E
CO
S
COPE
The Economy Observer
17 June 2013
RBI leaves Repo rate and CRR unchanged
RBI's policy review
Hawkish statement links policy with BoP, expect 25bp rate cut
RBI keeps policy rates and CRR
in Jul-13
unchanged
Macroeconomic projections for FY14
RBI kept the policy rates unchanged as expected. However, contrary to our
and policy stance too unchanged
expectations of a 25bp cut, it kept CRR unchanged too.
Links policy rate decisions explicitly
RBI maintained all its forecasts on growth, inflation and monetary indicators
with BoP situation
unchanged at the levels articulated in its May-13 Annual Policy. Also the
Highlights inflation risks from food
stance was kept unaltered.
prices, hike in administered prices
The guidance makes monetary policy stance explicitly conditional on the
and INR
improvement in BoP along with growth and inflation following expected
Mentions that only a durable
receding of inflation would allow
trajectories.
pro-growth policies
The non-event policy comes as a moderate setback, particularly in the
backdrop of nearly eight consecutive policy easing (barring Dec-12 which
Draws comfort from seasonal easing
of liquidity
was followed up with significant OMOs), while rates still remained high for
Omits critical reference on
the investing and leveraged entities.
government, notes rating
In our assessment, the policy document remains fairly hawkish that chooses
improvement on fiscal correction
to concentrate on inflation risks in terms of i) persistence of high food
Expect 25bp cut in end-July 2013
inflation, ii) release of suppressed inflation through revisions in
policy rates as data on IIP, inflation
administered prices, including the minimum support prices (MSP), iii) INR
and trade deficit becomes more
depreciation. While acknowledging that inflation remained within its
supportive
estimates, it also made further easing contingent upon "durable receding
of inflation that will open up the space for monetary policy to continue to address risks to growth".
On the liquidity front it seemed to have drawn comfort from the lowering of LAF balance, while ignoring the fact that easing
liquidity stress is on the back of a moderating credit growth and CD ratio, a careful structuring of government borrowing
programme and payback of subsidies due to oil companies.
The policy document also omitted critical references to the government that has marked earlier policy documents.
In our assessment, the odds for a rate cut during end-July policy has increased as data including IIP, inflation and trade deficit
becomes more supportive for further cuts.
RBI leaves Repo rate and CRR unchanged, guidance highlights CAD concerns
Policy rates left unchanged:
RBI left the Repo rate unchanged as expected (MOSL/
Consensus - no change). Thus, Repo rate stood at 7.25%, Reverse Repo at 6.25%
and MSF/Bank rate at 8.25%.
CRR/SLR left unchanged:
RBI also left the CRR unchanged at 4% (MOSL 25bp cut;
Consensus - no change). SLR too has been kept unchanged at 23% after the
100bp cut in Jul-12.
FY14 estimates left unchanged:
The various projections for FY14, as articulated
in the May-13 Annual Policy, were left unchanged. Thus, estimates for growth
and inflation stood at 5.7% and 5.5% respectively. RBI's indicative monetary
projections remained at 13% for M3, 14% for deposits and 15% for non-food
credit.
Stance unaltered:
RBI maintained its stance of according top priority to growth
followed by inflation control and management of liquidity.
Dipankar Mitra
(Dipankar.Mitra@MotilalOswal.com); +91 22 3982 5405
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Guidance explicitly linked CAD with policy actions:
The guidance makes monetary
policy stance explicitly conditional on the improvement in BoP along with growth
and inflation following expected trajectories. Moreover it mentions that "it is
only a durable receding of inflation that will open up the space for monetary
policy to continue to address risks to growth".
Next policy on July 30, 2013:
The next policy review is scheduled on July 30, 2013.
Odds increase for a 25bp cut in Jul-13 policy now
Expect CRR to remain stable
Source: RBI, MOSL
Takeaways - RBI halts its easing course; hard talk continues, see odds
increased for a rate cut in end-July policy
RBI halts its easing course:
RBI halted its easing measures with no change in Repo
rate and CRR in the current policy. This marks a departure from its previous eight
policy meetings where some form of monetary easing was pursued. While Dec-12
policy too had seen no change in policy/reserve rates, it was followed by significant
infusion of liquidity in the form of OMO thereafter.
