RBI releases September 2011 Issue of RBI Bulletin

The Reserve Bank of India today released the September 2011 issue of its monthly RBI Bulletin (www.rbi.org.in/scripts/BS_ViewBulletin.aspx) . The September issue carries six articles:

1. India’s Foreign Trade: 2011-12 (April-June),

2. Monthly Seasonal Factors of Selected Economic Time Series,

3. Corporate Investment: Growth in 2010-11 and Prospects for 2011-12,

4. International Banking Statistics of India: December 31, 2010,

5. Performance of Financial and Investment Companies: 2009-10  and

6. Finances of Non-Government Non-Financial Private Limited Companies: 2009-10. Highlights of the articles are:

Highlights:

i) India’s Foreign Trade: 2011-12 (April-June): Robust Performance

This article reviews the performance of India’s merchandise trade during 2011-12 (April-June) on the basis of data released by Directorate General of Commercial Intelligence and Statistics (DGCI&S). The article also covers disaggregated commodity-wise and direction-wise analysis of India’s trade during 2010-11.

Main Findings

• During 2011-12 (April-June), India’s merchandise exports at US$ 79.0 billion witnessed a growth of 45.7 per cent compared with an increase of 41.2 per cent in the corresponding period of the preceding year.

• Merchandise imports at US$ 110.6 billion showed a rise of 36.2 per cent (30.1 per cent a year ago).

• The robust performance of exports appeared to have been driven by supportive policy of the Government to promote exports in terms of products and destinations. Trade deficit during 2011-12 (April-June) amounted to US$ 31.6 billion, as compared with US$ 27.0 billion during the same period of the preceding year.

• The disaggregated data on commodity-wise merchandise exports during 2010-11 indicate that items, such as, engineering goods, petroleum products, gems and jewellery and agriculture and allied products contributed more than 80 per cent of the overall growth in exports.

• Destination-wise, there has been diversification of exports towards developing countries and Oil Producing and Exporting countries (OPEC).

ii) Monthly Seasonal Factors of Selected Economic Time Series: Trend Analysis

This article presents the estimated monthly seasonal factors of selected 95 economic/financial time series taken from broad sectors, namely, Monetary and Banking; Price; Industrial Production; External Trade and Services sector. The series is classified into six major groups: Monetary and Banking Indicators (22 series), Wholesale Price Index (WPI) (27 series), Consumer Price Index (CPI) (3 series), Industrial Production (38 series), Services Sector Indicators (2 series) and External Trade (3 series).

Main Findings

• The computed seasonal factors and the variation over the time reveal that seasonal variations for M3 and currency in circulation remained stable in recent years. However, seasonal variations for M1 and reserve money showed an increasing trend.

• The seasonal variations of Aggregate Deposits, Non-Food Credit and Investments for scheduled commercial banks have been found to be stable in recent years. Within Aggregate Deposits, Demand Deposits have shown greater seasonal fluctuations than Time Deposits.

• Within the price-related series, data reveal that seasonal variation for WPI-All Commodities remained low and declined in recent years. Average variation for WPI-Primary articles was higher than for WPI Manufacturing. For WPI-Fuel and Power group, no significant seasonal factors were observed. However, the subgroup of ‘freely priced product ex-petrol’ showed significant seasonal variations.

• Seasonal variation of CPI-IW was stable in the recent years, and marginally lower than the CPI-AL and CPI-RL. Among the production series, seasonal variation of IIP general index increased marginally over the time. Over the years, the seasonal peak of IIP-General, sectoral and the use-based groups indices had remained in March; the seasonal trough, however, varied and occurred in different months. Seasonal variations in IIP for Basic goods, Intermediate goods and Capital goods increased but were partially offset by decline in seasonal variation in Consumer goods.

• During 2010-11, 38 out of 95 select series recorded their seasonal peaks in March. The largest seasonal variation has been observed in ‘IIP- Office, accounting and computing machinery’ series and the smallest is observed in ‘WPI milk’.

iii) Corporate Investment: Growth in 2010-11 and Prospects for 2011-12: Likely to be Lower than Expected

This article captures capital investment intentions of the companies in private and joint business sector in order to assess broadly the likely short-term changes in business sentiment. The estimation of capital investment during the year is based on phasing details of the investment intentions indicated by the companies while raising funds through sanctioned assistance by banks/FIs, ECB/FCCBs and domestic equity. Capital expenditure envisaged from pipeline projects are also estimated for the year 2011-12.

Main Findings:

• The cost of projects which were sanctioned institutional assistance during 2010-11 aggregated to `4,60,303 crore which is only marginally higher than `4,55,968 crore envisaged in 2009-10.

• The investment plan was led primarily by high value projects (projects having cost more than `1,000 crore each) envisaged in power, metal & metal products and telecom sectors. Spatial pattern of projects proposed during 2010-11 revealed that Chhattisgarh was the most preferred state that captured 14.9 per cent of total investment intentions followed by Andhra Pradesh, Gujarat and Karnataka.

• Based on the phasing details of investment intensions made during various years, capital expenditure that might have been incurred in 2010-11 worked out to be `3,82,641 crore.

