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Theme
of the week: Economic Cencus-7 Distribution of Enterprises By Economics Activities: Agriculture Activities*
The
Economic Censuses conducted by the
Central Statistical Organisation (CSO)
not only cover the censuses of the
number of enterprises spread over
the economy and the persons employed
by them, but also collect
information as to the nature of
economic activities these
enterprises are engaged in. These
economic activities are then grouped
into two main categories, viz.,
agricultural sector and
non-agricultural sector according to
the National Industrial
Classification (NIC) used at the
time of the census. The results of
economic activities canvassed under
the Economic Census 1980 were
grouped by using NIC 1977 (expanded
version). Similarly, NIC 1987 was
used to group data under different
activities canvassed during Economic
Censuses 1990 and 1998. Finally,
data obtained during the recent
Economic Census 2005 (EC 2005) has
been grouped by using NIC 2004.
Thus, there are some chances that
some activities at four-digit level
have been grouped differently under
various NICs and hence there will
occur some differences while
comparing the data under different
Economic Censuses. However, at
two-digit level of classification,
these differences are almost
negligible to make any impact in
their comparison between different
censuses.
This note, the seventh in the series of notes dealing in different aspects of data collected through Economic Censuses, mainly deals with data grouped under Agricultural Activities. Here, it may be recalled that in our earlier notes also, we have had some brief discussion on the agricultural activities as narrowly defined for the Economic Census studies. 2.
Economic Activities Grouped Under
Agricultural Sector Agricultural
Establishments engaged in activities pertaining to crop production and plantation (group 011 of NIC 2004) has been excluded under the coverage of Economic Censuses. A broad list of activities grouped under the agricultural sector along different censuses by using different NICs has been given below in Table 1.
These different activities are grouped into livestock production (farming of animals according to EC 2005), agricultural services, hunting, trapping and game propagation, forestry and logging and fishing. All these groups are summed up to arrive at different characteristics of agricultural enterprises. The CSO had disseminated only total agricultural sector data for the second, third and fourth Economic Censuses. But in the latest Economic Census conducted in 2005, further classification of agriculture sector into farming of animals, agricultural services, etc and fishing has been disseminated by CSO. 3. Growth in Agricultural Enterprises According
to the 5th Economic
Census, there have been 6.08 million
agricultural enterprises in the
country accounting for 14.5 per cent
of the total enterprises in 2005.
Out of these 6.08 million, 5.71
million agricultural enterprises
forming about 94 per cent of the
total agricultural enterprises has
been located in the rural areas and
the remaining 0.4 million in urban
areas. As against this, in 1980
there were 1.46 million agricultural
enterprises spread over rural and
urban
Though
the growth rate of establishment
with hired workers during the
25-year period works out to be 5.9
per cent, the actual addition of
number of enterprises had been only
0.7 million during the period 1980
and 2005 (Table 2). An establishment with hired worker, employing six or more persons daily on a fairly regular basis is termed as directory establishment. The addition of agricultural directory establishment between 1998 and 2005 works out to about 17 thousand, the entire addition has been in rural areas. An
establishment with hired worker,
employing less than 6 persons daily
on a fairly regular basis is termed
as agricultural Non Directory
Establishment whose number got
expanded 5.6 lakh during 1998 and
2005, with 5.3 lakh addition of
agricultural non-directory
establishments in rural areas.
4:
Distribution of Agricultural The
fifth Economic Census conducted in
2005, reveals three major activities
pursued by agricultural enterprises
along with employment therein.;
there were thus three major activity
groups’ viz., farming of animals,
agricultural services and fishing. Out
of 6.1 million enterprises, farming
of animals dominated with its total
share of 87 per cent (5.3 million),
and 94.3 per cent of enterprises
involved in farming of animals were
found in rural areas. Among the 5.3
million enterprises engaged in
farming of animals, 4.5 million
enterprises accounting for about 85
per cent were on account enterprises
and the rest 15 per cent were
establishment with hired workers.
Out of this 0.74 million
establishments with hired workers,
0.71 million enterprises had been
non-directory establishments and
39,406 enterprises had been
directory establishments (Table 4).
About
0.43 million forming about 7 percent
of total enterprises has been
engaged in agricultural services
with 0.31 million of them being own
account enterprises and the
remaining 0.12 lakh comprising of
0.10 lakh has been non-directory
establishments and 15,263 has been
directory establishments. Different kind of fishing has been the third major economic activities of 0.36 million agricultural enterprises. Among them major chunk of 0.27 million were owned by own account enterprises. Among the remaining 87,371 establishments with hired workers, 73,835 had been non-director establishment and 13,536 had been directory establishment.
5. Special Characteristics of Agricultural Enterprises The number of seasonal agricultural enterprises rose from 209,000 in 1980 to 808,000 enterprises according EC-2005. However the growth rate registered a declining trend over different censuses. Between 1980 and 1990, CAGR was 8.2 per cent, which declined to 4.9 per cent in the period 1990-1998 then to 2.6 per cent during 1998-2005. The average annual growth rate during the 25-year period works out to 5.6 per cent. However,
the number of perennial agricultural
enterprises steadily rose during the
period with a compounded annual
average growth rate of 5.9 per cent
during the 25-year period. The trend
was same for both own account
enterprises and establishment with
at least one hired worker. However,
the seasonal agricultural
establishment with at-least one
hired worker there was a notable
increase between 1998 and 2005.
