Motilal Oswal Financial Services

23 May 2024

COPE

The Economy Observer

A primer of Household finances in India

Income, savings, and debt patterns reflect deteriorating financial position



The household sector, which includes all individuals and unincorporated enterprises, is one of the three primary

domestic participants in an economy. From the perspective of GDP, the household (HH) sector has the highest share and

contribution to GDP growth, as their spending – consumption and investments – accounts for ~70% of GDP. This is not

only true for India, but for most other major nations on the planet. Still, the data availability and research dedicated to

this segment is not up to the mark in India. Not only is there an absence of a comprehensive and timely income statistics

(on monthly or quarterly basis), but quarterly consumption data presents many challenges and annual savings data is

highly under-researched. With a sharp surge in personal loans in the recent period, household debt has attracted some

attention.



In this note, we intend to discuss in detail about personal disposable income (PDI), household savings, their debt and

spending patterns in the country. Given below are some of the questions we have answered in this note:



What are the recent trends in PDI and what are its constituents?



What explains the combination of weak PDI growth and very strong growth in personal income tax (PIT) collection?



What explains low and falling household savings in India? Why are they important and do they pose a concern?



Why does household net financial savings (NFS) hold special significance in economic growth?



What are the recent trends and key drivers of household debt in India?



Is the recent surge in household debt a matter of concern?



Lastly, is the recent slowdown in private consumption temporary or structural? Can household spending (consumption +

investments) grow much faster in FY25 and beyond than in FY24?



These answers help us draw conclusions regarding the ability of consumers to support economic growth in India. The

growth in private final consumption expenditure (PFCE) – in nominal terms – has weakened to 8.0-8.5% YoY in FY24, the

slowest in two decades, barring FY21. In real terms also, PFCE growth (at 3-4%) was the slowest in two decades. Is this

something fleeting or more durable? Not only consumption, household total spending growth was only ~9% YoY in FY24,

much weaker than 10.5% in the previous four years (FY20-FY23) and 11-12% in the pre-pandemic years.



Our conclusions are clear. The financial position of the household sector in India began deteriorating in the pre-pandemic

years and continued to worsen in the recent years as well. Not only is the growth in household debt in recent years the

fastest in several decades, it has coincided with weak income growth. At the same time, while physical savings are

substituting financial savings, the collapse in the latter is unprecedented and HH total savings have declined. Our

calculations suggest that HH net financial savings (NFS) have likely fallen further in FY24 (to about 5% of GDP, from 5.3%

in FY23), and even if it remains unchanged in FY25 (though we hope it improves from these levels), household spending

growth would remain subdued at sub-10%.



Overall, we expect household spending growth to remain muted in FY25 and for the next few years, until HH NFS comes

back to a reasonable level of 7-8% of GDP. In particular, we believe that while consumption could grow faster in FY25

compared to the two-decade slowest growth in FY24, household investments (which largely consist of the residential real

estate) could moderate. This assumption is based on the expectation that HH NFS picks up to 5.5% of GDP this year.



If household spending remains subdued (as we predict) and the government spending also grows slowly in order to meet

its fiscal consolidation path, then the entire responsibility to keep nominal GDP growth intact at 11% (same as in the pre-

pandemic years, let alone higher growth) falls on the corporate sector. This would be a tall task for the corporate sector

(since it contributes only about 20%-25% to GDP growth), and therefore underlines the urgent need for HH NFS to pick up

in the coming years.



Alternatively, HH NFS may remain stuck at low levels (or fall further), potentially boosting GDP growth in the near term.

However, this growth model will become unsustainable when corporate investments pick up in the future.

Nikhil Gupta

– Research analyst

(Nikhil.Gupta@MotilalOswal.com)

Tanisha Ladha

– Research analyst

(Tanisha.Ladha@MotilalOswal.com)

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Personal disposable income (PDI): Trends, constituents, and drivers

Aggregate income (equal to GDP) generated in an economy is distributed among the

three domestic economic participants – household (HH), corporate, and the

government. In simple words, PDI is the total income accrued to the household

sector after paying taxes in an economy, i.e., take-home income. In this section, we

will delve deeper into the long-term trends in PDI growth and its key components.

Overall, PDI growth has moderated in the post-pandemic years, which was broadly

the case in the pre-pandemic period as well. This fact poses another important

question regarding its disconnect with very strong growth in personal income taxes

(PIT). We argue that the sharp uptick in PIT in the past four years is not due to

higher income, but led by a regulatory change in FY21.

1. Falling share of PDI (as % of GDP/GNDI) neither unique nor concerning

Based on three-year centered moving average (3ycma), nominal PDI growth stayed

in a narrow range of 10-12% YoY in the pre-pandemic years (FY14-FY19), compared

to an average growth of 16% in the prior six years (FY08-FY13). Due to the

pandemic, it moved into high single-digit growth post-FY20, but recovered to 12% in

FY23

(Exhibit 1).

India’s long-term data

suggests that PDI growth

has lagged GDP growth for

majority of the post-

independence period in

India

What is more important to note is that GDP growth has outpaced PDI growth in the

post-pandemic period (FY20-FY23), due to which the share of PDI – as % of gross

national disposable income (GNDI) or GDP – has fallen to a five-year low of 77.8% in

FY23

(Exhibit 2).

This, however, is neither unique nor concerning. India’s long-term

data suggests that PDI growth has lagged GDP growth for majority of the post-

independence period in India, and that is why the fall in the share of PDI (as % GNDI)

has been happening almost continuously for a long period of time

(Exhibit 3).

Moreover, if we compare the share of household income in recent years vis-à-vis

two decades ago (2000-04) in the world’s other major economies, we find that it has

declined in many of these economies

(Exhibit 4).

Notably, this share at 79% in the

last five years (and 78% in FY23) in India is the highest compared to other nations.

