eco scan april'11

7/31/2019 ECO Scan April'11

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ECOSCAN - April 2011

ECOSCAN April 2011Monthly Report on Indian and Global Economic Scenario

This issu

1. Executive Summary2. Business Outlook

3. Global Economic Scenario

Real GDP growth rate YoY %

CPI Inflation

Industrial Production Growth rates

4. India EconomyPerformance Indicators

GDP Growth rate

Inflation WPI YoY %

IIP growth rate

RBI Key Ratios

5. External Sector

Foreign trade

Exports

Imports

FDI

INR exchange Rate

6. Infrastructure

7. Commodities

Crude Oil, Natural Gas

Sugar

Steel

8. Sector Update

Automobiles & Insurance

Fertilizers & Tea


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1. Executive Summary

World Economy Highlights

Galloping crude oil prices

The Brent crude price surged from

an average of US$ 75 a barre

during May-September 2010 to US$

123 a barrel by April 2011. Since

February 2011, oil prices have

come under further pressure on

account of apprehensions aboutsupply disruptions due to politica

developments in the Middle East

and North African (MENA) region.

Euro edging over dollar

The euro held near a 17-month

high against the dollar as markets

waited for the European Centra

Bank to reinforce higher rate

expectations, with a hint of a June

hike needed to boost the currency

further.

U.S. showing signs of weakness in

economic recovery

The U.S. dollar hit a three-year low

against major currencies and Wal

Street stocks fell as much as 1.0

percent after a batch o

disappointing U.S. economic data

for April -- including a surprise

slowdown in the services sector

and less hiring by the private

sector. U.S. services sector, whichgrew at its slowest pace sinceAugust 2010, according to the

Institute for Supply Management

Pesticide Endosulfan to Be Banned

Worldwide

Representatives from 127

governments have agreed to add

Endosulfan to the United Nations

list of persistent organic pollutants

to be eliminated worldwide.

A slowdown in growth in 2011-12 is expected with World real GDP growth is

forecast to be about 4 percent in 2011 and 2012, down modestly from 5 percentin 2010. Global commodity and fuel prices are rising; putting pressure on growth

worldwide and with several economies pegging their growth for the current year at

lower levels, India will be following this trend prevalent all over the world. The

Indian economy is estimated to grow by nearly 8 per cent during 2011-12. The auto

sector appears for moderation after growing at a scorching pace of 26 percent

(inclusive of cars, bikes and commercial vehicles) in the last two years. The society

of Indian Automobile manufacturers (SIAM) too expects industry growth to settle

around a much lower 12-15 percent in 2011-12.

With average crude prices in the range of $118 a barrel, a heavily oil import-

dependent country like India has little option other than seeing inflation andcurrent account deficit as the major issues this financial year. RBI had raised key

rates eight times since March 2010 to tame inflation. Last month, RBI had raised

the repo rate to 7.25% and reverse repo rate to 6.25%. Higher interest rates may

affect the pace of economic activity. The impact of rising interest rates is felt first

by the commercial vehicles sector. However the strong growth in the services

sector, robust hiring outlook and rising incomes may continue to support consumer

demand. With overall inflation hovering above 8% since January 2010, the

monetary tightening is a right measure but is definitely going to impact the

industrial production of country. The country's six key infrastructure industries

grew 7.4% in March, rising from 6.8% in the previous month. The six core sector

industries grew 5.9 per cent in financial year 2010-11 as against 5.5 per cent in

financial year 2009-10.

Exports in the current 2011-12 fiscal year are expected to cross $300 billion and

could touch $500 billion by 2014-15. However, FDI in India declined for the third

consecutive month in March, dipping by 11% yoy to $1.07 billion in the backdrop of

financial turmoil in Europe. Falling FDI trends in FDI inflows makes it imperative for

the country to fine-tune its policies to attract overseas investment. Rupee

remained weaker this month, pressured by choppy shares and rising import

payments.

