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Current state of Indian Economy

September 2010

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Federation of Indian Chambers of Commerce and Industry
New Delhi

Highlights – September 2010

The overall mood of the industry looks promising with growth at 10.6 per cent for the five month
period , April- to August 2010. However, growth slipped to 5.6 per cent for the month of August
2010 from 10 percent plus in the previous year.

Capital goods production remained volatile as growth dipped into the negative zone on two
occasions during the present fiscal after a steep rise. However, the average growth stood at 29 per
cent during the period April- August as against 3.4 percent increase in the corresponding period of
previous year. Output in the basic and intermediate goods rose but not as much as seen in the
previous year. Consumer goods segment went up by 8.6 percent during the period from April to
August in 2010-11, as against 3.6 percent increase in output in the previous year and the rise was
seen on account of consumer durables segment.

8 of the 17 industry segments were seen to surpass the growth rate during the first five months of
FY11 as compared to the growth observed in the previous year.

The six core infrastructure industries continues to remain positive cumulatively up to August 2010,
however the pace of growth is slightly lower as compared to the growth posted in the previous year.
Growth in the overall infrastructure industries mainly came from crude petroleum, petroleum
refinery and steel.

Government’s efforts in taming inflation brought positive results. In September 2010 the rate of
inflation was brought under 10 per cent. Currently the rate of inflation averaged for the month of
September 2010 was 8.62 percent, this has come down from 9.55 percent in August and 10.3 in July
2010.

During the month of September the confidence of the foreign investors in the Indian stock market
was seen to go up. The index Sensex was observed to swing between 19-20 K and Nifty was seen
move between 5- 6 K points.

In August FY 11, M3 decelerated to 15 percent calculated on a Y-o-Y basis as compared to 19


percent in the previous year. The percentage changed in the net bank credit to the government
halved as compared to the increase observed in the previous year. However, borrowings by the
commercial sector were seen to increase by 18.3 per cent vis-a-vis the increase of 13.8 percent in
the previous year.

Investments in the government securities slowed compared to the previous year and so were the
aggregate deposits. The total credit off-take increased which was on account non-food segment.

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Fiscal deficit up to August this year was lower at Rs 151425 crores compared to the fiscal deficit
recorded in the previous year which was at Rs 182290 crores . The reasons for low fiscal deficits
were increase in the revenue receipts ( non tax source ) on account of disinvestments in the PSUs
and auction of 3G and BWA spectrum.

Total merchandise trade from April – August FY11 stood at USD 227 billion compared to the total
trade of USD 171.9 billion in the corresponding period of previous year.

The trade deficit widened by 56 billion ( upto August) as the merchandise exports cumulatively from
April to August 2010-11 rose to USD 85 billion as compared to USD 66 billion in the 2009-10. Imports
were also seen to increase by 33 per cent to USD 141 billion.

FDI is an area which requires special attention because of its inherent long term investment
intentions. Presently the FDI investments received up to August this year is running behind the
investments received in the previous year.

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Contents

Title Page

1 Industrial Growth 6

2 Core Infrastructure Industries 8

3 Trends in Inflation 9

4 Monetary Indicators 10

5 Stock Market Trends 11

6 Fiscal Management 12

7 Foreign Trade 14

8 Capital Inflows 15

9 Foreign Exchange Reserves 16

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List of Tables and Graphs

Table- 1.1: Growth of Industry: Recent Trends (in percentage) 6


Table -1.2: Growth in 17 Industry sectors 7
Table-1.3: Growth in six-core infrastructure industries (% change) 8
Table-1.4: Growth in six-core infrastructure industries (% change) 8
Table-1.5. Monthly trends in Wholesale price index- monthly average (% change) 9
Table-1.6: Monthly trends in consumer prices (% change) 9
Table-1.7: Monetary sector indicators 10
Table-1.8: Monthly trends in stock market indices 11
Table-1.9: Trends in cumulative tax collections of central government (%) 12
Table-1.10: Service Tax 13
Table-1.11: Trends in central government finances: 13
Table-1.12: Monthly trends in growth of merchandize trade (% change) 14
Table-1.13: Monthly trends in foreign investments ($ million) 15
Table-1.14: Monthly trends in foreign exchange reserves ($ billion) 16