Exhibit 1: Nominal PDI growth has weakened in the past few

years…

Nominal PDI (% YoY, 3ycma)

Exhibit 2: …and it has fallen to five-year low of 78% of GNDI

in FY23

Nominal PDI (% of GNDI)

FY99 FY02 FY05 FY08 FY11 FY14 FY17 FY20 FY23

3-year centered moving average (Assuming 9% growth in FY24)

2004-05 base till FY11; 2011-12 base since FY12

FY99

FY03

FY07

FY11

FY15

FY19

FY23

GNDI = Gross national disposable income

Source: Central Statistics Office (CSO), CEIC, RBI, MOFSL

23 May 2024

Exhibit 3: PDI has lagged GDP growth during most decades…

(% CAGR)

Nominal GDP

Nominal PDI

Exhibit 4: …and is the case in many other economies as well

Share of PDI in GNDI (%)

2000-04

Recent*

14.9

10.6

10.3

15.0

15.2

12.4

12.1

12.4

12.3

9.5

9.3

11.0

10.7

14.8

1960s

1970s

1980s

1990s

2000s

2010s FY20-23

SKr

SAf

1960s decade runs from FY50-FY59 and so on

*Last five years

#As % of GDP or GNDI

Source: CSO, CEIC, Various national sources, MOFSL

The share of CoEs – at 40% -

in India is, by far, the lowest

and compares with 55-86%

in other economies

2. Lower share of compensation of employees (CoE) in line with the low share of

regular wage/salaried employment

Further details of PDI reveals that it can be divided into three major components –

compensation of employees (CoEs, earned by regular wage/salaried workers), mixed

income/operating surplus (MI/OS, earned by self-employed or own-account

workers) and others (including property income, interest receipts, current transfers

form the government etc.). In India, only about 40% of PDI comes from CoEs, while

another 35% accrues to the self-employed people. After remaining steady for many

years in the pre-pandemic period, this composition changed slightly in the favor of

CoEs, at the cost of self-employed class

(Exhibit 5).

A comparison of the break-up of

India’s PDI vis-à-vis other major nations suggests that the share of CoEs – at 40% - is,

by far, the lowest and compares with 55-86% in other economies. While the share of

‘others’ in India is similar to that in the US (and lower than in Russia), the share of

MI/OS – at 35% - is the highest in PDI

(Exhibit 6).

This, however, should not be surprising considering the profile of India’s workforce.

Based on International Labour organization (ILO), the share of self-employed is as

high as 75% in India, while regular employees account for less than a quarter of its

workforce

(Exhibit 7).

Unfortunately, the share of the latter has actually fallen in the

post-pandemic period.

The share of regular

employees at ~25% is the

lowest in India, and

compares with >90% in

Germany, Russia, and the

A comparison with other major nations suggests that the share of regular employees

is, by far, the lowest in India, and compares with more than 90% in Germany, Russia,

and the US

(Exhibit 8).

At the same time, India’s self-employed workforce is huge.

The lower share of CoEs in India represents the earnings of regular employees,

which accounts for a small portion of the total workforce in the country.

23 May 2024

Exhibit 5: Compensation of employees (COEs) accounts for

only ~40% of PDI…

Exhibit 6: …which is the lowest compared to that in world’s

other major economies

Key components of PDI (%)

CoE

MI/OS

Others

Key components of PDI (%)

CoE

MI/OS

Others*

-1

FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23P

*Include property income, current transfers and others

SAf

-4

SKr

CN#

Arranged by the share of CoE

Average of last five years

#Data up to 2021

Source: CEIC, Various national sources, MOFSL

Exhibit 7: India’s workforce profile may explain the lower

share of CoEs…

India's employment by economic status (%)

Employees

1.6

1.4

73.1

5.9

Self-employed

2.4

Others

1.4

1.5

Exhibit 8: …as the share of regular wage/salaried employees

is the lowest compared to other nations

Employment by economic status (%)

Employees

Self-employed

72.6

74.8

75.8

75.0

73.3

25.1

2018

25.5

2019

21.4

2020

22.8

2021

22.8

2022

23.5

2023

SAf

SKr

Source: International Labour Organization (ILO), MOFSL

3. What explains the combination of weak PDI growth and strong personal income

taxes (PIT)?

After discussing India’s PDI, it is important to address the most perplexing question

about it. If PDI growth has moderated in India, what explains a very strong rise in

PIT? Income taxes paid by entities other than corporations (i.e., the household

sector, conveniently called personal income taxes) have increased at a compounded

rate of ~20% during the last four years (FY21-FY24RE), while PDI (and GDP) growth is

more modest at <10%

(Exhibit 9).

Consequently, PIT has increased to 3.5% of GDP in

FY24RE (and budgeted at 3.5% in FY25 as well), up from 2.5% in the pre-pandemic

years

(Exhibit 10).

If PDI growth is so muted, what explains this surge in PIT?

We believe that taxes paid

on dividends explain a good

chunk of the surge in PIT

during the past four years

Because of the lack of any details on PIT, the question is largely unsettled with

possible explanations like the K-shaped recovery or higher surcharges on high-

income individual taxpayers. We, however, believe that taxes paid on dividends

explain a good chunk of the surge in PIT during the past four years.

In its

2020-21 Budget speech,

on the 1

February 2020, before the pandemic hit us,

the Finance Minister proposed

“…to remove the DDT and adopt the classical system

of dividend taxation under which the companies would not be required to pay DDT.

The dividend shall be taxed only in the hands of the recipients at their applicable

rate…”.

It means that dividend distribution tax (DDT) ended to exist in its erstwhile

23 May 2024

form in FY21, and was shifted from the corporation taxes into PIT. With such a shift,

the tax rate on dividends was also changed from 15% (plus surcharges and cess) to

the personal income tax applicable to the individual taxpayer. These two related

changes – to our mind – explains about 60-65% of the surge in PIT in the post-

pandemic years.

Exhibit 9: Personal income taxes (PIT) have grown very

strongly in the past three years…

(% YoY)

-18

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24E

Source: Union Budget documents, Capitaline, Author’s calculation

2.1

2.4

PDI

PIT

Exhibit 10: …rising to 3.5% of GDP in FY24RE from 2.5% in

FY18/FY19

PIT (% of GDP)

2.5

3.0

3.1

3.5

The shift of dividend taxes

from the corporation taxes

to PIT alone accounts for

60-65% of the surge in PIT

According to the last data available for DDT under corporation taxes, it amounted to

INR500b (or 0.3% of GDP) in FY20. It is common knowledge that the equity market is

dominated by the high-income or the wealthiest individuals. In the US, as much as

87% of all corporate equities and mutual fund shares were held by the top 20%

income earners (or 20% wealthiest) in 2023. It would not be unfair to assume that

similar is the case in India also, and thus, their dividend receipts are subjected to a

much higher tax rate since FY21. Including the surcharges, the effective tax rate on

dividends could be 35-40%, double the tax rate on dividends till FY20.

Further, our calculations suggest that listed companies accounted for about 75% of

total dividends paid in the country in the pre-pandemic years (back calculated from

dividend tax receipts). Assuming that the share of listed companies would have

increased to 90%-100% now, taxes on dividends (with an effective tax rate of 36%)

would amount to INR1.8-2t in FY24 or 0.6-0.7% of GDP

(Exhibit 11).

If so, the shift of

dividend taxes from the corporation taxes to PIT alone accounts for 60-65% of the

surge in PIT (to 3.5% of GDP, from 2.5% in the pre-FY20 years). Excluding dividend

taxes, thus, PIT would have mostly increased in line with nominal PDI/GDP, with

better growth only in FY24. PIT excluding dividend taxes (PIT ex DT) amounted to

2.4% of GDP in FY23, lower than 2.5% of GDP each in FY19 and FY20, but likely

surged to 2.8% of GDP in FY24RE

(Exhibit 12).

