Secular
Trends in the Behaviour of Monetary Variables*
India can justifiably
claim to possess a fairly well-developed financial system and in it the
pivotal role of monetary and banking sectors; in fact the latter role has
been dominating which speaks for many an aspect of the country’s
development or the lack of it in some respects.
As the economy got evolved through different stages
in the six decades of post-Independence era, there have been divergent
debates on the role of the monetary and banking sectors. For instance, in
the 1950s and 1960s, there was concerted thinking on the subject of
monetisation. With increasing commercialization of agriculture, it was
thought that the widespread system of barter would be progressively replaced
by the phenomenon of monetisation. It did happen and there had been many
field studies which brought out this changing phenomenon.
The process of monetisation itself was a complex
phenomenon. The reflection of it in monetary and banking data was not found
to be straightforward. Along with the replacement of barter transactions by
currency, there was also the commercialization of the rural economy and the
gradual modernization of the economy in general which facilitated the growth
of the banking system and the transfer of transaction balances in favour of
bank deposits in a variety of forms: current, saving and term deposits.
Currency-Money
Supply Ratio
As shown in Table 1, the share of currency
with the public in broad money (M3) remained much above 50%
throughout the first 15 years of planning – 1950s and the first half of
1960s. If narrow money (M1)
is considered as the genuine transaction balance, currency component in it
had constituted more than two-thirds during that period. But, it is
significant that despite the progressive commercialization of the rural
economy and modernisation of the economy as a whole, the importance of
currency in transaction balances has hardly come down. It was around 60% in
early 1970s and it has remained at around 50% even after four decades (see
also Chart A). The persistence of this relative importance of currency in
transaction balances is an interesting feature of the Indian economy to
which we shall revert after awhile.
No
doubt, the process of financial development and economic modernization was
reflected in the steady growth in the proportion of aggregate bank deposits
in M3 (Table 1 and Chart B). This proportion, which was around
40% in the early 1950s, gradually increased to over 50% in mid-1960s, to 70%
in mid-1970s, to 80% in mid-1980s and to over 85% now. Aggregate deposits
play twin roles; on the one hand, they constitute transaction balances, but
on the other, the increases in their stock represent savings of the
community. One of the outstanding aspects of the Indian economy has been the
steady increase in the household financial savings, and in this feature,
bank deposits played a major role. As per the recent Report of the
High-Level Committee On Estimation of Saving and Investment (2009),
household financial savings have risen steadily from 1.9% of GDP at current
prices in the 1950s to 8.7% in the 1990s and finally to 11.3% in 2006-07; in
fact, the latest RBI’s updated data suggest that the ratio has stood at
11.2% in 2007-08 (RBI’s Annual Report 2007-08, p.71). As per these RBI
data, of the gross financial assets, as much as 56.5% represent bank
deposits.
Currency
to GDP and M3 to GDP Ratios
The
process of financial sector development is also reflected, in very broad
terms, by the ratios of currency, narrow money (M1) and broad
money (M3) to GDP. As shown in Table 2, the currency with the
public had consistently fallen from around 14% of GDP in the early 1950s to
the lowest level of 8% in 1975-76, the year of the Emergency when there was
a drastic curb on holdings of unaccounted money (Chart C). Looking at the
behaviour of currency to GDP ratio more closely, we find that the falling
trend in it had almost stopped in the mid-1960s. By then many structural
changes had occurred in the Indian economy. Certainly, the process of
monetisation replacing barter had spent itself out, which may have entailed
the use of relatively more currency. But by then the banking system had got
strengthened and hence the banking habits. These banking habits were
promoted by the changes in the composition of national income. Agriculture
which contributed more than about 57% of GDP suddenly began to lose its
importance after the Green Revolution in the 1960s and 1970s. By the end of
1980s, its share in GDP had dipped to 31.3%; in fact, now in 2007-08 it
stands at as low as 18%.

The
gainer in the development process has been the various kinds of services
sectors, which has contributed to the growth of urbanization. All of these
in turn would have contributed to the advancement of banking habits and the
expansion of bank deposits. But
the progress of banking and expansion of bank deposits have been greatly
facilitated by the measure of bank nationalization in July 1969. Even as
these changes have occurred in the system, it was accompanied by a major
feature particularly in the urban economy, which was the phenomenon of
informalisation; such informalisation has been also in the unorganized
manufacturing. The informal sectors obviously use relatively more of
currency for transaction purposes. Added to all these, there are clear
indications that the incidence of unaccounted dealings had grown and become
rampant in India, which obviously calls for deployment of more currency.
The
behaviour of currency to GDP ratio has become an amalgam of all of the above
forces operating in the economy. It is interesting that the phenomenon of
falling trend in this ratio had almost stopped in the mid-1960s. More
significantly, the ratio had remained almost unchanged for about 34 years
from 1967-68 to 2000-01, and thereafter it tended to increase.
