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Agricultural Outlook and Situation Analysis Reports: Kharif Outlook Report

The NCAER 2017 Rabi Outlook Report provides a comprehensive assessment of the current availability of inputs, monsoon rainfall, demand conditions in domestic and global markets, and government policies, all of which are likely to impact this year’s Rabi crop.
The work underlying the Report has been supported by the National food Security Mission, Government of Inda, ad the Ministry of Agriculture, Cooperation and Farmer Welfare.

GDP accelerates in September quarter, stirs hopes

 New Delhi: India’s economic growth accelerated to 7.4% in the second quarter of the current financial year riding on a spike in industrial activity and pick up in investment demand.

However sectoral data reveal that this growth is not uniform with the growth in construction plunging and agriculture reeling under the impact of two back-to-back weak monsoons.
If the current acceleration in growth sustains then it suggests a revival something that is likely to be a key input when Reserve Bank of India (RBI) takes a call on interest rates at its meeting on Tuesday. Recent surveys are indicating a pick-up in business and consumer sentiment which only reinforce perceptions of a revival.
The government projects growth to be above 7.5% in 2015-16 while most economists expect growth at 7.3-7.5%. In 2014-15 the economy grew 7.3%.
In the quarter ended 30 September the gross domestic product (GDP) growth picked up by 7.4% against 7% in the first quarter (April-June). Both Bloomberg and Reuters polls had suggested that the economy would grow at 7.3% in the second quarter.
India’s growth overtook that of China which grew by 6.9% in the second quarter.
To be sure the Chinese economy at $10.4 trillion is little over five times the size of the Indian economy estimated at $1.9 trillion in 2014-15.
Regardless the acceleration in the second quarter should boost the government’s confidence especially with respect to the strategy of development it has pursued—kick-starting projects in limbo in the short run and creating a domestic manufacturing base in the long term.
The economic affairs secretary Shaktikanta Das said as much in a tweet: “Manufacturing growth at 9.3% in Q2 important growth driver. Will continue to work for bigger success of Make in India.”
Crisil Ltd’s chief economist D.K. Joshi said that RBI is likely to hold rates at its current level and unlikely to take a call based on the GDP data.
“What happens in the budget and how the government implements the Seventh Pay Commission recommendations will be more important to RBI. I believe RBI will hold rates until the budget in February” he added.
Joshi however said the data is surprising because GDP deflator has fallen into the negative zone indicating a deflationary scenario while in the real economy there is no deflation. “Nominal GDP coming below the real GDP was a surprise. The impact of wholesale price deflation has started to overshadow the retail price inflation. If this trend continues it may make the fiscal deficit and current account deficit numbers look slightly worse than expected” Joshi added.
Nominal GDP in the second quarter grew at 6% as wholesale price index (WPI)-based inflation remained in the negative zone while real GDP grew 7.4%. Deflation is the opposite of inflation where actual prices start falling from their level a year ago.
Yes Bank Ltd’s chief economist Shubhada Rao said that the government needs to continuously push ahead with reforms to drive private investment and domestic demand. “Gradual implementation of structural reforms the subdued inflation superior quality of fiscal spending and lagged response to policy rate cuts are likely to be important growth boosters for India going forward” she added.
The details
During the second quarter manufacturing and electricity growth picked up by 9.3% and 6.7% respectively against 7.2% and 3.2% in the first quarter. Construction and trade hotel and transport sectors slowed to 2.6% and 10.6% respectively.
The large dip in construction activities came as a surprise despite significant push in road construction by the government. This could be because the Central Statistical Office derives its growth for construction from production of cement and consumption of finished steel which registered tepid growth at 1.6% and 1.2% respectively.
The farm sector grew 2.2% faster than 1.9% in the first quarter despite a 15% drop in monsoon rains because about 51% of value-addition in the sector now comes from livestock products such as forestry and fisheries that registered a combined growth of more than 6% during the second quarter.
While the growth of “trade hotels transport and communication” was somewhat lean in its off-season (10.6%) other components of services such as “finance real estate and professional services” (9.7%) along with public administration representing government expenditure (4.7%) did the heavy lifting.
Investment demand
Growth in the second quarter was more investment-driven than consumption-led.
Gross fixed capital formation (GFCF) which represents overall investment demand in the economy picked up to a five-quarter high of 6.8%signalling an investment revival.
But surprisingly private consumption demand fell to a three-quarter low at 8.3% in the September quarter. A 23.6% hike in salaries and pensions recommended by the Seventh Pay Commission is expected to boost demand for consumer goods after it is implemented from 1 January 2016 though any such pick-up will only be over period of time as there is unlikely to be any significant accrual of arrears.
Joshi said that the recovery in investment demand is led by public expenditure such as road construction. “There is yet to be any sign of pick up in private investment demand. Investment is also a very volatile component of growth. Sustainable recovery in investment is still some time away” he added.
Various surveys have already indicated a pick-up in consumer and business sentiment. The Business Expectations Survey (BES) by the National Council of Applied Economic Research (NCAER) released on Monday shows a revival of business sentiment after the Business Confidence Index (BCI) fell for two consecutive quarters.
BCI for the second quarter showed an increase of 6.3% in October 2015 over July 2015 on a quarter-on-quarter basis. However the BCI continued to fall on a year-on-year basis (9.1%).
Another survey by ANZ Bank and Roy Morgan research firm released last week also showed the Indian consumer confidence rebounding strongly in November after dipping in October buoyed by increased optimism about the country’s economic outlook over the next 12 months as well as the next five years. The ANZ-Roy Morgan India Consumer Confidence Index rose to 122 up 9.5 points in November compared with the previous month pushing the index above its long-term average of 117.
Bornali Bhandari a fellow at NCAER said that the economy has shown signs of bottoming out but recovery remains weak and fraught with uncertainty.
“There is improvement in business sentiments and stabilizing of political sentiments. The improvement in sentiments of small and medium enterprises is the best signal that this survey shows. The capital goods and services sectors also show improvement in sentiments” she added.
Bhandari however said that the percentage of respondents saying that “present investment climate is positive” remains at 43.3% in October 2015 signalling that investment sentiment remains subdued. “And the continued weak expectations on hiring labour in the next six months and weak confidence in ‘managing unemployment’ imply that improvement in business sentiments may not necessarily translate to more jobs in the near future” she added.