Growth inflation within its projection:
The latest growth inflation balance
remained within the trajectory laid by RBI in its May-13 policy. While commenting
on Apr-13 IIP data, RBI mentioned that "all constituent categories of industry
have slowed". It also mentioned that "inflation has moderated as projected". Yet
it has chosen to abstain from easing policy rates further.
17 June 2013
2

Highlighted inflationary risks:
RBI has highlighted several inflationary risks
including i) persistence of high food inflation, ii) release of suppressed inflation
through revisions in administered prices, including the minimum support prices
(MSP), iii) INR depreciation. However, the easing factors highlighted were equally
exhaustive and includes i) easing commodity prices and ii) weaker pricing power
of corporates.
Drawn comfort on seasonal liquidity easing:
Contrary to our expectations, RBI
kept CRR unchanged and also expressed some comfort in this regard. This may be
based on the fact that liquidity remained within its announced comfort zone,
despite seasonal advance tax outflows. This assessment, however, ignores the
fact that the easing liquidity stress is on the back of a moderating credit growth
and CD ratio, a careful structuring of government borrowing programme and
payback of subsidies due to oil companies. Also, RBI showed no urgency to ease
the liquidity situation to a neutral zone to improve the transmission of its policy
signals. If RBI does not undertake commensurate OMOs, the liquidity situation
would again flare up in the coming months.
Explicitly linking of CAD in policy decisions:
RBI highlighted the external sector
concern, particularly the funding risks for CAD as exemplified in the following
statement: As recent experience has shown, shifts in global market sentiment
can trigger sudden stop and reversal of capital from a broad swath of emerging
economies, swiftly amplifying risks to the outlook. India is not an exception."
However, it has also sought to explicitly link the BoP situation to monetary policy
decisions apart from growth-inflation mix. Thus, this may act as an added overhang
for future rate cuts.
Reduced verbiage against government:
Unlike the past, the policy document
omitted any critical reference towards government and its 'policy stasis'. The word
'governance' too did not find any mention. It noted the rating upgrade on the back
of better fiscal performance and commitment from the government.
Conservative approach marks the policy document:
RBI was emphatic in its
pronouncement that further easing would be contingent upon "durable receding
of inflation that will open up the space for monetary policy to continue to address
risks to growth". This is somewhat divergent from the current stance of giving
growth top priority following by inflation and liquidity.
Expect 25bp cut in policy rates in Jul-13:
In our assessment, the odds for a rate cut
during end-July policy have increased as data becomes more supportive for further
cuts. We expect both IIP and WPI data to come somewhat lower than expectations,
while trade deficit too should wane in view of the lower gold demand, past their
seasonal peak. Thus, incremental data would create further room for a 25bp cut in
Repo rate.
