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Update on Indian Economy
March 2013

Economic Snapshot
Item Units February 2013 [1] January 2013 [2] February 2012 [3] (%) Change [1]/[2] [4] [1]/[3] [5]

Contents -Editorial -Capital Market -Other Markets -Union Budget 2013-14 -Important Policy Pronouncements
WPI -Index* WPI -Inflation** 2004-05=100 Per cent

169.2 6.6 (Jan 2013) 179.3 (Dec 2012)

168.6

158.7

0.4

6.6

IIP (2004-05=100) 2 months lag INR / US$ M3 [i] Agg. Deposits [ii] Currency

Month End 53.77 Rs. '000 Cr. 8160.00 8111.57 7159.47 Rs. '000 Cr. 7036.08 7001.80 6162.82 Rs. '000 Cr. 1123.92 1109.77 996.65 (08.02.2013) (11.01.2013) (27.01.2012) (Outstanding as on) 7.83 8.00 8.73 Call Money Weighted Average % (22.02.2013) (25.01.2013) (24.02.2012) (Lending) Week ended Source: RBI Weekly Statistical Supplement March 01, 2013 *All Commodities. **Over the year.

7.2 6.6 (Dec 2012) (Jan 2012) 167.3 167.4 (Nov. 2012) (Nov. 2011) 53.21 49.03

7.17 1.05 0.6 0.5 1.3 -

7.11 9.67 13.97 14.17 12.77 -

Editorial A) Domestic As per the data released by the Central Statistics Office (CSO), the domestic economy is estimated to grow at 5.0% in 2012-13 against 6.2% in 2011-12, whereas, the RBI has forecast a GDP growth of 5.5% for the same period. The lowest-in-a-decade growth rate could be estimated on account of poor performance of manufacturing, agriculture and services sector. The agriculture output is expected to grow 1.8%, while the manufacturing sector is likely to grow 1.9%. The slowdown in services, particularly the trade, hotels, transport, communication category is expected to slow down drastically than anticipated. The sharp slowdown in private final consumption expenditure (PFCE) data in the advance GDP estimates indicates a continued slack in consumption demand. The capital investment i.e. gross fixed capital formation (GFCF) is expected to slow down to an annual 2.5% from 4.4% in the previous year. Structural bottlenecks have restricted India's growth potential to around 6.0-6.5%. The need of an hour is that the government should make it easier for firms to acquire land for new projects and carry out tax reforms to boost economic growth. Road, power and mining projects held up for years (because of delays in getting multiple regulatory clearances) are affecting the growth of overall industrial sector. RBI in its recent monetary policy review has indicated that while stabilizing the economic growth was a priority it had limited room for further easing unless inflation and a high current account deficit improved by more than expected.

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Quarterly GDP Growth The GDP growth expanded by a sluggish 4.5% in Q3 of 2012-13 against 6.0% in the corresponding period a year ago, reflecting a slower-than-anticipated growth of the services and continued low growth in agriculture sector. A decline in the growth of agriculture & allied activities to 1.1% in Q3FY13 from 4.1% in Q3FY12, reflected the shortfall in kharif production in 2012. Industrial growth improved slightly, albeit to a sluggish 3.3% in Q3FY13 from 2.6% in Q3FY12, reflecting the performance of manufacturing and mining & quarrying. However, this was partly offset by a weakening growth of electricity, gas and water supply and construction. Service sector growth eased to 6.1% in Q3FY13 from 8.3% in Q3FY12, primarily reflecting a considerable decline in the pace of growth of financing, insurance, real estate & business services and trade, hotels, transport and communication. In addition, the pace of growth of community, social & personal services eased to 5.4% in Q3FY13 from 6.8% in Q3FY12. The growth of GDP at market prices slowed from 5.8% in Q3FY12 to 4.1% in Q3FY13 led by a 0.7% de-growth in indirect taxes less subsidies. GFCE slowed sharply to 1.9% in Q3FY13 from 8.1% in Q3FY12, in line with the fiscal tightening being undertaken by Government of India. While the unfavourable monsoon in 2012 dampened consumer demand and contributed to an inferior growth of PFCE. In contrast, the pace of growth of GFCF improved partly reflecting the base effect.
Table 1: Advance & Quarterly Estimates of Real GDP & Expenditure (2004-05 Prices) 2011-12 ® 2012-13 (A) 2012 -13 (A) % y-o-y growth 3.6 3.5 -0.6 2.7 6.5 5.6 8.2 7 11.7 6 6.2 8 8.6 4.4 6.3 1.8 3.1 0.4 1.9 4.9 5.9 6.6 5.2 8.6 6.8 5 4.1 4.1 2.5 3.3 201112 ® 2011-12 ® 2012-13 (A) 201112 ® 201213 (A)

