Confederation of Indian Industry

November 2011 | Volume 16 | No. 8

CoNteNts
Global Section ..................................................................................... .....1
The month gone by witnessed the intensification of global uncertainties with the unfolding of the Greek drama and fear of contagion on the rest of the world. Fresh concerns rose on the possibility of Italy heading for a default on its massive government debt.

Nation Now: Monetary And Liquidity Conditions ........................................5

RBI hiked monetary policy rates for the twelfth time since April 2010 Repo Rate stood at 8.5% and Reverse Repo stood at 7.5%. The Index of Industrial Production slumped to a two year low of 1.9% in September, attributed primarily to the poor performance of manufacturing and mining sectors. Indias headline inflation (WPI) continued its upward trend for the month of October 2011 and stood at 9.73% as compared to 9.08% in the corresponding period last year. Corporate results showed a dismal picture , reporting a sharp decline in profits in the second quarter of 2011-12 despite sales growth remaining high.

Sector In Focus: Roads And Highways ......................................................12

India has the second largest road network in the world with approximately 4.24 million kilometers of road network. The Indian road network comprises of four major types of roads Highways, Rural Roads, Urban Roads and Project Roads. The total road length stood at 41,09,592 km in 2008. According to the Ministry of Finance statistics, road projects accounted for 60.0% of the 450 PPP infrastructure projects and 45.0% of Rs 224,000 crore (US$ 45.81 billion) project costs of all the infrastructure projects. The Government has taken various policy initiatives like Tax and FDI to encourage the development of this sector. The 12th Plan is expected to lay down various measures that further enhance this critical sector.

Special Feature: National Manufacturing Policy ...........................................23

The Indian government approved a long-debated manufacturing policy on October 25, 2011 Main objectives of the policy include; enhancing manufacturing growth, employment, skill development, competitiveness and environmental sustainability. The major policy instruments proposed in the policy include; introduction of National Manufacturing Investment Zones, ease in business regulations, establishment of a Technology Acquisition and Development Fund and industrial training.

foreword
There is now renewed pressure on global economic growth resulting from the debt crisis in the Eurozone. As a consequence of the recent turn of events in the global economy, investors turned risk averse resulting in a bout of capital outflows from emerging markets including India. As a result, the Rupee has weakened considerably, falling by 15% in a period of 3 months, making it the worst performing currency in Asia. There is now much speculation about the levels it could go to. One major concern that arises from this trend is that it will offset any benefit from the softening of global commodity prices, making it harder for the RBI to tame inflationary pressures. This makes it difficult to understand why the RBI did not intervene earlier to limit the extent of the depreciation. The rupee depreciation has also highlighted the weaknesses that the Indian economy is currently facing slowing growth, stubborn inflation and rising Budget deficits. Urgent action is required to initiate supply-side reforms that will renew growth and tame inflation. In this context, CII strongly supports the Governments efforts in this direction such as the announcement of the New Manufacturing Policy and Cabinet clearance to allow 51% FDI in multi-brand retail.

Chandrajit Banerjee Director General, CII

global treNds

the greek drama adds to global turbulence

The month gone by saw the intensification of global uncertainties with the unfolding of the Greek drama and fear of contagion on the rest of the world. The EU summit held in Brussels aimed to put into place measures that overcome present difficulties in Euro zone and take the necessary steps for the completion of the countries economic and monetary union. In order to address the burgeoning debt, the plan agreed upon in the Summit had three main tennets: In dealing with the debt crisis in Greece, the 1. Addressing Greeces sovereign debt with a focus on Private Sector Involvement (PSI). 2. Bolstering the capacity of the European Financial Stability Fund (EFSF). European Financial Stability Fund (EFSF) the 3. Measures to enhance the banking sector Addressing Greeces debt the main objective underlined in the Summit was the effort to reduce Greek debt to 120% of GDP by 2020. This is size of the EFSF is expected to be enhanced to Euro 1 trillion, to ensure fiscal stability in the euro area. Two major ways have been proposed to carry out this process one, providing credit enhancement to new debt issued by member first step is the haircut on debt held by investors. This is expected to be followed up with another round of bailout funds to the country, possibly following a fresh round of austerity measures. currently 160%+ and could peak at close to 180%. In order to achieve this, private investors of Greek Sovereign Bonds, mostly European Banks, would be required to write off 50% of the face value of these bonds. Further, EU member countries would contribute to the PSI package up to Euro 30 billion. This is expected to make available funds worth Euro 100 billion by 2014 to Greece, including the required recapitalization of its banks. These measures are expected to be supported by privatization revenue and mechanisms for monitoring program implementation.

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states and two, seeking funds from private and public financial institutions and investors, which can be arranged through Special Purpose Vehicles. Enhancing the banking sector guarantee on bank liabilities and a coordinated

approach regarding entry criteria, pricing and conditions for banks to access term funding, a higher capital ratio of 9% and all public support being subject to the conditions of the special state aid crisis framework were the measures proposed to strengthen the banking system.

the greek referendum- to be or not to be

Post the announcement of the Greece Bailout package, Greek Prime minister George Papandreou, unexpectedly announced a referendum on the same, citing that the future of Greece would be decided by the Greeks. However, the referendum was more to do with whether Greece would continue to be part of the Euro Area or not. This bewildering pronouncement took the global economy by shock and stock markets across continents plunged downwards. The biggest concern with the referendum was that, given the globalised setting today, Greece which is a small contributor to Euro areas GDP and trade, has in its capacity to create a ripple effect which would result in other economies falling out of the Euro zone. Also, the prospect of a vote that could pave the way for an exit from the euro, and a disorderly default, had pushed the Greek government to the brink of collapse. A Greek default would alarm investors Subsequently, there was a change in the Greek government and a new coalition government was formed, headed by former European Central Bank vice-president Lucas Papademos. Political uncertainties in Greece have made European leaders walk a tight rope and have added substantially to financial volatility in an environment where global uncertainties have been ballooning. in other indebted nations, such as Portugal and Italy, and might trigger the very financial meltdown the authorities have been striving to avoid. European bank shares, which rallied on initial news of the deal, slumped again on the referendum news. There was also the risk that depositors will shift their funds from banks in weak countries to safer havens. However, the Greek Prime minister called off the referendum on Greeces new debt deal after winning a measure of support from his opposition.

