INDIAN ECONOMY

“Unlocking and vaccine ramp up

brighten revival prospects”

JUNE 2021

Aditi Nayar Yash Panjrath

+91 124 4545 385 +91 124 4545 399
aditin@icraindia.com yash.panjrath@icraindia.com

Aarzoo Pahwa Tiasha Chakraborty

+91 124 4545 873 +91 124 4545 300
X`aarzoo.pahwa@icraindia.com tiasha.chakraborty@icraindia.com
ICRA LIMITED Page | 1
 Table of Contents
OUTLOOK……………………………………………………………………………………………………………………………………………………………………………………………………………………….…………..3

UPDATE ON PROJECT ACTIVITY.…………………………………………………………………………………………………………………………….…………………………………………………………………… 7

UPDATE ON FINANCING…………………………………………………………………………………………………………………………….………………………………………………………………………………10

UNION GOVERNMENT FINANCES…………………………………………………………………………………………………………………………….…………………………………………………………………11

INFLATION………………………………………………………………………………………………………………………………………………………………………………………………………………………………..12

SECTORAL TRENDS…………………………………………………………………………………………………………………………………………………………………………………………………………………….13

ANNEXURE………………………………………………………………………………………………………………………………………………………………………………………………………………………………..20

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OUTLOOK
Click to Provide Feedback
High frequency indicators reveal mixed
trend relative to June 2020
Over 70% of active Covid-19 cases are
concentrated in five states-
Maharashtra, Kerala, Karnataka, Tamil
Nadu and Andhra Pradesh
Vaccine administration rose to a record-
high 42.2 million doses in the week ended
June 27, 2021
Fiscal cost of new relief measures
unveiled by Government of India
estimated at Rs. 0.5-0.7 trillion in FY2022
or 0.2-0.3% of the expected nominal GDP
ICRA LIMITED
With many states having commenced a phased unlocking, the early high frequency indicators confirm a sequential improvement in June
2021, although the trend relative to June 2020 is mixed. Active Covid-19 cases have declined, but remain considerable at 0.6 million, and
are concentrated in just a few states such as Maharashtra, Kerala, Karnataka, Tamil Nadu and Andhra Pradesh. Encouragingly, the last
week has seen a sharp ramp up in the administration of Covid-19 vaccines to an average of 6 million per day during June 21-27, 2021, from
an average of 3.2 million per day in the previous week. If the pace of vaccination is maintained at 6 million per day in Q2 FY2021 and
subsequently increased to 8 million from Q3 FY2022 onwards, we expect all adults to receive both doses of the vaccine by early February
2022. If the expected ramp-up doesn’t materialise in Q3 FY2022, and on average 6 million vaccine doses continue to be administered per
day, we estimate India’s entire adult population to be fully vaccinated by mid-March 2022. Recently, the Government of India (GoI) has
unveiled a new set of relief measures with a total value of Rs. 6.3 trillion or 2.8% of India’s expected nominal GDP for FY2022; ICRA estimates
the fresh fiscal outlay of the new announcements at Rs. 0.5-0.7 trillion or 0.2-0.3% of GDP in FY2022. Overall, while the unlocking and
vaccine ramp up have brightened the prospects for the pace of the economic revival, uncertainty persists given the emergence of the Delta
Plus variant of Covid-19. We maintain our expectation that Indian GDP will expand by 8.5% in FY2022 (at constant 2011-12 prices), with an
upside of 9.5% predicated on an accelerated vaccine coverage.
ICRA’S MACRO ECONOMIC PROJECTIONS FOR FY2022
FY2021 ICRA’s FY2022 Projections
GDP Growth (at constant 2011-12 prices) -7.3% 8.5%
GVA Growth (at constant 2011-12 prices) -6.2% 7.3%
CPI Inflation (average) 6.2% >5.4%
WPI Inflation (average) 1.3% 9.2%
Current Account Balance Surplus of US$27 to 30 billion Deficit of US$23-28 billion
INR 74.2/US$ 74.5/US$
G-sec Yields 6.2% 6.3%
Rs. 16.1-16.3 trillion
GoI’s Fiscal Deficit Rs. 18.2 trillion; 9.2% of GDP
(Budget Estimate: Rs. 15.1 trillion)
Repo rate Repo rate cut by 40 bps in May Rising likelihood of rate hike in Q3
2020 FY2022
Rising likelihood of stance change to
Monetary Policy Stance Accommodative
neutral in Q3 FY2022
Source: NSO; Office of the Economic Advisor, Ministry of Commerce and Industry, GoI; Controller General of Accounts (CGA); RBI; Bloomberg; CEIC; ICRA research
Page | 3
High frequency indictors: The prolonged impact of the Covid-19 pandemic in India was EXHIBIT 1: Volume trend for high-frequency economic indicators in FY2021
evident in the year-on-year (YoY) contraction in the volumes of most of the high frequency 40%
indicators in FY2021 relative to FY2020 (refer Exhibit 1). Contact-intensive sectors (such 20%
as airline passenger traffic) and big-ticket items (such as vehicle purchases) were the 0%