17 June 2013
3

E
CO
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COPE
Data Monitor
Macro Economic Indicators
Annual
I. National Income (Growth %)
Nomi na l GDP (USDb)
Gros s Domes ti c Product
Agri cul ture
Foodgra i ns (M Ton)
Rai nfa l l (% of l ong peri od a vera ge)
Indus try
Servi ces
II. Inflation (Y-o-Y %)
WPI (Annua l Avera ges )
Al l commodi ti es
Pri ma ry arti cl es
Fuel & power
Ma nufactured products
CPI-IW
III. Fiscal Situtaion (as % of GDP)
Tota l recei pts
Di rect tax
Indi rect ta x
Net ta x
Tota l expendi ture
Pl a n
Non-pl a n
of whi ch s ubs i di es
Fi s ca l defi ci t
Revenue defi ci t
Combi ned fi s ca l defi ci t (centre + s ta tes )
Publ i c debt
IV. Money and Banking (Y-o-Y%)
Res erve money
Money Suppl y (M3)
Depos i ts
Bank credi t
V. External Sector
(i n USDb)
Exports
Imports
Tra de Defi ci t
Invi s i bl e Surpl us
Current A/c defi ci t
Net capi ta l fl ows
Forex Res erves
(As % of GDP)
Exports
Imports
Tra de Defi ci t
Invi s i bl e Surpl us
Current A/c defi ci t
Externa l debt
VI. Financial Markets (Avg %)
Ca l l ra te
1-yr AAA corpora te bond
Yi el d on 10-yr G-s ec (%)
Exchange Ra te (INR/USD)
BSE Sens ex return
P/E ra ti o (Tral l i ng)
Ma rket ca pi ta l i s a ti on (a s % of GDP)
Oi l pri ce (Indi an Ba s ket, USD/bbl )
Fi gures i n red a re es ti ma tes
FY04 FY05
618
8.1
9.0
213
-20.0
7.3
8.1
721
7.0
0.2
198
5.0
9.8
8.1
FY06
834
9.5
5.1
209
-9.0
9.7
10.9
FY07
FY08
FY09
FY10
FY11
1,710
9.5
7.7
245
-19.0
9.9
9.8
FY12
1,872
6.2
3.6
255
2.0
3.5
8.2
FY13E
1,840
5.0
1.9
250
-7.0
2.1
7.1
FY14E
2,106
5.8
3.8
255
0.0
4.7
6.7
948 1,239 1,226 1,366
9.6
9.3
6.7
8.4
4.2
5.8
0.1
1.0
217
231
234
218
-1.0
-5.0
-1.0 -10.0
12.2
9.7
4.4
8.4
10.1 10.3 10.0 10.5
5.5
4.3
6.4
5.6
3.9
17.2
3.8
5.4
6.8
17.1
4.4
12.7
1.6
4.5
3.6
8.4
86
18.3
16.8
17.6
16.0
6.5
3.7
10.1
6.3
3.8
15.6
4.1
5.3
6.9
15.4
4.1
11.3
1.4
3.9
2.4
7.2
82
12.1
12.3
10.8
26.2
4.4
2.9
9.5
3.1
4.4
14.3
4.5
5.4
7.3
13.7
3.8
9.9
1.3
4.0
2.5
6.5
79
17.2
21.2
23.4
38.0
6.5
9.6
6.5
5.6
6.7
13.6
5.4
5.7
8.2
13.6
4.0
9.6
1.3
3.3
1.9
5.4
75
23.7
21.3
23.8
28.1
4.8
8.3
0.0
4.9
6.2
14.3
6.3
5.6
8.8
14.3
4.1
10.2
1.4
2.5
1.1
4.1
71.4
31.0
21.4
22.4
22.3
8.0
11.1
11.6
6.1
9.1
15.8
6.0
4.9
7.9
15.8
4.9
10.9
2.3
6.0
4.5
8.5
72.2
6.4
19.3
19.9
17.5
3.6
12.7
-2.1
1.8
12.4
15.9
5.8
3.8
7.1
15.9
4.7
11.2
2.2
6.5
5.2
9.6
70.8
17.0
16.9
17.2
16.9
9.6
17.8
12.3
5.7
10.5
15.6
5.8
4.5
7.4
15.6
4.9
10.7
2.3
4.9
3.3
7.4
66.0
19.1
15.9
15.8
21.4
8.9
9.9
13.6
7.3
8.2
14.8
5.6
4.5
7.2
14.8
4.8
10.0
2.4
5.9
4.4
8.0
65.6
9.2
13.0
13.4
17.0
7.4
9.8
10.6
5.4
10.4
14.9
5.6
4.8
7.5
14.9
4.7
10.2
2.4
5.2
4.1
7.3
64.0
8.4
13.6
14.3
14.1
5.0
6.1
8.3
2.8
7.5
14.2
5.6
4.9
7.6
14.2
4.6
9.6
2.0
4.8
3.4
6.9
9.0
14.0
15.0
17.0
66
80
-14
28
14
17
113
11.1
13.3
-2.3
4.6
2.3
17.8
4.6
5.1
5.4
45.9
83.4
16.0
42.3
28.0
85
119
-34
31
-2
28
142
11.8
16.5
-4.7
4.3
-0.3
18.5
4.7
5.5
6.2
44.9
16.1
14.4
52.4
39.2
105
157
-52
42
-10
25
152
12.6
18.8
-6.2
5.0
-1.2
17.3
5.6
6.7
7.1
44.3
73.7
21.6
81.8
55.7
129
191
-62
52
-10
45
199
13.6
20.1
-6.5
5.5
-1.0
18.2
166
258
-91
76
-16
107
310
13.4
20.8
-7.4
6.1
-1.3
18.1
189
309
-120
92
-28
7
252