Italys debt Crisis: too big to be rescued

There are renewed concerns that Italy could default on its massive government debt. As investors lose faith that Italys leaders will get their finances in order, Italy has to offer a higher interest rate on its bonds just to borrow enough money to get by. On Wednesday 9th November, 2011, Italian 10-year bond yields spiked above 7%, the tipping point at which economists say a countrys debt becomes unsustainable. Shortly after Greece, Portugal, and the Irish Republic hit that level, they had
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to be bailed out. In April 2010, 10-year bond yields in Greece hit 7%; within a month they had reached 12%, prompting Greeces first bailout package. In Ireland, 10-year bond yield hit 7% in November 2010; a month later it had risen above 9%, triggering a bailout. In Portugal, yields hit 7% in November 2010; the bailout came in May. The surge in Italian bond yields was eventually capped by the European Central Bank, which
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intervened in the markets to buy limited quantities of Italian debt. But analysts say the ECB will eventually have to step up its action, and act as a lender of last resort to bring interest rates down to pre-crisis levels. The ECB is seen as the only institution with the firepower to rescue Italy, because the EU lacks the resources to bail out such a large economy. The Italian debt crisis has shaken world markets across the globe as investors are concerned on account of the fact that Italy is too big to be bailed out by European leaders. Italy is the eighth largest economy in the world and the fourth largest in Europe. Its gross domestic product (GDP) was over $2trillion in 2010. Italys debts on the other hand stand at US$2.2trillion, or 120% of GDP As a matter . of fact, Italy owes its creditors more than

Greece, Ireland, Portugal, and Spain combined owe. Analysts at Capital Economics calculate that if Italys cost of borrowing continues to soar, it will have to raise around 650bn ($880bn) for the next three years or so. If the government also received loans to provide its troubled banking sector with additional capital buffers, the bill could end up being closer to 700bn. Clearly it doesnt have that cash, so it will have to turn to the European Financial Stability Facility (EFSF), but the EFSF doesnt have unlimited cash and a multi-year financing programme for Italy would seriously deplete funds. Also, the bailout fund is backed by Euro big economies including Germany, France and Italy. Therefore, Italys debt crisis brings into focus the need to look into new sources to fund the EFSF.

The new guarantee commitment contribution per country is as follows

New EFSF Guarantee Austria Belgium Cyprus Estonia Finland France Germany Greece Ireland Italy Luxembourg Malta Netherlands Portugal Slovakia Slovenia Spain Total Commitments ( m) 21,639 27,032 1,526 1,995 13,974 158,488 211,046 21,898 12,378 139,268 1,947 704 44,446 19,507 7,728 3,664 92,544 779,783 New EFSF Contribution Key (%) 2.8 3.5 0.2 0.3 1.8 20.3 27.1 2.8 1.6 17.9 0.3 0.1 5.7 2.5 1.0 0.5 11.9 100.0 EFSF Amended Guarantee Commitments ( m) EFSF amended contribution Key* (%) 21,639 27,032 1,526 1,995 13,974 158,488 211,046 139,268 1,947 704 44,446 7,728 3,664 92,544 726,000 EFSF amended contribution key* (%) 3.0 3.7 0.2 0.3 1.9 21.8 29.1 0.0 0.0 19.2 0.3 0.1 6.1 0.0 1.1 0.5 12.8 100.0

Source: EFSF Note: * The amended contribution key and Amended Guarantee Commitments take into account the stepping out of Greece, Portugal and Ireland

A major concern with Italy s collapse is that borrowing costs would spiral upwards across Europe, and spread the crisis to
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other big economies, such as France. It is also speculated that to pay off its debts, Italy might have to abandon the euro
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and pay its creditors with a new domestic currency, at a one-to-one exchange. Such a move would result in the currency to drop in value, which would finally determine how much Italy s default would cost the banks and other investors that lent in euros. The growing fear is that, if Italy defaults, the losses could cripple Europes financial system and spark runs on banks in Italy, then in other debt-burdened countries. This would subsequently send shock waves around the world. The ongoing debt crisis which has spiraled out of control has brought to focus the existential threat to the eurozone. There are already preliminary talks by Germany and France on a break-

up of the eurozone, amid fears that Italy is too big to be rescued. Political uncertainties exacerbated in Italy as well. Continued controversies regarding the flamboyant Silivio Berlusconi, finally resulted in his forced resignation and the appointment of economist Mario Monti, as the prime minister of Italy. The 68-year-old former European Union commissioner won the backing of Berlusconis political party and Italys largest left-wing party. Mario Monti, recently announced that he has formed a new Italian Government, opting to put technocrats instead of bickering politicians in his cabinet to enact reforms that can save the country from financial disaster.

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NatIoN Now: moNetary aNd lIquIdIty CoNdItIoNs

rbI increases interest rates

Given the current macro-economic conditions, RBI went ahead in its second quarter Monetary Policy Review in October with a 25 basis point hike in repo rate from 8.25% to 8.5%. Consequently the reverse repo rate stands automatically adjusted to 7.5% and the Marginal Standing Facility (MSF) rate at 9.5%. This is the twelfth hike in policy rates since April 2010.

Revision in Policy Rates since April 2010

Effective Date 20-Apr-10 24-Apr-10 27-Jul-10 16-Sep-10 2-Nov-10 25-Jan-11 17-Mar-11 3-May-11 16-Jun-11 26-Jul-11 16-Sep-11 25-Oct-11 Repo rate 5.25 5.5 5.75 6.00 6.25 6.50 6.75 7.25 7.50 8.00 8.25 8.5 Reverse Repo rate 3.75 4.00 4.50 5.00 5.25 5.50 5.75 6.25 6.50 7.00 7.25 7.5
Source: RBI

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The decision to continue with a tight monetary stance was based on two considerations. First, both inflation and inflation expectation have remained above the comfort level of the Reserve Bank. RBI expects these levels to remain elevated in the coming two months. The second consideration that shaped the policy decision is that growth is clearly moderating on account of the cumulative impact of past monetary policy actions. According to the Central Bank, as inflation begins to decline, there will be growing room for the policy stance to give due consideration to growth risks, within the overall objective of maintaining a low and stable inflation environment. RBI has also projected that inflation will be falling in December 2011 and then continue down a steady path to 7% by March 2012. It is expected to moderate further in the first half of 2012-13. This reflects a combination

of commodity price movements and the cumulative impact of monetary tightening. Further, moderating inflation rates are likely to impact expectations favorably. These expected outcomes provide some room for monetary policy to address growth risks in the short run. However, on the downside, several factors such as structural imbalances in agriculture, infrastructure capacity bottlenecks, distorted administered prices of several key commodities and the pace of fiscal consolidation combine to keep medium-term inflation risks in the economy high, says the RBI. Also, the central bank highlights in its second quarter monetary policy review that, these risks can only be mitigated by concerted policy actions on several fronts. In the absence of progress on these, over the medium term, the monetary policy stance will have to take into account the risk of inflation surging in response to even a moderate growth recovery.

september Industrial Production falls to two year low

The Index of Industrial production fell to 1.9% in September 2011, lowest in two years; mainly due to poor output from the manufacturing sector particularly the capital goods sector and contraction in mining. Also, the IIP figure for August this year has been revised downward to 3.6% from the provisional estimate of 4.1%. The sharp deceleration in IIP growth reaffirms the slowdown in the economic activity.