The number of agriculture enterprises with premises grew at CAGR of 6.6 per cent during 1980-2005 and that working without fixed premises has also increased, but at a lower CAGR of 4.0 per cent. While own account premises working from fixed premises grew faster at a CAGR of 6.8 per cent during 1980-2005, that the growth of establishment with at least one hired worker operating without premises grew faster at a CAGR of 6.7 per cent (Table 4). 6. Employment in Agricultural Enterprises All
Agricultural Enterprises (OAE+Estt) Agricultural
enterprises employed 10.9 million
people in 2005 as against 2.8
million in 1980, a massive increase
of 8.1 million people in 25-years
with an CAGR of 5.52 per cent (Table
6). The growth rate was fastest
between 1998 and 2005 with CAGR of
7.11 per cent during the period.
While rural agricultural employment grew from 2.5 million people in 1980 to 10.2 million people in 2005, that in urban area increased from 0.4 million in 1980 to 0.7 million in 2005. In 2005, the share of employment in rural area was 93.2 per cent as against 86.0 per cent in 1980. However, a marginal decline in average worker per enterprises has been witnessed during the period.
Hired workers increased from 0.6 million to 2.2 million during the period with rural enterprises employing most of the workers. In 2005, hired workers formed about 20.0 per cent of the total workers in agricultural enterprises, as against 19.5 per cent in 1980 (Table 7). A marginal increase of 1.8 per cent were witnessed in the share of hired workers in urban areas and a one percent increase in the share of hired workers engaged by rural agricultural enterprises. Agricultural
Own Account Enterprises (OAE)
Agricultural Establishment with at least one Hired Worker
Persons employed by agricultural establishment with at least one hired worker had risen from 0.8 million in 1980 to 3.1 million in 2005, an addition of 2.3 million during the 25-year period, with a CAGR of 5.49 per cent. Still the rate of employment during the period saws a decline from 3.6 to 3.2. There was a change in the share of employees among the rural and urban areas in favour of rural enterprises (Table 9). While the share of rural enterprise employees rose from 79 to 89 per cent that of urban employees went down from 21 to 11 percent during the 25-year period ending 2005. Another interesting fact is both in rural and urban areas the rate of employment witnessed declines. While rate of rural employment came down to 3.2 in 2005 from 3.4 1980, that among urban enterprises decline to 3.7 in 2005 from 4.4 in 1980. Still, the CAGR in rural during the 25-year period works out to be 6.0 per cent, clearly 3.3 per cent more than that seen among urban enterprise employment during the entire period. Male and Female Employments Table 10 shows gender wise employments among agricultural own account enterprises, establishments with at least one hired worker and all enterprises along with child employments for the years 1990, 1998 and 2005. In 2005, out of 10.9 million workers, 4.0 million workers were females forming 36.6 per cent of the total employment; as against this in 1990 there were 1.6 million females employees forming 33.9 per cent of 4.8 million total employees. CAGR of female employees works out to 4.86 during the 15-year period. Female
employment in rural agricultural
enterprises grew from 1.5 million in
1990 to 3.8 million in 2005. In
urban enterprises female
participation grew from 0.1 million
in 1990 to 0.2 million in 2005. The,
CAGR of female employment in
agricultural enterprises in urban
areas was slower at 1.2 per cent
than that of 5.3 per cent in rural
areas. Female participation in own
account enterprises rose from 1.3
million in 1990 to 3.0 million in
2005 with a CAGR of 4.7 per cent
during the period. The share rose
marginally from 33.9 in 1990 to 36.6
percent in 2005. Agricultural
Establishment with hired worker has
1.2 million females in the roaster
in 1990, which rose to 3.0 million
in 2005 with CAGR of 5.2 per cent.
The share of female workers
increased from 29.8 per cent in 1990
to 33.3 percent in 2005.
According to EC 2005, out of 10.9 million workers engaged in agricultural enterprises, a major chunk 9.2 million workers forming about 84.4 per cent were employed in farming of animals., with 6.9 million persons engaged in their family owned enterprises and the remaining 2.3 million in agricultural establishment with hired workers (Table 11). Amongst them, 1.6 million were employed in non-directory establishment and the remaining 0.7 million in directory establishment. Rural agricultural enterprises engaged in farming of animals consist of 8.6 million. Enterprises pursuing agricultural services employed 0.99 million persons and that in fishing activities engaged 0.71 million workers.
A distribution of agricultural enterprises by sources of finance is depicted in Table 12. Out of 6.08 million agricultural enterprises in 2005, major portion i.e., 5.70 million enterprises forming about 94 per cent were self-financed as against this 2.92 million forming about 84 per cent were self financed.
It can be seen from table that there has been a drastic reduction in number f enterprises assisted by government programmes (viz., IRDP, poverty alleviation programs like TRYSEM, DWCRA etc). However, there has been an increase of 48,700 enterprises that are institutionally financed. Similarly, enterprises financed by moneylenders increased to 79,600 in 2005 from 56,500 in 1998, but there share in overall financing came down from 1.6 per cent in 1998 to 1.3 per cent in 2005.
