Highlights of Reserve Bank of India's review of Macroeconomic
and Monetary Developments during Apr-Jun, released today:
.
.
BUSINESS OUTLOOK SURVEYS
* Survey cuts FY13 GDP growth forecast to 6.5% vs 7.2%
* Survey cuts FY13 industry growth forecast to 4% vs 6%
* Survey cuts FY13 services growth forecast to 8.0% vs 8.8%
* Survey keeps FY13 farm growth unchanged at 3.0%
* Survey ups FY13 avg WPI inflation to 7.3% vs 6.9%
* Survey revises FY13 exchange rate to 53 rupees/$1 vs 48/$1
* Survey cuts FY13 import growth to 8.3% vs 15.0%
* Survey cuts FY12 export growth to 12.0% vs 13.2%
* Surveys suggest business, consumer confidence low
.
MONETARY POLICY
* Monetary policy space needs to be created via fiscal steps
* Lack of fiscal correction limits room for monetary easing
* Persistent inflation, weak growth a major policy challenge
.
LIQUIDITY
* Monetary, liquidity conditions have eased in FY13
* Liquidity conditions eased on policy actions
* Weak deposit growth can adversely affect liquidity
* Loan growth picked up; in line with FY13 indicative aim
* Flow of resources from non-bank sources also good
* Need to monitor liquidity, monetary conditions ahead
* Reserve money expansion improves in Apr-Jun
* Broad money growth deceleration arrested Apr-Jun
.
FINANCIAL MARKETS
* Currency, equity markets remained under pressure
* Rupee depreciated 10% Apr-Jun; seeing some recovery in Jul
* Equity markets remained rangebound
* Money market rates, gilt yields reflect improved liquidity
.
INFLATION
* Inflation risks remain significant
* Inflation moderation limited by several offsetting factors
* Near-term inflation outlook marked by several upside risks
* WPI, retail inflation show continued supply side pressure
* Supply side pressures may not be mitigated in near term
* Rupee fall limits benefit of easing crude oil, metal prices
* Suppressed inflation may show up in coal, electricity, fuel
* Despite easing core inflation, upside risks significant
* Seeing slack in econ but inflation remains persistent
* Inflation turned sticky after falling in Jan-Mar
* Price pressure remains with high suppressed inflation
* Suppressed inflation in domestic energy prices
* Rupee fall has offset gains from weak global commodity prices
* Inflation pressures persist despite weak growth momentum
* Headline inflation persists above 7%
* Consumer price inflation remains in double-digits
* Food, energy prices contributing to inflationary pressures
* Core inflationary pressures are currently muted
* Continued rise in real wages may spill over to core inflation
* Inflation risk stays high due to suppressed inflation
* Inflation risk stays high due to deficit monsoon
.
GROWTH
* FY13 growth prospects weak on global, domestic factors
* India's growth decelerated faster than envisaged
* Some slowdown in growth was inevitable
* Growth sacrifice was needed to fight high inflation
* Lack of fast response to structural bottleneck added slowdown
* Structural factors impeding growth still need to be addressed
* Manufacturing sluggish due to rising input cost, low demand
* FY13 growth outlook may be lower than expected
* Growth recovery appears possible if policy correctives taken
* Despite slowdown, sharp dip in growth can be averted
* Policy space needs to be created via supply-side measures
* Must try to support revival in non-inflationary manner
* Growth in Apr-Jun likely to have stayed low
* Slowdown primarily driven by weak investment
* Seeing signs of consumption slowdown too
* Economic activity likely to have been weak Apr-Jun
* FY13 growth likely to remain below potential
* Newer risks to domestic growth emerging
* Below normal monsoon so far a new risk to growth
* Svcs sector slowing in line with industrial growth
* Aggregate demand slowed further in Jan-Mar
* Private consumption moderated in Jan-Mar
* Investment slowdown extended into Jan-Mar
* Econ may be susceptible to external shocks unless FDI rises
* Must address policy stasis fears to boost consumer confidence
* Expenditure side of GDP showing weak demand
.