Agricultural growth was above trend last year, following a good monsoon. The

sugar production of India is estimated to rise to 24.5 million tonnes in the 2010-11sugar year. Tea production in March saw an upswing of around 16 per cent to

56.73 million kg compared with 49 million kg produced during the same period last

year. IFFCO has increased the DAP and Urea prices and other companies are also

expected to increase the prices soon.

Looking macro economically, in many emerging and developing economies, output

is already above pre-crisis trends, which is clearly reflected in their stock market

indices. It suggests that recovery is complete and expansion is under way. However

in order to look for sustainable growth inflationary pressures need to be tackled

effectively.


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3. Global Economic Scenario

Brazils CNI industry group has reduced 2011-12 GDPgrowth projections from 4.5% to 3.5%

Q1 2011 Russia GDP growth rate has slowed down to1.3% against 2.8% in Q4 2010.

Q1 GDP results for EU stood at 2.2 percent yoy withgermany at 4.5% yoy Q1 GDP growth rate.

IMF has pegged down the growth rate of India for 2011-12 to 8% while chinas growth rate is expected to be at

9.5% for 2010-11.

China's industrial production grew steadily at 14.4

percent year on year in the first quarter of FY 2011-12.

While the expansion of Chinas manufacturing activities

moderated in April under the influence of tightening

policies.

German industrial production rose for a third time in

March as construction surged. Industrial Output inMarch increased 0.7% from February while economists

had a forecast of 0.5%.

In Brazil March was the third consecutive month of

rising industrial output to 0.3%, afterJanuary's increase

of 0.3%, and February's 2%.

Russian industrial production rose an annual 5.3

percent compared to 8.2% in 2010

Consumer price inflation in China reached an all time of

5.4% in the month of March, highest level since 2008.

Inflation in Brazil could top 6.3% by year end which is

well over central banks target of 4.5% according to

economists.

Developed economies have also shown inflationary

pressures in March 2011.

Prices levels in Russia rose 0.2 percent in the seven days

through May 3, the fastest pace since the week ended

March 14.


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4. India Econom Performance Indicators

GDP Growth

Finance Minister Pranab Mukherjee projected Indias

economic growth at 8 per cent for the current fiscal, lower

than the budgetary estimate of 9 per cent, due to

measures taken to rein in high inflation.

8% growth forecast is based on the assumptions that

there would be a normal monsoon and oil prices would

remain around $110 per barrel during the year

Industrial Production

Manufacturing output advanced 0.7 percent in March, its

fourth consecutive month of strong expansion;

The rate of capacity utilization for total industry rose 0.5

percentage point to 77.4 percent, which is 3.0 percentage

points below its average from 1972 to 2010.

With increased RBI rates, declining growth rates in

industrial production is predicted

Inflation

WPI increased sharply by 3.4 per cent in the month of

March to 8.98%.

80 per cent of the increase in WPI was due to fuel, power

group and non-food manufactured products.

Overall inflation has been above the 8 per cent mark since

January, 2010.


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Ke Interest Rates & Credit Growth

Cash Reserve Ratio 6.0 %

Repo Rate 7.25%

Reverse Repo Rate 6.25%

PLR 12.25 %

SLR 24 %

US Federal Fund Rate 0.1 %

1 Month LIBOR 0.21 %

3 months LIBOR 0.27 %

Containing inflation would take precedence over growth is the foremost criteria of the RBI Governo

D.Subbarao.

Home, auto and other loans are set to become costlier with the Reserve Bank of India hiking key short-term

rates to contain inflation,

The increase in the savings bank rate to 4 per cent from 3.5 per cent now has become a relief for small savers

Credit extended by banks to various sector. Credit growth to agriculture decelerated to 10.6 per cent during 2010-11 from 22.9 per cent in the previou

year.

Credit to industry, led by infrastructure, metals, food processing, rubber, plastic and their products an

engineering grew by 23.6 per cent in 2010-11 as compared with 24.4 per cent in the previous year.

Credit to the services sector, led by NBFCs, professional services, transport operators and tourism, hotels an

restaurants, grew by 23.9 per cent during 2010-11 as compared with 12.5 per cent in the previous year.

