Current Economic Statistics and Review For the Week 
Ended September 15, 2007 (37^th Weekly Report of 2007)

Theme of the week:

I

Introduction

All India Debt and Investment Survey (AIDIS) conducted by National Sample Survey Organisation (NSSO) decennially throws light on basic quantitative information on assets, liabilities and capital expenditure of the household sector of the economy.

Interest Burden for a borrower depends upon rate of interest, terms of interest, duration of loans, type and terms of loan, size of loan and at times the security furnished. It is, therefore, interesting to study the interest burden of households according to different characteristics of loans, such as type of credit agencies, terms of interest, rate of interest, duration of debt and type of loan, etc. The interest amount charged per 100 rupee per annum by the lender is usually considered as rate of interest (ROI)  by the NSSO in their 59^th round (January-December 2003).

The quantum of interest paid by households depends on both the nature of interest and actual rate of interest as well as duration of debt at which loans are contracted. This analysis does not attempt to categorise interest rate by terms or nature of interest rate but reviews the cash loan outstanding among households by duration of debt.

Duration of loan is the length of time between actual date on which a loan was taken and the fixed date i.e. as on 30-6-2002, or as the case may be. It is the period for which the loan is remaining outstanding.

A loan, which was contracted for a specific period of time may remain outstanding for a period of time which may exceed the period for which loan was contracted. In such cases, actual period for which the loan was outstanding had been considered as the duration.

The amount of debt has been classified into 8 time periods for the purpose of NSSO survey round 59. They are : (1) Below 1 year, (2) Between 1 and 2 years, (3) Between 2 and 3 years, (4) Between 3 and 4 years, (5) Between 4 and 5 years , (6) Between 5 and 10 years , (7) Above 10 years , and (8)  Unspecified  duration.

The period-wise analysis would heave been more meaningful if information on duration of debt is available according to the credit agencies which have lent and purposes for which the amount had been originally borrowed. However, absence of such data restricts the analysis to only period of debt.

2

 Trend in Distribution of Debt by Duration of Debt

Table 1 gives distribution of total amount of cash debt (hereafter referred as TCD) as on 30^th June for last three decades both for rural and urban households by duration of debt. It exhibits changes, if any, in the distribution of cash dues by duration of debt, which took place among rural and urban households.

 About 59 per cent of TCD outstanding on 30.6.2002 had been contracted for a relatively shorter duration of 2 years or less and about 4 per cent of TCD for a period of 10 years or more.

In rural households, the proportion of cash dues outstanding exhibited considerable fall from 18 per cent to 9 per cent in duration set 5-10 years during the decade 1981 to 1991. Between 1991 and 2002 there is not much difference in the distribution of cash dues outstanding as per duration of debt.

Broadly, the similar trend had been witnessed in urban areas also.

3

Distribution of Households Reporting and Outstanding Debt By Duration

Table 2 depicts number of households, level of debt and average debt per indebted households among rural and urban India .

As on 30-6-2002, out of 147.9 million rural households 39.2 million households were indebted to the tune of Rs. 11,468 crore with an average of Rs. 7,537 per rural households or 28,436  per indebted rural households. As on 30-6-2002, 27.9 million rural households (almost 72 per cent of total indebted households) have an aggregate loan of Rs.64,763 crore ( 58 per cent of the total cash debt outstanding) at an average loan outstanding of Rs. 23,213 for a short duration of 2 years or less. At the other end , 1.9 million indebted rural households had a cash debt of Rs. 4,460 crore at an average of Rs. 23,474 for 10 years or above.

Among  55.5 million urban households, 9.9 million households are indebted and they availed Rs. 65,327 crore as cash debt at an average of Rs. 11,771 per urban household or at an average of Rs. 65,987 per indebted urban housheolds. It can also be seen from Table 2 that 0.8 million urban households had cash debt of Rs. 7,421 crore at an average amount of Rs. 92,763 contracted for a duration of 5 to 10 years, the maximum average amount contracted as on 30-6-2002 among all sets of duration of debt.