* This note has been prepared by R. Krishnaswamy Highlights of Current Economic Scene AGRICULTURE
Haryana food and supplies department has reiterated that 30.72 lakh tonnes of paddy has arrived in the mandis across the state during the current kharif season during the first 30-40 days of the kharif marketing period ((October- September) 2008-09. Out of the total paddy arrival, about 16.92 lakh metric tonnes have been procured by government agencies at the minimum support price and remaining 13.80-lakh metric tonnes have been purchased by private millers and traders. Similarly, 3, 31,279 metric tonnes of bajra also has arrived in the mandis across the state, out of which, 3, 11,203 metric tonnes have been procured by government agencies at the minimum support price and the remaining 20,076 metric tonnes have been purchased by private traders. The state government of Karnataka would procure 33 per cent of rice produced in the state in order to safeguard its interests in the national foodgrains procurement pool managed by the Food Corporation of India (FCI). It has further mandated that in case paddy or rice is to be transported out of the state, rice growers and millers must seek permission for the same from the deputy commissioners of their respective regions. Also, merchants would be allowed to transport rice to other states only if they have fulfilled the levy quantum. Sources expect that retail prices of rice in the state would increase due to enforcement of the levy rice order and would restrict inter-state rice movement. In order to ensure free flow of rice in the retail market, the Karnataka government has ordered that each rice mill in the state can keep a maximum of 3,000-quintal of paddy in their stocks. Meanwhile, the Karnataka State Rice Mill Owners’ Association has opposed the state government’s decision, since rice owners would incur huge losses due to this move. Tamil Nadu, where rice prices have already soared, is expected to affect largely and even western regions, which are completely dependent on rice from Karnataka -are expected to get affected adversely. The
central government as on November 5,
2008 has decided to set aside around
2 million tonnes of wheat for
exports to meet requests of
neighbouring countries. This would
be first time during the period of
more than a year that the government
has gone for a one-off exemption to
the country’s export ban on wheat.
The government’s stock of
foodgrains (wheat and rice) as on
October 17 this year is reported to
be around 30 million tonnes. Wheat
prices in the international market
have plummeted by almost 54 per cent
from its all-time high in May last
year (US $ 6 per bushel). Meanwhile,
in case of non-basmati rice, the
government, as on November 4, 2008,
has decided to export 55,000 tonnes
of non-basmati rice to five African
nations. This decision too is a
one-time exemption to the blanket
ban on non-basmati rice exports.
Rice would be exported to Rabi sowing of oilseeds has got a brisk start because of late withdrawal of southwest monsoon and good rains during the month of August. According to the latest data from the directorate of oilseeds development, total oilseeds sowing during the week ending October 30, 2008 is estimated to be around 2.23 million hectares from 1.50 million hectares sown during the same period last year. The data showed that rapeseed, the largest oilseed grown during the rabi season, has been planted on around 1.47 million hectares from 947,000 hectares sown during the same period a year ago. Sunflower has been planted on 478,000 hectares as against 330,000 hectares sown last year. While Groundnut has been planted on 136,000 hectares from 79,000 hectares cultivated during the previous year. Safflower has been sowings have covered 116,000 hectares as compared with 109,000 hectare planted last year.
Solvent
Extractors’ Association of India (SEAI)
reiterated that exports of oilmeal
in the month of October fell nearly
by 43 per cent to 149,326 tonnes
shipped during the same month a year
ago, as global prices have eased and
domestic stocks have plummeted.
Currently, global prices have fallen
to US $275 per tonne from US $480 in
August and heavy exports from April
have depleted our stocks, leading to
a drop in exports in October.
Overall exports of oilmeal during
April-October 2008 have increased by
55 per cent to 2.66 million tonnes
as against 1.71 million tonnes
during the same period a year ago,
backed by strong growth in soyabean
and rapeseed meal production.
Exports of soyabean meal and
rapeseed meal have increased to 1.72
million tonnes and 634, 000 tonnes
during the first seven months of
current financial year as against
the 944,000 tonnes and 450,000
tonnes in the corresponding period
last financial year. National
Agriculture Co-operative Marketing
Federation (Nafed) has kept minimum
export price of onion unchanged for
the month of November for the most
of the destinations. However, Nafed
has increased MEP for onion in
November for Maize
production in Tamil Nadu has been
hit by the Downy Mildew disease. It
is expected that this would affect
country’s overall production, as
Tamil Nadu alone accounts for 83 per
cent of the total maize production. The central government has given approval for the sugar mills to export sugar without seeking government permission upto December 31, 2008. The
Centre has allocated 1.5 million
tonnes of sugar for the open market,
while nearly 2 lakh tonnes have been
released for the public distribution
system in November. About 1-lakh
tonnes of sugar is expected to come
in the open market form the
dismantled second buffer stock. The
central government has asked sugar
mills to dispose old stocks so that
new supplies of sugar can be
accommodated. Sugar Production has
touched 26.5 million tonnes in the
2007-08-sugar season ending
September, though this year
(2008-09) sugar output is expected
to decline to 22 million tonnes.
The government has 11 million
tonnes of sugar in the opening
stocks this year. International
Cotton Advisory Committee (ICAC)
reiterated that global cotton
exports are expected to fall by 6.47
per cent to 7.8 million tonnes in
2008-09 due to slowing demand from
textile importing countries. Mill
uses are expected to fall by 4 per
cent to 10.5 million tonnes in According
to the United Planters Association
of South India (Upasi), tea exports
from Egg prices touched to a record high for the first time in 25 years, the floor price of a single egg has risen to Rs 2.09. Industry sources claim that this is the first time when the prices of egg has not slipped downward despite healthy production to meet the high demand in northern states that are now experiencing winter season. Global
cereal output is projected to surge
by 5.3 per cent to a new high of
2,241.5 million tonnes in 2008-09
even though high prices have boosted
plantings and favourable weather
conditions in most of the countries.
