INDIAN ECONOMY REVIEW

Company: Mint Money Advisory

Date: 05th June 2012 Presented by: Mr. Gaurav Agarwal

BRIEF _____________________________________________________________________ 3

India Balance of Trade _______________________________________________________ 4

India Business Confidence ____________________________________________________ 4

India Consumer Confidence ___________________________________________________ 5

USDINR - Indian Rupee Exchange rate __________________________________________ 6

India Current Account _______________________________________________________ 6

India Current Account to GDP _________________________________________________ 7

India Exports _______________________________________________________________ 8

India GDP _________________________________________________________________ 8

India GDP Annual Growth Rate ________________________________________________ 9

India GDP Growth Rate _____________________________________________________ 10

India GDP per capita _______________________________________________________ 10

India GDP per capita PPP ____________________________________________________ 11

India Government Bond 10Y _________________________________________________ 12

India Government Budget ___________________________________________________ 12

India Government Debt To GDP _______________________________________________ 13

India Imports _____________________________________________________________ 14

India Industrial Production __________________________________________________ 14

India Inflation Rate ________________________________________________________ 15

India Interest Rate _________________________________________________________ 16

Present Scenario of the Indian Economy ________________________________________ 16

Disclaimer ________________________________________________________________ 17

BRIEF

The Indian Prime Minister Manmohan Singh is proved to be incapable of handling the

complex and difficult situations in his government. The Singh's government

comprising different parties with almost contrarian to his views. With executive

powers - the top commander of the Indian Government has been under intense

pressure. His ruling coalition federal government has failed to commence the

important economic reforms, which took a considerable toll on the economy.

Assembly elections specifically in Uttar Pradesh was the key event which changed the

political theatre. The losing ground of two major political parties of the country, the

Congress and the BharatiyaJanata Party (BJP), would definitely make India a

battleground in 2014 LokSabha elections and is gain for anti-capitalist and anti-

socialist regional political parties, which is not favorable for India economy. In 2011,

the Indian government faced every month with disapproval from the people, coming

out on street in amass protesting against the government's inactivity on corruption

and irregularities in the system.

Economic Policies has predicted the alarming levels of fiscal deficit last year in its

Economic Review report. Even though RBI has reduced its policy rates by 50 bps, The

current fall in inflation is largely driven by change in base year and the key index for

RBI - manufacturing index is restless. RBI is giving full concentration on the inflation

problem, which is undermining the fragile economic growth and revised the policy

rates by number of times to contain the rising risk of inflation in the economy. As per

our observation, RBI, alongside inflation concern, would think about the economic

expansion of the country since the liquidity situation could get distressed and will put

India's economic growth at risk. Moreover, the higher cost of credit will certainly

have an impact in the corporate balance sheet, which will prevent the short term

foreign inflows (i.e. FII inflow) in the country to finance the current account (CA)

deficit. RBI might not be concerned about the CA deficit.

Despite the rising risk of political and economic policies, the overall economic

outlook of India in the long run is still intact. There could be a greater risk of high

fiscal deficit followed by the increase in current account deficit due to sharp decline

in Indian Rupee and rise in oil prices, which will increase reduce the revenue to the

government. Tighter monetary policy and a modest reduction in the deficit will help

cool demand somewhat. After moderating towards the end of 2010, inflation has

veered up again and remains high. Moreover, inflationary pressures have become

more generalized, with non-food prices accelerating.

India Balance of Trade

India reported a trade deficit equivalent to 13486 Million USD in April of 2012.

Historically, from 1994 until 2012, India Balance of Trade averaged -3601.8 Million

USD reaching an all-time high of 491.3 Million USD in November of 2001 and a record

low of -19644.0 Million USD in October of 2011. India is leading exporter of gems and

jewelry, textiles, engineering goods, chemicals, leather manufactures and services.

India is poor in oil resources and is currently heavily dependent on coal and foreign

oil imports for its energy needs.