MONSOON
* Some uncertainty from temporal, spatial deficiency in monsoon
* RBI production weighted rainfall index down 24% from normal now
* Monsoon impact will emerge more clearly in coming wks
* Monsoon risks to overall growth may be limited
* Monsoon risk impacts the poor via inflation, income
* Monsoon risk has fiscal implication via govt schemes
* Monsoon progress so far unsatisfactory
* Adverse monsoon may up food inflation in short term
* Financial stress may stay on weak earnings
* FY13 growth risk up on weak global trade, local supply issues
.
FISCAL SITUATION
* Fiscal, monetary space to stimulate econ remains limited
* Monetary space limited on large fiscal gap, high inflation
* FY13 fiscal gap target is "at risk of being breached"
* See FY13 fiscal gap at risk due to high subsidy, low receipts
* Need to create fiscal space by curtailing subsidies
* Need to create fiscal space by boosting govt capital expenses
* Govt capital expenditure must rise to give boost to econ
* State finances budgeted to improve further FY13
* Need to create fiscal space, spur investment to revive growth
.
EXTERNAL FACTORS
* Current account deficit risks remain significant in FY13
* Weak oil prices may give relief to balance of payments
* Fall in gold imports may give relief to balance of payments
* Slowing global growth to keep export of goods, services low
* Services export, net of imports, down significantly Apr-Jun
* Sustainable level of current acct gap down to 2.5% of GDP
* Financing big current acct gap to be difficult as flows weak
* External debt is likely to rise
* External vulnerability indicators may deteriorate
* Global factors continue to weigh on India's exports
* Upside risks to trade deficit persist
* Weak global IT spend may hit India software exports
* Capital flows may stay volatile due to global uncertainties
* Jan-Mar rupee gains dissipated in Apr-Jun
* Increasing external debt is a concern
.
GLOBAL ECONOMY
* Global growth turning weaker than anticipated
* Weak global growth impacting global trade
* Slow growth in advanced economies may drag India growth a lot
* If global growth loses steam, it may impact India's recovery
* Global growth prospects have worsened in Apr-Jun
* Global growth prospects down with weakness in emerging nations
* Debt issues, EU problems keeping advanced nations growth low
* LIBOR fixing case has added to global uncertainty
* Monetary easing globally ups emerging nation' inflation risk
* Inflation likely to stay subdued in advanced economies
and Monetary Developments during Apr-Jun, released today:
.
.
BUSINESS OUTLOOK SURVEYS
* Survey cuts FY13 GDP growth forecast to 6.5% vs 7.2%
* Survey cuts FY13 industry growth forecast to 4% vs 6%
* Survey cuts FY13 services growth forecast to 8.0% vs 8.8%
* Survey keeps FY13 farm growth unchanged at 3.0%
* Survey ups FY13 avg WPI inflation to 7.3% vs 6.9%
* Survey revises FY13 exchange rate to 53 rupees/$1 vs 48/$1
* Survey cuts FY13 import growth to 8.3% vs 15.0%
* Survey cuts FY12 export growth to 12.0% vs 13.2%
* Surveys suggest business, consumer confidence low
.
MONETARY POLICY
* Monetary policy space needs to be created via fiscal steps
* Lack of fiscal correction limits room for monetary easing
* Persistent inflation, weak growth a major policy challenge
.
LIQUIDITY
* Monetary, liquidity conditions have eased in FY13
* Liquidity conditions eased on policy actions
* Weak deposit growth can adversely affect liquidity
* Loan growth picked up; in line with FY13 indicative aim
* Flow of resources from non-bank sources also good
* Need to monitor liquidity, monetary conditions ahead
* Reserve money expansion improves in Apr-Jun
* Broad money growth deceleration arrested Apr-Jun
.
FINANCIAL MARKETS
* Currency, equity markets remained under pressure
* Rupee depreciated 10% Apr-Jun; seeing some recovery in Jul
* Equity markets remained rangebound
* Money market rates, gilt yields reflect improved liquidity
.