Growth (%)
hardest hit by the pandemic. The notable exceptions to this trend were tractor sales, -1.0% -0.9%
-20%
buoyed by a robust farm economy, and to a mild extent, rail freight traffic. -40%
-60%
Subsequently, the second wave of Covid-19 led to the imposition of state-level -80%
restrictions, and most indicators recorded an MoM decline in volumes in April 2021 and
May 2021, such as automobile output, generation of GST e-way bills, consumption of
diesel and petrol, electricity demand, ports cargo traffic and non-oil merchandise exports.1

However, given the low base of April-May 2020, many sectors (except domestic passenger
traffic, vehicle registrations and diesel consumption) have emerged out of a contraction
Source: SIAM; CIL; CEA; IPA; MoRTH; Ministry of Commerce, GoI; GSTN; DGCA; PPAC; Indian Railways;
for the Trailing Twelve Months (TTM) ending May 2021 (refer Exhibit 2).
CMIE; CEIC; ICRA research

Following a dip in the new Covid-19 cases over the last few weeks, many states have
commenced a phased unlocking over the month of June 2021. The early high frequency EXHIBIT 2: TTM-ending May 2021 for high-frequency economic indicators
indicators confirm a sequential improvement in June 2021, although the trend relative to 60%
June 2020 remains mixed. On the positive side, the daily average GST e-way bills 40%
generated have improved to 1.8 million in June 1-27, 2021 from 1.3 million in May 2021. 20%

TTM Growth (%)

The YoY growth in electricity generation has risen mildly to 7.7% in June 2021 so far (till 1.1%
0%
June 28, 2021) from 7.3% in May 2021. Moreover, the vehicle registrations during June
-20%
2021 were 7.2% higher than the level in June 2020. However, as per data compiled by
state refiners, petrol and diesel sales fell by 3.5% and 7.5%, respectively, during the first -40%
half of June 2021, relative to the same period last year. -60%

Active cases concentrated in five states: The number of active cases in India stood at 0.6
million as on June 28, 2021, with just five states- Maharashtra, Karnataka, Kerala, Andhra
Pradesh and Tamil Nadu accounting for 72.3% of this total (refer Exhibit 3).

The daily fresh cases of Covid-19 have come down from 0.4 million during the peak of the Source: SIAM; CIL; CEA; IPA; MoRTH; Ministry of Commerce, GoI; GSTN; DGCA; PPAC; Indian Railways;
second wave (May 7, 2021) to around 50,000 in the past few days. In addition, the number CMIE; CEIC; ICRA research

1
Refer to ICRA’s publication, “Sequential slackening continued in May 2021 as state-level restrictions widened”, published in June 2021.