4

Distribution of Cash Debt According to Duration and Asset Holdings

Table 3 exhibits the distribution of cash dues outstanding as on 30-6-2002 by duration of debt for each asset holding class for rural and urban areas. There distribution reveals a broad similarity over the assets holding classes in both the rural and urban areas as well as it is very much similar to that of the all-India pattern.  About 28 to 40 per cent of the cash debt across the asset holding class is contracted at less than one year among rural households and at the other end i.e. for more than 10 years the cash distribution ranged between 3 to 5 per cent across asset holding class.

However, for households in AHC Rs.15,000 to AHC Rs.150,000 , their cash debt of duration 5-10 years formed 10-14 per cent of their total debt which is in higher AHC, the proportion of debt with same duration was smaller at 7 to 10 per cent of total cash loans. In urban areas, the similar proportion were 31 to 45 per cent and 2 to 6 per cent respectively.

5

State level Variation in 2002

Statement 1 and 2 show the percentage distribution of number of households and cash dues outstanding on 30-6-2002 by duration of debt for the major states for rural and urban areas. No large variation is observed among the states for most of the duration of debt categories. However, for relatively shorter duration of less than 1 year debts, rural households in Bihar (25 per cent) and urban households in Jammu and Kashmir (26 per cent)  reported quite low figures compared to the corresponding national figures.  Among the rural households in this duration class, the highest proportion of debt was reported by Assam at 48 per cent. More than all-India proportion , were reported by rural households of Bihar and West Bengal in the longer duration debts i.e., above 10 years. The proportion of csh debt, having the duration of less than one year reported by rural households in Kerala, Madhya Pradesh,, Maharashtra , Orissa , Punjab, Rajastahn,, Uttar Pradesh was less than all India proportion. Similarly, in respect of  urban households, 10 out of 21 states reported proportion of debt with duration of less than 1year was less than the all-India proportion of 36 per cent. The highest proportion of debt among urban households was reported by Jammu and Kashmir at 61 per cent followed by Delhi and Madhya Pradesh ( each 49 per cent )  and then Jharkhand (48 per cent). However, for 10 years and above duration of debt, only urban households of Himachal Pradesh reported 9 per cent of their debt. All other states, for this duration set, reported  shares  ranging from

0 to 5 per cent in the respective urban households’ debt.

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*This note had been prepared by R.Krishnaswamy.

Highlights of  Current Economic Scene

AGRICULTURE  

The government of Australia has decided to announce revised interim measures (RIM) under biosecurity Australia Policy Memorandum (BAPM) for the import of prawns and its products by the end of September 2007. Implementation of this would affect the Indian marine product exporters severely, as they would be practically evicted from the Australian market, as India is the only country that exports shrimps and its products worth around Rs 200 crore, which is about 2.5 per cent of total annual exports to Australia .

State trading Corporation (STC) has finalised its wheat import tender for 7.95 lakh tonnes lakh tonnes of wheat at an average price of US $389.45 per tonne, cost and freight (C&F). Out Of the total 7.95 lakh tonnes, Glencore International AG of Switzerland would supply bulk of 7.4 lakh tonnes) from which 5.2 lakh tonnes would be delivered at Mundra port in Gujarat for US $385 per tonne in October 2007, US $387 per tonne in November 2007 and US $390 per tonne in December 2007. Besides, it would be delivering 2.2 lakh tonnes in Kandla for US $388 per tonne in October 2007 and US $391 per tonne in November 2007. Apart from this Alfred C. Toepfer of Germany would be supplying 50,000 tonnes at Chennai for US $397 per tonne and the balance of 5,000 tonnes would be supplied by Starcom Resources of Singapore. This tender is more than twice the weighted average of US $178.75 per tonne that had been contracted at 5 lakh tonnes in its first tender floated on February 10 last year.

