Current State

Of
Indian Economy
December 2008

Federation of Indian Chambers of Commerce and Industry

New Delhi
Recent Trends in Indian Economy :

• During the phase of demand contraction in the global market industrial

growth is bound to suffer. Acute moderation in industrial growth started in
September 2008, and although in November 2008 growth picked up but it
was half of what was recorded in the same month of previous year. Growth
in output of all the three main sectors namely manufacturing, mining and
electricity slowed compared to the previous year.

The stimulus packages brought out from time to time have shown some
impact on the industrial climate. Yet, it is still early days to comment on
how the stimulus measures would work on the ground. It seems that the
industry will take some more time to absorb the feeders.

Going by the use based classification we see negative growth being posted
by the capital goods segment. The remaining segments, the basic and
intermediate were saw growth decelerating in November 2008.

Growth in the consumer durables segment surpassed the growth rate

recorded in the previous year. Higher growth in production could be on
account of higher expected sales during the approaching festive season.

Few sectors that posted a surge in output were food products, beverages and
tobacco, jute, textiles, rubber, non metallic items, and basic metals sectors .

• In 2008-09 the food grain production may fall short of the target 233 MT for
2008-09 , as the received rainfall is 32% below the normal (cumulatively,
Oct 2008 to December 2008 ) during the North-east monsoon season.
Further, rainfall received during the south west monsoon season too has
been moderate.

• The laggards among the six core infrastructure industries in November 2008
included finished steel, crude petroleum, petroleum refinery and power.
Growth was seen to accelerate in November 2008 in the coal sector
compared to the corresponding period of previous year.

• The headline inflation rate dropped to an average of 6.5% in December 2008

compared to 8.66% posted in the same month of previous year. The falling
oil prices mainly contributed to softening of inflation.

2
 However the concern over rising prices still remain with prices of some
articles such as food, textiles, wood products, paper products and basic
metals getting dearer.

• In y-o-y terms (growth calculated from April- December 2008 over the same
period of previous year ) an upward revision in the (M3) money supply was
done to 19% and data for December shows M3 exceeding the target.

In December 2008 money supply expanded by 10.6% compared to that of

11.7% (calculated December 2008 over March 2008 ) in the same month of
previous year. The expansion in M3 in December was lower but close to
previous year’s growth..

Government borrowings and credit received by the commercial sector grew

substantially compared to the previous year. Our foreign exchange assets
have begun to decline. Aggregate deposits have slowed in comparison to the
growth in the previous year, however, investments were seen to scale up in
the government and approved securities.

• The stock markets and the prices of the scrips are at the all time low. On one
hand the when the investors mainly the FIIs are shying away from the
markets there is another category of investors that maintained the
investment tempo as they viewed investments during weakness in the
market an opportunity for greater returns in future. There has been a slight
increase by 5 percentage points in the sensex in December 2008..

• Revenue collections from the tax sources slowed to 9.6% as against the
collection rate of 27% recorded in the previous year. The percentage share
of direct and indirect taxes remain intact, however, the rate of collection was
observed to decline in both the segments. Perhaps the months in the last
quarter of 2008-09 will see some surge in rate of collection.

• By the end of 8 months the fiscal deficit got even worse. The were some off
budget liabilities on account of fertilizer, food and oil, along with some
other unbudgeted liabilities due to loan waiver, announced schemes and six
pay commission, could amount to 8% of the GDP in 2008-09. By November
2008 the revenue collection was 62% of the target compared to 73%
achieved in the same period of previous year and expenditures were found
to be much ahead of the target.

• Data on Indian exports show merchandise exports in the de-growth mode as

a result of financial crises leading to a demand crunch world over. In USD
terms, October and November 2008 witnessed negative growth while in
Rupee terms exports growth suffered a slowdown compared to the previous
year.

3
• The impact of the global economic turmoil is also seen in India’s long term
investments. Data on foreign direct investments shows gradually falling
direct investments with inflows received being quite low in November 2008
at USD 1083 million.

• There has been more than US$ 60 bn drain out in forex reserves from its
peak of US$ 315 bn reserves primarily due to efforts of RBI to aid Rupee
from declining further against the other major currencies and also due to
feed the forex-starved Indian banks overseas.