ICRA LIMITED Page | 4

of daily Covid deaths has also dipped below 1,000 on June 28, 2021, recording lowest in EXHIBIT 3: Number of active cases (in million) as on June 28, 2021
80 days. Although the total active cases in India have dipped sharply from the peak of 3.7
million on May 10, 2021 to 0.6 million at end-June 2021, the latter is still 3.5 times the Maharashtra
total active cases at end-February 2021 (refer Exhibit 4). 0.13
0.16 Karnataka
Some nations around the globe have started introducing a fresh round of restrictions to
tackle the surge of the Delta variant of the coronavirus. In Maharashtra too, the Kerala
Government recently decided to reimpose the Level-3 curbs in some big towns amid the
emergence of the Delta Plus variant. This suggests that some caution is warranted Andhra Pradesh
regarding the strength and shape that the economic recovery will take, going forward. 0.04 0.10
Tamil Nadu
Vaccination update: As on June 28, 2021, India has administered 323.7 million total
0.04
vaccine doses, which comprises 266.9 million of dose 1 and 56.7 million of dose 2. This is Others
a modest 28.5% and 6.1%, respectively of the estimated adult population of India.2 0.10
Source: Indian Council of Medical Research (ICMR); CEIC; ICRA research
Encouragingly, total weekly vaccine doses administered nearly doubled to 42.2 million
during the week ended June 27, 2021, relative to the previous week (refer Exhibit 5), after
the beginning of centralised procurement policy from June 21, 2021. On average, India has
administered 6 million vaccine doses per day post June 21, 2021, which we assume will be
the baseline in Q2 FY2022. EXHIBIT 4: Active cases have come down from the peak of 3.74 million as on May
10, 2021 to 0.6 million as on June 28, 2021
According to news sources, the GoI has said in an affidavit to the Supreme Court that ~1.87
In Million
billion doses are required to vaccinate India’s adult population of 930-940 million. Of this,
4.0
516 million doses are expected to be available by end-July 2021, leaving a requirement of
3.5 Covid 2.0: Second peak
~1.35 billion doses to complete the vaccination to the eligible population. While Bharat
Biotech and the Serum Institute of India are ramping up their vaccine production, the GoI 3.0
has said that it is making attempts to procure vaccines made outside India. 2.5
2.0
Our baseline estimate is that on average, 6 million vaccine doses per day would be Covid 1.0: First peak
1.5
administered during Q2 FY2022, which would subsequently increase to 8 million from Q3 1.0
FY2022 onwards. Based on this, we estimate that the entire India’s adult population (18+ 0.5
age group) would be fully vaccinated by February 3, 2022 (refer Exhibit 6). 0.0

If the expected ramp-up doesn’t materialise in Q3 FY2022, and on average 6 million

vaccine doses continue to be administered per day, we estimate that India’s entire adult
population would be fully vaccinated by March 13, 2022 (refer Exhibit 6). However, the Source: ICMR; CEIC; ICRA research

2
We have taken the adult population as 935 million, based on news reports of 930-940 million adults being estimated in the GoI’s affidavit submitted to the Supreme Court

ICRA LIMITED Page | 5

time duration can be reduced if the average number of doses administered per day EXHIBIT 5: Total weekly vaccine doses administered nearly doubled to 42.2 million
increases to 8 million (January 7, 2022) or 10 million (November 30, 2021) from Q2 FY2022 for the week ended June 27, 2021, relative to the previous week
onwards. Such scenarios would be predicated on how quickly the Government can
procure vaccines made outside India, for instance from Pfizer, Johnson & Johnson, and 45
40
Moderna, and Serum Institute and Bharat Biotech can ramp up their supplies. Moreover,
35
Russian developers have signed agreements with several firms in India to manufacture up
30
to 850 million doses of Sputnik a year, which is expected to boost the vaccine supply.