Rs Crore Agriculture, forestry & fishing Industry Mining & quarrying Manufacturing Electricity, gas & water supply Construction Services Trade, hotels, transport and communication Financing, insurance, real estate & business services Community, social & personal services GDP at factor cost PFCE GFCE GFCF GDP at Market Prices 739495 1442498 108249 823023 98814 412412 3061589 1440312 948808 672469 5243582 3334900 634559 1897309 5631379 752746 1487533 108713 838541 103642 436637 3263197 1514593 1030633 717971 5503476 3472980 660630 1944279 5818308

Q3 (Rs Crore) 233894 359046 27345 202665 24686 104350 758313 356768 238586 162959 1351253 888613 178362 460717 1447327 236376 370954 26971 207813 25798 110372 804262 374992 257511 171759 1411592 929839 181803 488580 1507033

y-o-y growth 4.1 2.6 -2.6 0.7 7.7 6.9 8.3 6.9 11.4 6.8 6.0 9.2 8.1 -1.7 5.8 1.1 3.3 -1.4 2.5 4.5 5.8 6.1 5.1 7.9 5.4 4.5 4.6 1.9 6.0 4.1

A: Advance Estimates; R: Revised Estimates; Q3: Third Quarter Source: CSO, Compiled by Mega Ace Research Team

For the month January 2013, WPI inflation eased to 6.62% against 7.18% in December 2012 led by fuel & power (to 7.1% from 9.4%), manufactured products (to 4.8% from 5.0%) and non-food

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primary products (to 10.5% from 13.2%). However, inflation in food articles, which have a 14.3 per cent share in the WPI basket, witnessed an increase as onion prices shot up during the month. The index of industrial production (IIP) for the month of December 2012 contracted to 0.6% against an expansion of 2.7% in 2011. The fall in IIP figures reflects a broad-based weakness with de-growth in consumer goods, capital goods and intermediate goods. In terms of industries, 12 out of the 22 industry groups in the manufacturing sector contracted in December 2012 in comparison with December 2011. Output in eight core infrastructure industries expanded at a lower growth of 2.6% in December 2012. Within eight core industries, natural gas, coal and fertilizers showed a contraction which had a bearing on overall industrial production. Exports during the month of January, 2013 saw a lower increase of 0.82%, whereas imports grew by 6.12% for the same period. The positive growth of exports was on the back of better performance by engineering goods, drugs and gems and jewellery. The trade deficit for the month of January 2013 widened at 13.8%, to US$ 19.99 billion from US$ 17.57 billion a year ago. The persistent surge in the import bill is expected to keep the trade deficits at elevated levels. The rising international prices of relatively inelastic POL imports still pose a serious threat to India’s Balance of Trade position. On the fiscal front, the central government’s fiscal deficit at 90.7% (against 105.4% a year ago) of the budgeted amount up to January 2013 stood at Rs 4,65,681 crore. The slight improvement in deficit is a reflection of government’s tightening on the expenditure front. Union Budget 2013-14, Railway Budget: 2013-14 & Economic Survey 2012-13 There is a mixed reaction to the Union Budget, while a section of the society welcomed the budget, a large section of the industry expressed unhappiness on the budget. The Union Budget 2013-14 was presented by the finance minister, Mr P. Chidambaram on February 28, 2013. He expressed that India rank 3rd after China and Indonesia in terms of economic growth and expects a GDP growth of 6.1-6.7% for 2013-14. The government believes in inclusive development with emphasis on improving human development indicators especially of women, the scheduled caste/tribes, the minorities and backward classes. A fiscal deficit of 5.2% for the current fiscal and 4.8% for 2013-14 is targeted by the government, whereas, revenue deficit for the current year at 3.9% and for 2013-14 at 3.3%. By 2016-17, fiscal deficit is decided to be brought down to 3%, revenue deficit to 1.5% and effective revenue deficit to zero percent and plan expenditure in 2013-14 at 29.4%. Budget 2013-14 is expected to have overarching goal of creating opportunities for youth to acquire education and skills. The agricultural credit target for 2013-14 is kept at Rs 7 lakh crore. On infrastructure side, a Cabinet Committee on Investment (CCI) has been set up. IIFCL is to offer a credit enhancement, Infrastructure tax-free bond of Rs 50,000 crore in 2013-14. Decisions have been taken in respect of a number of gas, power and coal projects. Plans for 7 new cities have been finalized and work on two new smart industrial cities at Dholera, Gujarat and Shendra Bidkin; Maharashtra will start during 2013-14. Delhi Mumbai industrial Corridor (DMIC) to be provided additional funds during 2013-14. Chennai Bengaluru Industrial Corridor to be developed. Two new major ports will be established in Sagar, West Bengal and in Andhra Pradesh. On banking front, capital infusion of Rs 14, 000 crore is provided to the public sector banks in BE 2013-14 and also a proposal to set up India’s first women’s bank as a public sector bank. Investments proposal: Where an investor has a stake of 10% or less in a company, it will be

