Motilal Oswal Financial Services

16 September 2020

COPE

The Economy Observer

3QCY20 – India’s Quarterly Economic Outlook

Higher inflation complicates matters



With the worst quarter behind us, the economic environment has turned clearer, but not necessarily in an expected

way. While real GDP growth declined further than expected, the real surprise has been on the inflation front.

Consequently, we have now revised our real GDP decline forecast from 4.7%/3.5% YoY in real/nominal terms for the

year to 6.5%/5.3%. Notwithstanding the massive contraction in economic activity, we have revised headline/core

inflation projections to higher levels of 5.9%/5.4% now from 5%/2.3% earlier. In the past quarter, the INR has moved

broadly as expected. Thus, we revise it marginally to 74.5/USD for FY21 from an average of 74.8/USD earlier.

Our

Economic Activity Index (EAI)

for India suggests ~5% YoY contraction in Jul’20, and most macroeconomic indicators

suggest slower contraction in Aug’20. We initially expected economic activity to start improving from Aug/Sep’20;

however, as this has not happened yet, we now expect another contraction of ~7% in 2QFY21 (from 4.7% earlier).

Finally, while the central government’s capital spending grew a strong 40% YoY in 1QFY21, the combined finances of

the center and 14 states

suggest

meager growth of 2% in total capital spending. Furthermore, our calculations suggest

the central government’s fiscal deficit could be INR14.6t (or 7.6% of GDP) in FY21 on account of an ~18% YoY

contraction in total receipts and 8% growth in total spending. This implies growth of just 6.4% YoY over Aug’20–

Mar’21, v/s growth of 11.3% over Apr–Jul’20.

Economic forecasts have once again changed since

Jun’20

Real GDP:

This shrank by a record 23.9% YoY in

1QFY21.

India’s contraction was not

only the deepest v/s other major nations but also worse than market consensus of

18%. Accordingly, while many market participants have revised down their

2QFY21/FY21 real GDP decline forecasts to the double digits, we have revised it

comparatively modestly to 7%/6.5% from 4.8%/4.7% earlier.

Since core inflation rose

unexpectedly to 5.4% each

in Jul’20 and Aug’20, from

3.9% YoY in Feb’20, we

have revised our headline

inflation forecasts from 5%

earlier to 5.9% in FY21.

CPI inflation:

This has been a bigger surprise than growth. Since core inflation rose

unexpectedly to 5.4% each in Jul’20 and Aug’20, from 3.9% YoY in Feb’20, we have

revised our headline inflation forecasts from 5% earlier to 5.9% in FY21. This implies

that headline inflation is unlikely to fall below 4% by Mar’21. If so, we believe the

monetary easing cycle is broadly over.

Foreign trade and exchange rate:

From 76 against the US dollar (USD) in early

Jun’20 (when our last QEO was released), the INR has now strengthened to 74/USD,

in line with our expectation. We now expect India’s Balance of Payments (BoP) to

post a larger surplus, led by a higher current account surplus and strong capital

inflows. Accordingly, we believe the INR could be 73-74, averaging at 74.5 in FY21.

Actual data

FY19

11.0

6.1

3.4

6.25

69.9

(2.1)

(3.4)

Sep’20 forecasts

1QFY21

2QFY21F 3QFY21F

(22.6)

(5.6)

0.9

(23.9)

(7.1)

(0.2)

6.6

6.7

5.4

4.00

75.9

74.5

73.7

4.2F

1.5

1.2

n/a

Exhibit 1:

Forecasts of key macroeconomic variables for the Indian economy

Macro indicators

Unit

Nominal GDP

% YoY

Real GDP

% YoY

Consumer price index (CPI)

% YoY

Policy repo rate (year-end)

% pa

INRUSD (average)

unit

Current account balance

% of GDP

Fiscal balance*

% of GDP

* For the central government only

FY18

11.3

7.2

3.6

6.00

64.4

(1.8)

(3.4)

FY20

7.2

4.2

4.8

5.15

70.9

(0.9)

(4.6)

FY21F

(5.3)

(6.5)

5.9

4.00

74.5

2.1

(7.6)

4QFY21F

5.0

4.2

5.0

4.00

74.0

1.9

F = Forecasts

Source: Various national sources, MOFSL

Nikhil Gupta

– Research analyst

(Nikhil.Gupta@MotilalOswal.com)

Yaswi Agrawal

– Research analyst

(Yaswi.Agrawal@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.