• Despite the intervention of the central bank it was a struggle to maintain the
level of Indian Rupee value against the major foreign currencies within a
certain range. In December 2008 the exchange rate between Indian Rupee
and USD remains steady within the range 49-50 against the US dollar.

4
 Contents

Title Page

1 Industrial Growth 7

2 Core Infrastructure Industries 9

3 Trends in Inflation 11

4 Monetary Indicators 13

5 Stock Market Trends 17

6 Fiscal Management 19

7 Foreign Trade 21

8 Capital Inflows 22

9 Foreign Exchange Reserves 23

10 Trends in Exchange Rates 24

5
 LIST OF TABLES

Table-1.1 Growth of industry 8

Table-2.1 Growth in six core infrastructure industries-1 9

Table-2.2 Growth in six core infrastructure industries-2 10

]
Table-3.1 Monthly trends in Wholesale Price Index 11
Table-3.2 Monthly trends in consumer prices 12

Table-4.1 Monetary indicators 13-16

Table-5.1 Month trends in major stock market indices 17

Table-6.1 Trends in tax collections of central government 19

Table-6.2 Trends in central government finances 20

Table-7.1 Monthly trends in growth of merchandize trade 21

Table-8.1 Monthly trends in foreign investments 22

Table-9.1 Monthly trends in foreign exchange reserves 23

Graph-10.1 Monthly trends in exchange rate of Rupee 24

6
1. Overall Economy and Industrial Growth :

Industrial production continues to post a conservative growth rate of 2.5% in

November 2008 growth as against the growth of 4.9% a year ago. The growth in the
month of November 2008 surpassed the negative growth posted in the previous
month of the same year.

It is however important to note that the fiscal expansionary steps taken by the
government will take some more time to show their impact on the growth of overall
production. .

Despite the liquidity infusions in the economy from time to time the banks are
taking time to make necessary adjustments. This is perhaps because of the
unfavorable experience lending institutions have had in the past.

Economies world over have adopted monetary measures that include interest rate
cuts and liquidity infusions. However, the measures have failed to invoke demand
in the markets. It is reported that the lending institutions are loaded with funds but
they are more hesitant than ever before.

In India about 60% of the GDP is dependent on the domestic market and now the
demand in the domestic market is seen to be loosing steam.

Growths in all the three main sectors of the overall industry were observed to
decelerate as compared to that of the previous year. In November 2008 the mining
sector posted 0.5% growth, while the manufacturing sector clocked 2.4% growth
and electricity grew by 3.1% as compared to the growth of 6.3%, 4.7% and 5.8%
respectively in the corresponding month of previous year.

On going by the use based classification we see intermediate goods posting

negative growth of 2.3% compared to 24.2% registered in the previous year. The
basic and capital goods were seen to slow from 5.2% and 5.5% in November 2007
to 2.3% and 2.6 % in same month of 2008 respectively

There was however, sharp acceleration in the consumer goods segment in

November 2008 by 4.4% , the growth came from the consumer durables segment
that recorded a 7.3% increase. Production for the non durables declined further.

In November 2008 among the 17 industry sectors production was seen to slid i.e.
negative growth in seven sectors. These were cotton textiles, wool, silk and man
made fibres, leather, fur products, basic chemicals, metal products, transport
equipments and other manufacturing industries. In November 2008 growth in the
case of wood, paper and machinery goods slowed compared to the growth numbers
in November of the previous year. The only sectors that have been able to post a

7
higher growth were food products, beverages and tobacco, jute , textiles, rubber,
non metallic items, and basic metals sectors.

1.1: Growth Of Industry: Recent Trends (in percentage)

Nov Nov
Weights
2007-08 2008-09
Industry 100 4.9 2.4
Mining 10.2 6.3 0.5
Manufacturing 79.4 4.7 2.4
Electricity 10.5 5.8 3.1
Use Based Classification
Basic 35.6 5.2 2.3
Intermediate 26.5 5.5 2.6
Capital 9.3 24.5 -2.3
Consumer Goods 28.7 -2.9 4.4
Consumer non Durables 23.3 -5.5 -4.2
Consumer Durables 5.4 -2 7.3

