MCCI pleads for 'stimulus' to stave off recession effects
FE Report | Tuesday, 10 March 2009
Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI) said some specific segments of the national economy have started taking the brunt of the ongoing global economic recession.
Reviewing the country's economic situation of October-December period of 2008, the MCCI said the growth of industrial activity, government's revenue collection, and inward remittances decelerated in the second quarter of the current fiscal.
"A big worry at the moment is that a prolonged and deeper recession in the richer economies may further undermine the short and medium term prospects of Bangladesh's exports and inflows of aid, FDI, and workers' remittances," the MCCI said.
"Considering these adverse effects of the global economic recession, we expect the government and policymakers to adopt, as a preemptive measure, a stimulus package combining monetary, fiscal, and sectoral policies to boost economic activity, employment and income," it suggested.
Export growth has been negative and trade and current account deficits have worsened during the said quarter, it said.
For assisting export activity, a suggestion for devaluing the taka has come up from a section of the business community on the plea that the country's major exports have in recent months lost competitiveness to countries whose currencies have depreciated against the US dollar.
"This Chamber, however, does not find any strong rationale for currency devaluation at the moment. It believes that such a move will be self-defeating because devaluation would inevitably raise the production cost of exporting firms whose production is highly import-intensive, and make exports more uncompetitive in the world market."
The MCCI suggested that, instead of raising the exchange rate, a greater focus be given to trade facilitation measures, product diversification and improvements in product quality, training to increase labour productivity, cheap sourcing of raw materials, devising appropriate mechanisms for timely delivery, offering policy supports of various types, and so on. These are more important factors than any change in the exchange rate for influencing exports.
Appropriate steps will also be needed to avoid the adverse effects of possible aid cuts, low level of FDI flow, and decline in remittances. Cuts in aid would mount a pressure on the government's budget, affecting the ongoing poverty alleviation efforts and social safety net, health and education sector programmes.
Such a situation will demand the mobilisation of more domestic resources through enhancing the government's revenue collection to meet any shortfall in aid receipts.
The growth of inward remittances has decelerated as, reportedly, many migrant workers have already lost their jobs. A deep and prolonged recession in the West may hurt migrant remittances further. Protecting unskilled jobs abroad is not an easy task for the emigrating country, but yet the government will need to keep a constant vigil on manpower exports, create, skilled workers to suit the needs of the labour-importing countries and facilitate their emigration, and, through official persuasion, ensure continuity of jobs of migrant workers abroad.
The slowdown in some components of GDP, particularly net exports, was much higher than what was anticipated earlier. It now appears that the drastic slowdown of the world economy has finally begun to adversely affect Bangladesh's exports.
Both in terms of value and quantity, exports shrank during the quarter under review compared to the same period of the previous year. In fact, exports declined by 1.6 per cent in the review quarter while imports grew at the rate of 18.0 per cent during the October-November months of the same quarter.
Private spending was the only engine of growth in this quarter, but even this driver of growth began to show signs of slowing down, particularly in private investment. Thus, the impetus to growth from both global and domestic factors weakened during the quarter under review.
In the quarter under review, the agriculture sector performed much better than in the previous quarter. Growth in this sector was driven by crop and fish production as high prices earlier in the year motivated farmers and fishermen to increase their production. However, the rates of growth of industrial production and services decelerated during this period.
Revenue collection by government increased by only 6.6 per cent in Q2FY2009 compared to 20.6 per cent in the preceding quarter. The deceleration occurred in the collection of all kinds of taxes, but prominently in customs duties, VAT collection, and taxes on income.
The total NBR tax revenue collection during the first half of FY2009 fell short of the half-yearly target, as only 41 per cent of the annual target for FY2009 was achieved during the period. The drop in revenue collection was due mainly to the slowing down of economic activity during the period.
On the other hand, government expenditure increased significantly in October and November by about 112 per cent over the same period last year - mainly due to increased revenue expenditure related to national elections.
The inflationary pressure eased somewhat in the review period as a result of some moderation in international commodity prices. However, because of the lagged effects of previous increases in international commodity prices, upward adjustments in the some domestic administered prices, higher inflation expectations as well as insufficient pass-through of low world prices to domestic prices, the average inflation rate remained as high as 8.9 per cent in December 2008.
