NCAER - IIC. Mid-Year Economic Review/Outlook. November 1, 2014

Transcription

1 NCAER - IIC Mid-Year Economic Review/Outlook November 1, 2014

2 Outline of the Presentation Macro-economic performance to date Dis-aggregated view / sectoral performance Near Term Challenges Forecast & Outlook

3 Flashback : NCAER-IIC MYR November 2013 One word to describe the first Half of : Tumultuous! Only good thing about the first half of : It s behind us!

4 Fast forward : NCAER-IIC MYR Nov 2014 Only way to describe H : Period when India got its mojo back! Really good thing about H : It s given us a rare (undeserved?) window of opportunity

5 The Transformation! From being a member of the Fragile Five To now being the only BRIC standing India has come full circle in 1 yr

6 Go further back in time &it s not the 1 st time! Indian economy has flattered in the past as well only to deceive... In 1999, Economist described India as the World s Biggest Under-achiever By 2003 the tag-line had changed India was the eye of the Brics!

7 The billion dollar question!! Crouching tiger? Nearly-power? Lumbering elephant? Tortoise?

8 Alternatively, as the London Financial Times put it, is it Incredible India? OR Incompetent India?

9 On the Macro Front GDP Growth recovers from 17 qtr low to 9 qtr high

10 Is this the new normal? Why has growth slowed? Will it revive? 12 GDP Growth

11 Could growth in gross fixed capital formation be a lead indicator? Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY15

12 Are the clouds lifting or is it still too early to call? Sectoral Performance Q1 FY14 Q4 FY14 Q1 FY15

13 Is the whole more or less than the sum of its parts? The dis-aggregated view

14 Agriculture: Last year s silver lining is fast disappearing!

15 Rain Gods have not smiled on us but have spared us the worst! 115 Rainfall % of LPA June July Aug Sept

16 Selected Kharif Crops (Million Crops (1 st adv estimates) Min of Agriculture /bales) Estimated output (NCAER) Estimated rates of growth Kharif Rice to -3.6 Kharif Coarse Cereals to Kharif Pulses to Kharif Total Foodgrains to -7.1 Kharif Oilseeds to 23.3 Cotton* to 1.2 Sugarcane to 5.7

17 Industry : Have hopes been raised only to disappoint?

18 Industrial growth falls sharply till Q1 FY % Growth FY11 FY12 FY13 FY14 Q1FY15 GDP Agriculture Industry Services

19 Little to cheer on industrial front ; only bright spot is electricity Mining Manufacturing Electricity Overall Apr-14 May-14 Jun-14 Jul-14 Aug-14-2 Source: Central Statistical Organisation

20 Core Sector Growth a poor indicator of industry s performance 8 6 Core sector growth IIP Source: Central Statistical Organisation

21 Services: No longer immune

22 Services: The mainstay that s slowly running out of steam!

23 Money and Capital Markets.

24 No takers for bank credit 8,500,000 8,000,000 Bank credit to commercial sector aggregate deposits 7,500,000 7,000,000 6,500,000 6,000,000 5,500,000 5,000,000 4,500,000 4,000,000

25 9.2 One man s meat is another man s poison! Govt gets lucky: Yield on G-Secs falls Gsec 10 yr yield

26 Govt is not the only lucky one! Sensex goes stratospheric! BSE sensex

27 External Sector: No longer the Achilles heel

28 Current account deficit improves and HOW! BOP (US$ billion) Q Q Trade balance Net Service Net income Current account (-4.9) (-1.7) Source: RBI; figs in brackets give % of GDP

29 Rupee recovers and is relatively stable 62.0 INR per USD

30 Public Finance: Prudence only on paper

31 Promises to keep but miles to go before he sleeps! Budget estimates Actuals to Aug 15 % of actuals to BE Comparable period FY14 Revenue receipts Non-debt capital receipts Total receipts Non-plan expenditure Plan expenditure Total expenditure Fiscal deficit Revenue deficit Primary deficit

32 Prices: Some signs of respite

33 Wholesale comfort on price front! WPI WPI Food

34 Less comfort for aam admi though he fares better than khas admi! CPI combined CPI food

35 Near-term Challenges : Internal Revive investment Improve productivity ; arrest rise in ICOR Reverse decline in manufacturing sector Improve governance Improve infrastructure: physical & social Structural reform - focus on land and labour markets Legal reform

36 Near term Challenges : External End of Federal Reserve s QE and reversal of US interest rate cycle Threat of recession in Europe Slowdown in China s growth rate Geo-political tensions Terrorism Ebola Despite all this.

37 Can we do it? Yes we can!

38 Why optimism might not be misplaced?

39 Business Confidence Index : low but improving NCAER Expectations Survey

40 Regional laggards look more optimistic

41 Sectoral business confidence

42 Projected GDP

43 In 2013 talk of tapering affected all emerging markets; but India more than others Source: Reserve Bank of India

44 In 2014, India seen as only Bric left standing! GDP CAD Budget balance Interest rate 10 yr Govt bonds Brazil Russia India China S Africa

45 Reading the tea-leaves MYR Nov 2015 GDP growth rate 6 6.5% Inflation 7-8% CAD % GFCF - 35% Fiscal deficit 5%

46 Forecast: Dare we say we re seeing light at the end of the tunnel?

47 Quarterly Model: Assumptions for Exogenous Variables Rainfall 17.1% (y-o-y) BSE Sensex (%yoy) 29.1% Bank Credit to the Commercial Sector (%yoy) 11.6% Central Government Expenditure (%yoy) 10%

48 Quarterly Model: GDP growth forecast for (%y-o-y) Forecast for July October Q (Actual) Q Q Q Overall Source: NCAER

49 Annual Model: Assumptions for Fiscal Account Unit to Average Disinvestment revenue (Centre) Rs crore 9,178 63,425 Subsidies (% of GDPmp) Direct tax collection rate %YOY Indirect tax collection rate %YOY Others WPI energy (Fuel, power, light etc.) %YOY 6.7 5

50 Annual Model: Assumptions for Exogenous Variables Agriculture related Unit Rainfall to Average % (yoy) External Conditions World real GDP %YOY International oil prices %YOY Non-fuel international prices %YOY FDI (US$) %YOY Net foreign institutional investment (US$) %YOY Net invisibles (US$) %YOY Exchange rate (Re/US$) %YOY

51 Annual Model: Forecast for Item NCAER forecast (PE) October 2014 % Change y-o-y Real GDP - Agriculture Industry Services Total Exports ($ value) Imports ($ value) Inflation (WPI) % of GDP at market prices Current account balance* Fiscal Deficit (Centre) Note: * surplus (+)/deficit (-) Source: NCAER

52 Many hands make light work!

53 To conclude.. There is a tide in the affairs of nations Which, taken at the flood, lead on to fortune; Omitted, all the voyage of their life Is bound in shallows and in miseries. On such a full sea are we now afloat, And we must take the current when it serves..or lose our ventures. (Julius Caesar)

54 Thank You

55 MYR Team Overview Forecast: Agriculture: Industry: Services: Money and Credit: Prices: External Sector: Public Finance: Mythili Bhusnurmath Bornali Bhandari Anil K. Sharma Poonam Munjal Rupa Chanda (IIMB) Mythili Bhusnurmath Bornali Bhandari Rajesh Chadha and Anjali Tandon Mythili Bhusnurmath Research/ Data Support: Ajaya Sahu, Praveen Sachdeva Organisational Support: Sudesh Bala