16 industry sectors
Food Products 9.1 -15.3 3.8
Beverages, Tobacco and Related Products 2.4 12.7 14.5
Cotton Textiles 5.5 -3.6 -0.1
Wool, Silk and man-made fibre textiles 2.3 -4.3 -11.4
Jute and other vegetable fibre Textiles (except
cotton) 0.6 -3.4 5.1
Textile Products (including Wearing Apparel) 2.5 0.3 6.0
Wood and Wood Products; Furniture and
Fixtures 2.7 37.2 8.7
Paper & Paper Products and Printing,
Publishing & Allied Industries 2.6 2.6 0.2
Leather and Leather & Fur Products 1.1 9.3 -13.1
Basic Chemicals & Chemical Products (except
products of Petroleum & Coal) 14.0 7.7 -2.1
Rubber, Plastic, Petroleum and Coal Products 5.7 5.4 30.7
Non-Metallic Mineral Products 4.4 -0.5 2.3
Basic Metal and Alloy Industries 7.5 5.1 5.6
Metal Products and Parts, except Machinery
and Equipment 2.8 -5.9 -8.7
Machinery and Equipment other than Transport
equipment 9.6 9.2 5.5
Transport Equipment and Parts 4.0 -0.7 -8.9
Other Manufacturing Industries 2.5 44.2 -16.9
Source: Central Statistical Organization

8
2. Core infrastructure industries

Among the six core infrastructure industries the sectors that were the low
performers in the 2008 were finished steel, crude petroleum, petroleum refinery and
power. During the April-November period of 2008 the above mentioned sectors
grew at 3.3%, -0.6%, 3.8% and 2.8% respectively. Cement too slowed but only for
4 months during the eight-month period of 2008, and the cumulatively from April-
November the growth rate stood at 6.4% as against 8.1% in the previous year. The
growth was only higher in the coal sector compared to the previous year.

Table-2.1: Growth in six-core infrastructure industries (% change)

All infrastructure
Finished steel Cement Crude petroleum
industries
2008- 2007- 2008-
2007-08 2008-09 2007-08 2008-09 2007-08 09 08 09
April 5.9 3.6 2.7 4.0 5.8 6.9 1.4 0.9
May 7.8 3.5 8.4 5.2 9.9 3.8 -1.6 3.2
June 5.3 3.4 5.6 4.4 6.0 6.5 -0.7 -4.7
July 7.2 4.3 10.8 1.9 9.4 8.8 0.9 -3.0
August 9.0 2.7 9.6 5.5 16.7 1.9 6.4 -1.0
September 5.8 5.1 9.5 5.8 5.4 7.9 -0.7 0.4
October 4.5 3.4 5.2 -0.5 7.5 6.2 -0.1 -0.3
November 5.3 1.8 4.8 -2.7 5.2 8.7 0.3 0.5
December 3.2 1.8 4.4 -1.5
January 4.2 5.5 5.2 -0.2
February 8.7 8.2 12.4 2.3
March 9.6 21.8 9.3 -0.3
April- Nov 6.4 3.6 7.0 3.3 8.1 6.4 0.6 -0.6
Source: Ministry of Industry

9
Table-2.2: Growth in six-core infrastructure industries (% change)

Petroleum refinery Coal Power

2007-08 2008-09 2007-08 2008-09 2007-08 2008-09
April 15.1 4.3 0.6 10.3 8.7 1.4
May 14.9 0.1 0.5 8.3 9.3 2.0
June 9.8 5.6 0.9 6.2 6.8 2.6
July 4.6 11.8 1.1 5.5 7.5 4.5
August 8.2 2.5 8.0 5.9 9.2 0.8
September 6.9 2.6 6.2 10.7 4.3 4.4
October 2.8 5.0 8.9 10.9 4.2 4.4
November 5.2 -1.1 7.7 9.6 5.8 2.6
December 3.2 8.4 3.8
January 5.3 4.8 3.3
February 5.8 11.7 9.6
March 0.0 9.3 3.6
April- Nov 8.3 3.8 4.3 8.6 7.0 2.8
Source: Ministry of Industry

10
3. Inflation Trends

In December 2008 the WPI based inflation rate recorded was almost double (6.5%)
the rate of previous year (3.8%). The overall inflation rate dropped to an average of
6.5% in December 2008 compared to 8.66% posted in November of the same year.
Apart from the softening prices of fuel, oil and lubricants, some other items were
also observed to slow in December 2008 compared to the previous month of the
same year. These articles include food products, non metallic minerals, rubber,
basic metals and transport items.

