State of the

Economy
Ministry of Finance

State of the Economy

Ministry of Finance

August 30, 2014

State of the
Economy
Ministry of Finance

Growth with stabilisation

State of the
Economy

Policy focus: Growth with macroeconomic

stability

Growth with framework for stabilisation to counteract

business cycle fluctuations is the key focus of the
Government.
Macroeconomic stability involves:
I
I

2014-08-30

Ministry of Finance

Flexible monetary policy framework

Fiscal consolidation

The Government has initiated a number of steps to

put forth a stable growth framework.

State of the Economy

Policy focus: Growth with macroeconomic

stability

Growth with framework for stabilisation to counteract

business cycle fluctuations is the key focus of the
Government.
Macroeconomic stability involves:
I

Policy focus: Growth with macroeconomic

stability

Flexible monetary policy framework

Fiscal consolidation

The Government has initiated a number of steps to

put forth a stable growth framework.

The focus of the government is to revive growth with macroeconomic

stability. For achieving macroeconomic stability the government is
focussing on fiscal discipline with thrust on quality of expenditure.
Growth will be revived by creating a conducive environment for
investment. A number of steps have already been initiated.

State of the
Economy

Recent initiatives

Ministry of Finance

Enabling environment for Doing Business

Labour Reforms

Enhanced FDI limits in Railway infrastructure and

Defence

Committee in respect of retrospective amendments

related to indirect transfers-Notified

2014-08-30

State of the Economy

Recent initiatives

Enabling environment for Doing Business

Recent initiatives

Labour Reforms

Enhanced FDI limits in Railway infrastructure and

Defence

Committee in respect of retrospective amendments

related to indirect transfers-Notified

Initiatives have been taken to ease the difficulties of doing business in

India, since the budget. These include labour reforms, increase in
FDI limits in railway infrastructure and defence. A committee has
been set up to look into fresh issues arising out of the retrospective
indirect transfers.

State of the
Economy

Recent initiatives, continued

Ministry of Finance

Infrastructure:
I

REiTs/InviTs SEBI Guidelines issued

More powers to the Road Ministry to clear projects

faster

BRICS Bank

Financial Inclusion:
Pradhan Mantri Jan Dhan Yojana

Varsihtha Pension Beema Yojana

2014-08-30

State of the Economy

Recent initiatives, continued

Infrastructure:
I

REiTs/InviTs SEBI Guidelines issued

More powers to the Road Ministry to clear projects

faster

BRICS Bank

Financial Inclusion:

Recent initiatives, continued

Pradhan Mantri Jan Dhan Yojana

Varsihtha Pension Beema Yojana

Steps to revive infrastructure include giving greater autonomy to the

road ministry to speed up project clearances. Measures have been
taken to attract long term finance in infrastructure. To make finance
inclusive, the Pradhan Mantri Jan Dhan Yogna is being undertaken in
mission mode.

State of the
Economy

Financial Sector Reform

Ministry of Finance

2014-08-30

SEBI Act passed by the Parliament

State of the Economy

Financial Sector Reform

SEBI Act passed by the Parliament

Financial Sector Reform

Consumer Protection in finance has been strengthened. The

Securities Laws (Amendment) Act, 2014 which empowers SEBI and
facilitates a crackdown on ponzi schemes, has been passed the
Parliament.

State of the
Economy
Ministry of Finance

2014-08-30

Green shoots of recovery

State of the Economy

Green shoots of recovery

The first signs are now visible in the Q1 GDP results.

State of the
Economy

Recent data points to revival in GDP Growth

5.7

Mar 2013

4.66

4.56

4.61

Mar 2014

4.44

Dec 2013

4.38

Dec 2012

4.62

5.15

Jun 2014

Sep 2013

Jun 2013

Sep 2012

YoY Change (Per cent)

Ministry of Finance

Recent data points to revival in GDP Growth

4.56

4.61

Mar 2014

4.66

Dec 2013

Mar 2013

4.44

4.38

Dec 2012

Recent data points to revival in GDP Growth

5.7
5.15
4.62

YoY Change (Per cent)

State of the Economy

Source: CSO

GDP growth in Q1 (April-June 2014) is estimated to be 5.7 percent.

This was a significant improvement over Q1 2013-14.

