Economics

INDIA
20 January 2014

Macro Junction
Easing inflation opens up options for the RBI
Moderating inflation levels in December have provided muchneeded comfort to the central bank. CPI at 9.9% vs. 11.2% in Nov and WPI at 6.2% vs. 7.5% reflect a sharp drop in primary inflation, which augurs well for the RBI’s monetary stance, but core inflation th remains sticky. On rates, while we expect a pause on the 28 , we do not rule out one last repo hike this fiscal if core inflation does not head south. Our chart-of-the-week illustrates the sharp divergence in between investment rates of major economies that sowed the seeds of sustainable long-term growth. We started out well enough in the 2000s, but chronic inflation has taken its toll. On the global front, World Bank has raised global growth forecasts from 2.4% in 2013 to 3.2% in 2014 as it believes growth in the US, China and Japan will pick up but will be sensitive to potential turbulence from the slowdown in China and US taper this year.  Dec inflation levels have eased considerably: WPI inflation at 6.16% was a positive surprise (RCMLe: 7.3%, Cons: 7.1%, Nov: 7.5%), almost entirely driven by lower primary inflation even as Mfg./Fuel remained largely stable. Retail inflation tells the same story – down to 9.9% from 11.2% in Nov. Sticky core inflation apart, the sharp dip is good news and we expect a sustained downward trajectory on inflation – important for rates to come off. We maintain our expectations of a th pause on the 28 , but do not rule out one last uptick on the repo this fiscal if core inflation does not head south.  World Bank expects better growth going forward: The World Bank has increased its global growth forecast from 2.4% in 2013 to 3.2% in 2014, as it believes that Europe, US and Japan will pick up but will be sensitive to potential turbulence from the slowdown in China and US tapering this year. India is expected to see a strong growth revival from 4.8% in 2013 to 7.1% in 2016, which will depend on political, economic, monetary and fiscal conditions. China and Japan are the only major regions that will see falling growth due to structural changes in their economic reforms amidst a US taper this year.  ECB issuance picks up marginally: ECB issuance in Nov’13 stood at $2.2bn, implying marginal 13%MoM growth, as the INR depreciated by ~1.6% in Nov against 1.8% appreciation in Oct. On a YoY basis, ECB issuance was up 62% backed by overseas acquisitions and telecom investments, but the total for Jan-Nov’13 increased merely 3% YoY.  OECD indicator update for Nov: The OECD indicator for India has fallen to 97.71 in Nov from 97.76, indicating that economic recovery will be prolonged and growth will be slow for now, while China's figures reflect improvement from 99.40 to 99.51 MoM. Despite the rupee stabilising, the OECD indicator has dropped for India, suggesting a macro turnaround has a long way to go (as the turning point in the indicator tends to precede changes in economic activity by about six months).

REPORT AUTHORS

Tirthankar Patnaik
(91-22) 6766 3446 tirthankar.patnaik@religare.com

Prerna Singhvi
(91-22) 6766 3413 prerna.singhvi@religare.com

Saloni Agarwal
(91-22) 6766 3438 agarwal.saloni@religare.com

December inflation has eased considerably
(%) 12% 10%
9.9% 8% 6% 6.2% 4% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 CPI WPI

Source: MOSPI, RCML Research

World Bank has raised its growth est.
2013E US China Eurozone Japan India World* 1.8 7.7 -0.4 1.7 4.8 2.4 2014E 2.8 7.7 1.1 1.4 6.2 3.2 2015E 2.9 7.5 1.4 1.2 6.6 3.4 2016E 3 7.5 1.5 1.3 7.1 3.5

Source: World Bank, RCML Research * Output growth

Rupee continues to trade in upper part of band
70.0 67.0

64.0
61.0 58.0 55.0 1-Jun

8-Jul

14-Aug 20-Sep 27-Oct

3-Dec

9-Jan

Source: Bloomberg, RCML Research This report has been prepared by Religare Capital Markets Limited or one of its affiliates. Where the report is distributed by Religare Capital Markets (UK) Limited (“RCM UK”), the firm is an Appointed Representative of Elevation Trading Limited, which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. For analyst certification and other important disclosures, please refer to the Disclosure and Disclaimer section at the end of this report. Analysts employed by non-US affiliates are not registered with FINRA regulation and may not be subject to FINRA/NYSE restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Macro Junction
Easing inflation opens up options for the RBI

Economics
INDIA

Macro estimates
Fig 1 - Key macroeconomic estimates
Year to 31 March Real Indicators Growth may have bottomed out but overall business activity remains weak and recovery could stretch well into FY15. Economic growth is likely to remain below-potential on elevated cost of funds until structural issues (directed rural transfers, rent-seeking in agri, etc.) are addressed. Estimate FY14 growth at 4.7% with some recovery to 5.3% in FY15. Bumper southwest monsoon bodes well for agri production in FY14 with our growth estimate at 3.6%. However, the sharp upside in agri sector is unlikely to continue into FY15. Industrial growth in FY14 is expected to be the lowest in 22 years, thanks to much weaker domestic and global demand. A marginal demand revival and low base should help support growth in FY15. A prolonged slowdown would now hurt the Services sector which has hitherto been comparatively resilient, and it would likely report a sub-7% print in FY14 after more than a decade, with meaningful turnaround unlikely in the near term. Sustained hike in import duties and implementation of quantitative-based restrictions would result in a 20% decline in trade deficit in FY14. However, a pick-up in demand would likely boost imports in FY15. Sharply falling trade deficit along with steady software earnings would likely result in much-needed relief on the current account deficit (CAD) in FY14. FY13 FY14E FY15E Comments

GDP growth (%)

5.0

4.7

5.3

Agriculture growth (%)

1.9

3.6

2.5

Industry growth (%)

2.1

1.6

3.1

Services growth (%) External Sector (US$bn) Trade deficit Current Account Deficit % to GDP External Debt % to GDP Exchange Rate US$/INR - year end % depreciation Monetary Indicators (%YoY) Money supply Inflation - WPI (Avg.) Fiscal Indicators (%GDP) Center's fiscal deficit State fiscal deficit
Source: RCML Research

7.1

6.4

6.9

(196) (88) (4.8) 400 21.7

(156) (44) (2.6) 450 26.2

(172) (55) (2.8) 470 24.0

ECBs (Commercial Borrowings) remain the biggest component of external debt in India, accounting for ~30% of overall liabilities. Overall levels remain comfortable vs. peers.

54.3 19.5

62.0 1.9

65.0 17.9

The INR stabilised towards the latter part of the year on a sharp decline in imports and huge inflows via the central bank’s forex swap window. Expectations of a strengthened dollar on a potential US recovery along with domestic growth (imports) revival would keep the INR under pressure in FY15.

