WHAT'S NEW. International Developments. U.S. GDP expanded an annualized 0.50% in the first quarter of 2016, the slowest pace in two years.

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1 International Developments U.S. GDP expanded an annualized 0.50% in the first quarter of 2016, the slowest pace in two years. China's GDP grew 6.70% in first quarter of 2016, down from 6.80% in fourth quarter of Euro area GDP grew at an annualized 1.60% in the first quarter. Seasonally adjusted GDP rose by 0.60% over the previous quarter. GDP growth in the U.K. slowed to 0.40% in the first quarter of South Korea's GDP grew 2.70% in the first quarter. The trade deficit in the U.S. narrowed to $56.90 billion in March from $63.44 billion in February. China's recorded a trade surplus of $29.86 billion for the month of March. Japan recorded a trade surplus of $6.90 billion in March. Chinese consumer prices rose 2.30% in March from a year earlier, as food prices jumped 7.60%. Producer price declines narrowed to 4.30% posting the first month-on-month increase since Japan's core consumer prices slid 0.30% year on year in March, the fastest pace in three years. Euro-area consumer prices remained unchanged in March. U.K. inflation accelerated to a 15-month high of 0.50% in March. Australia's CPI rose an annualized 1.30% in the first quarter. Canada's annual inflation rate cooled to 1.30% in March from February's 1.40% as fuel prices fell. New Zealand's CPI rose 0.20% in the March quarter. Annual inflation was 0.40%. China's foreign-exchange reserves rose by $10.30 billion to $3.21 trillion in March after capital outflow pressure eased as the nation's currency steadied. The WTO cut its forecast for world trade growth in 2016 to 2.80% from the earlier estimate of 3.90%. 36

2 International Developments World Bank expects the developing East Asia and Pacific region, which includes China, to grow 6.30% in 2016 and 6.20% in 2017, slowing from 6.50% growth in IMF's latest Global Financial Stability Report points that advanced economies' stock and currency markets are becoming increasingly sensitive to spillovers from emerging markets. As per UN's Economic and Social Survey of Asia and the Pacific, growth in the region is broadly stable and expected to rise 4.80% in 2016 and 5% in 2017, up from an estimated 4.60% growth in Fitch Ratings warned that China's growth spurt fueled by resurgence in borrowing threatens to wreak havoc on the financial system. Chinese President Xi Jinping said more should be done to deal with unemployment as the government tries to curb overcapacity in state-owned enterprises. Indian Economy India's exports declined 5.47% in March 2016 to $22.72 billion from $24.03 billion in March Imports fell by 21.56% to $27.79 billion from $35.43 billion during the same period. The trade deficit for was estimated at US$ billion which was lower than the deficit of US$ billion during The Index of Industrial Production (IIP) grew 2.0% in February 2016 against 4.80% growth in February The IIP grew 2.60% in April- February as against 2.80% in April-February The eight core industries with a combined weight of 37.90% in the Index of Industrial Production (IIP) grew 6.40% in March 2016 as compared to contraction of 0.70% in March Cumulative growth for was 2.70%, as against 4.50% growth in Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for March 2016 on point to point basis are 5.70%, 3.95% and 4.83% (5.67%, 4.75% and 5.25% in March 2015). Inflation rates (final) for Rural, Urban and Combined for February 2016 are 6.05%, 4.30% and 5.26% respectively. 37

3 Indian Economy The annual rate of inflation, based on monthly WPI, stood at -0.85% (provisional) for March 2016 as compared to -0.91% (provisional) for February 2016 and -2.33% during March The annual rate of inflation based on final index was lower at % for January 2016 as compared to % reported earlier. The year-on-year inflation measured by monthly CPI-IW stood at 5.51% for March 2016 as compared to 5.53% for February 2016 and 6.28% during March Point to point rate of inflation based on the CPI-AL remained stationary in March 2016 at 4.98% and for CPI-RL, it decreased from 5.33% in February 2016 to 5.08% in March India's holding of US Treasury Securities at the end of February 2016 stood at $ billion vis-à-vis $ billion at the end of January FDI into the country increased by 37% to USD billion during India recorded FDI inflows of more than $51 billion during April-February The India Meteorological Department predicted the country's monsoon rainfall to be 106% of long period average this year. Government achieved the tax revenue targets for FY with actual collections of direct & indirect tax revenues at `14.60 Lakh crore as against revised target of `14.55 Lakh crore. Finance minister ArunJaitley said India's GDP growth could surge to 8.50% if the monsoon was above normal as forecast, adding that he hopes interest rates will fall further as prices trend lower. NitiAayog CEO Amitabh gave a 2032 date to India becoming a $10-trillion economy. IMF retained India's growth projections for at 7.50%, while cut its global growth forecast by two percentage points to 3.20% for 2016 and one percentage point to 3.50% for India's economic activity is expected to accelerate from 7.50% in FY 2016 to 7.70% in FY 2017 based on the expectation of strong private investment, a push in infrastructure spending, an improved investment climate, and 38