While more systematic econometric works may establish very authentic
hypotheses on this divergent behaviour of currency to GDP ratio, it is
possible to pinpoint certain institutional and other causes which may have
contributed to this phenomenon.
First, it
was during the first 15 years after Independence that the banking system was
put on a firmer footing thus facilitating increasing confidence in its
operations. Therefore, the people reposed faith in them and opted for more
of bank deposits as percentage of GDP. As shown in Table 3, the proportion
of aggregate bank deposits to GDP steadily increased during the first 15
years after Independence (see also Chart D).
Second,
in the next three decades or so, the phenomenon of bank deposits increasing
in relation to GDP continued as a result of the diversification of the
economy and the institutionalization of household savings, but there was the
pressing need for more currency holdings as a result of informalisation of
the economy and also rising tendency to settle transactions out the official
channels. These conflicting demands made the currency to GDP ratio remain at
around 9 to 10% for 34 years as mentioned above. Finally, after the start of
the current century, there have occurred increases in the share of services
sectors in total GDP, with small enterprises occupying the commercial
activity scene. Besides there has been a tendency for greater inequality and
also the phenomenon of large unaccounted money – all of which have
entailed relatively more of currency in circulation.
Income
Velocity of Money
The
inverse of currency to GDP, M1 to GDP and M3 to GDP
ratios are their income velocities – income velocity of currency and
income velocity of money (Chart E and Table 4). As shown therein, a unit of
currency turned over 7 to 8 times the GDP in the 1950s but thereafter the
multiple steadily increased to 10 to 11 in the 1970s and even to 12 in the
1980s. Of course there was the interregnum of the Emergency period when the
currency velocity had touched the highest level in history at 12.4/12.6. The
phenomenon of the currency velocity sticking above 10 remained until 2001-02
after which it has gradually receded to as low as 8.3. That is, despite the
phenomenal growth in the economy, a unit rupee turned GDP amount just over
about 8 times going back to the early 1950s. The obverse of it is that the
currency proportion in GDP has remained now as it was in the early 1950s.
On
the other hand, velocities of M1 and M3 have behaved
rather divergently. While the velocity of M1 has stubbornly
remained high for five decades at 6 to 7, that is, until the end of the last
century, income velocity of M3 has experienced almost a
persistent and steady decline from a multiple of 4/5 in the early 1950s to
1.2 in 2008-09. This is the surest sign of increasing monetisation of the
Indian economy.
(This note has been
prepared by Miss Shruti Pandey under the guidance of R. Krishnaswamy)
• This note has been prepared by Sonali prabhu
Highlights of
Current Economic Scene
Agriculture
The Centre’s wheat
procurement from non-conventional states like Uttar Pradesh, Gujarat and
Bihar has not yet picked up substantially during this season. The
government agencies by 22 April 2009 have procured 16.81 lakh tonnes in
non-conventional states as compared with 121.95 lakh tonnes from the
conventional states of Punjab and Haryana. Procurement from Gujarat during
the same period has declined by 29% to 37,680 tonnes against previous
year, while from Bihar, it stood at zero. The maximum procurement has been
reported from Punjab and Haryana, touching to 121.95 lakh tonnes, wheat
purchase in Haryana intensified at 50.73 lakh tonnes due to UP farmers,
who sold major chunk of wheat in the state. Of the total 144.96 lakh
tonnes of wheat arrival, the government has so far purchased 138.97 lakh
tonnes of wheat.
Imports of vegetable oil is
expected to rise by 20% to 7.5 million tonnes in 2008-09 season ending
October this year on the back of zero import duty on cooking oil. Imports
of vegetable oil which include both edible and non edible oil have
increased by 59% to nearly 36 lakh tonnes during November 2008 to March
2009 of the current oil year. It is projected that imports of oil are
likely to slow down in the coming months due to additional stock of 1
million tonnes of edible oil. The total oil imports during the oil year
(November – October) 2007-08 have been 6.3 million tonnes, of which 5.6
million tonnes were in the form of edible oil. Imports of palm oil were
sourced from Indonesia and Malaysia, while soyabean oil was sourced from
Argentina and Brazil.
The central government
would be allowing the private traders to import duty free refined sugar to
cool domestic prices that have reached a three-year high amid a decline in
sugar output domestically and internationally. Country’s sugar output is
expected to be around 15 million tonnes in the year ending 31 September
2009. The central government on 17 April 2009 has asked mills to sell an
additional 600,000 tonnes of sugar locally in April- June quarter to boost
supplies.
