Diesel, Gas, subsidies by Indian Government oil firms on Rise

Fortnightly Under-Recoviries on Petroleum Products and International Prices of Indian Basket of Crude Oil As on 31.10.2011

The Petroleum Planning and Analysis Cell under the Ministry of Petroleum and Natural Gas has reviewed international prices of crude oil and petroleum products during the past fortnight. Accordingly, the impact of the prices prevailing at the end of the fortnight ending on 31/10/11   (from 16/10 to 31/10/2011) is provided in below:                 Average international FOB price   for Indian Basket of Crude Oil and Exchange Rate ; Particulars Unit Price on last trading day i.e., 31,October, 2011 Fortnight Oct 16-31,  2011 (last fortnight) Crude Oil (Indian Basket) ($/bbl) 106.65 108.59 ( Rs  /bbl) 5211.99 5360.00 Exchange Rate ( Rs /$) 48.87 49.36   2.             Product-wise Under-recovery of Public Sector Oil Marketing Companies (OMCs); Product Unit Under-recovery (eff. 01,November, 2011) Diesel Rs/Litre 8.58 PDS Kerosene* Rs /Litre 25.66 Domestic LPG* Rs /Cylinder 260.50 * Additionally, a subsidy of Rs 0.82/Litre on PDS Kerosene and Rs  22.58/Cylinder on Domestic LPG is provided by the Government. (iii) OMCs are currently (effective 1St  November, 2011) incurring daily under-recovery of about  Rs 319  crore  on the sale of Diesel, PDS Kerosene and Domestic LPG. 3.  The OMC’s have reported the following under-recovery during the 1st half  of the current year (April-Sept. 2011) : Product Under Recovery (Rs /Crore) Diesel 37,719 PDS Kerosene 13,361 Domestic LPG 13,820 Total 64,900

Macroeconomic and Monetary Developments: Second Quarter Review 2011-12

The Reserve Bank of India today released the Macroeconomic and Monetary Developments Second Quarter Review 2011-12. The document serves as a background to the Monetary Policy Statement 2011-12 to be announced on October 25, 2011. Highlights: Overall Outlook While inflation remains sticky, growth risks add to policy complexity The baseline inflation path still remains sticky and broadly unchanged from earlier projections. On the other hand, growth risks have increased on account of global headwinds and domestic factors. On current assessment, growth in 2011-12 is likely to moderate slightly from that projected earlier. While persistent high inflation is impacting growth, investment is slowing down. The fall in new corporate fixed investment since the second half of 2010-11 has been significant and can impact the pipeline investment in coming years. Inflation risk, however, persists. The policy choices have become more complex. In this backdrop, the monetary policy trajectory will need to be guided by the emerging growth-inflation dynamics even as transmission of the past actions is still unfolding. Various surveys conducted, both by the Reserve Bank and the outside agencies, suggest that business expectations have suffered, while inflation expectations remain high. As a further step for increased transparency in monetary policy formulation, the Reserve Bank for the first time is releasing surveys conducted by it along with the ‘Macroeconomic and Monetary Developments’, one day ahead of the policy. Global Economic Conditions Global growth in siege from debt overhang Prospects for global growth appear to be declining, even though recovery has not stalled so far. There have been significant downward revisions in growth projections. Business and consumer confidence have dampened on the back of euro area sovereign debt crisis. Private sector balance sheets are at risk and significant weakness in the banking sector has re-emerged. Global commodity prices, especially those of metals, have softened but have stayed elevated. Even after some correction, the current Brent crude oil price is still over 25 per cent higher than its average for 2010-11. The IMF has revised upwards its consumer price inflation forecast for EDEs. Indian Economy Output Growth moderating below trend in 2011-12 Growth in 2011-12 is likely to moderate to below trend. Agriculture prospects remain encouraging with the likelihood of a record Kharif crop. However, moderation is visible in industrial activity and some services. In addition to domestic factors, global factors may slow down growth. With the increasing linkage of domestic industrial growth with global industrial cycle, some further moderation is likely ahead, given the weak global PMIs. Capacity constraints seem to be easing in some manufacturing segments, especially cement, fertilizers and steel. Construction activity has slowed and leading indicators suggest that going forward, services growth may slightly weaken. Aggregate Demand Investment slowdown may impact growth ahead Investment demand is softening as a result of combination of factors including monetary tightening, hindrances to project execution, deteriorating business confidence and slowing global economy. Planned corporate fixed investment in new projects declined significantly since the second half of 2010-11 and has stayed low in Q1 of 2011-12. Consequently, the pipeline of investment is likely to shrink, putting growth in 2012-13 at risk. Private consumption is also starting to soften in parts, but it remains robust overall as is evident from corporate sales performance. Sales growth continues to be healthy, but profits are under pressure. Fiscal slippages during 2011-12 may complicate the task of aggregate demand management.  Key to growth sustainability lies in supporting investment by rebalancing demand from government consumption to public and private investment. External Sector Widening CAD poses risk if global trade and capital flows shrink The Current Account Deficit (CAD) widened in Q1 of 2011-12, despite a surge in exports and higher net invisibles receipts. Going forward, exports could decelerate as global growth slows down. Invisible earnings may also decelerate as slow down in US and euro area could impact software exports. Sharp decline in FII flows in Q2 of 2011-12 has been largely offset by strong FDI flows. However, capital flows are entering an uncertain phase with increased financial stress and worsening global growth prospects. External sector outlook, although stable, warrants close monitoring. Monetary and Liquidity Conditions Liquidity remains comfortable, credit growth stays above trajectory During Q2 of 2011-12, liquidity conditions, though in deficit mode in line with the policy objective, remained comfortable. Base money decelerated as currency growth moderated. Money (M3) growth, however, moderated less sharply and remained above the indicative trajectory as the money multiplier increased. Bank credit growth is presently above the indicative trajectory. This has been supplemented by increased resource flows from non-banking sources. Going forward, credit growth is expected to moderate as growth slows. Monetary policy has been significantly tightened since February 2010 with an effective increase of 500 bps in policy rates and a 100 bps increase in CRR; but monetary transmission is still unfolding and real interest rates remain low and non-disruptive to growth. Financial Markets Volatility spillovers to domestic equity and currency markets are contained Volatility was high in global financial markets in Q2 of 2011-12. Rising risk aversion caused credit spreads to widen. Volatility spillovers impacted domestic currency and equity markets in a limited way. Rupee depreciation and the fall in equity indices in Q2 of 2011-12 were comparable to the patterns in most other emerging markets. Money market rates remained in line with policy signals, while G-sec yields hardened after the announcement of additional market borrowing. Price Situation Inflation risks stay as falling global commodity prices provide limited comfort High inflation is likely to persist over next couple of months before moderating as falling global commodity prices so far has been offset by rupee depreciation. Incomplete pass-through is likely to limit the impact of falling global commodity prices. Financialisation of commodities leaves future commodity price path uncertain. Domestic price pressures still remain significant and broad-based. Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large MSP revisions. Real wage inflation has extended into Q1 of 2011-12. In sum, the inflation challenge remains significant. Ajit Prasad Assistant General Manager Press Release : 2011-2012/640

