Download Indian Economy Overview

Indian Economy Overview
The Centre for Monitoring Indian Economy (CMIE) has estimated India’s gross domestic
product (GDP) to expand at 9.2 per cent in 2010-11 as compared to the growth of 7.4 per cent in
2009-10. Overall growth in industrial output was 10.8 per cent year-on-year (y-o-y) in October
2010. The growth in the industrial sector is expected to increase at 9.4 per cent in 2010-11, as
compared to 9.2 per cent in 2009-10. According to a survey by the Confederation of Indian
Industry (CII) and ASCON, around 50 segments (out of 127) in the manufacturing sector grew
by 39 per cent, entering the 'excellent growth' category, during April-December 2010-11
compared to 29 sectors (22.9 per cent) in April-December 2009 which shows a marked
improvement. Also, services sector is projected to expand by 10 per cent as compared to 8.6 per
cent last year, led by the trade and transport segment. The major turnaround is expected from the
agriculture and allied sector, which is being projected to grow by 5.7 per cent in 2010-11.
As per Use-based classification, the Sectoral growth rates in October 2010 over October 2009
are 7.7 per cent in Basic goods, 22 per cent in Capital goods and 9.5 per cent in Intermediate
goods. The Consumer durables and Consumer non-durables have expanded by 31 per cent and
0.1 per cent respectively in the reported month.
The industrial output registered a robust growth of 10.8 per cent year-on-year (y-o-y) in October
2010. Among the three major constituents of the IIP, manufacturing and electricity recorded
higher growth rates of 11.3 per cent and 8.8 per cent in October as against their corresponding
levels of 10.8 per cent and 4 per cent for the corresponding month in 2009. The third constituent
mining index registered 6.5 per cent in October 2010.
The Economic scenario
Foreign injections amounted to US$ 6.4 billion in October 2010, which was almost 25 per cent
of the total inflows in the stock market registered so far in 2010. The net foreign fund investment
crossed the US$ 100 billion mark on November 8 2010, since the liberalization policy was
implemented in 1992. As per the data given by SEBI, the total figure stood at US$100.9 billion,
wherein US$ 4.78 billion were infused in November itself. The humungous increase in
Indian Economy Overview
investment mirrors the foreign investors’ faith in the Indian markets. FIIs have made investments
worth US$ 4.11 billion in equities and poured US$ 667.71 million into the debt market.
Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of
registered sub-accounts rose to 5,592 as of November 10, 2010.
As on December 17, 2010, India's foreign exchange reserves totalled US$ 294.60 billion, an
increase of US$ 11.13 billion over the same period last year, according to the Reserve Bank of
India's (RBI) Weekly Statistical Supplement.
Moreover, India received foreign direct investment (FDI) equity worth US$ 12.39 billion during
April-October, 2010-11, taking the cumulative amount of FDI inflows during April 2000 October 2010 to US$ 179.45 billion, according to the Department of Industrial Policy and
Promotion (DIPP).
The services sector comprising financial and non-financial services attracted 21 per cent of the
total FDI equity inflow into India, with FDI worth US$ 2,163 million during April-October
2010, while telecommunications including radio paging, cellular mobile and basic telephone
services attracted second largest amount of FDI worth US$ 1,062 million during the same period.
Metallurgical industries were the third highest sector attracting FDI worth US$ 920 million
followed by power sector which garnered US$ 729 million during the financial year AprilOctober 2010.

Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to touch US$
18.9 billion in November 2010, urging the Government to exude confidence that overall
shipments in 2010-11 may touch US$ 215 billion. For the April-November 2010 period,
exports have grown by 26.7 per cent to US$ 140.3 billion, while imports totaled up to
US$ 222 billion, expanding 24 per cent.

India's logistics sector is witnessing increased activity. According to the Indian Shipping
ministry, the country's major ports handled 44.4 million tones of cargo during September
2010, 4.5 per cent higher as compared to 5.9 per cent growth in September 2009. Leading
Indian Economy Overview
consultants Frost&Sullivan, as cited by The Economic Times, are expecting traffic to
boost at Indian ports from 814.1 million tones (MT) to 1,373.1 MT from 2010 to 2015 at
a CAGR of 11 per cent. The study group has underlined three key trends in the sector,
namely, increase in containerized cargo, increased private sector participation and traffic
diversion toward minor ports.

Foreign Tourist Arrivals (FTA) in India during the period of January- November 2010
were 4.93 million as compared to the FTAs of 4.46 million during the same period of
2009, showing a growth of 10.4 per cent. The Foreign Exchange Earnings (FEE) during
the period of January-November 2010 were US$ 12.88 billion as compared to US$ 10.67
billion during the same period of 2009, registering a growth rate of 20.7 per cent,
according to data released by the Ministry of Tourism.