15.5
25.4
-9.8
7.5
-2.3
20.5
7.1
9.8
7.6
45.9
-37.9
11.8
54.8
82.7
182
301
-118
80
-38
53
279
13.2
21.8
-8.6
5.8
-2.8
18.9
3.2
5.9
7.2
47.4
80.5
21.0
95.2
69.6
251
381
-130
86
-44
57
305
14.5
22.1
-7.6
5.0
-2.6
17.3
4.5
8.1
7.9
45.6
10.9
19.0
87.7
85.1
310
500
-190
112
-78
68
294
16.8
27.0
-10.3
6.0
-4.2
18.7
8.0
9.6
8.4
47.9
-10.5
15.5
69.2
111.9
301
491
-191
105
-86
85
293
16.3
26.7
-10.4
5.7
-4.7
21.0
8.0
8.2
9.3
54.5
8.2
15.8
63.4
108.3
320
498
-178
115
-63
80
310
15.2
23.6
-8.5
5.5
-3.0
22.0
7.2
9.0
7.6
54.0
14.1
58.5
104.0
7.2
6.1
8.5
9.3
7.8
7.9
45.3 40.2
15.9 19.7
18.2 18.8
82.5 103.0
62.4 79.5
17 June 2013
4

E
CO
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COPE Data Monitor
Macro Economic Indicators
Quarterly
I. National Income (Growth %)
Gros s Domes ti c Product
Agri cul ture
Indus try
Servi ces
II. External Sector (USDb)
Exports
Imports
Tra de Defi ci t
Invi s i bl e Surpl us
Current A/c defi ci t
Net capi ta l fl ow
Forex Res erves
Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13
9.7
4.1
11.1
10.5
55
87
-32
20
-12
17
276
8.9
6.4
8.5
9.5
52
89
-37
20
-17
21
287
9.3
11.3
10.4
8.2
66
97
-31
21
-10
13
296
10.1
7.6
9.8
10.9
77
107
-30
24
-5
8
305
7.5
5.4
5.7
8.9
79
124
-45
28
-17
24
316
6.5
3.2
3.8
8.5
76
120
-43
25
-18
17
311
6.0
4.1
2.6
8.3
71
119
-48
28
-20
8
297
5.1
2.0
2.1
7.3
80
132
-52
30
-22
17
294
5.4
2.9
1.8
7.7
77
119
-42
26
-17
16
290
5.2
1.7
1.3
7.6
70
118
-48
26
-23
24
295
4.7
1.8
2.5
6.7
72
131
-60
27
-33
32
297
4.8
1.4
2.7
6.6
Macro Economic Indicators
Monthly
Jun '12 Jul '12 Aug '12 Sep '12 Oct '12 Nov '12 Dec '12 Jan '13 Feb '13 Mar '13 Apr '13 May '13
I. Growth and inflation (Y-o-Y %)
IIP
-2.0
-0.1
2.0
-0.7
8.4
-1.0
-0.6
2.5
0.5
3.4
2.0
WPI - Al l commodi ti es
7.6
7.5
8.0
8.1
7.3
7.2
7.3
7.3
7.3
5.7
4.9
4.7
Pri ma ry arti cl es
9.8
10.5
11.2
9.2
7.8
9.6
10.6
11.4
10.5
7.4
5.8
6.7
Fuel & power
12.1
8.4
8.7
12.0
11.7
10.0
10.3
9.3
10.6
7.8
8.8
7.3
Ma nufactured products
5.4
5.9
6.4
6.5
6.0
5.4
5.0
4.9
4.8
4.3
3.4
3.1
CPI-IW
10.1
9.8
10.3
9.1
9.6
9.6
11.2
11.6
12.1
11.4
10.2
II. Fiscal situation (as % of budgeted)
Tota l recei pts
12.4
17.7
23.3
36.5
42.1
46.5
60.0
66.1
78.3 101.1
0.7
of whi ch ta x revenue
13.6
18.5
22.7
38.1
43.3
47.9
62.8
68.5
77.1
99.9
0.4
Tota l expendi ture
20.9
29.3
37.9
46.5
52.3
58.2
66.5
74.5
85.2
98.5
6.1
Non-pl a n
23.2
33.3
43.0
50.7
57.2
64.4
71.7
82.0
86.5
99.4
6.9
Pl a n
16.5
21.9
28.4
38.9
43.2
46.7
56.8
60.7
82.3
96.5
4.5
Fi s ca l defi ci t
37.1
51.5
65.7
65.6
71.6
80.4
78.8
90.7
97.4
94.0
17.3
Revenue defi ci t
43.6
61.3
79.2
75.1
81.4
91.2
85.1 100.5
101.2
92.9
22.8
III. Money and Banking (Y-o-Y%)
Res erve money
7.8
6.6
6.0
6.9
5.3
2.9
4.6
4.2
7.4
6.1
7.5
7.0
Money Suppl y (M3)
15.7
13.9
14.0
13.5
13.4
13.4
11.3
12.7
12.4
13.4
12.5
12.1
Bank Credi t (Y-o-Y %)
18.7
17.3
17.6
15.7
15.9
17.0
15.1
16.0
16.3
14.1
14.6
14.1
Depos i ts (Y-o-Y %)
16.0
13.9
15.1
13.6
13.4
13.8
11.1
13.1
12.7
14.3
13.4
13.4
IV. External Sector
Exports (USD b)
25
23
22
24
23
22
25
26
26
31
24
Exports (Y-o-Y %)
-0.1
-0.1
-0.1
-0.1
0.0
0.0
0.0
0.0
0.0
0.1
0.0
Imports (USD b)
36
41
37
42
44
42
43
46
41
41
42
Imports (Y-o-Y %)