The new guarantee commitment contribution per country is as follows

IIP Mining Manufacturing Electricity Basic Goods Capital goods Intermediate Goods Consumer Durables Consumer-non Durables Sep-10 6.1 4.3 6.9 1.8 3.5 7.2 4.6 14.2 5.8 Sep-11 1.9 -5.6 2.1 9.0 4.5 -6.8 1.5 8.7 -1.3 Apr-Sep 2010 8.2 7.2 8.8 3.8 4.7 16.4 8.4 15.9 3.8 Apr-Sep 2011 5.0 -1.0 5.4 9.4 6.9 4.6 1.4 5.2 3.8
Source: MoSPI

September data shows that manufacturing sector, which contributes over 75% of the index

grew at a dismal rate of 2.1%, lowest since October 2009, while Mining and Quarrying

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decelerated by 5.7%. The mining sector continued to post a decline for two consecutive months primarily led by the sharp fall in coal production. Coal production fell 17.8% in September 2011 compared to a decline of 1.8% in September 2010. Rain in key coal mining areas and a strike in state-run Coal India could have hurt output during the month. Electricity on the other hand recorded a robust growth of 9.0% as compared to a mere 1.8% in September 2010. Looking at a longer term, for the period April-September 2011, the overall index of industrial production moderated to 5.0% as compared to 8.2% achieved in the same period last year. This reinstates that rising input costs and interest rates has taken a toll on factory output, and it is not short term volatility.

Use based classification reveals that all sectors except Basic goods recorded a decline or stagnancy in production, both in the short term (September) and in the longer term (April-September). Fo r the period April-September 2011, growth in capital goods production fell to 4.6% as compared to a robust 16.4% in the same period last year, pointing to the fact that rising interest rates, high inflation and weak global and domestic sentiment is taking its toll on the investment activity. Rising interest rates have also taken a toll on Consumer Durables production, which recorded considerable moderation from 15.9% in April-September 2010 to 5.2% in the same period this fiscal. Also, Consumer Non-Durables have remained stagnant at 3.8% in the specified period, suggesting that persistently high inflation is affecting real income, which in turn has moderated consumer demand.

Index of Industrial Production (Y-o-Y Growth)

16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 1.6
Mar-10 Mar-11 May-10 May-11 Nov-09 Nov-10 Sep-09 Sep-10 Sep-11 Jan-10 Jan-11 Jul-10 Jul-11

15.0 10.0 11.4 8.7

1.9

Source: MOSP

The 2-digit classification shows a fair amount of diversity in the performance across sectors. 9 out of 22 manufacturing sectors reported

negative growth in April-September 2011, while 4 sectors grew above 10% and 6 sectors grew at the range 0-10%.

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Y-O-Y IIP Growth in April-September 2011 (2-Digit Level)

Sectors Reporting Negative Growth in April-September11 -0.6 -1.0 -1.3 -2.1 -2.1 -2.7 -3.5 -3.8 -6.0 Publishing, Prin ng & reproduc on of recorded media Luggage, handbags, Saddlery, Harness & footwear Paper & Paper products Coke, rened petroleum products & nuclear fuel Radio, TV and Communica on Equipment & Apparatus Other Non-Metallic Mineral Products Furniture Other Transport Equipment Basic Metals Fabricated Metal products, except machinery equipments Motor vehicles, trailers & semi-trailers 14.2 14.1 13.7 0.1 17.6 2.3 5.7 5.4 5.1 7 Chemical & Chemical Products Tobacco Products Rubber & Plas c Products Tex les Machinery & Equipment Medical Presicion & Op cal Instruments, Watches & Clock Wood & products of wood excwpt furniture Electrical Machinery & Apparatus Wearing Apparel 9 Sectors Reporting 0-10% Growth in April-September11
Source: MOSPI

Sectors Reporting >10% Growth in April-September11

Inflation Continues to hover around 10%

Indias headline inflation (WPI) continued its upward trend for the month of October 2011 and stood at 9.73% as compared to 9.08% in the corresponding period last year and at about the same level of 9.72% for September 2011, on account of costlier food and fuel. While inflation in Primary Articles fell moderately in October 2011 to 11.4% as compared to 11.8% in September 2011, inflation in Manufactured Products continued to grow at 7.7% same a the previous month,
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inflation in Fuel and Power increased from 14.1% in September to 14.8% in October 2011. Fuel and Power inflation in October 2010 was 11.0%. The rise in Fuel inflation is mainly on account of 27.9% rise in petrol prices in October 2011 against 16.7% seen during October 2010. Within Primary articles, Food Inflation accelerated to 11.1% in October, highest in nine months, on account of increase in inflation of Food grains (5.6%), Vegetables (21.8%), Milk(11.1%),
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Eggs, Meat and Fish(12.6%) and Condiments and Spices(4.1%), as compared to the previous month. While prices of vegetables, milk, eggs and meat have been high in the last few months, what is worrying is that- inflation in food-grains are also showing an upward trend. Food-grain inflation which stood at 1.6% in June 2011 has risen moderately in the consecutive few months and has reached 5.6% in October 2011. On the supply side, due to the encouraging monsoons in 2011, agricultural production outlook is very strong for FY12. According to

the First Advanced Estimate of major crops grown in Kharif season, total food grains production is likely to be 123.88 million tonnes (MT) as compared to 120.20 MT in 2010-11 (fourth advance estimates). over the last estimates. It represents an increase of about 3.68 MT Also, for FY12, the agricultural ministry expects to surpass Indias own production record set last year. Given, the positive outlook for the agriculture sector, the Government needs to closely look into the distribution side of food-grains to prevent any mismatch between demand and supply in the open market.