The poultry prices have risen by about 35 per cent since last week of the August 2007 as the poultry supply is getting affected due to the scare of bird flu. As a result, the sector has been unable to meet the demand from the market, due to which prices are rising upwards rapidly.  For instance, retail poultry price increased to about Rs 110 per kg on September 1 2007, from Rs 90 per kg on August 20 2007. While, the farm price and daily market price (wholesale price) have also risen significantly during the same period, the farm price was ruling at Rs 50 per kg, up from Rs 37 and the daily market price was at Rs 60, up from Rs 45.

According to Central Arecanut and Cocoa Marketing and Processing Cooperative (Campco) Ltd., the state government of Karnataka has approved to release Rs 10 crore for the arecanut sector, under which subsidy would be granted of Rs 10 per kg for each grower and for those who cultivate maximum 10 quintals. This renders that maximum subsidy of Rs 10,000 would be given for each grower, as this sector have drastically been affected by fruit rot disease.

As per Spices Board, India ’s spices exports in April-July 2007 have increased by 29 per cent in terms of volume to 152,650 tonnes due to good demand for chilli and fenugreek, while in value terms it has risen by 42 per cent to Rs 1,385 crore. In the first four months of 2007-08 spices exports have achieved 40 per cent of the full-year target and are likely to export 3.8 lakh tonnes during the entire fiscal year. Exports of pepper, cardamom (large), coriander, fennel, fenugreek, chilli have picked up compared to last year. Pepper exports have soared by 42 per cent to 10,100 tonnes, fenugreek exports have doubled to 5,850 tonnes and that of chilli have touched 71,500 in April-July 2007. Whereas, exports of some spices like cumin, garlic and vanilla have fallen as against those recorded a year ago.

According to Spices Board, India has exported approximately 13,900 tonnes of pepper during April-August 2007 as against that of 9,100 tonnes in the same period a year ago, recording an increase of 35 per cent on account of existing lowest price tag. It has been estimated that total exports might cross 30,000 tonnes by March 2008, 46 per cent of which have already been achieved within the first 5 months of the current financial year. One of the leading exporters believes that if the trend continues in the same manner during short term then India would be the one of the highest exporters of pepper since 2000.

As per National Horticulture Research and Development Foundation, India had exported 1, 15,304 tonnes of onions in August 2006. Currently, the data projected by central government, indicates that India ’s onion exports have fallen rapidly to 65,478 tonnes, i.e., by 43 per cent in August 2007 due to regulation of prices within the country. In wholesale market onion prices have climbed to Rs 18,000 per tonne during the month of August.

According to the study conducted by Media Today group in collaboration with Indian Flowers and Ornamental Plants Welfare Association (iFlora), India’s domestic flower and plant market, which is currently valued over Rs 1000 crore, has the potentiality to widen its market speedily. It is expected that within next five years it would grow to Rs 10,000 crore. As per the study, the domestic consumption of cut flowers is growing at the rate of 30 per cent at present, while floriculture exports have increased gradually from Rs 256 crore in 2003-04 to over Rs 400 crore in 2006-07.

Central Organisation of Oil Industry and Trade have finalised the deal of Soymeal export for October and November delivery and the prices have been contracted between US $275-290 per tonne. It is expected that nearly 3, 00,000 to 4, 00,000 tonnes of soymeal exports would be undertaken from the new crop. While a year ago, export prices of soyameal were lower at around US $80 per tonne, which illustrate that there is an increase in price by about 40 per cent compared to last year. Increase in the price can be attributed to the expected bumper crop and robust demand. Meanwhile, industry is expecting that the soybean harvest in the new season would cross to 8.5 million tonnes, up from 7.6 million tonnes this year.

