Trade deficit down, industrial output up, banking revives

Trade deficit down, industrial output up, banking revives

The trade deficit for October was at $8.8 billion, declining on a year-on-year (y-o-y) basis, though expanding on a sequential basis. On a y-o-y basis, the trade deficit fell by 25%, while the sequential increase stood at 13.3%. Notably, the pace of decline in exports moderated in October as exports contracted by 6.6% y-o-y. According to provisional data, the exports have registered a turnaround with 18% y-o-y growth during November, though driven by lower base effect.

In October, the Index for Industrial Production registered a growth of 10.3% y-o-y, which stood well below the consensus estimate of 12% y-o-y. The manufacturing segment posted the highest growth at 11.1% y-o-y, followed by the mining and electricity segments with 8.2% and 4.7% growth, respectively.

Also See Deciding Factors (Graphics)

From a use-based perspective, in the capital goods segment continued its upward trend, registering a stellar growth of 12.2% against the 4.2% rise seen during October 2008.

The growth in consumer goods stood strong at 11.8% against the 0.9% contraction in the previous year.

The inflation rate for November was at 4.78%, against the street estimate of 4.2%. This indicates an increase of 344 basis points (bps) from the October inflation rate of 1.34%, led primarily by rising prices of food products and articles. Excluding food products and articles, the inflation rate is quite contained.

Globally, the macroeconomic data continues to point towards signs of economic recovery, pushing central banks to ponder over withdrawing various stimulus measures announced earlier.

Banking sector

With a revival in the economy coupled with some easing in the high base effect of the previous year, credit (non-food) growth expanded to 11% y-o-y against 10.3% a month ago.

Further, deposit growth continued to moderate during December as it fell to 18.3% y-o-y.

The credit-deposit (CD) ratio remained more or less stable at 68.4% (as on 4 December), in line with the previous month.

Meanwhile, the incremental CD ratio expanded to 43.6% (as on 4 December) compared with 41% seen as on 6 November.

The money supply (M3, which is the broadest measure of money supply in the economy) growth as on 4 December stood at 17.7% y-o-y, more or less in line with that of the previous month (as on 6 November).

The yields on 10-year government securities stood at 7.57% as on 18 December, up by 30 bps compared with the previous month. The government securities yields for all other maturities rose on a month-on-month basis by approximately 15-20 bps each as the Street expects tightening measures from the Reserve Bank of India.

Equity markets

During the month-till-date period, i.e., 1-17 December, the average daily volume contracted in both the futures and options and cash segments.

The positive growth momentum in the industry’s assets under management (AUMs) continued during November as the industry AUMs grew by a strong 100.7% y-o-y to touch Rs8.08 trillion, much higher than the 76.4% y-o-y growth seen in the previous month.

However, high growth in the AUMs can largely be attributed to the low base of the previous year in which the industry AUMs had declined by 26.7% y-o-y.

Photo by Rajkumar and Graphics by Ahmed Raza Khan/Mint