-0.1
0.0
-0.1
0.1
0.1
0.1
0.1
0.1
0.0
0.0
0.1
Tra de Defi ci t (USD b)
-11
-18
-16
-18
-21
-19
-18
-20
-15
-10
-18
Forex Res erves (USD b)
290
289
290
295
295
295
297
296
292
293
296
Rea l effecti ve excha nge rate
102.2 103.9 104.3 104.2 106.8 105.1 104.7 105.0
106.4 106.4 106.3
RBI's net forex i nterventi on
-0.1
-0.8
-0.5
0.0
-0.1
-0.9
0.1
0.0
-0.3
0.8
0.5
V. Financial Markets (Avg %)
Ca l l ra te
8.1
8.0
7.9
7.9
7.9
7.9
8.0
7.9
7.7
7.7
7.5
7.2
Govt borrowi ng (% compl eted)
33.0
43.7
56.8
64.9
71.8
83.2
89.5
93.7
100.0 100.0
9.3
24.8
91-day T-bi l l
8.3
8.2
8.2
8.1
8.1
8.2
8.2
8.0
8.0
8.1
7.7
7.3
Yi el d on 10-yr G-s ec (%)
8.2
8.3
8.2
8.2
8.2
8.2
8.1
7.9
7.8
7.9
7.8
7.5
SBI Bas e ra te
10.0
10.0
10.0
9.8
9.8
9.8
9.8
9.8
9.7
9.7
9.7
9.7
CP - 3 month
9.7
9.4
9.0
8.8
8.8
9.0
9.0
8.7
9.5
9.6
8.6
8.5
CD - 1yr
9.6
9.3
9.1
8.9
8.6
8.8
8.8
8.7
9.3
9.1
8.5
8.3
AAA corpora te - 1yr
9.7
9.6
9.5
9.2
8.8
8.9
8.9
8.9
8.9
9.0
8.8
8.4
Exchange Rate (INR/USD)
56.0
55.5
55.6
54.6
53.0
54.8
54.6
54.3
53.8
54.4
54.4
55.0
BSE Sens ex return
7.5
-1.1
1.1
7.6
-1.4
4.5
0.4
2.4
-5.2
-0.1
3.5
1.3
P/E ra ti o (1 Yea r Forwa rd)
14.1
13.8
13.9
14.8
14.4
14.9
14.8
15.1
14.1
14.0
14.3
14.3
Mkt ca pi ta l i za ti on (a s % of GDP)
61.2
60.3
60.5
65.3
64.3
67.2
68.9
69.9
65.0
63.4
65.8
66.4
Oi l (Indi a n ba s ket, USD/bbl )
94.8 100.7 110.2 111.9 109.9 108.1 107.1 109.5
113.1 106.8 102.1 101.3
17 June 2013
5

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CO
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COPE Data Monitor
Annual
GDP growth (%): Slows to decadal low of 5%
Quarterly/Monthly
GDP growth (%): Continuous slowdown for two years
Inflation: Showing signs of definite moderation
Inflation: WPI comes within 5% comfort level of RBI
Fiscal deficit (% to GDP): Consolidation process started
Fiscal trend: Deficits contained in FY13
Monetary indicators:
Credit growth constrained by tight money
Monetary indicators:
Deposit and credit growth moderates
17 June 2013
6

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CO
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COPE Data Monitor
Annual
External sector: A source of continued worry
Quarterly/Monthly
External sector: Trade growth moderates, deficit higher
Financial markets: Rates are easing though yield curve
flattens further
Financial markets: Interest costs are falling from their peak
for the corporate sector
Seesaw ride of the equity market
Markets are fairly valued now
INR, forex reserves: Some stability now
RBI intervened to stabilize INR
17 June 2013
7

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CO
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COPE
Gallery
E
C
OS
C
O
PE
E
C
OS
C
O
PE
E
C
OS
C
O
PE
17 June 2013
14 June 2013
12 June 2013
June 2013
The Economy Observer
RBI's policy review
RBI keeps policy rates and CRR
unchanged
Macroeconomic projections for FY14
and policy stance too unchanged
Links policy rate decisions explicitly
with BoP situation
Highlights inflation risks from food
prices, hike in administered prices
and INR
Mentions that only a durable receding
of inflation would allow pro-growth