Agricultural output growth in the quarter under review exceeded that in the preceding quarter. The growth was driven by the increase in crop and fish production. High prices earlier in the year motivated farmers and the fishermen community to increase production in respective areas. In addition, favourable climate helped facilitate the rise in agricultural output. Information from different sources suggests that agriculture production increased by 15-20 per cent from the same period of the last fiscal year, compared to 10-15 per cent in the previous quarter.
The latest available data on the industrial sector indicates that manufacturing production expanded by only 1.47 per cent in October of Q2FY09 compared to 13.5 per cent in Q1FY09. The slowdown was due mainly to production deceleration in garments industries, and wood products and furniture industries, resulting from the slowdown in both domestic and external demand. Nevertheless, food, beverage & tobacco, and non-metallic and basic metal industries still managed to perform well in the review period.
In October of Q2FY09, the production in jute, cotton, wearing apparel & leather industries declined by 4.06 per cent, compared to as much as 19.55 per cent growth in Q1FY09, while wood products and furniture industries contracted by 4.35 per cent during the quarter against a 5.76 per cent expansion in the previous quarter. On the other hand, the production of food beverage & tobacco industries expanded by 3.28 per cent in October of Q2FY09, recovering from the negative growth of 0.92 per cent in Q1FY09.
In addition, during this period, the growth of paper and paper products industries accelerated to 3.39 per cent in October of Q2FY09 from 3.21 per cent in Q1FY09 and that of chemical, petroleum & rubber industries to 6.61 per cent from 6.51 per cent, fabricated metal industries to 7.84 per cent from 6.31 per cent, non-metallic products industries to 17.07 per cent from 11.23 per cent and basic metal industries to 17.27 per cent from 16.44 per cent.
Growth in the services sector slowed down in the review quarter owing to the slowdown in both domestic and foreign trading activities. The weak performance of the overall services sector was due to the slow growth of its largest sub-sector, transport, storage & communication, in which there was only a nominal increase in new investments.
The high cost of transport services also negatively affected the performance of other services sub-sectors during the review quarter. The hotels, restaurants services industry decelerated as tourism activities declined while the performance of the education sector also decelerated in the review period, following the closure of educational institutions for national election preparedness.
Bangladesh Bank's approach to monetary policy remained unchanged in the quarter under review. It sought to preserve foreign exchange market stability and limit inflationary pressures. In Q2FY09, short-term money market interest rates rose. The call money rate increased to 10.4 per cent in December 2008 from 9.9 per cent in September.
Consequently, private sector credit growth slightly decelerated to 24.3 per cent in December 2008 from 26.9 per cent at the end of the previous quarter. On the other hand, credit to the other public sector in the October-December quarter increased by 9.3 per cent following a contraction of 21.8 per cent in the previous quarter. The growth in government sector credit during this quarter, however, decelerated to 20.4 per cent from 27.3 per cent in Q1FY09.
In the October-December 2008 quarter, the supply of broad money (M2) increased by 19.6 per cent as against 20.4 per cent in the previous quarter. The growth of the more liquid narrow money (M1) decelerated to 13.4 per cent in December 2008 quarter from 18.5 per cent in the previous quarter.
Data on industrial lending is not available beyond the first quarter of FY09.
Available statistics shows that the disbursement of industrial term loans during Q1FY09 was Tk 49.51 billion, which was 16.6 per cent lower than in Q4FY2008. The recovery of industrial term loans during that quarter was Tk 38.78 billion, which was 1.0 per cent lower than in the previous quarter.
Net disbursement of industrial term loans thus stood at Tk 10.73 billion during the Q1FY2009, compared to Tk 16.61 billion during Q4FY2008 - a 35.4 per cent decline.
The NBR's tax revenue collection in the October-December quarter of FY09 increased by only 6.6 per cent compared to a 20.6 per cent increase in the previous quarter. The lower growth in revenue collection was largely due to the decline in import-related revenues owing to a fall in international commodity prices. The growth of revenues from domestic VAT and income tax also decelerated, reflecting a slowdown in overall economic activity.
Among the components of NBR taxes, the collection of income tax in Q2FY09 rose by 22.4 per cent to Tk 27.41 billion from Tk 22.39 billion in Q2FY08.
The collection of VAT rose by 5.25 per cent to Tk 42.25 billion in Q2FY09 from Tk 40.14 billion in Q2FY08, and that of other taxes increased by 3.65 per cent to Tk 20.83 billion from Tk 20.10 billion in Q2FY08.