India Business Confidence

In India, business confidence declined to 125.2 in January of 2012 from 125.4 in

October of 2011. Historically, from 1995 until 2012, India Business Confidence

averaged 129.1300 reaching an all-time high of 162.1000 in October of 2010 and a

record low of 68.3000 in June of 1998. In India, the NCAER (National Council of

Applied Economic Research) - MasterCard Worldwide Index of Business Confidence

measures the level of optimism that people who run companies have about the

performance of the economy and how they feel about their organizations’ prospects.

Survey incorporates four indicators: overall economic conditions six months from

now, financial position of firms six months from now, investment climate and

capacity utilization level. Data is collected through personal interviews and

questionnaires sent to a diverse range of businesses across various regions in India.

India Consumer Confidence

In India, consumer confidence improved to 81.2 in the second half of 2011 from 62.8

in the first half of 2011. Historically, from 1995 until 2011, India Consumer

Confidence averaged 63.7800 reaching an all-time high of 86.6000 in December of

2007 and a record low of 34.3000 in December of 1997. In India, the twice annual

MasterCard Index of Consumer Confidence analyzes prevailing consumer perceptions

of economic conditions for the next six-months. Generally consumer confidence is

high when the unemployment rate is low and GDP growth is high. Measures of

average consumer confidence can be useful indicators of how much consumers are

likely to spend.

USDINR - Indian Rupee Exchange rate

The USDINR spot exchange rate appreciated 1.9600 or 3.67 percent during the last

30 days. Historically, from 1973 until 2012, the USDINR averaged 30.6600 reaching

an all-time high of 56.2400 in May of 2012 and a record low of 7.1900 in March of

1973. The USDINR spot exchange rate specifies how much one currency, the USD, is

currently worth in terms of the other, the INR. While the USDINR spot exchange rate

is quoted and exchanged in the same day, the USDINR forward rate is quoted today

but for delivery and payment on a specific future date.

India Current Account

India reported a current account deficit equivalent to 19.6 Billion USD in the fourth

quarter of 2011. Historically, from 1949 until 2011, India Current Account averaged -

1.0800 Billion USD reaching an all-time high of 7.3600 Billion USD in March of 2004

and a record low of -19.6000 Billion USD in December of 2011. Current Account is the

sum of the balance of trade (exports minus imports of goods and services), net factor

income (such as interest and dividends) and net transfer payments (such as foreign

aid).

India Current Account to GDP

India reported a Current Account deficit of 3.70 percent of the country's Gross

Domestic Product in 2011. Historically, from 1980 until 2011, India Current Account

to GDP averaged -1.3300 Percent reaching an all-time high of 1.5000 Percent in

December of 2003 and a record low of -3.7000 Percent in December of 2011. The

Current account balance as a percent of GDP provides an indication on the level of

international competitiveness of a country. Usually, countries recording a strong

current account surplus have an economy heavily dependent on exports revenues,

with high savings ratings but weak domestic demand. On the other hand, countries

recording a current account deficit have strong imports, a low saving rates and high

personal consumption rates as a percentage of disposable incomes.

India Exports

India exports were worth 24455 Million USD in April of 2012. Historically, from 1994

until 2012, India Exports averaged 8192.1 Million USD reaching an all-time high of

30418.0 Million USD in March of 2011 and a record low of 1805.0 Million USD in May

of 1994. Exports amount to 22% of India’s GDP. Gems and jewelry constitute the

single largest export item, accounting for 16 percent of exports. India is also leading

exporter of textile goods, engineering goods, chemicals, leather manufactures and

services. India’s main export partners are European Union, United States, United

Arab Emirates and China.

India GDP

The Gross Domestic Product (GDP) in India was worth 1729.01 billion US dollars in

2010, according to a report published by the World Bank. The GDP value of India is

roughly equivalent to 2.79 percent of the world economy. Historically, from 1960

until 2010, India GDP averaged 339.8400 billion USD reaching an all time high of

1729.0100 billion USD in December of 2010 and a record low of 36.6100 billion USD

in December of 1960. The gross domestic product (GDP) measures of national

income and output for a given country's economy. The gross domestic product (GDP)

is equal to the total expenditures for all final goods and services produced within the

country in a stipulated period of time.

