update on indian economy, march 2013

7/28/2019 Update on Indian Economy, March 2013

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Update on Indian Economy

March 2013

Economic Snapshot

Item Units February J anuary February (%) Change

Contents 2013 2013 2012 [1]/[2] [1]/[3]

[1] [2] [3] [4] [5]

-Editorial WPI -Index* 2004-05=100 169.2 168.6 158.7 0.4 6.6

-Capital Market WPI -Inflation** Per cent 6.6 7.2 6.6

-Other Markets (Jan 2013) (Dec 2012) (Jan 2012)-Union Budget IIP (2004-05=100) 2 months lag 179.3 167.3 167.4 7.17 7.11

2013-14 (Dec 2012) (Nov. 2012) (Nov. 2011)

-Important Policy INR / US$ Month End 53.77 53.21 49.03 1.05 9.67

Pronouncements M3 Rs. '000 Cr. 8160.00 8111.57 7159.47 0.6 13.97

[i] Agg. Deposits Rs. '000 Cr. 7036.08 7001.80 6162.82 0.5 14.17

[ii] Currency Rs. '000 Cr. 1123.92 1109.77 996.65 1.3 12.77

(Outstanding as on) (08.02.2013) (11.01.2013) (27.01.2012)

Call Money Weighted Average % 7.83 8.00 8.73 - -

(Lending) Week ended (22.02.2013) (25.01.2013) (24.02.2012)

Source: RBI Weekly Statistical Supplement March 01, 2013 *All Commodities. **Over the year.

EditorialA) Domestic

As per the data released by the Central Statistics Office (CSO), the domestic economy isestimated to grow at 5.0% in 2012-13 against 6.2% in 2011-12, whereas, the RBI has forecast aGDP growth of 5.5% for the same period. The lowest-in-a-decade growth rate could be estimatedon account of poor performance of manufacturing, agriculture and services sector. Theagriculture output is expected to grow 1.8%, while the manufacturing sector is likely to grow1.9%. The slowdown in services, particularly the trade, hotels, transport, communicationcategory is expected to slow down drastically than anticipated. The sharp slowdown in privatefinal consumption expenditure (PFCE) data in the advance GDP estimates indicates a continued

slack in consumption demand. The capital investment i.e. gross fixed capital formation (GFCF) isexpected to slow down to an annual 2.5% from 4.4% in the previous year. Structural bottleneckshave restricted India's growth potential to around 6.0-6.5%. The need of an hour is that thegovernment should make it easier for firms to acquire land for new projects and carry out taxreforms to boost economic growth. Road, power and mining projects held up for years (becauseof delays in getting multiple regulatory clearances) are affecting the growth of overall industrialsector. RBI in its recent monetary policy review has indicated that while stabilizing the economicgrowth was a priority it had limited room for further easing unless inflation and a high currentaccount deficit improved by more than expected.

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Quarterly GDP Growth

The GDP growth expanded by a sluggish 4.5% in Q3 of 2012-13 against 6.0% in thecorresponding period a year ago, reflecting a slower-than-anticipated growth of the services andcontinued low growth in agriculture sector. A decline in the growth of agriculture & alliedactivities to 1.1% in Q3FY13 from 4.1% in Q3FY12, reflected the shortfall in kharif productionin 2012. Industrial growth improved slightly, albeit to a sluggish 3.3% in Q3FY13 from 2.6% inQ3FY12, reflecting the performance of manufacturing and mining & quarrying. However, thiswas partly offset by a weakening growth of electricity, gas and water supply and construction.Service sector growth eased to 6.1% in Q3FY13 from 8.3% in Q3FY12, primarily reflecting aconsiderable decline in the pace of growth of financing, insurance, real estate & business servicesand trade, hotels, transport and communication. In addition, the pace of growth of community,social & personal services eased to 5.4% in Q3FY13 from 6.8% in Q3FY12. The growth of GDPat market prices slowed from 5.8% in Q3FY12 to 4.1% in Q3FY13 led by a 0.7% de-growth inindirect taxes less subsidies. GFCE slowed sharply to 1.9% in Q3FY13 from 8.1% in Q3FY12, inline with the fiscal tightening being undertaken by Government of India. While the unfavourablemonsoon in 2012 dampened consumer demand and contributed to an inferior growth of PFCE.

In contrast, the pace of growth of GFCF improved partly reflecting the base effect.