The total telephone subscriber base in the country reached 742.12 million as on October
31, 2010, taking the overall tele-density to 62.51, according to the figures released by the
Telecom Regulatory Authority of India (TRAI). Also the wireless subscriber base
increased to 706.69 million.

The average assets under management of the mutual fund industry stood at US$ 160.44
billion for the month of September 2010, according to the data released by Association of
Mutual Funds in India (AMFI).

As per NASSCOM’s Strategic Review 2010, the Indian IT-BPO sector continues to be
the fastest growing segment of the industry and is estimated to aggregate revenues of
USD 73.1 billion in FY2010, with the IT software and services industry accounting for
USD 63.7 billion of revenues.

The cumulative production of vehicles in India grew by 32.4 per cent upto August 2010
as compared to the same period in 2009, Mr B S Meena, Secretary, Ministry of Heavy
Industry, reported. Passenger vehicles, commercial vehicles and two-wheeler segments
had all recorded impressive growth rates of 32 per cent, 49 per cent and 31 per cent,
respectively during the period upto August 2010.
Indian Economy Overview

According to the Gem and Jewellery Export Promotion Council, jewellery shipments
were worth US$ 23.57 billion in April-November 2010, registering a rise of 38.25 per
cent as compared to US$ 17.05 billion in the corresponding period of 2009.

According to the Ministry of Civil Aviation, passengers carried by domestic airlines from
January-November, 2010 were 46.81 million as against 39.35 million in the
corresponding period of year 2009, thereby registering a growth of 18.9 per cent.

According to Ernst & Young (E&Y), a global consultancy firm, India is expected to
receive more than US$ 7 billion in private equity (PE) investments in 2010, on the back
of robust economic growth. According to research firm VCCEdge, mergers and
acquisition (M&A) deals worth US$ 54.6 billion have been signed till December 15,
2010, significantly more than the previous high of US$ 42 billion achieved in 2007.

The HSBC Markit Business Activity Index, which measures business activity among
Indian services companies, based on a survey of 400 firms, rose to 60.1 in November
2010 from 56.2 in October 2010.
Agriculture
Agriculture is one of the strongholds of the Indian economy and accounts for 14.6 per cent of the
country's gross domestic product (GDP) in 2009-10, and 10.23 per cent (provisional) of the total
exports. Furthermore, the sector provided employment to 55 per cent of the work force.
India's agriculture and allied sector grew by 3.8 per cent in the first six months of the current
fiscal (2010-11). Capital investment in agriculture has increased from US$ 1.2 billion in 2007-08
to US$ 3.26 billion in 2010-11 (inclusive of State Plan Scheme Rashtriya Krishi Vikas Yojana),
as per a Ministry of Agriculture press release dated August 3, 2010.
In the Union Budget 2010-11, the Finance Minister, Mr Pranab Mukherjee made the following
announcements for the agriculture sector.
Indian Economy Overview

US$ 86.89 million is provided to increase the Green Revolution to the eastern region of
the country comprising Bihar, Chattisgarh, Jharkhand, Eastern up, West Bengal and
Orissa.

US$ 65.17 million has been provided to organise 60,000 pulses and oil-seed villages in
rain-fed areas in 2010-11 and provide an integrated intervention for water harvesting,
watershed management and soil health to improve productivitiy of the dry land farming
areas.

Banks have been consistently meeting the targets set for agricultural credit flow in the
past few years. For the year 2010-11, the target has been set at US$ 81.47 billion.

In addition to the 10 mega food park projects already being set up, the government has
decided to set up five more such parks.

External commercial borrowings are available for cold storage for preservation or storage
of agricultural and allied products, marine products and meat.
Growth potential story

The data centre services market in the country is forecast to grow at a compound annual
growth rate (CAGR) of 22.7 per cent between 2009 and 2011, to touch close to US$ 2.2
billion by the end of 2011, according to research firm IDC India’s report published in
March 2010. The report further stated that the overall India data centre services market in
2009 was estimated at US$ 1.39 billion.

According to a report by research and advisory firm Gartner published in March 2010,
the domestic BPO market is expected to grow at 25 per cent in 2010 to touch US$ 1.2
billion by 2011. Further, the BPO market in India is estimated to grow 19 per cent
through 2013 and grow to US$ 1.8 billion by 2013. According to the report, the domestic
India BPO services market grew by 7.3 per cent year-on-year in 2009.

The BMI India Retail Report Quarter 3, 2010 released in May 2010, forecasts that total
retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014.

According to a report titled 'India 2020: Seeing, Beyond', published by domestic broking
major, Edelweiss Capital in March 2010, stated that India's GDP is set to quadruple over
Indian Economy Overview
the next ten years and the country is likely to become an over US$ 4 trillion economy by
2020.

India will overtake China to become the world's fastest growing economy by 2018,
according to the Economist Intelligence Unit (EIU), the research arm of London-based
Economist magazine.