2011

compared to (-) 6.7% in year ago period. Cement production maintained itscontinuous contraction in growth during the current fiscal, this time by (-) 0.8%as compared to 3.7% in June 2010.

During the first three months of current financial year (April-June 2011-12), Steelproduction grew by 7.8% compared to an increase of 8.6% during the sameperiod of 2010-11. Similarly, during the period Electricity generation, Crude Oilproduction, and the Petroleum refinery production grew by 8.3% (5.7% in 2010-11), 9.5% (5.9%), and 5.3% (5.3%) respectively. On the other hand, Natural Gasproduction registered a growth of (-) 10.2% during April-June 2011-12 comparedto 37.0% during the same period of 2010-11. Similarly, the respective rates of

growth for the remaining sectors were 0.2% (- 0.6% in 2010-11) for Coalproduction, 1.1% (-2.6%) for Fertilizer production, and (-) 0.9% (7.0%) for CementProduction.

Fiscal deficit surges four-fold in April-June, 2011

The central government's fiscal deficit surged by over four-fold in the first threemonths of the current fiscal 2011-12 to Rs 1.62 lakh crore on account of lowernon-tax receipts. The deficit was Rs 40,196 crore in April-June, 2010. The fiscal

deficit, or the gap between overall expenditure and receipts in the first quarter ofthis year is almost 40% of the Budget estimate of Rs 4.12 lakh crore for 2011-12.

The sharp rise in Centre's fiscal deficit is on account of 89% decline in non-taxreceipts which went down to Rs 12,221 crore in the first quarter of this fiscalcompared to Rs 1.15 lakh crore in the year-ago period. Besides, there was a 6.3%


5/19

decline in tax revenues at Rs 78,699 crore during the period under review. Thefigure was Rs 83,994 crore in the year-ago period.

As per the latest data of the Controller General of Accounts (CGA), the total

receipts were Rs 98,564 crore in April-June 2011, down by 51% year-on-year. Thefigure was Rs 2.02 lakh crore in the three month period in 2010.

Also The non-tax receipts have been lower as the government's disinvestmentprogramme for this year is yet to take off fully. The higher non-tax revenue infirst quarter of last fiscal was on account of auction of 3G spectrum. Meanwhile,the revenue deficit, the difference between revenue earned and expenses, inApril-June this year stood at Rs 1.34 lakh crore, which is almost 13 times higherthan the figure of Rs 10,577 crore in the first three months of 2010-11. The latestnumber is 48.3% of the Budget estimate of Rs 3.07 lakh crore.

Though, the government has set a fiscal deficit target of 4.6% of the GDP for thecurrent fiscal. Experts had said that lower revenue collection on account ofremoving duties on petroleum products, could pose a challenge and take thedeficit to over 5%. In 2010-11, the fiscal deficit was 4.7%.

Food inflation moderation trend continued for yet another week

India's food inflation rate based on the Wholesale Price Index (WPI) eased to 7.33per cent (%) for the week ended July 16, 2011 as compared to 18.56 per cent

during the corresponding period of the previous year. Food inflation for theprevious reported week was recorded at 7.56 per cent on a year-on-year basis.The decline was mainly on account of fall in the prices of coarse cereals, fibresand minerals.

Among the major groups, the index for Primary Articles rose by 0.2 percent ascompared to the previous week levels. Annual rate of inflation for this groupwas 10.49 per cent, down from last week's level of 11.13 per cent. It was 19.23 percent for the corresponding week of the preceding year.

The index for 'Food Articles' sub-group moved up by 0.8 per cent, due to higherprices of fish-inland, fruits & vegetables and fish-marine (2% each). However, theprices of jowar (4%), ragi and poultry chicken (2% each) declined.

The index for Non-Food Articles sub-group also declined by 0.3 per cent owingto higher prices of flowers (16%), groundnut seed (10%), gaur seed


6/19

(3%). However, the prices of raw cotton (6%), raw silk (3%), copra and rawrubber (2% each) declined.