Wholesale Price Index (y-o-y growth)

20.0 15.0 10.0 5.0

Mar-11

Jun-11

Jul-11

May-11

Aug-11

Dec-10

Jan-11

Feb-11

Apr-11

Sep-11

Oct-10

All

Nov-10

Primary Articles

Fuel & Power

Manufactured products
Source: Office of Economic Adviser

Corporate performance deteriorates in q2

Corporate results from a sample of 2,249 companies show a dismal picture. Fears of deterioration in the performance of the corporate sector since the onset of this ongoing financial year have been proven right. The sector reported a sharp decline in profits in the second quarter of 2011-12 despite sales growth remaining high. In fact, aggregate profits in Q2 2011-12 were the lowest in the last six quarters. This is primarily attributed to high input costs and high interest expenditure resulting in a squeeze on margins. Companies are reeling under the pressure of high input costs resulting in restricted profit growth. Expenditure has increased considerably on most heads including raw materials and interest expenditure. Increase in raw material expenses is mainly on account of sustained high commodity prices internationally despite slowing global growth and domestically due to high inflation. In addition, interest expenditure has also gone up considerably as a result of the tight monetary policy. As a result, total expenditure as percentage of sales has gone up from 77.4% in 2009-10 to 78.5% in 2010-11 and further to 79.4% in 2011-12 so far. These factors have also restricted the operating profitability of companies.

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Oct-11

0.0

India Inc. Profit & Sales Growth (%)

25.38 27.25 30 25 20 15 10 -4.94 5 0 2009-10 Q2 2009-10 Q3 2009-10 Q4 -5 -10 46.87 40.54 13.73 60 22.01 2.65 -10.81 2010-11 Q1 2010-11 Q2 2010-11 Q3 2010-11 Q4 2011-12 Q1 2011-12 Q2 -37.29 50 40 30 20 11.62 10 0 -10 -20 -30 -40 -50

20.56

42.86 18.28

10.66

Net Sales (yoy Growth)- LHS

19.28

19.77

PAT Growth (yoy)- RHS

Source: Ace Equity Database

The Impact of increase in expenditure is reflected in a moderation of profit margins. Both the operating profit (PBDIT) margin and the

net profit (PAT) margin have been sliding since Q2 2010-11. Profit margins in Q2 2011-12 were lowest in the last five quarters.

Profit Margins
12% 11% 10% 9% 8% 7% 6% 5% Q2 2009-10 Q3 2009-10 Q4 2009-10 Q1 2010-11 Q2 2010-11 Q3 2010-11 Q4 2010-11 Q1 2011-12 9.4% 19.7% 19.2% 9.6% 9.0% 7.8% 16.3% 6.3% 5.8% Q2 2011-12 16.1% 18.1% 20.2% 20.2% 11.3% 19.4% 18.5% 9.1% 8.8% 21% 20% 19% 18% 17% 16% 15%

PAT Margin (LHS)

PDBIT Margin (RHS)

Source: Ace Equity Database

The slowdown is visible across most of the major sectors. PAT has declined compared to the same period of the previous year for many of the major sectors such as Auto & Auto parts, Consumer Durables, Health Care

& Pharmaceuticals, Media & Entertainment and Metals & Minerals and Textiles, Paper, Leather, Rubber & Wood. Profit growth has declined sharply to low single digits in the case of Capital goods.

22.61

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PAT Growth (yoy) in Major Sectors

40% 30% 20% 10% 0%
Texile, Paper, Leather, Rubber & wood Health Care & Pharma Auto & Auto Parts Ferlizers & Chem. Cons. Durables Metals & Min. Capital Goods IT & Telecom Const & Const Mat. Media & Entert. Banks & FS Power

-10% -20%

Q1 2011-12

Q2 2011-12
Source: Ace Equity Database

What is more worrisome is the turbulent time ahead which corporate India has to battle in the coming quarters. There are indications of a slowdown in domestic demand in the coming quarters due to slowing overall economic growth and lagged effect of the tight monetary policy. Moreover, export growth

which has remained robust in the last one and a half years, is facing downward risks as a result of economic uncertainties in the US and Europe; Indias major trade destinations. Further, while the depreciating rupee would help exporters, it will exacerbate the problem of rising input costs.

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Hotels & Retail

Oil & Gas

FMCG

seCtor IN foCus: roads aNd hIghways

sector overview
India has the second largest road network in the world with approximately 4.24 million kilometers of road network. In India, road transport is considered to be one of the most cost effective and preferred mode of transport, both for freight and passengers, keeping in view its level of penetration into populated areas. Easy availability, adaptability to individual needs and the cost savings are some of the factors which go in favour of road transport. Between 1950 and 2004, the Indian roads sector has grown at an average annual rate of 4.6% whereas motor vehicles have grown at a rate of 10.9%. As per the present estimate, the road network carries nearly 60.0% of freight and 87.4% of passenger traffic. However, the capacity is not enough and there is a mismatch between demand and supply of roads. Further, it is projected by Planning Commission (Secretariat for Infrastructure) that passenger traffic will grow at the rate of 12-15% and cargo traffic by 15-18%. The rapid expansion Both union and state governments are making all possible efforts to encourage investment in the roads sector and to bridge the gap between supply and demand of roads. To improve and expand the existing infrastructure, Indian Government spent about Rs. 2,78,658 crore during the 11th five year Plan, up by 119.2% from the 10th Plan outlay of Rs. 1,27,107 crore. In budget 2011-12, total allocation (Centre, State and UTs) for the Ministry of Road Transport and Highways has been enhanced by about 9.0% to Rs. 29,747.8 crore from Rs.27,348.8 crore earmarked in the Budget 2010-11. Furthermore, there has been an increase in the share of Plan Expenditure in total budgetary allocation from 72.7% in 201011 to 74.8% in 2011-12.
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and strengthening of the present road network, therefore, is imperative, to handle both present and future traffic and for improved accessibility to the hinterland.

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Investment in Roads during the 10th and 11th Five Year Plan (Rs. Crore at 2006-07 prices)
10th Plan (Actual) Centre States Private Total 50,468 67,416 9,223 1,27,107 40% 53% 7% 100% 11th Plan (Original Projections) 1,07,359 34% 1,00,000 32% 1,06,792 34% 3,14,152 100% 11th Plan (Revised Projections) Apr-Sep 2011 90,916 33% 1,41,855 51% 45,887 16% 2,78,658 100%
Source: Planning Commission

Indian road Network

The Indian road network comprises of four major types of roads Highways, Rural Roads, Urban Roads and Project Roads. Highways consist of Expressways, National Highways, State Highways, Other PWD Roads and Panchayati Raj Roads. The primary road network consists of National Highways (70,934km as of March, 2010) and Expressways (200km as of March, 2010) which form just 2.0% of total road network but carry 40.0% of the total road traffic. State Highways (1,54,522 km as of March, 2008) comprising of 4.0% of the road network also carry a substantial percent of road traffic. The State Highways connect National Highways, district headquarters, important towns, tourist locations and minor ports. The focus of this article is on the above two main types of roads which carry the burden of the nations road traffic National Highways and State Highways.