Saudi Arabia has raised the premiums of crude oil for Asian countries. It would charge more than the benchmark prices for two of its most popular varieties of crude oil that would be one of the highest since last seven years. Dhahran-based Saudi Aramco, the world’s largest state oil company has raised Arab Super Light variety by 50 cents to a premium of US $6.45 per barrel and has narrowed the discounts for Arab Medium by 30 cents to US $1.05 a barrel and by 25 cents to US $3.35 per barrel for its Arab Heavy grade. Asian prices are quoted in relation to the average of Oman and Dubai grades, the two Arabian Gulf benchmarks used by Asian oil refiners and traders. For US customers, Arab Light, Arab Medium and Arab Heavy grades were cut by between 5 cents and 90 cents.

State government of Andhra Pradesh has introduced a plan for enhancing the rural poor and development of agriculture sector would be boosted. Under this plan, it is going to offer 1.32 lakh milch cows to nearly about 5,000 rural woman self-help groups, which would benefit them to enhance their income. Each family would be offered two animals at a total cost of Rs 60,000, and 50 per cent subsidy on the total cost, while remaining would be extended through SHG-Bank linkage programme. This scheme would be implemented in 22 districts, excluding Hyderabad . Further, the state has fixed a target of 9 per cent growth in the milk production during its 11^th Plan period and accordingly has planned to increase the milch cow population in the state and for this purpose it has already provided Rs 500 crore in the current budget as a special package to the agri-allied activity.

Indcoserve, apex body of the various industrial co-operative tea factories identified as Indco factories, has decided to cover members of its factories under a new insurance scheme launched by the Tea Board. This scheme includes life, medical, accident and education and is expected to benefit more than 20,000 small tea growers. One of the insurance companies have come out with attractive packages, whereby a group of five members in a family is covered for at least Rs 30,000 per year in the best hospitals of the Nilgiris, Coimbatore and nearby districts and annual premium would be paid by the tea board.

The state government of Kerala has plans to launch a programme to tap the huge market of ornamental fish trade, by setting up country’s first aqua park for ornamental fish production and marketing in Kadungalloor, near Kochi . As per the central government, the state has the potential to be an excellent player in this sector, as it has pleasant environment and huge fresh water reservoir so it has aided the project, while state government itself has invested Rs 14 crore for the same. The work would be undertaken soon and in the initial phase it is expected to provide employment to 5,000 people directly and 10,000 indirectly. This park would have an existing, but non-functioning farm at Neyyar in Thiruvananthapuram, Parappanagadi in Malappuram and Pannivelichira in Pattanamtitta as satellite farms under it. Infrastructure facilities such as laboratory, quarantine, provision for power, water and storage facility would be provided, so that rearing, marketing, and export of ornamental fishes may get a boost.

The state Government of Kerala has initiated a project under which preliminary steps would be undertaken for the construction of a new dam at Mullaperiyar and some sections under Irrigation Design and Research Board [IDRB]. Consequently, the Ernakulam Minor Irrigation Investigation Sub-division has been shifted to Kattapana Division in order to conduct feasibility in the study of the project. With the construction of new dam, some regions of Tamil Nadu state situated

Industry

The quick estimates of Index of industrial production with base 1993-94 for the month of July 2007 registered a lower growth of 7.1 per cent as compared to 13.2 per cent over July 2006. Cumulative growth for the period April-July 2007-08 it stands at 9.6 per cent as compared to 11.1 per cent last year.

Manufacturing sector and mining sector registered lower growth of 7.2 per cent and 4.9 per cent respectively when compare to 14.3 per cent and  5.1 per cent last year during the month of July.

As per two digit classification out of 17 groups of industries 13 industries registered positive growth ranging from 3.6 per cent to 21.1 per cent.

3 industrial group which witness a negative growth are food products, paper and paper products, metal products and transport equipments.

.

Infrastructure

Index of six core industries having a combined weight of 26.7 per cent in IIP stood at 227.7 in July 2007 and registered a lower growth of 6.3 per cent compared to a growth of 10.9 per cent in July 2006. During April-July 2007 the growth at 6.1 per cent was less than that of 8.7 per cent registered last year.