Personal loans grew significantly by 17.0 per cent during 2010-11 as compared with 4.1 per cent during th

previous year, with all its components barring credit card outstanding exhibiting high growth.


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5. External Sector

Exports during March, 2011 were valued at US $ 29.13 Billion

which was 43.8 per cent higher in Dollar terms than March,

2010..

Exports in the current 2011-12 fiscal year are expected to

cross $300 billion and could touch $500 billion by 2014-15.

Imports during March, 2011 were valued at US $ 34.74 Billion

representing a growth of 17.2 per cent in Dollar terms than

March, 2010

FDI in India declined for the third consecutive month in March, dipping by 11% yoy to $1.07 billion in the backdrop of

financial turmoil in Europe.

During the fiscal 2010-11, the inflows declined by 25 per cent to $19.43 billion. The FDI during the fiscal 2009-10 was

$25.83 billion and $27.83 Billion in 2008-09.

Falling FDI trends in FDI inflows makes it imperative for the country to fine-tune its policies to attract overseas investment.


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India's foreign direct investment (FDI) has recorded a sharp decline in FY-11.

India is the lone South East Asian country to witness a decline in FDI flows.

Inflows into the metals, petroleum and natural gas and chemicals sectors increased in FY-11

Inflows into the housing and real estate as well as construction activities that include road and highwayshave halved, while that received by the telecom sector has fallen by 45 per cent. Significantly

Rupee Reference Rates

6. Infrastructure

Rupee Reference Rates

The Indian Rupee exchange rate for April, 2011

averaged 44.30 INR to USD.

That's 61.3 basis points lower than the March,

2011 rate of 44.91, and 14 basis

points lower than the April, 2010 rate of 44.44.

Experts feel in the near term rupee is expected

to remain stronger although fundamentals areweak on higher crude oil trade gap.

Broad weakness in the US dollar is supporting

rupee appreciation. Also hike of 50 basis points

in key rates by the central bank will help the

rupee to appreciate.

India: Infrastructure Growth

The country's six key infrastructure industries

grew 7.4% in March, rising from 6.8% in the

previous month.

The six infrastructure industries account for

26.7% of overall industrial growth.

The six core sector industries grew 5.9 per cent

in financial year 2010-11 as against 5.5 per cent

in financial year 2009-10.

Numbers will help the IIP stabilize but not make it

grow.


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7. Commodities

Henry Hub Natural Gas Index

Ukraine has opened up talks with 3 Western energy

Giants; Exxon Mobile, Chevron and Shell to prospect forshale-Gas.

Henry hub price rose a token 2 cents per million Btu

(MMBtu) (0.5 percent) to $4.35 per MMBtu on April 27

Crude Oil Index

Oil imports during March, 2011 were valued at US $

9438.6 million which was 8.2 per cent higher than oil

imports corresponding period last year

ONGC is in discussions to buy oil sands reserves in

Canada and it may also increase its investments in

Kazakhstan to help offset declining production.

Baltic Dry Index

Baltic Dry Index, has plummeted close to fifty percent

in the last six months

The demand for dry-bulk shipping has fallen.

Oversupply of ships has continued to damage a fragile

recovery.


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Commodities : SUGAR

The sugar production of India -- the world's second largest producer after Brazil -- is

estimated to rise to 24.5 million tonne in the 2010-11 sugar year.

Sugar prices may trade higher for short term on account of improved buying at lower

levels.

China is expected to increase its sugar imports in the second half of the year. This is

likely to provide support to the prices.

Increase in stock limits and reintroduction of 60% import duty on Sugar may favour the

prices. Prices may gain by Rs. 100-150 per qtl in the coming weeks.

The medium term prices would depend on the permissible Sugar exports by India and

the final estimates of Sugar output. Prices are expected to trade in the range of Rs.

2600 Rs. 2900 per qtl levels. (Courtesy: Angel Commodities).

The Food Ministry has issued export orders for nearly 92,000 tonne of sugar to mills of

the total quantity of five lakh tonne that the government has allowed for outbound

shipment.