On the other hand, index for another major category fuel, power, light &

lubricants remained unchanged at its previous week's level. The annual rate ofinflation under this category for the week ended July, 16 stood at 12.12 percent ascompared to previous week level of 11.89 per cent.

India- UK Reaffirms their Commitment to Strengthen their Economicand Financial Relations

The Union Finance Minister Shri Pranab Mukherjee said that the Indo-UKEconomic and Financial Dialogue which was established in 2005 has contributed

successfully in strengthening the bilateral relationship. He said that thesignificance of this dialogue is in laying the agenda and guidance for futureengagement.

While speaking at the Fourth Ministerial Level Indo-UK Economic and FinancialDialogue at London, Shri Mukherjee said that both the countries have identifieda number of issues for joint collaboration. He said that he is sure that both thecountries will make further progress in the coming months in deepeningcountries economic relations based on mutual appreciation of their respectiveconcerns and aspirations.

This exchange of views will go a long way in improving our understanding ofeach others position on issues of mutual concern, he said. Shri Mukherjee saidthat India and UK share a strategic partnership and enjoy traditionally warm andclose bilateral relations in diverse areas.

Our two countries enjoy strong historical and cultural relations built on sharedvalues and traditions. Since the visit of His Excellency, UK Prime Minister DavidCameron to India in July 2010, we have seen our bilateral relations beingelevated to an Enhanced Partnership for the Future- he added.


7/19

POLICYFirst Quarter Review of Monetary Policy 2011-12: RBI

The Reserve Bank of India (RBI) has released its first quarter review of monetarypolicy for 2011-12 on 26th July 2011. In its monetary policy release, theRBI signalled that battling inflation took precedence over growth imperatives.The RBI remains confident that moderation of domestic growth is not yet broad-based, but the risks to growth from uncertainties abroad have increased insteadof dissipating. Also the Inflation expectations are becoming entrenched due topersistently high food prices, while rising wages are another worry.

"There are signs that growth is beginning to moderate, particularly in interestsensitive sectors. But there is no signs of a broad-based slowdown", said RBIGovernor D Subbarao, adding that a moderation in demand is necessary to bringdown inflation and that the US debt standoff will add risks to the global capitalflows. In this backdrop, the RBI continued the tightening cycle and took a moredecisive step with a 50 basis point hike, beating market expectations. Moreover,the central bank gave enough hints that the latest hike may not be the last.

On the basis of the policy stance RBI has raised the Repo Rate by 50 basis points(bps) from 7.5 per cent to 8.0 per cent. This has raised operational policy rates by475 basis points in a span of 15 months since mid-March 2010, one of the sharpestmonetary tightening seen across the world. Infact, RBI has hiked the rates at allits previous 10 policy meetings.


8/19

The Central Bank, however, kept the Cash Reserve Ratio (CRR) and Bank Rateunchanged at 6.0 per cent. The Marginal Standing Facility (MSF) rate,determined with a spread of 100 basis points above the repo rate, gets calibratedat 9.0 per cent. Similarly, the Reverse Repo Rate, or short-term borrowing rate,

hiked to 7.0 per cent from 6.5 per cent.

RBIs May 3 Policy Statement projection of baseline real GDP growth for 2011-12,based on the assumption of a normal monsoon and crude oil prices averagingUSD 110 a barrel, left unchanged at around 8.0 per cent.

The RBI's both the documents, Macroeconomic and Monetary DevelopmentsFirst Quarter Review 2011-12 and First Quarter Review of Monetary Policy2011-12 by the Governor D. Subbarao were critical on the fiscal intervention ofthe government as well as its policy. Among other things it said While the anti-inflationary bias of monetary policy (of RBI) anchors inflation expectations, thepresent trends necessitate structural reforms to enhance supply response (fromthe government).

Further, the RBI pointed out that with overshooting of the fiscal deficit target apossibility, its expansionary impact on demand could partly offset themoderation in demand resulting from anti-inflationary monetary actions andweaken monetary policy effectiveness.

