RBI Bulletin December 2011

Monday, December 12, 2011

The Reserve Bank of India today released the December 2011 issue of its monthly RBI Bulletin (rbi.org.in/scripts/BS_ViewBulletin.aspx) . The Bulletin carries six articles, namely, (i) India’s Foreign Trade: 2011-12 (April-September) (ii) Central Government Finances 2011-12 (April-September) (iii) Inflation Expectations Survey of Households: September 2011 (Round 25) (iv) Quarterly Industrial Outlook Survey: July-September 2011 (Round 55)  (v) Quarterly Order Books, Inventories and Capacity Utilisation Survey: April-June 2011 (Round 14) (vi) Consumer Confidence Survey: September 2011.


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

The article reviews India’s merchandise trade performance during 2011-12 (April-September) on the basis of data released by the Directorate General of Commercial Intelligence and Statistics (DGCI&S). It also analyses disaggregated commodity-wise and direction-wise details for the period 2011-12 (April-June).

Main Findings

  • During 2011-12 (April-September), exports stood at US$ 160 billion and recorded a growth of 52.1 per cent as compared with an increase of 30.0 per cent during the corresponding period of the previous year.

  • During 2011-12 (April-September), imports at US$ 233.5 billion registered a growth of 32.4 per cent as compared with 37.6 per cent in the preceding year.   There has been significant rise in import of gold and silver and machinery.

  • Petroleum, oil and lubricants (POL) imports at US$ 70.4 billion in 2011-12 (April-September) exhibited a higher growth of 42.0 per cent, reflecting increase in international crude oil prices, as compared 31.8 per cent a year ago.

  • Non-oil imports during 2011-12 (April-September) at US$ 163.1 billion recorded a growth of 28.5 per cent as compared to 40.0 per cent in the corresponding period of the preceding year.

  • Trade deficit during 2011-12 (April-September) amounted to US$ 73.5 billion, as compared with US$ 71.2 billion during April-September 2010.

  • The disaggregated data on commodity-wise merchandise exports indicate that during 2011-12 (April-June), engineering goods, petroleum products, chemicals, gems & jewellery and agricultural products contributed more than 80 per cent of exports. Export growth was higher in sectors, viz., leather & manufactures and textile & textile products while the same was lower for petroleum products and ores & minerals.

  • There has been diversification of merchandise exports towards developing countries with their share in total exports increasing to 43.6 per cent during April-June 2011-12 from 41.7 per cent during April-June 2010.

2. Central Government Finances 2011-12 (April-September)

The article reviews the finances of the Central government during the first half of 2011-12, based on the data released by the Controller General of Accounts on October 31, 2011. It provides the details of receipts and expenditures of the Central government during the period under review.

Main Findings

  • Central government finances for the first half (April-September) of 2011-12 show that it would be challenging to anchor the key deficit indicators within the budget estimates for 2011-12.

  • The key deficit indicators, viz., gross fiscal deficit, revenue deficit and primary deficit, of the Centre, as proportion of budget estimates, were much higher in the first half of the current fiscal year even after adjusting for higher than the budgeted spectrum receipts during the first half of 2010-11.

  • Tax revenue growth remained far below the budgeted growth, reflecting not only a significant amount of direct tax refunds but also slowdown in indirect tax revenues during the current financial year. Moderation in economic growth and changes in customs/excise duty rates on petroleum products in June 2011 may have also impacted the tax revenues.

  • While the expenditure growth of the Centre during April-September 2011 remained lower than a year ago, it overshot the budgeted growth primarily on account of higher non-plan expenditure. This indicates strong upside pressures in respect of subsidies, which when accounted for in Central finances, pose the risk of fiscal slippages during 2011-12. 

  • The Centre has revised upwards the market borrowings through dated securities by ` 52,872 crore for the second half of 2011-12, thereby raising the gross market borrowings for 2011-12 by 12.7 per cent above the budgeted amount (` 469,738 crore).

  • While there could be a fiscal slippage during 2011-12, it would be imperative to return to the medium-term path of fiscal consolidation through timely implementation of tax reforms (Direct Tax Code, Goods and Services Tax), expenditure reform measures and linking the expenditure related announcements to tax/revenue enhancing initiatives.