Table 1: Advance & Quarterly Estimates of Real GDP & Expenditure (2004-05 Prices)

2011-12

2012-13(A)

2011-12

2012-13(A)

2011-12

2012-13(A)

2011-12

2012-13 (A)

Rs Crore % y-o-y growth Q3 (Rs Crore) y-o-y growth

Agriculture, forestry & fishing 739495 752746 3.6 1.8 233894 236376 4.1 1.1

Industry 1442498 1487533 3.5 3.1 359046 370954 2.6 3.3

Mining & quarrying 108249 108713 -0.6 0.4 27345 26971 -2.6 -1.4

Manufacturing 823023 838541 2.7 1.9 202665 207813 0.7 2.5

Electricity, gas & water supply 98814 103642 6.5 4.9 24686 25798 7.7 4.5Construction 412412 436637 5.6 5.9 104350 110372 6.9 5.8

Services 3061589 3263197 8.2 6.6 758313 804262 8.3 6.1

Trade, hotels, transport andcommunication

1440312 1514593 7 5.2 356768 374992 6.9 5.1

Financing, insurance, real estate &business services

948808 1030633 11.7 8.6 238586 257511 11.4 7.9

Community, social & personalservices

672469 717971 6 6.8 162959 171759 6.8 5.4

GDP at factor cost 5243582 5503476 6.2 5 1351253 1411592 6.0 4.5

PFCE 3334900 3472980 8 4.1 888613 929839 9.2 4.6

GFCE 634559 660630 8.6 4.1 178362 181803 8.1 1.9

GFCF 1897309 1944279 4.4 2.5 460717 488580 -1.7 6.0

GDP at Market Prices 5631379 5818308 6.3 3.3 1447327 1507033 5.8 4.1

A: Advance Estimates; R: Revised Estimates; Q3: Third Quarter

Source: CSO, Compiled by Mega Ace Research Team

For the month January 2013, WPI inflation eased to 6.62% against 7.18% in December 2012 ledby fuel & power (to 7.1% from 9.4%), manufactured products (to 4.8% from 5.0%) and non-food


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primary products (to 10.5% from 13.2%). However, inflation in food articles, which have a 14.3per cent share in the WPI basket, witnessed an increase as onion prices shot up during the month.

The index of industrial production (IIP) for the month of December 2012 contracted to 0.6%against an expansion of 2.7% in 2011. The fall in IIP figures reflects a broad-based weaknesswith de-growth in consumer goods, capital goods and intermediate goods. In terms of industries,12 out of the 22 industry groups in the manufacturing sector contracted in December 2012 incomparison with December 2011. Output in eight core infrastructure industries expanded at alower growth of 2.6% in December 2012. Within eight core industries, natural gas, coal andfertilizers showed a contraction which had a bearing on overall industrial production.

Exports during the month of January, 2013 saw a lower increase of 0.82%, whereas imports grewby 6.12% for the same period. The positive growth of exports was on the back of betterperformance by engineering goods, drugs and gems and jewellery. The trade deficit for themonth of January 2013 widened at 13.8%, to US$ 19.99 billion from US$ 17.57 billion a yearago. The persistent surge in the import bill is expected to keep the trade deficits at elevatedlevels. The rising international prices of relatively inelastic POL imports still pose a serious threat

to Indias Balance of Trade position.

On the fiscal front, the central governments fiscal deficit at 90.7% (against 105.4% a year ago)of the budgeted amount up to January 2013 stood at Rs 4,65,681 crore. The slight improvementin deficit is a reflection of governments tightening on the expenditure front.

Union Budget 2013-14, Railway Budget: 2013-14 & Economic Survey 2012-13

There is a mixed reaction to the Union Budget, while a section of the society welcomed thebudget, a large section of the industry expressed unhappiness on the budget. The Union Budget2013-14 was presented by the finance minister, Mr P. Chidambaram on February 28, 2013. Heexpressed that India rank 3rd after China and Indonesia in terms of economic growth and expectsa GDP growth of 6.1-6.7% for 2013-14. The government believes in inclusive development withemphasis on improving human development indicators especially of women, the scheduledcaste/tribes, the minorities and backward classes. A fiscal deficit of 5.2% for the current fiscaland 4.8% for 2013-14 is targeted by the government, whereas, revenue deficit for the current yearat 3.9% and for 2013-14 at 3.3%. By 2016-17, fiscal deficit is decided to be brought down to 3%,revenue deficit to 1.5% and effective revenue deficit to zero percent and plan expenditure in2013-14 at 29.4%.