Sugar industry is trapped
under regulatory measures announced by the central government. As per the
order issued by the government on 16 April 2009, mills have to sell half
of the unsold stock under the monthly free sale quota by 11 April and
remaining part before 30 April 2009. Mills are facing the threat of unsold
stocks under the open market quota converted into levy sugar and sold
through PDS system, where these are fetching lower prices. Dispatches of
sugar are affected badly due to unavailability of trucks.
As per the notification
released by Directorate General of Foreign Trade (DGFT), the government
has reimposed export restriction on sugar with effect from 01 January 2009
for export under open general list. Since sugar production in 2008-09
sugar season would be substantially lower than that of last two years,
this attempt would improve the availability of the sweetener in the
domestic market and price would slowly come down. Since January 2009, the
directorate has not been issuing any release orders for exports of sugar
and hence exports have not been carried out.
Cotton Corporation of India
(CCI) has reduced the sale price of the Sankar-6 variety of cotton by
around Rs 400 per candy. Currently, it is selling this variety at Rs
23,100 per candy from Rs 23,500 a week back. They have reduced prices of
cotton as the demand from domestic mills has gone down and further, cotton
merchants have also cut its prices. Out of the total 88-lakh bales cotton
procured, the CCI had sold 61 lakh bales by the first week of April.
Cotton mills have lower stocks, which are expected to last up to four
months; as a result, they have slowed down purchases, forcing the CCI to
reduce prices.
Cashew kernel exports from
the country have declined by 5.4% to 108,131 tonnes for the year ended
March 2009 as compared to the period a year ago. In value terms exports
have gone up by 29% to Rs 2,950 crore as compared to the last year; the
highest ever performance by the commodity. The rise in the value was
mainly due to a 36% rise in the unit value realisation at Rs 272.8 per kg,
as a result of the appreciation of dollar against Indian rupee in the
international market. The cashewnut processing industry, which is mainly
dependent on the import of raw cashew nut to meet requirements, has
imported 605,654 tonnes of raw nuts during the year. In value terms, the
imports have gone up by 50.6% to Rs 2,631.78 crore compared to the last
financial year. The unit value of imported nuts has increased by 50.7% to
Rs 43.45 per kg compared to the last year. The export of cashew nut shell
liquid, which is a major raw material in various industrial applications,
has declined by 10.7% to 6,976 tonnes. In value terms, exports have risen
by 40.1% to Rs 16.7 crore compared to last year.
Officials of Automotive
Tyre Manufacturers’ Association (ATMA) have reiterated that imports of
natural rubber is likely to double in the current fiscal due to the
growing concerns on availability and price. It is expected that the huge
difference in the prices of global and domestic rubber is likely to take
the imports to 1, 50,000 tonnes in the current fiscal as against 80,000
tonnes of 2008-09.
Seafood importing countries
led by Japan and the European Union (EU) have tightened quality checks on
shrimp imports from India. Japan has increased the frequency of quality
checks of the Indian consignments nearly by 30%. These cecks would undergo
thorough quarantine stations.
Industry
The General Index (IIP)
stands at 280.4, which is 0.5% lower as compared to the level in the month
of January 2008. The cumulative growth for the period April-January
2008-09 stands at 3.0% over the corresponding period of the previous year.
The annual growth of thee
Indices of Industrial Production for the Mining, Manufacturing and
Electricity sectors for the month of January 2009 at (-) 0.4%, (-) 0.8%
and 1.8% as compared to January 2008. The cumulative growth during
April-January, 2008-09 over the corresponding period of 2007-08 in the
three sectors have been 2.7%, 3.0% and 2.6% respectively, which moved the
overall growth in the General Index to 3.0%.
In terms of industries, as
many as five (5) out of the seventeen (17) industry groups (as per 2-digit
NIC-1987) have shown positive growth during the month of January 2009 as
compared to the corresponding month of the previous year. The industry
group ‘Machinery and Equipment other than Transport Equipment’ have shown
the highest growth of 17.5%, followed by 10.3% in ‘Other Manufacturing
Industries’ and 5.3% in ‘Beverages, Tobacco and Related Products’. On the
other hand, the industry group ‘Food Products’ have shown a negative
growth of 16.1% followed by 15.2% in ‘Wood and Wood Products; Furniture
and Fixtures‘ and 13.4% in ‘Transport Equipment and Parts’.
As per Use-based
classification, the Sectoral growth rates in January 2009 over January
2008 are (-) 1.0% in Basic goods, 15.4% in Capital goods and (-) 9.2% in
Intermediate goods. The Consumer durables and Consumer non-durables have
recorded growth of 2.5% and 0.7% respectively, with the overall growth in
Consumer goods being 1.1%.
Infrastructure
The Index of Six core
industries having a combined weight of 26.7 per cent in the Index of
Industrial Production (IIP) with base 1993-94 stood at 242.0(provisional)
in February 2009 and registered a growth of 2.2% (provisional) compared to
a growth of 7.0% in February 2008. During April-February 2008-09, six
core-infrastructure industries registered a growth of 3.0% (provisional)
as against 5.8% during the corresponding period of the previous year.
