At a time when inflationary pressures have not subsided and the prospects of growth of Indian economy during the current period is not that bright, the Indian banking system is facing the trilemma of balancing between liquidity, capital and return. The slower deposit growth partly explained by high inflation and substitution of bank deposits by households with inflation hedging products like gold and real estate has caused a dent in availability of liquid resources to the banking system. Afflicted with growing non-performing loans and higher provisioning requirements inter alia due to pension liabilities, banks have been put under the radar of Basel III requirements at a faster and tighter pace than the agreed international requirements for compliance.

On current assessment, the year 2012-13 is likely to be a year when the economy starts to recover slowly from the large output gap created by growth falling significantly below trend. Service sector growth, which has remained healthy despite the slowdown in industrial growth is expected to support overall economic growth in 2012-13.

Impaired by sluggishness in the industrial production over the previous fiscal coupled with high volatility in its growth on the monthly basis, persistent escalations in food inflation, deteriorating fiscal health as well as current account deficit (CAD), and uncertainty over global growth recovery, the financial year 2011-12 has ended with a slowing growth momentum for the domestic economy.

The discouraging Budget 2012-13 resulted in the reluctant foreign investor's behaviour and gloomy financial market activities in the first fortnight of financial year 2012-13. Weak global markets and lower-than-expected 4.1% index of industrial production (IIP) y-o-y growth in February 2012 due to sluggish manufacturing plus consumer goods and durables performances also underpinned market confidence. The worst part was that the government sharply revised downward the industrial output figure for January to 1.14% from 6.8% .....

The bleak financial markets activity in the aftermath of budget announcements continued to thwart investors' sentiments across segments in the first fortnight of April. Foreign investors fear to invest in Indian markets after GAAR proposal in Budget sustained, hampering overall market outlook, in addition to the dreary industrial growth in January and February. However, the entire downbeat outlook persuaded the RBI for a rate cut in the Annual Policy Review. The surprising 50 basis points cut in repo rate relieved the bankers from interest rate worries after a lengthy gap of 3 years.

The objective of this study is to identify the period or periods when the domestic economy recorded a structural break in GDP growth, if any, based on both the annual GDP and quarterly data series for two different periods for which such data are available. The exercise uses the relevant econometric tools, which have an array of tests on tracing structural breaks in different economic scenarios. We have surveyed them, and also used them as a tool to the analysis of the quarterly series from 1996-97 (Q1) to 2009-10 (Q2) and the annual series of GDP for as long as 58 years from 1950-51 to 2008-09

The point-to-point inflation rate based on wholesale price index for March 2012 eased to 6.9% from 9.7% a year ago. But the index of manufactured food products hardened from 2.4% to 5.9% and the overall food index, including primary food articles, also hardened from 6.8% to 8.5%. Inflation rates of minerals and fuel and power continued to rule high at elevated two-digit levels. The overall inflation rate on a monthly average basis for 2011-12 stood relatively high at 8.8%, though it had moderated from 9.6% in 2010-11.