On the other hand, the collection of customs duty in Q2FY09 declined by 7.07 per cent to Tk 19.94 billion from Tk 21.45 billion. The total NBR tax revenue collection during July-December 2008 was Tk 223.63 billion, which was 41 per cent of the NBR tax revenue collection target for the entire FY2008-09.
Total budget financing of the government through borrowing was Tk 106.558 billion during July-November FY09. Of this total amount, domestic financing was Tk 82.08 billion (or 77 per cent of the total) and the remaining Tk 24.48 billion (or 23 per cent of the total) came from foreign financing.
Outstanding domestic debt of the government at the end of November 2008 increased by Tk 146.54 billion to Tk 102.309 billion, or by 16.7 per cent over November 2007. Some 52.3 per cent of this domestic debt was in the form of borrowing from the banking sector and the rest was the borrowing from non-bank sources.
On the external front, export earnings in Q2FY09 shrank considerably after acceleration in the previous quarter. Export volume declined due to the weakening of external demand following the intensification of the global financial crisis in the US as well as in the euro area, Japan, China, Australia, and ASEAN countries. The slowdown in the economy of these important trading partners caused export demand for Bangladeshi goods to weaken for almost all categories, including most apparently for knitwear & woven garments, pharmaceuticals, raw jute & jute goods, frozen foods, leather, and engineering products such as bicycle. In Q2FY09, export earnings contracted by 1.6 per cent compared to a 42.4 per cent increase in the Q1FY09.
The total value of import payments also decelerated from 34.9 per cent in the first quarter of FY09 to 12.1 per cent in Q2FY09. The deceleration occurred mainly in the imports of industrial raw materials, fuels, and capital goods, a result of declining world prices of these products. The lower rate of import growth was also a reflection of a slower growth in private investment in the economy.
According to the latest available information, the deficit in commodity trade balance in July-December 2008 was 2974 million US dollars as against 2227 million US dollars in July-December 2007. The balance of services trade recorded a deficit of $1219 million compared to the deficit of $749 million in July-December 2007. The balance of income also recorded a higher deficit of $449 million in July-December 2008 compared to $565 million in July-December, 2007.
However, the current account balance exhibited a surplus of 130 million US dollars during the period, compared to 338 million US dollars in the same period last year. The surplus was due mainly to a larger amount of current transfers of US$4874 million, some 92 per cent of which came from workers' remittances. The financial accounts, on the other hand, recorded a surplus of $213 million compared to a deficit of $130 million in July December 2007. Consequently, the overall balance of payments recorded a surplus of $489 million in July-December 2008 as against a surplus of US$44 million in July-December 2007.
In the quarter under review, the growth of inward remittances decelerated to 20.0 per cent from 43.5 per cent in the previous quarter (Q1FY09). In absolute terms, the total amount of remittances during October-December 2008 was US$2173 million, compared to US$2337 million in Q1FY09, US$2266 million in Q4FY08, US$2209 million in Q3FY08, and US$1812 million in Q2FY08.
The foreign exchange market was generally stable throughout the Q2FY2009 period. The exchange rate slightly depreciated (by 0.61 per cent) in this quarter. Stability in the market was underpinned by an increase in net private capital inflows largely attributed to improved investors' confidence amid a continued easing of the domestic inflationary pressure, a stable growth in remittances, and a declining trend in import payments.
At end-December 2008, the foreign exchange reserve was US$ 5788 million, which was US$273 million (5%) higher than the end-December, 2007 level. Foreign exchange reserve at end-December 2008 was equivalent to 3.2 months of estimated goods imports. As of end-December 2007, the foreign exchange reserve was $5514 million, compared to $3878 million in December 2006.
In October-December 2008, global oil prices continued to decline from the previous quarter, with the price of Dubai oil falling from an average of 113.62 US dollars per barrel in the quarter of July-September 2008 to 52.8 US dollars per barrel in the reviewed quarter.
However, the decline in world oil prices led only to a small drop in domestic retail oil prices. In the review period, prices of other raw materials used in production also fell in line with those in the world market.
As a result, the overall Consumer Price Index (CPI) dropped from 10.1 per cent in September 2008 (end of Q1FY09) to 8.9 per cent in December 2008 (Q2FY09). Also, the 12-month point-to-point inflation, declined to 6.03 per cent at end-December 2008 from 10.2 per cent at the end of September.