Jun 2014

Jun 2013

Sep 2013

Sep 2012

2014-08-30

Source: CSO

State of the
Economy

Revival in production across major sectors

10

Mining

Manufacturing

Electricity

IIP

Ministry of Finance

YoY Change (3mma)

Percentage Y-o-Y change in industrial production

Jun 2011

Mar 2012

Dec 2012

Sep 2013

Jun 2014

Revival in production across major sectors

Revival in production across major sectors

IIP

Mining

Manufacturing

Electricity

10

Percentage Y-o-Y change in industrial production

YoY Change (3mma)

State of the Economy

2014-08-30

Source: CSO

Jun 2011

Mar 2012

Dec 2012

Source: CSO

Industrial production is showing signs of a pick up. Apart from an

uptick in mining, manufacturing and electricity, we find that capital
goods were up 23 percent in June.

Sep 2013

Jun 2014

State of the
Economy

Strong rebound by the Core sector

Performance of core sector by categories

Ministry of Finance

Core sector (YoY change)

4
0

Per cent

Jun 2014; 7.19

Jul 2012

Dec 2012

May 2013

Oct 2013

Mar 2014

Aug 2014

State of the Economy

Strong rebound by the Core sector

Performance of core sector by categories

Core sector (YoY change)

4
2

Per cent

Jun 2014; 7.19

Strong rebound by the Core sector

2014-08-30

Source: CSO

Jul 2012

Dec 2012

May 2013

Oct 2013

Mar 2014

Source: CSO

Eight core sectors showed high growth led by cement and electricity
output. The core sectors include coal, crude oil, oil refining, natural
gas, steel, cement, electricity and fertilizers.

Aug 2014

State of the
Economy

Purchasing Managers Index

Signalling an expansion in manufacturing mainly on account of
expansion in new orders

Ministry of Finance

52
51
49

50

Index

53

54

Jul 2014; 53

Jul 2012

Dec 2012

May 2013

Oct 2013

Mar 2014

Aug 2014

State of the Economy

Purchasing Managers Index

Signalling an expansion in manufacturing mainly on account of
expansion in new orders

Purchasing Managers Index

52
51
50

Index

53

54

Jul 2014; 53

49

2014-08-30

Source: HSBC Markit

Jul 2012

Dec 2012

May 2013

Oct 2013

Mar 2014

Source: HSBC Markit

The HSBC PMI index rose to 53. Values above 50 are considered a
signal of expansionary conditions with an increase in new orders.

Aug 2014

State of the
Economy

Early signs of moderation in inflation

Ministry of Finance

CPI New Series

WPI

YoY Change (3mma)

11
10
9
8
7
6
5

Nov 2012

Apr 2013

Sep 2013

Feb 2014

Jul 2014

State of the Economy

Early signs of moderation in inflation

CPI New Series

WPI

11

Early signs of moderation in inflation

YoY Change (3mma)

2014-08-30

Source: Office of Economic Advisor & CSO

10
9
8
7
6
5

Nov 2012

Apr 2013

Sep 2013

Feb 2014

Source: Office of Economic Advisor & CSO

Inflation is now showing clear signs of moderation. The reduction in

food inflation has helped pull down both CPI and WPI.

Jul 2014

State of the
Economy

Optimism on the equity market

Market capitalisation of the BSE

Ministry of Finance

70
60

Rs. Billion

80

90

Jul 2014; 90.1

Apr 2011

Dec 2011

Aug 2012

Apr 2013

Dec 2013

Aug 2014

State of the Economy

Optimism on the equity market

Market capitalisation of the BSE

Optimism on the equity market

70

Rs. Billion

80

90

Jul 2014; 90.1

60

2014-08-30

Source: BSE.

Apr 2011

Dec 2011

Aug 2012

Apr 2013

Dec 2013

Source: BSE.

There has been an improvement in business confidence and growth

prospects of the Indian economy. This is reflected in higher valuations
for Indian companies and stock market indices. This will spur
investment by private firms.

Aug 2014

State of the
Economy
Ministry of Finance

2014-08-30

Thank you

State of the Economy

Thank you

The Indian Economy is now showing significant signs of a pick up.

The government will continue to take measures to sustain the revival.