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treated as FII and, where an investor has a stake of more than 10% it will be treated as FDI will be laid. FIIs permitted to use their investment in corporate bonds and government securities as collateral to meet their margin requirements and also be permitted to participate in the exchange traded currency derivative segment to the extent of their Indian rupee exposure in India. SME to be permitted to list on the SME exchange without being required to make an initial public offer. Stock exchanges to be allowed to introduce a dedicated debt segment on the exchange. Taxation: A relief for tax payers in the first bracket of Rs 2 lakhs to 5 lakhs, a tax credit of Rs 2000 to every person with total income up to Rs 5 lakhs. Increase of surcharge from 5 to 10% on domestic companies whose taxable income exceeds Rs 10 crore. In case of foreign companies who pay a higher rate of corporate tax, surcharge to increase from 2 to 5% (if taxable income exceeds Rs 10 crore). Railway Budget 2013-14 The Railway Budget for 2013-14, was presented in the Lok Sabha on February 26, 2013, by Railway Minister Pawan Kumar Bansal. The rail Budget proposed a plan outlay of Rs. 63, 363 crore for the railways, the highest ever outlay by far. The minister has foreseen 4 focus areas for the coming year – safety, consolidation, passenger amenities and fiscal discipline. The railway budget spared economy class passengers from any burden, but those travelling on superfast trains and reserved compartments are now required to shell out more in the form of supplementary charges, reservation fee, clerkage and cancellation and tatkal charges. Freight rates too have been hiked by about 5.79% on almost all categories of commodities in a bid to offset the increase in the fuel bill of Rs. 5,100 crore in the next financial year. The other highlights of the budget are the introduction of 107 new trains, a special coach in select trains with the latest amenities, training for technical and financial staff to make them remain abreast with the happenings in the transport segment. Economic Survey 2012-13 The Economic Survey 2012-13 released on February 27, 2013 presents an overall assessment about the economic situation during this period. It summarizes the performance on major development programmes, and highlights the policy initiatives of the government and the prospects of the economy in the short to medium term. The survey was presented by the Chief Economic Advisor Raghuram Rajan's for the first time in the parliament. The survey says, the strong post financial stimulus led to a stronger growth in 2009-10 (8.6%) and 2010-11 (9.3%) but with the increase in consumption demand coupled with supply side constraints resulting in high inflation. To curb inflation monetary policy was tightened; external sector was doing well though and helped in sustaining the growth. The slowdown was followed in 2012-13 and has been across the board, with no sector left unaffected. The recent fall in saving rate (30.8%) without an equal fall in investment rate (35.0%) has led to widening current account deficit (CAD). In the recent few months WPI inflation has come down however, food inflation remains around two digit growth and continues to be a matter of concern. The tax revenue collected in the fiscal 2012-13 also was below the expectation and added to slowdown. The fiscal targets is expected to exceed substantially given the subsidy bill, particularly that of petroleum products. The situation warranted urgent steps to reduce government spending so as to contain inflation. Also required were steps to facilitate corporate and infrastructure investment so as to ease supply. Several measures announced in recent months are aimed at restoring the fiscal health of the government and shrinking the CAD as also improving the growth rate. With the global economy