Million
25
20
Economic relief package: The Finance Minister unveiled an economic relief package on 15
June 28, 2021, with a substantial total value of Rs. 6.3 trillion or 2.8% of India’s estimated 10
nominal GDP for FY2022 (refer Annex. 1). The announcements can be bucketed into four 5
categories. The first is credit guarantee linked schemes. This includes the loan guarantee 0
scheme for Covid affected sectors with a cost of Rs. 1.1 trillion, of which Rs. 0.5 trillion is
for the health sector, an enhancement of the Emergency Credit Line Guarantee Scheme
(ECLGS) scheme to the tune of Rs. 1.5 trillion and the new Credit Guarantee Scheme for
Micro Finance Institutions with a modest cost of Rs. 7,500 crore. Such guarantee-linked Source: Indian Council of Medical Research (ICMR); CEIC; ICRA research
schemes will help to ensure that the credit needs of the pandemic-afflicted sectors can be
met at a reasonable cost, although they may not alleviate all the woes of these sectors.
EXHIBIT 6: Timelines by which India’s entire adult population is estimated to be
fully vaccinated based on four scenarios of vaccine doses administered per day
The next categories are other new schemes, including free tourist visas to 5 lakh tourists

doses administered (in million)

Cumulative number of vaccine
to attract visits to India once travel restrictions are eased, additional funds for exports, 2,000 323.7 million doses administered as
public health, and Bharat Net, and extension of earlier schemes such as the Atmanirbhar on Jun 28, 2021
Bharat Rozgar Yojana and extension of the tenure of the PLI Scheme for large scale 1,600
electronics manufacturing. Lastly, there was a reiteration of recent decisions such as the 1,200
extension of free food grains up to November 2021 (Rs. 0.94 trillion) and enhancement in
fertilizer subsidy (Rs. 0.15 trillion) made after the Union Budget for FY2022, and an 800
Jan 7, Feb 3, Mar 13,
announcement made in the FY2022 Budget (reform based result linked power distribution 400
Nov 30,
2021 2021 2022 2022
scheme). We have estimated the fresh fiscal outlay of the new announcements in this
package at Rs. 0.5-0.7 trillion for FY2022 or 0.2-0.3% of the estimated nominal GDP. 0
6 mn doses per day
While the unlocking and vaccine ramp up have brightened the prospects for the pace of 6 mn doses per day in Q2 FY2022 & 8 mn doses per day from Q3 FY2022 onwards
the economic revival, uncertainty persists given the emergence of the Delta Plus variant 8 mn doses per day
of Covid-19. We maintain our expectation that Indian GDP will expand by 8.5% in FY2022 10 mn doses per day
(at constant 2011-12 prices), with an upside of 9.5% predicated on an accelerated Source: ICMR; CEIC; ICRA research
vaccine coverage.3

3
Refer to ICRA’s publication, “Baseline real GDP expansion forecast at 8.5% for FY2022”, published in June 2021.

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UPDATE ON PROJECT ACTIVITY
• The gross fixed capital formation (GFCF) displayed a seven-quarter high YoY growth of EXHIBIT 7: The GFCF recorded a seven-quarter high YoY growth of 10.9% in Q4
10.9% in Q4 FY2021, a sharp improvement from 2.5% and 2.6%, respectively, in Q4 FY2021, with a substantial expansion in the capital outlay of the state and Central
FY2020 and Q3 FY2021. governments
o The growth in the capital outlay of 19 state governments*, for which the data is YoY (%)
120%
available, increased to 36.7% in Q4 FY2021 from 9.8% in Q3 FY2021.
o While the YoY growth in the GoI’s capital outlay moderated to 42.6% in Q4 100%
FY2021 from 110.5% in Q3 FY2021, it remained healthy. 80%
o In addition, capital goods output witnessed a turnaround to a YoY growth of 8.1% 60%
in Q4 FY2021, from the contraction of 0.7% in Q3 FY2021. Subsequently, the pace
40%
of YoY growth in the output of capital goods surged to 1077.1% in April 2021,
driven by low base. However, compared with April 2019, the output of capital 20%
goods declined by 14.3% in April 2021, reflecting the impact of the widening 0%
state-wise restrictions on production. -20%
• The value of new and completed projects in Q4 FY2021 remained considerably lower GFCF Capital Goods GoI Capex States Capex*
than the year-ago levels, in line with the trend in the previous three quarters. Q3 FY2021 Q4 FY2021
However, new and completed projects rose in Q4 FY2021 relative to Q3 FY2021.
o There was a sharp sequential improvement in new project announcements to Rs. *Includes capex data of 19 states, namely, AP, Uttarakhand, UP, Tripura, Telangana, TN, Sikkim,
2.0 trillion in Q4 FY2021 from 1.2 trillion in Q3 FY2021 (source: Rajasthan, Punjab, Odisha, Nagaland, Mizoram, Maharashtra, MP, Kerala, Karnataka, Haryana, Gujarat,
www.economicoutlook.cmie.com, Centre for Monitoring Indian Economy, June Chhattisgarh; Source: NSO; CGA; GoI; ICRA research