Business sentiment revives in Q2: NCAER

Business sentiment revived in the second quarter with the Business Confidence Index showing an increase of 6.3 per cent on a quarter-on-quarter basis a survey by economic thinktank NCAER said.

“The 94th round of the Business Expectations Survey (BES) carried out in September 2015 shows a revival of business sentiments after the Business Confidence Index (BCI) fell for two consecutive quarters.

“The BCI shows an increase of 6.3 per cent in October 2015 over July 2015 on a quarter-on-quarter (q-o-q) basis. However the BCI continues to fall on a year-onyear basis (9.1 per cent)” said a survey by economic think-tank National Council of Applied Economic Research (NCAER) today said.

NCAER’s fellow Bornali Bhandari said that the economy showing signs of bottoming out but the recovery remain weak and fraught with uncertainty. There is improvement in business sentiments and stabilising of political sentiments.

“The improvement in sentiments of small and medium enterprises is the best signal that this survey shows. The capital goods and servicessectors also show improvement in sentiments” Bhandari said.

The economic think-tank said barring the Rs 500-crore plus companies which show a q-o-q decline in the BCI all firms showed improvement.

The Business Expectations Survey (BES) tracks business sentiment of over 500 Indian companies.

NCAER’s Business Confidence Index rises in the second quarter of 2015-16 by 6.3%

Highlights of NCAER’s most recent Business Expectations Survey for Quarter 2 2015–16

 

  • The 94th round of the Business Expectations Survey (BES) carried out in September 2015 shows a revival of business sentiments after the Business Confidence Index (BCI) fell for two consecutive quarters. The BCI shows an increase of 6.3% in October 2015 over July 2015 on a quarter-on-quarter (q-o-q) basis. However the BCI continues to fall on a year-on-year basis (9.1%).
  • All but one of the four components of the BCI show improvement in sentiments between July and October 2015. Three components showing improvement in terms of percentage of respondents in October 2015 versus July 2015 are ‘overall economic conditions will improve in the next six months’ ‘financial position of firms will improve in the next six months’ and ‘present investment is climate is positive compared with six months ago’. The percentage of respondents saying that ‘present capacity utilisation is close to or above optimal level’ declines from 93.5% in July 2015 to 91.3% to October 2015.
  • All five sectors show improvement in business sentiments in October 2015 on a q-o-q basis. The services sector has the highest BCI followed by intermediate goods consumer non-durables consumer durables and capital goods in this current round. The BCI of the intermediate goods sector shows the highest q-o-q increase of 14.6% followed by the services sector (8.8%).
  • All but the West show improvement in the BCI. The BCI of the South shows an increase of 25.9% followed by the East (3.7%). The BCI declines in the West by 3.9%.
  • Barring the ` 500 crore plus companies which show a q-o-q decline in the BCI all other firms show improvement. Firms with an annual turnover of less than ` 1 crore which have the lowest BCI show 10.5% q-o-q growth in BCI. The ` 1–10 crore firms show an improvement of 7.2%. The maximum increase has been experienced by ` 100 –500 crore firms (15.2%).
  • The distribution of firms by ownership type reveals improvement in the BCI in all but the public sector companies with private limited companies rising the maximum (8%). The BCI of public sector companies has fallen by 6.3%.
  • Overall sentiments regarding production domestic sales exports imports of raw materials pre-tax profits and costs are dampened in October 2015 compared to July 2015. Significant exceptions to the overall trends are the capital goods and service sectors. Labour markets continue to be weak as expectations about hiring have only worsened from the last quarter.
  • The slide in the Political Confidence Index (PCI) seems to be stabilising in October 2015 when it shows a q-o-q rise of 0.3%. Components that show an increase in positive responses between July and October 2015 are ‘managing inflation’ ‘managing overall economic growth’ ‘managing conducive political climate’ and ‘managing unemployment’. Components showing a decline in positive responses in the same period are ‘managing government finances’ ‘managing exchange rate’ ‘external trade negotiations’ and ‘pushing economic reforms forward’. Increase or decrease in positive responses notwithstanding the percentages of positive responses are not more than 60% for any of the PCI components. The percentage of positive responses is the worst for ‘managing exchange rate’ (28.5%) followed by ‘managing unemployment’ (34.9%) and ‘managing inflation’ (37.9%). The best performing parameters are ‘managing overall economic growth’ and ‘external trade negotiations (both bilateral and multilateral)’ with the percentage of positive responses being 58.8% and 55% respectively.