Expect real

GDP to contract

~7% YoY in 2QFY21

and decline by

6.5% in

FY21

Three key themes:

In this note, we not only provide our updated macroeconomic forecasts for India but

also discuss the three main themes likely to play out in coming quarters. These

themes have helped shape our forecast.

1) With worse-than-expected decline in 1QFY21, we have revised down our FY21

real GDP decline forecasts to 6.5% YoY (from 4.7% earlier). We now expect real

GDP to post growth only in Nov/Dec’20 (or 4QFY21), later than previously forecast

in Aug/Sep’20.

2) More concerning is that headline inflation is unlikely to fall toward 4% anytime

soon and may average at ~6% for the full-year FY21. To add to woes,

notwithstanding the worst real GDP decline in the past seven decades, core CPI

inflation is now expected to stay in the 5.5–6% range in 2HFY21. This makes us

believe the monetary easing cycle is largely over.

3) The central government fiscal deficit already breached the budget estimate (BE)

in Jul’20. Considering a likely slippage of 4 percentage points (pp) of GDP in FY21

fiscal deficit, government spending for the remaining eight months could grow

only 6.4% YoY – versus 11.3% over Apr–Jul’20 and 22% in the corresponding

period a year ago.

I. Expect real GDP to contract ~7% YoY in 2QFY21, decline by 6.5% in FY21

India’s real GDP shrank by a record 23.9% YoY in

1QFY21,

worse than market

consensus of 18% YoY and our expectation of 19%. Although private consumption

and investment decline were more pronounced than anticipated, fiscal spending

grew faster, and external trade also contributed higher. With the worst behind us,

the focus now is on strength in recovery in 2QFY21 and subsequent quarters.

Inflation

back in economic

debates; Monetary

easing cycle largely

over

Government

spending likely to

grow 6.4% in

Aug’20-Mar’21 v/s

11.3% growth over

Apr–Jul’20

India’s EAI-GVA contracted

around -5% YoY in Jul’20,

moderately better than in

Jun’20, following the worst

decline of ~31% in Apr’20.

Our in-house

Economic Activity Index (EAI)

suggests India’s EAI-GVA contracted to

around -5% YoY in Jul’20, moderately better than in Jun’20, following the worst

decline of ~31% in Apr’20 (Exhibit 2). Notably, while the farm sector remains strong,

the contraction in industrial activity moderated last month (broad-based), while it

worsened for the services sector due to a plunge in fiscal spending (Exhibit 3).

Exhibit 3:

…led by the non-farm sector

(pp)

2.0

(0.0)

(5.4) (4.7)

(18.8)

(30.5)

(6.1)

Agri

(0.5)

(17.7)

(10.0)

(12.2)

Industry

0.6

(9.3)

Services

1.0

(4.0)

(2.5)

0.9

(2.8)

(2.9)

Exhibit 2:

India’s economic activity fell ~5% YoY in Jul’20…

6.9

4.4 2.8

1.3

EAI-GVA (% YoY)

5.7 5.8 4.8 6.6

(4.1)

Jul-19

Oct-19

Jan-20

Apr-20

Jul-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Please refer to our

report

for details

Contribution of different components to EAI-GDP growth

Source: Various national sources, CEIC, MOFSL

With various macroeconomic indicators available for Aug’20, economic growth

appears to have improved, though only modestly. The following is a list of these

indicators:

11 June 2020

Freight traffic (railways and ports)

declined only 1.6% YoY in Aug’20 v/s 7.8% in

Jul’20.

Power production

was down 2.1% YoY last month v/s -2.7% in Jul’20.

Auto sales

posted first growth of 1.2% YoY in Aug’20 in 21 months (-16.6% in

Jul’20), led by passenger vehicles.

Tractor sales

grew 65% YoY in Aug’20, marking the highest growth in more than

a decade.

Daily e-way registrations

declined by 3.5% YoY in Aug’20 (-7.3% in Jul’20).

Non-oil non-gold imports

declined 29.6% YoY last month (same as in Jul’20).