India GDP Annual Growth Rate

The Gross Domestic Product (GDP) in India expanded 5.3 percent in the first quarter

of 2012 over the same quarter of the previous year. Historically, from 2004 until

2011, India GDP Annual Growth Rate averaged 8.3 Percent reaching an all-time high

of 10.1 Percent in September of 2006 and a record low of 5.5 Percent in December of

2004. The annual growth rate in Gross Domestic Product measures the increase in

value of the goods and services produced by an economy over the period of a year.

Therefore, unlike the commonly used quarterly GDP growth rate the annual GDP

growth rate takes into account a full year of economic activity, thus avoiding the

need to make any type of seasonal adjustment.

India GDP Growth Rate

The Gross Domestic Product (GDP) in India expanded expanded 5.3 percent in the

first quarter of 2012 over the same quarter of the previous year. Historically, from

2000 until 2011, India GDP Growth Rate averaged 7.4 Percent reaching an all-time

high of 11.8 Percent in December of 2003 and a record low of 1.6 Percent in

December of 2002. The Gross Domestic Product (GDP) growth rate provides an

aggregated measure of changes in value of the goods and services produced by an

economy. India's diverse economy encompasses traditional village farming, modern

agriculture, handicrafts, a wide range of modern industries, and a multitude of

services. Services are the major source of economic growth, accounting for more

than half of India's output with less than one third of its labor force. The economy

has posted an average growth rate of more than 7% in the decade since 1997,

reducing poverty by about 10 percentage points.

India GDP per capita

The Gross Domestic Product per capita in India was last reported at 822.76 US dollars

in 2010, according to a report published by the World Bank. The GDP per Capita in

India is equivalent to 7 percent of the world's average. Historically, from 1960 until

2010, India GDP per capita averaged 335.0500 USD reaching an all-time high of

822.7600 USD in December of 2010 and a record low of 180.8600 USD in December

of 1960. The GDP per capita is obtained by dividing the country’s gross domestic

product, adjusted by inflation, by the total population.

India GDP per capita PPP

The Gross Domestic Product per capita in India was last reported at 3582.48 US

dollars in 2010, when adjusted by purchasing power parity (PPP), according to a

report published by the World Bank. The GDP per Capita, in India, when adjusted by

Purchasing Power Parity is equivalent to 16 percent of the world's average.

Historically, from 1980 until 2010, India GDP per capita PPP averaged 1413.4300 USD

reaching an all-time high of 3582.4800 USD in December of 2010 and a record low of

415.3000 USD in December of 1980. The GDP per capita PPP is obtained by dividing

the country’s gross domestic product, adjusted by purchasing power parity, by the

total population.

India Government Bond 10Y

India's Government Bond Yield for 10 Year Notes declined 25 basis points during the

last 30 days which means it became less expensive for India to borrow money from

investors. During the last 12 months, India government bond yield advanced 0.09

percent. Historically, from 1998 until 2012, India Government Bond 10Y averaged 8.0

Percent reaching an all-time high of 12.3 Percent in February of 1999 and a record

low of 5.0 Percent in October of 2003. Generally, a government bond is issued by a

national government and is denominated in the country`s own currency. Bonds

issued by national governments in foreign currencies are normally referred to as

sovereign bonds. The yield required by investors to loan funds to governments

reflects inflation expectations and the likelihood that the debt will be repaid.

India Government Budget

India reported a Government Budget deficit equal to 4.60 percent of the country's

Gross Domestic Product in 2011. Historically, from 1990 until 2011, India

Government Budget averaged -3.7400 Percent of GDP reaching an all-time high of -

2.0400 Percent of GDP in December of 1996 and a record low of -7.8000 Percent of

GDP in December of 2008. Government Budget is an itemized accounting of the

payments received by government (taxes and other fees) and the payments made by

government (purchases and transfer payments). A budget deficit occurs when an

government spends more money than it takes in. The opposite of a budget deficit is a

budget surplus.