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1. Industrial growth

The growth in IIP for the period April to August 2010-11 stood at 10.6 percent and this was higher
than the growth posted during the five month period of the previous fiscal. The overall mood of the
industry looked promising, however growth in August decelerated to 5.6 per cent as compared to 10
percent plus in the previous year, which was slightly disappointing. The high growth oriented
manufacturing sectors which accounts for the majority share has been the backbone of the rising
Industrial growth numbers.

Coming to the use-based classification one can say that the capital goods which includes the plant
and machinery grew by a phenomenal number, with average growth for April- August being 29 per
cent as against 3.4 percent increase in the previous year. Nevertheless, capital goods shows
volatility when we look at the monthly numbers as it turns negative for the second time this year in
August 2010 after a positive movement. Output in the basic and intermediate goods rose but not as
much as seen in the previous year.

The consumer goods cumulatively for the five-month period has also shown acceleration in growth,
it rose by 8.6 percent as against the increase of 3.6 percent seen in the previous year. The rise was
however, seen to mainly come from the consumer durables goods category.

Acceleration in growth was observed in food products, cotton textiles, jute products , paper
products, rubber products, basic metals , metal products machinery and transport equipments
during the period from April to August as compared to the corresponding growth numbers of the
previous year.

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

Weights August August


2009 2010

Industry 100 10.6 5.6


Mining 10.2 11.0 7.0
Manufacturing 79.4 10.6 5.9
Electricity 10.5 10.6 1.0
Use Based Classification
Basic 35.6 7.7 3.7
Intermediate 26.5 14.4 10.0
Capital 9.3 9.2 -2.6
Consumer Goods 28.7 10.9 6.9
Consumer non Durables 23.3 6.1 -1.2
Consumer Durables 5.4 24.7 26.5

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Table- 1.2: Growth in 17 Industry sectors

17 industry sectors
Food Products 9.1 -6.0 16.8
Beverages, Tobacco and Related Products 2.4 5.7 2.5
Cotton Textiles 5.5 5.7 4.0
Wool, Silk and man-made fiber textiles 2.3 20.4 4.6
Jute and other vegetable fiber Textiles (except 0.6
cotton) -10.2 7.0
Textile Products (including Wearing Apparel) 2.5 21.6 -3.0
Wood and Wood Products; Furniture and Fixtures 2.7 2.7 -15.3
Paper & Paper Products and Printing, Publishing & 2.6
Allied Industries -0.2 11.5
Leather and Leather & Fur Products 1.1 -0.4 19.6
Basic Chemicals & Chemical Products (except products of 14.0
Petroleum & Coal) 14.8 -2.0
Rubber, Plastic, Petroleum and Coal Products 5.7 20.4 12.2
Non-Metallic Mineral Products 4.4 7.3 3.5
Basic Metal and Alloy Industries 7.5 2.1 6.4
Metal Products and Parts, except Machinery 2.8
and Equipment 9.5 33.4
Machinery and Equipment other than Transport 9.6
Equipment 15.2 0.4
Transport Equipment and Parts 4.0 15.0 22.8
Other Manufacturing Industries 2.5 9.5 27.9

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2 Core infrastructure industries

The growth numbers in the six core infrastructure industries also suggest steady growth.
Cumulative growth numbers up to August this fiscal shows growth slightly lower at 4.3 per cent as
compared to the growth posted up to August in the previous fiscal ( 4.5 percent ) . The growth is
mainly ascribed to good performance seen in the crude petroleum, petroleum refinery and steel.
And all the other sectors grew positively, however at a pace lower as compared to the pace of
growth in the previous year.