Excluding dividend taxes,

thus, PIT would have mostly

increased in line with

nominal PDI/GDP, with

better growth only in FY24

23 May 2024

Exhibit 11: A good chunk of PIT growth is likely because of

the inclusion of dividend taxes since FY21…

Exhibit 12: …without which PIT growth may not have been

as impressive in the post-pandemic period

(% of GDP)

PIT ex DT

3.0

2.5

0.3

2.5

0.7

PIT

3.5

3.1

0.7

Taxes paid on dividends* (% of GDP)

0.7

0.3

0.2

0.3

0.2

2.5

1.8

2.3

2.4

2.8

FY16 FY17 FY18 FY19 FY20 FY21E FY22E FY23E FY24E

*Shifted from corporate to PIT from FY21. Tax rate on dividends also

changed from 15% in FY20 to applicable individual income tax slab

(assumed at 36%)

FY19

FY20

FY21E

FY22E

FY23E

FY24E

MOFSL estimates from FY21 based on total dividends paid by listed

companies and effective tax rate of 36%

Source: Union Budget documents, Capitaline, MOFSL

Besides dividends, it is very likely that the capital market could have accounted for

another 5-10% of the surge in PIT in FY24. The securities transaction taxes (STT) are

also expected to triple to INR360b in FY25BE (or 0.11% of GDP), from INR124b (or

0.06% of GDP) in FY20.

Besides dividends, the

capital market could have

accounted for another 5-

10% of the surge in PIT in

FY24

Overall, the following three factors explain the surge in PIT in the last few years – 1)

inclusion of taxes on dividends into PIT, from the corporation taxes, 2) almost

doubling of the effective tax rate on dividends, which have almost doubled, and 3)

capital market transactions (incurring STT) and capital gains taxes. In other words,

the growth in PIT, excluding these factors, has been largely in line with the nominal

PDI/GDP growth. Additionally, the K-shaped recovery (since the surcharges were

increased at high-income levels) may have also contributed to the surge in PIT, but

its impact is likely small.

23 May 2024

Household savings – Why do NFS hold special importance?

What do consumers do with their earnings? They can either spend it on

consumption or invest in property market (called physical savings) or save in

financial assets. PDI, thus, is divided into these three segments – private final

consumption expenditure (PFCE), physical savings, and net financial savings (NFS).

The share of PFCE has risen to almost three-decade high of 77% of PDI in FY23 and

that of physical savings was at a decade high of 17%, implying that NFS has fallen to

a four-decade low of 7% of PDI

(Exhibit 13).

These shares would have changed only

slightly in FY24, with PFCE and NFS falling a little, while physical savings are expected

to have risen further (official data only available up to FY23 as of now). NFS and

physical savings, together, are called HH total savings in India.

In this section, we delve deeper into the recent trends of HH savings, and dissect the

changing composition and preferences within that. We also argue that HH NFS holds

special significance in economic growth, and thus, its sharp collapse in the last two

years should not be ignored.

1. What are the significant shifts in household savings?

HH savings in India consist of two parts – net financial savings (NFS) and physical

savings. NFS is arrived by adjusting gross financial savings (GFS) with financial

liabilities (FL). GFS includes seven key areas: currency, deposits (bank and non-bank),

insurance, provident and pension funds (P&PFs, including public provident funds

[PPF]), shares & debentures (S&D), claims on government (small savings), and

others. HH physical savings primarily constitute residential real estate (accounting

for about two-thirds) and machinery & equipment (owned by producers within the

HH sector).

HH total savings were at a

six-year low of 18.4% of

GDP in FY23, as NFS

collapsed to a four-decade

low of 5.3% of GDP of PDI

The share of PFCE has risen

to almost three-decade high

of 77% of PDI in FY23 and

that of physical savings was

at a decade high of 17%

As mentioned above, physical savings were at a decade high in FY23 (and we expect

it to have increased further in FY24). At 13.2% of GDP, HH physical savings have

come a long way from its trough of 10% in FY16 and pre-pandemic levels of 11-12%

of GDP

(Exhibit 14).

Nevertheless, HH total savings were at a six-year low of 18.4% of

GDP in FY23

(Exhibit 15),

as NFS collapsed to a four-decade low of 5.3% of GDP

(Exhibit 16).

Exhibit 14: …and physical savings (=investments) were at a

decade high in FY23

HH physical savings (% of GDP)

Exhibit 13: PFCE accounted for 77% of PDI in FY23, the

highest in three decades...

(% of PDI)

Consumption

Physical savings

NFS

10 10 10 10 10 14

16 17 17

14 15 16 14

20 19 16

15.1

75 76 76 75 76 73 76 77 77

70 70 72 74

FY12

FY15

FY18

FY21

FY24F

FY13

12.9 12.5

11.6 12.4 11.4 11.0 12.8 13.2

9.9 10.7

FY15

FY17

FY19

FY21

FY23

FY24 are our forecasts

Source: CSO, CEIC, MOFSL

23 May 2024

Exhibit 15: HH total savings, however, were at a six-year low

in the year...

NFS

Physical savings

HH total savings

(% of GDP)

22.7

22.5

20.3 19.6

20.1

19.3 20.3 19.1

18.4

18.0 18.1

15.1 12.9

12.5 9.9 10.7 11.6 12.4 11.4

11.0

12.8

11.7

13.2

Exhibit 16: …as HH NFS collapsed to a four-decade low of

5.3% of GDP in FY23

HHNFS (% of GDP)

5.3

7.4

7.1

8.1

7.4

7.6

7.9

7.7

7.3

5.3

FY73 FY78 FY83 FY88 FY93 FY98 FY03 FY08 FY13 FY18 FY23

Source: CSO, CEIC, MOFSL

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23

Physical savings accounted

for more than 71% of total

HH savings in FY23, the

highest proportion in at

least the past half-century

Three key trends have emerged within HH total savings in recent years.

First,

within

GFS, HHs have increased their exposure to non-deposit assets such as shares &

debentures, pension & provident funds and small savings

(Exhibit 17). Second,

HHs

have transitioned away from financialization of its savings by allocating a larger

portion to physical assets in the post-pandemic years. Physical savings accounted for

more than 71% of total HH savings in FY23, the highest proportion in at least the

past half-century, and compared to 60% in the pre-pandemic years

(Exhibit 18).

And

third,

HH liabilities have mounted in the past few years, particularly in the last

couple of years. All these trends are interconnected, reflecting the evolving

preferences of Indian consumers, which present both opportunities and some

challenges.