policies
Draws comfort from seasonal easing
of liquidity
The Economy Observer
The Economy Observer
WPI inflation
May-13 WPI inflation falls to
43-month low of 4.7%
Thus, inflation remains below RBI's
comfort level for two months
CPI-RU too eased marginally to 9.3%
Food & primary inflation accelerated
on vegetables price spike; Fuel
inflation moderates as global oil
price decline absorbs diesel price
hike
Manufacturing inflation fell 3.1%,
core inflation at 40-mon low to 2.4%
Expect FY14 WPI inflation at 5%
Expect 25bp CRR cut on June 17
Apr-13 IIP decelerates to 2%
Apr-13 IIP decelerates to 2% despite
a low base
Most sectors within IIP decelerated,
barring consumer non-durables
Manufacturing in line, mining and
electricity disappoint
Basic goods reported positive growth,
while intermediate goods matched
MoM growth
Capital goods underperformed after
two months of near 9% growth
Consumer sector accelerated on 2-
digit gr. of non-durables; durables,
however, recorded a deep decline
10 May 2013
E
C
OS
C
O
PE
E
C
OS
C
O
PE
E
C
OS
C
O
PE
31 May 2013
14 May 2013
May 2013
The Economy Observer
4QFY13 GDP
4QFY13 GDP gr. at 4.8%; FY13 at 5.0%
FY13 industrial growth at 11 year lows
while that services is at 10-year low
Demand side GDP grew by a mere
3.2% in FY13, weakest in 21 years
Fiscal austerity weighs on growth
with FY13 deficit now at 4.9% of GDP
Nominal GDP growth slows to 11.7%
but INR depreciation of 13.6% results
in Dollar GDP to degrow by 1.7% to
USD1,840b
Expect moderate recovery in FY14
GDP growth at 5.8%; see more
supportive policy measures
The Economy Observer
The Economy Observer
Mar-13 IIP at 2.5%; FY13 at 1%
Improvement in nearly all sectors,
although growth remained uneven
Capital goods and non-durables a/c
for 2.2% of the 2.5% growth in IIP
Mining decline was of lower intensity,
electricity turned around
While manufacturing picked up, only
10 of the 22 industry groups within
showed positive growth
Basic goods turned around, capital
goods continued with the sharp
upturn, intermediate goods fell
Mar-13 IIP at 2.5%
WPI inflation
Apr-13 WPI inflation falls to
41-month low of 4.9%
CPI-RU too moderated to 9.4%
While WPI moderated within RBI's
comfort level, CPI inflation is down
to single digit; Very high base
ensured moderation in YoY inflation
for all three groups within WPI
Food prices, however, continued to
increase, while fuel prices fell and
manufactured prices remained static
Manufacturing inflation moderated
to 3.4%, core declines sharply to 39-
month low of 2.8%
E
C
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O
PE
E
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OS
C
O
PE
E
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OS
C
O
PE
18 April 2013
15 April 2013
12 April 2013
April 2013
The Economy Observer
Mar-13 trade deficit
Mar-13 exports spike to USD31b,
imports static at USD41b, trade
deficit at two-year low of USD10b
FY13 trade deficit at record high of
USD191b, though at 10.4% of GDP, it
was not way above of 9.7% of GDP in
FY09 and 9.8% in FY12
Increase in oil bill despite moderation
in international prices spoilt the
