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INDIA ECONOMY AND
REAL ESTATE OVERVIEW
Economic Overview
• India’s GDP growth for FY12/13 was estimated at
5.0% 1. The debt crisis in the Eurozone, bottlenecks
in India’s policy reforms, persistently high infation in
the country and high lending rates led to a notable
slowdown in GDP growth during FY12/13.
• The tight monetary policy depressed the investment
sentiments in the country. Investment rate as a ratio
of GDP dropped to 29.9% in FY12/132 as compared
to 30.6% in FY11/12 and 36.8% in FY10/11. Similarly,
total consumption expenditure as a percentage
of GDP at constant market prices dropped from
8.1% in FY11/12 to 4.1% in FY12/133.The widening
current account defcit on account of lower growth in
exports and increase in imports and increasing fscal
defcit (5.1% in FY12/13) are some of the other prime
concerns for the economy.
• Further increase in urbanisation during FY12/13 is
driving the purchasing power of households and hence
consumer spending. The per capita income at current
prices for FY12/13 is estimated to be INR 68,747, an
increment of 11.2%4 over the previous year.
• India has emerged amongst the largest trading
nations in the world and has attained trade worth
more than USD 646.55 billion 5 (INR 34,267 billion)
in FY12/13. India’s major trading partners are the
European Union, China, US and the United Arab
Emirates, even as the Government is shifting focus
on African and Latin American markets 6.
• The FY13/14 Union Budget seems to seek a balance
between implementing reforms in the economy and also
promoting populist measures. The Government has
indicated GDP growth of 6.1% to 6.7% for FY13/14,
and lowering the fscal defcit to 4.8%. To address the
issue of fscal defcit, a divestment target of USD 7.4
billion (INR 400 billion) has been set along with limiting
the extent of subsidies.
• The government has taken steps to revive investment
and growth of the Indian economy. These comprise
setting up the Cabinet Committee on Investment
headed by the Prime Minister to fast-track mega
projects of over USD 185 million (INR 10 billion);
permitting Foreign Direct Investments (“FDI”) in a
number of areas including multi-brand retail, power
exchanges, and civil aviation. This move is likely to
pave the way for investment in new technology and
development of back-end infrastructure in the country.
• The government also supported infrastructure funding
by permitting tax free infrastructure bonds of up to USD
9.25 billion (INR 500 billion), encouraging long term low
cost debt raising through infrastructure debt funds and
credit fnance to infrastructure companies.
• To encourage investments, the Reserve Bank of India
(“RBI”) reduced the repo rates by 50 bps in April 2012
and by another 25 bps in January 2013. This was
followed by a reduction in the Cash Reserve Ratio by
25 bps. These measures are expected to ease liquidity
in the economy and pave the way for an increase in
investment activity in the coming few months.
1 Reserve Bank of India
2 Advance Estimates of National Income 2012-13 released by Central Statistics Offce (CSO) on February 2013
3 Ministry of Statistics and Programme Implementation, Government of India – Press notes FY Q3, 2012
4 Advance Estimates of National Income, 2012-13
5 Ministry of Statistics and Programme Implementation, Government of India – Press Note February 2013. (Trade for April 2012 – January 2013) Exchange rate: USD 1 = INR 54
6 Ministry of Commerce, Government of India
Source: CBRE South Asia Pvt. Ltd.