Exhibit 18: …and the share of physical savings was at a five-

decade high in FY23

(% of HH

savings)

NFS

Physical savings

Exhibit 17: HH financial savings shifting from deposits to

other assets…

Currency

P&PFs

(% of GDP)

0.9

1.0

2.2

2.0

3.1

2.8

FY18

1.1

0.9

2.1

4.3

1.5

FY19

1.3

0.5

2.3

1.7

4.4

Deposits

S&D

1.3

0.5

2.5

2.9

6.3

1.9

FY21

1.1

0.9

2.3

2.1

3.5

1.1

FY22

Insurance

Small savings

0.9

0.8

2.3

2.0

4.1

0.9

FY23

1.4

FY20

Source: CSO, CEIC, MOFSL

Our estimates suggest that

HHNFS fell slightly (or, at

best, remained steady) in

FY24, and thus, the fall in in

FY23 was not a one-off

2. Was a dramatic fall in HHNFS in FY23 a one-off?

The collapse in NFS in FY23 was sudden, and thus, there were doubts over its

durability. It may be, as was argued, a response to the all-time high NFS of 11.7% of

GDP in FY21 (the pandemic year). However, our

estimates

clearly suggests that

HHNFS fell slightly (or, at best, remained steady) in FY24, and thus, the fall in HH NFS

in FY23 was not a one-off.

Based on our component-wise calculations, we believe that HH GFS increased

slightly to 10.8% of GDP in 9MFY24, as higher deposits and small savings were

almost entirely offset by the fall in currency holdings. HHNFS, however, was 5.0-

23 May 2024

5.5% of GDP in FY24, since higher GFS was more than offset by the stronger rise in

FL – to 6.2% of GDP in 9MFY24, from 5.7% of GDP in the corresponding period a

year ago

(Exhibit 19).

Exhibit 19: HH NFS likely steady at 5-5.5% of GDP in FY24 as well

% of GDP

FY19

GFS

12.0

Deposits

4.3

Currency

1.5

Insurance

2.1

P&PFs^

2.1

Investments@

0.9

Small savings

1.1

Financial liabilities

4.1

Bank loans

3.3

HFCs*

0.3

NBFCs

0.5

NFS

7.3

~CSO’s data up to FY23

FY20

11.6

4.4

1.4

1.7

2.3

0.5

1.3

4.1

2.9

0.0

1.2

7.5

Annual data~

FY21

15.4

6.3

1.9

2.9

2.5

0.5

1.3

4.0

3.3

0.3

0.4

11.6

FY22

11.1

3.5

1.1

2.1

2.3

0.9

1.1

3.8

3.3

0.4

0.1

7.4

FY23

11.0

4.1

0.9

2.0

2.3

0.8

0.9

6.0

4.6

0.4

0.9

5.1

9MFY20

10.5

3.3

0.8

2.1

2.0

0.8

1.4

3.3

2.9

0.1

0.4

7.2

First nine-month data#

9MFY21

9MFY22

9MFY23

9MFY24

14.5

9.0

10.5

10.8

4.9

1.8

3.8

4.5

2.2

0.7

0.4

-0.7

3.0

2.0

2.1

2.2

2.3

2.0

2.2

2.4

0.3

1.0

0.7

1.6

1.5

1.2

1.5

3.4

3.2

5.7

6.2

3.1

2.7

4.5

4.9

0.2

0.4

0.1

0.2

0.1

0.8

1.3

11.0

5.9

4.8

4.6

@ Including net flows into MFs and capital

raised

^ Assumptions for

9MFY24

Source: Various national sources, CEIC,

MOFSL

#Based on RBI’s quarterly data (up to FY23), which may be different from CSO’s data

*For comparison sake, HDFC Ltd. is included in HFCs in 2Q/3QFY24

3. Why does HHNFS hold special significance in economic growth?

In my Book titled

“The Eight Per Cent Solution”,

I have used an identity extensively,

which I call the

Theory of Everything.

It says that every rupee (physically) invested in

an economy must be financed either through gross domestic savings (GDS) or

foreign savings (i.e., current account deficit, CAD), i.e.,

Total investments = GDS +

CAD.

As the name suggests, it provides important insights analyzing the potential impacts

of any economic policy in this context. It indicates that any policy announced to

affect the external balance must alter the interaction between total investments

and domestic savings in an economy.

CAD is – barring some errors & omissions – the sum of the differences of savings and

investments of each of the three institutional participants – HH, corporate and

government. The higher savings, given a level of total investments, will lead to lower

CAD (or higher surplus) and vice-versa. Therefore, one must analyze the sectoral

balances – savings

minus

investments – to understand the likely implications on

CAD. Commenting on only savings or investments isn’t as comprehensive and

helpful.

The rise and fall of HHNFS

can happen only due to two

factors – either

consumption and/or

physical savings could grow

faster than income/GDP

HH NFS, therefore, holds special significance since it represents the

surplus(+)/deficit(-) of the household sector, i.e., the difference between its total

savings and investments. The rise and fall of HHNFS, as % of income/GDP, can

happen only due to two factors – either consumption and/or physical savings could

grow faster than income/GDP, shifting the balance towards de-financialization

within HH total savings. Of course, HH total savings fall in the former case, but

remain unchanged in the latter (but this is not important for this discussion).

23 May 2024

Consumption in India has become import-oriented in the past many years. Based on

our classification of India’s foreign trade, consumption basket (primarily including

agricultural products, textiles and electronic goods) has seen a continued

deterioration in its external balance. India used to run a large foreign trade surplus

of ~3% of GDP on its consumption basket in the mid-1990s, which worsened to a

surplus of only 1% of GDP by mid-2000s and turned into a small deficit in the pre-

COVID years (beginning FY16) to a trade deficit of 0.7% of GDP in the last three years

(FY22-FY24). Therefore, if higher consumption drives lower HHNFS, it is very likely to

lead to higher CAD

(Exhibit 20).

Exhibit 20: India’s external trade balance on its consumption* basket

India's trade balance on consumption basket (% of GDP)

2.8

2.3

2.0

2.7

2.1 2.1

1.6

1.1 1.0

0.7 0.7

-0.1

0.2

0.8

0.5 0.6

1.3

0.4

-0.2 -0.2

-0.4 -0.4 -0.4 -0.3

-0.7 -0.8

-0.8

FY98

FY00

FY02

FY04

FY06

FY08

FY10

FY12

FY14

FY16

*Includes agriculture, textiles (including readymade garments), electronic goods and others

FY18

FY20

FY22

FY24

Source: CMIE, CEIC, MOFSL

The conclusions, however, would not be very different, if a surge in physical savings

drive lower HHNFS – by changing the composition of HH total savings. Let’s assume

household total savings remain unchanged at 19% of GDP (hypothetically) in the

year 1 and 2, but physical savings increase to 13% from 12%, while HHNFS fall to 6%

from 7% of GDP earlier. Assuming all other things constant, higher physical savings

would push India’s total investments higher by the same extent. However, with no

change in corporate and government net surplus/deficit (i.e., difference between

savings and investments), India’s CAD will widen (by lesser extent since income also

rises with higher investments) since household surplus (i.e., HHNFS) has declined

amid higher total investments.