12.4 7.7

13.0 6.5

13.0 5.5

Inflationary pressures are rising and while some near-term relief is expected as food prices come off, structural problems need addressing to lower inflation beyond seasonal shifts. Rates therefore are likely to be ‘stronger for longer’. We expect the Govt. to meet its fiscal target of 4.8% for FY14 led by sharp expenditure cuts and subsidy deferral, even as tax collections are expected to surprise negatively. Growth implications to be evident. Fiscal balances remain a matter of concern given SEB worries.

4.9 2.7

4.8 2.7

4.4 2.7

20 January 2014

Page 2 of 23

Blast from the Past: Investment growth remains the key for long-term sustainable growth Source: Datastream.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Chart of the Week Investment trends of major economies Fig 2 . RCML Research 20 January 2014 Page 3 of 23 .

core might follow Dec WPI inflation at 6.6% in Nov to 2.9% in Nov). almost entirely driven by lower primary inflation even as Manufacturing/Fuel have remained largely stable.3%. Sticky core inflation apart (flat MoM).9% – a big positive…: Dec WPI inflation came in at 6. but do not rule out one last uptick on the repo this fiscal if core inflation does not head south.3 % 2. inflation (wt. Power Mfg.6% 10.8% (vs.2% in Nov.5%.0% 10. we would not rule out one last hike in rates this fiscal.5%).24% earlier. released on 13 Jan.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Dec WPI/CPI at 6.2%/9.8% Nov-13 7. a sticky point in an otherwise seamless downward trajectory. The theme remains ‘stronger for longer’.3% 15.5% 2.64% was a tad lower than our est.8% 11. *P = Previous.2% 10.9%) declined marginally to 11.0% 2. albeit expectedly so Much as this points to an easing of rates. falling rates?: We maintain our stance – that it’s the downward trajectory that is relevant going forward as inflationary expectations matter more th than the headline figures. declining sharply to 10. Component-wise: (1) Mfg. (3) Primary inflation came in much below expectations. and Fuel remained stable. the sharp dip is good news.0% Oct-13P 7. even as core inflation inched up marginally from 2.9% 11.16% was a positive surprise (RCMLe: 7.  …but core remains sticky: Core inflation remained flat for both the WPI (2. Fruit.   Fig 3 .WPI inflation intervals (%) Wt.9% YoY Food getting cheaper.  Dec WPI/CPI inflation at 6.1% and 1. fibre.5% Oct-13R 7. Nov: 7.6% 10. 65%) at 2.05% vs.5% MoM respectively.0% (from 11. also dropped from 11.6% in Nov) as well as the CPI (8. again driven by vegetable prices.65% vs.1%. minerals and eggs. led by a drop in LPG prices YoY even as diesel/petrol prices went up. Cons: 7.9% in Dec. While there could be a pause on the 28 .5%.97% in Nov).2% 14.9% from 11. Retail inflation tells the same story (released on 13 Jan) – down to 9.1% in Nov). R = Revised 20 January 2014 Page 4 of 23 .24% from 7.7% 10.5% 15. even as Mfg. goods 20.12 14. 2.8% 2. we expect otherwise and view a sustained downward trajectory on inflation as important for rates to come-off.6% Source: RCML Research. 3.8% and stood flat MoM.16% in Nov to 9.0% 14.97 Dec-12 7. while Nov’13 CPI has been revised down to 11.2%/9.8% Dec-13A 6. 7. in line with the trend witnessed over the last few months.1% 2. Historical revisions continue: The Oct’13 WPI figure has been revised up to 7.16% from 11. meat & fish prices also fell by 6.14. of 2. Falling inflation.6% Dec-13E 7. thanks to ~30% MoM decline in vegetable prices (onion prices down 42.2% led by sharp relief on Primary inflation.2% 5. 3.4% MoM).91 64.64% in Dec. (2) Fuel & Power (wt. 15. CPI inflation. WPI Primary Fuel. We maintain our th expectations of a pause on the 28 .0% earlier. MOSPI.3% 10.

0% Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 2.6% NA 7.97% 12.0% 17.0% 8.Macro Junction Easing inflation opens up options for the RBI Fig 4 . RCML Research Source: MOSPI.7% 14.3% Combined 11. RCML Research Source: MOSPI.29% 6.26% 6.7% 9.0% 5.0% 9.0% 5.8% 4.0% 7.07% 7.0% 4.CPI inflation growth trajectory (%YoY) Items Overall Food.5% 12.0% 5.00% 8.25% 10.8% 39.8% 11.0% 7.87% 12.0% 16.05% Fig 5 .3% 6.5% 7.0% 6.3% 6.Fuel and Power inflation trend 19.0% Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 Source: MOSPI.5% 14.0% 2.0% 15.6% 1.9% 12.0% Fig 6 .1% 11.8% 57.0% 7.0% 3.7% 5.0% Mar-10 10.9% 8.9% 11.0% 13.16% 6.0% 8.7% 9.94% 10.4% 7.6% Combined 9.0% 20.5% Rural 11.07% 61.6% 6.4% 71.Core (non-food manufacturing) inflation trend 9. RCML Research Economics INDIA Nov-13 Urban 10.0% 12.5% 7.1% 12.90% 12.4% 7.3% 38.97% Urban 9.9% 8.0% 7.Primary inflation trend 24.0% 4.Manufacturing inflation trend 8.0% Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 Source: MOSPI.0% 11.16% 14. bedding and footwear Housing Miscellaneous Cereal & products Vegetables Transport & Communication Core CPI Source: MOSPI. RCML Research Fig 7 .12% 8.0% 2.6% 7.76% 7.45% 7.0% 6. RCML Research 20 January 2014 Page 5 of 23 .0% Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 1.0% 2.0% 3.0% 0.1% NA 6.9% 8.0% 11. Beverages and Tobacco Fuel & Light Clothing.6% 10.0% Fig 8 .98% 9.4% Dec-13 Rural 10.3% 5.0% 6.14% 38.14% 7.7% 8.6% 10.