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also likely to recover somewhat in 2013, these measures should help in improving the Indian economy's outlook for 2013-14. B) International Although the international economy has integrated considerably in recent decades, a new database developed jointly by United Nations Economic and social Commission for Asia and the Pacific and the World Bank reveals that trade costs fall disproportionately on developing countries. The IMF has forecast that Europe remains a focus of efforts to restore confidence and revive the global recovery. Europe needs to revive economic growth to help break the vicious cycle that keeps many countries stuck in crisis mode the feedback loop between weak government finances, weak banks, and weak growth that continually undermine each other. Europe also needs to tackle older challenges that hinder growth potential. UK Prime Minister proposed to help in building Mumbai-Bangalore industrial corridor The UK prime minister on the first day of his visit to India announced a series of significant measures to ease student and business travel to Britain. He proposed to help in building a massive industrial corridor stretching from Mumbai to Bangalore and also announced that his government is rewriting the rules of high end technology transfers so that it can be shared with India. On the economy front, he expressed Britain is in danger of slipping into a rare triple-dip recession after its economy declined 0.3% in the fourth quarter of 2012. Trade between Britain and India is still negligible given the size of the economies. He believes that India and the UK can expand their economic ties by identifying newer areas of investments and the can also be partners in progress benefiting from mutually complementary strengths. UK can help mobilise sizeable investments for setting up manufacturing units in the Mumbai-Bangalore corridor of India's Golden Quadrilateral. Financial service is another area where holds big scope for Indian and British firms to work together. French President to reinforce trade in India French President Francios Hollande during his two days visit to India (February 14 & 15) sought to reinforce trade and strategic ties between the two countries, particularly through large-scale arms deals. He pushed for the conclusion to sell 126 Rafale fighter jets to India for a deal of $10 billion. The deal to be signed would be the biggest purchase in last 15 years. During the meet France and India also concluded talks on a $6 billion project to co-develop short-range surfaceto-air missiles. Talks are also proceeding between French nuclear firm Areva and the state-owned Nuclear Power Corporation of India for a $9.3 billion contract to build a 9,900-megawatt nuclear power plant at Jaitapur in the western state of Maharashtra. India and US trade tie up The US is already India’s leading partner for trade, investment, jobs and technology. Trade in goods and services have exceeded $100 billion in 2012. The rising investment flows from both sides are creating jobs and expanding opportunities for technology-and-innovation driven collaboration. A bilateral investment treaty (BIT), which is under negotiation, is expected to aid these trends and be a starting point of this roadmap. The key to boosting investment in the Indian economy and making progress on an India-US investment treaty is to establish the predictability