Budget 2013-14 is expected to have overarching goal of creating opportunities for youth toacquire education and skills. The agricultural credit target for 2013-14 is kept at Rs 7 lakh crore.On infrastructure side, a Cabinet Committee on Investment (CCI) has been set up. IIFCL is to

offer a credit enhancement, Infrastructure tax-free bond of Rs 50,000 crore in 2013-14. Decisionshave been taken in respect of a number of gas, power and coal projects. Plans for 7 new citieshave been finalized and work on two new smart industrial cities at Dholera, Gujarat and ShendraBidkin; Maharashtra will start during 2013-14. Delhi Mumbai industrial Corridor (DMIC) to beprovided additional funds during 2013-14. Chennai Bengaluru Industrial Corridor to bedeveloped. Two new major ports will be established in Sagar, West Bengal and in AndhraPradesh. On banking front, capital infusion of Rs 14, 000 crore is provided to the public sectorbanks in BE 2013-14 and also a proposal to set up Indias first womens bank as a public sectorbank. Investments proposal: Where an investor has a stake of 10% or less in a company, it will be


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treated as FII and, where an investor has a stake of more than 10% it will be treated as FDI willbe laid. FIIs permitted to use their investment in corporate bonds and government securities ascollateral to meet their margin requirements and also be permitted to participate in the exchangetraded currency derivative segment to the extent of their Indian rupee exposure in India. SME tobe permitted to list on the SME exchange without being required to make an initial public offer.Stock exchanges to be allowed to introduce a dedicated debt segment on the exchange. Taxation:A relief for tax payers in the first bracket of Rs 2 lakhs to 5 lakhs, a tax credit of Rs 2000 to everyperson with total income up to Rs 5 lakhs. Increase of surcharge from 5 to 10% on domesticcompanies whose taxable income exceeds Rs 10 crore. In case of foreign companies who pay ahigher rate of corporate tax, surcharge to increase from 2 to 5% (if taxable income exceeds Rs 10crore).

Railway Budget 2013-14

The Railway Budget for 2013-14, was presented in the Lok Sabha on February 26, 2013, byRailway Minister Pawan Kumar Bansal. The rail Budget proposed a plan outlay of Rs. 63, 363crore for the railways, the highest ever outlay by far. The minister has foreseen 4 focus areas for

the coming year safety, consolidation, passenger amenities and fiscal discipline. The railwaybudget spared economy class passengers from any burden, but those travelling on superfast trainsand reserved compartments are now required to shell out more in the form of supplementarycharges, reservation fee, clerkage and cancellation and tatkal charges.Freight rates too have been hiked by about 5.79% on almost all categories of commodities in abid to offset the increase in the fuel bill of Rs. 5,100 crore in the next financial year.The other highlights of the budget are the introduction of 107 new trains, a special coach in selecttrains with the latest amenities, training for technical and financial staff to make them remainabreast with the happenings in the transport segment.

Economic Survey 2012-13

The Economic Survey 2012-13 released on February 27, 2013 presents an overall assessmentabout the economic situation during this period. It summarizes the performance on majordevelopment programmes, and highlights the policy initiatives of the government and theprospects of the economy in the short to medium term. The survey was presented by the ChiefEconomic Advisor Raghuram Rajan's for the first time in the parliament. The survey says, thestrong post financial stimulus led to a stronger growth in 2009-10 (8.6%) and 2010-11 (9.3%) butwith the increase in consumption demand coupled with supply side constraints resulting in highinflation. To curb inflation monetary policy was tightened; external sector was doing well thoughand helped in sustaining the growth. The slowdown was followed in 2012-13 and has been acrossthe board, with no sector left unaffected. The recent fall in saving rate (30.8%) without an equalfall in investment rate (35.0%) has led to widening current account deficit (CAD). In the recent

few months WPI inflation has come down however, food inflation remains around two digitgrowth and continues to be a matter of concern. The tax revenue collected in the fiscal 2012-13also was below the expectation and added to slowdown. The fiscal targets is expected to exceedsubstantially given the subsidy bill, particularly that of petroleum products.