Table-1.3: Growth in six-core infrastructure industries (% change) August 2010

All Finished steel Cement Crude


infrastructure petroleum
industries
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 4.6 3.7 5.1 7.5 -1.3 4.7 6.9 11.9 8.7 1.0 -3.1 5.2
May 4.4 3.2 5.0 8.3 2.8 2.5 3.8 11.8 8.6 3.2 -4.3 5.8
June 4.4 6.3 3.4 8.1 3.6 3.5 6.6 12.7 3.6 -4.7 4.0 6.8
July 5.2 3.2 3.9 6.3 4.0 -0.9 5.5 13.8 -0.2 -3.0 -0.4 15.8
August 2.0 6.5 3.7 3.3 0.3 7.7 1.9 17.6 1.6 -1.0 -2.6 15.0
September 4.1 4.5 2.3 0.8 8.1 6.5 -0.4 -0.5
October 2.4 3.8 -3.8 2.5 6.2 5.2 -0.2 -2.2
November 0.8 6.0 -6.3 11.7 8.7 9.0 0.5 -1.5
December 0.7 6.4 -8.0 9.6 11.6 11.0 -0.3 1.1
January 2.2 9.4 3.2 16.2 8.3 12.4 -8.1 9.7
February 1.9 4.5 2.4 0.9 8.3 5.8 -6.2 4.0
March 3.3 7.2 -1.8 9.2 10.1 7.8 -2.3 3.5
Source: Ministry of Industry

Table-1.4: Growth in six-core infrastructure industries (% change)

Petroleum Coal Power


refinery
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 4.3 -4.5 5.3 10.4 13.2 -2.3 1.4 6.7 6.0
May 0.1 -4.3 7.7 8.8 10.4 0.1 2.0 3.0 6.4
June 5.6 -3.8 2.9 6.1 15.2 0.9 2.6 7.7 3.4
July 11.8 -14.4 13.7 5.5 10.5 4.5 4.5 3.8 3.8
August 2.5 31 -2.3 5.9 12.9 1.0 0.8 10.2 1.0
September 2.8 3.4 11.2 6.5 4.4 7.9
October 5.0 7.2 10.6 5.0 4.4 4.7
November -1.1 4.9 9.7 4.6 2.6 3.3
December 3.0 0.8 11.2 2.5 1.5 6.7
January -1.3 3.8 6.7 6.0 1.8 5.6
February 0.5 0.8 6.0 6.8 0.6 7.3

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March 3.3 -0.4 5.2 7.8 6.3 7.8

Source: Ministry of Industry

3. Trends in inflation

Inflation in September 2010 has been brought under 10 per cent. The inflation was 8.62 percent in
September 2010 on a Y-o-Y basis , this has been brought down from 9.55 percent in August this
year. The buildup in the wholesale price index in September over March has been 3.9 percent
compared to the build of 5.4 percent in the previous year.

Table-1.5. Monthly trends in Wholesale price index- monthly average (% change)


3.
2009 2010

Aug Sept Aug Sept


All Commodities -0.5 1.09 10.0 8.62
I Primary Article 7.6 10.63 14.9 17.45
(A) Food Articles 14.2 13.92 10.3 15.71
(B) Non-Food Articles -3.3 -0.89 21.0 18.2
II Fuel Power Light & Lubricants -10.4 -8.09 14.3 11.06
III Manufactured Products 0.1 0.16 6.2 4.59
(A) Food Products 9.7 12.08 4.1 2.8
(B) Beverages, Tobacco & Tobacco
5.5 6.85 6.5 5.89
Products
(C) Textiles 2.1 -0.76 13.8 14.84
(D) Wood & Wood Products 0.3 9.51 14.6 3.17
(E) Paper & Paper Products 2.0 2.05 1.4 3.44
(F) Leather & Leather Products -1.2 3.63 0.2 -0.08
(G) Rubber & Plastic Products 2.5 -1.74 7.0 5.32
(H) Chemicals & Chemical Products 3.2 -2.17 4.9 4.34
(I) Non-Metallic Mineral Products 5.2 8.37 -4.8 2.2
(J) Basic Metals Alloys & Metals Products -15.2 -11.66 11.9 5.96
(K) Machinery & Machine Tools -2.2 -0.68 4.2 2.9
(L) Transport Equipment & Parts 0.6 3.02 2.3 4.23
Source: Reserve Bank of India