Road Length, 2010

National Highways/ Expressway 70,934 km

Category-wise Road Length in India, 2010

2% 26% 4%

21%

State Highways

1,54,522 km
7%

Major and Other District Roads

25,77,396 km

7% 33% National Highways Urban roads Project Roads Rural Roads (JRY and PMGSY)

Rural Roads

14,33,577 km

State Highways Other PWD Roads Panchyati raj Roads

Note: National Highways numbers have been updated in 2010 but all other numbers are from 2008. Source: Ministry of Road Transport and Highways

length of roads
The total road length in India has increased significantly from 3,99,942 km as on March 31, 1951 to 41,09,592 km in
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March 31, 2008. Concomitantly, surfaced road has also increased from 1,57,177 km to around 20,36,063 km over the same period resulting

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in the improvement of its share in total road length. The share of surfaced road has surged to 49.5% in March 31, 2008 from 39.3% in March 31, 1951. The total road length has expanded considerably since 1970s. It has increased from 9,14,979 km in March 1971 to 41,09,592 km in March 2008 - an increase of

349.2% over 37 years, yielding a compound annual growth rate of 4.1 %. Though the expansion in road length has been significant during 1971 to 2008, however, the decadal compound annual growth rate has moderated considerably from 5.7% in 1970s to 3.2% during 2000s. This is attributable to the better and increasing connectivity within India with each passing decade.

Total Road length and its Growth Rate (1950-51 to 2010)

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 Total Length of the Roads (in 000'Km) 5.7% 5.0% 4.6% 3.8% 2.7% 1,485 2,331 3,374 4,236 400 524 915 2.6% 6.0% CAGR of Roads 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

1951

1961

1971

1981

1991

2001

2010

Total Length of the Roads (in 000'Km)

CAGR of Roads
Source: Ministry of Road Transport and Highways

Category-wise break-up of total and surfaced roads

The table below gives a snap shot of progress in expansion of road length under different categories between the years 1971 and 2008. The table shows that there has been more than five fold increase in the total surfaced road length which grew from 3,97,948 km (accounting for 43.5% of the total road length) in 1971 to 20,36,063 km (accounting for 49.5% of the total road length) in 2008. The category wise classification of road length exhibits that the length of National Highways has increased from 23,838 km to 66,754 km an increase of over 180 % or CAGR of 2.8% in the same period whereas, State Highways has expanded from 56,765 km to 1,54,522 km (an increase of over 172 % or CAGR of 2.7%). Urban roads extended in length from 72,120 km to 3,04,327 km reflecting an increase of over 322.0% or
Jawahar Rozgar Yojana Pradhan Mantri Gram Sadak Yojana

CAGR of about 4.0%. The highest growth during the reference period, however, has been noticed in case of Rural Roads which have increased from 3,54,530 km to 24,50,559 km (including 10,61,809 km roads constructed under JRY1 & PMGSY2) registering an increase of nearly 591.0% and a CAGR of 5.4%. Project roads exhibited the lowest expansion from 1,30,893 km to 2,70,189 km resulting in a growth of 106.0% and a CAGR of just about 2.0%. Furthermore, it is important to note that by March 31, 2008, only half of the Indian roads were surfaced roads on account of sizeable improvement in case of National and State Highways and to an extent in Urban roads. Rural roads and Project roads which together constitutes more than three fifth (66.2%) of

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the total road length in India have just about 33.0% of their roads as surfaced roads. Such a poor state of progress calls for concerted efforts to hasten the pace of improving the

quality of roads. Poor condition of roads has been taking a toll on the cost effectiveness and the opportunity cost of transportation from rural and interior places.

Category-wise break-up of Total and Surfaced Roads (in Km)1971 & 2008 (As of 31, March)
Year/Category A. Highways National Highways State Highways B. Rural Roads C. Urban Roads D. Project Roads Total Roads Total/Surfaced T S T S T S T S T S T S T S 1971 7,11,966 3,38,483 23,838 23,276 56,765 51,744 3,54,530 72,120 53,359 1,30,893 6,106 9,14,979 3,97,948 2008 24,73,267 14,04,122 66,754 66,754 1,54,522 1,52,738 24,50,559 8,10,258 3,04,327 2,12,750 2,70,189 74,180 41,09,592 20,36,063

Note: T-Total road length, S- Surfaced road length Source: Ministry of Road Transport and Highways

quality of Indian roads

The quality of Indian roads is examined in the table below which shows roads by type of surface. National Highways are completely surfaced with either Bitumen or Cement (B.T/ C.C). Majority (97.8%) of the State Highways are surfaced with either Bitumen or Cement whereas about 0.2% of State Highways are non-motorable unsurfaced roads. Furthermore, out of total highway length 56.2% are Panchayat Raj Roads. 66.5% of these Panchayat roads are unsurfaced and 46.3% of which are non-motorable which clearly highlights that the condition of roads in India is still a cause of concern. In addition, there are still a large number of unsurfaced motorable urban roads which probably shows their poor quality and the amount of investment required in this area. Large proportions (72.5%) of project roads are Although the artery of Indias road network, National Highways and State Highways are surfaced, there is a large variation in other types of roads. It is not enough to build roads but they have to be of the minimum quality to be able to transport cargo and passengers in time. Additionally, the impact of poor quality of roads in India has been felt in terms of poor connectivity and increase in the overall transportation cost that has ripple effects in terms of rise in the prices of products. Besides, this is a drain on the exchequer as every year huge expenditure is incurred on repair and maintenance of these roads instead of extending the overall road network. still unsurfaced but about three fifth of them are found to be motorable.

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Road Length by Categories and by Type of Surface in India (in Km)(As of 31, March 2008)
Year/Category Total Surfaced Total WBM B.T./C.C. Total Unsurfaced Motorable Nonmotorable

A. Highways A.a. PWD Roads National Highways State Highways A.b. Panchayat Raj Roads B. Rural Roads C. Urban Roads D. Project Roads Total Roads*

24,73,267 10,84,517 70,934 1,54,522 13,88,750 1,61,809 3,04,327 2,70,189 32,09,592

14,04,122 9,38,875 70,934 1,52,738 4,65,247 1,61,809 2,12,750 74,180 18,52,861

2,75,339 76,820 0 1,579 1,98,519 0 48,360 33,798 3,57,497

11,28,783 8,62,055 70,934 1,51,159 2,66,728 0 1,64,390 40,382 13,33,555

10,69,145 1,45,642 0 1,784 9,23,503 0 91,577 1,96,009 13,56,731

5,82,305 4,86,840 86,690 58,952 0 0 1,499 285 4,95,615 4,27,888 0 0 68,150 23,427 1,17,524 78,485 7,67,979 5,88,752

Note: (*) Does not include 900,000 km of roads under Jawahar Rozgar Yojana Scheme (JRY). Source: Ministry of Road Transport and Highways

As per the report by National Transport Development Policy Committee headed by former RBI deputy governor Rakesh Mohan, Poor maintenance of roads costs the country about Rs 35,000 crore annually and erodes some 40,000 km of rural roads and 10,000 km of secondary roads. The

current replacement value is estimated at a massive Rs 9,00,000 crore by this report. Furthermore, describing the road policy as a vicious cycle of build, neglect and rebuild, the report says that bad roads increase vehicle operating costs to the tune of about Rs 20,000 crore annually.