Responding to persistent high inflation and increasing generalisation of pricepressures, the Reserve Bank has significantly raised its emphasis on containinginflation. The RBI noted that two things, the minimum support price foragricultural commodities and the increase in wages of rural labour would addfurther pressure to prices. The Central Bank feels that controlling inflation isimperative both for sustaining growth over the medium-term and for increasingthe potential growth rate.

The challenge for the government and the Reserve Bank, said Dr. Subbarao, wasto ensure that demand was constrained in the short-term to bring inflation down,

but to encourage supply response so as to expand the potential output of theeconomy in the medium-term.The economy's ability to grow rapidly for anylength of time without provoking inflation is dependent on implementingpolicies, with corresponding resource allocations, which will allow supply ofvarious products and services to keep pace with demand he added.


9/19

REPORTSRising prices hurt Asia's growth - ADB

World Surging inflation, a weak post-tsunami economic recovery in Japan anddebt woes in the U.S. and Europe threaten East Asia's economic outlook, theAsian Development Bank (ADB) said on July 28, 2011. ADB maintained itsgrowth forecasts for 14 emerging and newly industrializing East Asianeconomies in 2011 and 2012. But it said the region faces risks that also includemore volatile financial markets and destabilizing inflows of short term capital,also known as "hot money."

The ADB's growth forecasts were unchanged from a report in April, with East

Asia forecast to expand nearly 8 percent this year and next. It forecasts China'sgross domestic product growth at 9.6 percent this year and 9.2 percent next year.But it indicated that economic growth forecasts for China, Malaysia, Thailandand Vietnam would likely to be cut. That would also result in a downgrade forthe region, which includes 10 Southeast Asian countries as well as the economiesof China, Taiwan, Hong Kong and South Korea.

In the first half of 2011, economic growth across East Asia eased from a blisteringpace as inflation surged across much of the region, driven by higher commodityprices and strong economic recovery. Annual growth in the region's ten largesteconomies moderated to 8.1%, in the first quarter of 2011, down from 8.4% in the

previous three months. "Rapidly rising inflation risks a wage-price spiral thatcould derail the region's recent strong growth," the report said, noting thatinflation in many economies has risen above 10-year averages.

Consumer prices in the region have been rising due to higher food and fuel costs.The report also detailed other sources of rising prices. In many East Asianeconomies property prices are climbing quickly. The devastating tsunami and


10/19

nuclear disaster in Japan in March has also spurred a debate over the use ofnuclear power, which could drive up energy prices by boosting demand forother energy sources such as oil and gas.

The threat of inflation has been a major worry in Asia this year. The ADB warnedin April that surging food prices of 10 percent on average in many Asianeconomies could drive 64 million more people into poverty. The bank warnedthat if price growth does not slow, it could make things more difficult for theregion's economies. "Elevated food and commodity prices and robust domesticdemand could push inflation higher yet," the bank said. Rising prices have seenmany economies in the region raise interest rates in a bid to curb price growth.Tighter monetary policies have resulted in a slowdown in growth.

However, the bank said the economies will continue to take measures to tackle

inflation. "Authorities are expected to keep tightening monetary policy androlling back fiscal stimulus to counter rising inflation and economic overheating,"the bank said.

The ADB's economists also fretted about the dismal prospects for the U.S. andEurope, which are plagued by high unemployment and debt problems. Both aremajor customers for East Asia's exports. "If the recovery in Japan, U.S. andeurozone falters, sluggish external demand could once again disrupt the region'sexports," the report said.

The report also warned that the region could be hurt if the U.S. government's

top-notch credit rating is downgraded amid fears that U.S. lawmakers may fail tocome up with a way to prevent a debt default in the world's biggest economy.That could depress the dollar against other currencies, hurting Asiangovernments that hold large amounts of U.S. government debt in their foreignreserves.

The bank said this "two-paced" global economy had resulted in investorsflocking to the region's economies looking for better returns, putting furtherpressure on inflation. "Continued short-term capital inflows add to alreadyample liquidity and exacerbate price pressures," it said.