Table-1.6: Monthly trends in consumer prices (% change)

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


08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 7.8 8.7 13.3 7.0 8.8 14.4 8.9 9.1 15.0 8.6 9.1 15.0
May 7.8 8.6 13.9 6.8 9.7 14.1 9.1 10.2 13.7 8.8 10.2 13.7
June 7.7 9.3 13.7 7.3 9.6 14.1 8.8 11.5 13.0 8.8 11.3 13.0
July 8.3 11.9 11.3 7.4 13.0 -- 9.4 12.9 11.0 9.4 12.7 11.2
August 9.0 11.7 8.5 12.9 10.3 12.9 10.3 12.7
September 9.8 11.6 9.5 12.4 11.0 13.2 11.0 13.0
October 10.4 11.5 10.4 12.0 11.1 13.7 11.1 13.5

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November 10.4 13.5 10.8 13.9 11.1 15.7 11.1 15.7
December 9.7 15.0 9.8 15.5 11.1 17.2 11.1 17.0
January 10.4 16.2 10.4 16.9 11.4 17.6 11.1 17.4
February 9.6 14.9 9.9 15.8 10.8 16.5 10.8 16.5
March 8.0 14.9 9.3 14.9 9.5 15.8 9.7 15.5
Source: Ministry of Labor, CMIE

4. Monetary indicators

The broad money supply ( M3) in August this year has slowed to 15 percent calculated on a
Y-o-Y basis as compared to 19 percent in the previous year. Growth in the net bank credit
to the government halved compared to the growth in the previous year and credit to the
commercial sector has increased by 18.3 per cent presently as compared to 13.8 percent in
the previous year. Interbank liquidity is observed to be on the lower side low and the mood
is likely to continue on account of the festive season.

Table-1.7: Monetary sector indicators – up to August (August 2010-11 over March 2009-10)

Variation in M3 (Rs Variation in M3 (%)


crore)
08-09 09-10 10-11 08-09 09-10 10-11
April 22235 124682 42384 0.6 2.6 0.8
May 73398 172709 92656 1.9 3.6 1.7
June 89283 172702 77314 2.2 3.6 1.4
July 169734 253921 191240 4.2 5.3 3.4
August 208571 280313 270884 5.2 5.9 4.1
September 264364 331793 6.6 7.0
October 331450 391310 8.3 8.2
November 374193 431266 9.3 9.1
December 423509 521426 10.6 10.9
January 508078 575387 12.7 12.1
February 635810 652944 15.9 13.7
March 740332 806190 18.4 16.9

Source: Reserve Bank of India

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5. Stock market trends

Sensex was observed to swing between 19-20 K level and Nifty traded above 6 K points
during the month of September of this year. Investment activity was mainly observed
strong among the FII community in the Indian markets.

Table-1.8: Monthly trends in stock market indices (beginning of month figures)

Date BSE Sensex % Change S&P CNX % Change


NIFTY
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
30.01.09 9424 1.0 2874 0.5
02.03.09 8607 -8.7 2674 -7.0
31.03.09 9708 12.8 3020 12.9
29.04.09 11403 17.5 3473 15.0
01.06.09 14840 30.1 4529 30.4
01.07.09 14645 -1.31 4340 -4.1
03.08.09 15924 8.7 4711 8.5
01.09.09 15551 -2.3 4625 -1.8
01.10.09 17134 10.2 5083 9.9
03.11.09 15405 -10.1 4564 -10.2
01.12.09 17198 11.6 5122 12.2
04.01.10 17558 2.1 5232 2.1
01.02.10 16356 -6.8 4900 -6.4
02.03.10 16773 2.5 5017 2.4
01.04.10 17693 5.5 5291 5.5
03.05.10 17386 -1.7 5223 -1.3
01.06.10 16572 -4.7 4970 -4.8
01.07.10 17509 5.7 5251 5.7
02.08.10 18081 3.3 5431 3.4
01.09.10 18205 0.7 5471 0.7
Source: Reserve Bank of India