Crude petroleum during April-July 2007-08 declined by 0.3 per cent as against a gain in its production of 1.2 per cent last year.

Growth in Petroleum refinerary production came down from 12.1 per cent during April-July 2006 to 11.0 per cent in April-July 2007.

Coal production witnessed a marginal gain of 0.6 per cent during the first four month of current fiscal year compared to an increase of 8.3 per cent during the same period last year.

Generation of electricity however, grew by 8.1 per cent during April-July 2007 compared to 6.2 per cent previous year.

Cement production recorded a growth of 7.3 per cent during the review period compared to an increase of 11.1 per cent during the same period of 2006-07.

During the review period growth in production of finished steel is less than half at 5.3 per cent as compared to 13.3 per cent registered during April-July 2006 .

Inflation

The annual point-to-point inflation rate based on wholesale price index (WPI) declined to 3.52 percent for the week ended September 01,2007. During the comparable week of the earlier year, it was 5.34 per cent.

During the week under review, the WPI remained stable at 214.4 from 213.6 at the previous weeks’ level (Base: 1993-94=100). The index of ‘primary articles’ group, (weight 22.02 per cent), rose by 1.3 percent to 227.5 from its previous week’s level of 224.5, mainly due to higher  prices of fish marine, fruits and vegetables, ragi and milk.

The price index of ‘fuel, power, light and lubricants’ group (weight 14.23 per cent) declined by 0.1 per cent to 321.9 from 322.1 because of the lower price of aviation fuel and furnace oil.

The index of ‘manufactured products’ group rose by 0.2 per cent to 185.9 from 185.6 for the previous week due to higher prices of maida,rawa,coconut oil and khandasari.

The latest final index of WPI for the week ended July 07, 2007 has undergone upward  revision; as a result both, the absolute index and the implied inflation rate stood at 213.3 and 4.61 per cent as against the provisional data of 212.6 and 4.27 per cent..

Banking

RBI has decided to allow regional rural banks (RRBs) to convert their satellite offices into full-fledged branches, a move intended to enhance customer services in rural areas.

Kotak Mahindra Bank is planning to increase its branches to 200 by June next year. The bank would increase its branches to 180 from the present 132 in 92 locations by March next and to 200 by June 2008, in around 100 locations and that 25 per cent would be in rural areas.

External Sector

Merchandise exports during July 2007 have reflected the impact of the appreciating rupee which have grown by 18.5 per cent – a significant deceleration from 40.3 per cent growth during July 2006.Considering in rupee terms, the impact of the weaker dollar had been starker — export growth has gone up by mere 3.1 per cent during July 2007 against 31.8 per cent during the corresponding month of the previous year. The rupee has appreciated 8.2 per cent between April and July. Meanwhile, non-oil imports during the month have stood at US $ 12.46 billion, similar to the corresponding month a year-ago. Oil imports, however, have registered a relatively small increase of 8.7 per cent at US $ 5.04 billion against 32.8 per cent growth at US $ 4.64 billion in July 2006. Considering the cumulative period, during the first four months of the current fiscal year, imports worth US $ 72.41 billion and exports worth US $ 46.79 billion have been recorded. It has widened the trade deficit by 62 per cent to US $ 25.62 billion during April-July 2007

Financial Markets

Capital Markets

Secondary Market

The Securities and Exchange Board of India (Sebi) has ruled that non-convertible portions of partly convertible debentures cannot be bought back under Sebi 's buyback regulation, and nonconvertible debentures have not been notified by the Government as "specified securities" under Section 77 A of the Companies Act 1956.This follows a reference made by Insilco Ltd regarding the premature redemption of the non-convertible portion of its partly convertible debentures issued in March 2000.