expected correction in FY13
Gold imports barely corrected by
USD2b to USD45b in Apr-Jan FY13
We expect stability in INR in the
range of 53-55 with appreciating bias
The Economy Observer
The Economy Observer
Feb-13 IIP at 0.6%, YTD FY13 at 0.9%
Sharp turnaround in capital goods adds
1.2% to IIP; Weakness in all other
sectors; Mining declines the highest-
ever; Electricity turns negative
Basic goods showed first negative
growth in four years; Intermediate
negative again; Consumer goods
managed positive growth on non-
durables, decline of durables deepens
See FY13 IIP growth at 0.9%; Scaled
down FY14 IIP growth to 3% from
3.7% earlier
8
Feb-13 IIP at 0.6%
WPI inflation
Mar-13 WPI inflation declines to 40-
month low of 6%, well below RBI
estimate of 6.8%
Stable food inflation, declining
minerals group prices and base effect
bring down primary articles inflation
Fuel group inflation moderated as
the increase in fuel prices was
somewhat mitigated by a cut in
petrol and ATF prices along with a
supportive base
Manufacturing inflation moderated
to 4.1%, core declines to 3.5% -- the
same as the previous low of Mar-10
17 June 2013

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COPE
Gallery
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PE
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C
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PE
E
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O
PE
29 March 2013
19 March 2013
14 March 2013
March 2013
The Economy Observer
3QFY13 BoP
3QFY13 CAD at record high USD33b
(6.7% of GDP); Exports decline,
imports higher, invisibles static
Capital flows, viz., FIIs and debt flows
match up CAD; Apr-Dec 2012 CAD at
USD72b (5.4% of GDP); exports
decline, imports and invisibles static
Capital flows keep overall BoP in
balance during Apr-Dec 2012
Net international investment (NII)
position deteriorates
External debt rises to USD376b
(20.6% of GDP); Expect CAD/GDP at
4.8% in FY13 and 3.9% in FY14
The Economy Observer
The Economy Observer
RBI's policy review
RBI cuts key policy rates by 25bp;
CRR/SLR unchanged
Growth and inflation estimates,
policy stance unaltered; Guidance
alludes to continued inflation, BoP
risks and limited headroom
Rate cut in accordance with
calibrated easing articulated by RBI
See more headroom for cuts created
with drop in inflation and contained
twin deficit risks
Announces further OMO of INR100b
taking total FY13 OMO to INR1.6t
WPI inflation
Feb-13 WPI inflation inches up to 6.8%
on spike in fuel inflation
Fuel inflation spiked to double digit
on deregulation of bulk diesel prices
and firming up of international oil
prices
CPI inflation inched up to 10.9%
Both CPI and WPI expected to fall
sharply in Mar-13; WPI in Mar-13
expected at 6.3%, well below the RBI
estimate of 6.8%
Expect RBI to cut CRR/rates by 25bp
in 19th March policy
E
C
OS
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PE
E
C
OS
C
O
PE
E
C
OS
C
O
PE
12 March 2013
14 February 2013
12 February 2013
March/February 2013
The Economy Observer
Jan-13 IIP at 2.4%
Jan-13 IIP recovers to 2.4%; YTDFY13
at 1%;
Nearly all sectors recorded MoM
improvement