Public Private Partnership in roads a success story

A c c o r di n g to th e M i n i s tr y of Fi n a n c e statistics, road projects accounted for 60.0% of the 450 PPP infrastructure projects and 45.0% of Rs 224,000 crore (US$ 45.81 billion) project costs of all the infrastructure projects.

PPP Progress in National and state highways a) National highways

National Highways Authority of India (NHAI) has so far awarded nearly 180 projects worth US$ 27.0 billion under the public-private partnership model, with scope for increased private sector participation. NHAI has set a target of awarding contracts for 7,300 km, during the financial year 2011-12, most of which would come under the purview of NHDP Phase IV.

b) state highways
73 state highways projects with an investment of US$1.9 billion have been completed through PPP model as on May 2010. Gujarat has completed a maximum of 16 projects, followed by Andhra Pradesh with 13 projects
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and Madhya Pradesh with 12 projects. 62 state highway projects with an investment of US$12.53 billion are currently under implementation. This includes two major
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expressway projects in Uttar Pradesh (Yamuna expressway US$ 2.2 billion and the Greater Noida-Balia expressway US$ 6.7 billion). Andhra

Pradesh is implementing a maximum number of 18 projects, followed by Maharashtra with 12 projects and Madhya Pradesh with 10 projects.

Policy Initiatives
Major initiatives are as follows:z 100% FDI under the automatic route is permitted for all road development projects. The cumulative inflows during April 2000 to August 2011 amounted to US$ 9.4 billion, accounting for 6.0% of the total FDI equity inflows. z 100% income tax exemption applicable for highway widening projects for a period of 10 years. z Government to provide capital grant up to 40.0% of project cost to enhance viability on a case to case basis. z Model Concession Agreement formulated. z IIFCL to provide funding up to 20% of project cost. z Full exemption from basic customs duty to bioasphalt and specified machinery for application in the construction of national highways. z An outlay of Rs. 600 lakhs has been provided for R&D in 2010-11, of which Rs.57 lakhs had been incurred up to December 2010. z Right to retain toll. z Declare road sector as an industry. z Relaxed external commercial borrowing norms. z Permitted duty free import of high capacity and modern road construction equipments. z Government to bear the cost of the project feasibility study related to land acquisition, shifting of utilities, environment clearance, cutting of trees, etc. In addition, government has announced several other measures to attract private participation which includes:z Allowed issue of tax free bonds to the tune of Rs 300 billion by various Government undertakings including NHAI, would further support infrastructure financing (budget 2011-12). z FII investment cap in corporate bonds issued by infrastructure companies raised to US$ 25 billion from US$ 20 billion with residual maturity of 5 years (budget 2011-12).

sector outlook
Though India has the second largest road network in the world, concerns are expressed over the deficit in terms of the quality as well as the length of road network in the country. According to Ministry of Roads, Transport and Highways, The National Highways (NH), with a total length of 70,934 km, serves as the
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arterial network of the country. Much of this network has suffered from prolonged neglect and requires significant augmentation through widening and upgradation. The Government has set an ambitious target of upgrading 20 km of National Highways per day. This implies a length of 7,300 kms in a year.
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Going by the current status, there is an imperative need to make an intense and sustained effort to ensure that this deficit is bridged. National Highways Development Programme (NHDP) which envisages six-laning of 6,500 km, four laning of 24,700 km and upgradaing of 20,000 km of National Highways along with the development of 1,000 km of expressways, has so far been able to witness completion of about 15,000 km of length and about 10,000 km is under construction. Over the next three years, it is proposed to take up new sections of about 25,000 km, through

a combination of PPP and EPC3. In addition, Ministry for Road Transport and Highways is looking forward to build a huge network of expressways of 17,661 km to connect areas with high traffic capacity by 2022. Given the poor achievement rate, these appears to be ambitious targets, however, the thrust laid in the 12th Plan approach paper and the recent government proposal to award road contracts on EPC basis with an inbuilt mechanism of bringing road contractors under 5 years of defect liability brings a ray of hope.

12th Plan approach Paper emphasis on the following aspects:z Development of the State Highways and District roads along with National Highway network to ensure full connectivity. z For greater, active and accountable involvement of sates, each state is expected to prepare an effective five year plan for the state and lower level road networks as a part of a long term twenty year plan for network development. z Resources needed for road development will be mobilized by the Centre and the States for their respective spheres. z Public Private Partnership model would remain an important instrument in the 12th Plan. The government is estimating an investment of over Rs 2.64 lakh crore in the road sector during the 12th Five-Year Plan (2012-17). Of which more than three fifth (65%) is expected to come from the private sector.

Besides, widening and upgrading the roads, the government should also consider ensuring fast and smooth traffic flow by reducing the number of barriers, adoption of uniform documentation and electronic check-posts to reduce paperwork and delays and introduction of uniform integrated tolling systems where vehicles need to only slow down rather than completely stop and wait in queues for collection of toll at toll gates. A TCI -IIM joint study (2009) states
4 5

as compared to developed nations. Commercial vehicles in India cover on an average 250300 km per day, whereas the counterparts in developed nations travel more than double the distance. In case of trucks, Indian trucks cover 250-400 km per day versus 700-800 km in developed countries which has an impact on fuel costs as well. As per this study, fuel worth Rs 100-150 billion is wasted on highways and check posts annually due to interstate and intrastate check post delays, stringent document requirements etc.

that due to inadequate road infrastructure, the average trucking speed is much lower in India

Engineering, Procurement and Construction Transport Corporation of India Ltd (TCI) and IIM Kolkata (IIM-K) 5 http://www.projectsmonitor.com/ROADWAY/do-away-with-interstate-checkposts-says-report
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sPeCIal feature: NatIoNal maNufaCturINg PolICy

despite significant progress, performance of manufacturing sector remains below potential

Industrial development in Independent India was catalyzed by three major industrial policy resolutions of Government of India in 1948, 1956 and 1991, which provided a strong industrial base. Economic reforms unveiled in 1991, have brought about a structural shift enabling the private sector to assume a much larger role in all sectors of the economy. Thereafter, Indian Industry has also recorded remarkable progress over the last twenty years, attributable to the opening up of the economy.