Crude Oil production
(weight of 4.17% in the IIP) registered a negative growth of 6.2% in
February 2009 compared to a growth rate of 2.3% in February 2008. The
Crude Oil production registered a growth of (-)1.7 (provisional) during
April-February 2008-09 compared to 0.5% during the same period of 2007-08.
Petroleum refinery
production (weight of 2.00% in the IIP) registered a growth of 0.5%
(provisional) in February 2009 compared to growth of 5.8% in February
2008. The Petroleum refinery production registered a growth of 3.0%
(provisional) during April-February 2008-09 compared to 7.2% during the
same period of 2007-08.
Coal production (weight of
3.2% in the IIP) registered a growth of 6.0% (provisional) in February
2009 compared to growth rate of 11.6% in February 2008. Coal production
grew by 8.7% (provisional) during April-February 2008-09 compared to an
increase of 5.6% during the same period of 2007-08.
Electricity generation
(weight of 10.17% in the IIP) registered a growth of 0.3% (provisional) in
February 2009 compared to a growth rate of 9.8% in February 2008.
Electricity generation grew by 2.1% (provisional) during April-February
2008-09 compared to 6.6% during the same period of 2007-08.
Cement production (weight
of 1.99% in the IIP) registered a growth of 8.3% (provisional) in February
2009 compared to 12.8% in February 2008. Cement Production grew by 7.2%
(provisional) during April-February 2008-09 compared to an increase of
7.9% during the same period of 2007-08.
Finished (carbon) Steel
production (weight of 5.13% in the IIP) registered a growth of
3.6%(provisional) in February 2009 compared to 2.3% (estimated) in
February 2008. Finished (carbon) Steel production grew by 2.4%
(provisional) during April-February 2008-09 compared to an increase of
5.6% during the same period of 2007-08.
Inflation
The official Wholesale
Price Index for ‘All Commodities’ (Base: 1993-94 = 100) for the week ended
11April 2009 rose by 0.3 percent to 228.8 from 228.2 for the previous
week.
The annual rate of
inflation, calculated on point-to-point basis, stood at 0.26 percent
(Provisional) for the week under reference as compared to 7.95 percent
during the corresponding week of the previous year.
The index of major group
primary articles rose by 0.5% from 247.6 to 248.9 due to increase in
prices of tea, bajra, jowar, fruits and vegetables, mutton, maize,
groundnut and raw rubber.
The price index for major
group fuel, power, light and lubricants remained unchanged at its previous
week level of 322.6.
The index for major group
manufactured products rose by 0.2 percent over the week due to higher
prices of imported edible oils, other edible oils, sooji, rawa, sugar etc.
Wholesale price index for
‘All Commodities’ (Base: 1993-94=100) revised up to 227.4 from 227.8 for
the week ended 14 February 2009 and annual rate of inflation based on
final index, calculated on point to point basis, stood at 3.18 percent as
compared to 3.36 percent (Provisional).
Financial Market Developments
Capital
Markets
Primary Market
Adani Power has re-filed its draft red herring
prospectus (DRHP) for IPO, after dropping plans last year, scaling down
the size of offering. The company had filed DRHP in May 2008 but did not
proceed with the IPO due to unfavourable market conditions. According to
the revised DRHP, the percentage of equity share holding of the promoter
and promoter group would decrease to 73.50% from 86.97% after the issue.
Secondary Market
Bulls are on the rampage with the market
surging for the seventh week in a row on the back of sustained buying by
foreign funds amid signs of improvement in the Indian economy, possibility
of further reduction in interest rates with inflation at near zero and on
easing credit crunch. Domestic indices ignored the weak global markets.
The RBI, as part of its Annual Credit Policy, cut its key short-term rates
by 25 basis points each on 21 April 2009, to prop up growth amid global
economic slowdown. The repo rate, was cut to 4.75%, and the reverse repo
rate, was reduced to 3.25%, effective immediately. The bank rate, used by
banks to price long-term loans, remained at 6%. Banks' cash reserve ratio
(CRR) was also left unchanged at 5%. Inflation based on the wholesale
price index (WPI) rose 0.26% in the year through 11 April 2009, higher
than previous week's 0.18%. BSE Sensex rose 306 points or 2.78% to 11,329
during the week. It was the biggest closing level for the BSE Sensex in
more than six months. Demand for mid and small cap counters has helped BSE
mid-cap and BSE small-cap indices to close with gains of 3.67% and 2.95%
respectively. The NSE Nifty increased 96 points or 2.84% to 3,481 in the
week. Sustained buying by FIIs to the tune of Rs 583.3 crore in the first
four days of the week also helped to build on the gains from previous
week. Foreign institutional investors (FIIs) inflow in April 2009 totaled
Rs 4,860.40 crore, while the outflow in calendar year 2009 totaled Rs
1,811.20 crore (till 23 April 2009).