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of India’s regulatory and taxation regime. As BIT negotiations advance and India’s economic liberalisation progresses, India and the US can gradually begin consideration of a future free trade agreement (FTA). The other desirable elements of the framework could include addressing the long-standing concerns of India’s information technology (IT) services sector, reviving the bilateral Trade Policy Forum (TPF), restoring cooperation at the WTO and intensifying dialogue on the Asian economic architecture. In both democracies, there is a need to generate public support for trade liberalisation. Deepening the India US economic partnership will improve investor confidence, unlock the full potential of our trade and commercial ties, and boost economic growth in both countries. Indo-Iran Trade Indo-Iran trade is expected to undergo a substantive changes in view of the recently reported US’ modified sanctions on Iran, which mandate 100% payment in the currency of the importing country for Iranian products. Banks and other financial institutions have to carry out stricter due diligence on corporates, their counterparties and trades before processing any payments. This move is anticipated to affect traders whose activities are unrelated to Iran. In short, the risk of doing business with Iran will be high. However, the ‘challenge’ that US’ recent action provides is, in fact, an “opportunity” for greater bilateral commercial cooperation between India and Iran. The immediate implications for India are- all imports, most of it being in crude oil, of about $15 billion (Rs 79,500 crore)- will be paid in “rupees only”, instead of the rupee/euro ratio of 45:55 finalised under the 2012 agreement with Iran. Likewise, Iranian urea will also be accessed under 100% rupee payment, instead of UAE’s dirhams, as was the past practice. Massive rupee payments will be credited in India’s UCO Bank account held in the name of Central bank of Iran, from which Indian exports will continue to be financed. This is subject to Iran’s acceptance of 100% payment of their crude, fertiliser or other items in Indian rupees. IMF completes first review Under the Extended Credit Facility (ECF) Arrangement for Bangladesh The Executive Board of the IMF has completed the first review of Bangladesh’s economic program under a three-year arrangement supported by the ECF. The completion of the review enables an immediate disbursement of an amount equivalent to SDR 91.423 million (about US$139.4 million), bringing the total amount disbursed equivalent to SDR 182.846 million (about US$278.8 million). In completing the review, the board has approved the request for a waiver for nonobservance of the performance criterion on new non concessional external debt maturing in more than one year. World Bank Bolster Cooperation on improving Business Climate & Supporting Innovation in Russia World Bank group President during his visit to the Russian Federation focused on building on the country’s two-decade partnership, improving the country’s business climate and diversifying the economy. During his earlier visit to Russia with Russian minister of economic development

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and finance both parties agreed to create a knowledge delivery hub in Moscow focusing on improving the business climate and encouraging innovation in the country. The hub will build on the World Bank group’s current business environment advisory work in 30 Russian regions and with the federal government. Planned Hydropower Plant Key Step to Easing Nepal's Energy Crisis The Asian Development Bank (ADB) has lent $150 million towards a $500 million project that will build a hydropower plant in Nepal with a 140-megawatt capacity. The hydropower plant, to be located around 150 kilometers west of Kathmandu on the Seti River in Tanahu district, will generate electricity year round. In addition to building the plant and a transmission system, the project will also provide at least 17,636 homes in the area of the hydropower plant with direct connections to the national power grid. Only around one-third of households in Nepal are connected to the electricity distribution grid, with connection rates much lower in rural areas. The entire project will be co-funded by ADB and the Japan International Cooperation Agency lending, the European Investment Bank, and the Abu Dhabi Fund for Development. ADB, Australia provide $37 million to keep Viet Nam road upgrades on track The ADB and Government of Australia provided an extra $37 million for a project improving roads and tackling HIV and human trafficking risks along a key coastal route linking Vietnam and Cambodia. The additional funds, is expected to improve the quality and safety of upgraded roads in Vietnam and ensure the project meets its intended output. ADB’s loan follows an earlier contribution of $75 million, while the Australian Agency for International Development is providing a grant of $12 million, on top of an initial sum of $25.5 million. The new assistance is earmarked for the Viet Nam component of the project, which will be completed in 2015 with a second stage to follow through to end 2018. The total revised project cost of $329 million also includes contributions of $71.5 million from the Government of Viet Nam and $120 million from Export-Import Bank of Korea. Capital Market Review
February 2013 Major Indices BSE Sensex – Close Monthly High Monthly Low S&P CNX Nifty –Close P/E Ratio : BSE – 30 FII Investments (Equity+ Debt) Inflows – Rs. Cr. Outflows – Rs. Cr. Net – Rs. Cr. Cum. Net Inv–US$ Mn. (Month End) [1] 18,861.54 (28.02.2013) 19,781.19 (01.02.2013) 18,861.54 (28.02.2013) 5693 17.01 97728.90 69288.60 28440.50 168787.20 January 2013 [2] 19,894.98 February 2012 [3] 17,752.68 January 2012 [4] 17,193.55 [1]/[2] [5] (5.19) (%) Change [1]/[3] [6] 6.25 7.34 9.02 5.72 (7.05) (5.70) 1.29 (19.26) 20.48 [2]/[4] [7] 15.71 16.65 26.18 16.07 (0.56) 25.12 40.92 (5.02) 22.97