Fuel consumption,

however, declined faster by 16.2% YoY in Aug’20, v/s 12.3%

in the previous month. This was led by industrial fuel items such as naphtha and

petroleum coke.

We expect real GDP to

contract ~7% YoY in

2QFY21, worse than our

earlier forecast of -4.7%,

but certainly better than

the growing consensus of

another double-digit

decline in real GDP.

These indicators suggest that while economic activity continued to contract in

Aug’20, it is likely to have improved on a YoY basis v/s Jun/Jul’20. Consequently, we

expect real GDP to contract ~7% YoY in 2QFY21, worse than our earlier forecast of -

4.7% (when we had anticipated positive growth from Aug/Sep’20), but certainly

better than the growing consensus of another double-digit decline in real GDP

(Exhibit 4). Furthermore, we have revised down our forecasts for 3QFY21 to almost

stagnant levels (from +1.3% earlier) and to 4.2% YoY from 4QFY21 (from 4.6%

earlier).

Consequently,

we believe real GDP could decline to -6.5% YoY for the full-year

FY21, marking the worst fall in the past seven decades

(Exhibit 5). Also, India’s

nominal GDP is likely to contract to -5.3% this year, marking its first contraction in 65

years, following the slowest growth seen in 48 years (7.2% in FY20).

Exhibit 4:

Real GDP growth forecasts revised down, but

nowhere close to double digits

Real GDP growth forecasts (% YoY)

Jan'20

Jun'20

Sep'20

(5)

(10)

(15)

(20)

(25)

5.7

4.6

4.2

Exhibit 5:

Real GDP to fall 6.5% YoY in FY21, marking worst

decline since the 1950s

(5)

Real GDP growth (% YoY)

Q3FY20 Q4FY20 Q1FY21 Q2FY21F Q3FY21F Q4FY21F

(10)

FY 52

FY 62

FY 72

FY 82

FY 92

FY02

FY12

FY22F

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

II. Inflation returning in economic debates; monetary easing cycle largely over

With the massive slowdown in the global and domestic economic environments, it is

broadly expected that inflationary pressures would also subside substantially.

While

headline inflation has actually subsided in most nations, it has risen in Russia (RU)

and Mexico (MX) and remained elevated in India (IN) and Turkey (TR).

As we had

explained in our last

QEO,

the share of food items is the highest in RU and IN, which

at least partly explains the higher/elevated headline inflation in these economies.

11 June 2020

Core inflation in IN, MX, and

the UK has also been higher

in recent months v/s Dec’19

levels.

However, what is more surprising is core inflation in IN, MX, and the UK has also

been higher in recent months v/s Dec’19 levels. In the UK/MX, the recent core

inflation reading was 1.8%/4%, v/s 1.4%/3.6% in Dec’19. In India, not only was core

inflation already among the highest at 3.8% YoY in Dec’19, but it also rose further to

5.4% in Aug’20 (Exhibit 6).

Exhibit 6:

Comparison between the core CPI inflation levels in the world’s major economies for Dec’19 and Jul/Aug’20

(% YoY)

Recent core inflation (Jul/Aug'20)

Core inflation in Dec'19

12.8

3.4

1.6

0.5

0.2

0.5

0.3

0.8

0.4

0.6

0.4

1.4

0.5

1.7

0.8

1.4

1.1

1.3

(3.5) (1.1)

HK*

SG*

2.2

1.7

3.0

1.4

1.8

2.0

4.1

3.0

3.1

3.6

4.0

3.8

5.4

11.7

1.2

JP*

SKr

CA*

MY*

EA*

UK*

SAf*

# Core CPI excludes food & energy for all except Hong Kong (HK), Singapore (SG) and South Africa (SAf) (CPI excl. Food)

# CPI excl seasonal products for Turkey (TR) and CPI excl food, fuel & light and pan & tobacco for India (IN)

* Data for Jul’20 (Aug’20 otherwise)

Source: CEIC, MOFSL

In Jan’20 (pre-COVID), we had projected that India’s headline inflation would remain

at ~6% up to Jul’20, before easing to 4% by Dec’20. Due to COVID-19, we expected it

to ease to 3% by Dec’20 (Exhibit 7). However, with headline inflation at 6.7% YoY

each in Jul’20 and Aug’20, we have revised our forecasts upward. Consequently, our

calculations suggest headline inflation is unlikely to fall below 4.5% in FY21.