India GDP Growth slows to 7.7% Year over Year

Estimates of Gross Domestic Product for the First Quarter (April-June) of 2011-12

The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation has released the estimates of Gross Domestic Product (GDP) for the first quarter (April-June) Q1, of 2011-12, both at constant (2004-05) and current prices, alongwith the corresponding quarterly estimates of expenditure components of the GDP. 2.         The estimates of Quarterly GDP have been compiled using the new series of Index of Industrial Production (IIP). The new series of IIP with base 2004-05 was released by CSO on 10th June, 2011.  The new series of IIP is based on a representative item basket comprising of 682 individual items and a weighting diagram which better reflects the present structure and composition of the industry due to changes in the technology, economic reforms and production behaviour over time. A comparative table showing growth rates of IIP in the new series and the old series for Q1 of 2009-10 to 2011-12 is given below.             Growth Rates of IIP in New and Old series for Q1 (In percentage) Mining Manufacturing Electricity Capital Goods Consumer Goods Old series New series Old series New series Old series New series Old series New series Old series New series 2009-10 6.8 6.2 3.6 -3.7 5.8 6.1 3.5 -16.5 -0.3 -1.6 2010-11 10.2 8.0 12.6 10.3 5.6 5.4 31.9 17.2 9.2 11.5 2011-12 1.0 7.5 8.2 16.8 4.2             Accordingly, Q1 estimates of  GDP for 2009-10 and 2010-11, which were released on 31st May 2011, have been revised on account of using the new series of IIP.  The use of new series of IIP (base 2004-05) has resulted in revisions in mining, manufacturing, electricity and trade, hotels and restaurant sectors in GDP. Estimates of Private Final Consumption Expenditure (PFCE), Gross Fixed Capital Formation (GFCF) and valuables, components of expenditure side of GDP have also been revised, accordingly. 3.         The details of estimates of GDP for Q1, 2011-12 are presented below. I           ESTIMATES OF GDP BY ECONOMIC ACTIVITY (a)        At constant (2004-2005) prices 4.         Quarterly GDP at factor cost at constant (2004-2005) prices for Q1 of 2011-12 is estimated at ` 12,26,339 crore, as against  `11,38,286 crore in Q1 of 2010-11, showing a growth rate of 7.7 per cent over the corresponding quarter of previous year.   5.         The economic activities which registered significant growth in Q1 of 2011-12 over Q1 of 2010-11 are  ‘electricity, gas & water supply’ at 7.9 per cent,  ‘trade, hotels, transport and communication’ at 12.8 per cent, ‘financing, insurance, real estate and business services’ at 9.1 per cent.  The estimated growth rates in other economic activities are: 7.2 per cent in ‘manufacturing’, 5.6 percent in ‘community, social and personal services’, 3.9 percent in ‘agriculture, forestry & fishing’, 1.8 percent in ‘mining & quarrying’ and 1.2 percent in ‘construction’ during this period. 6.         According to the information furnished by the Department of Agriculture and Cooperation (DAC), which has been used in compiling the estimate of GDP from agriculture in Q1 of 2011-12,  the production of crops - rice, wheat, coarse cereals and pulses during  the  Rabi  season  of agriculture year 2010-11 (which ended in June 2011) recorded growth rates of 11.3 per cent, 6.3 per cent, 0.7 per cent and 4.9 per cent, respectively over the production in the corresponding season of previous agriculture year.   Among the commercial crops, the production of oilseeds increased by 12.0 per cent during the Rabi season of 2010-11. 7.         According to the latest estimates available on the Index of Industrial Production (IIP) for the new series, the index of mining, manufacturing and electricity, registered growth rates of 1.0 per cent, 7.5 per cent and 8.2 per cent, respectively during Q1 of 2011-12, as compared to the growth rates of  8.0 per cent, 10.3 per cent and 5.4 per cent in these sectors during Q1 of 2010-11. The estimates of Q1 for 2009-10 and 2010-11 have been revised on account of using new series of IIP. 8.         