(31.01.2013) (29.02.2012) (31.01.2012) 20,103.53 18,428.61 17,233.98 (1.60) (25.01.2013) (21.02.2012) (27.01.2012) 19,580.81 17,300.58 15,517.92 (3.67) (01.01.2013) (01.02.2012) (02.01.2012) 6034.75 5385.20 5199.25 (5.66) 17.60 18.30 17.70 (3.35) 95777.00 70770.80 25006.30 163469.00 103633.91 68406.20 35226.90 140094.70 76548.20 50219.7 26328.9 132930.31 2.04 (2.09) 13.73 3.25

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The BSE index closed at 18861.54 points on February 2013 representing a decline of 5.19% in the index value during the said month. The sensex hit a high of 19781.19 in February and a low of 18861.54. S& P CNX Nifty also saw a decline of 5.66% compared to a month before. The cumulative investment by FIIs stood at US$ 168.79 billion in February 2013, and this reflected an increase of 3.25% over the previous month. The improved global liquidity and recent policy reforms have aided FII inflows. FII flow into Indian capital market grew four-fold to over Rs.1.63 lakh crore in 2012. Other Markets Debt Market During the month of January 2013 there were 27 corporate debt issues for a total amount of Rs.7, 468.12 crore. Corporate bond spreads over G-secs in the month of January 2013 settled lower than those in December across maturities considered here. Some of these issues are recorded below:
Sr. no 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Name of the Issuer Rural Electrification Corporation Ltd. Power Finance Corporation Ltd. Export Import Bank of India National Housing Bank Industrial Development Finance Corporation Ltd. Shriram Transport Finance Co. Ltd. L&T Infrastructure Finance Co. Ltd. Bhushan Steel Ltd. LIC Housing Finance Ltd. Bajaj Finance Ltd. Karnataka State Finance Corp. AEON Trust 2013 Aditya Birla Finance Ltd. Kotak Mahindra Prime Ltd. Tata Motors Finance Ltd. Asian Satellite Broadcast Pvt. Ltd. Fullerton India Credit Co. Ltd. Mahindra & Mahindra Financial Services Ltd. Sundaram Finance Ltd. IL&FS Financial Services Ltd. HDB Financial Services Ltd. Tata Capital Finance Services Ltd. IFMR Capital MOSEC XXII Singhvi Investment & Finance Pvt. Ltd. Sundaram BNP Paribas Home Finance Ltd. ECL Finance Ltd. Reliance Capital Ltd. Duration (yrs) 5 5 10, 5 3 3 3.5, 1.2, 3, 5 10 7 2.3 5 12 4 2 1.4, 3 2 3 2 5,3,5,1.2 10 3,5 5 1.4, 1.2 1.7 4 5,2 3.3 3 Rating AAA AAA AAA AAA AAA AA+ AA+ A+ AAA AA+ AA-(SO) AAA(SO) AA AA+ AAA-(SO) AA+ AA+ AA+ AAA AAA AA+ A+(SO) BBB AA+ AAAAA Amount (Rs. Crore) 1500 1000 750 500 500 480 450 350 300 270 200 200 150 150 110 100 80 70.5 60 50 50 35 34.62 28 25 20 5 Type of Instrument Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD Bonds/NCD

(Sources: Credit Analysis & Research Ltd. February 2013) Corporate bond spreads for AAA rated companies over G-secs for 10 year maturity was 1.03%, 5 year maturity was 1.00% and 3 year maturity was 1.12% as on 28th February 2013.

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Call Money Market The weighted average call money rate generally remained around the repo rate. The average daily turnover in the call money market was Rs.10, 320 crore for the week ending February 22, 2013. Average call rate on February 28, ended slightly higher at 7.85% against 7.84% on good demand from borrowing banks.