Mining degrowth continued,
manufacturing turned around while
electricity accelerated
Basic and intermediate goods
accelerated while capital goods
continued to degrow
Consumer goods turned around solely
on sharp rebound of the non-durables
while durables recorded second
month of degrowth
The Economy Observer
The Economy Observer
WPI inflation
Jan-13 WPI inflation at 3-year low
of 6.6%; Food inflation accelerates
on base effect and seasonality;
primary inflation still lower
Fuel inflation falls sharply as a huge
base effect absorbs the fuel price
hike, especially bulk diesel
Manufacturing inflation decelerates
to a 37-month low of 4.8%, core
inflation at 34-month low of 4.1%
CPI inflation inched up to 10.8%; CPI
and WPI expected to converge from
Mar-13 onwards; Expect RBI to cut
rates by 25bp in 19th March policy
Dec-12 IIP degrows again
Dec-12 IIP declines at -0.6%; YTDFY13
at 0.7%
IIP remains negative in six of nine
months of FY13 so far; All sectors
showed a decline barring electricity
and basic goods - the two sectors to
remain positive throughout FY13
Capital & intermediate goods showed
milder fall compared to earlier months
Consumer goods slumped to four-year
low, with deep decline spread across
both durables and non-durables sector
Expect FY13 IIP at 1%; FY14 at 5.6%
Expect RBI to cut rates by 25bp in 19th
March policy
11 January 2013
E
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C
O
PE
E
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OS
C
O
PE
E
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OS
C
O
PE
29 January 2013
14 January 2013
January 2013
The Economy Observer
RBI's policy review
RBI cuts key policy rates by 25bp
CRR too cut by 25bp to 4%
FY13 growth estimate lowered by
30bp to 5.5%; Mar-13 inflation
estimate lowered by 70bp to 6.8%
Monetary stance eased to accord top
priority to growth followed by
inflation and liquidity
Expect calibrated but frontloaded rate
cut of 75bp more in CY13
RBI needs to conduct INR500b more
of OMO to close the structural
liquidity gap & increase effectiveness
of the transmission channel
The Economy Observer
The Economy Observer
December 2012 inflation
Dec-12 WPI inflation at 7.2%, index
static for four months
Food and primary inflation rise
purely because of base effect
Manufacturing inflation drops to 25-
month low of 5%; core inflation at
4.2% lowest for 33 months
Expect WPI inflation to ease
significantly in 4QFY13 and near
5.7% by Mar-13
CPI inflation in double digit at
10.6%; divergence between CPI and
WPI expected for two more months
Expect RBI to cut rates by 50bp.
Nov-12 IIP de-grows
Nov-12 IIP de-grows at -0.1%;
YTDFY13 at 1.0%
IIP remains negative in five out of
eight months of FY13 so far; Oct-12
IIP growth of 8.3% seems to be
seasonal exuberance
All sectors showed either negative or
low single-digit growth
Mining, Capital and Intermediate
Goods down YoY
CG moderated to low single-digit from
double-digit growth a month back
See FY13 IIP at 1.0%; GDP gr at 5.2%
Place FY14 first estimate of IIP growth
at 5.6%; GDP growth at 6.5%
9
17 June 2013

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