ANALYSIS OF FIXED INCOME SECURITIES

1. India has emerged as the fastest growing major economy in the world. The
current GDP is 7.1% which is below than april-june quarter i.e. 8.2%. But due to
trade war between U.S. & CHINA, INDIAN economy has been impacted. Private
consumption slowed down possibly on account of moderation in rural demand,
subdued growth in kharif output, depressed prices of agricultural commodities
and sluggish growth in rural wages. Growth in the index of industrial production
(IIP) slowed down to 4.5 per cent in September 2018. Imports also grew at a
faster pace in October, contributed mainly by petroleum products and electronic
goods. Consequently, the trade deficit widened in October 2018 sequentially as
also in comparison with the level a year ago. Besides from the negative impacts,
still there has been improvement in economic scenario. There have been various
investments in various sectors of the economy. Some of the important recent
developments in Indian economy are as follows:
 India's Foreign Direct Investment (FDI) equity inflows reached US$ 389.60
billion between April 2000 and June 2018, with maximum contribution
from services, computer software and hardware, telecommunications,
construction, trading and automobiles.
 India's Indexof Industrial Production (IIP) rose 5.4 per cent year-on-year in
April-July 2018, but in October it was fall down to 4.5%.
 Retail inflation, measured by y-o-y changein CPI, declined from3.7 per cent
in September to 3.3 per cent in October.
 Moody’s upgraded India’s sovereign rating in November 2017 after 14
years to Baa2 with a stable economic outlook.
 Exports fromIndia increased 20.7 per cent year-on-year to US$ 221.83
billion in April-August2018.
 Around 855,000houses have been constructed up to August21 2018,
under Government of India’s housing schemenamed Pradhan MantriAwas
Yojana (Urban).
FIXED INCOME-TRENDS AND OUTLOOK
INDIAN ECONOMY

2.  The Government of India has decided to invest Rs 7 trillion (US$
109.31billion) for construction of new roads and highways over the next
five years.
India is expected to be the third largest consumer economy as its consumption
may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and
expenditure pattern and achieve upper-middle income status on the back of
digitisation, globalisation, favourable demographics, and reforms. India's
revenue receipts are estimated to touch Rs 28-30 trillion by 2019, owing to
Government of India's measures to strengthen infrastructure and reforms like
demonetisation and Goods and Services Tax (GST). India's labour force is
expected to touch 160-170million by 2020, based on rate of population growth,
increased labour force participation, and higher education enrolment.
OVERVIEW LAST REFERENCE PREVIOUS
GDP GROWTH RATE 1.9 JUNE 2018 2
GDP ANNUAL GROWTH
RATE
7.1 SEP 2018 8.5
UNEMPLOYMENTRATE 3.52 DEC 2017 3.51
INFLATION RATE 2.33 NOV 2018 3.38
INTEREST RATE 6.5 DEC 2018 6.5
CASH RESERVERATIO 4 DEC 2018 4
BALANCEOF TRADE -$16670M NOV 2018 -17130
CURRENT ACCOUNT -$19100M SEP 2018 -15807
ROAD AHEAD:
ECONOMIC INDICATORS
OPPORTUNITIES FOR AN INDIAN ECONOMY

3.  India’s 1.3 billion people come froma wide rangeof economic and cultural
backgrounds. This diversity can be a strength or a challenge.
 By 2025,MGI estimates, India willhave69citieswith a population ofmorethan
onemillion each.Economicgrowthwillcenteron them, and the biggest
infrastructurebuilding willtakeplacethere.
 PowerfultechnologieswillbenefitIndia, helping to raiseproductivity,improving
efficiencyacrossmajorsectorsoftheeconomy, and radically alteringthe
provision ofservicessuchaseducation and healthcare.Thesetechnologies
could add $550billion to $1trillion a yearofeconomic valuein 2025.
 Our research suggeststhatwomen nowcontributeonly 17percentof India’s
GDP and makeupjust24percentof theworkforce,comparedwith40percent
globally.Inthecomingdecade,theywillrepresentoneof thelargestpotential
economic forcesin thecountry. Ifitmatched theprogresstoward gender parity
of theregion’sfastest-improvingcountry,weestimatethatitcould add $700
billion to its GDPin 2025.
 There have been a lot of governmentinitiatives and measures to propel
growth of agriculturesector in the country. The government targets to
double the income of farmers by 2022.
 English is one of India’s officiallanguages. Many Indians speak it. This,
combined with the high level of education, attracts U.S. technology and call
centers to India.
 The Government of India has been taking up numerous flagship
programmes such as Make in India, Startup India, and Digital India among
others that shall promoteentrepreneurship and employment opportunities
across the nation. Itis expected that the growing population fromthe rural
areas shall look at urban regions for better employment opportunities and
life style options.
 According to industry experts, it is expected that the Indian e-commerce
industry will witness more than 300 million new online shoppers between
2015-2030. Itis further expected that India will have 10,500-11,000 new
technology-based startups emerging by 2020 from4,750 in 2016. With
more and morebusinesses coming into existence, the contribution of the e-
commerce marketwill reach the US$ 300 billion mark by the end of 2030
fromUS$ 20 billion in 2015.
CHALLENGES THAT ARE FACING BY AN INDIAN ECONOMY

4.  Economic growth of any country can be viewed from its
level of national income and per capita income. Comparing
India’s per capita income with the other countries of the
world, one comes to the conclusion that India is one of the
poorest nations of the world
 Not only per capita income is low, but Indian economy is
also marked by great inequalities in the distribution of
income and wealth. In India, as years roll on, inequalities are
on the rise. This inequality widens the problem of poverty
 In Less developed countries, not only natural resources are
under-utilised but also a massive wastage occurs in the case
of manpower resources. Slow economic growth rate on the
one hand, and rapid growth of population on the other
hand, has accentuated the problem of unemployment in
India.
 Due to illiteracy, use of advanced or sophisticated
technology is rather an exception in India. Because of the
limited growth of technological institution, we are forced to
use primitive methods of technology whose productivity is
low.
 Being an LDC, India’s infrastructural facilities or economic
and social overheads of capital are inadequate.
10 YEAR G-SEC YIELD CURVE

5. MONTH 1 YEAR 3 YEAR 5YEAR 10 YEAR
JAN 102 47 38 46
FEB 96 51 46 44
MAR 83 42 24 49
APR 79 34 27 43
MAY 121 72 62 64
JUNE 101 67 55 58
JULY 90 62 49 60
AUG 61 51 47 59
SEP 96 67 70 61
OCT 98 87 79 72
NOV 109 95 91 79
DEC(till 10 dec) 112 93 77 94
CORPORATE YIELD OVER G-SEC YIELD

6. JAN FEB MAR APR MAY JUNE JULY AUG SEP OCT NOV DEC
1 YEAR 102 96 83 79 121 101 90 61 96 98 109 112
3 YEAR 47 51 42 34 72 67 62 51 67 87 95 93
5 YEAR 38 46 24 27 62 55 49 47 70 79 91 77
10 YEAR 46 44 49 43 64 58 60 59 61 72 79 94
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AxisTitle
CORPORATEYIELD SPREAD OVER G-SEC YIELD