Global stocks of wheat, coarse
cereals and rice are expected to
expand this year, as against the
declining trend witnessed in last
few years. The recent decline in
prices of most of the crops is
expected to discourage growers from
planting because they are burdened
with high input costs and lower
returns than earlier anticipated,
which could potentially affect farm
output in 2009-10. World wheat
production has shown a record
increase of nearly 11 per cent to an
unprecedented 677 million tonnes
this year, while consumption is
projected to expand by 4.5 per cent
to a new high of 643.3 million
tonnes. World wheat trade is
projected to touch a new high of 119
million tonnes as against 111.2
million tonnes last year due to
abundant supplies and lower export
prices. In case of coarse grains,
production is expected to be at
1,114.2 million tonnes and total
utilisation of cereal would be at
1,109.2 million tonnes; both are
projected to increase by 3.3 per
cent each in 2008-09; but trade may
actually decline because most of the
part would be met by feed wheat
supplies. Rice output is likely to
show a modest growth of 2.4 per cent
to 450.2 million tonnes, while total
utilisation would grow even slower
at 1.8 per cent to 444.4 million
tonnes allowing stocks to expand by
5.5 per cent to 115.4 million tonnes. Global
cotton consumption in most of the
major consuming nations in 2008-09
has been affected by rising
production costs, high yarn prices,
energy shortages and tightening
credit in the world’s spinning
industry. According to a report by
Globecot, global consulting firm for
the fibre and textile industries,
monthly yarn production in Industrial Production Crude Oil production (weight of 4.17 per cent in the IIP) registered a negative growth of 0.4 per cent (provisional) in September 2008 compared to a growth rate of (-) 0.7 per cent in September 2007. The Crude Oil production registered a growth of (-) 0.8 per cent (provisional) during April-September 2008-09 compared to 0.7 per cent during the same period of 2007-08. Petroleum
Refinery Products Petroleum
refinery production
(weight of 2.00 per cent in
the IIP) registered a growth of 2.8
per cent (provisional) in September
2008 compared to growth of 6.9 per
cent in September 2007. The
Petroleum refinery production
registered a growth of 4.5 per cent
(provisional) during April-September
2008-09 compared to 9.8 per cent
during the same period of 2007-08. Coal Coal
production (weight of 3.2 per cent
in the IIP) registered a growth of
10.7 per cent (provisional) in
September 2008 compared to growth
rate of 6.3 per cent in September
2007. Coal production grew by 7.9
per cent (provisional) during
April-September 2008-09 compared to
an increase of 2.8 per cent during
the same period of 2007-08. Electricity Electricity
generation (weight of 10.17 per cent
in the IIP) registered a growth of
4.4 per cent (provisional) in
September 2008 compared to a growth
rate of 4.3 per cent in September
2007. Electricity generation grew by
2.6 per cent (provisional) during
April-September 2008-09 compared to
7.6 per cent during the same period
of 2007-08. Cement Cement
production (weight of 1.99 per cent
in the IIP) registered a growth of
7.9 per cent (provisional) in
September 2008 compared to 5.4 per
cent in September 2007. Cement
Production grew by 6.0 per cent
(provisional) during April-September
2008-09 compared to an increase of
8.7 per cent during the same period
of 2007-08. Finished
(carbon) steel Finished (carbon) Steel production (weight of 5.13 per cent in the IIP) registered a growth of 5.8 per cent (provisional) in September 2008 compared to 9.5 per cent (estimated) in September 2007. Finished (carbon) Steel production grew by 5.3 per cent (provisional) during April-September 2008-09 compared to an increase of 7.7 per cent during the same period of 2007-08. Inflation The
annual rate of inflation, calculated
on point to point basis, stood at
10.72 per cent
for the week ended 25/10/2008
(over 27/10/2007) as compared to
10.68 per cent over the previous
week.
The annual rate of inflation
stood at 3.11 per cent as on
27/10/2007. The
index of primary articles
major group rose by 0.4 per
cent to 249.9 (Provisional) from
248.8
over the week. 'Food
Articles' group rose by 0.4 per cent
due to higher prices of rice (3 per
cent) and urad and tea (2 per cent
each). Price index for 'Non-Food
Articles' group rose by 0.8 per cent
due to higher prices of raw rubber
(7 per cent) and raw cotton (3 per
cent).
However, the prices of castor
seed (4 per cent) declined. The
annual rate of inflation, calculated
on point to point basis, for
‘Primary Articles’ stood at
11.41 per cent for the week ended
October 25, 2008 as compared to 5.01
per cent during the comparable
period of previous year. The annual
rate of inflation for ‘Food
Articles’ stood at 8.84 per cent
(Provisional) as compared to. 3.18
per cent registered previous year. The
index for the major group fuel,
power, light and lubricants remained
unchanged at its previous week's
level of 369.3. Price
index of
manufactured products has
declined marginally to 205.3
from 205.4
for the previous week. The
index for 'Food Products' group
declined by 0.1 per cent
due to lower prices of gur (6
per cent) and cotton seed oil (1 per
cent). Final wholesale price index for ‘All Commodities’ (Base: 1993-94=100) stood at 241.4 as on August 30, 2008 compared to 240.8 (Provisional) and annual rate of inflation based on final index, calculated on point to point basis, stood at 12.38 per cent as compared to 12.10 per cent. The annual rate of inflation, on point to point basis, stood at 10.7 per cent for the week ended Oct 18, 2008 as compared to 3.1 per cent during the corresponding period a year ago. Index of Primary Articles, major group, declined by 0.3 per cent due to decline in the prices of raw cotton, some oil seeds and raw rubber. The annual rate of inflation, calculated on point-to-point basis, for ‘Primary Articles’ stood at 10.9 per cent as compared to 5.1 per cent a year ago. The
index for fuel power, light and
lubricants declined marginally due
to lower prices of furnace oil. The index for manufactured products dipped by 0.1 per cent due to of fall in food products prices by 0.5 per cent. For
the week ended 23/08/2008, the final
wholesale price index for 'All
Commodities’ (Base: 1993-94=100)
stood at 241.2 as compared to 240.3
(Provisional) and annual rate of
inflation based on final index,
calculated on point to point basis,
stood at 12.76 per cent as compared
to 12.34 per cent. Financial
Markets Capital Markets Primary
Market The
Bombay Stock Exchange (BSE) has
initiated the process of floating an
initial public offer (IPO). The IPO
is intended to unlock the value of
the exchange and provide liquidity
for the shares held by the existing
shareholders as well as a window to
the secondary market. Initially, BSE
had floated the idea of listing its
shares on itself without an IPO. BSE
has proposed to take the IPO route
for listing. Secondary
Market Key
benchmark indices gained marginally
for the week ended Friday, 7
November 2008, thereby, ending
six-week loosing streak arrested by
the measures announced by some
global central banks to tackle the
turmoil in the financial markets.