The situation warranted urgent steps to reduce government spending so as to contain inflation.Also required were steps to facilitate corporate and infrastructure investment so as to ease supply.Several measures announced in recent months are aimed at restoring the fiscal health of thegovernment and shrinking the CAD as also improving the growth rate. With the global economy


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also likely to recover somewhat in 2013, these measures should help in improving the Indianeconomy's outlook for 2013-14.

B) International

Although the international economy has integrated considerably in recent decades, a newdatabase developed jointly by United Nations Economic and social Commission for Asia and thePacific and the World Bank reveals that trade costs fall disproportionately on developingcountries. The IMF has forecast that Europe remains a focus of efforts to restore confidence andrevive the global recovery. Europe needs to revive economic growth to help breakthe vicious cycle that keeps many countries stuck in crisis mode the feedback loop between weakgovernment finances, weak banks, and weak growth that continually undermine each other.Europe also needs to tackle older challenges that hinder growth potential.

UK Prime Minister proposed to help in building Mumbai-Bangalore industrial corridor

The UK prime minister on the first day of his visit to India announced a series of significantmeasures to ease student and business travel to Britain. He proposed to help in building amassive industrial corridor stretching from Mumbai to Bangalore and also announced that hisgovernment is rewriting the rules of high end technology transfers so that it can be shared withIndia.On the economy front, he expressed Britain is in danger of slipping into a rare triple-diprecession after its economy declined 0.3% in the fourth quarter of 2012. Trade between Britainand India is still negligible given the size of the economies. He believes that India and the UKcan expand their economic ties by identifying newer areas of investments and the can also bepartners in progress benefiting from mutually complementary strengths. UK can help mobilisesizeable investments for setting up manufacturing units in the Mumbai-Bangalore corridor ofIndia's Golden Quadrilateral. Financial service is another area where holds big scope for Indianand British firms to work together.

French President to reinforce trade in India

French President Francios Hollande during his two days visit to India (February 14 & 15) soughtto reinforce trade and strategic ties between the two countries, particularly through large-scalearms deals. He pushed for the conclusion to sell 126 Rafale fighter jets to India for a deal of $10billion. The deal to be signed would be the biggest purchase in last 15 years. During the meetFrance and India also concluded talks on a $6 billion project to co-develop short-range surface-to-air missiles. Talks are also proceeding between French nuclear firm Areva and the state-ownedNuclear Power Corporation of India for a $9.3 billion contract to build a 9,900-megawatt nuclearpower plant at Jaitapur in the western state of Maharashtra.

India and US trade tie up

The US is already Indias leading partner for trade, investment, jobs and technology. Trade in

goods and services have exceeded $100 billion in 2012. The rising investment flows from both

sides are creating jobs and expanding opportunities for technology-and-innovation driven

collaboration. A bilateral investment treaty (BIT), which is under negotiation, is expected to aid

these trends and be a starting point of this roadmap. The key to boosting investment in the Indian

economy and making progress on an India-US investment treaty is to establish the predictability


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of Indias regulatory and taxation regime. As BIT negotiations advance and Indias economic

liberalisation progresses, India and the US can gradually begin consideration of a future free

trade agreement (FTA). The other desirable elements of the framework could include addressing

the long-standing concerns of Indias information technology (IT) services sector, reviving the

bilateral Trade Policy Forum (TPF), restoring cooperation at the WTO and intensifying dialogue

on the Asian economic architecture. In both democracies, there is a need to generate publicsupport for trade liberalisation. Deepening the India US economic partnership will improve

investor confidence, unlock the full potential of our trade and commercial ties, and boost

economic growth in both countries.

Indo-Iran Trade

Indo-Iran trade is expected to undergo a substantive changes in view of the recently reported USmodified sanctions on Iran, which mandate 100% payment in the currency of the importingcountry for Iranian products. Banks and other financial institutions have to carry out stricter duediligence on corporates, their counterparties and trades before processing any payments. This

move is anticipated to affect traders whose activities are unrelated to Iran. In short, the risk ofdoing business with Iran will be high. However, the challenge that US recent action providesis, in fact, an opportunity for greater bilateral commercial cooperation between India and Iran.

The immediate implications for India are- all imports, most of it being in crude oil, of about $15billion (Rs 79,500 crore)- will be paid in rupees only, instead of the rupee/euro ratio of 45:55finalised under the 2012 agreement with Iran.