All the sectoral indices of BSE recorded
positive returns over the week except Consumer Durable index. Among the
gainers Metal recorded 5.5% growth followed by TECk and Realty with 5.4%
and 4.2%, respectively.
FIIs have reduced their
stake in more than half of the Sensex and Nifty-listed companies during
the January-March quarter of 2009. According to the shareholding pattern
of 50 companies available with the stock exchanges, FIIs have reduced
their holding in 30 firms, including Reliance Communications, the State
Bank of India and Tata Motors, in the fourth quarter of the financial
year. Out of these companies, FIIs have reduced their holdings in 14 firms
by over 1% each. Public sector Steel Authority of India has not disclosed
its latest shareholding pattern to the BSE and NSE. FIIs, who pulled out
over Rs 8,700 crore from the domestic equities in the three-month period,
have lowered their stake from Suzlon Energy, Reliance Capital, Punjab
National Bank, and Axis Bank in the range of 2-5% each.
Derivatives
After opening on a weak
note, Nifty future found strong support at lower levels and reversed the
direction to end on a positive note. The Nifty April future ended 2.2%
higher at 3482.05 against the spot close of 3480.7. The Nifty May future
finished at 3491.05 and witnessed a rollover of about 38%. The rollover
was lower when compared with the previous month’s figure, as traders
preferred to book profits. The market-wide rollover is in the region of
35-38%. Despite the sharp recovery, the Nifty future lacks conviction to
move above the immediate resistance zone of 3515-25 level. The carryover
trend seems very strong going into settlement week. Trading volumes and
open interest (OI) are also at high levels with a visible tendency of
profit-booking in long positions. This was an extremely high volume month.
While the FIIs have almost doubled collective exposure in value terms,
their exposure as a percentage of OI has dropped to around 35% of all OI
from an average of 39. The overall put call ratio (PCR) in terms of OI is
1.5. The April ratio is 1.9 (on the verge of overbought). The high PCR was
driven by the cashing out of April calls. Incidentally, around 42% of
index option volume is already in May and beyond. Futures in the Bank
Nifty and the CNXIT have both generating relatively high volumes as well
and the Bank Nifty has become a popular contract in its own right. The
CNXIT did better than expected last week despite the rupee staying stable.
The cumulative FII
positions as percentage of the total gross market position on the
derivative segment as on April 23 is 35.21%. They indulged alternate bout
of buying and selling in derivative segment. They now hold index futures
worth Rs 13,286.71 crore (Rs 12,743.48 crore) and stock futures Rs
18,447.89 crore (Rs 16,370.08 crore). Their holding in index options
continued to be at record high. They now hold Rs 34,658.94 crore worth
index options against the previous week level of Rs 27,150.9 crore.
Though the volatility index
weakened slightly on Thursday and Friday, ended at 47.78 against the
previous week’s close of 50.8. But during intra-day trading it peaked at
63 points.
The NSE has dropped 50
scrips from its futures and options (F&O) segment as they could not fulfil
the new criterion prescribed by the SEBI. On 22 April SEBI had issued
fresh F&O guidelines to exchanges and imposed strict norms with immediate
effect. These new guidelines came following the sharp rise and fall in the
Akruti City stock in which traders had allegedly rigged the price because
of a low float. Most of these 50 stocks that have been dropped by the NSE
had turned illiquid, increasing the possibility of price manipulation. No
new contracts of these stocks can be traded from next month after the
expiry on April 29. However, the existing contracts for April, May and
June will continue to be traded until they expire.
Government Securities
Market
Primary Market
RBI auctioned 91-day TBs and 364-day TBs on 22
April 2009 for the notified amount of Rs 8,000 crore and Rs 1,000 crore,
respectively. The cut-off yield for the 91-day TBs and 364-day TBs was set
at 3.36% and 3.76%, respectively.
On 23 April 2009, RBI purchased 7.38% 2015,
8.07% 2017, 8.24% 2018, 8.35% 2022 and 7.95% 2032 securities through open
market operation (OMO) for the notified amount of Rs 6,000 crore. The
cut-off yield for these securities was set at 6.74%, 6.45%, 6.46%, 6.83%
and 7.28%, respectively.
RBI re-issued 6.05% 2019 and 7.50% 2034 for
the notified amount of Rs 8,000 crore and Rs 4,000 crore, respectively.
The cut-off yield for the 10-year paper maturing in 2019 was set at 6.13%
and for the 25-year paper maturing in 2034 was set at 7.23%.