2010 Global FDI Inflows up 5%; India slips to 14th spot: UNCTAD

Global FDI inflows grew 5 percent to USD 1.24 trillion in 2010, according to theUnited Nations Conference on Trade and Development (UNCTAD) World


11/19

Investment Report 2011. This was nevertheless 15% below pre-crisis averagelevels, and 37% below the 2007 peak of USD 1.9 trillion.

Also, the UNCTAD predicts in this report that the recovery of FDI flows will

continue in 2011 and will reach a total of some USD 1.4 to USD 1.6 trillion, thusreturning to the pre-crisis average. Thereafter, flows are forecast to rise to USD1.7 trillion in 2012 and USD 1.9 trillion in 2013, barring any unexpected globaleconomic shocks.

The US topped the tables for FDI inflows in 2010 at USD 228.2 billion, followedby China (USD 105.7 billion) and Hong Kong (USD 68.9 billion). Regionwise, EUand other developed European countries attracted the highest FDI inflows (USD313.1 billion), followed by North America and other developed countries (USD288.8 billion).

On the other hand, the US topped the tables for FDI outflows in 2010 at USD 329billion, followed by Germany (USD 105 billion) and France (USD 85 billion).Regionwise, EU and other developed European countries contributed the highestFDI outflows (USD 475.8 billion), followed by North America and otherdeveloped countries (USD 288.8 billion).

In terms of sectoral patterns, FDI in services continued its downward path in2010. FDI flows to the financial industry experienced one of the sharpestdeclines. The share of foreign investment channelled to manufacturing increased,meanwhile, and accounted for almost half of all FDI projects.

In 2010, the rise of emerging economies as new powerhouses of FDI becamemore apparent. Developing countries and transition economies absorbed morethan half of global FDI inflows for the first time. Half of the top 20 hosteconomies for FDI in 2010 were developing and transition economies. Theiroutward FDI also rose sharply in 2010, climbing by 21 per cent. These economiesnow account for 29 per cent of global FDI outflows. Six developing and transitioneconomies were among the top 20 investors.

The record level of cash holdings, low rates of debt financing and rising stock

market valuations of transnational corporations (TNCs) should encourage themto expand overseas, the report says. On the recipients side, ongoing corporateand industrial restructuring, privatizations resulting from fiscal rebalancingefforts and unwinding of state support programmes, and the growth of emergingeconomies should create new investment opportunities.

However, the report warned that the post-crisis business environment is stillbeset by uncertainties. Risk factors such as the unpredictability of global


12/19

economic governance, a possible widespread sovereign debt crisis, and fiscal andfinancial sector imbalances in some developed countries, as well as risinginflation and signs of overheating in major emerging market economies, may yetderail the FDI recovery.

Despite the emergence of certain developing countries, FDI flows continued todecline in some of the poorest regions of the world. Flows to the Africa andSouth Asia, as well as to least developed countries, landlocked developingcountries and Small Island developing States fell in 2010. FDI to South Asiadeclined to USD 32 billion, reflecting a 31 per cent slide in inflows to India and a14 per cent drop in flows to Pakistan. By contrast, inflows to Bangladesh, a risinglow-cost production location, increased by nearly 30 per cent to USD 913million, the report said.

Meanwhile, at a time when developing and emerging countries are setting newrecords in foreign direct investment (FDI) inflows, Indias position among thetop 20 recipients fell to 14th position, from 8th in 2009. India attracted FDI worthUSD 25 billion in 2010, much lower than the inflows of USD 36 billion seen in2009. In contrast, the other emerging economies such as China stood at 2ndposition with inflows totalling USD 106 billion in 2010. Similarly, Brazil stood at5th position with inflows at USD 48 billion during the year, the report said.