In case, total investments, and thus, income (or GDP), remain unchanged and

physical savings substitute corporate or government savings, then lower NFS does

not lead to higher CAD. However, one must remember that household investments

(majorly in the residential property market) may be less efficient than the

government (i.e., infrastructure) and corporate investments (in machinery &

equipment). And thus, even though lower HHNFS does not pose a direct challenge, if

higher physical savings replace corporate/government investments, it could

certainly hurt overall efficiency in the economy, and thus, GDP growth.

The policy makers must

ensure to push India’s total

savings higher before a

revival in its investment

rate

In any case, since the broad general expectation (or narrative) is for India’s

investment rate to pick up from FY25, we don’t find the declining trend of HHNFS

very comforting in India. Irrespective of its drivers, a durable fall in HHNFS combined

with higher investment rate, has the potential to widen India’s external deficit (i.e.,

CAD). The policy makers, thus, must ensure to push India’s total savings higher

before a revival in its investment rate.

23 May 2024

Household debt – Is it concerning or not?

India’s household debt is estimated at 38% of GDP in FY23, as per the recent data

published by the Reserve Bank of India (RBI) in Sep-23. Although there are no official

updates yet, our calculations suggest that it is likely to have touched 40% of GDP as

of Dec-23. As % of PDI, household debt is expected to have risen to 52% in FY24F,

compared to 48% in FY23. Is this a matter of concern? Is HH debt in India high or

low? How does one approach this question? In this section, we address these

questions and discuss HH debt in detail.

1. Household borrowings/debt has risen rapidly in the last few years

Household borrowings have increased rapidly in the past many years. From its peak

annual level of 6.7% of GDP in FY07, household financial liabilities (FL) dropped to

~3% of GDP in FY09 and remained around that level till FY17. In the run-up to the

pandemic (FY18-FY21), FL increased towards 4% of GDP, which surged to 5.8% of

GDP in FY23 and our calculations suggest that it likely crossed 6% of GDP in FY24F,

only the second time in history

(Exhibit 21).

With mounting annual

borrowings, HH debt surged

from 32% of PDI in

FY12/FY13 to 40% in FY20

and further to 48% in FY23

With mounting annual borrowings, HH debt (outstanding stock) surged from 32% of

PDI in FY12/FY13 to 40% in FY20 and further to 48% in FY23. We project it to have

risen further to 52% of PDI in FY24F

(Exhibit 22),

as HH borrowings is likely to grow

~13% YoY compared to 9% growth in PDI during the year.

Exhibit 22: …which means that household debt may have

risen to ~52% of PDI

Household debt (% of PDI)

6.1

37 38

34 35

32 32 33

Exhibit 21: Household annual financial liabilities likely at

~6% of GDP in FY24F...

HH financial liabilities (% of GDP)

6.7

47 46 48

FY74 FY79 FY84 FY89 FY94 FY99 FY04 FY09 FY14 FY19 FY24F

2004-05 base till FY11; 2011-12 base since FY12

FY12

FY14

FY16

FY18

FY20

FY22

FY24F

Source: RBI, CEIC, MOFSL

The Banking sector

accounts for about four-

fifths of HH total debt,

while HFCs and other NBFCs

account for ~10% each

2. What is driving household debt in India?

We divide household debt into four parts – agricultural debt, housing loans, non-

housing personal loans and loans taken by small businesses (calculated as the

residual). The RBI publishes quarterly data on scheduled commercial banks’ (SCBs)

aggregate loan book divided into household, corporate and government sector. The

Banking sector (including SCBs and cooperative &credit societies) accounts for about

four-fifths of HH total debt, while housing finance companies (HFCs) and other non-

banking financial companies (NBFCs) account for ~10% each

(Exhibit 23).

This ratio

has remained quite stable in the past few years.

23 May 2024

Non-housing personal loans

are now the largest

component with 32% share

in HH total debt, followed

by housing loans (~30%),

business loans (24%) and

agricultural loans

RBI data provides details of SCBs exposure to the household sector into the four

components, HFCs debt is entirely housing debt and we classify NBFCs loan book to

the household sector using RBI data (assuming no exposure to unincorporated

businesses since there is not enough data). Such compilation suggests that non-

housing personal loans are now the largest component with 32% share in HH total

debt, followed by housing loans (~30%), business loans (24%) and agricultural loans

(remaining ~15%). Interestingly, while the share of housing loans has remained

broadly stable in the past few years, non-housing personal loans have witnessed an

increase, while business and agricultural loans have fallen

(Exhibit 24).

This is

because non-housing personal loans have increased at an average of ~20% in the

last five years, compared to ~13% average growth each in housing and businesses,

with 10% growth in agricultural loans. Notably, business loans have increased ~20%

in the last two years, second to 24% growth in non-housing personal loans

(Exhibit

25).

Exhibit 24: Housing loans account for ~30% of household

total debt in India

Details of household debt~ (% of total)

Agri Housing Non-housing Businesses@

Exhibit 23: Banks* account for four-fifths of household total

debt in the country

Share in HH total debt (%)

Banks*

NBFCs

HFCs@

FY20

FY21

FY22

FY23

1HFY24

FY18

FY19

FY20

FY21

FY22

FY23

Dec'23#

FY19

*Including cooperative and credit societies

@HDFC Ltd. included in HFCs for comparison purposes

#MOFSL estimates (Official data available up to FY23)

~Excluding cooperative & credit societies

@Business loans are estimated as the residual

Source: RBI, CEIC, MOFSL

Exhibit 25: Non-housing personal loans have increased at

the fastest pace in the last few years…

Components of HH debt~ (% YoY)

Agri

FY20

FY21

FY22

FY23

1HFY24

Business loans are estimated as the residual

Housing

Non-housing

Businesses

Exhibit 26: …of which ‘others’ have risen at the fastest pace

in the past few years

Details of non-housing debt (% of total HH debt)

Gold

Vehicles

Education

Others

FY19

FY20

FY21

FY22

1HFY24

FY23

‘Others’ is a residual

~Excluding cooperative & credit societies

Source: RBI, CEIC, MOFSL

Within non-housing loans, it is very clear that while ‘vehicle’ loans account for more

than a fourth of such loans, their share has been broadly static in the past few years.