3. Inflation Expectations Survey of Households: September 2011 (Round 25)

The findings of Inflation Expectations Survey of Households conducted in the July-September 2011 quarter, the 25th round in the series is presented here. The survey captures the inflation expectations of 4,000 urban households across 12 cities for the next three-month and for the next one-year.

These expectations are based on their individual consumption baskets and, hence, should not be considered as predictors of any official measure of inflation. The households’ inflation expectations provide useful directional information on near-term inflationary pressures and also supplement other economic indicators to get a better indication of future inflation. The survey results are those of the respondents and not necessarily shared by the Reserve Bank of India.

Main Findings

  • The current round of the survey shows that the percentage of respondents expecting price rise have gone down for all product groups (viz., food, non-food, households durables, housing and services) except three-month price of housing.

  • Expectations on general price rise were mainly influenced by movements in food prices. The three-months ahead inflation expectations of households have moved higher at 12.2 per cent from 11.8 per cent in the last round of survey but one-year ahead inflation expectations has remained same at 12.9 per cent.

  • The survey findings indicate that households expect inflation to rise further by 50 and 120 basis points during next three-month and next one-year, respectively, from the perceived current rate of 11.7 per cent.

  • On category-wise inflation expectations, daily-wage workers and housewives expected higher inflation rates compared to other categories.

  •  Across the cities, Jaipur expected the highest inflation while expectations were the lowest for Kolkata.

  • 27 per cent of the respondents felt that the Reserve Bank is taking necessary action to control inflation, of which, 58 per cent felt that the Reserve Bank’s action has an impact on controlling inflation.

4.  Quarterly Industrial Outlook Survey: July-September 2011 (Round 55)

This article presents the findings of Industrial Outlook Survey conducted for the July-September 2011 quarter, 55th round in the series. It gives an assessment of business situation of companies in manufacturing sector, for the quarter July-September 2011, and their expectations for the ensuing quarter October-December 2011.

Main Findings

  • The survey results showed further decline of business conditions in the Indian manufacturing sector for assessment quarter as well as expectation quarter.

  • The Business Expectation Index, a measure that gives a single snapshot of the industrial outlook in each study quarter, dropped to 109.4 from 116.3 for assessment quarter and to 118.8 from 121.5 for expectation quarter; however, it still remains well above 100, the threshold that separates contraction from expansion.

5.  Quarterly Order Books, Inventories and Capacity Utilisation Survey: April-June 2011 (Round 14)

This article, first in the series, presents the survey findings of the 14th round of the Order Books, Inventories and Capacity Utilisation Survey. The survey was conducted for the April-June 2011 quarter (Q1:2011-12) and captures the quarterly movements in order books, inventories and capacity utilisation of a targeted group of manufacturing companies, which are important indicators of economic activities, inflationary pressures and overall business cycle and as such, are useful in assessing the consumption and investment demand outlook.

Main Findings

  • During Q1:2011-12, the new orders of respondent companies dropped significantly by 13.8 per cent as compared to previous quarter. This is reflected in lowering of capacity utilisation rate to 72.3 per cent in Q1 of 2011-12 from 77.8 per cent in Q4 of 2010-11, that could be partly due to seasonal factors. There has also been an increase in finished goods inventories.

6. Consumer Confidence Survey: September 2011

This article presents the salient findings of the Consumer Confidence Survey conducted in September 2011, the 6th round in the series. The survey covers 5,400 households well spread in six metro cities. The survey captures the household’s confidence in the current and expected economic conditions, household circumstances, employment conditions, current and future spending and prices based on their perceptions of the general economic and own financial situation.  The survey results are those of the respondents and are not necessarily the perceptions of Reserve Bank of India.

Main Findings

  • The survey indicates a decline in the positive perceptions of the current economic conditions. Though more than half of the respondents felt that their household circumstances have become better off as compared with a year ago, this proportion has declined in September 2011 as compared with June 2011.

  • Optimism regarding an increase in future income, though high, has been sliding over the last four quarters.

  • The degree of negative perceptions on price levels for current and future are down marginally in September 2011 as compared with June 2011. However, about 85 per cent of the respondents felt that prices would continue to increase during the next year.

  • Overall the Current Situation Index as well as the Future Expectations Index is estimated to be marginally lower in September 2011 as compared with June 2011

Alpana Killawala
Chief General Manager

Press Release : 2011-2012/921

Filed under: Finance

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