The markets started the week on a
strong note, buoyed by a 75 basis
point cut in prime lending rate by
some public sector banks and touched
a high of 10,945, before paring
gains and slipping to a low of
9,632. However, the markets lost
momentum in the middle of the week
on the back of negative global
sentiments, profit booking and
higher-than-expected inflation
(10.72
per cent). The index finally
ended the week on a high, boosted by
rise in infrastructure sector output
(5.1
per cent in September) and
the positive response by markets
abroad to benchmark rate cuts by the
Bank of England and the European
Central Bank. The BSE Sensex ended
the week with a gain of 176 points
at 9,964 on the back of selective
buying. The BSE Sensex edged higher
in three out of the five trading
sessions during the week. The NSE
Nifty on the other hand rose 87
points or 3.02
per cent to 2,973 over the
week. Among
the sectoral indices of BSE,
Reality, Bankex and FMCG recorded
positive gains over the week. IT
stocks witnessed selling on concerns
about the elected The
Securities and Exchange Board of
India (SEBI) issued the legal
framework for setting up a separate
platform/stock exchange for small
and medium enterprises (SMEs) on
November 5, 2008. The market
regulator has set a minimum networth
of Rs 100 crore for entities wanting
to set up SME exchanges and has said
that such exchanges should be
corporatised since inception and
demutualised within one-to-two years
from the start of trading. This
means that the promoter of the
exchange has to dilute 51
per cent equity within the
specified period. Other norms
prescribed by the regulator include
having trading terminals across the
country; an online screen-based
trading system and suitable business
continuity plan with a disaster
recovery site. With
the volatility in the stock markets
over the past one-year, collections
from securities transaction tax
(STT) too, have slipped 1.6
per cent to Rs 3,722 crore
till October end 2008. The tax
department had collected Rs 3,784
crore from the tax in the same
period last fiscal. The government
hopes to collect Rs 9,000 crore from
STT in 2008-09, after a record
collection from the tax last fiscal.
With stock markets performing well
and the BSE Sensex breaching the
20,000-point in 2007-08, the revenue
department collected Rs 8,577 crore
from the tax. Similarly in 2006-07,
STT earned the Exchequer Rs 4,730
crore. According
to the data released by the
Association of Mutual Funds in India
(AMFI), mutual fund industry
witnessed an 18
per cent decline in its
assets under management (AUM) in
October, plunging below the Rs
5-trillion mark. The combined
average AUM of the 35 fund houses in
the country saw an erosion of over
Rs 97,000 crore and dropped to Rs
4,31,901 crore at the end of
October. At the end of September,
the average AUM had been Rs 5,29,103
crore. The top five mutual funds in Massive
outflows in Fixed Maturity Plans (FMPs)
and liquid schemes have resulted in
a steep fall in AUMs of fund houses
in October. FMPs, which constitute
nearly a quarter of the total AUM
industry, witnessed panic redemption
following concerns about the credit
quality of debt papers held by these
schemes. In the past few months, (FMPs)
of mutual funds have come under some
serious scrutiny of investors. This
was attributed to the fact that many
of them had invested significantly
in commercial papers (CPs) and bonds
of real estate companies and
non-banking financial institutions (NBFCs).
There were strong rumours that many
of these companies were unable to
repay the fund houses on time,
leading to rollover of schemes. This
fuelled fears that many schemes
would be forced to default. However,
it seems that the fund houses have
garnered over Rs 1.5 lakh crore from
investors, only 8-10 would declare
their monthly FMP portfolios till a
few months ago. Instead, they gave
“indicative portfolios” and
“indicative returns” to the
potential investor. Derivatives The
SEBI has extended the issuance of
electronic contract note (ECN) as a
legal document to the equity
derivatives segment, a step that has
been long-awaited by the broking
fraternity. Earlier, confirmation
and settlement of trades in the
equity segment happened through the
ECN route. However, in the equity
derivatives segment, this happened
through the physical route. SEBI had
earlier stated that the contract
note in the derivatives segment
could be sent through certificate of
posting, telegram, hand delivery,
express delivery post, registered
post or advertising it at least once
in any daily newspaper published in
Mumbai. The regulator has advised
the exchanges to permit issuance of
ECNs, including all the standard
pre-printed terms and conditions as
given in the physical contract note. The
turnover in the derivative segment
on NSE increased during the week
under review to Rs 187,223 crore
from Rs 147,538 crore recorded in
the previous week. The NSE Nifty
closed at 2,973 points for a
week-on-week gain of 3.03
per cent. Volatility remained
high nevertheless and the effect was
exaggerated given a pattern of low
volume derivatives trading. The spot
Nifty and the Nifty futures were
able to end the week on positive
notes due to sharp gains on November
7. Short-covering coupled with
additions of fresh long positions,
particularly on Thursday and Friday,
helped the Nifty future fetch a
premium to the spot. It ended the
week at 2989.1 points, gaining over
3.7
per cent over its previous
week’s close. The
FIIs continued to hold around 39
per cent of the entire
futures and options (F&O)
outstandings but they were net
buyers in the cash markets during
the week that cancelled out the
bearish effect of domestic
institutional sales. The cumulative
foreign institutional investors (FIIs)
positions as a per centage of total
gross market position on the
derivative segment as on November 6
decreased to 38.73
per cent. According to NSE
data, FIIs turned net sellers during
the later part of the week. They now
hold index futures worth Rs 9,137
crore (Rs 7,840 crore in the
previous week) and stock futures
worth Rs 10,731 (Rs 8,985 crore).