Likewise, Iranian urea will also be accessed under 100% rupee payment, instead of UAEsdirhams, as was the past practice. Massive rupee payments will be credited in Indias UCOBank account held in the name of Central bank of Iran, from which Indian exports will

continue to be financed. This is subject to Irans acceptance of 100% payment of their crude,fertiliser or other items in Indian rupees.

IMF completes first review Under the Extended Credit Facility (ECF) Arrangement forBangladesh

The Executive Board of the IMF has completed the first review of Bangladeshs economicprogram under a three-year arrangement supported by the ECF. The completion of the reviewenables an immediate disbursement of an amount equivalent to SDR 91.423 million (aboutUS$139.4 million), bringing the total amount disbursed equivalent to SDR 182.846 million(about US$278.8 million). In completing the review, the board has approved the request for awaiver for nonobservance of the performance criterion on new non concessional external debtmaturing in more than one year.

World Bank Bolster Cooperation on improving Business Climate & Supporting Innovation in

Russia

World Bank group President during his visit to the Russian Federation focused on building onthe countrys two-decade partnership, improving the countrys business climate and diversifyingthe economy. During his earlier visit to Russia with Russian minister of economic development


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and finance both parties agreed to create a knowledge delivery hub in Moscow focusing onimproving the business climate and encouraging innovation in the country. The hub will build onthe World Bank groups current business environment advisory work in 30 Russian regions andwith the federal government.

Planned Hydropower Plant Key Step to Easing Nepal's Energy Crisis

The Asian Development Bank (ADB) has lent $150 million towards a $500 million project thatwill build a hydropower plant in Nepal with a 140-megawatt capacity. The hydropower plant, tobe located around 150 kilometers west of Kathmandu on the Seti River in Tanahu district, willgenerate electricity year round. In addition to building the plant and a transmission system, theproject will also provide at least 17,636 homes in the area of the hydropower plant with directconnections to the national power grid. Only around one-third of households in Nepal areconnected to the electricity distribution grid, with connection rates much lower in rural areas. Theentire project will be co-funded by ADB and the Japan International Cooperation Agencylending, the European Investment Bank, and the Abu Dhabi Fund for Development.

ADB, Australia provide $37 million to keep Viet Nam road upgrades on track

The ADB and Government of Australia provided an extra $37 million for a project improvingroads and tackling HIV and human trafficking risks along a key coastal route linking Vietnamand Cambodia. The additional funds, is expected to improve the quality and safety of upgradedroads in Vietnam and ensure the project meets its intended output. ADBs loan follows an earliercontribution of $75 million, while the Australian Agency for International Development isproviding a grant of $12 million, on top of an initial sum of $25.5 million. The new assistance isearmarked for the Viet Nam component of the project, which will be completed in 2015 with asecond stage to follow through to end 2018. The total revised project cost of $329 million alsoincludes contributions of $71.5 million from the Government of Viet Nam and $120 millionfrom Export-Import Bank of Korea.

Capital Market Review

February January February January (%) Change

2013 2013 2012 2012 [1]/[2] [1]/[3] [2]/[4]

Major Indices [1] [2] [3] [4] [5] [6] [7]BSE Sensex Close 18,861.54 19,894.98 17,752.68 17,193.55 (5.19) 6.25 15.71

(28.02.2013) (31.01.2013) (29.02.2012) (31.01.2012)

Monthly High 19,781.19 20,103.53 18,428.61 17,233.98 (1.60) 7.34 16.65

(01.02.2013) (25.01.2013) (21.02.2012)(27.01.2012)

Monthly Low 18,861.54 19,580.81 17,300.58 15,517.92 (3.67) 9.02 26.18

(28.02.2013) (01.01.2013) (01.02.2012) (02.01.2012)S&P CNX Nifty Close 5693 6034.75 5385.20 5199.25 (5.66) 5.72 16.07

P/E Ratio : BSE 30 17.01 17.60 18.30 17.70 (3.35) (7.05) (0.56)

FII Investments (Equity+Debt)

Inflows Rs. Cr. 97728.90 95777.00 103633.91 76548.20 2.04 (5.70) 25.12

Outflows Rs. Cr. 69288.60 70770.80 68406.20 50219.7 (2.09) 1.29 40.92

Net Rs. Cr. 28440.50 25006.30 35226.90 26328.9 13.73 (19.26) (5.02)

Cum. Net InvUS$ Mn. (Month End) 168787.20 163469.00 140094.70 132930.31 3.25 20.48 22.97


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The BSE index closed at 18861.54 points on February 2013 representing a decline of 5.19% inthe index value during the said month. The sensex hit a high of 19781.19 in February and a lowof 18861.54. S& P CNX Nifty also saw a decline of 5.66% compared to a month before.

