Monthly economy review

Monthly economy review

            Economy: Export growth turns positive

              a.. India?s trade deficit in November 2009 came in at USD9.7 billion, declining on a year-on-year (y-o-y) basis but increasing on a month-on-month (m-o-m) basis. On a y-o-y basis, the trade deficit fell by 21.4% whereas the sequential increase in the same stood at 10%. Notably, exports registered a y-o-y growth of 18.2% in November 2009, after contracting for 13 consecutive months. Meanwhile imports continued to contract albeit at a slower pace of 2.6% year on year (yoy).
              b.. The Index of Industrial Production (IIP) for November 2009 registered a growth of 11.7% yoy, well above the consensus estimate of 10% y-o-y growth. The growth in industrial output during November 2009 was broad based and spanned across segments. The manufacturing segment posted the highest growth at 12.7% yoy followed by the mining and electricity segments with 10% and 3.3% y-o-y growth respectively.
              c.. The inflation rate for December 2009 came in at 7.31%, which stood in line with the consensus estimate of 7.32%. The inflation rate for December 2009 indicates a 253-basis-point increase from the November 2009 inflation rate of 4.78%, led primarily by the rising prices of food products and articles.
              d.. Globally, the macro economic data continues to point towards signs of economic recovery with industrial production and exports showing signs of a revival. However, the looming threat of rising inflation and high unemployment rates pose concerns relating to the sustainability of growth especially after the phasing out of the fiscal stimulus measures announced earlier (read more under ?Global round-up?).
            Banking: Credit offtake shows signs of revival

              a.. The credit offtake (non-food) registered a growth of 14.3% yoy (as on January 1, 2010), higher than the 12.7% y-o-y growth seen during the previous period (December 25, 2010). The deposit growth continued to moderate during January 2010 as it fell to 17.6% yoy (as on January 1, 2010), lower compared with the 18% y-o-y increase seen as on December 25, 2009.
              b.. The credit-deposit (CD) ratio remained more or less stable at 69.7% (as on January 1, 2010), in line with that of the previous month. Meanwhile, the incremental CD ratio expanded to 58.2% from 51.5% seen in the previous period (December 25, 2009).
              c.. The money supply (M3) growth as on January 1, 2010 stood more or less in line with that of the previous period (December 18, 2009) at 17.1% yoy.
              d.. The yields on the government securities (G-Secs; ten-year) stood at 7.64% as on January 19, 2010, up by 7.4 basis points from the previous month?s levels. The G-Sec yields for all other maturities fell on an m-o-m basis with the three-year and two-year yields falling by 31.3 basis points and 49.4 basis points respectively while the one-year and five-year yields fell marginally.
            Equity markets: FIIs remained net buyers

              a.. During the month-till-date (MTD) period of January 1-19, 2009 the average daily volumes expanded in the cash segment but contracted in the futures and options (F&O) segment.
              b.. The total industry average assets under management (AUM; equity + debt) declined by 1.6% mom during December 2009. The net resources mobilised in equity schemes during the same period stood at a negative Rs2,464 crore as redemptions outpaced resources raised through new and existing schemes.
              c.. During December 2009 and the MTD period in January 2010 (January 01-19, 2010), the foreign institutional investors (FIIs) remained net buyers while the domestic mutual funds (MFs) remained net sellers.
            Insurance: Life insurance industry displays robust growth

              a.. The annual premium equivalent (APE) for the life insurance industry increased by a strong 58.9% yoy during December 2009, after registering a growth of 22.4% yoy during the previous month.
              b.. In December 2009, the gross premium underwritten for the general insurance industry grew by 13.4% yoy, in line with the y-o-y growth seen in the previous month. The public sector players posted a healthy growth of 12.2% while the private sector players registered a growth of 15.3% yoy, higher than the growth seen by the public sector players during the month.