Their holding in index options also
increased to Rs 13,589 crore (Rs
10,005 crore). Most
index futures are at small premiums
to the respective underlyings. Also
open interest (OI) has increased in
index futures, though the focus is
heavily concentrated on the Nifty.
Higher OI and futures premiums are
both mildly bullish signals but the
concentration on the Nifty (a high
hedge ratio) is bearish. The Nifty's
put-call ratio (PCR) in terms of OI
is at 1.15 while the PCR OI for
November Nifty is at 1.05. Both are
in the normal or neutral range and
offer no directional signals as
such. OI has grown across all series
in both puts and calls and about 40
per cent of all OI is in
December or beyond. Government
Securities Market Primary
Market Reserve
Bank of India (RBI) conducted the
auction of 8.24
per cent 2018 and 8.28
per cent 2032 for the
notified amounts of Rs.6,000 crore
and Rs.4,000 crore respectively, on
November 07, 2008. The cut-off
yields for the securities were 7.73
per cent and 8.44
per cent, respectively. RBI
conducted the repurchase auctions
under MSS for 5.48
per cent 2009 and 6.65
per cent 2009 for the
notified amounts of Rs.5,000 crore
each on November 06, 2008. The
cut-off yields for the securities
were 6.82
per cent and 6.78
per cent, respectively. The rate of interest on the Floating Rate Bonds, 2012 (FRB 2012) applicable for the year (November 10, 2008 to November 9, 2009) shall be 7.81 per cent. Secondary
Market The
inter bank call rates maintained a
declining trend during the week and
moved in a range of 5.32-7.18
per cent. Bonds
retreated the week, cutting short
their rally on technical correction
and on banks shifting resources to
meet credit requirements. Bankers
said that with the reduced Statutory
Liquidity Ratio (SLR), many banks
reduced their holdings in government
securities. The RBI reduced SLR from
25 to 24
per cent on November 1. In
addition, during the week, the buy
back of the 6.65
per cent 2009 and the 5.87
per cent 2009, improved the
liquidity. The buyback resulted in
an inflow of approximately Rs 10,000
crore. The
improved liquidity was also evident
from the thin cash to spot forward
premia. Cash to spot forward premium
that was in double digits last week
was down to 5.03
per cent. Banks were suddenly
flush with liquidity, which was
evident from the recourse to the
reverse repurchase window at the
weekend Liquidity Adjustment
Facility (LAF) auctions. During
the week ended November 07, 2008,
banks borrowed an average amount of
Rs.6,552 crore from RBI under the
daily LAF repo auctions. On the
other hand, RBI absorbed an average
amount of Rs.18,589 crore from the
system through the daily LAF reverse
repo auctions. Moreover, RBI
also offered a special 14-day repo
of Rs 48,275 crore for onward credit
lines to mutual funds and non-bank
finance companies. However, there
were few takers for the special repo
facility, in view of the change in
the liquidity situation. Banks
have borrowed an amount of Rs.5,525
crore during the week ended November
07, 2008 under the special term repo
facility. RBI
has decided to extend the facility
of temporary liquidity support for
financing agricultural operations up
to December 5, 2008. The rate of
interest on the facility would be
the prevailing fixed repo rate under
LAF. Daily
average trade volume was about Rs
7,100 crore during the week, down
from the previous week’s Rs 9,100
crore. Average
CBLO volumes during the week
increased by around 17
per cent as compared to the
previous week. The weighted average
rates moved lower during the week,
with the weighted average overnight
rates at 6.5
per cent as against 8.19
per cent during the previous
week Bond
Market During
the week under review, AXIS Bank Ltd
tapped the market through issuance
of lower Tier- II Bonds to mobilise
Rs 1,500 crore by offering 11.75
per cent for 10 years. Fitch
has rated the bond AAA. Redemption
pressures and a sharp fall in share
prices have turned overseas
institutional investors and hedge
funds into distress sellers of
foreign currency convertible bonds (FCCBs)
issued by Indian companies. These
hybrid instruments, which are listed
on some European stock exchanges and
the Singapore Stock Exchange, are
being traded at such huge discounts
that their yields are as high as 30
to 50
per cent. Yields move in
inverse ratio to market price. The
government’s recent efforts to
prop up foreign institutional
investments in corporate debt market
has not found many takers in the
last one month. FIIs have been
hesitant to invest in corporate debt
instruments on fears of downgrade in
ratings. As per market experts, the
concerns over corporate growth
slowing down and higher default
risks have deterred FIIs from
investing in corporate debt papers.