RCML Research Source: MOSPI.Macro Junction Easing inflation opens up options for the RBI Fig 9 .9% 7% 6% WPI-New WPI-old 10% 8% 6% 6.2% 12% 10% 8% 6% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Source: RCML Research Source: RCML Research Fig 13 . Bedding & Footwear 14% 13% 12% 11% 10% 10% 9% 8% 7% 6% 7.CPI inflation for Clothing.2% 4% 5% 4% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Source: RCML Research Source: RCML Research Fig 11 .CPI inflation for Fuel & Light 12% 11% Fig 14 .CPI inflation for Food.87% 9% 8.WPI inflation – provisional vs.05% 8% 7% 12.0% 9. revised figures (%) 9% 8% 9.CPI and WPI in tandem with each other (%) 12% CPI WPI Economics INDIA Fig 10 .3% 9% 8% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Mar-12 Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Source: MOSPI. Core inflation (%) 12% General CPI Core CPI' (%YoY) Fig 12 . RCML Research 20 January 2014 Page 6 of 23 . Beverages & Tobacco 16% 14% 11% 10% 9.CPI General Inflation vs.

RCML Research Source: MOSPI. RCML Research 20 January 2014 Page 7 of 23 . RCML Research Source: MOSPI.CPI inflation for Cereals & Products 20% 18% 16% 14% Fig 18 . RCML Research Fig 17 .6% 2% 0% 8% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Source: MOSPI.8% 14% 13% 12% 11% 10% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 10.CPI inflation for Miscellaneous Items 9% 8% 13% 12% 11% 10% 9% 8% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 6% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 7.CPI inflation for Egg.CPI inflation for Vegetables 70% 60% 50% 40% 30% 20% 10% 0% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Fig 20 .3% 7% Source: MOSPI.CPI inflation for Housing 17% 16% 15% 14% Economics INDIA Fig 16 .0% 10.Macro Junction Easing inflation opens up options for the RBI Fig 15 . RCML Research Source: MOSPI. fish & meat 17% 16% 15% 12.CPI inflation for Others 17% 16% 15% 38.1% 12% 10% 8% 6% 4% 14% 13% 12% 11% 10% 9% Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 12.9% Dec-13 Source: MOSPI. RCML Research Fig 19 .

is expected to remain flat at 7.6 6. UN. *** Latest forecasts ****Forecasts as of Jan'14 Fig 22 .7 1.5% for the next two years as structural changes in its economy and global financial conditions will weigh on its investment and export demand. In Asia.5 2 3.World Bank’s growth forecasts for key regions globally (%) 9. and ongoing or planned fiscal consolidation in several countries. Developing countries are expected to pick up from 4.1 NA 1.6 1.3% in 2014.1 World Bank **** 2013E 1.2   Fig 21 . China and Japan will pick up but will be sensitive to potential turbulence from the slowdown in China and US taper this year. due to slower growth in Malaysia.3 5.4 2014E 2.7 1.3 7.2 IMF ** 2013E 2014E 2. Indonesia and Thailand led by weak commodities and policy tightening. if fiscal and policy reforms are on track. as it believes growth in the US.1 3.5 3.6 1.8 1.8% in 2013 to 5.1 Growth forecast is improving for most nations over the next four years.4 1.7% in 2013-14.7 4.0 5.3 2014E 2.8 US China -0.8% in 2014/2015/2016.5% in 2013 to 2.1 9.9 2 3. 2011 2012 2. ** IMF forecasts as per the WEO released in October 2013.7 -0. China.2% in 2014.8 3.8 NA 7.5%/3.9 NA 7.0 3 4.4 0.8 NA 7. but this is slower than previously expected due to the cool-off effect from pre-crisis growth levels.2% in 2014.9 7.6 NA 7. World Bank * Output growth. inflation levels are contained.6 -0.4 NA 1.0) 1.4 -0.  High-income nations are expected to grow richer with the World Bank increasing its growth forecast from 1.7%/3. election uncertainty is ruled out.0 1.1 NA 1. tighter international financial conditions.8 2.5 1. but this will be partly offset by weaker domestic demand due to ongoing banking sector restructuring.9 UN *** 2013E 1. The growth in developing Europe and Central Asia is expected to strengthen to 3.0 7.4 Eurozone Japan India World Source: RCML Research *Output growth 20 January 2014 Page 8 of 23 . and grow slower at 7.0 4. as European economies will benefit from stronger exports.0 (1.0 6.Global forecasts by international agencies US UK China Eurozone Germany Japan India World* 1.2 3.4 1.8% in 2013 to 6.5 2.8 2.3 1.2 3.3 1 1.5 2.4% in 2013 to 3.Macro Junction Easing inflation opens up options for the RBI Economics INDIA World Bank’s Global Economic Prospects Rich countries to get richer in 2014 The World Bank has increased its global growth forecast from 2.6%/7/1% in 2014/2015/2016.5 2014E 2015E 2016E 7.0 8.3 NA 1.6 6.6 0.3 3. and capital inflows remain adequate amidst a US taper.4 7. growth levels will ease to 7.2% in 2013.1 3.2 7. India is expected to see a major growth revival from 4.8 -0. specifically. This is due to structural economic changes and potential impact on flows amidst a US tapering this year 2.0 0.7 1.8 0.9 Source: IMF.7 -0.7 2013E 7. except China and Japan that are seeing a marginal downtrend towards 2016.0 3.6 1.2%/6.2 5.4 6.

implying a marginal 13%MoM growth.629 4.FCCB issuance trending down on weak markets (US$bn) 38.2% 14.5 Fig 25 . for the purpose of ECB.1% 1. The RBI decided early this year that under Transportation. and more such norms are expected given heavy redemptions in the near term. and FY15 adds another $17bn.968 %Share in 2012TD 11.2bn over FY14: ECBs worth $5.0% %Share in 2013TD 18.389 8. in which it had permitted infrastructure companies in India to utilise 25% of fresh ECBs for refinancing of rupee loans availed from the domestic banking system under the Approval Route. ECB issuance was up 62% backed by overseas acquisitions and telecom investments. and 6) Social and commercial infrastructure. but the total for Jan-Nov’13 increased merely 3% YoY.0 May-11 3.5% 2.0 13. RCML Research 20 January 2014 Page 9 of 23 .5% 2.0 33. RBI amends ECB norms: The RBI had issued guidelines for Infrastructure sector liberalisation in 2011.2% 5. These liberalisation measures will likely improve capital flows in India.7 1. The macro slowdown and unrelenting currency risk could significantly hurt refinancing/payback of these maturing ECBs.6% 30.ECB/FCCB monthly inflow trend (US$bn) 5.0 18.6 2.2bn.0% 0. RCML Research Source: RBI.413 4. 5) Mining.8% 15.0 ECB FCCB 3.2bn are maturing during Q4FY14.775 5. 4) Water and sanitation.2 23.035 669 1.0) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: RBI.7% 8.1% 0.8% appreciation in Oct. 3) Transportation. 2) Communication. RCML Research Fig 24 . Repairs and Overhaul’ (MRO) will be treated as a part of airport infrastructure.Macro Junction Easing inflation opens up options for the RBI Economics INDIA ECB/FCCB approvals at $2.662 810 2.9 0.831 900 351 1.0% 100.ECB/FCCB inflows by end-use for 2013TD (US$ mn) End-use Refinancing/Buyback Import of Capital Goods Modernisation/Projects On-lending Overseas Acquisition Port/Road/Railways Power Rupee Expenditure Loc CG Telecommunication Rest Grand Total Source: RBI.061 25 173 29.0% 3.505 29.1% 15. 2012TD 3.0 8.2bn in Nov’13… …up by a mere 3%YoY in 2013TD  ECB issuance picks up marginally: ECB issuance in Nov’13 stood at $2.0 0.6% in Nov against 1.4% 5. ‘Maintenance.103 2013TD 5.565 1.8% 13. On a YoY basis.846 4. The sectors for this purpose include: 1) Energy.2% 20.2% 5.626 6.622 1.0 28.2% 4.0 Nov-11 May-12 Nov-12 May-13 Nov-13 (2. as the INR depreciated by ~1. ECB/FCCB maturity at $5.8 2.184 4.6% 100.8% 22.0% %YoY growth 66% -22% -21% 74% 374% -32% -40% -1% 2575% 771% 3%   Fig 23 .4 4.