India Government Debt To GDP

India recorded a Government Debt to GDP of 68.05 percent of the country's Gross

Domestic Product in 2011. Historically, from 1991 until 2011, India Government Debt

To GDP averaged 74.9000 Percent reaching an all-time high of 84.3000 Percent in

December of 2003 and a record low of 67.6200 Percent in December of 1997.

Generally, Government debt as a percent of GDP is used by investors to measure a

country ability to make future payments on its debt, thus affecting the country

borrowing costs and government bond yields.

India Imports

India imports were worth 37942 Million USD in April of 2012. Historically, from 1994

until 2012, India Imports averaged 11653.9 Million USD reaching an all-time high of

40906.0 Million USD in May of 2011 and a record low of 1924.0 Million USD in May

of 1994. India is poor in oil resources and is currently heavily dependent on coal and

foreign oil imports for its energy needs. Other imported products are: machinery,

gems, fertilizers and chemicals. Main import partners are European Union, Saudi

Arabia and United States.

India Industrial Production

Industrial Production in India decreased 3.50 percent in March of 2012. Historically,

from 1994 until 2012, India Industrial Production averaged 7.4100 Percent reaching

an all-time high of 20.0000 Percent in November of 2006 and a record low of -7.2000

Percent in February of 2009. Industrial production measures changes in output for

the industrial sector of the economy which includes manufacturing, mining, and

utilities. Industrial Production is an important indicator for economic forecasting and

is often used to measure inflation pressures as high levels of industrial production

can lead to sudden changes in prices.

India Inflation Rate

The inflation rate in India was recorded at 7.23 percent in April of 2012. Historically,

from 1969 until 2012, India Inflation Rate averaged 8.0300 Percent reaching an all-

time high of 34.6800 Percent in September of 1974 and a record low of -11.3100

Percent in May of 1976. Inflation rate refers to a general rise in prices measured

against a standard level of purchasing power. The most well-known measures of

Inflation are the CPI which measures consumer prices, and the GDP deflator, which

measures inflation in the whole of the domestic economy.

India Interest Rate

The benchmark interest rate in India was last reported at 8.00 percent. Historically,

from 2000 until 2012, India Interest Rate averaged 6.4700 Percent reaching an all-

time high of 14.5000 Percent in August of 2000 and a record low of 4.2500 Percent in

April of 2009. In India, interest rate decisions are taken by the Reserve Bank of India's

Central Board of Directors. The official interest rate is the benchmark repurchase

rate.

Present Scenario of the Indian Economy

Since the economic crisis of 1991, sustained economic liberalization has steered the

country towards a more globally integrated and market-based economy. This twin

strategy of economic reforms and encouragement to foreign and private capital

resulted in the economy beginning to register high growth rates in the first decade of

the 21st century. By 2008, India had established itself as the world’s second-fastest

growing economy after China.

It was the financial crisis of 2007–2010 that emerged as a major setback for our

economy. The poor monsoon too worsened the situation as India’s Gross Domestic

Product (GDP) growth rate significantly slowed to 6.7 per cent in 2008–09, but

subsequently recovered to 7.2 per cent in 2009–10, while the fiscal deficit rose from

5.9 per cent to a high 6.5 per cent during the same period. India’s current account

deficit surged to 4.1 per cent of GDP during Q2 FY11 against 3.2 per cent the

previous quarter. The unemployment rate for 2009–2010, according to the State

Labour Bureau, was 9.4 per cent nationwide, rising to 10.1 per cent in rural areas,

where two-thirds of the 1.2 billion population live. Finally, the Central Statistical

Organization’s recently released estimate of GDP growth of 8.6 per cent for 2010-11

is consistent with the Reserve Bank’s projection set out in the Third Quarter Review

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