Secondary Market
Inter-bank call rates moved in the range of
2.17-3.48% during the week. Bond prices rallied on the back of liquidity
overhang in the financial markets and low credit off-take. The rally came
as the RBI signalled its intention for lower interest rates in the lean
season Credit Policy announcement, through a 25 basis points reduction
each in the reverse repurchase and repurchase rates taking them down to
3.25% and 4.75% respectively. As a result, the reverse repo rates dropped
below the savings bank rate of 3.5%.
Bond Market
During the week under review, 3 FIs/banks, 1
NBFC and 1 central undertaking tapped the bond market to mobilize an
amount of Rs 4,111 crore, respectively.
Profile of
Major Commercial Bond Issues for the Week Ending 24 April 2009 |
Sr |
Issuing
Company / Rating |
Nature of
Instrument |
Coupon in %
per annum and tenor |
Amount in Rs.
crore |
No |
|
FIs / Banks |
|
|
|
1 |
Punjab
National Bank
AAA by Crisil, Care. |
Upper Tier II
Bonds |
8.25%
with the step up of 50 bps if call is not exercised at the end of 10th
year. |
500 |
2 |
Housing
Development Finance Corp Ltd
AAA by Crisil. |
Bonds |
6.84%
for 2 years. |
200 |
3 |
ICICI Bank Ltd
AAA by Crisil. |
Upper Tier II
Bonds |
9.30%
for 10 years. |
1500 |
|
NBFCs |
|
|
|
1 |
Shriram City
Union Finance Ltd
A by Fitch. |
Bonds |
0% for 1
years. |
100 |
|
Central
Undertakings |
|
|
|
1 |
Indian Railway
Finance Corp Ltd
AAA by Crisil, Care. |
Bonds |
7.45%, 8.19%
and 8.20% for 5 years, 10 years and 15 years respectively. |
1811 |
|
Total |
4111 |
|
Source:
Various Media Sources |
In order to enable over-the-counter (OTC)
settlements in corporate bonds on a real time basis, the RBI decided to
allow the clearing houses of the exchanges to have a transitory pooling
account facility with the central bank on April 21. The move comes close
on the heels of a recent announcement by the Securities and Exchange Board
of India (SEBI) Chairman C B Bhave to route OTC corporate bond
transactions through clearing entities to mitigate risks in such deals
while bringing in more transparency in OTC settlements. Under the proposed
transitory pooling mechanism, settlements of corporate bonds can be done
through the real time gross settlement (RTGS) system with the
corresponding central clearing house. The buyer of corporate bonds will
transfer the funds through his bank to the transitory account, while the
clearing house will be able to transfer the securities to the buyer's
account from the seller's account and release the funds to the latter's
account. According to the central bank, this settlement mechanism will be
done on a trade-by-trade basis or delivery versus payment-I (DvP-I) basis
that was earlier recommended by the R H Patil Committee at RBI.
Foreign Exchange Market
Forward premia remained largely steady. As
result, one, three six and 12-month premia ended the week at 3.63% (3.5%),
3.27% (3.16%), 2.77% (2.69%) and 2.17% (2.13%) respectively. Cash-to-spot
ended the week at a low of 2.32% (2.51%), in view of the low call rates
and high liquidity. Despite the slight widening of premia, the rupee faced
little downside risk, traders said. This was apparent from the
Non-Deliverable Forward market ((NDF) rate that ended the week at Rs 49.92
(Rs 49.97) or lower than the domestic spot rate.
Commodities Futures
derivatives
Commodity market regulator Forward Markets
Commission (FMC) has said it does not intend to suspend futures trading in
sugar in the near future, even though traders' association are demanding a
ban on sugar futures to arrest price rise. On 22 April in the Committee of
Secretaries (CoS) decided that the FMC will monitor the price movement of
sugar in the futures market and take steps if and when necessary.
According to B C Khatua futures trading is not responsible for the rise in
sugar prices in the spot market. The demand for suspension of sugar
futures arose following an unprecedented rise in prices of sweetener in
the physical market in the last couple of weeks. Mumbai-based Bombay Sugar
Merchants Association had sought ban on sugar futures. It had attributed
the latest price spurt to unbridled speculation in the futures market.
Insurance
Regulator of insurance sector, IRDA, has prescribed eligibility criteria
for the appointment of the auditors to insurers.
Oriental Insurance has entered into an arrangement with MyTVS for
providing free emergency roadside assistance to customers covered under
comprehensive motor package policies.
Public
Finance
According to the latest press note revenue receipts as on February 2009
works out to be 79 per cent of the actual to revised estimates at Rs.
437,397 crore with the receipts under net tax revenue reaching to Rs.
356,390 crore and non-tax revenue Rs.81, 007 crore.