0 20.2 14.4 7. RCML Research Source: RBI.ECB/FCCB maturity profile (US$bn) 30 25 20 Power 9% Import of Capital Goods 23% 15 10 5 0 13.6 3.2 16.6 24.1 23. RCML Research Note: Annual data for calendar years 20 January 2014 Page 10 of 23 .Macro Junction Easing inflation opens up options for the RBI Fig 26 .ECB/FCCB issuance by end-use for 2013TD Rupee Expenditure Loc CG 13% Telecommuni Rest 5% cation 2% Refinancing/B uyback 19% Economics INDIA Fig 27 .0 12.5 15.4 7.6 18.8 18.4 Port/Road/Rai lways/Infra 3% Overseas Acquisition 6% On-lending 5% Modernisation /Projects 15% Source: RBI.

84    Fig 28 .21 in Nov. RCML Research Fig 29 . suggesting a macro turnaround has a long way to go (as the turning point in the indicator tends to precede changes in economic activity by about six months). a qualitative indicator.84 100. production levels are still declining.58 Oct-13 97.76.) US (normalized) 102 100 98 96 94 Feb-05 May-06 Aug-07 Nov-08 Feb-10 May-11 Aug-12 Nov-13 Source: Datastream.76 99. The central bank has kept policy rates high to bring inflation to comfortable levels and ensure adequate liquidity in the system.98 99.21 100.23 100.4% for 2013). reflecting a continued slowdown in the economy.71 99. Despite the rupee stabilising.40 to 99.93 101. The UK indicator has also improved from 101.63 100.93 in Nov from 100.84 in Nov from 100. The OECD indicator for the Eurozone has moved up to 100.73 Nov-13 97. indicating that economic recovery will be prolonged and growth will be slow for now.71 in Nov from 97.73 in Oct.51 100. the OECD indicator has dropped for India. Jul-13 Aug-13 97.Macro Junction Easing inflation opens up options for the RBI Economics INDIA OECD Leading Indicator: Update India remains the sole laggard  India and China: The OECD indicator for India has fallen to 97.14 100.62 100.41 Sep-13 97. 20 January 2014 Page 11 of 23 . while China’s figures reflect improvement from 99. RCML Research The OECD system of Composite Leading Indicators (CLIs).51 MoM. is designed to provide early signals of turning points in business cycles with fluctuations in economic activity around its long-term potential level.40 100.14 to 101.24 Source: Datastream.74 101.82 in Oct. Developed nations: US economic conditions are expected to improve as the Fed announces the start of its tapering program.02 100.25 100.OECD leading indicator trend 104 India (normalized) UK (normalized) China (normalized) EU (Amplitude adj.82 99.9% to 1.89 99.68 100.31 100. and this is reflected from a rise in OECD figures to 100. though the main contribution comes in from Germany. India outlook: Even though inflationary pressures moderated in Dec. Europe: Euro economies continued to perform better economically.CIL readings for major countries India China US UK Europe 97. as France still suffers de-growth.82 101. a growth recovery that is reflected in recent GDP upgrades by the IMF (0.

as released by the Ministry of Railways.9% vs.067 -4. Earnings growth in this period is still lower than the 19.Railway freight traffic monthly trend (mt) 100 Fig 32 .3% Freight 688 620 10. RCML Research 20 January 2014 Page 12 of 23 .4% in Apr-Dec’12.1% Coaching Total passengers 29 23 22.Railway earnings monthly trend (Rs. 24. Source: Ministry of Railways.8%YoY. led by modest growth in freight earnings. grew by 13.0%YoY on account of higher passenger fares.Railway revenues for Apr-Dec’13 Freight traffic (mt) 770 735 4.017 897 13. Revenues earned from both passengers/coaching increased by 20.0trn in Apr-Dec’13.1% and -4.414 -0.6%YoY uptick seen in the corresponding period last year.3% YoY: Total railway earnings.347 2.8% Traffic (mn) Suburban 3.bn) 120 Goods traffic revenue Passenger revenue 90 100 80 60 80 70 40 20 Apr-10 60 Apr-10 Mar-11 Feb-12 Jan-13 Dec-13 Mar-11 Feb-12 Jan-13 Dec-13 Source: Ministry of Railways.3% in FY14TD  Railway revenue earnings up 13. but did not compensate for the rising input costs. but better revenues from passenger and coaches.0% 6.7% Source: Ministry of Railways.9% Passenger 276 230 20.1% Non-Suburban 2.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Railway revenues improve Total earnings up 13.1%/22.944 3. RCML Research. Revenues (Rs bn) Total Apr-Dec’13 Apr-Dec'12 %YoY 1.0% YoY respectively in Apr-Dec’13.0%   Fig 30 .3% YoY to Rs1.360 6. Total passengers declined marginally by -0. Modest decline in rail traffic: Suburban and non-suburban passenger traffic grew 2. RCML Research Fig 31 .416 3. Slower growth in railway freight earnings: Earnings from freight traffic in the AprDec’13 period grew at a lower rate of 10.

