OREANDA-NEWS. February 13, 2012. The Reserve Bank of India today released the February 2012 issue of its monthly RBI Bulletin. The Bulletin carries  seven special  articles - (i) Developments in India's Balance of Payments during Second Quarter (July-September) of 2011-12 (ii) Survey of India's Foreign Liabilities & Assets for the Mutual Fund Companies (2010-11) (iii) Finances of Non-Government Non-Financial Large Public Limited Companies: 2010-11 (iv) Quarterly Industrial Outlook Survey: October-December 2011 (Round 56) (v) Quarterly Order Books, Inventories and Capacity Utilisation Survey: July-September 2011 (Round 15) (vi) Inflation Expectations Survey of Households: December 2011 (Round 26) (vii) Consumer Confidence Survey: December 2011. Highlights of the special articles are:

Highlights:

1. Developments in India's Balance of Payments during Second Quarter (July-September) of 2011-12

The article provides details on developments in India's balance of payments during July-September 2011(Q2). The disaggregated data on invisibles for the Q2 of 2011-12 along with quarterly data for 2009-10 and 2010-11 and Q1 data for 2011-12 have also been published as part of this article.

Main Findings

During Q2 of 2011-12, a rise in trade deficit, despite sharper increase in exports than imports and increase in net export of services, led to a marginal increase in the current account deficit (CAD) as compared with Q2 of the previous year.

On a BoP basis, merchandise exports recorded a growth of 47.2 per cent while imports registered a growth of 35.4 per cent leading to a higher trade deficit of USD  43.9 billion during Q2 of 2011-12 as compared to USD  37.0 billion during corresponding quarter of preceding year.

Rise in services receipts coupled with a decline in services payments resulted in  rise in net services exports to USD  15.7 during the quarter from USD  11.9 billion in corresponding quarter of preceding year.

Net inflows under secondary income were partly offseted by net outflows on account of primary income.  The CAD was USD  16.9 billion in Q2 of 2011-12.

The financial account surplus moderated in Q2 of 2011-12 as compared to Q2 of 2010-11 primarily on account of outflow of portfolio investment.

There was an accretion to foreign exchange reserves (USD  0.3 billion) during Q2 of 2011-12 (excluding valuation).

During April-September 2011, the CAD, in absolute terms, was higher than the corresponding period of the previous year mainly on account of increase in trade deficit, though net receipts on account of services and secondary income experienced robust growth. However, as a percentage of GDP, CAD was marginally lower than the first half of preceding year.

Despite improvement in the financial account surplus, accretion to reserves during April-September 2011 was lower mainly due to the widening of the CAD as compared to April-September 2010.

2. Survey of India's Foreign Liabilities & Assets for the Mutual Fund Companies (2010-11)

The article presents an overview of the foreign assets and liabilities of mutual fund companies (MFs) in India based on the information collected by the Reserve Bank for the reference period March 2009 to March 2011. The results cover the responses from 44 MFs for March 2011 which held/acquired foreign assets or liabilities and 38 of them were common during the entire survey period. The study analyses in detail the changes in foreign assets and foreign liabilities of MFs during this period and country-wise classification of the foreign assets and liabilities has also been made.

Main Findings:

The global financial crisis induced considerable volatility in foreign assets and liabilities of the Indian mutual funds and asset management companies during 2009-11.

Foreign liabilities of MFs in March 2011 were lower than the March 2009 level whereas their foreign assets increased during this period, on a net basis.

Foreign liabilities of MFs were estimated to be nearly five times the foreign assets of MFs in March 2011. Foreign liabilities of Asset Management Companies (AMCs) associated with the MFs also far exceeded their foreign assets.

Foreign assets of MFs were overwhelmingly on account of equity investment, overseas mutual fund units had a small share and no MF invested in debt securities abroad.

3. Finances of Non-Government Non-Financial Large Public Limited Companies: 2010-11

The article presents the financial performance of select 2,072 non-government non-financial large (with paid-up capital of ` 10million or more) public limited companies during the financial year 2010-11, based on their audited annual accounts.

Main Findings

The aggregate results of the select companies have shown that the growth rates in major parameters like sales, value of production, manufacturing expenses etc. improved in 2010-11 as compared with those in 2009-10.

However, growth in various measures of profit, viz., PBDIT, gross profits (PBIT) and profits after tax was moderated in 2010-11 after recording high growth in 2009-10 mainly on account of relatively higher growth in expenses than in sales.

The profitability and profit allocation ratios e.g. profit margin, return on equity contracted in 2010-11 compared with that in 2009-10.

Total outstanding borrowing grew at higher rate in the study year than in the previous year leading to higher growth in interest payments. Outstanding borrowing from banks also displayed increase at higher rate in 2010-11 compared with that in 2009-10.