On comparing the prices of articles with that of the previous year, we found prices
of some articles still increasing, among these are the food articles, textiles, wood
products, paper products and basic metals.

Table-3.1. Monthly trends in Wholesale price index- monthly average (% change)

2007-08 2008-09
Nov Dec Nov Dec
All Commodities 3.25 3.8 8.66 6.5
I Primary Article 4.64 4.5 11.63 11.7
(A) Food Articles 2.61 2.4 9.70 10.1
(B) Non-Food Articles 11.58 10.5 11.61 11.3
II Fuel Power Light & Lubricants 0.12 2.9 7.20 -0.1
III Manufactured Products 3.95 3.9 8.02 6.9
(A) Food Products 2.33 3.2 5.10 3.8
(B) Beverages, Tobacco & Tobacco Products 10.43 8.7 8.33 9.0
(C) Textiles -1.65 -2.9 7.61 10.2
(D) Wood & Wood Products 7.15 1.7 9.77 9.8
(E) Paper & Paper Products 1.35 1.3 4.81 5.7
(F) Leather & Leather Products 5.02 2.6 0.60 0.6
(G) Rubber & Plastic Products 5.57 7.0 4.57 3.5
(H) Chemicals & Chemical Products 5.73 6.6 9.26 6.5
(I) Non-Metallic Mineral Products 9.28 8.6 3.71 2.9
(J) Basic Metals Alloys & Metals Products 3.72 2.8 15.06 12.8
(K) Machinery & Machine Tools 7.05 5.7 5.43 5.5
(L) Transport Equipment & Parts 1.81 4.6 6.47 3.6
Source: RBI

11
Table-3.2: Monthly trends in consumer prices (% change)

CPI-IW CPI-UNME CPI-AL CPI-RL

2007-08 2008-09 2007-08 2008-09 2007-08 2008-09 2007-08 2008-09
April 6.7 7.8 7.7 7.0 9.4 8.9 9.1 8.6
May 6.6 7.8 6.8 6.8 8.2 9.1 7.9 8.8
June 5.7 7.7 6.1 7.3 7.4 8.8 7.5 8.8
July 6.5 8.3 6.9 7.4 8.6 9.4 8.0 9.4
August 7.3 9.0 6.4 8.5 8.8 10.3 8.5 10.3
September 6.4 9.8 5.7 9.5 7.9 11.0 7.6 11.0
October 5.5 10.4 5.5 10.4 7.0 11.1 6.7 11.1
November 5.5 10.4 5.1 6.2 11.1 5.9 11.1
December 5.5 5.1 5.9 5.6
January 5.5 5.1 5.6 5.9
February 5.5 6.0 6.4 6.1
March 7.9 - 7.9 7.6
Source: Ministry of Labor, Center for Monitoring Indian Economy

12
4. Monetary Indicators:

In December 2008 money supply expanded by 10.6% compared to that of the

11.7% in the same month of previous year. The expansion in M3 in December was
lower but close to the growth in the previous year.

Credit off-take by the government grew by 21% in December 2008 as against 0.9%
in the same month of previous year. Commercial sector borrowings also increased
from 9.5% in December previous year to 11.6% in the same month of 2008-09.

Since November 2008 the net foreign exchange assets to banks were observed to
shrink. In December 2008 net foreign exchange assets dropped by 6.3% as against a
rise of 21% in the previous year.

Liabilities (non monetary) were reported to drop during the month of December
2008 compared to the corresponding month of the previous year.

Growth in the aggregate deposits stood at 11.6% in the end of third quarter of 2008-
09 as against the growth of 13.1% recorded in the corresponding period a year ago.

Investments in the government and approved securities rose substantially, however,

step up in investments seem to be lower than the rise seen in the same period of
previous year. The increase in total credit was found to be on account of both food
and non food credit.