the Central Board of Excise & Customs on 16 Jan raised this to $407/10gm from $392/10gm earlier.6mn hectares as on 17 Jan compared to 59.5%.6% to 15. This was done after reviewing the Govt.4mn hectares while pulses increased 4. in which the total period for merchanting trade has been extended to nine months from six months.’s cash position and funding requirement.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Macro snippets RBI revises guidelines for merchanting trade transactions The RBI released the revised guidelines on Merchant Trade Transactions. as per the RBI’s provisional aggregate monthly data on India’s internation al trade in services.2% in Nov’13 to $6.3bn in Nov’13 India’s service export earnings fell 2%MoM in Nov to $12.6mn hectares a year ago.1bn compared to the preceding month.1%. Payments for India’s import of services fell by 12. Area sown under oilseeds rose by 3. the empowered group of ministers (EGoM) approved the sale of 10% stake in state refiner Indian Oil Corporation (IOCL) through a block deal on the stock exchanges.3bn .6mn hectares on 17 Jan Total area sown for Rabi crops rose to 62. Gold import tariff value hiked to $407/10gm After slashing the import tariff value on gold five times in a row. 20 January 2014 Page 13 of 23 . This is expected to ensure better monitoring. Short-term financing for both export and import legs has been enabled and half-yearly reporting of outstanding merchanting trade by Authorised Dealer Banks prescribed. Service exports fall 2% to $12. The government will sell its stake to two upstream oil companies – ONGC and Oil India – fetching ~Rs50bn. It also increased the import tariff value on silver to $663/kg from $638/kg. On the other hand.6mn hectares. and consulting with the RBI. Total area sown at 62.3%YoY to 31. area sown under coarse cereals declined by 2. and rabi rice also registered an increase. Government defers auction of dated securities to be held on 17 Jan The finance ministry issued a statement on 15 Jan saying that it had decided to defer the auction of dated securities amounting to Rs150bn scheduled for 17 Jan. EGoM approves 10% stake sale in IOCL to ONGC and OIL On 16 Jan. Area sown under wheat rose by 6.

Fig 34 . as its cash position and funding requirements are at comfortable levels. FX reserves increased to $293. MSF at 9%).95 from 5.Credit-deposit and Investment-deposit trend credit growth Fig 33 . On the 28 .Credit and Deposit growth trend (%) 24.1bn a week ago.71 a fortnight ago. Credit-deposit ratio rose to 76.19% last week.73 from 75. dated securities of Rs150bn scheduled for 15 Jan. Average daily borrowing at LAF increased to Rs404bn from Rs355bn last week. Cash-deposit ratio fell to 4. which include: (1) conducting a 28-day term repo of Rs100bn on Friday.77 a fortnight ago.0% 74 12.FX reserves growth trend (US$bn) 330 310 290 Total FX reserves % growth yoy (R) (%) 20% 15% 10% 5% 0% -5% -10% 250 Jun-10 -15% Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 8 7 6 5 4 Jun-10 4.0% deposit growth (%) 80 78 76 Credit-Deposit Ratio Investment-Deposit Ratio ( R) 33 32 31 30 20.16 a fortnight ago. which we believe would cap the rate cycle (repo at 8%.52 from 29. however. The RBI has taken several steps to ease liquidity. our base case remains that of a 25bps hike in Q4.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Key macro indicators Average daily LAF borrowing over the last week has risen slightly to Rs404bn.25% from 8. 17 Jan.95 270 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Source: RBI.0% 29 28 27 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 72 70 Jun-10 8. The RBI has also deferred the auction of Govt.0% 16. Investment-deposit ratio fell to 29. RCML Research Source: RBI. RCML Research 20 January 2014 Page 14 of 23 . RBI Fig 35 .       Call-money rates rose to 8.0% Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Source: RCML Research.3bn from $293. RBI Source: RCML Research.Cash-deposit trend (%) 9 Fig 36 . The surprise on rates needs to be maintained – we do not expect the central bank to remain restricted to th policy dates for its rate stance. 22 Jan. On rates. we expect a pause. and (2) an OMO announcement of Rs100bn for Wednesday.

5% of NDTL band 10% 8% 6% 4% 2% Jun-10 8. RBI Fig 39 . RBI 20 January 2014 Page 15 of 23 .CP issuance trend (Rsbn) 2400 2000 1600 1200 800 400 Fig 42 .Macro Junction Easing inflation opens up options for the RBI Fig 37 .000 12 3.800 4.200 2. RBI Source: RCML Research.600 6 800 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Source: RCML Research.LAF borrowing trend (Rs bn) 1000 500 0 Reverse Repo (L) +/-1% of NDTL band Repo (R) +/-0.Call Money rate trend (%) 12% Fig 40 .400 9 Amt outstanding (LHS) Low High (%) 15 Amount Outstanding (LHS) 1. RBI Fig 41 . RBI 0 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 2 Dec-13 3 Dec-13 Source: RCML Research.Narrow Money (M0) growth trend (Rsbn) 17 16 15 14 13 12 11 Reserve Money (M0) % growth (R) (%) 30% 25% 20% 15% 10% Thousands 90 80 70 60 50 40 30 20 Jun-10 10 9 8 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 5% 0% Source: RCML Research.Broad Money (M3) trend (Rsbn) M3 M3 growth (R) (%) 18% 17% 16% 15% 14% 13% 12% Jan-11 Aug-11 Mar-12 Oct-12 May-13 11% Dec-13 100 Economics INDIA Fig 38 .25% -500 -1000 -1500 -2000 Apr-10 Jan-11 Oct-11 Jul-12 Apr-13 Jan-14 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Source: RCML Research.CD issuance trend Low High (%) 20 17 14 11 8 5 (Rsbn) 4. RBI Source: RCML Research.

5%).0% 1.9% -0.0% 0. RCML Research 20 January 2014 Page 16 of 23 .2% 0.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Markets Markets across the globe were down last week as US bank earnings disappointed and investors waited for Chinese economic data that came in today (GDP growth of 7.0% -0.0% 2.2% -0.000 -1. Fig 43 .000 21.2% 1. Goods Pharma Realty Banks Power IT Telecom FMCG (100) (200) Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Source: Datastream.5% 0. The rupee continued to appreciate by ~0.7% in 2013 vs.000 2.5% 2.0% -6. RCML Research Source: Datastream.4% 0. EMs were up on firm global stocks that boosted sentiments. Domestic indices were largely up last week as inflation eased.6% Fig 46 .000 18.0% -4.0% Sensex NIFTY Defty BSE100 BSE500 Source: Datastream.Institutional fund flow and Sensex 2.0% 2. providing some comfort on rates.9% 0.9% 1.0% 1.000 19. official target of 7.0% -2.0% 1.9% 1.6% (US$mn) 400 300 FII DMF Sensex (R) 22. even as disappointing US unemployment data raised investor hopes that the Fed would not accelerate taper cuts – a major source of liquidity in Asian markets. RCML Research -1.Sector-wise weekly return 4.0% -0.4% -1.4% Midcap Small-cap Fig 45 .0% 0.000 17.0% -2.4% -1.Key global indices – weekly returns 3% 2% 1% -1% -2% Sensex MSCI IndiaMSCI India MSCI EM MSCI EM S&P500 Shanghai ($) Asia Source: Datastream.6% last week on the back of higher capital flows into the country.0% 200 20. Sector-wise.1% 0. RCML Research Fig 44 .6% 100 0 -4. Cap Goods and Oil & Gas moved up on expectations of better earnings.8% Metals Auto Oil & Gas Cap.4% 1.5% 1. but Telecom was down ~5% after RIL’s surprise decision to join the bidding for the upcoming telecom spectrum auction.5% 1.Key domestic indices – weekly returns 3.8% 0.

