SMERA Weekly Economic Watch - November 1-4, 2016
SMERA Weekly Economic Watch - November 1-4, 2016
months. The index recorded 5.0% growth in September, 2016 and cumulative growth of
4.6% in 2016 (April-September) as against 2.3% in the previous year. The bright spots
are steel, petroleum and cement.
SMERA WEEKLY
ECONOMIC WATCH
(NOVEMBER 1, 2016
NOVEMBER 4, 2016)
The steel industry recorded negative growth of (-) 1.1% in FY16 due to cheap imports.
However, after the government imposed a minimum import price and anti-dumping
duties, the sector registered a growth of above 15% for the last two months leading the
core sectors growth. With a strong domestic demand and protection from antidumping, the steel industry is expected to continue the growth momentum in the near
term.
Similarly, the petroleum industry is expected to continue its growth momentum in the
second half of the year as well. As per an estimate, road transportation alone consumes
around 70% of diesel and 99% of petrol sales in India. The double digit growth in
automobile sales will further increase demand for petroleum.
The fertilizer industry was growing at an average of (-) 0.3% during FY11 to FY15
recording solid growth of 12% in FY16. With normal rainfall, the area under cultivation
in current rabi season is also expected to increase. Therefore, fertilizer consumption is
likely to be higher than the previous years. Moreover, improvement in domestic
production efficiency reduced fertilizer imports by (-) 37% in 2016 (April -July) as
compared to the corresponding period last year.
Month
Apr-16 May-16
Jun-16
Jul-16
Core
8.5
2.8
5.3
3.2
Coal
-0.9
5.5
12.1
5.1
Crude Oil
-2.3
-3.3
-4.3
-1.8
Natural Gas
-6.8
-6.9
-4.5
3.3
Petroleum
Refinery
17.9
1.2
3.5
13.7
Fertilizer
7.8
14.8
9.8
2.5
Steel
6.1
3.2
2.4
-0.5
Cement
4.4
2.4
10.4
1.4
Electricity
14.7
4.6
8.1
1.6
Source: Ministry of Commerce, Government of India
Aug-16
3.2
-9.2
-3.9
-5.7
Sep-16
5.0
-5.8
-4.1
-5.5
3.5
5.7
17
3.1
0.1
9.3
2.2
16.4
5.5
2.1
Ease of Doing Business: India inched up by one notch to 130 in the World Banks ease of
doing business ranking. Indias overall points have risen by 1.34% to 55.27. India aims at
featuring among the top 50.
Impact: Higher ranking in ease of doing business indicates simpler regulations and
patent rights are protected. Countries are competing among themselves to simplify
business procedures and attract more investments. While India has improved
significantly in absolute terms, it has improved by one notch in relative terms. Indias
position with respect to paying of taxes and trading across borders is expected to
improve in the near future with reforms in the tax system. Also, India needs to simplify
procedures related to starting of a business, construction permits and bring in efficiency
in solving commercial disputes as its rank on these parameters is very low. Changes in
the above mentioned parameters will ensure a place for India among the top 50.
Rank in different parameter
Doing Business Rank (Overall)
Starting a Business
Dealing with Construction Permits
Getting Electricity
Registering Property
Getting Credit
Protecting Minority Investors
Paying Taxes
Trading across Borders
Enforcing Contracts
zResolving Insolvency
Source: World Bank, SMERA Research
2016
131
151
184
51
140
42
10
172
144
178
135
2017 Change
130
1
155
-4
185
-1
26
25
138
2
44
-2
13
-3
172
0
143
1
172
6
136
-1
Fiscal Deficit: Fiscal deficit in FY17 is much higher than previous year as it reached to
84% in the mid of the year. This is because of lower tax revenue as there is a lower
collection in non-tax revenue segment. Revenue received under this segment is only
37% of the budget estimates in FY17 (up to September), whereas 65% was received by
September in FY16. Keeping rate of interest (repo) at six year low of 6.25% reduced the
earning from interest payment, which is part of the non-tax revenue segment.
Budget
Actual up to
estimates FY17 September, 16
Total revenue
Rs. 14,450 bn
Rs. 5,797 bn
Total expenditure
19,781
10,277
Fiscal deficit
5,339
4,480
External finance
191
55
Domestic finance
5,148
4,425
Source: Ministry of Finance, Government of India
% of budget estimates
FY17
FY16
40.1
43.5
52.0
51.2
83.9
68.1
29.0
15.0
86.0
69.0
US GDP growth: Based on the advance estimation of the Bureau of Economic Analysis,
the US economy expanded by 2.9% in Q3, 2016. This is due to improvement in personal
expenditure, private investment and exports.
Impact: The US economy registered a two year high average growth of 1.8% in three
quarters and is expected to post a solid growth in the next quarter as well. The IMF
expects a 2.2% growth in 2016. The US economy contributes around 24% to the world
GDP and the above is expected to have a major bearing on the global economy.