Exhibit 7:

Headline CPI inflation is expected to remain over

4.5% up to Mar’21…

Dec-19

Mar-20

Jun-20

Sep-20F

Dec-20F

4.0

Mar-21F

FY15

FY16

FY17

FY18

FY19

FY20

FY21F FY22F

5.5

4.6

Headline CPI inflation (% YoY)

Jan'20

Jun'20

Sep'20

5.9

5.5

5.8

4.9

4.3

4.54.7

3.6

4.5

3.4

4.8

4.0

5.9

5.4

Exhibit 8:

…and the core inflation forecast has been revised

to 5.4% (from 2.3% earlier) for FY21

(% YoY)

Headline CPI

Core CPI*

4.9

5.1

Source: CSO, MOFSL

* Excluding ‘Food & beverages’, ‘Fuel & light’, ‘Pan & tobacco’

Against our earlier forecasts

of average core inflation of

2.3% in FY21, recent

readings have made us

revise it dramatically to

5.4% currently.

While we had initially attributed higher headline inflation to food items, recent

readings suggest higher inflation is broad-based. Core inflation (excluding ‘Food &

beverages’, ‘Fuel & light’, and ‘Pan & tobacco’) also moved higher to 5.4% each in

Jul’20 and Aug’20 from 3.9% over Feb–Mar’20. Against our earlier forecast of

average core inflation of 2.3% in FY21, recent readings have led us to revise it rather

dramatically to 5.4% currently (Exhibit 8). It would range between 5.4% and 5.8% for

the remainder of FY21. If so,

we believe the monetary easing cycle is broadly over.

11 June 2020

Notwithstanding 40% YoY

growth in capital spending

by the center, combined

capital spending (center +

states) by the governments

was broadly stagnant last

quarter.

III. Government spending to grow 6.4% YoY over Aug’20–Mar’21, slower than

11.3% over Apr–Jul’20

In one of our recent

reports,

we combined the finances of the central government

with that of 14 states (together accounting for 63% of all states) to understand fiscal

spending in 1QFY21. The findings were very interesting. If we analyze only the

central government, we are likely to appreciate the strong growth in spending and

would conclude this as an offsetting factor to the sharp decline in private sector

spending. However, the combined finances suggest that: a) total spending by the

governments grew only 7% YoY in 1QFY21 and b) notwithstanding 40% YoY growth

in capital spending by the center, combined capital spending by the governments

was broadly stagnant last quarter (Exhibit 9).

Nevertheless, due to the sharp reduction in total receipts, the governments’

combined fiscal deficit was 64.7% of budget estimate (BE) in 1QFY21 – the highest in

at least the past decade (Exhibit 10). Moreover, the central government fiscal deficit

already breached the budget estimate (BE) for Apr–Jul’20.

Exhibit 9:

Although central government spent profusely,

combined spending growth muted in 1QFY21

(20)

(40)

Total spending

(% YoY)

Capital spending

Exhibit 10:

Combined fiscal deficit reached two-thirds of BE

in 1QFY21

Fiscal deficit (% of BEs)

States

Center

Combined

64.7

54.5

42.5

50.1

46.4

34.0

13.1

61.1

10.3

80.8

1QFY18

17.3

68.7

1QFY19

19.6

61.4

1QFY20

83.2

1QFY21

7.2

0.3

(60)

1QFY18

1QFY19

1QFY20

1QFY21

Adjusted for ‘grants from the center’

Capital spending includes loans & advances

1QFY17

Combined data of center + 15 states

Source: CGA, CAG, CEIC, MOFSL

Our calculations suggest the center’s fiscal deficit would be closer to INR14.6t (or

7.6% of GDP) in FY21, marginally higher than predicted in

Jun’20

(Exhibit 11). The

downward revision in receipts is almost entirely attributable to downward revisions

in GDP forecasts. Our new forecasts now suggest that the total receipts of the

central government could decline ~18% YoY this year, led by almost a third decline

in corporate taxes and around a quarter in GST collections.