Sector-wise Share in Indias GDP

60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 31.4% 25.9% 14.4% 27.9% 57.7%

42.7%

15.8% 14.4% 2010-11

Source: CSO

Agriculture

Industry

Services

Manufacturing

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However, despite significant development of the industrial sector, the growth of GDP in India has largely been enabled by dynamic growth in the services sector. As a result, the share of services in the countrys GDP has increased considerably whereas the share of manufacturing has remained more or less constant in the range of 15-16% in the last 15 years. While the share of manufacturing has remained stable, growth in the manufacturing sector has exhibited some improvement over the years. The average growth increased from 5.0 % in 1990-94 to 6.5 % during 1995-99, and

from 6.9 % during 2000-05 to 7.9 % during 2006-10. Nevertheless, both growth and contribution of the manufacturing sector in India is much below its potential. This situation is a cause of concern especially when seen in context with the transformation registered by manufacturing sector in other Asian countries, in similar stages of development. The increasing gap in the share of manufacturing in GDP between India and these economies indicates that India has not been able to fully leverage the opportunities provided by globalization.

Country Wise Share of Industry in GDP, 2010

46.90% 47%

39.30%

31.20%

27.80%

26.80%

26.30%

Indonesia

China

South Korea

South Africa

Brazil

Canada

Germany

Source: CIA World Factbook

structural rigidities Constrain growth Potential

Structural rigidities and bureaucratic delays are affecting the long-run growth of the industrial sector in India. According to a report of the World Bank and IFC (2011), India is ranked 134 out of 183 economies in ease of doing business while Singapore is ranked first. The country fares relatively poor in ease of starting a business, and India is ranked 165 out of 183. India ranks poorly on most of the parameters that define transaction cost in the list of 183 counties. Starting a business in India
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may require as much as 12 procedures and 29 days, while in a country like New Zealand, it requires just a single procedure and a day. Registration of property in the country is also quite cumbersome, besides being a costly affair. On an average, it takes around 44 days and 7.4 % of the value as registration charges. Enforcement of contracts is yet another glaring issue, as it may take anywhere around 1,420 days in comparison to only 406 days required in China.
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India

26.30%

Indias Rank in Doing Business 2011

Getting Credit Protecting Investors Registering Property Trading Across Borders Closing a Business Paying Taxes Dealing w ith Construction Perm its Enforcing Contracts 32 44 94 100 134 164 177 182
Source: Doing Business 2011, The World Bank

Indias performance is specifically poor on Enforcing Contracts, Dealing with Construction Permits and paying taxes. On an average, a manufacturing unit needs to comply with nearly 70 laws and

regulations. Apart from facing multiple inspections, these units have to file as many as 100 returns in a year. This kind of compliance burden discourages young entrepreneurs and they are not willing to take up an entrepreneurial role.

manufacturing sector needs a structural breakthrough by deepening and recalibrating economic reforms
The Budget 2011 envisages an increase in manufacturing share in GDP from 16% to 25% in the next 10 years. However, this increase would require structural reforms for improving overall investment climate in the country. Moreover, over the next decade, India has to create gainful employment opportunities for a large section of its population, with varying degrees of skills and qualifications. This will entail creation of 220 million jobs by 2025 in order to reap the demographic Besides the employment imperative, the development of the manufacturing sector is critical from the point of view of ensuring that the growth model of India is sustainable by providing value addition to our natural and agricultural resources, addressing our strategic needs, and developing new technologies for the welfare of our citizens. dividend. The manufacturing sector would have to be the bulwark of this employment creation initiative.

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National manufacturing Policy - right step for revitalizing the manufacturing sector
To bring about a quantitative and qualitative change in the Manufacturing Sector, the Indian government approved a long-debated manufacturing policy on October 25, 2011 with the following objectives:

Policy Objectives
1 2 3 4 5 6 Increase manufacturing sector growth to 12-14% over the medium term to make it the engine of growth for the economy. Increase the rate of job creation in manufacturing to create 100 million additional jobs by 2022. Creation of appropriate skill sets among the rural migrant and urban poor to make growth inclusive. Increase domestic value addition and technological depth in manufacturing. Enhance global competitiveness of Indian manufacturing through appropriate policy support. Sustainability of growth with regard to the environment, optimal utilization of natural resources and restoration of damaged/ degraded eco-systems.

Policy Instruments Conceptualized in the Policy

Specific policy instruments have been conceptualized in the policy to achieve the objectives stated above. These instruments cover the following areas:

Clustering & Aggregation: National Investment & manufacturing Zones (NImZs)

Global experience of manufacturing has shown the advantages of clustering and agglomeration as it enhances supply chain responsiveness, provides easier access to market, talent and substantially lowers logistic costs. Therefore, one of the key instruments to catalyze the growth of manufacturing will be establishment of NIMZs (with an area of at least 5,000 hectares) which will be developed in the nature of green field industrial townships, benchmarked with the best manufacturing hubs in the world. The State Government will be responsible for selection of land suitable for development of the NIMZ including land acquisition if necessary. The State Government, applying for NIMZ, will ensure that after notifying the area, all physical infrastructure and linkages to utilities under its jurisdiction are provided within one year from the date of notification failing which the NIMZ may be denotified. These NIMZs would be managed by SPVs which would ensure master planning of the Zone; pre-clearances for setting up the industrial units to be located within the zone and undertake such other functions as specified in the various sections of this policy. NIMZ would be different from SEZs in terms of size, level of infrastructure planning, and governance structures related to regulatory procedures and exit policies.
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 Rationalization & simplification of business regulations

The lengthy and cumbersome regulatory procedures being followed at present limit the growth of this sector. A number of efforts have been made in the past to reduce the compliance burden but they have exhibited limited success. In this backdrop, this policy calls for a framework wherein, mechanisms may be developed for cooperation of public or private institutions with government inspection services under the overall control of statutory authorities. The policy also calls for defining timelines for all clearances. Further, the policy seeks to replace submission of multiple returns to different departments by one simplified Monthly/ Quarterly return wherever feasible. Given that environment clearances and matters related to labour welfare are the most important statutory clearances required for any industry, major environmental aspects will be taken care of in the NIMZ in the beginning itself by having an impact study while selecting the site and subsequently by having proper zoning during Master Planning.