INFLATION
* Inflation risks remain significant
* Inflation moderation limited by several offsetting factors
* Near-term inflation outlook marked by several upside risks
* WPI, retail inflation show continued supply side pressure
* Supply side pressures may not be mitigated in near term
* Rupee fall limits benefit of easing crude oil, metal prices
* Suppressed inflation may show up in coal, electricity, fuel
* Despite easing core inflation, upside risks significant
* Seeing slack in econ but inflation remains persistent
* Inflation turned sticky after falling in Jan-Mar
* Price pressure remains with high suppressed inflation
* Suppressed inflation in domestic energy prices
* Rupee fall has offset gains from weak global commodity prices
* Inflation pressures persist despite weak growth momentum
* Headline inflation persists above 7%
* Consumer price inflation remains in double-digits
* Food, energy prices contributing to inflationary pressures
* Core inflationary pressures are currently muted
* Continued rise in real wages may spill over to core inflation
* Inflation risk stays high due to suppressed inflation
* Inflation risk stays high due to deficit monsoon
.
GROWTH
* FY13 growth prospects weak on global, domestic factors
* India's growth decelerated faster than envisaged
* Some slowdown in growth was inevitable
* Growth sacrifice was needed to fight high inflation
* Lack of fast response to structural bottleneck added slowdown
* Structural factors impeding growth still need to be addressed
* Manufacturing sluggish due to rising input cost, low demand
* FY13 growth outlook may be lower than expected
* Growth recovery appears possible if policy correctives taken
* Despite slowdown, sharp dip in growth can be averted
* Policy space needs to be created via supply-side measures
* Must try to support revival in non-inflationary manner
* Growth in Apr-Jun likely to have stayed low
* Slowdown primarily driven by weak investment
* Seeing signs of consumption slowdown too
* Economic activity likely to have been weak Apr-Jun
* FY13 growth likely to remain below potential
* Newer risks to domestic growth emerging
* Below normal monsoon so far a new risk to growth
* Svcs sector slowing in line with industrial growth
* Aggregate demand slowed further in Jan-Mar
* Private consumption moderated in Jan-Mar
* Investment slowdown extended into Jan-Mar
* Econ may be susceptible to external shocks unless FDI rises
* Must address policy stasis fears to boost consumer confidence
* Expenditure side of GDP showing weak demand
.
MONSOON
* Some uncertainty from temporal, spatial deficiency in monsoon
* RBI production weighted rainfall index down 24% from normal now
* Monsoon impact will emerge more clearly in coming wks
* Monsoon risks to overall growth may be limited
* Monsoon risk impacts the poor via inflation, income
* Monsoon risk has fiscal implication via govt schemes
* Monsoon progress so far unsatisfactory
* Adverse monsoon may up food inflation in short term
* Financial stress may stay on weak earnings
* FY13 growth risk up on weak global trade, local supply issues
.
FISCAL SITUATION
* Fiscal, monetary space to stimulate econ remains limited
* Monetary space limited on large fiscal gap, high inflation
* FY13 fiscal gap target is "at risk of being breached"
* See FY13 fiscal gap at risk due to high subsidy, low receipts
* Need to create fiscal space by curtailing subsidies
* Need to create fiscal space by boosting govt capital expenses
* Govt capital expenditure must rise to give boost to econ
* State finances budgeted to improve further FY13
* Need to create fiscal space, spur investment to revive growth
.
EXTERNAL FACTORS
* Current account deficit risks remain significant in FY13
* Weak oil prices may give relief to balance of payments
* Fall in gold imports may give relief to balance of payments
* Slowing global growth to keep export of goods, services low
* Services export, net of imports, down significantly Apr-Jun
* Sustainable level of current acct gap down to 2.5% of GDP
* Financing big current acct gap to be difficult as flows weak
* External debt is likely to rise
* External vulnerability indicators may deteriorate
* Global factors continue to weigh on India's exports
* Upside risks to trade deficit persist
* Weak global IT spend may hit India software exports
* Capital flows may stay volatile due to global uncertainties
* Jan-Mar rupee gains dissipated in Apr-Jun
* Increasing external debt is a concern
.
GLOBAL ECONOMY
* Global growth turning weaker than anticipated
* Weak global growth impacting global trade
* Slow growth in advanced economies may drag India growth a lot
* If global growth loses steam, it may impact India's recovery
* Global growth prospects have worsened in Apr-Jun
* Global growth prospects down with weakness in emerging nations
* Debt issues, EU problems keeping advanced nations growth low
* LIBOR fixing case has added to global uncertainty
* Monetary easing globally ups emerging nation' inflation risk
* Inflation likely to stay subdued in advanced economies
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