Market Dynamics & Fundamentals-2 - Indian Wealth Management

Please find below the Macro data points of the Economy.

	2009	2010	2011	2012	2013	2014	2015	Difference between 2014 & 2015	Observation between 2014 & 2015
Income of Govt (INR Billion)	5,912	6,000	8,010	7,964	8,953	6,938	5,134	-1,804	↓
Expenditure of Govt (INR Billion)	1,500	1,683	1,722	1,953	2,167	2,764	3,100	336	↑
Fiscal Deficit (Expenditure Over Income- %)	5.99%	6.46%	4.89%	5.75%	5.19%	4.77%	3.99%	-0.78%	↑
Imports (USD Million)	303,696	288,373	369,769	489,181	361,272	450,200	448,033	-2,166	↑
Exports (USD Million)	185,295	178,751	251,136	304,624	214,100	314,405	310,338	-4,067	↓
Currency (INR WRT USD)	46.47	44.70	53.05	54.96	61.95	63.78	65.99	2.21	↓
Inflation (CPI)	14.97%	9.47%	6.49%	11.17%	9.13%	5.86%	5.00%	-0.86%	↓
Current Account Deficit (USD Million)	5,019	-14,328	-6,362	-31,857	-21,772	-8,226	-6,200	2,026	↑
Gold Reserve (Tonnes)	358	558	558	558	558	558	558	0	–
Oil Price (per Barrel & price in USD)	79	91	99	92	98	53	41	-12	↑
FII Investment (Net Purchase/Sales in Crores)	4,241	-722	-2,387	14,366	13,466	-3,937	-3,411	526	↓
Government Bond 10Y Yield	7.67	7.91	8.57	8.04	8.82	7.85	7.65	-0.20	↑
Sensex Value (BSE)	17,465	20,509	15,455	19,427	21,171	27,499	25,760	-1,739	↓

Summary
Government revenue is money received by a government. It is an important tool of the fiscal policy of the government and is the opposite of government spending. Revenues earned by the government is received from sources such as taxes levied on the incomes and wealth accumulation of individuals and corporations and on the goods and services produced, exports, non-taxable sources such as government-owned corporations’ incomes, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions and interest income earned. Government expense is cash payments for operating activities of the government in providing goods and services. There are two types of expenditure- Revenue and Capital Expenditure. Expenses include compensation to employees (such as wages and salaries), interest and subsidies, grants, social benefits, and other expenses paid from companies owned by the Government such as rent and dividends. The data of 2015 indicates that revenue is lower as compared to expenses. Fiscal deficit is how much the government is spending with respect to its revenue. Looking at the last 7 years data, we can see that fiscal deficit has been decreasing over the years and reporting 2015 (till date) a good figure. This indicates that India is on the path to recovery. Lower fiscal deficit reduces the government’s expenditure on interest payment and unlocks funds for investments in social welfare programmes as well as infrastructure development. If increase in public expenditure is used for productive investment, especially for investment in infrastructure and rural development, it will boost produc¬tion and help increase employment opportunities in the economy. In fact, increase in public invest¬ment in infrastructure such as irrigation, roads, highways, is highly beneficial from the viewpoint of accelerating economic growth. It helps in increasing aggregate demand on the one hand and helps to reduce supply constraints on economic growth on the other. A weaker currency (when you need to pay more rupees per dollar) will stimulate exports but make imports more expensive. Increase of inflation every year is considered to be healthy for economic growth. Inflation and economic growth are parallel lines and can never meet. As interest rates are increased, when inflation is high, consumers tend to have less money to spend. With less spending, the economy slows and inflation automatically comes down. Investors expect some amount of inflation. Many governments issue inflation-indexed bonds, which protect investors against inflation risk by linking both interest payments and maturity payments to an inflation index. The statistics show that 2009 reported the highest inflation leading to difficulty for the common man and increase in cost of living & in basic necessities. The government bond is inversely proportional to inflation. Current account deficit is a measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports. We can see that in 2012 and 2013 imports were way higher than exports which has been successfully controlled in succeeding years and has come to an acceptable point currently. India’s current account deficit narrowed to 0.2 percent of gross domestic product in the January-March quarter, its lowest in a year, as global oil prices slumped while foreign investments into the country remained robust. Gold Reserves are the country’s gold assets held or controlled by the central bank. It has shown negligible change in the last 6 years. Oil Prices have fallen over the years. This indicates that more oil reserves has been recognised and fall in commodity prices. There has been a upward trend in Foreign Institutional Investment (FII) over the years. Currently, the purchase is way higher than sales leading to fall in economic growth as people tend to invest less in our country.

Summary

Government revenue is money received by a government. It is an important tool of the fiscal policy of the government and is the opposite of government spending.
Revenues earned by the government is received from sources such as taxes levied on the incomes and wealth accumulation of individuals and corporations and on the goods and services produced, exports, non-taxable sources such as government-owned corporations’ incomes, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions and interest income earned.
Government expense is cash payments for operating activities of the government in providing goods and services. There are two types of expenditure- Revenue and Capital Expenditure. Expenses include compensation to employees (such as wages and salaries), interest and subsidies, grants, social benefits, and other expenses paid from companies owned by the Government such as rent and dividends.
The data of 2015 indicates that revenue is lower as compared to expenses.
Fiscal deficit is how much the government is spending with respect to its revenue. Looking at the last 7 years data, we can see that fiscal deficit has been decreasing over the years and reporting 2015 (till date) a good figure. This indicates that India is on the path to recovery. Lower fiscal deficit reduces the government’s expenditure on interest payment and unlocks funds for investments in social welfare programmes as well as infrastructure development.
If increase in public expenditure is used for productive investment, especially for investment in infrastructure and rural development, it will boost produc¬tion and help increase employment opportunities in the economy.
In fact, increase in public invest¬ment in infrastructure such as irrigation, roads, highways, is highly beneficial from the viewpoint of accelerating economic growth. It helps in increasing aggregate demand on the one hand and helps to reduce supply constraints on economic growth on the other.
A weaker currency (when you need to pay more rupees per dollar) will stimulate exports but make imports more expensive.
Increase of inflation every year is considered to be healthy for economic growth. Inflation and economic growth are parallel lines and can never meet. As interest rates are increased, when inflation is high, consumers tend to have less money to spend. With less spending, the economy slows and inflation automatically comes down. Investors expect some amount of inflation. Many governments issue inflation-indexed bonds, which protect investors against inflation risk by linking both interest payments and maturity payments to an inflation index.
The statistics show that 2009 reported the highest inflation leading to difficulty for the common man and increase in cost of living & in basic necessities. The government bond is inversely proportional to inflation.
Current account deficit is a measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports. We can see that in 2012 and 2013 imports were way higher than exports which has been successfully controlled in succeeding years and has come to an acceptable point currently.
India’s current account deficit narrowed to 0.2 percent of gross domestic product in the January-March quarter, its lowest in a year, as global oil prices slumped while foreign investments into the country remained robust.
Gold Reserves are the country’s gold assets held or controlled by the central bank. It has shown negligible change in the last 6 years.
Oil Prices have fallen over the years. This indicates that more oil reserves has been recognised and fall in commodity prices.
There has been a upward trend in Foreign Institutional Investment (FII) over the years. Currently, the purchase is way higher than sales leading to fall in economic growth as people tend to invest less in our country.

Source:www.dilzer.net

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