INTERNATIONALUK economy slows to 0.2% growth

Britain's Gross Domestic Product (GDP) growth slipped to just 0.2% in thesecond quarter, according to the new figures released by the Office for National


13/19

Statistics (ONS). The figure is lower than the 0.5% seen in the previous quarter,but ONS said the figures this time were heavily influenced by one-off factorssuch as the royal wedding, Olympic ticket sales, record warm weather in Apriland the Japanese tsunami. The ONS estimated the impact of these effects

knocked as much as 0.5% off the GDP figure, which otherwise may have showngrowth of 0.7%. Year on year the UK economy grew by 0.7%, which was thelowest rate of growth since the first quarter of 2010.

"There is likely to be some bounce back over the autumn, but it's clear that theunderlying economic recovery remains fragile and difficult," chief economicadviser Ian McCafferty said. Production output dropped by 1.4% during thethree months with mining and quarrying down 6.6%, but this was offset by agood performance in the powerhouse services sector, where output rose by 0.5%,and in construction where output rose by 0.5%.

Transport, storage and communication contributed particularly strongly to thegrowth of the services sector. On the other hand, Manufacturing declined by0.3% quarter on quarter, a performance put down to the impact of the Japanesetsunami on supply chains. The warm weather also had an impact on gas andelectricity demand. Agriculture sector declined by 1.3%

The performance will offer some relief to Chancellor George Osborne, who hascome under pressure to amend his deficit reduction strategy amid concerns thata sluggish economy could affect tax revenues targets. "The positive news is thatthe British economy is continuing to grow and is creating jobs," said Mr.

Osborne. "And it is positive news too at a time of real international instability weare a safe haven in the storm."Our economy is stable at this time because thisGovernment has taken the difficult decisions to get to grips with Britain's debts.Abandoning that now, as some argue we should, would only risk British jobsand growth."

However, the weak quarterly growth number makes it almost certain that theOffice for Budget Responsibility will have to downgrade its forecasts for the fullyear from 1.7% at its next update this autumn.

Australia's inflation accelerates on rising food prices

Australian inflation rose unexpectedly in the second quarter as high cost of foodand fuel put pressure on inflation. The Australian Bureau of Statistics said theconsumer price index (CPI) rose 0.9 percent in the three months to Junecompared with the first quarter, while it was 3.6 percent higher year on year. The


14/19

figures were well above market expectations of 0.8 percent and 3.5 percentrespectively.

Strong rises in fruit, clothing, alcohol and petrol prices have pushed Australia's

inflation data higher than expected. Food prices have been rising due to thedevastation caused by floods and cyclones earlier this year. The inflation newssent the Australian dollar to its highest level against the U.S. currency since beingfloated almost 30 years ago on concerns that central bank will raise interest rates.

The bigger-than-forecast rise in consumer prices has already triggered a debatein the country on the impact of rising price on the economy. While the ReserveBank of Australia (RBA) has maintained that keeping prices in check is one of itstop priorities, it has left interest rates unchanged since November 2010. Earlierthis month, Glenn Stevens, the governor of RBA said "as the temporary price

shocks dissipate, CPI inflation is expected to be close to target over the next 12months." However, analysts said the latest figures indicate that the central bankmay have to change its stand going forward.

US recovery has slowed, says Fed

The US central bank Federal Reserve said the economy grew at a slower pace inmore parts of the country since the beginning of June due to ongoing troubles inthe housing and labour markets. "Economic activity continued to grow; however,the pace has moderated in many districts," the Fed said in its influential Beige

Book survey released in Washington.

Economic activity continued to grow, the Fed said in its Beige Book surveyreleased today in Washington. However, the pace has moderated in manydistricts. Growth slowed in eight of the Feds 12 regions, compared with four inthe last survey, the central bank said. The Beige Book survey, released two weeksbefore each policy meeting, is based on information compiled by officials at theFeds 12 regional banks. The recent report covers June and the first half of July.

The report underscored Fed Chairman Ben S. Bernankes message to Congress

earlier this month that maintaining record monetary stimulus is necessary tobolster the economy. Bernanke left the door open to additional action, includingbuying more government bonds, should the recovery appear in danger ofstalling. In the Dallas region, the survey said that optimism has been temperedby consumer fear regarding economic and fiscal policy uncertainty.