Spending growth in the

remaining eight months of

FY21 could be 6.4% YoY, v/s

22% YoY growth in the

corresponding period last

year.

Based on these forecasts, we learn that total spending by the central government is

likely to grow 8.1% YoY in FY21, following 16.2% growth in FY20. Given that

spending by the central government already grew 11.3% YoY over the Apr–Jul’20

period implies that spending growth in the remaining eight months of FY21 could be

closer to 6.4% YoY (v/s 22% YoY growth in the corresponding period last year).

11 June 2020

Exhibit 11:

Center’s fiscal deficit could widen to 7.6% of GDP in FY21 without any further stimulus

INR trillion

Total receipts

Net tax receipts

Gross tax receipts

Corporate tax

Personal income

GST

Customs duties

Excise duty

Other tax

Non-tax revenue

Non-debt capital

Disinvestment

Total spending

Fiscal deficit

Deficit (% of GDP)

Nominal GDP

FY18

15.6

12.4

19.2

5.7

4.1

4.4

1.3

2.6

1.1

1.9

1.2

1.0

21.4

5.9

3.4

171.0

FY19

16.7

13.2

20.8

6.6

4.6

5.8

1.2

2.3

0.2

2.5

1.0

0.8

23.1

6.5

3.4

189.7

FY20 Prov.

17.5

13.6

20.1

5.6

4.8

6.0

1.1

2.4

0.2

3.3

0.7

0.5

26.9

9.4

4.6

203.4

22.5

16.4

24.2

6.8

6.4

6.9

1.4

2.7

0.1

3.9

2.3

2.1

30.4

8.0

3.5

224.9

FY21

Pre-COVID Est. Jun’20 Est.

Sep’20 Est.

19.2

14.8

14.4

14.7

11.9

11.7

22.6

18.4

18.0

6.6

3.9

3.8

5.6

4.6

4.4

6.7

4.7

4.6

1.1

1.0

2.4

4.0

0.2

3.0

2.3

2.1

1.5

0.7

1.4

0.5

27.1

29.0

8.0

14.2

14.6

3.5

7.3

7.6

224.4

196.3

192.7

Source: Union Budget documents, CGA, MOFSL

Our calculations suggest

capital spending would fall

~5% YoY over the remaining

eight months of FY21 (v/s

3.9% growth over Apr–

Jul’20).

This is one of the concerns we have already incorporated in our growth forecasts.

Government spending is expected to be highly skewed toward revenue (or current)

spending this year. As a result, it appears that while revenue spending could grow at

~10% in FY21, capital spending could decline by 2–3%. If so, this implies capital

spending would decline ~5% YoY in the remaining eight months of FY21 (v/s 3.9%

growth over Apr-Jul’20). On the other hand, revenue spending would grow 8% over

the Aug’20–Mar’21 period (v/s 12.2% growth over Apr–Jul’20).

11 June 2020

Detailed economic projections

Exhibit 12:

Detailed projections for economic growth

Macro indicators

Nominal variables

Gross domestic product at market prices (GDP

)

GDP

Private consumption expenditure (PCE)

Government consumption expenditure (GCE)

Gross capital formation (GCF)

GFCF + change in stocks

Exports of goods & services

Less:

Imports of goods & services

Gross Value Added at basic prices (GVA

)

Agriculture & allied activities

Industry

Unit

USD b

% YoY

% of GDP

% YoY

% of GVA

% YoY

FY16

2,104

10.5

59.0

10.4

32.1

30.6

19.8

22.1

9.3

17.7

30.0

17.1

7.9

52.3

8.0

7.9

7.5

4.7

5.0

(5.6)

(5.9)

