The December issue of the Bulletin contains five special articles: Quarterly Industrial Outlook Survey: July-September 2010 - (51st Round), Inflation Expectations Survey of Households - September 2010 - (21st Round), Report of the Working Group on Balance of Payments Manual for India, Central Government Finances: April-September 2010 and India's Foreign Trade: April-September 2010.

Highlights of special articles:

1. Quarterly Industrial Outlook Survey: July-September 2010 (51^st Round)

The article presents the findings of Industrial Outlook Survey conducted for July-September 2010 quarter, the 51st round in the series. It gives the assessment of business situation of companies in manufacturing sector, for the quarter July-September 2010, and their expectations for the ensuing quarter October-December 2010.

Main Findings

The survey results signal that the Indian manufacturing sector took further steps to recovery pointing towards economic growth.

Production and new business continued to grow significantly reflecting in the increase in work-force.

The input price pressure eased noticeably and the manufacturers exhibited more optimism in their profits.

The Business Expectation Index, which acts as a barometer of the overall health of the sector, posted 119.0 for the assessment quarter and 126.5 for the ensuing quarter - the highest reading since April-June 2007 quarter.

2. Inflation Expectations Survey of Households - September 2010 (21^st Round)

The article presents the findings of Inflation Expectations Survey of Households for July-September 2010 quarter, the 21st round in the series. The survey sheds light on the inflation expectations of 4000 households across 12 cities for the next quarter (October- December 2010) and for the next year (October 2010- September 2011). The survey captures the expectations of inflation for a respondent's own basket of consumption. Therefore, the inflation rates from this survey represent the inflation expectations of 4000 urban households based on their individual consumption baskets and, hence, these rates are not to be considered as predictors of any official measure of inflation.

Main Findings

The households' inflation expectations provide useful directional information on near-term inflationary pressures and also complement other economic indicators, to get a better idea of future inflation.

The survey findings portray that households expect inflation to rise further by 20 and 60 basis points during the next quarter (to 12.3 per cent) and the next year (to 12.7 per cent), respectively, from the perceived current rate of 12.1 per cent.

Households' expectations of general price rise was mainly influenced by movements in prices of food products. More respondents expected price rise in food, housing and non-food products compared to other product groups.

Housewives and daily-wage workers expected higher inflation rates compared to other categories. Higher inflation expectations persisted in Bangalore and Lucknow.

3. Report of the Working Group on Balance of Payments Manual for India

The Working Group on Balance of Payments Manual for India (Chairman: Shri Deepak Mohanty) was constituted to examine the current practices, procedures of compilation, presentation, coverage and sources of India's balance of payments statistics in relation to international best practices and also to bring out a comprehensive Balance of Payments Manual for India.The Group has submitted its Report to Deputy Governor, Dr. Subir Gokarn on October 13, 2010.

The Report has two parts. Part I discusses various issues relating to India's Balance of Payments statistics and makes a number of suggestions to improve compilation, coverage and presentation of India's balance of payments (BoP) consistent with international best practices. Part II presents the revised Balance of Payments Manual for India, drawing from the international best practices as suggested by the IMF's BoP Manual. Besides discussing the concepts and documenting the compilation methods pertaining to various accounts of the BoP, the Manual has made a detailed assessment of the current practices of compilation, data sources and presentation of BoP in India against the backdrop of the significant changes introduced by the IMF's latest Manual (BPM6). The Report can be accessed at www.rbi.org.in

4. Central Government Finances: April-September 2010

The article reviews the finances of the Central Government during the first half of 2010-11, as released by the Controller General of Accounts in October 2010. This article covers the details of the receipts and expenditures of the Central Government during the period under review.

Main Findings

Central Government finances during the first half of the current fiscal year show that Government is well within its target to meet its budgeted deficit indicators.

The key deficit indicators, viz., gross fiscal deficit, revenue deficit and primary deficit, were found to be substantially lower during April-September 2010 than the corresponding period of previous year.

As a proportion of their respective budget estimates, the levels were much lower in the first half of current fiscal year than that of the previous year. Revenue receipts increased substantially during the first half of 2010-11 on account of surge in non-tax revenue and rebound in tax revenue.

While continued economic recovery and reversal of tax rate contributed to higher tax receipts, the mobilisation of revenues from 3G spectrum and broadband wireless access (BWA) auctions helped to ease the pressure on Government finances.

The lower growth in aggregate expenditure reflects deceleration in non-Plan expenditure during the first half of 2010-11.

In the remaining part of the year, developments with regard to the progress in disinvestment, the likely impact of economic growth on tax revenues and cash outgo on account of supplementary demand for grants may have implications for overall Central Government finances.

5. India's Foreign Trade: 2010-11 (April-September)

The article reviews the performance of India's merchandise trade during 2010-11 (April-September) on the basis of data released by the Ministry of Commerce and Industry and Directorate General of Commercial Intelligence and Statistics (DGCI&S). The article also covers disaggregated commodity-wise and direction-wise analysis of India's trade during the period 2010-11 (April-June).

Main Findings

The article observes that during 2010-11 (April-September), India's merchandise exports at US$ 103.6 billion posted a growth of 28.0 per cent over the corresponding period of previous year as against a decline of 25.7 per cent during 2009-10 (April-September).

 Merchandise imports at US$ 166.5 billion registered a rise of 29.9 per cent as against a decline of 30.7 per cent during 2009-10 (April-September).

The exports maintained the growth momentum while the imports showed a slight deceleration in comparison to growth in previous months.

The oil and non-oil imports registered growth rates of 30.0 per cent and 29.9 per cent in 2010-11 (April-September) as against declines of 40.8 per cent and 25.5 per cent, respectively, during 2009-10 (April-September).

Further, the disaggregated data on commodity-wise merchandise trade as well as source and direction of exports and imports reveal that trade of all major commodity groups (viz., primary products, manufactured goods, petroleum products and bulk and non-bulk import items) and with major trading partners (viz., OECD, OPEC, Eastern Europe and Developing Countries) registered a rise during 2010-11 (April-June) over the corresponding period of previous year.

Ajit Prasad
Assistant General Manager

Press Release : 2010-2011/805

Economic outlook and inflation expectations signal recovery with implications for public finances and external trade dynamics. The Bulletin presents five analytical pieces: an Industrial Outlook Survey showing manufacturing recovery with higher production, new orders, employment and profit optimism; a Households Inflation Expectations Survey indicating rising near term inflation expectations driven by food prices; a Working Group Report proposing a revised Balance of Payments Manual aligned with international best practices; a Central Government Finances review reporting lower key deficit indicators supported by higher revenues and moderated expenditure; and a merchandise trade review documenting a broad rebound in exports and imports across commodity groups and partners.