Is India totally immune from global financial crisis? Several macro-economic indicators suggest that India’s growth rate across sectors is cooling down although the global recessionary trends is yet to make a severe impact in the country.
This is quite evident from the Macroeconomic and Monetary Developments Mid-Term Review 2008-09 released by Reserve Bank of India.
Quoting Central Statistical Organisation data, RBI has pointed out that real GDP growth during first quarter of 2008-09 would be 7.9% as against 9.2% during the corresponding quarter in 2007-8. The deceleration in growth is spread across sectors, agriculture and allied activities, industry and services.
Here are the main indicators of the slowdown:-
• Index of industrial production falls to 4.9% in April-August 2008-09 on a year-on-year basis as against 10 % during April-August 2007-08.
• Manufacturing sector recorded 5.2 percent growth as against 10.6 % during the corresponding period last year.
• Power sector grew 2.3% as against 10.6% last year.
• Infrastructure grew 2.3% as against 7.1% during the corresponding period last year reflecting the deceleration except in coal.
• According to the First Advance Estimates, the kharif foodgrains production during 2008-09 was placed at 115.3 million tonnes as compared with that of 121.0million tonnes during 2007-08 (Fourth Advance Estimates
Available information on the leading indicators of services sector activity during 2008-09 so far suggest healthy growth in respect of some indicators such as railway revenue earning freight traffic, commercial vehicle production, telephone connections and export cargo handled by civil aviation as compared with the corresponding period of 2007-08.
On the other hand, growth decelerated in respect of cargo handled atmajor ports and other indicators of civil aviation excluding export cargo.
Some deceleration was also observed in tourist arrivals and production of cement and steel.
Fiscal Situation
• Available information on Central Government finances for 2008-09 (April-August) indicates that gross fiscal deficit and revenue deficit were placed higher than a year ago. Revenue deficit was 177.4 per cent of budget estimates for 2008-09 as compared with 74.9 per cent (122.9 per cent, net of transfer of profit on sale of the Reserve Bank’s stake in SBI to the Central Government) a year ago. GFD during the same period was 87.7 per cent of the budget estimates as compared with 68.5 per cent in April-August 2007..
Monetary and Liquidity Conditions
• Growth in broad money (M3), year-on-year (y-o-y), moderated to 20.3 per cent (Rs. 7,29,338 crore) onOctober 10, 2008 as compared with 21.9 per cent (Rs. 6,43,963 crore) a year ago.
• Aggregate deposits of banks, y-o-y, increased by 20.4 per cent (Rs.6,28,140 crore) on October 10, 2008 ascompared with 23.5 per cent (Rs. 5,85,253 crore) a year ago.
• Growth in bank credit continued to expand at a strong pace. Non-food credit by scheduled commercial banks (SCBs) increased by 29.3 per cent (Rs.5,80,060 crore), y-o-y, as on October 10, 2008 as compared with 23.3 per cent (Rs.3,74,054 crore) a year ago. The higher credit growth relative to the deposit growth resulted in an increase in the incremental credit deposit ratio (y-o-y) of SCBs to 96.2 per cent as on October 10, 2008 from 66.8 per cent a year ago. During the financial year 2008-09 ( up to October 10, 2008), nonfood credit expanded by 10.4 per cent (Rs. 2,40,995 crore) as compared with 5.0 per cent (Rs. 93,781 crore) during the corresponding period of the previous year.
• Disaggregated sectoral data available up to August 29, 2008 showed that about 45 per cent (Rs. 2,18,246 crore) of incremental non-food credit (y-o-y) was absorbed by industry as compared with 40 per cent (Rs. 1,43,614 crore) in the corresponding period of the previous year. The agricultural sector absorbed around 8 per cent (Rs. 40,913 crore) of the incremental non-food bank credit expansion as compared with 13 per cent (Rs. 44,360 crore) in the corresponding period of the previous year. Personal loans accounted for nearly 17 per cent (Rs. 81,729 crore) of incremental non-food credit; within personal loans, the share ofincremental housing loans was at 40 per cent (Rs. 32,792 crore).
”Emerging market economies (EMEs), which had been relatively resilient in the initial phase of the financial turbulence, witnessed a changed environment in recent months, reflecting tightened liquidity conditions and rising risk,” according to an RBI press release.