Reviewing the country's economic situation of October-December period of 2008, the MCCI said the growth of industrial activity, government's revenue collection, and inward remittances decelerated in the second quarter of the current fiscal.
"A big worry at the moment is that a prolonged and deeper recession in the richer economies may further undermine the short and medium term prospects of Bangladesh's exports and inflows of aid, FDI, and workers' remittances," the MCCI said.
"Considering these adverse effects of the global economic recession, we expect the government and policymakers to adopt, as a preemptive measure, a stimulus package combining monetary, fiscal, and sectoral policies to boost economic activity, employment and income," it suggested.
Export growth has been negative and trade and current account deficits have worsened during the said quarter, it said.
For assisting export activity, a suggestion for devaluing the taka has come up from a section of the business community on the plea that the country's major exports have in recent months lost competitiveness to countries whose currencies have depreciated against the US dollar.
"This Chamber, however, does not find any strong rationale for currency devaluation at the moment. It believes that such a move will be self-defeating because devaluation would inevitably raise the production cost of exporting firms whose production is highly import-intensive, and make exports more uncompetitive in the world market."
The MCCI suggested that, instead of raising the exchange rate, a greater focus be given to trade facilitation measures, product diversification and improvements in product quality, training to increase labour productivity, cheap sourcing of raw materials, devising appropriate mechanisms for timely delivery, offering policy supports of various types, and so on. These are more important factors than any change in the exchange rate for influencing exports.
Appropriate steps will also be needed to avoid the adverse effects of possible aid cuts, low level of FDI flow, and decline in remittances. Cuts in aid would mount a pressure on the government's budget, affecting the ongoing poverty alleviation efforts and social safety net, health and education sector programmes.
Such a situation will demand the mobilisation of more domestic resources through enhancing the government's revenue collection to meet any shortfall in aid receipts.
The growth of inward remittances has decelerated as, reportedly, many migrant workers have already lost their jobs. A deep and prolonged recession in the West may hurt migrant remittances further. Protecting unskilled jobs abroad is not an easy task for the emigrating country, but yet the government will need to keep a constant vigil on manpower exports, create, skilled workers to suit the needs of the labour-importing countries and facilitate their emigration, and, through official persuasion, ensure continuity of jobs of migrant workers abroad.
The slowdown in some components of GDP, particularly net exports, was much higher than what was anticipated earlier. It now appears that the drastic slowdown of the world economy has finally begun to adversely affect Bangladesh's exports.
Both in terms of value and quantity, exports shrank during the quarter under review compared to the same period of the previous year. In fact, exports declined by 1.6 per cent in the review quarter while imports grew at the rate of 18.0 per cent during the October-November months of the same quarter.
Private spending was the only engine of growth in this quarter, but even this driver of growth began to show signs of slowing down, particularly in private investment. Thus, the impetus to growth from both global and domestic factors weakened during the quarter under review.
In the quarter under review, the agriculture sector performed much better than in the previous quarter. Growth in this sector was driven by crop and fish production as high prices earlier in the year motivated farmers and fishermen to increase their production. However, the rates of growth of industrial production and services decelerated during this period.
Revenue collection by government increased by only 6.6 per cent in Q2FY2009 compared to 20.6 per cent in the preceding quarter. The deceleration occurred in the collection of all kinds of taxes, but prominently in customs duties, VAT collection, and taxes on income.
The total NBR tax revenue collection during the first half of FY2009 fell short of the half-yearly target, as only 41 per cent of the annual target for FY2009 was achieved during the period. The drop in revenue collection was due mainly to the slowing down of economic activity during the period.
On the other hand, government expenditure increased significantly in October and November by about 112 per cent over the same period last year - mainly due to increased revenue expenditure related to national elections.
The inflationary pressure eased somewhat in the review period as a result of some moderation in international commodity prices. However, because of the lagged effects of previous increases in international commodity prices, upward adjustments in the some domestic administered prices, higher inflation expectations as well as insufficient pass-through of low world prices to domestic prices, the average inflation rate remained as high as 8.9 per cent in December 2008.