8.0

0.6

9.6

13.1

3.6

9.4

6.1

9.5

10.1

3.3

9.5

5.4

FY17

2,290

11.5

59.3

10.3

30.2

29.1

19.2

21.0

10.8

17.9

29.4

16.8

7.8

52.7

8.3

8.1

6.1

3.7

4.8

5.0

4.4

7.9

6.3

7.7

7.9

6.1

8.4

9.2

8.2

8.0

4.6

11.0

6.9

FY18

2,655

11.3

59.0

11.0

30.9

29.7

18.8

22.0

11.1

17.2

29.3

16.4

7.8

53.5

7.0

11.8

10.0

9.4

4.6

17.4

6.9

5.0

5.9

5.6

8.1

11.9

7.3

6.5

4.4

10.4

6.8

FY19

2,712

11.0

59.3

11.1

31.7

30.6

19.9

23.6

10.7

17.1

28.9

16.1

7.8

54.0

6.1

7.2

10.1

9.5

10.5

12.3

8.6

5.8

3.8

5.3

6.4

5.3

6.6

7.5

6.1

5.9

3.8

12.6

8.2

FY20

2,869

7.2

60.3

12.0

29.7

28.6

18.4

21.1

7.0

17.8

27.5

15.1

7.5

54.8

4.2

5.3

11.8

(2.0)

(2.6)

(3.6)

(6.8)

3.9

4.0

0.9

0.0

1.3

5.5

10.0

3.9

2.8

(0.8)

7.0

3.4

FY21F

2,583

(5.3)

59.6

14.2

25.4

24.6

19.3

18.7

(4.8)

19.8

25.2

14.4

6.5

54.9

(6.5)

(9.1)

9.0

(17.0)

(16.1)

(1.3)

(16.5)

(6.4)

4.0

(11.3)

(10.5)

(17.0)

(6.5)

(1.8)

(8.2)

(9.4)

(8.5)

(4.7)

(7.5)

FY22F

2,823

10.2

60.2

14.3

26.7

25.6

19.1

19.8

10.0

20.0

24.9

14.3

6.6

55.1

7.8

7.9

7.0

13.1

12.4

7.7

15.4

7.6

3.9

8.7

8.6

9.5

8.0

7.2

8.3

8.5

9.5

9.9

6.5

Manufacturing

Construction

Services

Real variables

Real GDP

PCE

GCE

GCF

Gross fixed capital formation (GFCF)

Exports of goods & services

Less:

Imports of goods & services

Real GVA

Agriculture & allied activities

Industry

Manufacturing

Construction

Services

Community services, etc.

Non-agriculture GVA

Non- agriculture non-community GVA

Other real sector

Index of industrial production (IIP)

Nominal personal disposable income (PDI)

Real PDI

Incremental capital-output ratio (ICOR)

4.38

4.09

4.75

5.63

8.13

(4.77)

3.84

Industry includes mining & quarrying Manufacturing, electricity and construction;

Nominal PDI deflated by PCE deflator;

The ratio of last two years’ investments (as a percentage of GDP) and GDP growth - it is calculated using real-term data

Source: RBI, CSO, CEIC, MOFSL

unit

11 June 2020

Exhibit 13:

Detailed projection of prices, rates, and money & banking

Macro indicators

Price measures

GVA

deflator

GDP

deflator

PCE deflator

Consumer price index (CPI)

Food & beverages

Fuel & light

Core CPI

Unit

% YoY

% pa

unit

USD/bbl

FY16

1.2

2.3

3.9

4.9

5.1

5.3

4.3

(3.7)

(0.4)

(19.7)

(1.8)

(1.9)

1.2

13.1

10.1

7.5

9.5

77.7

97.1

6.75

65.5

46.2

FY17

2.9

3.0

3.8

4.5

4.4

3.3

4.7

1.7

3.4

(0.3)

1.4

(0.1)

5.9

(12.9)

10.1

15.3

8.2

72.9

41.4

6.25

67.1

48.0

FY18

4.1

4.0

3.4

3.6

2.2

6.2

4.5

2.9

1.4

8.1

2.7

2.9

1.9

27.3

9.2

6.2

10.0

75.5

117.3

6.00

64.4

56.4

FY19

4.2

4.6

4.1

3.4

0.7

5.7

5.8

4.3

2.7

11.5

3.7

4.2

0.6

14.5

10.5

10.0

13.3

77.7

99.9

6.25

69.9

69.6

FY20

3.0

2.9

3.5

4.8

6.0

1.3

4.0

1.7

6.8

(1.8)

0.3

(0.4)

6.9

9.4

8.8

7.9

6.1

76.4

60.3

4.40

70.9

60.7

FY21F

1.6

1.3

2.9

5.9

6.7

1.7

5.4

(0.5)

0.8

(11.9)

0.9

0.4

3.3

8.7

7.4

7.5

(4.0)