The cumulative investment by FIIs stood at US$ 168.79 billion in February 2013, and thisreflected an increase of 3.25% over the previous month. The improved global liquidity and recentpolicy reforms have aided FII inflows. FII flow into Indian capital market grew four-fold to overRs.1.63 lakh crore in 2012.

Other MarketsDebt Market

During the month of January 2013 there were 27 corporate debt issues for a total amount of Rs.7,468.12 crore. Corporate bond spreads over G-secs in the month of January 2013 settled lowerthan those in December across maturities considered here. Some of these issues are recordedbelow:

Sr.no

Name of the Issuer Duration(yrs)

Rating Amount(Rs. Crore)

Type ofInstrument

1 Rural Electrification Corporation Ltd. 5 AAA 1500 Bonds/NCD2 Power Finance Corporation Ltd. 5 AAA 1000 Bonds/NCD3 Export Import Bank of India 10, 5 AAA 750 Bonds/NCD4 National Housing Bank 3 AAA 500 Bonds/NCD5 Industrial Development Finance Corporation Ltd. 3 AAA 500 Bonds/NCD6 Shriram Transport Finance Co. Ltd. 3.5, 1.2, 3, 5 AA+ 480 Bonds/NCD7 L&T Infrastructure Finance Co. Ltd. 10 AA+ 450 Bonds/NCD8 Bhushan Steel Ltd. 7 A+ 350 Bonds/NCD9 LIC Housing Finance Ltd. 2.3 AAA 300 Bonds/NCD10 Bajaj Finance Ltd. 5 AA+ 270 Bonds/NCD

11 Karnataka State Finance Corp. 12 AA-(SO) 200 Bonds/NCD12 AEON Trust 2013 4 AAA(SO) 200 Bonds/NCD13 Aditya Birla Finance Ltd. 2 AA 150 Bonds/NCD14 Kotak Mahindra Prime Ltd. 1.4, 3 AA+ 150 Bonds/NCD15 Tata Motors Finance Ltd. 2 AA- 110 Bonds/NCD16 Asian Satellite Broadcast Pvt. Ltd. 3 A-(SO) 100 Bonds/NCD17 Fullerton India Credit Co. Ltd. 2 AA+ 80 Bonds/NCD18 Mahindra & Mahindra Financial Services Ltd. 5,3,5,1.2 AA+ 70.5 Bonds/NCD19 Sundaram Finance Ltd. 10 AA+ 60 Bonds/NCD20 IL&FS Financial Services Ltd. 3,5 AAA 50 Bonds/NCD21 HDB Financial Services Ltd. 5 AAA 50 Bonds/NCD22 Tata Capital Finance Services Ltd. 1.4, 1.2 AA+ 35 Bonds/NCD23 IFMR Capital MOSEC XXII 1.7 A+(SO) 34.62 Bonds/NCD

24 Singhvi Investment & Finance Pvt. Ltd. 4 BBB 28 Bonds/NCD25 Sundaram BNP Paribas Home Finance Ltd. 5,2 AA+ 25 Bonds/NCD26 ECL Finance Ltd. 3.3 AA- 20 Bonds/NCD27 Reliance Capital Ltd. 3 AAA 5 Bonds/NCD

(Sources: Credit Analysis & Research Ltd. February 2013)

Corporate bond spreads for AAA rated companies over G-secs for 10 year maturity was1.03%, 5 year maturity was 1.00% and 3 year maturity was 1.12% as on 28th February 2013.


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Call Money Market

The weighted average call money rate generally remained around the repo rate. The average dailyturnover in the call money market was Rs.10, 320 crore for the week ending February 22, 2013.Average call rate on February 28, ended slightly higher at 7.85% against 7.84% on good demandfrom borrowing banks.

Foreign Exchange Market

The nation's current-account deficit is set to widen; keeps the domestic currency under pressure.The exchange rate (RBI reference rate) on February 28, 2013 was Rs.53.73 per US dollar ascompared to Rs.49.03 per US dollar in February 2012. Rupee depreciated due to month-enddollar demand and a steep fall in local equities. Further, the six month forward premia was 7.28%on February 22, 2013 as compared to a premium of 7.34% on February 24, 2012. The foreigncurrency assets were US$ 258228.9 million on February 22, 2013 and inclusive of gold andSDRs and the reserve position in the Fund, the foreign exchange reserves aggregated to US$

291916.0 million.