Gold and education loans account for a very small portion of household debt, while

‘others’ have seen the maximum increase within non-housing personal loans

23 May 2024

(Exhibit 26).

Although there is a lack of clarity on ‘others’, it includes all sort of loans,

such as medical loans, credit cards, personal exigencies, consumer durables among

others.

Non-housing HH debt is

~30% of GDP in India,

comparable to that in

Malaysia and Taiwan, and

higher than in the US, Japan

and China

All-in-all, it means that housing debt in India amounts to ~11% of GDP, up from 10%

in FY20, and non-housing HH debt is ~30% of GDP

(Exhibit 27 and 28).

A comparison

of the latter with their counterparts in world’s major economies confirms that

India’s non-housing HH debt is comparable to that in Malaysia (MY) and Taiwan

(TW), and higher than in the US, Japan (JP), and China (CN).

Exhibit 28: …which means that India’s non-housing HH debt

is comparable to that in world’s major economies

HH non-mortgage debt (% of GDP)

Exhibit 27: India’s housing debt* is only about 11% of GDP in

3QFY24…

India's housing debt (% of GDP)

11.2

8.5

8.6

9.1

9.5

9.9

10.6

10.5

10.8

27 28 29

24 24 24 25

12 12 13

FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Dec-23

* Including Banks and HFCs

RU# SAf ID DE UK US JP CN AU CA TW MY IN SKr TH

#Data as of Sep-23 (Dec-2023 for all others)

Source: CEIC, Various national sources, MOFSL

3. Is India’s HH debt a concern?

Many participants compare India’s HH debt-to-GDP ratio with that in other

economies and conclude that even though it has risen sharply in the past few years,

at 40%, it is still among the lowest compared to others

(Exhibit 29).

To our mind, this

is not appropriate. One of the most well-acceptable ways to answer this question is

to estimate HH debt service ratio (DSR). DSR measures the portion of income used

by the borrower to meet its repayment (principal + interest) obligations. So, a DSR of

10% would mean that, on an average, a typical household spends 10% of its income

to meet its loan repayment dues. A higher DSR, thus, means higher debt repayment

obligations, which tend to affect GDP growth adversely via the restricted ability of a

household to grow its spending and savings. A look at the trends in India’s HH DSR

and its comparison with other economies will throw valuable insights into this

question.

According to the RBI, debt

service ratio (DRS) of Indian

households is estimated at

6-7%, compared to our

estimate of 11-12%

An estimation of DSR has two major components – residual maturity and effective

interest rate. The lower the residual maturity and the higher the effective interest

rate, the higher (and worse) the DSR will be and vice-versa. According to the

Financial Stability Report of the RBI published in December 2023, DSR of Indian

households was estimated at 6-7%, which is not only comparable to other

economies, but also very stable in the past few years. According to the RBI, the

weighted average effective interest rate stood at 9.7% in March 2023 and the

residual maturity of retail loans (from a survey of 12 major scheduled commercial

banks, comprising about 80% of the retail loan portfolio at the system level) was

12.7 years on the existing stock of debt.

23 May 2024

This, however, is in stark contrast to our calculations of household DSR in India,

which was published in a

report

titled

“How sustainable is India’s household debt?”

on 4

October 2023. According to our analysis, DSR for Indian households is 11-12%

(almost double of that estimated by the RBI), which is not only much higher than its

counterparts in other major economies, but has also increased gradually over the

past many years. The substantial difference between our and the RBI’s estimates of

household DSR emerges from the estimates of residual maturity (effective interest

rate estimates are similar). In stark contrast to the RBI’s residual maturity of 12.7

years, our calculations suggested a residual maturity of only about 5.5 years. What

explains this difference and what are its implications?

As mentioned above, there are four parts in India’s HH debt – housing loans, non-

housing personal loans, agricultural loans and business loans. Even if one assumes a

residual (not contracted) maturity of 12 years on housing loan portfolio, the

remaining HH debt must have a residual maturity of about 13 years to make RBI’s

estimates believable. This looks highly impractical

(Exhibit 30).

Exhibit 29: Although India’s HH debt is very low compared

to world’s other major nations…

Household debt-to-GDP (%)

102

63 66

ID RU# SAf IN DE JP CN US TW UK MY SKr TH CA AU

#As of Sep-23 (All other data as of Dec-23)

Share of non-mortgage debt (%)

100

76 79

84 84 87

110

Exhibit 30: …it has a much higher share of shorter duration

loans vis-à-vis other economies

100

SAf RU#

SKr

#As of Sep-23 (All other data as of Dec-23)

Source: CEIC, Various national sources, MOFSL

Agricultural loans, which account for ~15% of HH debt in India, are primarily short-

term crop loans, with a maturity about a year. Similarly, business loans, which

accounts for 24-25% of HH debt in India, are also likely to be dominated by working

capital loans (of 1-3 years), rather than long-term investment loans (which would

largely be a part of corporate loans).

Of the non-housing personal loans, vehicle loans (including that of banks and non-

banking finance companies, NBFCs) account for 9-10% and education loans were

only about 1% of HH debt. These loans are likely to have a residual maturity of up to

5 years, with the remaining non-housing personal loans (which includes all

unsecured and gold loans) falling into 1-3 years’ maturity profile.

23 May 2024

30% of HH debt may have a

residual maturity of 12

years, another 10-15% of

say, 5 years, and the

remaining 55-60% may have

a maturity of, say 2 years

In short, this understanding suggests that 30% of HH debt may have a residual

maturity of 12 years, another 10-15% is likely to have a residual maturity of say, 5

years, and the remaining 55-60% may have a residual maturity of, say 2 years (i.e.,

1-3 years). If so, the weighted average residual maturity of the entire HH debt would

be 5.3-5.5 years. Notably, only 22.5% of SCBs’ entire loan book (at INR143t) had a

maturity of above 5 years in FY23, compared to 16-17% a decade ago.

With an effective interest rate of 9.7 years and weighted average residual maturity

of 5.5 years, Indian household DSR would be 11-12% in FY23/FY24F, instead of 6-7%

estimated by the RBI. Further, it has also increased over a period of time – to 11-

12% now from ~10% up to FY18

(Exhibit 31).

Is this high or low? This can be gauged by comparing 11-12% DSR for Indian

households at 52% leverage ratio (debt-to-PDI), with 6-9% DSR in several advanced

economies with much higher (almost double) leverage ratio. HH DSR in China with

debt-to-income ratio of more than 100% is estimated at 8.5%. A few advanced

economies, which have a HH DSR of more than 10%, have household debt at more

than 175% of income

(Exhibit 32).

