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Economy Update: India's GDP grew 5.8% during Q4FY09. The GDP growth estimated by the CSO at 5.8% during Q4FY09 as against 8.6% in Q4FY08 and 5.8% in Q3FY09 came above street expectations. The 'agriculture, forestry & fishing' segment picked up to 2.7% in Q4FY09 from 0.8% decline in Q3FY09 on back of good winter crops. However, manufacturing sector declined 1.4% in Q4FY09 on expected line as reflected by the falling IIP numbers in recent times. The GDP growth was 6.7% for FY09 despite the world economy facing one of deepest economic crisis on back of 13.1% expansion in community services, 9.0% in transport and communications sectors and 7.8% in financial and other services sector. Our savings as well as Investments as a percentage of GDP are one of the highest in the world, which is likely to insulate us (albeit partly) from deteriorating world economic environment. We expect economic activities to pick up in the H2FY10. The recent indicators like PMI data, cement dispat...

Indian Economy Update: February IIP fell by 1.2% YoY. The index of industrial production (IIP) for February 2009 declined 1.2%, as compared to 9.5% growth in February 2008 on back of 1.4% and 1.6% de-growth in manufacturing and mining segments, respectively. During the same month, electricity grew by only 0.7%. The capital goods and consumer durables witnessed growth of 10.4% and 5.7%, espectively during February 2009. However, intermediate goods, basic goods and consumer non-durables declined by 5.4%, 0.4% and 5.5%, respectively. The cumulative growth for April-February 2008-09 stands at 2.8% over the corresponding period of the previous year. At the same time, IIP growth for January 2009 has been revised upward to 0.4% from the previously reported negative growth of 0.5%. The recent fall in inflation would provide greater leeway to Reserve Bank of India for taking softer monetary stance, going forward.

Indian Economy Update March 2009. India’s GDP grew 5.3% during Q3FY09. • GDP growth estimated by the CSO at 5.3% during Q3FY09 as against 8.9% in Q3FY08 came below street expectations. • The 'agriculture, forestry & fishing' and 'manufacturing' segments witnessed decline of 2.2% and 0.2%, respectively. However, the economic activities in mining, construction and services provided some vibrancy to Q3FY09 numbers. • With 9MFY09 GDP growth coming at 6.9%, our 4QFY09 growth would need to come at 7.6% to achieve the 7.1% advance estimate by the CSO for FY09. This is less likely in current uncertain macro-economic environment. • However, our savings as well as Investments as a percentage of GDP are one of the highest in the world. This is likely to insulate us (albeit partly) from deteriorating world economic environment.

Vote-on-account: • The vote-on-account, with impending general elections, stuck to convention and did not contain any major announcements / initiatives. • Revised FY09 revenue and fiscal deficits are estimated at 4.4% and 6%, respectively - significantly above the budgeted levels, but in line with consensus estimates • Fiscal deficit for FY10 is budgeted at 5.5% and revenue deficit at 4% of GDP; Budget assumes a 10% rise in corporation tax and a similar rise in income tax in FY10, which may be challenging to achieve in the backdrop of a weak economic environment. • No sector specific incentives announced except extension of interest rate subsidy for labour intensive export operations. Major initiatives to be taken up only in the full budget to be unveiled by the new Government, post elections • With no major triggers in the near term, markets will now look at the elections and international factors over the next two months. Monetary measures, if any, will have an impact in the intermed...

Interim Railway budget. Growth targets maintained despite slowdown, sixth pay commission impacts operating ratio, passengers get some relief Interim budget was largely in line with expectations with no major strategic initiatives announced for the next fiscal While freight rates maintained at FY09 levels, marginal relief has been given on passenger fares The growth targets for freight volumes and total earnings have been maintained at the budgeted levels despite the economic slowdown. Significantly high expenditure for the sixth pay commission as compared to the budgeted levels has dented operating ratio at 88.3%. Ratio for FY10 expected to remain at those levels.The total plan outlay target has been marginally revised to Rs.367.73bn for FY09. Mr. yadav has set a target to invest Rs.2.3trn over the 11th five year plan. Key points. FY09 growth targets maintained despite slowdown. The budget has maintained the targets for growth in FY09 at near the budgeted levels. Gross earnings are exp...

Economy Update: Inflation falls to 5.07%. India's wholesale price index (WPI) came down to 5.07% for the week ended January 24, 2009 from 5.64% for the week ended January 17, 2009, lowest in almost last one year. The index number of 'primary articles' and 'manufactured goods' declined week-on-week for the week ended January 24, 2009.However, 'Fuel segment' saw some moderate up move during the same period. 'Fuel segment' continues to witness deflation for last seven consecutive weeks. Recent cut in fuel prices would start showing its impact from the next week's reported numbers. Manufacturing segment is largely on the downward trajectory for last two months, consequently, reducing the inflation risk emanating from it.One can expect headline Inflation (read WPI) to continue to fall at an accelerated pace before coming down to sub-2.0% levels by the end of FY09.

Lowest in almost last 10 months; Downward movement to continue India's wholesale price index (WPI) dropped to 5.91% for the week ended December 27, 2008 from 6.38% for the week ended December 20, 2008,lowest in almost last 10 months. The index number of Primary articles and manufactured products declined week-on-week for the week ended December 20, 2008, whereas it was flat for fuel groups.We expect headline Inflation (read WPI) to continue to fall at an accelerated pace before touching 2.0-2.5% levels by the end of FY09. We also expect continuation of monetary and fiscal policies. Although not much scope is left for any more fiscal stimulus on Keynesian philosophy,our planners are likely to apply more of monetary instruments.

Economy: Inflation eases but slowdown intensifies India’s trade deficit stood at USD10.5 billion in October 2008 compared with USD10.6 billion in the previous month. Though the trade deficit is up by 61.2% year on year (yoy), the same remains largely flat on a month-on-month (m-o-m) basis. With this, the year-till-date (YTD) trade deficit has now widened to USD75.8 billion from USD45.5 billion in the comparable period of the previous fiscal. Equity markets: Volumes continue to decline During November 2008, the benchmark indices corrected by 7.0%, followed by an increase of 8% during the month-to-date (MTD) period (December 01–15), negating the decline in the previous month. However, the volatility in the equity markets has taken its toll on the volumes, which continued to decline in the MTD period. In the month till date, the volumes in the futures and options (F&O) continued to decline while that in the cash market remained largely stable compared with the previous month. For Dec...