Important Policy Pronouncements

Technical Committee on Services/Facilities for the Exporters

Given the current global and Indian scenario and the importance of export sector in the overallcontext, the RBI has constituted a technical committee to examine issues relating to difficultiesbeing faced by exporters with regard to availability of credit, transaction costs, insurance andfactoring and other procedural hassles in their dealings with banks and financial institutions. The

recommendation on the same is expected to be submitted by end of April 2013.

The terms of reference of the Technical Committee are:

To review the existing policies/procedure relating to bank finance for exports and suggestmeasures to improve timely, adequate and hassle-free flow of credit towards working capital,capital expenditure and other requirements of the sector, and, in particular SME units;

To evaluate and suggest ways for improving financial support to the export sector fromalternative sources like factoring, interest subvention, export advance from the externalsources, etc.;

To assess the efficacy of the schemes/facilities of the export supporting bodies like the EXIMBank, ECGC and suggest changes, if any, in such schemes/facilities;

To examine and suggest measures to rationalise/reduce the transaction cost including bankcharges and payment of other statutory fees, so as to improve transparency and certainty inthe dealings of exporter clients with banks/other institutions;

To suggest measures to simplify and rationalise the existing procedure including thedocumentation, etc., requirements for availing of various facilities and compliance with therequirements under FEMA;

To examine specifically the special needs of exporting units located in SEZ, requirements ofmerchanting trade;


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To review the process of realisation/repatriation of export proceeds in a timely manner,including the use of new methods of receipts like the online payment gateways;

To suggest further measures for risk mitigation for the exporters including use of hedginginstruments, smoothening the accounting issues, if any, relating to hedging, invoicing ofexports in Indian Rupee;

To specifically examine the existing capabilities and the emerging requirement of the systemand the staff of the banks, financial /other connected institutions dealing with the exportsector; and

To examine any other related matter/issue for improvement of the services/facilities beingextended to the exporters.

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Exchange Rates2012-13 2011-12

Feb 13 Jan 13 Dec 12 Feb12 Jan 12 Dec11

Rs/US$ 53.77 53.29 54.78 48.94 49.68 53.27

Rs/Pound 81.57 84.22 88.51 77.95 78.17 82.10

Rs/Euro 70.68 72.23 72.26 65.93 65.51 68.90

Figures are for month-end

Broad Money (M3) & WPI InflationM3 (Rs.Crore)

M3 (%Change)

WPI (Index)All

Commodities

WPIInflation

(%)

Mar-07 3310038 21.7 111.4 6.6

Mar-08 4017855 21.4 116.6 4.67

Mar-09 4794775 19.3 126 8.06

Mar-10 5602698 16.9 130.8 3.81

Mar-11 6504116 16.1 143.3 9.56

Mar-12 7357750 13.2 158.7 7.2

Feb-13 8160000 12.7 169.2* 6.62Source: RBI, Weekly Statistical Statement: February 22,2013 *January 2013


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India's Foreign Trade

Exports (US$ Million)

Imports (US$ Million)

TradeBalance(US$ Million)

2005-06 103091 149166 -46075

2006-07 126414 185735 -593212007-08 162904 251439 -88535

2008-09 185295 303696 -118401

2009-10 178751 288373 -109621

2010-11 251136 369769 -118633

2011-12 303719 488640 -184922

Jan-13 25587 45583 -19996

Source: Ministry of Commerce, Compiled by Mega AceConsultancy

BSE Sensex vs. BSE Turnover (Rs Crore)BSE

Sensexclose

BSETurnover

(Rs.Crore)

BSE Sensexclose

BSETurnover (Rs.Crore)

31-Jan-13

19,894.98 2378 15-Feb 19,468.15 1825

1-Feb 19,781.19 2387 18-Feb 19,501.08 1608

4-Feb 19,751.19 2020 19-Feb 19,635.72 1659

5-Feb 19,659.82 2453 20-Feb 19,642.75 1825

6-Feb 19,639.72 2098 21-Feb 19,325.36 1958

7-Feb 19,580.32 2189 22-Feb 19,317.01 1725

8-Feb 19,484.77 2519 25-Feb 19,331.69 1931

11-Feb 19,460.57 2140 26-Feb 19,015.14 1960

12-Feb 19,561.04 1972 27-Feb 19,152.41 2107

13-Feb 19,608.08 2041 28-Feb 18,861.54 3555

14-Feb 19,497.18 2166

Source: Compiled by Mega Ace Research Team


12/12

12

Annexur e 1 : Select Internat ional Economi c Ind icat ors fo r Devel oped Industri alis ed Countr ies And India