Exhibit 31: Consequently, Indian HH DSR is estimated at 11-

12% now…

Indian household DSR (%)

FY03

FY06

FY09

FY12

FY15

FY18

FY21

FY24F

10.8

12.4

11.7

Exhibit 32: …which is much higher than that in other major

economies

100

150

Household debt-to-income (%)

200

IN#

CN*

SKr*

9.7

8.9

Assuming residual maturity of 5.5 years

*Dec-22, #Mar-23 (All other data as of Sep’23)

Source: CEIC, Various national sources, MOFSL

23 May 2024

Private final consumption expenditure (PFCE): Is the slowdown temporary

or durable?

The household sector is the primary consumer in any economy. Of the total final

consumption expenditure in India, consumers account for ~85%, while the

government contributes to the remaining 15%. PFCE, thus, is the largest component

of GDP in India, like in most other economies in the world. In the pre-pandemic

years (FY13-FY20), PFCE growth outpaced GDP growth significantly. While the

former grew at an average of 12.1% during the eight-year period, the latter posted

an average growth of 11%

(Exhibit 33).

Accordingly, the share of PFCE in GDP

increased to multi-year high of ~61% in FY20 and remained there till FY23, from its

all-time low of 56.2% in FY12

(Exhibit 34).

Notably, the share of PFCE in GDP has

risen for the first time in India since the 1970s.

Exhibit 33: PFCE growth has outpaced GDP almost

continuously for a decade up to FY21...

(% YoY)

56.2

-7

FY14

FY16

FY18

FY20

FY22

FY24F

Nominal GDP

Nominal PFCE

Exhibit 34: …due to which PFCE (as % of GDP) increased for

the first time in the 2010s decade since the 1970s

PFCE (% of GDP)

61.1

61.0

60.5

FY04

FY08

FY12

FY16

FY20

FY24F

FY24 are our forecasts

Source: CSO, CEIC, MOFSL

PFCE growth has exceeded

PDI growth for the first time

in the post-independence

era in the 2010s decade,

which has continued in the

first four years of the 2020s

decade as well

Although PFCE is generally seen as a ratio of GDP, it is more appropriate to compare

it with PDI. As mentioned earlier, PDI growth has lagged GDP growth in the last few

years. It means that PFCE has not only increased faster than GDP, but it has also

outpaced PDI growth in the last many years

(Exhibits 35).

As % of PDI, PFCE stood at

77%, the highest in almost three decades

(Exhibit 36).

In fact, a look at the long-term

trends in PDI and PFCE growth reveals that the latter has exceeded the former for

the first time in the post-independence era in the 2010s decade, which has

continued in the first four years of the 2020s decade as well

(Exhibit 37).

Exhibit 36: …due to which PFCE (as % of PDI) has risen to

almost three-decade highest level in FY23

PFCE (% of PDI)

Exhibit 35: More importantly, PFCE growth has outpaced

PDI growth in the past many years...

(% YoY)

-9

PDI

PFCE

FY24 are our forecasts

Source: CSO, CEIC, MOFSL

23 May 2024

PFCE, however, has weakened sharply in FY24. In the first three quarters of the year,

real (nominal) PFCE has increased at just 3.7% (8%) YoY, compared to 8.7% (17.4%)

in the previous year. It is very likely, thus, that real (nominal) PFCE growth will be 3-

4% (8-8.5%) in FY24E, the slowest in the past two decades (except FY21). Although

the slowdown in consumption had come as a surprise to many participants, we had

projected

a slowdown in household spending (either consumption and/or

investments) in FY24. As it turned out, both have weakened, though the weakness in

PFCE has outpaced the weakness in household investments (=physical savings).

A decline in NFS by one

percentage point of GDP

allows a growth of ~8pp in

physical savings or about

2pp in PFCE

Our calculations suggest that compared to an average growth of 16.4% and 28.2%

during the previous two years (and 10.3%/12.2% in the previous four years, i.e.

FY20-FY23), PFCE growth could have moderated to 8.4% YoY in FY24

(Exhibit 38),

while physical savings could have increased 12% last year. If so, it is likely that

HHNFS declined further to 5% of GDP (and 6.3% of PDI) in FY24E, from a four-

decade low of 5.3% (6.6%) in FY23. The fall in NFS may not be much in FY24, but we

must note that a decline in NFS by one percentage point of GDP allows a growth of

~8pp in physical savings or about 2pp in PFCE (or some combination of both).

Exhibit 38: Real (and nominal) PFCE growth has moderated

sharply in FY24F

Nominal PFCE (% YoY)

-7

Exhibit 37: PFCE has grown faster than PDI for the first time

in the recent decade in the post-independence period

(% CAGR)

1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s*

* FY21-FY24F

PDI

PFCE

FY03

FY06

FY09

FY12

FY15

FY18

FY21

FY24F

Source: CSO, CEIC, MOFSL

We expect the residential

real estate to see sharper

moderation in FY25,

especially since PFCE

growth is expected to

recover

Is this slowdown temporary or structural? We believe that like FY24, household

spending (PFCE + physical savings) growth could remain modest in FY25 as well;

however, faster growth in PDI (in line with GDP growth) could help push HH total

savings higher – only marginally – for the second consecutive year

(Exhibit 39).

the same time, we hope (as reflected in our base case, FY25-S2) that HHNFS

recovers in FY25 (to 5.5% of GDP), which means that the residential real estate (a

large part of physical savings) would see sharper moderation this year, especially

since PFCE growth is expected to recover.

Alternatively, HH NFS may remain unchanged (at 5% of GDP) or fall further (to 4.5%

of GDP), and thereby boost the residential property market (FY25-S1 and FY25-S3,

respectively). Lastly, nominal PFCE may continue to grow at the same pace or slowly

this year (say 7-8%), which means that real PFCE grows faster, as the deflator is

expected to be lower in FY25. In this case, HH savings could also pick up faster,

helping both NFS and physical savings.

23 May 2024

Exhibit 39: Can HH NFS fall further in FY25?

PFCE growth (% YoY)

39.2

18.6

14.2 17.1

5.3

22.5

8.4

12.5

3.4 5.0

9.5 11.9 11.6

5.0

9.5 7.9

5.5

9.5

16.1

4.5

0.0

-17.3

-26.5

FY22

FY24 are MOFSL forecasts

FY23

FY24F

FY25-S1

FY25-S2*

FY25-S3

* MOFSL base case for FY25 (FY25-S2)

Source: CSO, RBI, various other national sources, MOFSL

Physical savings (% YoY)

NFS (% YoY)

NFS (% of GDP)

7.3

We believe that household

spending could continue to

grow modestly for the next

few years, until HHNFS

comes back to a reasonable

level of 7-8% of GDP

Overall, we believe that household spending (consumption + investments) is likely to

continue to grow modestly (say, 9-10% YoY per annum) for the next few years,

slower than 11-12% growth witnessed in the pre-pandemic years, until HH NFS

comes back to a reasonable level of 7-8% of GDP. Further, we hope that HHNFS

recovers within HH savings, so that a pick-up in India’s investments, led by corporate

sector as and when it happens, does not create external imbalances in the economy.