Macro Junction Easing inflation opens up options for the RBI Fig 47 .India – 10-year G-sec yield (%) 9.2 7.0) Source: Bloomberg. RCML Research 20 January 2014 Page 17 of 23 .5 0.Price of Indian crude oil basket (US$/bbl) 130 120 110 100 90 May-11 India crude basket in US$/bbl (L) India crude basket in Rs/bbl (R) (Rs/bbl) 7500 6500 5500 4500 3500 Jan-12 Sep-12 May-13 Jan-14 0.6 8.0) (1. RCML Research Source: PPAC.INR versus key currencies (1W) 1.5) (3.0 (0.57 Economics INDIA Fig 48 .0 8.8 7.0 0.0 6-Jan 6-May 4-Sep 3-Jan 4-May 2-Sep 1-Jan Source: Datastream. RCML Research Fig 49 .0) (2.4 9. RCML Research Source: Bloomberg.India equity market volatility (%) 28 26 24 22 20 18 16 14 12 30-Sep 15-Oct 30-Oct 14-Nov 29-Nov 14-Dec 29-Dec 13-Jan Fig 50 .4 7.5) (1.5) (2.

4 8.5) 0.7 13.0 0.1 5.8) (1.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Global markets IMF Global GDP forecast (%) 2012 Developed Emerging World 1. Bloomberg Fig 53 .2)(0.1 Oct 3. Datastream 20 January 2014 Page 18 of 23 .1 3.5 8.6) 1.4 10.Global and BRIC policy rates Fig 54 .6 2013E 23. Bloomberg.8 10.8 1.2 0.2) (0. *MSCI indices GSCI BR Source: RCML Research.5 2.4 4 2 Fig 52 .5 4.Global Commodities Jefferies Index 400 Fig 56 .4 (0.7 (2.1 (0.4 1.8 Aug 2.6 1.5 5.4 Nov 3.Key global indices – Weekly returns (%) 6 4.2 0.0) 0 (2) 6000 5000 4000 May-11 110 100 90 80 Jan-12 Sep-12 May-13 Jan-14 ID TW MY TH UK IN CN US World RU KR JP EM Asia Source: RCML Research.Inflation across Emerging Markets (%) 20 15 Russia Malaysia Brazil Indonesia China Thailand India 350 300 250 200 10 5 0 (5) (10) (15) Jan-10 Jan-11 Jan-12 Dec-12 Dec-13 150 Jan-09 (20) Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Source: RCML Research. Datastream Source: RCML Research.8 13.9 3.MSCI global equities indices 200 180 160 140 120 100 80 60 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Dec-13 Source: RCML Research.3 0.2 4.4 2014E 23.5 9.0 3.7 140 130 120 7000 0.9 0.0 5. RCML Research *Note: Updated in Oct’13 Source: RCML Research.7)(0.4) Sep 3.2 1.Global crude oil prices (US$/bbl) India crude basket in Rs/bbl Brent crude in US$/bbl (R) Oman Crude Oil US$/bbl (R) 8000 2.2 2013E 1.1 1.2 10.3 US China Europe Germany Japan Source: IMF.0) (1.0 IEA forecasts on global oil demand (mb/d) America Europe Asia 2012 23.7 8.7 5. Datastream Fig 55 . IEA Source: Bloomberg Fig 51 .2 10.7 13.6 IIP for major countries (%) Jul 1. Bloomberg Source: RCML Research.2 0.4 (1.9 2014E 2.