With
total expenditure reaching 83.1 per cent of the revised estimates, fiscal
deficit till date works out to be Rs.307, 133 crore. Market borrowings at
Rs.300255 crore financed about 98 per cent of the fiscal deficit.
Banking
HDFC Bank has
announced reduction in its deposit rates by 25-35 basis points across all
tenors, with effective from April 22, 2009. The bank’s domestic term
deposit rate for one year tenure has been revised to 7%. However, the
highest interest rate of 8% offered by the bank on deposit for the tenure
of two years and 16 days remains unchanged.
On a standalone
basis Mahindra & Mahindra Financial Services has posted profit after tax
(PAT) at Rs 108 crore during the quarter ended 31 March 2009, an increase
of 43.3% from Rs 75 crore during the same period a year ago.
Private sector
lender Yes Bank’s net profit increased by 24% in the fourth quarter ended
March 31, 2009 at Rs 80 crore as against Rs 64.50 crore over the
corresponding period a year ago.
State Bank of Mysore
has reported an increase in its net profit to Rs 337 crore from Rs 318
crore during the financial year ended March 31, 2009.
Corporate
ACC, the largest
cement manufacturer in India has reported increase of 23% in its net
profit to Rs 399 crore for the first quarter ended March 31, 2009, against
Rs 324 crore in the corresponding quarter last year. The company is going
ahead with its planned organic expansion programme of increasing the
capacity to 30.58 million tonnes by 2010 from the current 22.63 million
tonnes. The company has planned capital expenditure of Rs 1,600 crore in
the year 2009 followed by Rs 1,300 crore in 2010.
Engineering
equipment supplier BGR Energy has bagged a contract worth Rs 15 crore from
Maithon Power at Jharkhand for engineering related works.
Piramal Healthcare
is planning to hire 300-400 people this year across the country, taking
its total employee base to 7,400. Last year the company had employed 1,500
people in the country for its mass marketing division.
In a
joint venture ONGC Mittal Energy Ltd will buy 25% stake in Kasakhstan’s
Satpayev oil field in the Caspian Sea after the final approval of the
Cabinet Committee on Economic Affairs. Remaining 75% stake will be hold by
Kazakh national oil firm KazMunaiGas. OVL, overseas arm of the ONGC and
Mittal Investment Sarl are equal partners in the joint venture. A peak
output of 287,000 barrels per day is envisaged from the 256 million tonne
of reserves in the field. It lies in proximity to major fields like
Karazhanbas, Kalamkas, Kashagan and Donga, where a significant amount of
oil has been discovered.
Ambuja
Cement, a part of Swiss cement giant Holcim has announced that the company
has reported a growth of 2.4% in its net profit to Rs 334 crore for the
first quarter ended March 31, 2009 against Rs 326 crore in the
corresponding quarter last year. Net sales for the quarter stood at Rs
1,848 crore, up 11.6% as compared to Rs 1,655 crore last year.
Malaysia’s no frills airline Air Asia Group is planning to venture into
India in a big way.
FMCG
Company Marico Industries net profit has grown by 8.9% to Rs 44 crore in
the fourth quarter ended March 31, 2009. Net sales of the company surged
to Rs 561 crore in the quarter under review as against Rs 456 crore in the
same quarter ended March 31, 2008.
The US
Food and Drug Administration (FDA) has found nine deviations in Indian
drug maker Cipla’s manufacturing process during a recent inspection of the
company’s Bangalore plant. The company, however, said the deviations are
minor ones relating to manufacturing practices.
The
national carrier and state-owned Air India has decided to cut fares by as
much as 70% on 35 sectors. The massive cut in fares will take place
despite a 6.7% increase in aviation turbine fuel (ATF) prices last week.
The
$63.7 billion Johnson & Johnson (J&J) is planning to turn India into a
global hub for late-phase development of its new drugs. In the late-phase,
scientists decide on the form in which medicines can be best produced and
packaged.
Reliance Industries (RIL), has reported 9.4% drop in its quarterly net
profit, on falling fuel demand and thinning crude processing margins.
RIL’s net profit in the fourth quarter of 2008-09 stood at Rs 3,546 crore,
compared to Rs 3,912 crore in the corresponding quarter of 2007-08. The
profits were aided by a one-time gain of Rs 993 crore in the quarter from
interest on cash balance and an insurance claim of Rs 60 crore. The
company made a one-time provision of Rs 370 crore towards estimated claims
on subsidiaries. For the financial year 2008-09, RIL’s net profit dropped
to 21.5% to Rs 15,279 crore from Rs 19,458 crore in the previous year.
External
Sector
Exports during February
2009 were valued at US$ 11931 million which was 21.7% lower than that in
February 208 as a result during the fiscal year so far the total exports
at US$156597 million registered a growth of 7.3% over that of US $ 145878
million reported in the comparable period last year.