23 May 2024

Conclusion – Household financial position has deteriorated:

In this report, we discussed in detail the financial position of the Indian household

sector, delving deeper into its earnings, savings (financial and physical),

borrowings/debt and consumption patterns. Our conclusion is that its finances have

worsened in the past few years, and thus, it would be unreasonable to expect them

to continue to be the primary driver of economic growth in the coming years. A look

at the long-term finances of household finances

(Exhibit 40)

confirms that:

1) Income growth has weakened continuously in the past few decades, falling into

single-digits in the last four years (FY21-FY24E), led by the pandemic,

2) For the first time, PFCE growth outpaced PDI growth in the 2010s decade, which

continued in the post-pandemic years as well

(see Exhibit 41 also),

3) Although household borrowings have risen at the fastest pace (of all the

indicators) in almost all the decades, its average growth of 27% in recent years is the

highest, at a time when PDI growth has been the least, and

4) While financial savings have been replaced by physical savings since the 1990s,

the collapse in the former in the recent years in unprecedented.

PDI

19.9

21.1

PFCE

NFS

24.1

14.9

12.1 10.9

15.5

10.8

9.2

9.6 10.1

2.5

1980s

1990s

2000s

2010s

FY21-FY24E

15.8

26.6

An average growth of 27%

in HH borrowings in recent

years is the highest ever, at

a time when PDI growth has

been the least

Exhibit 40: A look at long-term trends in household finances (% CAGR)

(% CAGR)

22.8

19.6

13.2

17.8

14.8 13.7

12.9

15.2 14.3

12.0 13.2

All data used are ‘flow’ (annual) indicators

PS = physical savings (=investments)

FY24E are our forecasts

Source: RBI, CEIC, Various national sources, MOFSL

Exhibit 41: PDI growth has lagged PFCE growth for the first

time in the post-independence period…

(% CAGR)

PDI

PFCE

Exhibit 42: …which is tantamount to lower household

savings and rising debt

HH total savings

(% of GDP)

32.0

25.5

25.9

HH debt

40.8

1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s*

*FY21-FY24F

FY00

FY03

FY06

FY09

FY12

FY15

FY18

FY21 FY24F

Source: CSO, CEIC, MOFSL

Household spending may

remain subdued on average

in the coming years unless

their finances improve

We believe that it is just a beginning of a long-term trend. Household spending

(consumption + investments) may remain subdued on average in the coming years

(it may grow faster in one year and slower in another), unless household finances

improve. Combined with the fact that the growth in government spending will

remain muted over the next few years due to ongoing fiscal consolidation, the

entire responsibility of keeping GDP growth at ~7% will fall on the corporate sector.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

23 May 2024

NOTES

23 May 2024

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

Expected return (over 12-month)

>=15%

< - 10%

> - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take

appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures:

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MO FSL, the Research Entity (RE) as defined in the Regulations, is engaged in

the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com.

MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock

Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock

broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual

Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal

Oswal Financial Services Ltd. are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf

Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

MOFSL, it’s associates, Research Analyst or their relatives may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst or their relatives may have actual

beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or date of the public appearance.

MOFSL

and its associate company(ies), their directors and Research Analyst and their relatives may have any other potential conflict of interests at the time of publication of the research report or at the time of public

appearance, however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the

views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

In the past 12 months, MOFSL or any of its associates may have:

received any compensation/other benefits from the subject company of this report

managed or co-managed public offering of securities from subject company of this research report,

received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,

received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.



MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report.



Subject Company may have been a client of MOFSL or its associates during twelve months preceding the date of distribution of the research report.



Research Analyst may have served as director/officer/employee in the subject company.



MOFSL and research analyst may engage in market making activity for the subject company.

MOFSL and its associate company(ies), and Research Analyst and their relatives from time to time may have:

a) a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein.

(b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as

an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall

have no bearing whatsoever on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL

even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts

which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures.

To enhance transparency, MOFSL has incorporated a Disclosure of Interest Statement in this document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and

/ or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware that MOFSL may have a

potential conflict of interest that may affect the objectivity of this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way,

transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures and

information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from publicly available media or other sources believed

to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information

and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities

or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers

by virtue of their receiving this report.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or

will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Disclosure of Interest Statement

Companies where there is interest

Analyst ownership of the stock

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental research and Technical

Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have

an independent view with regards to subject company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to

law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures

Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Financial Services Limited

(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report is intended for distribution only to

“Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with

professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s)

who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

MOTILAL Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the

United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under

23 May 2024

applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by MOFSL, including the products and services

described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations

thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment

activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by

Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business

with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any

business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer,

MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research

analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co. Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt

financial adviser in Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely

to persons who qualify as “Institutional Investors”, of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act of Singapore .Accordingly,

if a Singapore person is not, or ceases to be, such an investor, they must immediately discontinue any use of this Report and inform MOCMSPL .

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any

other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer

document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any

investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own

investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient.

Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document

(including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all

investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors.

No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement

incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any

prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and

the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform

investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of

each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in publicly accessible media or

developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you

solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed

or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use

would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all

jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors,

employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with

the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and

agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs,

damages,

expenses that may be suffered by the person accessing this information due to any errors and delays.

This report is meant for the clients of Motilal Oswal only.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing.

Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 - 71934200 / 71934263; www.motilaloswal.com.

Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 71881000. Details of Compliance Officer: Neeraj Agarwal, Email

Id: na@motilaloswal.com, Contact No.:022-40548085.

Grievance Redressal Cell:

Contact Person

Ms. Hemangi Date

Ms. Kumud Upadhyay

Mr. Ajay Menon

Contact No.

022 40548000 / 022 67490600

022 40548082

022 40548083

Email ID

query@motilaloswal.com

servicehead@motilaloswal.com

am@motilaloswal.com

Registration details of group entities.: Motilal Oswal Financial Services Ltd. (MOFSL): INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412 . AMFI:

ARN .: 146822. IRDA Corporate Agent – CA0579. Motilal Oswal Financial Services Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Insurance, Bond, NCDs and IPO products.

Customer having any query/feedback/ clarification may write to query@motilaloswal.com. In case of grievances for any of the services rendered by Motilal Oswal Financial Services Limited (MOFSL) write to

grievances@motilaloswal.com, for DP to dpgrievances@motilaloswal.com.

23 May 2024