Agricultural output growth in the quarter under review exceeded that in the preceding quarter. The growth was driven by the increase in crop and fish production. High prices earlier in the year motivated farmers and the fishermen community to increase production in respective areas. In addition, favourable climate helped facilitate the rise in agricultural output. Information from different sources suggests that agriculture production increased by 15-20 per cent from the same period of the last fiscal year, compared to 10-15 per cent in the previous quarter.
The latest available data on the industrial sector indicates that manufacturing production expanded by only 1.47 per cent in October of Q2FY09 compared to 13.5 per cent in Q1FY09. The slowdown was due mainly to production deceleration in garments industries, and wood products and furniture industries, resulting from the slowdown in both domestic and external demand. Nevertheless, food, beverage & tobacco, and non-metallic and basic metal industries still managed to perform well in the review period.
In October of Q2FY09, the production in jute, cotton, wearing apparel & leather industries declined by 4.06 per cent, compared to as much as 19.55 per cent growth in Q1FY09, while wood products and furniture industries contracted by 4.35 per cent during the quarter against a 5.76 per cent expansion in the previous quarter. On the other hand, the production of food beverage & tobacco industries expanded by 3.28 per cent in October of Q2FY09, recovering from the negative growth of 0.92 per cent in Q1FY09.
In addition, during this period, the growth of paper and paper products industries accelerated to 3.39 per cent in October of Q2FY09 from 3.21 per cent in Q1FY09 and that of chemical, petroleum & rubber industries to 6.61 per cent from 6.51 per cent, fabricated metal industries to 7.84 per cent from 6.31 per cent, non-metallic products industries to 17.07 per cent from 11.23 per cent and basic metal industries to 17.27 per cent from 16.44 per cent.
Growth in the services sector slowed down in the review quarter owing to the slowdown in both domestic and foreign trading activities. The weak performance of the overall services sector was due to the slow growth of its largest sub-sector, transport, storage & communication, in which there was only a nominal increase in new investments.
The high cost of transport services also negatively affected the performance of other services sub-sectors during the review quarter. The hotels, restaurants services industry decelerated as tourism activities declined while the performance of the education sector also decelerated in the review period, following the closure of educational institutions for national election preparedness.
Bangladesh Bank's approach to monetary policy remained unchanged in the quarter under review. It sought to preserve foreign exchange market stability and limit inflationary pressures. In Q2FY09, short-term money market interest rates rose. The call money rate increased to 10.4 per cent in December 2008 from 9.9 per cent in September.
Consequently, private sector credit growth slightly decelerated to 24.3 per cent in December 2008 from 26.9 per cent at the end of the previous quarter. On the other hand, credit to the other public sector in the October-December quarter increased by 9.3 per cent following a contraction of 21.8 per cent in the previous quarter. The growth in government sector credit during this quarter, however, decelerated to 20.4 per cent from 27.3 per cent in Q1FY09.
In the October-December 2008 quarter, the supply of broad money (M2) increased by 19.6 per cent as against 20.4 per cent in the previous quarter. The growth of the more liquid narrow money (M1) decelerated to 13.4 per cent in December 2008 quarter from 18.5 per cent in the previous quarter.
Data on industrial lending is not available beyond the first quarter of FY09.
Available statistics shows that the disbursement of industrial term loans during Q1FY09 was Tk 49.51 billion, which was 16.6 per cent lower than in Q4FY2008. The recovery of industrial term loans during that quarter was Tk 38.78 billion, which was 1.0 per cent lower than in the previous quarter.
Net disbursement of industrial term loans thus stood at Tk 10.73 billion during the Q1FY2009, compared to Tk 16.61 billion during Q4FY2008 - a 35.4 per cent decline.
The NBR's tax revenue collection in the October-December quarter of FY09 increased by only 6.6 per cent compared to a 20.6 per cent increase in the previous quarter. The lower growth in revenue collection was largely due to the decline in import-related revenues owing to a fall in international commodity prices. The growth of revenues from domestic VAT and income tax also decelerated, reflecting a slowdown in overall economic activity.
Among the components of NBR taxes, the collection of income tax in Q2FY09 rose by 22.4 per cent to Tk 27.41 billion from Tk 22.39 billion in Q2FY08.
The collection of VAT rose by 5.25 per cent to Tk 42.25 billion in Q2FY09 from Tk 40.14 billion in Q2FY08, and that of other taxes increased by 3.65 per cent to Tk 20.83 billion from Tk 20.10 billion in Q2FY08.