4 Indian Economy improved corporate and financial balance sheets as per World Bank. Moody's Investors Service cautioned that inflation could rise in the event of unfavourable monsoon and a sharp currency depreciation. Moody's Investors Service cautioned that a prolonged worsening in asset quality at PSU banks is the main threat to India's sovereign credit profile and made a case for the government bearing some of the cost of cleaning up bank balance sheets. Ratings firm Ind-Ra revised India's GDP growth forecast for FY17 downwards to 7.70%, from 7.90% earlier, due to weak industrial growth. Reserve Bank of India: (Source: RBI issued UDAY bonds worth `98, crore on behalf of eight State Governments during RBI notified the revised methodology computation and dissemination of RBI Reference Rate. RBI issued comprehensive Master Directions on issue and pricing of shares by private sector banks. RBI issued comprehensive Master Directions on amalgamation of private sector banks. RBI amended the provisioning norms in respect of all cases of fraud. RBI notified guidelines on investment advisory services offered by banks. RBI issued instructions on publicity in the bank branches cautioning public against placing deposits in dubious schemes. RBI allowed foreign investment in the units of Real Estate Investment Trusts, Infrastructure Investment Trusts and Alternative Investment Funds governed by SEBI regulations. RBI notified on issuance of rupee denominated bonds overseas. RBI notified on rationalization and reporting of ODI forms and submission of annual performance report. 39

5 Reserve Bank of India: (Source: RBI notified on acceptance of deposits by Indian companies from a person resident outside India for nomination as Director. The FCNR(B) deposits and the related swaps undertaken under the Special Scheme in 2013 will mature starting from September this year. Banks having currency chests should ensure conducting of fire audits biannually. RBI released a consultative paper with the draft operational guidelines on hedging trade transactions under the contracted exposure route. RBI put in place a new system of oversight of government business. RBI notified instructions on trading in Priority Sector Lending Certificates (PSLCs). RBI issued directions on counterparty confirmation on the F-TRAC platform. RBI notified risk weights in respect of investments in corporate bonds by Standalone Primary Dealers. RBI notified on compliance with Jilani Committee recommendations relating to frauds and malpractices in banks. RBI amended Foreign Exchange Management (Remittance of Assets) Regulations, RBI notified on Import Data Processing and Monitoring System (IDPMS). The 17th meeting of the FSDC Sub-Committee was held in Mumbai. RBI released minutes of the meeting of the Technical Advisory Committee on Monetary Policy held on March 30, RBI released consultation paper on peer to peer lending. RBI released report of the working group on import data processing and monitoring system (IDPMS). Capital Small Finance Bank Ltd. commenced its operations as a small finance bank (SFB) with effect from April 24, Consequently, Capital Local Area Bank Ltd. ceased to exist with effect from April 24,

6 Reserve Bank of India: (Source: RBI notified the scheme for providing financial assistance to UCBs for implementation of CBS. RBI relaxed the norms on unsecured exposure for UCBs. RBI notified on the use of NBFC-MFI network as channelizing agents for schemes operated by central/state government agencies. Concentration of credit/investment norms will not apply to NBFC-NDSI. RBI allowed IDF-NBFCs to raise funds through shorter tenor bonds and commercial papers (CPs) from the domestic market to the extent of upto 10% of their total outstanding borrowings. RBI launched quarterly industrial outlook survey (IOS) for April-June 2016 (Round 74). RBI launched its quarterly order books, inventories and capacity utilisation survey for January-March RBI released the results of its forward looking surveys. RBI released the data on India's international trade in services for February RBI released 'Quarterly BSR-1: Outstanding Credit of Scheduled Commercial Banks for September 2015'. RBI released the State Finances: A Study of Budgets of RBI released its quarterly House Price Index (HPI). RBI released data on ECB/FCCB for March RBI released data on sectoral deployment of bank credit for March RBI released the data on Overseas Direct Investment for the month of March RBI released a working paper titled India's Potential Output Revisited. RBI released a working paper titled Measurement of Central Bank Output Methodological Issues for India. 41