@ Overall Economy

India’s trade deficit stood at USD10.5 billion in October 2008 compared with USD10.6 billion in the previous month. Though the trade deficit is up by 61.2% yoy, the same remains largely flat on a m-o-m basis. With this, the year-till-date trade deficit has now widened to USD75.8 billion from USD45.5 billion in the comparable period of the previous fiscal.

In October, the country’s industrial production declined by 0.4%, the lowest in the past 15 years. This was well below the 5.5% growth seen in September and the 12.2% growth recorded during the period last year. The growth in the Index of Industrial Production (IIP) moderated to 4.1%, less than half the growth achieved in the comparable period of the previous year (9.9%). The growth in the capital goods segment came in at 3.1% despite a high base of the previous year. Meanwhile production in the manufacturing segment registered a decline of 1.2% on account of the high base effect of the previous year.

The government along with the central bank has announced a slew of measures to address the slowdown in the overall industrial activity and to restrict further moderation in growth. With the growth in industrial production entering the negative territory for the first time in 15 years, the RBI has announced further monetary easing measures in the form of a cut of 100 basis points in the repo and reverse repo rates. Besides the government has announced a fiscal stimulus package that includes additional planned expenditure to the tune of Rs 20k crore, interest subvention for export oriented industries and a cut in the central value-added tax (CENVAT) among other things. These moves are aimed at providing credit at lower costs and address the other issues threatening the overall economic growth.

Inflation cooled off significantly to 6.84% for the week ended December 06, after touching a record high of 12.91% in August. The substantial decline in the inflation rate primarily stemmed from a sharp decline in the inflation in the “fuel, power & light” category. With such a sharp decline, the inflation rate is already below the RBI’s target of 7.0% for FY2009. This allows the policy makers to shift their focus to growth and undertake several monetary easing measures to provide some stimulus to growth.

The regulators across the world continue to take unprecedented measures to curb the ongoing financial turmoil and provide stimulus to growth, which is moderating. After the USA, China and India too have announced stimulus packages to boost the domestic consumption in the wake of the slowing global demand as evident from the moderation in growth seen across countries.

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