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Commodities : Steel

Brussels World crude steel production for the 64

countries reporting to World steel association

(worldsteel) was 129 million metric tons (mmt) in

March 2011.This is 7% higher than March 2010.

Chinas crude steel production for March 2011 was

59.4 mmt, up 9.0% compared to March 2010.

Japans crude steel production figure of 27.7 mmt

was 4.4% higher than the same period in 2010.

South Korea produced 5.8 mmt of crude steel inMarch 2011, 14.4% more than March 2010.

India produced 6.35 MT tonnes of steel in March

2011 as against 5.845 MT in the same month last

year

An additional 30 million tonnes of steel-making capacity is expected to be commissioned in the next two years in the

country, even as the steel ministry is working on a new National Steel Policy that seeks to factor in a higher-than-

expected growth in steel demand and consumption in five years


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Steel Authority of (SAIL) has decided to expand its crude steel output capacity from the existing 12.84 million

mt to 21.4 million mt per annum by the year 2012-2013.

Rashtriya Ispat Nigam (RINL) will be expanding its existing capacity of 2.9 million mt of crude steel production

to 6.3 million mt per annum by December 2011.

National Minerals Development Corporation (NMDC) is setting up a 3 million mt per annum integrated steel

plant at Nagarnar, Chhattisgarh

8. Sector U date : Automobile & Insurance

Automobile

Insurance

Insurance GWP

- Rs Crore

APRIL-MARCH% Change

Y-O-Y2010-11 2009-10

Private 17566.92 14341.39 22.49%

Public 25001.60 20642.69 21.12%

The BSE Auto Index is trading in the red with the index

down over 2% on the back of recently announced RBI

Monetary Policy.

Governor D. Subbarao has announced a steep 50 basis

points hike in key short term rates.

The increased interest rates will impact the sales and make

the auto loans dearer.

Year-on-year volumes of commercial vehicles grew by 30

per cent in 2010-11 respectively.

HDFC Life is looking to break-even bythe end of the current financial year. HDFC Life said the embedded value of its business stood at Rs 4,120 crore as of March 31.

United India Insurance Company is targeting a business of Rs 8,000 crore in the fiscal year 2011-12 focusing on micro,

small and medium enterprises (MSME) segment and rural market.

Religare Enterprises is in talks with two foreign insurers for a joint venture to offer general insurance services in India,

and plans to more than quadruple its asset management business in two years.


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Sector U date : Fertiliser & Tea

Fertilisers

Fertilizer Production

(000 tons)Mar 2011 Mar 2010

%

Change

Y-O-YUrea 1823.2 1628.27 11.94%

DAP 220.3 273.0 -19.30%

10-26-26 74.9 113.3 -33.89%

12-32-16 79.5 60.7 30.97%

14-35-14 69.2 0.4

20-20-0 168.1 227.5 -26.11%

15-15-15 33.7 41.7 -19.8%

28-28-0 1.7 44.0 -96.14

Total Complexes

(excluding DAP)2470.6 2388.87 3.42%

Tea

The benchmark price has been increased to

$612 per tonne for DAP and $420 per tonne for

MOP to ensure uninterrupted availability ofpotash and diammonium phosphate.

CCEA has given freedom to fertiliser companies

to raise retail prices of DAP by up to Rs. 600

per tonne from the existing rate of Rs. 10 750

per tonne.

The government reimburses subsidy on these

DAP to fertiliser companies based on the

benchmark price

The Union finance ministry has cleared two

foreign direct investment proposals from the

Darjeeling tea industry,

The first FDI approval since 1974 for the

branded brew sector in the hills

Tea production in March saw an upswing of

around 16 per cent to 56.73 million kg

compared with 49 million kg produced

during the same period last year.

Exports, however, fell to 11.9 million kg from

23.49 million kg last year.


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ECOSCAN April11

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Disclaimer: The information contained herein is obtained from Bloomberg, News articles and various research reports.

eco scan april'11

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