• The capital expenditure already planned to be spent in 2011-12 aggregated to `2,74,919 crore and if companies do not defer the investment decisions and adhere to their investment plan, this pipeline investment is expected to provide the momentum of investment in 2011-12. Thus, if the aggregate capex in 2011-12 were to match the capex envisaged in 2010-11 (`3,82,641 crore), the minimum capital expenditure of around `1,07,722 crore needs to show up from the new investment intentions of 2011-12 by the private corporate sector.

• There are possibilities of some softening in the industrial sector growth due to continued input price pressure and escalating cost of capital. This raises some concerns regarding the investment demand in 2011-12. Going by the assessment on date, the capital expenditure of the above order does not appear to be feasible.  In all likelihood, capital expenditures in 2011-12 are likely to be lower than the previous year.

iv) International Banking Statistics of India: December 31, 2010: Decline in Short Term?

The article presents analysis of international liabilities and assets of banks in India, classified under Locational Banking Statistics (LBS) and consolidated international/foreign claims under Consolidated Banking Statistics (CBS), collected as per the reporting system of the Bank for International Settlements (BIS), for the quarters ended December 2010.

Main Findings

Locational Banking Statistics

International Liabilities

• The international liabilities (in Indian Rupees) of banks in India, at end-December 2010 grew by 14.0 per cent over the position a year ago. However, there was a marginal decline at 0.2 per cent over the previous quarter.

• The foreign currency borrowings, investment in ADRs/ GDRs and equities of the banking sector by non-residents contributed to the growth in international liabilities over previous year’s position.

• At end-December 2010, international liabilities towards USA, UK, UAE, France and Hong Kong declined as compared to the position one quarter ago.

• As at end-December 2010, the non-bank sector continued to contribute major portion of the international liabilities with a stable share between 74.5 per cent to 76.0 per cent since December 2009.

International Assets

• At end-December 2010, the international assets (in Indian Rupees) of banks in India registered a growth of 19.3 per cent over the previous year’s position and a decline of 2.2 per cent over the previous quarter.

• Compared to previous quarter, the NOSTRO balances decreased, pulling down the overall international assets for the quarter.

• The share of the non-bank sector in the international assets increased to 69.2 per cent from 67.8 per cent for the previous year.

• At end-December 2010, a decline (from 98.4 per cent to 94.0 per cent) was observed in the share of the non-bank sector in the international assets denominated in Indian Rupee over the position a year ago.

Consolidated Banking Statistics

• The annual growth in consolidated international claims (in Indian Rupees) of banks based on country of immediate risk, as at end-December 2010, was 2.8 per cent compared with 17.9 per cent registered a year ago.

• Consolidated international claims of Indian banks on immediate risk basis, at end-December 2010, continued to be of short-term nature (less than one year) and accounted for 62.1 per cent of total claims.

v)  Performance of Financial and Investment Companies - 2009-10: Signs of Recovery?

The article presents the financial performance of select 1,289 non-government financial and investment companies (other than banking, insurance and chit fund companies) during the financial year 2009-10, based on their audited annual accounts.

Main Findings

• The consolidated results of the select companies in 2009-10 showed some signs of recovery from the global financial crisis experienced during 2008-09.

• The growth in major parameters like financial income, interest payment and net worth, etc., was lower in 2009-10 as compared with that in 2008-09. However, profit before depreciation and tax (PBDT) and profits after tax recovered in 2009-10 after recording a decline in 2008-09. The profitability and profit allocation ratios, for instance, profit margin, return on equity and dividends to net worth were higher due to improved profits in 2009-10.

• The pace of expansion of business of the select companies was higher in 2009-10. This led to a significant increase in the borrowing requirements. Also, the share of external sources (other than own sources) in total sources of funds increased during 2009-10 when compared with the previous year and it continued to be the major sources of finance.

• Major portion of the funds raised during the year was deployed as loans and advances in the credit market. The share of ‘Investments’ in total uses of funds declined during 2009-10.

vi) Finances of Non-Government Non-Financial Private Limited Companies: 2009-10: Better than 2008-09

The article presents the financial performance of select 1,642 non-government non-financial private limited companies during the financial year 2009-10, based on their audited annual accounts. The major findings of the study are:

• The aggregate results of the select companies in 2009-10 showed signs of recovery from the global financial crisis experienced during 2008-09.

• While the growth rates in major parameters like sales, value of production and manufacturing expenses further moderated, various measures of profit like PBDIT, gross profits, profits after tax and gross savings recorded high growth in 2009-10 after declining in 2008-09.

• Profitability and profit allocation ratios, such as, profit margin, return on equity and dividends to net worth improved in 2009-10 as compared with that in 2008-09.

• However, growth in borrowings was at much lower level in 2009-10 as compared with the previous year, as increase in profitability might have led to significant cut down in the borrowing requirement.

• The share of external sources of funds (i.e., other than own sources), which has been playing a major role in financing the asset formation and other activities since the year 2004-05, witnessed a significant decline in 2009-10 mainly due to a fall in incremental borrowings. Correspondingly, the share of the internal sources of funds increased, backed by higher accretion in reserves and surplus in 2009-10.

Ajit Prasad
Assistant General Manager

Press Release : 2011-2012/405