The government doubled the ceiling
on FIIs’ investment in corporate
debt to $6 billion (about Rs 28,800
crore) from $3 billion on October 15
and SEBI had allocated the fresh
limit to FIIs on October 22. SEBI
had allocated $2.8 billion (Rs
13,440 crore) limit to FIIs in the
list released by it in October. The
last day for utilising this limit is
November 6, failing which SEBI will
allocate the unutilised limit to the
next set of FIIs. Foreign
Exchange Market Rate
cuts have boosted market sentiment
and pushed up the demand for the
rupee. According
to SEBI overseas funds bought $543
million more Indian shares than they
sold in the four trading days
through Nov. 4,. The rupee closed at
Rs.47.18 per dollar on November 05,
2008 as compared with Rs.48.96 per
dollar as on November 03, 2008. The
Rupee moved between Rs.47.18 and
Rs.48.96. The rupee climbed about
3.8 per cent this week, that is, the
biggest weekly gain since March
1996, making it the best performer
among Asia’s 10 most-active
currencies outside The
six-month forward premia closed at
3.35
per cent (annualized) on
November 05, 2008 vis-à-vis 2.22
per cent on October 31, 2008.
The firm exchange rates were despite
marginal inflow from FIIs of just
$100 million during the week.
One-month premia remained high at
7.07
per cent (7.31
per cent in the previous
week). Three, six and 12 months
premia hardened as importers took
long forward cover at 4.44
per cent (3.25
per cent), 2.81
per cent (1.79
per cent) and 1.95
per cent (1.32
per cent) respectively. Foreign
exchange reserves continued to dip
further for yet another week, as
foreign investors continued to
pullout dollars from Indian markets.
The reserves including gold and
special drawing rights (SDR) dipped
by $5.5 billion to touch $253
billion during the week ended
October 31,2008. Currency Derivatives The
recently launched currency futures
market has clocked an average daily
turnover of nearly Rs 1,000 crore.
In the week ended November 7, all
the three exchanges — NSE, BSE and
MCX-SX — have achieved a total
volume of Rs 4,961 crore, which
means an average daily turnover of
Rs 992 crore. In terms of total
volumes, the NSE leads the race. In the week under review, NSE remained the market leader with a total turnover of Rs 2,973 crore, which is nearly 60 per cent of the market share. MCX-SX, recorded a weekly turnover of Rs 1,873 crore (average daily turnover Rs 375 crore), while the BSE was much behind in the race with a weekly turnover of Rs 15.95 crore. Total open interest on all the three exchanges is 1,80,970 contracts, while total average daily volume in terms of contract is over 2 lakh. Commodities Futures Derivatives The
Forward Markets Commission (FMC) is
in the process of liberalising open
position limits in futures trade,
which will boost confidence among
commodity futures traders. The
measures, likely to be introduced by
the end of November, are set to
boost the agricultural commodity
turnover on domestic exchanges. FMC
is looking at reworking near-month
positions in some commodities by
permitting “early pay-in”. FMC
will submit a report on the futures
ban on four commodities in two weeks
and is “confident” that the ban
on rubber, potato, soy oil and chana
will not be extended beyond November
30. FMC Chairman B C Khatua opine
that, easing inflation especially in
food commodities makes the situation
favourable to restart futures in
these commodities. It was
“unfortunate” that eight
commodity futures were blamed for
rising inflation as studies
repeatedly show there is no proof to
indicate futures trade caused price
rise. The
National Multi Commodity Exchange (NMCE)
of National
Spot Exchange Ltd (NSEL), an arm of
Multi Commodity Exchange (MCX), is
planning to launch gold and silver
(bullion) contracts in spot market
in Kolkata by end of November. NSEL
had rolled out spot exchange in
October, with contracts for cotton
and bullion in Mumbai and Banking State
Bank of Bank
of India (BoI) and Bank of Baroda (BoB)
have reduced their B-PLRs by 75
basis points each. For BoI, the B-PLR
cut will come into effect from
November 6, while for Bank of Baroda
the effective date is November 10.
After revision, the BoB’s B-PLR
will be at 13.25
per cent. Union
Bank of IDBI
Bank has decided to reduce its B-PLR
by 75 bps to 13.50
per cent per annum, with
effect from November 8, 2008. The
reduction of 75 bps would be
applicable to housing loans and
education loans also. The
government has stepped in to save
non-banking finance companies (NBFCs)
after foreign banks refused to
honour their lines of credit (LoCs).
The move comes close on the heels of
domestic banks’ attempt to freeze
LoCs. After finance ministry and the
RBI’s intervention, domestic banks
have lifted the freeze. Insurance The
Insurance Regulatory and Development
Authority (IRDA) has taken free
pricing to the next level by giving
non life insurance companies more
freedom to design their own
products. Both individual and
businesses, who buy non-life
insurance, can now look forward to
policies that are either more
comprehensive or better designed to
meet their requirement. The biggest
gainers from the move are small
businesses. The insurance regulator
has removed the minimum sum insured
limit of Rs 100 crore for the
industrial all-risk (IAR) policy. An
IAR policy – a package cover –
is convenient, cheaper and provides
comprehensive cover than the
piecemeal stand alone policies for
fire and insurance. Till now, only
large corporates were allowed to buy
the IAR cover. From now, even
small-scale industries can
participate. This gives a lot of
flexibility to insurance companies
in designing policies. Life
Insurance Corporation (LIC) has come
to rescue of corporates scrambling
to raise funds. The corporation has
invested around Rs 15,000 crore in
the first-half of the current
financial year in non-convertible
debentures (NCDs) issued by
companies. Its clients range from
Tata and Birla group companies to
L&T and Mahindra & Mahindra.