17, 2021), while the value of completed projects rose to Rs. 1.0 trillion from Rs.
0.8 trillion, respectively. EXHIBIT 8: Value of new projects stood at Rs. 2.0 trillion in Q4 FY2021, higher than
• After having plunged to 47.3% in Q1 FY2021 amid the Covid-induced disruptions the level in Q3 FY2021, while remaining significantly lower than the year-ago levels
(Source: Order Books, Inventories and Capacity Utilisation Survey of the RBI), capacity Rs. Trillion
utilisation displayed a festive-season uptick to 66.6% in Q3 FY2021 from 63.3% in Q2 5.0
FY2021.
o We expect that capacity utilization would have recovered further in Q4 FY2021, 4.0
before declining moderately in Q1 FY2022 amid the state-level restrictions.
o After the satiation of the pent-up demand seen during the festive season in 2020, 3.0
purchases of consumer durables may be restricted, which would impact capacity
utilisation in certain sectors in FY2022. 2.0
o However, a rise in exports in tune with the vaccine-induced rebound in certain
large economies, may boost capacity utilisation in export-oriented sectors. 1.0
o Accordingly, we expect capacity utilisation to improve to around 70-72% by the
0.0
end of FY2022. Based on this, we expect a gradual and sector-specific pick-up in
Q4 FY2020 Q1 FY2021 Q2 FY2021 Q3 FY2021 Q4 FY2021
private sector investment announcements in H2 FY2022, for instance in sectors
benefitting from the PLI schemes. However, we don’t expect capacity expansion New Completed
to broad-base until the utilisation levels cross 75%. Source: CMIE, www.economicoutlook.cmie.com; June 17, 2021

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EXHIBIT 9: Capacity utilisation rose to 66.6% in Q3 FY2021 from 63.3% in Q2 FY2021, while EXHIBIT 10: Dampened by the sharp decline in demand during the lockdown, cement
remaining below pre-Covid levels; expected to improve to around 70-72% by the end of capacity utilisation shrunk to an estimated ~58% in FY2021 from ~71% in FY2019 and
FY2022 ~68% in FY2020; capacity utilisation is expected to recover, but remain below pre-
Covid levels in FY2022, given the anticipated rise in capacities
80 (Million MT)
75 600 75%

70 500 70%
65 400
Percentage

65%
60
300
55 60%
200
50
100 55%
45
40 0 50%

Capacity(LHS) Capacity Utilization(RHS)

P: Projected; Source: Company Announcements and Media Releases, Company Annual Reports, Cement
Source: RBI; ICRA research Manufacturers Association, Office of Economic Advisor, ICRA estimates
EXHIBIT 11: Steel capacity utilisation declined to ~72% in FY2021 from 77% in FY2020, EXHIBIT 12: The all-India plant load factor for thermal power plants decreased to
with the fall in demand for steel during the nation-wide lockdown; despite capacity 54.5% in FY2021 from 56.1% in FY2020; it is likely to rise mildly to 57-58% in FY2022,
addition, utilisation is expected to rise to 78% in FY2022; capacities of 31 MT^ are given the rising share of renewables in the electricity generation mix amid the GoI’s
planned to be added between FY2022-2025 focus on reducing dependence on fossil fuel-based energy
(Million MT) Percentage
160 84% 70
82% 57-58%
140 60
120 80%
50
100 78%
76% 40
80
74% 30
60 72%
40 70% 20
20 68% 10
0 66%
0