The Fed said residential property activity was "little changed and remainedweak", while employment conditions "remained soft". In many regions,


15/19

manufacturing slowed or held steady, according to the report. Severe floodingand droughts had also hit the agriculture sector, it said. However, the consumerspending, which accounts for about 70 percent of the economy, showed modestgrowth.

Just before the release of report, the Commerce Department released the data onnew orders for US manufactured goods in June which unexpectedly fell due to asharp drop in transport equipment and, in particular, civil aircraft. Orders placedwith U.S. factories for durable goods fell by USD 4 billion or 2.1 percent in themonth. That suggests companies were losing confidence in the recovery as thesecond quarter ended. Transport goods orders accounted for about 8.5% of thetotal fall. Similarly, orders for commercial aircraft and parts slumped by almost30%, while those for defense planes and parts fell 20%. Excluding transport, neworders rose by 1%.

S&P further downgrades Greece credit rating into junk status

Ratings agency Standard & Poor's (S&P) has cut Greece's credit rating, saying theEuropean Union's latest bailout plan would put the country into "selectivedefault." Eurozone leaders recently agreed on a Euro 109 billion (USD 158 billion)package for Greece in order to address the country's debt problems. However,S&P said the plan appeared unfavorable to investors and warned that a selectivedefault might happen.

Greece's sovereign credit rating has been downgraded by one notch to CC fromCCC. It also put the outlook on the Greece rating to negative. The debt-riddledcountry is already the lowest-rated country in the world by S&P, whichdowngraded it 8 notches. S&P's move came just two days after downgradeaction by another rating agency Moody's, which also worried the possibility ofGreek debt default. Moody's cut Greece's credit rating by three notches to Ca,just one notch above default.

"The rating has a negative outlook, so we're pretty certain it's going to go lowerbecause, of course, an actual debt restructuring is now on the table," said David

Beers, S&P's global head of sovereign ratings. "We've also expressed the opinionbefore that we think that any near-term restructuring is probably not the end ofthe story. There may be another bigger restructuring down the road," Beers saidin an interview. Asked when the new restructuring might occur, Beers said:"That's partly in the hands of Greek politics. But it wouldn't surprise us if asecond restructuring had to be looked at over the next couple of years."


16/19

China wealth fund sees nearly 12% return

Chinas USD 400 billion sovereign wealth fund garnered 11.7% in 2010 on itsoverseas investments, which included a 21% allocation to alternative

investments. China Investment Corp (CIC) said its total assets were USD 409.58billion by the end of last year - more than double its original start-up fund ofUSD 200 billion in 2007 and 23% higher than the USD 332.39 billion it held at theend of 2009.

China Investment Corporation released its annual report on Jul 26, the third suchreport since the sovereign wealth fund was established in 2007. CIC said in itsannual report that 27% of its investments were in bonds and other fixed-incomeassets, while 4% was held in cash and 21% in alternative investments, such asprivate equity and hedge funds. CIC chief executive Lou Jiwei said he was

"cautiously optimistic" about 2011 and will pursue "overseas investment withprudence". "An increasing percentage of investments have been made inemerging markets, such as Asia, Africa and South America."

CIC was set up to invest some of the country's estimated USD 2.4 trillion incurrency reserves. CIC now controls close to 410 billion US dollars in assets. Themajority of the reserves are mainly held in safer investments such as US Treasurybonds, but the advent of the global financial crisis has seen CIC try to diversifyits investments to bag bigger returns.

In 2010, CIC reduced the proportion of cash holdings from 32% at the start of the

year to only 4% of its investment portfolio by the end of the year. The sovereignwealth fund said it invested nearly half of its global portfolio in stocks last year.The fund made USD 35.7 billion in new offshore investments last year, afteradding USD 58billion in 2009.


17/19

MARKETSBSE: The 30 share BSE Sensex decreased by 2.8 per cent and closed at 18,197.2.

NSE: Nifty decreased by 2.7 per cent during the week and closed at 5,482.0.