7) (7.4) 49 (3.5 16.5 28.5 67.6 6.8 26.8) 45.2 0.0 6.6 (4.2 0.4 3.4 9.1 4.8) 9.2 304 7.0 (6.8 5.2 31.7) 4.8 78.5 30.1 11.4 35.3 (0.2 9.4 84 30.8 33.7 45.8 (196) 108 (88) (4.0 13.0 46.0 (6.2 7.1 9.2 62 26.0) 4.3) (8.5) (8.0 203 0.4) (3.8) 16.9 26.1 FY08 49.5 3.9 25.3 1.1) (3.5 (4.0 4.5 8.4 7.4 89.0 25.6) 288 (3.9 16.2 (2.1 50 0.4 3.6 13.2 19.0 35.2 23.1) (4.3 4.8 7.4) (0.2) (3.3 5.4 28.4 465 2.4) (3.6 4.2) (2.4 (119) 84.9 1.9 3.5) (6.6 12.4 7.0) 9.4 10.1 48.5 13.2 69.8 FY12 FY13 FY14E 1.2 478 (4.0) (5) 15.0 FY04 28.778 1.6 7.4 1.4 7.6 (3.0 3.0) 4.953 1.3 178 (2.8 FY01 21.3) (7.9 9.6) (12.6 7.0 (87) 75.8 47.6 4.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Macroeconomic snapshot Year to 31 March National Income Indicators* Nominal GDP (Rs bn) Nominal GDP (US$ bn) Real GDP growth (%) Agriculture growth (%) Industry growth (%) Services growth (%) By Demand* (%YoY) Private Consumption Public Consumption Gross Fixed Capital Form.0 2.9 14.7 35.8 16.0 24.2 53.6 4.8 (46) 42.0 6.3) (5.5) (4.8 5.0 (22.9 488 32. Inv.8) 144.0 23.5 4.6 67.4 FY02 23.2 450 25 (0.2 8.0 6.9 65.0 8.1 305.0) (9.8 8.9 14.8 12.5 2.0 8.9) (2.7) (1.8 5.2 10.3 7.3) (3.5) (0.9 9.7 53 20.2 8.307 524 4.5 (6) 9.9 24.1 9.7) 278.1 163 29.9 14.2 44 20.4 172.1 20.0) (5.8 5.3 2.2) 5.5 6.5 (28) 31.3 44.5 21.1) (6.0 14.2 13.8 34.6 133.6 28.8 (1.7 (15.9 FY07 42.1) 39.1 9.3 FY09 56.9 9.0 6.3 8.6 10.301 1..2) 264.2 14.4 10.10.2 16.1 32.4 224.2 14.WPI (Avg) CPI (Avg) Bank credit growth Deposit growth Fiscal Indicators (%GDP) Center's fiscal deficit (5.872 1.3 6.9) (0.7 54.7 68.7) Combined deficit (Center + State) (9.8 9.2) (4.1 8.0 17.0 1.4 38.3 12.8 10.1 502 2.5 9.9 7.0 77.0 3.9 16.8 (2.9 24.9 (4.7 (9) 17.4 12.6 30.9 3.3 0.7 10.3) (1.5 54.6 6.7) (7.4 4.5) (6.4 7.1 3.6 (78.206 1.5 101.6) 7.5 126 22.8 14.7) (8.0 8.3 19.1 (14) 27.6) (10.0) (4.6 (27.5 21.5 111.9) 44.3 (8.6 9.4 16.9) (4.7 16.9 (0.0) (2.2 7.3 3.7 103 23.7 35.3 6.4 7.5 36.9 75.1 9.7 48.0 2.8 8.3 7.0 21.0 (38.934 834 9.0 211 4.4 3.3 20.7 183 12.7) 44.4 35.6 15.2 11.5 185 24.4 25.6) 55.4 350 9.5) 15.4 15.9 62.3 38.5 2.3 8.5 345.5) 45.6 5.2 (5.8 12.7 1.6 25.5 (0.7 21.year end % depreciation Monetary Indicators (%YoY) Money supply Inflation .7 138.6 5.5 4.8 12.5 32.422 721 7.6 16..9) 44.6 44 (0.8 260.3 12.3 48.7 10.8 5.0 4.9 78 27.2 14.6 3.7) (2.0 333 13.762 4.2 (9.7 111 42.7 4.2 (185) 111.4 69.3 1.5 9.7 64 20.8) (156) 111 (44) (2.Import growth(%)***** Port traffic .4 41.1) (9.7) (0.7 0.2 12.6) 45.2) (2.1 3.5 (2.5 3.2 8.6) (1.9 (2.6 8.9 6.6 11.3) 135.9 5.7 62.7 7.3 3.3 15.8 7.2 (2.3) (3.9 52.9 8.2 0.3 46.9 25.4 26.9) (4.1 16.5 45.4 4.9) 45.9 4.7 na 527 3.3 29.0 (0.8) 259.9 (11.1) 43.5 25.3) 9. Savings ** (%GDP) Consumption Gross Capital Formation Gross Domestic Savings Real Indicators (%YoY) Cement dispatches (domestic) Commercial vehicle sales Car sales Two-wheelers Diesel consumption Electricity growth (%) Fertilizers growth (%)*** Urea growth (%)*** Rest of fertilizers growth (%)*** Aviation passenger km (%)***** Crude Steel growth (%) Coal Dispatches**** Port traffic .4 22.4 18.6 14.4 0.3 107.1 2.0 0.9 18.4 10.5 43.4 4.8 12.3 (1.8 13.9) (2.0 18.1 FY06 36.8 9.6) 39.7 6.5 16.4 26.7 2.0 26.4) 5.3 1.5 11.8 2.4 20.8) 4.6 9.4 149 33.1 250 35.7 35.5 8.7 32.6 48.1 (59) 52.5 68.8 9.1 (5.1 15.1 6.9) 4.8 2.2 4.2 7.0 7.4 (1.3 11.7 28.00.8) (2.379 618 8.0 470 2.1 0.4 48.9 12.749 1.7 34.0 5.7 516 2.0 5.0 10.6 5.1 (2.239 9.132 1.4 28.0 1.9 3.871 1.8 31.8 77.6 4.3) (2.2 10.9) (109) 80.3 4. Cons.366 8.6) (5.6 4.5 3.0 17.0) 191.4 3.0 4.9 2.6 (3.5 (5.6) 45.1 FY05 32.9 98.3) 241.5 4.2 7.0 375 10.7 4.0 14.6 (4.9 8.2 401 3.4) 6.2 307 1.5 6.2 22.7 35.3 11.4 13.0 (3.2) 1.0 104. CSO.5) 0.6 (45.9) (2.0 19.6 6.2 0.3 251 40.5 14.0 FY10 64.947 948 9.6 16.2 390 97 322 5.0 13.9) (2.5 31.6 369 28.3 33.1) 3.9 (0.0 6.0) 6. RBI.0 70.2 34.4 21.3 2.4 (10.6 5.7 5.0 3.8 6.2 (4.7) 7.6 16.9 (2.5) 16.7 224.1 19.9 69.3 299 19.1 4.6 1. RCML Research * At constant price ** At current prices ***Government Estimates for FY13 ****Only for CIL *****CMIE Estimates (6.6 1.2 23.2 8.483 494 5.4) 4.8 11.1 8.0 11. gold) (US$ bn) Months of imports External Debt (US$ bn) Short Term debt (US$ bn) Exchange Rate US$/INR .7 3.7 (9.687 475 4.7) 2.7 3.7 47.7) (4.1 17.0 9.3 11.5 19.1 13.8 415 12.5 68.4 16.1) 40.0 (2.2 71.2 235 10.5 7.6) (4.0 2.0 303 20.9 34.7 12.6 4.6) (7.2 9.226 6.7 5.8 8.8) 4.0 3.2 5.839 6.9 FY03 25.1 20 January 2014 Page 19 of 23 .0) (3.6 0.0) 3.6) 2.5 5.4 9.3) Source: CMIE.5 6.5) (0.9 13.0 4.3 3.9 73.2 14.1 7.3 9.6 (2.7 10.5 FY11 77.8) 260 6.2 4.710 9.2) (4.6 4.7) (1.3) 299.Export growth(%)***** External Sector (%YoY) Exports (US$ bn) %YoY Imports (US$ bn) %YoY Trade deficit (US$ bn) Invisibles (US$ bn) Current Account Deficit (US$ bn) % to GDP Forex Assets (ex.0 3.5 4.1 3.7) (7.9) 5.2 10.1 1.2 (11.3 15.9 3.0 25.0 68.3) 47.0 (10.2) (0.4 32.1 3.1 2.8 (116) 91.6 0.9 9.5) State fiscal deficit (4.5 24.0 36.4 22.1 10.5 (11.4 45.annual avg % depreciation US$/INR .7 24.4 (5.