Installed capacity (in mt) Production

*FY2021 are provisional estimates; P: Projected; Source: Ministry of Steel; JPC; ICRA estimates P: Projected; Source: CEA; ICRA research

ICRA LIMITED Page | 8

EXHIBIT 13: Power generation capacity addition rose by 16.9% to 9,534 MW in H2 EXHIBIT 14: Power transmission capacity addition increased by a significant 42.1%
FY2021 from 8,158 MW in H2 FY2020, despite which this segment saw a YoY contraction to 9,036 CKT kms in H2 FY2021 from 6,361 CKT kms during H2 FY2020, contributing
of 18.6% in FY2021; capacity addition is projected at 17-18 GW in FY2022 to a YoY expansion of 43.6% in FY2021
MW CKT km
40,000 30,000
35,000
25,000
30,000
25,000 20,000
20,000 15,000
15,000 10,000
10,000
5,000
5,000
0 0

Source: CEA; ICRA research Source: CEA; ICRA research

EXHIBIT 15: Road contracts awarded directly under the Ministry of Road Transport and EXHIBIT 16: Hotel occupancies are expected to rise to ~36-38% in FY2022; however,
Highway (MoRTH) decreased to 663 kms in Apr-May FY2022 from 747 kms in Apr-May performance in FY2022 is likely to be significantly weaker than earlier estimates due
FY2021; however, execution improved to 1,470 kms from 847 kms during the same to the second Covid-19 wave, with industry recovery being pushed back by 6-8
period, with construction activities being permitted during the second wave months
(Kms) Number of Rooms
18,000 120,000 80%
16,000 70%
100,000
14,000 60%
12,000 80,000 50%
10,000 60,000 40%
8,000 30%
40,000
6,000 20%
4,000 20,000 10%
2,000 0 0%
0

Premium Supply (Across 12 Key Cities; LHS) Occupancies (RHS)

Awards Execution
*Premium supply stated here is as per pre-Covid times; P: Projected; Source: ICRA research
Source: MoRTH; ICRA research

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UPDATE ON FINANCING
• Growth in total financing through bank credit to large industry and services, EXHIBIT 17: The pace of growth of bank credit to large industry and services, corporate
commercial paper (CP), and bonds is estimated to have increased to 7.0% at end- bonds and CP is estimated to have risen to 7.0% at end-Mar 2021 from 4.3% at end-
March 2021 from 4.3% at end-March 2020, led by an increase in the YoY growth of Mar 2020
bonds outstanding to 11.2% from 6.1%, respectively, while there was a narrower Rs. Billion
contraction of CP outstanding (to -12.0% from -28.7%). However, the growth of bank 100,000
credit to large industry and services declined sharply (to +3.8% from +7.1%) during 6.2% 5.0% 5.4% 7.0%
80,000 4.3%
the period. -12.0%
-28.7% -22.3% -21.2% -21.2%
o Incremental non-food bank credit stood at Rs. 4.3 trillion during Q4 FY2021, lower 60,000 11.2%
than Rs. 4.6 trillion during Q4 FY2020. Similarly, the incremental credit stood at 6.1% 8.5% 10.3% 11.8%
Rs. 5.7 trillion during FY2021, which was slightly lower than Rs. 5.9 trillion during 40,000
FY2020. ICRA estimates the incremental credit in FY2022 at ~Rs. 8.0-9.0 trillion,
translating to a YoY credit growth of 7.3-8.3%. 20,000 7.1% 8.3% 3.9% 2.5% 3.8%
• ECB approvals declined to a three-year low US$28.4 billion in FY2021 from US$41.1 0
billion in FY2019 and US$52.0 billion in FY2020. Going forward, competitive funding Mar-20 Jun-20 Sep-20 Dec-20 Mar-21
from domestic sources is likely to keep approvals subdued in the near term. We Commercial paper Bonds* Banks credit to Large Industry and Services Total
anticipate a modest uptick in ECB approvals of US$30-35 billion in FY2022. *Data on outstanding corporate bonds for the quarter ended Sep 2020, Dec 2020 and Mar 2020 is not yet
• After the mild easing in FY2021 relative to FY2020, domestic equity fund raising available; ICRA’s estimates have been included in the exhibit; the data labels correspond to the YoY growth
decreased by a significant 79.4% in April-May FY2022 relative to April-May FY2021, rates; Source: RBI; SEBI; ICRA research
on account of lower QIP equity and rights issues.