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6. Fiscal Management

Fiscal deficit up to August this year was lower at Rs 151425 crores compared to the fiscal deficit
recorded in the previous year which was at Rs 182290 crores . The reasons for low fiscal deficits
were increase in the revenue receipts ( non tax source ) on account of disinvestments in the PSUs
and auction of 3G and BWA spectrum.

Table-1.9: Trends in cumulative tax collections of central government (%)

Gross tax revenue Corporation tax Income tax


08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 52.2 -16.9 27.0 55.0 -8.4 23.4 127.7 20.0 8.3
May 36.1 -11.8 22.0 58.1 10.1 -1.8 76.0 11.7 13.0
June 28.4 -11.4 28.6 43.4 1.8 23.7 50.0 7.1 13.8
July 26.2 -11.1 27.5 41.6 4.7 18.4 42.0 5.9 15.8
August 25.0 -11.5 27.3 45.9 2.4 18.3 35.7 8.1 13.9
September 25.3 -7.6 38.2 7.7 30.7 7.2
October 20.3 -7.5 30.3 6.5 21.9 10.5
November 17.5 -7.8 26.4 6.6 19.0 9.8
December 9.6 -2.5 11.9 16.8 6.8 12.2
January 7.2 -1.2 11.9 16.5 5.4 13.3
February 6.9 -1.6 17.9 10.9 7.5 11.4
March 2.7 10.8 7.1
Customs Excise duties Other taxes
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 25.0 -52..6 106.4 -28.3 -114.2 314.1 9.04 -5.4 -43.2
May 24.1 -38.2 56.6 1.3 -23.3 49.3 26.7 -18.7 -11.7
June 19.9 -37.3 62.2 -0.9 -23.7 52.0 26.0 -9.5 -36.8
July 19.2 -34.7 57.4 4.0 -26.6 52.0 24.7 -3.87 -33.3
August 17.0 -34.0 59.8 6.5 -24.5 43.3 17.4 -1.97 -30.7
September 16.8 -32.9 6.6 -22.9 30.7 -20.5
October 14.4 -31.7 6.3 -21.7 16.2 -17.2
November 13.7 -31.2 5.1 -20.0 6.1 -15.0
December 11.1 -29.2 2.1 -18.2 -2.6 -24.2
January 6.4 -25.2 -2.6 -14.5 -6.4 -21.8
February 1.7 -21.8 -7.1 -10.2 -10.0 -19.8
March -4.1 -12.0 -11.5

Table-1.10: Service Tax

Service Tax 08-09 09-10 10-11


April 62.3 -0.04 -6.0
May 40.7 -2.60 1.6
June 34.2 -2.85 9.1
July 29.7 -1.46 12.5
August 28.6 -2.29 13.8
September 31.8 -3.7
October 31.8 -5.3

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November 30.2 -6.2
December 25.4 -5.9
January 24.6 -6.2
February 22.2 -5.9
March 18.6
Source: Controller General of Accounts

Table-1.11 Trends in central government finances: August 2010

Actual to budget estimates


( in Rs crores)
09-10 10-11
Revenue receipts 157198 290799
Tax revenue 106837 138500
Non tax revenue 50361 152299
Total receipts 161033 296278
Non plan expenditure 245275 311249
On revenue account 228189 273620
On capital account 17086 37629
Plan expenditure 98048 136454
On revenue account 84094 117531
On capital account 13954 18923
Total expenditure 343323 447703
Fiscal deficit 182290 151425

Source: Controller General of Accounts

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7. Foreign trade

Merchandise exports in August ( cumulative for five months, i.e. from April- August ) were seen to
have risen to USD 85 billion as compared to USD 66 billion achieved in the previous year. Imports
were also seen to increase by 33 per cent to USD 141 billion. So were the trade deficits that widened
to USD 56 billion upto August 2010 from USD 40 billion upto August previous year.