Dr Bornali Bhandari Fellow NCAER noted “the economy shows signs of bottoming out but the recovery remain weak and fraught with uncertainty. There is improvement in business sentiments and stabilising of political sentiments. The improvement in sentiments of small and medium enterprises is the best signal that this survey shows. The capital goods and services sectors also show improvement in sentiments. However the percentage of respondents saying that ‘present investment is climate is positive’ remains at 43.3% in October 2015 thereby signalling that investment sentiments still remain subdued. And the continued weak expectations on hiring labour in the next six months and weak confidence in ‘managing unemployment’ imply that improvement in business sentiments may not necessarily translate to more jobs in the near future.”


Brief Methodology: The National Council of Applied Economic Research (NCAER) has been conducting the Business Expectations Survey (BES) every quarter since 1991. It tracks the business sentiments of more than 500 Indian companies to compute a composite index the Business Confidence Index (BCI). The survey consists of responses from firms/industries across six cities to assess business sentiments in four regions of India. Delhi NCR represents the North Mumbai and Pune represent the West Kolkata represents the East and South is represented by Bangalore and Chennai. Industries are adequately represented with regard to ownership type (namely public sector private limited public limited partnership/individual ownership and MNCs) industry sector (namely consumer durables consumer non-durables intermediate goods capital goods and services sector) and firm size based on their annual turnover (in the range of less than ₹1 crore ₹1 to 10 crore ₹10 to 100 crore ₹100 to 500 crore and more than ₹500 crore). The sample is drawn randomly from a list of industries in each city drawn from various sources. A sizeable number of units taken in one round are retained in the next round to maintain continuity of analysis.
The Business Confidence Index (BCI) is based on four questions that carry equal weight. Two questions are devoted to macro factors and the other two to micro factors. The BCI is a simple average of all the positive responses to three questions and on the fourth question (capacity utilisation) an average of the sum of the responses to improvement versus no improvement is taken. Then the BCI is compared with the base value to obtain the change. If the BCI increases for a particular round it is due to a larger proportion of positive responses in that round. The positive responses may increase for a specific question. An increase in the level of the BCI reflects optimism in the business sector about the performance of the economy.
About NCAER

NCAER the National Council of Applied Economic Research is India’s oldest and largest independent economic think tank set up in 1956 at the behest of Prime Minister Jawaharlal Nehru to inform policy choices for both the public and private sectors. Over nearly six decades the NCAER has served the nation well with its rich offering of applied policy research unique datasets evaluations and policy inputs to central and state governments corporate India the media and informed citizens. It is one of a few independent think tanks worldwide that combines rigorous economic analysis and policy outreach with data collection capabilities particularly for large-scale household surveys. The NCAER is currently led by its Director-General Dr Shekhar Shah and governed by an independent Governing Body chaired by Mr Nandan M. Nilekani.
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Reports on Regional Tourism Satellite Account, 2009-10: Phase II

This is the second in a series of reports that NCAER has prepared on detailed tourism satellite accounts for the states and Union Territories of India. This study was commissioned by the Ministry of Tourism in the Government of India in 2013 to compile Regional Tourism Satellite Account for all states and UTs of India for the base year 2009-10 in order to facilitate a complete understanding of the tourism sector. The second report covers the states of Arunachal Pradesh, Assam, Goa, Himachal Pradesh, Jharkhand, Karnataka, Maharashtra, Odisha, Puducherry, and Uttar Pradesh.

2009|10, Phase II, Reports

Reports on Regional Tourism Satellite Account, 2009-10: Phase I
Reports on Regional Tourism Satellite Account, 2015-16: Phase III

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