68.3

(40.8)

4.00

74.5

40.0

FY22F

2.2

3.3

4.9

5.0

2.2

5.1

1.7

5.5

(4.0)

0.9

0.3

5.8

14.4

8.8

9.0

10.0

68.9

75.9

4.00

75.3

50.0

Wholesale price index (WPI)

Primary articles

Fuel & power

Manufactured products

Non-food manufactured products

Food items (raw + processed)

Money & Banking (end-period)

Reserve money (M0)

Broad money supply (M3)

Bank deposit

Bank credit

Credit-deposit ratio

Incremental credit-deposit ratio

Key rates

Policy repo rate (end-period)

INRUSD (period-average)

Crude oil price (period-average)

Gold price (period-average)

USD/ounce

1,150

1,259

1,286

1,263

1,462

1,800

1,600

CPI excluding ‘Food & beverages’, ‘pan, tobacco and intoxicants’ and ‘Fuel & light’

Source: RBI, CSO, CEIC, MOFSL

11 June 2020

Exhibit 14:

Detailed projections for external sector

Macro indicators

Current account balance

Merchandise

Invisibles

Total credit

Merchandise

Petroleum products

Valuables

Invisibles

Services

Total debit

Merchandise

Petroleum products

Valuables

Invisibles

Services

Capital and Financial account

Foreign direct investment (FDI)

Foreign portfolio investment (FPI)

Financial derivatives

Other investment

Non-resident Indians (NRI) deposits

Change in forex reserves (+(withdrawal)/-(accretion))

Current account balance (CAB)

Non-oil

Non-oil non-valuables

Forex reserves (+(withdrawal)/-(accretion))

Savings-Investments

National savings

Households

Net financial savings

Physical savings

Corporate sector

Public sector

Domestic investments

Households

Corporate sector

Public sector

% of GDP

Unit

USD b

% of GDP

FY17

(14.4)

(112.4)

98.1

522.2

280.1

25.1

43.3

242.0

164.2

536.6

392.6

86.8

27.5

144.0

95.9

36.2

35.6

7.6

9.8

(16.8)

(12.4)

(21.9)

(0.6)

2.1

3.3

(1.0)

31.3

18.1

7.4

10.7

11.5

1.7

32.0

10.4

11.6

FY18

(48.7)

(160.0)

111.4

592.4

309.0

38.5

41.5

283.4

195.1

641.0

469.0

109.2

33.6

172.0

117.5

91.4

30.3

22.1

(2.9)

41.8

9.7

(42.7)

(1.8)

0.8

2.1

(1.6)

32.4

19.2

7.7

11.4

11.6

1.7

34.2

11.2

11.5

FY19

(57.2)

(180.3)

123.1

643.7

337.2

47.0

40.2

306.5

208.0

700.9

517.5

140.8

32.9

183.4

126.1

54.5

30.7

(2.4)

1.0

25.2

10.4

2.7

(2.1)

1.3

2.6

0.1

30.1

18.2

6.5

11.7

10.4

1.5

32.2

11.5

11.9

FY20F

(24.6)

(157.5)

133.0

642.1

320.4

42.7

35.8

321.7

213.2

666.7

477.9

129.6

28.2

188.8

128.3

84.2

43.0

1.4

4.1

35.7

8.6

(59.6)

(0.9)

2.2

3.2

(2.1)

30.5

18.0

7.6

10.5

11.4

1.0

31.3

10.3

11.1

FY21F

53.5

(67.4)

120.9

580.9

285.9

27.4

26.6

295.0

211.5

527.4

353.3

72.9

46.7

174.1

126.8

56.7

28.6

11.9

0.0

16.3

8.0

(110.2)

2.1

3.8

5.6

(4.3)

28.6

19.3

10.6

8.7

11.7

(2.3)

26.6

8.3

8.5

FY22F

19.6

(109.3)

128.8

642.3

315.5

34.0

30.9

326.8

224.1

622.8

424.8

90.5

49.2

198.0

133.7

63.1

34.0

7.5

0.0

21.6

8.0

(82.6)

0.7

2.7

4.4

(2.9)

28.7

18.4

9.2

10.5

(0.2)