Foreign Exchange Market The nation's current-account deficit is set to widen; keeps the domestic currency under pressure. The exchange rate (RBI reference rate) on February 28, 2013 was Rs.53.73 per US dollar as compared to Rs.49.03 per US dollar in February 2012. Rupee depreciated due to month-end dollar demand and a steep fall in local equities. Further, the six month forward premia was 7.28% on February 22, 2013 as compared to a premium of 7.34% on February 24, 2012. The foreign currency assets were US$ 258228.9 million on February 22, 2013 and inclusive of gold and SDRs and the reserve position in the Fund, the foreign exchange reserves aggregated to US$ 291916.0 million.

Important Policy Pronouncements

Technical Committee on Services/Facilities for the Exporters
Given the current global and Indian scenario and the importance of export sector in the overall context, the RBI has constituted a technical committee to examine issues relating to difficulties being faced by exporters with regard to availability of credit, transaction costs, insurance and factoring and other procedural hassles in their dealings with banks and financial institutions. The recommendation on the same is expected to be submitted by end of April 2013. The terms of reference of the Technical Committee are: ™ To review the existing policies/procedure relating to bank finance for exports and suggest measures to improve timely, adequate and hassle-free flow of credit towards working capital, capital expenditure and other requirements of the sector, and, in particular SME units; ™ To evaluate and suggest ways for improving financial support to the export sector from alternative sources like factoring, interest subvention, export advance from the external sources, etc.; ™ To assess the efficacy of the schemes/facilities of the export supporting bodies like the EXIM Bank, ECGC and suggest changes, if any, in such schemes/facilities; ™ To examine and suggest measures to rationalise/reduce the transaction cost including bank charges and payment of other statutory fees, so as to improve transparency and certainty in the dealings of exporter clients with banks/other institutions; ™ To suggest measures to simplify and rationalise the existing procedure including the documentation, etc., requirements for availing of various facilities and compliance with the requirements under FEMA; ™ To examine specifically the special needs of exporting units located in SEZ, requirements of merchanting trade;

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™ To review the process of realisation/repatriation of export proceeds in a timely manner, including the use of new methods of receipts like the online payment gateways; ™ To suggest further measures for risk mitigation for the exporters including use of hedging instruments, smoothening the accounting issues, if any, relating to hedging, invoicing of exports in Indian Rupee; ™ To specifically examine the existing capabilities and the emerging requirement of the system and the staff of the banks, financial /other connected institutions dealing with the export sector; and ™ To examine any other related matter/issue for improvement of the services/facilities being extended to the exporters. --------------------------------------------------------------------------------------------------------------Broad Money (M3) & WPI Inflation M3 (Rs. M3 (% WPI (Index) WPI Crore) Change) All Inflation Commodities (%) Mar-07 3310038 21.7 111.4 6.6 Mar-08 4017855 21.4 116.6 4.67 Mar-09 4794775 19.3 126 8.06 Mar-10 5602698 16.9 130.8 3.81 Mar-11 6504116 16.1 143.3 9.56 Mar-12 7357750 13.2 158.7 7.2 Feb-13 8160000 12.7 169.2* 6.62 Source: RBI, Weekly Statistical Statement: February 22, 2013 *January 2013

Exchange Rates 2012-13 2011-12 Feb 13 Jan 13 Dec 12 Feb12 Jan 12 Dec11 Rs/US$ Rs/Pound Rs/Euro 53.77 81.57 70.68 53.29 84.22 72.23 54.78 88.51 72.26 48.94 77.95 65.93 49.68 78.17 65.51 53.27 82.10 68.90

Figures are for month-end

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India's Foreign Trade Exports (US $ Million) 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Jan-13 103091 126414 162904 185295 178751 251136 303719 25587 Imports (US $ Million) 149166 185735 251439 303696 288373 369769 488640 45583 Trade Balance(US $ Million) -46075 -59321 -88535 -118401 -109621 -118633 -184922 -19996