Table-1.12: Monthly trends in growth of merchandize trade (% change) up to August 2010

Exports Oil imports Non-oil imports Total imports


08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 31.5 -33.2 36.2 46.2 -58.5 70.5 32.3 -24.6 34.3 36.6 -36.6 43.3
May 12.9 -29.2 35.1 50.8 -60.6 66.7 17.4 -25.4 28.2 27.1 -39.2 38.5
June 23.5 -27.7 30.4 53.4 -50.6 26.5 13.9 -16.5 21.5 25.9 -29.3 23.0
July 31.2 -28.4 13.2 69.3 -55.5 4.4 38.7 -24.5 49.6 48.1 -37.1 34.3
August 26.9 -19.4 22.5 76.7 -45.5 12.4 39.6 -25.5 41.1 51.2 -32.4 32.2
September 10.4 -13.8 57.1 -33.5 36.2 -30.4 43.3 -31.3
October -12.1 -6.6 22 -9.3 5.5 -17.2 10.6 -15.0
November -9.9 18.2 11.9 7.3 3.4 -5.9 6.1 -2.6
December -1.1 9.3 -30.9 42.8 31.9 22.4 8.8 27.2
January -15.9 11.5 -47.5 56.0 -0.5 28.8 -18.2 35.5
February -21.7 34.8 -47.5 97.4 -10.2 55.6 -23.3 66.4
March -33.3 54.1 -58.1 85.2 -18.9 61.0 -34.0 67.1

Source: Ministry of Commerce

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8. Capital inflows

FDI is yet to pick up this year, during the period from April to August of 2010-11 the FDI accumulated
was USD 11.5 billion this was lower from the FDI of USD 13.5 billion received during the
corresponding period of 2009-10.

Table-1.13: Monthly trends in foreign investments ($ millions)

Foreign direct Portfolio investments Total foreign


investments investments
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
April 3749 2339 2179 -880 2278 3315 2869 4617 5494
May 3932 2095 2213 -288 5639 41 3644 7734 2254
June 2392 2582 1380 -3010 353 1232 -618 2935 2612
July 2247 3476 1785 -492 2077 9114 1775 6508 10899
August 2328 3268 1330 593 926 -440 2921 4194 890
September 2562 1512 -1403 4999 1159 6511
October 1497 2332 -5243 2922 -3746 5254
November 1083 1722 -574 1274 509 2996
December 1362 1542 30 1533 1392 3075
January 2733 2042 -614 3139 2119 5181
February 1466 1717 -1085 230 381 1947
March 1956 1209 -889 5306 1067 6515
Source: Reserve Bank of India

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9 Foreign exchange reserves

Table-1.14: Monthly trends in foreign exchange reserves ($ billion)

07-08 % Change 08-09 % Change 09-10 % Change 10-11 % Change

April 204.1 2.5 314.5 1.5 251.7 0.0 279.6 0.2


May 208.3 2.0 312.5 -0.6 262.3 4.2 273.5 -2.2
June 213.4 2.4 312.0 -0.1 265.1 1.0 275.7 0.8
July 229.3 7.4 306.1 -1.8 271.6 2.4 284.2 3.1
August 228.8 -0.2 295.3 -3.5 276.4 1.8 283.1 -0.3
September 247.7 8.2 286.3 -3.0 281.2 1.7
October 262.4 5.9 252.8 -11.7 284.3 1.1
November 273.5 4.2 247.6 -2.0 288.1 1.3
December 275.9 0.8 255.9 3.3 283.4 -1.6
January 288.3 4.4 248.6 -2.8 280.9 -0.9
February 301.2 4.4 249.2 0.2 278.4 -0.9
March 309.7 2.8 251.7 1.0 279.1 0.3
Source: Reserve Bank of India

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