Foreign Exchange Market

The rupee extended its gains against the dollar on September 19 and hit 40.20, spurred by the US Federal Reserve’s 50 basis point cut in interest rates.. The appreciation was in tandem with the strength of major currencies against the greenback

Commodities Futures derivatives       

According to the Union Agriculture Ministry’s First Advance Estimates of crop output, released here on September 19, the country’s production of cotton, soyabean, sugarcane and kharif maize is expected to scale all time highs.

Production of kharif foodgrains during 2007-08 will touch 112.24 million tonnes (mt). This is 1.72 mt more than that of last year, though below the record 117 mt level of 2003-04.Within foodgrains, kharif rice output is estimated at 80.15 mt, the highest since the 80.52 mt of 2001-02. But production of kharif maize is slated to cross 13 mt, surpassing the previous record of 12.73 mt attained in 2003-04.While output of kharif pulses, oilseeds and jute are assessed to be higher than last year, farmers are going to harvest record crops of cotton and sugarcane, at 22.94 million bales and 345.62 mt, respectively.Similarly, soyabean production, at 9.04 mt, would scale a new high.

Insurance

Private life insurer Bajaj Allianz Life Insurance company has crossed 10 lakh individual policies in the current financial year. The company has issued over 45 lakh individual policies since its inception in October 2001 and received a premium income of over Rs 10,000 crore in total.

Corporate Sector

Public sector giants NTPC and BHEL have decided to float a new joint venture company for executing power sector projects in India and abroad.

Reliance Industries Ltd has acquired Hualon Corporation (HC), a leading, polyester producer in Malaysia , for an undisclosed sum. HC has a polyester manufacturing capacity of 0.5 million tonne per annum, which will help RIL consolidate its position further with 2.5 million tonne capacity.

The Empowered Group of Ministers has cleared the RIL pricing formula for the sales of gas from its D6 field in the Krihna-Godavari basin. The minor changes incorporated in the formula will lead to a gas price of $4.20 per million British Thermal Unit (MMBTU) at delivery point, which translates into a price of Rs 172.20 per MMBTU at the prevailing rupee-dollar exchange rate. The approved price is 13 cents lower than the price proposed by RIL.

The Aditya Birla Group plans to invest $550 – 600 million in ramping up its carbon black capacities in India and abroad over the next four years to meet the growing demand and also increase market share in a competitive industry. The new investments will come at its new plant in Mexico and at Patalganga in India and also by doubling its existing capacities in China and Egypt .

Labour

According to Manpower’s employment outlook survey, the Indian job market is expected to remain vibrant in the third quarter of 2007 as employers across the country are positive about their hiring intentions. Hiring activity is anticipated to strengthen in three of four Indian regions, with a slight decrease reported in Northern region. Southern region is expected to step-up its recruitment compared to 3^rd quarter of 2006. On a sect oral basis, for the ninth consecutive quarter, employers across 7 industry sectors in India report positive hiring intent. The strongest outlook is observed among services sector while the weakest is in public administration and education sector.

Information Technology

Hero Group has acquired Scotland ’s biggest call centre firm Telecom Service Centers (TSC) for an estimated $81 million. Following the deal, TSC, which has more than 3,000 employees, will be merged with HeroITES – a call centre subsidiary of Hero Group. The new entity will be known as TSC Hero.

Telecom

Bharti Airtel ( Singapore ) Pte Ltd has been awarded the facility based operator licence to operate international carrier services in Singapore on its owned infrastructure. The grant of licence is expected to give a boost to the operator’s global voice and data connectivity business.

The GSM cellular subscriber base in the country has touched 147.7 million-mark with addition of 5.9 million subscribers in August, against 5.5 million mobile phone users in the previous month, a growth of 4.20 per cent. According to COIA, Bharti Airtel remains the market leader with a market share of 31.7 per cent followed by Vodafone Essar (23.1 per cent).

*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project.

LIST OF WEEKLY THEMES

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