Table-4.1: Monetary sector indicators – up to December (December 2008-09 over March 2007-08)

Variation in M3 (Rs crore) Variation in M3 (%)

2007-08 2008-09 2007-08 2008-09
April 549 18342 - 0.5
May 13565 75113 0.4 1.9
June 73824 84387 2.2 2.1
July 141021 140700 4.3 3.5
August 168534 208571 5.1 5.2
September 272933 264364 8.2 6.6
October 301059 331450 9.1 8.3
November 364660 374193 11.1 9.3
December 389273 423509 11.7 10.6
January 546563 16.5
February 555364 16.8
March 682794 20.6
Variation in net bank credit to Variation in net bank credit to
government (Rs crore) government (%)

13
 2007-08 2008-09 2007-08 2008-09
April 30617 -7763 3.7 -0.9
May 24085 14613 2.9 1.6
June 28117 32597 3.4 3.6
July 80964 69352 9.7 7.6
August 47656 66866 5.7 7.4
September 43734 61550 5.2 6.8
October 20115 79275 2.4 8.7
November 32887 144131 3.9 15.9
December 7241 192566 0.9 21.2
January 24888 3.0
February 17399 2.1
March 9350 1.1
Variation in bank credit to commercial Variation in bank credit to
sector (Rs crore) commercial sector (%)

2007-08 2008-09 2007-08 2008-09

April -40585 -18293 -1.9 -0.7
May -46798 18626 -2.2 0.7
June -30547 42252 -1.4 1.6
July -12151 57878 -0.6 2.3
August 37019 106693 1.7 4.2
September 114895 196248 5.4 7.6
October 103108 266620 4.8 10.4
November 150784 285691 7.1 11.1
December 201772 298809 9.5 11.6
January 292883 13.8
February 341060 16.1
March 432664 20.3
Variation in net foreign exchange assets Variation in net foreign
of banks (Rs crore) exchange assets of banks (%)
2007-08 2008-09 2007-08 2008-09
April -28024 18732 -3.0 1.5
May -35519 113765 -3.9 9.0
June -17945 103932 2.0 8.0
July 12534 75552 1.4 5.8
August 54117 54821 5.9 4.2
September 100304 77194 11.0 6.0
October 152762 12706 16.7 1.0
November 192930 -46375 21.1 -3.6
December 194508 -82201 21.4 -6.3
January 267735 29.3
February 318273 34.9
March 354704 38.8
Variation in non-monetary liabilities of Variation in non-monetary
banks (Rs crore) liabilities of banks (%)
2007-08 2008-09 2007-08 2008-09

14
April -38474 -25665 -6.7 -3.5
May -71601 71891 -12.9 9.7
June -94033 94555 -16.5 12.2
July -59345 62244 -10.4 8.0
August -29287 19970 -5.1 2.6
September -13480 70928 -2.4 9.2
October -24478 27452 -4.3 3.5
November 12707 9554 2.2 1.2
December 14981 -13871 2.6 -1.8
January 39506 6.9
February 121932 21.3
March 114893 20.1

Variation of aggregate deposits of SCB Variation in aggregate deposits

(Rs crore) of SCB (%)
2007-08 2008-09 2007-08 2008-09
April 5857 51 0.2 -
May 31436 56760 1.2 1.8
June 54791 52837 2.1 1.7
July 162203 115943 6.2 3.6
August 164956 194522 6.3 6.1
September 261801 245198 10.0 7.7
October 301563 318500 11.5 10
November 340016 452567 13.0 14.2

December 341729 372413 13.1 11.6

January 481231 18.4
February 472550 18.1
March 580208 22.2
Variation in investments of SCB Variation in investments of
(Rs crore) SCB (%)
2007-08 2008-09 2007-08 2008-09
April 15950 41554 2.0 4.3
May 26938 34147 3.4 3.5
June 49683 36233 6.3 3.7
July 80461 20135 10.2 2.1
August 112277 46723 14.2 4.8
September 117638 15526 14.9 1.6
October 155283 34216 19.6 3.5
November 170128 127431 21.5 13.1
December 128842 118304 16.3 12.2
January 160158 20.3
February 196420 24.8
March 181222 22.9