Dollar: The value of rupee appreciated by Rs. 0.221 against the US dollarduring the week and closed at Rs 44.1553 per dollar.

Euro: The value of rupee appreciated by Rs. 0.773 against the Euro and closedat Rs. 63.1018 per euro.

Gold: Prices of gold increased by Rs. 174.75 per 10 grams and closed at Rs.23,186 per 10 grams.

Silver: Prices of silver increased by Rs. 87.65 and closed at Rs. 58,487.65 per kg.

Crude Oil: The Brent index prices of crude oil decreased by USD 3.06 and

closed at USD 116.78 per barrel.

Forex Reserves: Indias Foreign Exchange reserves increased by USD 2.294billion to USD 314.619 billion during the week-ended July 22, 2011.


18/19

ASSOCHAM Research Bureau

ASSOCHAM Research Bureau (ARB) is the research division of the AssociatedChambers of Commerce and Industry of India. The Research Bureau undertakes

studies on various economic issues, policy matters, financial markets,

international trade, social development, sector wise performance and monitoring

global economy dynamics.

The main banners of the Bureau are:

ASSOCHAM Eco Pulse (AEP) studies are based on the data provided by

various institutions like Reserve Bank of India, World Bank, IMF, WTO, CSO,Finance Ministry, Commerce Ministry, CMIE etc.

ASSOCHAM Business Barometer (ABB) are based on the surveys conducted by

the Research Team to take note of the opinion of leading CEOs, MDs, CFOs,

economists and experts in various fields.

ASSOCHAM Investment Meter (AIM) keeps the track of the investment

announcements by the private sector in different sectors and across the various

states and cities.

ASSOCHAM Placement Pattern (APP) is based on the sample data that is

tracked on a daily basis for the vacancies posted by companies via job portals

and advertisements in the national and regional dailies, journals and newspaper.

Data is tracked for 60 cities and 30 sectors that are offering job opportunities in

India.

ASSOCHAM Financial Pulse (AFP) as an analytical tool tracks quarterly

financial performance of India Inc; forming strong inter-linkages with the real

economy and presents sectoral insights and outlook based on financial

indicators, demand signals and corporate dividend activity.

For More Information: http://www.assocham.org/arb/index.php

Email:[email protected]
http://www.assocham.org/arb/index.phphttp://www.assocham.org/arb/index.phpmailto:[email protected]:[email protected]:[email protected]:[email protected]://www.assocham.org/arb/index.php


19/19

THE KNOWLEDGE CHAMBER

Evolution of Value Creator ASSOCHAM initiated its endeavor of value creationfor Indian industry in 1920. It has witnessed upswings as well as upheaval ofIndian Economy and contributed significantly by playing a catalytic role inshaping up the Trade, Commerce and Industrial environment of the country.

ASSOCHAM derives its strength from the following Promoter Chambers:Bombay Chamber of Commerce and Industry, Mumbai; Cochin Chamber ofCommerce and Industry, Cochin; Indian Merchant's Chamber, Mumbai; TheMadras Chamber of Commerce and Industry, Chennai; PHD Chamber ofCommerce and Industry, New Delhi.

VISION

Empower Indian enterprise by inculcating knowledge that will be the catalyst ofgrowth in the barrier less technology driven global market and help themupscale, align and emerge as formidable player in respective business segment

MISSION

As representative organ of Corporate India, ASSOCHAM articulates the genuine,legitimate needs and interests of its members. Its mission is to impact the policyand legislative environment so as to foster balanced economic industrial andsocial development. We believe education, health, agriculture and environmentto be the critical success factors.

GOALS

To ensure that the voice and concerns of ASSOCHAM are taken note of by policymakers and legislators. To be proactive on policy initiatives those are inconsonance with our mission. To strengthen the network of relationships ofnational and international levels/forums. To develop learning organization,sensitive to the development needs and concerns of its members. To broad-basemembership. Knowledge sets the pace for growth by exceeding the expectation,and blends the wisdom of the old with the needs of the present.

assocham economic review - july 31 2011

Documents