The debt to equity ratio (debt as percentage of equity) declined gradually in the three year study period from 2008-09 to 2010-11.

The share of external sources of funds (i.e. other than own sources) to total sources of funds during the year sharply increased mainly due to significant increase in incremental borrowing during 2010-11.Capital formation in uses of funds in 2010-11 was lower than in 2009-10.

4. Quarterly Industrial Outlook Survey: October-December 2011 (Round 56)

The article presents the findings of Industrial Outlook Survey conducted for the October-December 2011 quarter, the 56th round in the series. It gives an assessment of business situation of companies in manufacturing sector, for the quarter October-December 2011, and their expectations for the ensuing quarter January-March 2012.

Main Findings

The survey results signal slight moderation in most of the parameters reflecting demand condition in the Indian Manufacturing sector for assessment quarter as well as expectation quarter.  Financial condition showed lower optimism in both the quarters. Net response on Availability of finance further declined while pessimism on cost of finance and cost of raw material continued.

The Business Expectation Index, a measure that gives a single snapshot of the industrial outlook in each study quarter, marginally increased to 110.1 from 109.4 for assessment quarter and declined to 117.2 from 118.8 for expectation quarter; however, it still remains well above 100, the threshold that separates contraction from expansion.

5.  Quarterly Order Books, Inventories and Capacity Utilisation Survey: July-September 2011 (Round 15)

The article, second in the series, presents the survey findings of the 15th round of the Order Books, Inventories and Capacity Utilisation Survey. The survey was conducted for the July-September 2011 quarter (Q2:2011-12) and captures the quarterly movements in order books, inventories and capacity utilisation of a targeted group of manufacturing companies, which are important indicators of economic activities, inflationary pressures and overall business cycle and as such, are useful in assessing the consumption and investment demand outlook.

Main Findings

The survey results indicate continued growth (y-o-y) in the new orders with steady level of capacity utilisation. The finished goods inventories to sales ratio remained at an elevated level whereas raw material inventories to sales ratio declined as compared with the previous quarter.

6. Inflation Expectations Survey of Households: December 2011 (Round 26)

The findings of 26th round of Inflation Expectations Survey of Households conducted in the October-December 2011 quarter are presented in the article. The survey captures the inflation expectations of 4,000 urban households across 12 cities for the next three-month and for the next one-year. These expectations are based on their individual consumption baskets and hence should not be considered as predictors of any official measure of inflation. The households inflation expectations provide useful directional information on near-term inflationary pressures and also supplement other economic indicators to get an indication of future inflation path. The survey results are those of the respondents and not necessarily shared by the Reserve Bank of India.

Main Findings

Households expect inflation to rise further by 50 and 140 basis points during next three-month and next one-year respectively from the perceived current rate of 11.9 per cent.

The percentage of respondents expecting an increase in general prices by more than the current rate for three-month ahead has gone down to 73.4 per cent from 75.8 per cent in the previous round (July-September 2011). The proportion that expect prices to rise by more than the current rate in next one year has in contrast, increased to 76.9 per cent from 73.5 per cent in the previous round.

As compared with the last round, more respondents expect rise in prices at less than the current rate, particularly in respect of housing prices and cost of services.

The extent of association of three-month ahead general price expectations with that of household durables and cost of services has decreased in the current survey round in comparison with those in the previous round.

As in the past rounds, daily-wage workers and housewives expect higher inflation rates compared to other categories. Across the cities, households in Bengaluru and Jaipur expect the highest inflation while expectations were the lowest for households in Ahmedabad.

On the feedback on RBI action to control inflation, the survey finds that 68 per cent of the respondents are aware of RBI action to control inflation.

7. Consumer Confidence Survey: December 2011

The article presents the salient findings of the Consumer Confidence Survey conducted in December 2011, the 7th round in the series. The survey covers 5272 households spread over six metro cities. The survey captures the households confidence in the current and expected economic conditions, household circumstances, employment conditions, current and future spending and prices based on their perceptions of the general economic and own financial situation. The survey results reflect perceptions of the respondents and not of the Reserve Bank of India.

Main Findings

The survey indicates improvement in the positive perceptions in current and future economic conditions. Sentiments on household circumstances have stayed positive, with one fourth of respondents still expecting a weakening.

Majority of the respondents reported increase in income in last one year, though their proportion has shown a decline over the quarters.

Sentiments on increased future spending, though net positive, have shown a decline over the last three quarters.

More than half of the respondents reported optimistic perceptions about the employment scenario in the economy.

Overall consumer confidence appears to have improved marginally, both for current and future periods.