Variation in total credit of SCB Variation in total credit of SCB

(Rs crore) (%)
2007-08 2007-08

15
April 43352 -19427 -2.2 -0.8
May -40435 10455 -2.1 0.4
June -36348 30534 -1.9 1.3
July -16675 44520 -0.9 1.9
August 31120 96420 1.6 4.1
September 106290 180554 5.5 7.6
October 132037 289611 6.8 12.3
November 165818 359819 8.6 15.2
December 218096 283501 11.3 12.0
January 278399 14.4
February 322300 16.7
March 417304 21.6
Variation in food credit of Variation in non-food credit of
SCB (Rs crore) SCB (Rs crore)
2007-08 2008-09 2007-08 2008-09
April 3366 -3375 -46718 -16052
May -3079 3980 -37356 6474
June -2564 5748 -33784 24786
July -5462 -508 -11213 45029
August -8031 -56 39151 96476
September -9512 776 115802 179777
October -9800 7074 141837 282537
November -7554 5995 173372 353824
December -5509 8724 223605 274777
January -5329 283728
February -2209 324509
March -2121 419426
Source: Reserve Bank of India

16
5. Stock Market Trends

A slight indication of revival in investment sentiments was witnessed by the end of

December 2008 when the 30-stock index Sensex increased to 5.5 percentage points
after four months of slippage.

The Sensex stood at 9328 points in December end 2008 and the Nifty too was seen
to bounce by 6.5 percentage points to 2857 points.

Table-5.1: Monthly trends in stock market indices (beginning of month figures)

Date BSE Sensex % Change S&P CNX NIFTY % Change
1.1.05 6679 7.2 2115 7.8
1.2.05 6552 -1.9 2058 -2.7
1.3.05 6651 1.5 2084 1.3
1.4.05 6605 -0.7 2068 -0.8
1.5.05 6195 -6.2 1917 -7.3
1.6.05 6730 8.6 2088 8.9
1.7.05 7210 7.1 2211 5.9
1.8.05 7669 6.4 2318 4.8
1.9.05 7876 2.7 2406 3.8
1.10.05 8492 7.8 2574 6.9
1.11.05 7944 -6.5 2387 -7.3
1.12.05 8944 12.5 2699 4.8
2.01.06 9390 5.0 2835 5.0
1.02.06 9859 5.0 2971 4.8
1.03.06 10566 7.7 3123 5.1
3.04.06 11564 9.4 3473 11.2
1.05.06 12128 4.9 3605 3.8
1.06.06 10071 -17.0 2962 -17.8
3.07.06 10695 6.1 3150 6.3
1.08.06 10751 0.5 3147 -0.1
1.09.06 11778 9.5 3435 9.1
3.10.06 12366 5.0 3569 3.9
1.11.06 13033 5.4 3767 5.5
1.12.06 13844 6.2 3997 6.1
2.01.07 13942 0.7 4007 0.3
1.02.07 14267 2.3 4137 3.2
1.03.07 13159 -7.7 3811 -7.8
2.04.07 12455 -5.3 3633 -4.7
3.05.07 14078 13.0 4150 14.2
1.06.07 14570 3.5 4297 3.5
2.07.07 14664 0.6 4313 0.4
1.08.07 14935 1.8 4345 0.7
3.09.07 15422 3.2 4474 2.9
1.10.07 17328 12.3 5068 13.2
1.11.07 19724 15.7 5866 13.8
1.12.07 19363 -1.8 5762 -1.8

17
1.01.08 20300 4.8 6144 6.6
1.02.08 18242 -10.1 5317 -13.5
3.03.08 16677 -8.5 4953 -6.8
1.04.08 15626 -6.3 4739 -4.3
2.05.08 17600 12.6 5228 10.3
2.06.08 16063 -8.7 4739 -9.3
1.07.08 12961 -19.3 3896 -17.8
1.08.08 14656 13.1 4413 13.3
1.09.08 14498 -1.1 4447 0.8
1.10.08 13055 -9.9 3950 -11.1
3.11.08 10337 -20.8 3043 -23.0
1.12.08 8839 -14.5 2682 -11.9
26.12.08 9328 5.5 2857 6.5
Source: Reserve Bank of India

18
6 Fiscal Management

Data on revenues from taxes upto December 2008 shows growth in gross tax
revenue to slow to 9.6% as against 27% recorded in the previous year. Although the
share of the direct taxes in total tax collected was maintained at 50%, nevertheless
the rate of collection was observed to decline.

The remaining half of the total revenue was accounted by the indirect revenue
sources, like customs contributing 19%, excise 18%, service 9% and other taxes 2%
( other taxes include securities transaction tax, banking cash transaction tax, fringe
benefit tax, wealth tax etc.) . The rate of collection from indirect taxes slowed.

