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Presentation Outline
FY2013 Economic Performance
GDP growth Inflation External sector Fiscal and monetary developments
Significant drop in agriculture output and the delay in introducing a full budget dragged down GDP growth. Inflation remained high. Current account surplus contracted as remittance inflows decelerated.
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Percentage points
6 4.3 3.9 4 3.8 4.5 3.6
GDP growth decelerated to 3.6% in FY2013 Unfavorable monsoon Shortage of chemical fertilizers Delayed full FY2013 budget Weak industrial sector Growth driven by: Services sector (wholesale and retail trade; hotels and restaurants)
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Inflation
Inflation
% change 20 Overall Food & beverage Nonfood & services
15
Annual average inflation crept up to 9.9% in FY2013 Initially high food and nonfood prices Moderated in the later months of FY2013 Inflation driven by : Low agriculture harvest High food prices in India Rise in transport costs Supply-side constraints
10
0 Aug2010
Feb2011
Aug
Feb2012
Aug
Feb2013
Aug
Feb2014
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External Sector
Trade, tourism, and workers' remittances
Trade balance % of GDP 30 20 10 0 -10 -20 -30 2009 2010 2011 2012 2013 Remittances Tourism (travel) Current account balance
Current account surplus narrowed to 3.4% of GDP in FY2013 Deceleration of remittance inflows Increase in trade deficit BOP surplus moderated to $786.5 million Forex reserves increased to $5.6 billion Covers 9.3 months of imports of goods and services
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% change 35 30 25 20 15 10 5 0
15
10 5 0 -5
2009
2010
2011
2012
2013
2014BE
2009
2010
2011
2012
2013
Actual capital expenditure just 81% of planned capital expenditure Strong revenue performance
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FY2014 and FY2015 Economic Prospects Economic outlook optimistic than FY2013
Successful second Constituent Assembly elections Favorable monsoon Strengthening of remittance inflows Improved business and investor confidence
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FY2014: 4.5%
Favorable monsoon More rapid growth of remittance inflows Timely FY2014 full budget Political stability Improved business confidence
FY2015: 4.7%
Normal monsoon Timely full budget Continued strong remittance inflows Rebound of real estate and housing markets Better growth outlook in India
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FY2014: 10%
Wage pressures Higher administered fuel prices High inflation in India Weak currency Persistent energy deficit Supply-side constraints
FY2015: 9.5%
Good harvest Lower inflation in India Cautious monetary and fiscal policies Subsiding domestic wage pressures
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20
18 16 14 12 10 8 6
4
2 0
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Drivers of inflation
Inflation in India
Largest trading partner Pegged currency Food inflation affected more
Weak currency (higher cost of imports) Wage pressures Agricultural output Supply-side constraints
Power outages Transpiration bottlenecks Market distortions
% change 12 10 8
6
4 2 0
FY2003
FY1997
FY1998
FY1999
FY2000
FY2001
FY2002
FY2004
FY2005
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
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FY2013
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Selected economic indicators (%) 2014 GDP growth Inflation 4.5 10.0
3.6
3.7
THANK YOU!
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