LIC has invested in over 50
companies in the recent past. One of
the key criteria it insists on is
that the company should have a
minimum ‘AA’ rating from one of
the four approved credit rating
agencies in the country. Corporate Tata
Motors reported a fall of 34
per cent in its net profit at
Rs 347 crore for the quarter ended
September 30, 2008, as against Rs
527 crore during the same period
last year. The company has incurred
a notional foreign exchange loss of
Rs 285 crore in the quarter due to
volatility in foreign exchange rates
impacting the company’s long-term
funds raised through issue of
foreign currency convertible
instruments. Suzlon
Energy’s net profit for the
quarter ended September 30, 2008,
dropped by a record 95
per cent to Rs 16.9 crore
against Rs 355 crore in the
corresponding period of previous
years. Toyota
Kirloskar Motor (TKM) Pvt Ltd, the
Indian subsidiary of Japanese auto
giant Toyota Motor Corporation, has
decided to increase its investment
at its upcoming second car
manufacturing plant near Bangalore
to Rs 3,200 crore. An additional
investment of Rs 1,553 crore would
be pumped in for both general
purpose and specalised equipment
necessary for manufacturing compact
cars in the new plant. TKM is
building its second plant at its
factory complex in Bidadi village
near The
Boston Consulting Group (BSG)
expects merger and acquisition
(M&A) opportunities for Indian
companies after the ongoing global
financial crisis settled down in
future. The bearish market
sentiments along with global
uncertainty have impacted M&A
deals in the current year.
Investment bankers say by the end of
2008, Cement
prices in the country are likely to
fall by Rs 10 from December-end
onwards on account of deteriorating
demand. Meanwhile, some dealers in
Mumbai have started offering a
discount of Rs 2-3 per bag due to
weak demand. The
overall recession and global
financial meltdown have cast its
shadows on truck major Ashok Leyland
Ltd (ALL). Following Tata Motors,
which announced closure of its
commercial vehicle plants for three
days, it is now ALL’s turn to
announce a three-day a week schedule
for its manufacturing plants. During
the past few weeks, medium and heavy
duty commercial vehicles market has
been facing problems of inadequate
funding and high interest costs.
Consequently market demand has come
down and the commercial vehicles
sales have dipped by 40
per cent. Kalpataru
Power Transmission is diversifying
into the agri-logistics business
through its subsidiary company,
Shree Shubham Logistics Ltd, with an
initial investment plan of Rs 140
crore. NTPC
and Nuclear Power Corporation is
planning to forma a joint venture
for two nuclear reactors with 1,000
MW each. JSW
Steel has announced that the company
will cut output by about 20
per cent to cope with the
current market conditions. The
company is the first among other
steel manufacturers to formally
announce a production cut. The
third largest drug manufacturer of
Japan, Daiichi Sankyo Co has
concluded the acquisition of Ranbaxy
by obtaining the full 63.92
per cent equity shares of the
company. External Sector Exports during September, 2008 were valued at US $ 13748 million which was 10.4 per cent higher than the level of US $ 12455 million during September, 2007. In rupee terms, exports touched Rs. 62641 crore, which was 24.7 per cent higher than the value of exports during September, 2007. Cumulative value of exports for the period April- September, 2008 was US$ 94973 million (Rs.405118 crore) as against US$ 72556 million (Rs. 296423 crore) registering a growth of 30.9 per cent in Dollar terms and 36.7 per cent in Rupee terms over the same period last year. Imports during September, 2008 were valued at US $ 24380 million representing an increase of 43.3 per cent over the level of imports valued at US $ 17009 million in September, 2007. In Rupee terms, imports increased by 61.9 per cent. Cumulative value of imports for the period April- September, 2008 was US$ 154744million (Rs. 661208 crore) as against US$ 111654 million (Rs. 456407 crore) registering a growth of 38.6 per cent in Dollar terms and 44.9 per cent in Rupee terms over the same period last year. Oil imports during September, 2008 were valued at US $ 9096 million which was 57.1 per cent higher than oil imports valued at US $ 5792 million in the corresponding period last year. Oil imports during April- September, 2008 were valued at US$ 55063 million which was 59.2 per cent higher than the oil imports of US$ 34590 million in the corresponding period last year. Non-oil
imports during September, 2008 were
estimated at US $ 15284 million
which was 36.2
per cent higher than non-oil
imports of US$ 11218 million in
September, 2007. Non-oil imports
during April- September, 2008 were
valued at US$ 99681 million which
was 29.3
per cent higher than the
level of such imports valued at US$
77064 million in April- September,
2007. The
trade deficit for April- September,
2008 was estimated at US $ 59771
million which was higher than the
deficit at US $ 39098 million during
April- September, 2007. Information Technology Nasscom
has projected the Indian animation
industry to reach $1.16 billion of
revenues by 2012. The industry is
currently worth $460 million and is
expected to grow at a CAGR of 27
per cent. The Indian
Animation and Gaming 2008 report
outlines shortage of skill-sets,
high cost of consoles and lack of
sufficient bandwidth along with the
limited appeal of Indian animation
films as some of the challenges
facing the industry. Telecom Faced
with criticism over stake sales to
foreign partners by telecom
start-ups, the government plans to
impose a three-year lock in period
on sale of promoters’ equity. The
lock-in will apply only in case of
sale of promoter equity and not when
investment is brought into the
company by a strategic investor by
subscribing to fresh equity. The new
lock-in provision will be confined
to companies that got licences to
launch mobile services earlier this
year and will not apply to
established telecom companies such
as Bharti Airtel and Vodafone Essar.
Earlier this year, the government
had issued licences to nine new
companies for Rs 1,651 crore each to
launch mobile telephony services.
These companies include Loop
Telecom, Swan, Unitech, Datacom,
Shyam Telecom and STel. Recently,
Swan offloaded 45
per cent stake to UAE’s
Etilsalat for $900 million while
Unitech divested up to 60
per cent stake to
*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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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