By the end of the 8 months period the fiscal deficit got even worse. The current
fiscal deficit target ( including the off budgeted items ) has been revised from 2.5%
to 8 % of the GDP in 08-09. It has been observed that the revenue collection
achieved has only been 62% of the target compared to 73% achieved in the same
period of previous year. Total expenditures are ahead of the target. Growth in total
receipts was found to be running behind the growth achieved by this time last fiscal.
Perhaps it is the low rate of revenue receipts that may be the reason for high
deficits.

Table-6.1: Trends in cumulative tax collections of central government (%)

Gross tax revenue Corporation tax Income tax

2007-08 2008-09 2007-08 2008-09 2007-08 2008-09
April 5.4 52.2 -36.2 55.0 -4.1 127.7
May 35.0 36.1 231.8 58.1 22.1 76.0
June 28.1 28.4 48.2 43.4 25.6 50.0
July 25.7 26.2 49.3 41.6 32.4 42.0
August 24.1 25.0 46.1 45.9 34.4 35.7
September 24.5 25.3 38.6 38.2 35.3 30.7
October 25.8 20.3 43.0 30.3 34.5 21.9
November 25.2 17.5 41.7 26.4 37.8 19.0
December 27.0 9.6 37.1 11.9 42.7 6.8
January 26.1 36.6 42.2
February 26.7 37.1 42.4
March 24.8 31.3 40.7
Customs Excise duties Other taxes
2007-08 2008-09 2007-08 2008-09 2007-08 2008-09
April 30.1 25.0 29.6 -28.3 29.6 9.04
May 23.1 24.1 13.5 1.3 37.1 26.7
June 19.8 19.9 11.3 -0.9 43.5 26.0
July 19.6 19.2 6.3 4.0 32.1 24.7
August 18.6 17.0 4.9 6.5 33.9 17.4
September 15.8 16.8 3.4 6.6 40.2 30.7

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October 18.2 14.4 3.8 6.3 37.4 31.8
November 16.6 13.7 4.3 5.1 37.0 30.2
December 16.9 11.1 5.1 2.1 44.3 25.4
January 18.0 4.8 39.9
February 19.1 6.0 41.0
March 19.1 4.8 38.9

Service Tax 2008-09

April 62.3
May 40.7
June 26.0
July 24.7
August 28.6
September 31.6
October 16.3
November 6.2
December -2.6
January
February
March
Source: Controller General of Accounts

Table-6.2 Trends in central government finances: November

Actual to budget estimates

( in Rs crores)
2007-08 2008-09
Revenue receipts 355646 375937
Tax revenue 295994 309927
Non tax revenue 59652 66010
Non debt capital receipts 41029 3017
Recovery of loans 3304 2974
Total receipts 396675 378954
Non plan expenditure 337090 426419
On revenue account 280050 403758
On capital account 57040 22661
Plan expenditure 137163 170797
On revenue account 114806 146009
On capital account 22357 24788
Total expenditure 474253 597216
Fiscal deficit 77578 218262
Revenue deficit 39210 173830
Primary deficit -34186 94527
Source: Controller General of Accounts

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7 Foreign Trade

Growth numbers on Indian merchandise exports show exports in a phase of de-growth.

Indian exports performance has been grim October 2008 onwards in USD terms. Growth
in exports recorded in December 2008 was negative 1.1% as against 16% recorded in the
previous year. Imports too were impacted due to the global financial crisis, it registered
8.8% growth in December 2008-09 in contrast to 18% percent in 2007-08. The trade
numbers in Rs crores terms also show a slowdown in Indian trade compared to the
previous year.

Table-7.1: Monthly trends in growth of merchandize trade (% change) up to December

Exports Oil imports Non-oil imports Total imports

2007- 2008- 2007- 2008- 2007- 2008- 2007- 2008-
08 09 08 09 08 09 08 09
April 23.0 31.5 11.4 46.2 54.2 32.3 40.6 36.6
May 18.0 12.9 2.9 50.8 41.5 17.4 26.3 27.1
June 14.0 23.5 9.8 53.4 52.2 13.9 36.6 25.9
July 18.5 31.2 8.7 69.3 25.8 38.7 20.4 48.1
August 18.9 - 19.5 - 39.5 - 32.6 -
September 19.2 10.4 7.9 57.1 0.1 36.2 2.3 43.3
October 35.6 -12.1 14.5 22 28.8 5.5 24.2 10.6
November 26.8 -9.9 16.7 11.9 35.3 3.4 29.2 6.1
December 16.0 -1.1 23.7 30.9 15.3 31.9 18.0 8.8
January 20.4 60.8 65.0 63.5
February 35.2 39.5 26.3 30.5
March 26.5 76.6 18.7 35.2
April-Dec 21.7 17.1 11.6 44.8 32.9 25.3 25.9 31.5
Source: Ministry of Commerce