The key indicators of construction sector, namely, production of cement declined by 0.9% and consumption of finished steel registered growth rate of 1.5 per cent, during Q1 of 2011-12. 9.         Among the services sectors, the key indicators of railways, namely, the net tonne kilometres and passenger kilometres have shown growth rates of 6.3 per cent and 6.1 per cent,  respectively during Q1 of 2011-12.  In the transport and communication sectors, the sales of commercial vehicles, cargo handled at major ports, cargo handled by the civil aviation, passengers handled by the civil aviation registered growth rates of 14.1 per cent, 5.2 per cent, 4.9 per cent and 14.6 per cent respectively during Q1 of 2011-12 over Q1 of 2010-11.  The total stock of telephone connections (including WLL and cellular) registered growth of 34 per cent as against 41 percent in the first quarter of the previous year.  The other key indicators, namely, aggregate bank deposits, and bank credits have shown growth rates of 18.7 per cent, and 21.0 per cent, respectively during Q1 of 2011-12 over Q1 of 2010-11. (b)       At current prices 10.       GDP at factor cost at current prices in Q1 of 2011-12, is estimated at ` 19,37,123 crore, as against ` 16,59,708 crore in Q1, 2010-11, showing an increase of 16.7 per cent.  11.       The wholesale price index (WPI), in respect of the groups, food articles, minerals, manufactured products, electricity and all commodities, has risen by 9.1 per cent, 20.9 per cent, 7.2 per cent, 0.3 per cent and 9.4 per cent, respectively during Q1 of 2011-12, over Q1 of 2010-11. The consumer price index for industrial workers (CPI-IW) has shown a rise of 8.9 per cent during Q1 of 2011-12 over Q1 of 2010-11. II         ESTIMATES OF EXPENDITURES ON GDP 12.       The components of expenditure on gross domestic product, namely, consumption expenditure and capital formation, are normally measured at market prices.  The aggregates presented in the following paragraphs, therefore, are in terms of market prices. Private Final Consumption Expenditure 13.       Private Final Consumption Expenditure (PFCE) at current prices is estimated at ` 11,97,461 crore in Q1 of 2011-12 as against `10,29,527 crore in Q1 of 2010-11.  At constant (2004-05) prices, the PFCE is estimated at ` 7,95,683 crore in Q1 of 2011-12 as against `7,48,395 crore in Q1 of 2010-11. In terms of GDP at market prices, the rates of PFCE at current and constant (2004-2005) prices during Q1 of 2011-12 are estimated at 58.1 per cent and 60.5 per cent, respectively, as against the corresponding rates of 58.7 per cent and 61.7 per cent, respectively in Q1 of 2010-11. Government Final Consumption Expenditure 14.       Government Final Consumption Expenditure (GFCE) at current prices is estimated at ` 2,17,483 crore in Q1 of 2011-12 as against `1,95,413 crore in Q1 of 2010-11. At constant (2004-2005) prices, the GFCE is estimated at ` 1,36,935 crore in Q1 of 2011-12 as against `1,34,161 crore in Q1 of 2010-11. In terms of GDP at market prices, the rates of GFCE at current and constant (2004-2005) prices during Q1 of 2011-12 are estimated at 10.5 per cent and 10.4 per cent, respectively, as against the corresponding rate of 11.1 per cent each in Q1 of 2010-11. Gross Fixed Capital Formation 15.       Gross Fixed Capital Formation (GFCF) at current prices is estimated at ` 5,85,261 crore in Q1 of 2011-12 as against ` 5,12,457 crore in Q1 of 2010-11. At constant (2004-2005) prices, the GFCF is estimated at ` 4,10,533 crore in Q1 of 2011-12 as against ` 3,80,544 crore in Q1 of 2010-11. In terms of GDP at market prices, the rates of GFCF at current and constant (2004-2005) prices during Q1 of 2011-12 are estimated at 28.4 per cent and 31.2 per cent, respectively, as against the corresponding rates of 29.2 per cent and 31.4 per cent, respectively in Q1 of 2010-11. 16.       Estimates of GDP at factor cost by kind of economic activity and the Expenditures on GDP for Q1 of 2009-10, 2010-11 and 2011-12 at constant (2004-2005) and current prices, are given in Statements 1 to 4.