Exit Mechanism
Given that an expeditious exit mechanism is essential for unleashing the investments locked up in non-viable businesses units, the policy seeks to introduce specific policy measures. The transfer of assets belonging to a firm In the course of exit procedure, to protect the interest of employees, the policy calls for a Job Loss Policy. This policy will enable units to pay suitable worker compensation in the eventuality of business losses/closure either through insurance and thereby eliminate the charge on the assets, or a sinking fund mechanism to be funded by contributions as decided by the SPV or a combination of the which has been declared sick will be facilitated by the SPV of the concerned NIMZ. Most importantly, relief from Capital Gains Tax on sale of plant and machinery of a unit located in a NIMZ will be granted in case of re-investment of sale consideration within a period of three years for purchase of new plant & machinery in any other unit located in the same NIMZ or another NIMZ. two; for example the SPV may buy a policy out of the sinking fund. The SPV can evolve any other suitable option/arrangement also.

Technology Acquisition and Development

Given that technology development is the quickest way to become globally competitive and ensure sustained growth of the manufacturing sector, the policy calls for establishing a Technology Acquisition and Development Fund (TADF) for acquisition of appropriate technologies including environment friendly technologies; creation of a patent pool; and development of domestic manufacturing of equipments
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used for controlling pollution and reducing energy consumption. The policy highlights the need for supporting adoption of green technologies and resource conservation practices. In this regard, the policy calls for leveraging the existing incentives/ schemes of the Government of India and also introduces new mechanisms to promote green technologies.

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 Industrial Training & Skill Upgradation Measures

Recognizing the urgency of interventions needed to address both the qualitative and quantitative gaps in skill development, the National Manufacturing Policy proposes to create a three tier structure for skill development, namely: i. Skill building among large number of minimally educated workforce; iii. Specialized skill development through establishment of Polytechnics; The policy also calls for establishment of Instructors Training Centre in each NIMZ. ii. Relevant vocational and skill training through establishment of ITIs in PPP mode;

Small & Medium Enterprises

Given the importance of SME sector in generating income and employment in the economy, the policy proposes for improving access to finance for SMEs in the manufacturing sector. The policy has elaborated the provisions for the same. Further, to reduce the compliance burden on SMEs, it has proposed setting up of one or more service organizations which will undertake the responsibility of collecting dues from the companies and making the necessary payouts in return for a charge linked to the wage bill of the company.

Special Focus Sector

While the proposals in this policy paper are sector neutral, the policy seeks to identify special focus sectors where India can be cost competitive and which would generate maximum employment. In addition, the policy has also highlighted the importance of reducing infrastructure deficit and government procurement. The policy will take active measures to protect export of products and services from India from border taxes or other border measures that may be imposed by Considering these policy instruments, one can be confident that the National manufacturing policy is the right step in unlocking the potential of manufacturing sector in the country. However, its implementation still remains a challenge. States will have to exhibit rigorous enthusiasm and cooperation on their part in sorting out issues in its implementation for achieving effective outcome. partner countries on the grounds of protection of environment including those related to GHG emissions reduction.

Industries to be given Special Attention in the Policy

Employment intensive industries Capital Goods Industries where Indian enjoys a competitive advantage Small & Medium enterprises

Industries with strategic significance Public sector enterprises

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key INdICators
gdP
Indicator GDPfc (2004-05) Agriculture Industry Services Private Final Consumption Expenditure Government Final Consumption Expenditure Gross Capital Formation q1 fy 12 7.7 3.9 5.1 10.0 6.3 2.1 7.9 sep-11 9.7 11.8 9.2 14.8 14.1 7.7 sep-11 36.4 14.6 18.2 -9.8 Jul-11 16.4 aug-11 8.0 sep-11 7.25 8.25 10.5 q2 fy 12 6.9 3.2 3.2 9.3 5.9 4.0 -0.6 oct-11 9.7 11.4 11.1 7.7 14.8 7.7 oct-11 10.8 20.7 22.1 -19.6 aug-11 16.7 sep-11 8.0 oct-11 7.50 8.50 10.8

Price situation
Indicator WPI of All commodities WPI of Primary Articles Food Article Non Food Articles WPI of Fuel, Power, Light & Lubricant WPI of Manufactured Products

External Trade
Indicator Exports:(%) (Y-o-Y Growth) POL Imports:(%) (Y-o-Y Growth) Non-POL Items Imports:(%) (Y-o-Y Growth) Trade Balance : (US$ Billion)

money and banking

Indicator Growth in M3 (y-o-y) Indicator Weighted Call Money Rate : Borrowing Indicator Reverse Repo Rate Repo Rate Base Rate (Maximum)

Industry Production
Indicator Index of Industrial Production IIP: Mining & Quarrying IIP: Manufacturing IIP: Electricity IIP: Basic Goods IIP: Capital Goods IIP: Intermediate Goods IIP: Consumer Goods aug-11 3.6 -4.1 4.1 9.5 5.2 4.1 1.9 2.3 sep-11 1.9 -5.6 2.1 9.0 4.5 -6.8 1.5 3.5

Investment Indicators
Indicator Rupee Exchange Rate Foreign Exchange Reserves (US$ Bilion) Foreign Direct Investments (US$ Billion) Fresh Net FII Inflows (US $ Billion) sep-11 48.9 aug-11 322.0 2.8 -1.8 oct-11 48.9 sep-11 311.5 1.8 -1.3
Source: CII, CMIE Database

about us
CII Economy Watch is a monthly report prepared by the CII Economic Research Group. With the mandate to keep members updated on economic, political and business conditions across the country and abroad, the Report Comments on the domestic and international economic scenario that is relevant to Indias corporate sector Tracks policy developments to analyse the immediate as well as long-term impact of policy changes Presents comprehensive industry analysis to understand the industry dynamics and assess the growth potential and profitability in the broad regulatory and policy environment. Conducts surveys to reflect business conditions and sentiment. The Groups other publications available to subscribers include the weekly CII Economy Update and the CII Industry Series. Reach us at: ecopolicy@cii.in

Copyright 2011 by Confederation of Indian Industry (CII), All rights reserved. No part of this publication may be reproduced, stored in, or introduced into a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording or otherwise), without the prior written permission of the copyright owner. CII has made every effort to ensure the accuracy of information presented in this document. However, neither CII nor any of its office bearers or analysts or employees can be held responsible for any financial consequences arising out of the use of information provided herein. Published by Confederation of Indian Industry (CII) The Mantosh Sondhi Centre; 23, Institutional Area, Lodi Road, New Delhi-110003 (INDIA) Tel: +91-11-24629994-7, Fax: +91-11-24626149, Email: ciico@cii.in, Web: www.cii.in

Confederation of Indian Industry