Source: Ministry of Commerce, Compiled by Mega Ace Consultancy

BSE Sensex vs. BSE Turnover (Rs Crore) BSE BSE BSE Sensex Sensex Turnover close close (Rs. Crore) 31-Jan13 1-Feb 4-Feb 5-Feb 6-Feb 7-Feb 8-Feb 11-Feb 12-Feb 13-Feb 19,894.98 19,781.19 19,751.19 19,659.82 19,639.72 19,580.32 19,484.77 19,460.57 19,561.04 19,608.08 2378 2387 2020 2453 2098 2189 2519 2140 1972 2041 15-Feb 18-Feb 19-Feb 20-Feb 21-Feb 22-Feb 25-Feb 26-Feb 27-Feb 28-Feb 19,468.15 19,501.08 19,635.72 19,642.75 19,325.36 19,317.01 19,331.69 19,015.14 19,152.41 18,861.54

BSE Turnov er (Rs. Crore) 1825 1608 1659 1825 1958 1725 1931 1960 2107 3555

14-Feb 19,497.18 2166 Source: Compiled by Mega Ace Research Team

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Annexure 1 : Select International Economic Indicators for Developed Industrialised Countries And India

Country

Interest rates, %
10-year gov't bonds latest 1

Consumer prices Latest 2 2.0 Jan 1.7 Dec 2.7 Jan -0.1 Dec -0.10 Dec -0.3 Jan 10.8 Jan

Currency unit per US $ As on A Year 13.02.2013 ago 3 4 0.74 1.00 0.64 93.50 6.30 0.92 53.80 0.76 1.00 0.63 77.40 6.66 0.91 49.20

Union Budget (+) / (-) % of GDP 2012 5 -3.3 -7.0 -8.3 -9.8 0.0 0.0 -5.6

Real Rate (Long-term) (1-2) 6 -0.31 0.32 -0.43 0.85 2.14 1.08 -2.95

Currency Current account Balance unit per Euro latest 12 months 13.02.2013 (US$ bn) 7 8 1.00 1.35 0.86 126.35 8.51 1.24 72.70 135.5 Nov -477.9 Q3 -75.3 Q3 59.0 Dec 36.3 Q3 78.7 Q3 -80.6 Q3

Col 8 as Percentage of GDP 2012 9 0.6 -3.0 -3.5 1.0 6.8 11.8 -4.4

Euro-11 U. S. A. Britain Japan Sweden Switzerland India

1.69 2.02 2.27 0.75 2.04 0.78 7.85

Source : The Economist London: February 16th-22nd, 2013

Annexure 2 : Important Economic Indicators for Select Emerging Market Countries
Country

Interest rates, %
10-year gov't bonds latest 1

Consumer prices Latest 2 2.0 Jan 3.8 Dec 4.6 Jan 1.2 Dec 4.3 Dec 1.5 Jan 1.1 Jan 3.4 Jan 6.2 Jan 22.2 Jan 10.8 Jan

Currency unit per US $ As on A Year 13.02.2013 ago 3 4 6.23 7.76 9,647.00 3.09 1.24 1,087.00 29.70 29.80 1.97 6.29 53.80 6.30 7.75 9,000.00 3.02 1.26 1,122.00 29.50 30.80 1.72 4.29 49.20

Union Budget (+) / (-) % of GDP 2012 5 -1.6 1.0 -2.4 -4.7 1.1 2.1 -2.3 -3.4 -2.5 -15.0 -5.6

Real Rate (Long-term) (1-2) 6 1.25 -2.54 -4.60 2.27 -2.74 1.57 0.13 0.41 3.37 -12.15 -2.95

Currency Current account Balance unit per Euro latest 12 months 13.02.2013 (US$ bn) 7 8 8.42 10.49 13,036.49 4.18 1.68 1,468.92 40.14 40.27 2.66 8.50 72.70 213.8 Q4 6.4 Q3 -24.2 Q4 19.1 Q3 46.0 Q3 43.3 Dec 45.7 Q3 2.7 Q4 -54.2 Dec 17.1 Q3 -80.6 Q3

Col 8 as Percentage of GDP 2012 9 2.8 6.8 -2.6 6.9 18.7 2.2 9.8 -0.1 -2.6 4.6 -4.4

China Hongkong Indonesia Malaysia Singapore South Korea Taiwan Thailand Brazil Venezuela India

3.25 1.26 0.00 3.47 1.56 3.07 1.23 3.81 9.57 10.05 7.85

Source : The Economist London: February 16th-22nd, 2013

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March 2013

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