Country Interest rates, % Consumer p rices Currency uni t per US $ Un ion Budget Real Rate Currency Current account Balance Col 8 as10-year gov't Latest As on A Year (+) / (-) (Long-term) unit per Euro latest 12 months Percentage

bonds latest 13.02.2013 ago % of GDP 2012 (1-2) 13.02.2013 (US$ bn) of GDP 2012

1 2 3 4 5 6 7 8 9

Euro-11 1.69 2.0 0.74 0.76 -3.3 -0.31 1.00 135.5 0.6

J an Nov

U. S. A. 2.02 1.7 1.00 1.00 -7.0 0.32 1.35 -477.9 -3.0

Dec Q3

Britain 2.27 2.7 0.64 0.63 -8.3 -0.43 0.86 -75.3 -3.5

J an Q3

Japan 0.75 -0.1 93.50 77.40 -9.8 0.85 126.35 59.0 1.0

Dec Dec

Sweden 2.04 -0.10 6.30 6.66 0.0 2.14 8.51 36.3 6.8

Dec Q3

Switzerland 0.78 -0.3 0.92 0.91 0.0 1.08 1.24 78.7 11.8

J an Q3

India 7.85 10.8 53.80 49.20 -5.6 -2.95 72.70 -80.6 -4.4

J an Q3

Source : The Economist London: February 16th-22nd, 2013

Annexure 2 : Importan t Eco nomic Indicator s fo r Selec t Emergin g Market Coun tri es

Country Interest rates, % Consumer p rices Currency uni t per US $ Un ion Budget Real Rate Currency Current account Balance Col 8 as

10-year gov't Latest As on A Year (+) / (-) (Long-term) unit per Euro latest 12 months Percentage

bonds latest 13.02.2013 ago % of GDP 2012 (1-2) 13.02.2013 (US$ bn) of GDP 2012

1 2 3 4 5 6 7 8 9

China 3.25 2.0 6.23 6.30 -1.6 1.25 8.42 213.8 2.8

J an Q4

Hongkong 1.26 3.8 7.76 7.75 1.0 -2.54 10.49 6.4 6.8

Dec Q3

Indonesia 0.00 4.6 9,647.00 9,000.00 -2.4 -4.60 13,036.49 -24.2 -2.6

J an Q4

Malaysia 3.47 1.2 3.09 3.02 -4.7 2.27 4.18 19.1 6.9

Dec Q3

Singapore 1.56 4.3 1.24 1.26 1.1 -2.74 1.68 46.0 18.7

Dec Q3South Korea 3.07 1.5 1,087.00 1,122.00 2.1 1.57 1,468.92 43.3 2.2

J an Dec

Taiwan 1.23 1.1 29.70 29.50 -2.3 0.13 40.14 45.7 9.8

J an Q3

Thailand 3.81 3.4 29.80 30.80 -3.4 0.41 40.27 2.7 -0.1

J an Q4

Brazil 9.57 6.2 1.97 1.72 -2.5 3.37 2.66 -54.2 -2.6

J an Dec

Venezuela 10.05 22.2 6.29 4.29 -15.0 -12.15 8.50 17.1 4.6

J an Q3

India 7.85 10.8 53.80 49.20 -5.6 -2.95 72.70 -80.6 -4.4

J an Q3

Source : The Economist London: February 16th-22nd, 2013

The Research GroupMega Ace Consultancy [India] Private Limited,B-68, Mittal Tower, Nariman Point, Mumbai 400 021

Tel: +91-22-2281 2298Fax: +91-22-2281 2305Url: www.mega-ace.comFor research queries contact [email protected] private circulations only, contains no offer. Though care has been taken in ensuring correctness of thecontents, no responsibility is accepted for the accuracy of the contents or for the decision taken by anybodybased on the contents.Contents can be reproduced provided due credit is given and a copy of the same is sent to us.

March 2013

update on indian economy, march 2013

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