28.0

8.8

8.7

7.2

6.9

7.2

7.8

8.1

Valuables include items related to gold or any other precious metal

Source: RBI, CSO, CMIE, MOFSL

11 June 2020

Exhibit 15:

Detailed projections for central government finances

Macro indicators

Total receipts

Unit

INR b

% YoY

% of GDP

Revenue receipts

Gross taxes

Net tax collection

Direct tax receipts

Indirect tax receipts

Non-tax collection

Non-tax receipts

Non-debt capital receipts

Disinvestment

Total expenditure

INR b

% YoY

INR b

% YoY

INR b

% YoY

INR b

% YoY

INR b

% YoY

% of GDP

Revenue spending

Core revenue spending

Interest payments

Subsidies

Defense

Pensions

Capital spending

Defense

Railways

Roads & Highways

Fiscal balance

Revenue balance

Primary balance

INR b

% YoY

INR b

% YoY

INR b

% YoY

INR b

% of GDP

INR b

% of GDP

INR b

% of GDP

FY17

14,398

14.4

9.4

13,744

15.0

17,160

11,016

16.7

8,497

14.5

8,663

21.2

3,382

2,728

654

477

19,752

10.3

12.9

16,906

9.9

12,099

10.4

4,807

2,348

1,722

1,314

2,846

12.5

864

452

438

(5,354)

(3.5)

(3,162)

(2.1)

(547)

(0.4)

FY18

15,556

8.0

9.1

14,352

4.4

19,190

12,425

12.8

10,027

18.0

9,163

5.8

3,131

1,927

1,204

1,000

21,418

8.4

12.5

18,793

11.2

13,504

11.6

5,290

2,386

1,821

1,332

2,625

(7.8)

904

434

535

(5,863)

(3.4)

(4,441)

(2.6)

(573)

(0.3)

FY19

16,657

7.1

8.8

15,530

8.2

20,805

13,172

6.0

11,252

12.2

9,552

4.3

3,485

2,358

1,127

947

23,151

8.1

12.2

20,080

6.8

14,254

5.6

5,826

2,433

1,925

1,465

3,071

17.0

949

528

698

(6,494)

(3.4)

(4,550)

(2.4)

(668)

(0.4)

FY20P

17,507

5.1

8.6

16,821

8.3

20,099

13,559

2.9

10,372

(7.8)

9,727

1.8

3,948

3,262

686

503

26,864

16.0

13.2

23,496

17.0

17,386

22.0

6,110

2,595

2,075

1,679

3,367

9.7

1,111

678

673

(9,356)

(4.6)

(6,675)

(3.3)

(3,246)

FY21BE

22,459

28.3

10.0

20,209

20.1

24,230

16,359

20.7

13,190

27.2

11,040

13.5

6,100

3,850

2,250

2,100

30,422

13.2

13.5

26,301

11.9

19,219

10.5

7,082

2,621

2,093

2,107

4,121

22.4

1,137

700

820

(7,963)

(3.5)

(6,092)

(2.7)

(881)

FY21F

14,426

(17.6)

7.5

13,776

(18.1)

17,963

11,676

(13.9)

8,199

(21.0)

9,764

0.4

2,750

2,100

650

500

29,048

8.1

15.1

25,748

9.6

18,948

9.0

6,800

3,000

2,179

1,763

3,300

(2.0)

1,122

644

656

(14,622)

(7.6)

(11,972)

(6.2)

(7,822)

FY22F

17,064

18.3

8.0

15,564

13.0

20,392

13,254

13.5

9,429

15.0

10,963

12.3

3,810

2,310

1,500

1,300

30,408

4.7

14.3

26,778

4.0

19,298

1.8

7,480

3,500

2,288

1,851

3,630

10.0

1,235

709

721

(13,343)

(6.3)

(11,213)

(5.3)

(5,863)

(1.6)

(0.4)

(4.1)

(2.8)

P = Provisional, BE = Budget estimates and F= forecasts

Source: Union Budgets documents, CSO, MOFSL

11 June 2020

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.

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A graph of daily closing prices of securities is available at

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11 June 2020

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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.

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

www.motilaloswal.com.

CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022

7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:

ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration

No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:

INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,

NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered

through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk

Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,

read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law

Tribunal, Mumbai Bench.

11 June 2020