On the other hand, the collection of customs duty in Q2FY09 declined by 7.07 per cent to Tk 19.94 billion from Tk 21.45 billion. The total NBR tax revenue collection during July-December 2008 was Tk 223.63 billion, which was 41 per cent of the NBR tax revenue collection target for the entire FY2008-09.
Total budget financing of the government through borrowing was Tk 106.558 billion during July-November FY09. Of this total amount, domestic financing was Tk 82.08 billion (or 77 per cent of the total) and the remaining Tk 24.48 billion (or 23 per cent of the total) came from foreign financing.
Outstanding domestic debt of the government at the end of November 2008 increased by Tk 146.54 billion to Tk 102.309 billion, or by 16.7 per cent over November 2007. Some 52.3 per cent of this domestic debt was in the form of borrowing from the banking sector and the rest was the borrowing from non-bank sources.
On the external front, export earnings in Q2FY09 shrank considerably after acceleration in the previous quarter. Export volume declined due to the weakening of external demand following the intensification of the global financial crisis in the US as well as in the euro area, Japan, China, Australia, and ASEAN countries. The slowdown in the economy of these important trading partners caused export demand for Bangladeshi goods to weaken for almost all categories, including most apparently for knitwear & woven garments, pharmaceuticals, raw jute & jute goods, frozen foods, leather, and engineering products such as bicycle. In Q2FY09, export earnings contracted by 1.6 per cent compared to a 42.4 per cent increase in the Q1FY09.
The total value of import payments also decelerated from 34.9 per cent in the first quarter of FY09 to 12.1 per cent in Q2FY09. The deceleration occurred mainly in the imports of industrial raw materials, fuels, and capital goods, a result of declining world prices of these products. The lower rate of import growth was also a reflection of a slower growth in private investment in the economy.
According to the latest available information, the deficit in commodity trade balance in July-December 2008 was 2974 million US dollars as against 2227 million US dollars in July-December 2007. The balance of services trade recorded a deficit of $1219 million compared to the deficit of $749 million in July-December 2007. The balance of income also recorded a higher deficit of $449 million in July-December 2008 compared to $565 million in July-December, 2007.
However, the current account balance exhibited a surplus of 130 million US dollars during the period, compared to 338 million US dollars in the same period last year. The surplus was due mainly to a larger amount of current transfers of US$4874 million, some 92 per cent of which came from workers' remittances. The financial accounts, on the other hand, recorded a surplus of $213 million compared to a deficit of $130 million in July December 2007. Consequently, the overall balance of payments recorded a surplus of $489 million in July-December 2008 as against a surplus of US$44 million in July-December 2007.
In the quarter under review, the growth of inward remittances decelerated to 20.0 per cent from 43.5 per cent in the previous quarter (Q1FY09). In absolute terms, the total amount of remittances during October-December 2008 was US$2173 million, compared to US$2337 million in Q1FY09, US$2266 million in Q4FY08, US$2209 million in Q3FY08, and US$1812 million in Q2FY08.
The foreign exchange market was generally stable throughout the Q2FY2009 period. The exchange rate slightly depreciated (by 0.61 per cent) in this quarter. Stability in the market was underpinned by an increase in net private capital inflows largely attributed to improved investors' confidence amid a continued easing of the domestic inflationary pressure, a stable growth in remittances, and a declining trend in import payments.
At end-December 2008, the foreign exchange reserve was US$ 5788 million, which was US$273 million (5%) higher than the end-December, 2007 level. Foreign exchange reserve at end-December 2008 was equivalent to 3.2 months of estimated goods imports. As of end-December 2007, the foreign exchange reserve was $5514 million, compared to $3878 million in December 2006.
In October-December 2008, global oil prices continued to decline from the previous quarter, with the price of Dubai oil falling from an average of 113.62 US dollars per barrel in the quarter of July-September 2008 to 52.8 US dollars per barrel in the reviewed quarter.
However, the decline in world oil prices led only to a small drop in domestic retail oil prices. In the review period, prices of other raw materials used in production also fell in line with those in the world market.
As a result, the overall Consumer Price Index (CPI) dropped from 10.1 per cent in September 2008 (end of Q1FY09) to 8.9 per cent in December 2008 (Q2FY09). Also, the 12-month point-to-point inflation, declined to 6.03 per cent at end-December 2008 from 10.2 per cent at the end of September.