Imports during February
were valued at US $ 16823 million, a decrease of 23.3 per cent over that
of US$ 21934 million in February 2008 and the cumulative import at US$
271687 million was 19.1% more than that of US $ 228081 during April-
February 2007-08.
Trade balance during
February thus worked out to be $ 4910 as compared to $6714 in 2008. The
cumulative trade balance for April-February 2008-09 estimated at US $
115090 million was 1.4 times to that of US $ 82203 million during
April-February 2007-08.
While oil imports during
the current fiscal year so far gone up from US $ 70704 million in
April-February 2007-08 to US $ 89684 million, that of non-oil imports
accelerated by 15.6% to US $ 182003 million.
Information
Technology
HCL Technologies net
profit had declined by 36.3% to Rs 218 crore during the third quarter
ended March 31, 2009 compared to the same quarter last year. The company
has been suffering heavy forex losses during the past couple of quarters
due to its long-term hedging policies (Rs 97.4 crore in the first quarter,
Rs 120 crore in the second quarter and Rs 201 crore in the third quarter
ended March 31, 2009).
India’s largest IT
Company TCS has declared a 7% increase in its net profit for the fourth
quarter ended March 31, 2009 at Rs 1,333 crore, in line with market
expectations. Consolidated net profit for the full year ended March 31,
2009 rose by 4.6% to Rs 5,256 crore against Rs 5,026 crore in 2007-08. The
company closed 28 large deals during 2008-09, and acquired 163 new
customers. TCS has announced a bonus issue in the ratio of 1:1, subject to
regulatory approvals. This is in addition to a total dividend of Rs 14 per
share. The company acknowledged that it is facing pressure from its
clients to rework prices.
Telecom
Value added services
(VAS) providers have been witnessing huge volume of messaging. According
to analysts, political messaging has become 25% of the total traffic
during the last 2-3 months. VAS providers are charging less, in the range
of 5-10 paise for each SMS for bulk of the messages. The various political
parties in the country are using this new option as the cost of sending
message is comparatively less than campaign from TV channels.
ZTE Chinese telecom
equipment provider, which has provided infrastructure to Indian firms like
Reliance Communication, Tata Teleservices, Aircel and Loop Telecom, has
found a novel way to do business in India. ZTE has tied up with China
Development Bank for financing mobile operators for network rollout in
India. This is a strategy not only to compete with existing,
well-established players like Ericsson, Nokia-Siemens but also to increase
its market share in one of the fastest growing telecom sector in India.
Table
1 : Index Numbers of Industrial Production (1993-94 =100)
|
Table
2 : Production in Infrastructure Industries (Physical Output Series)
|
Table
3: Procurment, Offtake and Stock of foodgrains |
Table
4: Index Numbers of Wholesale Prices (1993-94 = 100)
|
Table
5 : Cost of Living Indices
|
Table
6 : Budgetary Position of Government of India
|
Table
7 : Government Borrowing Programmes and Performance
|
Table
8 : Scheduled Commercial Banks -
Business
in India
|
Table
9 : Money Stock : components and Sources
|
Table
10 : Reserve Money : Components and Sources
|
Table
11 : Average Daily Turnover in Call Money Market
|
Table
12 : Assistance Sanctioned and Disbursed by All-India Financial
Institutions
|
Table
13 : Capital Market
|
Table
14 : Foreign Trade
|
Table
15 : India's Overall Balance of Payments
|
Table
16 : Foreign Investment Inflows
|
Table
17 : Foreign Collaboration Approvals (Route-Wise) |
Table
18 : Year-Wise (Route-Wise) Actual Inflows of Foreign Direct Investment
(FDI/NRI) |
Table
19 : NRI Deposits - Outstandings
|
Table
20 : Foreign Exchange Reserves
|
Table
21 : Indices REER and NEER of the Indian Rupee
|
Table
22 : Turnover in Foreign Exchange Market
|
Table
23 : India's Template on International Reserves and Foreign Currency Liquidity [As reported under the IMFs special data dissemination standards
(SDDS) |
Table
24 : Settlement Volume and Netting Factor for Government
Securities Transactions Settled at CCIL - Monthly, Quarterly and
Annual Basis. |
Table
25 : Inter-Catasegory Distribution of All Types of Trade in
Government Securities Settled at CCIL (With Market Share in
Respective Trade Types) |
Table
26 : Settlement Volume and Netting Factor for Total Forex
Transactions Settled at CCIL - Monthly, Quarterly and Annual
Basis. |
Table
27 : Inter-Category Distribution of Total Foreign Exchange
Transactions Settled at CCIL (With Market Share in Respective Trade
Types) |
*These statistics and the
accompanying review are a product arising from the work undertaken under
the joint ICICI research centre.org-EPWRF Data Base Project.