8 46.7 19.2% 64.8% 22.0 Source: RBI.9% 488 32.3 6.5% (55) -2.7% 3.06 17.7% (88) -4.14 30.2% 19.0) 118 5.5 4.0% (20.0% 67.7 2.5 11.0 13.5% FY11 251 40.4) 107 -3.17 68 13.2 4.6% FY13 307 1.2% (190) -10.7 -70.6% 3.8) 112 31. Balance %GDP Capital Account Loans ECBs Short-term Loans Rest of loans NRI deposits Foreign investments %YoY FDI FII Capital Account %YoY %GDP 27.8 17.0 26.5 18.6% (44) -2.22 64.1% 502 2.1% 61.9 3.0 7.5 0.4 10.8 1. RCML Research *Note numbers have been revised 20 January 2014 Page 20 of 23 .8% FY14E 322 5.1% 67.3% (20.6% 369 28.5) 85 5.24 15.7 0.08 25.50 56 -37.80 58 4.3 6.0% Balance of Payments USDINR (end of year) 11 45.8% (46) -2.4% 3.8% 31.8% (196) -10.36 3.6% 63.7% Current Account FY12 303 20.98 14.4% (20.89 89 31.2% 478 -4.2 37.9 12.0 89.83 54.23 14.4 5.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Balance of Payments snapshot US$ bn Exports %YoY Imports %YoY Trade balance (RBI) %GDP Software Earnings %YoY Remittances %YoY Rest Invisibles Total %YoY Current Acc.2) 111 3.82 26.3 10.6% 64.1% 515 7.0 2.1 4.5 21.3% 7.21 1.1 5.0 4.8% (156) -9.6% (172) -8.2% FY15E 342 6.4% (131) -7.6% 18.6% 12.3 11.9 39.4 2.3% 63.1 8.8% 4.8% 53.6 (13) 47.98 62.1% 3.8% 11.6% 56.30 11.3 6.29 60 18.5% (25.4 1.7 11.3 1.8% 19.1% 19.9% (12.8% (78) -4.8% 70.4 -22.

6% FY14BE 8.425) (3.4 2.2% 63.0% 7.311 900 660 650 101 5.3% FY15E 9.129 2.2% 10.9% 3.915) (41) 1.6% -4.0% 15.577 850 660 969 98 4.861) (45) 1.569 2.0% 11.923 974 3.9% 13.653 (5.719 4.4 9.752 (5.143 849 3.3% 14.788 407 259 9.0% 35.2% 16.0% 8.055 2.24.0% 32.1% -35.658 1.1% 20.0% 17.5% 20.0% 12.206 4.8 11.9% 18.5% 1.2% -36.310 11.798) (1.9% 12.0% 0.553 1.8 3.1% 11.8% 19.835 4.0% -32.3% 13.736) %YoY 18.3% 17.377 8.068 1.0% 25.362 3.048 1.3% 5.6 13.793) %YoY 12.2% 18.338 2.13.094 (4.321 4.649) (1.723 10.635) (1.563 665 558 11.195 9.0% 16.656 100 (3.3% 8.491 11.4% 18.563 1.3% 23.5% 20.3% 22.883 2.325 93 (2.6% 22.9% -6.7% FY14E 8.00.135 10.171 9.0% 23.0% 34.841 2.6 1.6% 3.5% 8.2% 115.3% 17.6% 2.470) (48) 1.192 4.0% 14.3% 8.6% 10.5% 48.0% 1.991 1.9% -60.4% 11.1% 1.893 11.121 4.1% 11.9 3.5 1.3% 43.005 2.929 2.3% Source: India Budget documents.5% 14.991 (5.3% 13.3% 13.3% 5.7% 1.1% -22.3% 16.791 1.3% 35.704 1. CGA.949 15.2% 11.5 13.013 10.7% 15.800 1.7% 13.951 822 9. revenue receipts Non-debt Capital Receipts Divestment Proceeds Total Receipts Non-plan Expenditure Of which Capital Expenditure Of which Revenue Expenditure Subsidy outgo Food Fertilizers Oil Others Plan Expenditure Of which Capital Expenditure Of which Revenue Expenditure Total Expenditure Fiscal Deficit Revenue Deficit Primary Deficit Nominal GDP Fiscal Deficit/GDP Revenue Deficit/GDP Primary Deficit/GDP FY13 7.0% 12. net tax revenue Of which Income Tax Corporate Tax Custom Duties Excise Duties Service Tax Other Taxes States and UTs' share NCCD transferred to the National Calamity/Disaster Funds Non-tax revenue Central govt.1% 2.0% 12.8% 25.050 700 750 101 4.8% 35.779) %YoY 17.3% 19.411 1.0% -1.8% 13.442) (3.1% 5.6% 18.195 1.7% -5.8 3.13.759 1.433 16.0% 0.601 1.1% 10.996) (1.3% 25.9% 0.294 14.776 534 400 12.8% 21.476 4.0% -1.9 1.8% -10.8% 41.0% 13.589 2.719 4.1% 7.100 1.Macro Junction Easing inflation opens up options for the RBI Economics INDIA Fiscal budget snapshot (Rsbn) Central govt.000 800 850 150 6.5% 12.3 1.856 17.8% 22.873 1.8% 14.8% 14.0% 20.7% 35.273) (48) 1.718) %YoY 19.976 1.7% 10.9% 161.8% 17.899) (3.5% 1.0% 0.228 11.008 484 350 10.5% 6.236 100 (3.4% 10. RCML Research 20 January 2014 Page 21 of 23 .2% 23.499) (3.8% 12.801 37 (3.3% 48.5% 42.670 10.1% -530.2% 34.2% 14.968 3.759 1.024 2.

2%) Dec’13 trade deficit stable at $10.Exports revival key for sustained relief India Strategy: Q3FY14 Earnings Preview .Caveat emptor! Dec Mfg.Happy New Year! India Strategy & Economics: India in 2014 .1%YoY in Nov’13… dragging FY14TD growth below zero (-0.Food getting cheaper. core might follow Macro Junction .1bn .2%/9.Inflation to be the key this week IIP dips 2.9% YoY .Macro Junction Easing inflation opens up options for the RBI Economics INDIA Previous reports Fig 57 . PMI decelerates – but makes it above 50 Source: RCML Research 20 January 2014 Page 22 of 23 .RCML Economics and Strategy Reports over the last month Date 15-Jan-13 13-Jan-13 10-Jan-14 10-Jan-14 7-Jan-14 6-Jan-14 6-Jan-14 2-Jan-14 Title Dec WPI/CPI at 6.Margin expansion to drive profitability Macro Junction .

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