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8. Capital Inflows

The foreign direct investment inflows received in November this fiscal has been the
lowest, USD 1083 million. Total foreign investments are hit due to huge outflows in the
foreign institutional investments turning the portfolio investments negative at US$ 574
million.

Total foreign investments for April- November 2008-09 appeared even worse, down from
USD 41 billion received in 2007-08 to USD 12 billion of investments this fiscal. It seems
that investment sentiments in the past 7 months have weakened whether long or short term.
Cumulatively the foreign direct investment received which is long term in nature was USD
23.3 billion compared to USD 13.7 billion received in the previous year, much lower than
the set target for the current fiscal.

Table-8.1: Monthly trends in foreign investments ($ million)

Foreign direct Portfolio Total foreign investments

investments investments
2007-08 2008-09 2007-08 2008-09 2007-08 2008-09
April 1551 3749 1974 -880 3525 2869
May 2120 3932 1852 -288 3972 3644
June 1238 2392 3571 -3010 4809 -618
July 705 2247 6713 -492 7418 1775
August 831 2328 -2747 593 -1916 2921
September 713 2562 7081 -1403 7794 1159
October 2027 1497 9564 -5243 117591 -3746
November 1864 1083 -107 -574 1757 509
December 1558 5294 6852
January 1767 6739 8506
February 5670 -8904 -3234
March 4438 -1600 2838
April-Nov 13783 23331 27858 -11297 41641 12034
Source: Reserve Bank of India

22
9. Foreign Exchange Reserves

There could be many reasons that can be attributed to the fall in forex reserves that touched
$ 315 bn, Two reasons were support extended by the RBI to resist Rupee value from
further weakening and second, was to feed the drained Indian banks overseas. In December
2008 the forex reserves went slightly below USD 250 billion but were enough to cover 10
months of imports.

Table-9.1: Monthly trends in foreign exchange reserves ($ billion)

2005- % 2006- % 2007- % 2008- %

06 Change 07 Change 08 Change 09 Change
April 141.8 0.3 160.6 5.9 204.1 2.5 314.5 1.5
May 138.9 -2.9 164.5 2.4 208.3 2.0 312.5 -0.6
June 138.4 -0.5 162.9 -0.9 213.4 2.4 312.0 -0.1
July 140.5 2.1 164.0 0.6 229.3 7.4 306.1 -1.8
August 143.8 3.3 166.4 1.4 228.8 -0.2 295.3 -3.5
September 143.0 -0.6 165.3 -0.6 247.7 8.2 286.3 -3.0
October 143.7 0.5 167.1 1.1 262.4 5.9 252.8 -11.7
November 142.1 -1.1 175.5 5.0 273.5 4.2 247.6 -2.0
December 137.2 -3.4 177.2 1.0 275.9 0.8
January 139.5 1.7 180.0 1.6 288.3 4.4
February 143.1 2.5 194.6 8.1 301.2 4.4
March 151.6 5.9 199.1 2.3 309.7 2.8
Source: Reserve Bank of India

23
10. Trends in the Exchange Rates

The exchange rate between Indian Rupee and USD remains steady within the range 49-50
against the US dollar in December 2008.

Graph 10.1: Exchange rate of Rupee (per unit of other currencies).

60 80
50 70
60

Re/Euro
40
Re/USD

50
30 40
20 30
2006- 2007-08 2008-09
20
10 07 10
0 0
Jul

Jul

Jul
May

May

May
Jun

Jan

Jun

Jan

Jun
Sep

Sep

Sep
Nov
Dec

Nov
Dec

Nov
Dec
Oct

Oct

Oct
Aug

Aug

Aug
Apr

Apr

Apr
Feb

Feb
Mar

Mar
USD Euro

24