Domestic Economy Review - November 17, 2012 - Eastern Financiers

- After showing 2.5% growth in August, industrial output declined by 0.4% in September as manufacturing activity showed a decline. This has doused hopes of a revival in the economy and may force the Reserve Bank of India (RBI) to review its policy rates earlier than the fourth quarter credit policy. The indices of industrial production for mining, manufacturing and electricity sectors showed growth of 5.5%, (-)1.5% and 3.9%. Manufacturing alone constitutes about 76% of industrial production. The Index of Industrial Production (IIP) figures for August were also revised from 2.7% to 2.2%. The cumulative growth for the period April-September 2012-13 over the corresponding period of the previous year stands at 0.1%. As per use-based classification, the growth rates in September 2012 over September 2011 are 3.5% in Basic goods, (-) 12.2% in capital goods and 1.8% in Intermediate goods. Consumer durables and consumer non-durables have recorded growth of (-) 1.7% and 1.1% respectively, with the overall growth in consumer goods being (-) 0.3%.

- India's exports declined for the sixth consecutive month by 1.6% to $23.2 billion in October 2012, against $23.6 billion in the corresponding month of the previous year. Imports in October this year rose by 7.37% to $44.2 billion, compared with $41.1 billion in October 2011. Cumulative value of exports for the period April-October 2012-13 was $166.9 billion, against $177.9 billion in the year ago period - a decline of 6.18%. Cumulative value of imports for April-October 2012-13 was $277.1 billion, against $284.7 in the same period of 2011-12 - a fall of 2.66%. Trade deficit for the first seven months of 2012-13 was at $110 billion against $106.8 billion in the corresponding period of last year. Oil imports during October 2012 were valued at $14.7 billion, which was 31.61% higher than oil imports of $11.2 billion in the corresponding period last year. Oil imports during April-October 2012-13 were at $95.5 billion, which was 9.99% higher than the oil imports of $86.8 billion in the year ago period. Non-oil imports during October 2012 were estimated at $29.4 billion, which was 1.73% lower than non-oil imports of $29.9 billion in October, 2011. Non-oil imports during April-October 2012-13 were at $181.5 billion, which was 8.22% lower than the level of such imports valued at $197.8 billion in April-October 2011-12.

- The Wholesale Price index-based inflation stood at 7.45% in October 2012, against 9.87% in the corresponding month of the previous year. The annual rate of inflation stood at 7.81% in September 2012. Build up inflation in the financial year so far was 4.78% compared to a build-up of 5.02% in the corresponding period of the previous year. Fuel prices rose by 0.8% and prices of manufactured products increased by 0.1%. The index for primary articles declined by 0.2%. The index for 'Food Articles' group declined by 0.1 percent. The index for 'Non-Food Articles' group declined by 2.3%, while the index for 'Minerals' group rose by 2.4%.

- Retail inflation, measured by Consumer Price Index (CPI), increased marginally to 9.75% in October 2012 from 9.73% in September 2012. In rural areas, consumer price inflation increased to 9.98% in October from 9.79% in September, while in urban areas it was at 9.46% in October against 9.72% in September. India's retail inflation is the highest among the BRICS group of emerging and is way above what the Reserve Bank of India (RBI) calls its comfort level.

- A coalition of 46 developing countries led by India has proposed changing World Trade Organization rules to lift the limit on subsidized food stockpiling to support poor farmers. The proposal by the so-called G33 group of countries, which includes China, Indonesia, Pakistan and Zimbabwe, revives an idea previously contained in the Doha Round of trade talks that collapsed last year. Each of the 157 members of the WTO has to agree to limits on its trade-distorting subsidies, known as its "aggregate measure of support" (AMS), when it joins the global trade club. The proposal would amend the WTO's Agreement on agriculture to permit more exemptions to the limits on such subsidies.

- The government has extended the deadline for filling the Know Your Customer (KYC) form for domestic LPG customers by 15 days to November 30. In a nationwide exercise to weed out multiple or ghost connections, the government owned oil marketing firms had previously asked their domestic cooking gas (LPG) distributors to collect and verify duly filled KYC forms from the consumers by October 31. This was then extended to November 15. The drive to weed out multiple connections at the same address follows the government decision in September to cap supply of subsidized LPG to six cylinders per household in a year.

- The Commission for Agriculture Costs and Prices (CACP), in its latest report on rabi crop for 2013-14 marketing season has urged the government to immediately review the open-ended food grain procurement policy where the state purchases whatever quantity is sold by the growers.

Source : Equity Bulls

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