EXHIBIT 18: Net of refinancing, ECB volumes increased to US$2.6 billion in Apr 2021 from EXHIBIT 19: Domestic equity fund raising decreased by a significant 79.4% in Apr-May
US$1.0 billion in Apr 2020 FY2022 relative to Apr-May FY2021, on account of lower QIP equity and rights issues
Cumulative Inflows Rs. Billion
2,000
USD billion
60 1,500
50
40 1,000
30 500
20
10 0
FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2021 FY2022
0
(Till May) (Till May)
Public Issues - IPOS: Equity Public Issues - FPOS: Equity Public Issues - OFS: Equity
FY2020 FY2021 FY2022 Rights Issues - Equity QIP: Equity
Source: RBI; ICRA research Source: Prime Database; ICRA research

ICRA LIMITED Page | 10

UNION GOVERNMENT FINANCES

EXHIBIT 20: The GoI’s net tax revenues rose by 4.9% to Rs. 14.2 trillion in FY2021 Prov. EXHIBIT 21: The GoI’s revenue spending expanded by 31.3% to Rs. 30.9 trillion in
from Rs. 13.6 trillion in FY2020 Actuals, exceeding the FY2021 RE by Rs. 0.8 trillion; FY2021 Prov. from Rs. 23.5 trillion in FY2020, and exceeded the FY2021 RE by a modest
reflecting the low base of the lockdown, the GoI’s net tax revenues expanded by a steep Rs. 0.8 trillion; the revenue expenditure contracted by 35.6% to Rs. 1.8 trillion in Apr
510.9% in YoY terms in Apr 2021 2021 from Rs. 2.8 trillion in Apr 2020
YoY Growth of Cumulative Net Tax Revenues YoY Growth of Cumulative Revex
40%
40%
510.9% in April 2021 30%
20% 20%
0% 10%
-20% 0%
-10%
-40%
-20%
-60% -30%
-80% -40%

FY2020 FY2021 FY2022* FY2020 FY2021 FY2022

*Exponentially high growth of 510.9% in April 2021; Source: CGA; ICRA research Source: CGA; ICRA research

EXHIBIT 22: The GoI’s capital expenditure and net lending displayed a healthy YoY growth EXHIBIT 23: The GoI’s fiscal deficit nearly doubled to Rs. 18.2 trillion in FY2021 Prov.
of 27.6% to Rs. 4.1 billion in FY2021 Prov. from Rs. 3.2 trillion in FY2020, while it trailed from Rs. 9.3 trillion in FY2020 Actuals; it stood at a mild Rs. 0.8 trillion in April 2021
the FY2021 RE by Rs. 0.2 trillion; capital expenditure and net lending posted a growth of (Rs. 2.8 trillion in Apr 2020); with higher expenditure, we expect the fiscal deficit to
67.3% to Rs. 467.5 billion in Apr 2021 from Rs. 279.4 billion in Apr 2020 overshoot the FY2022 BE of Rs. 15.1 trillion, especially if disinvestment trails the BE
YoY Growth of Cumulative Capex Rs. billion
80% 20,000
60%
15,000
40%
20% 10,000
0%
5,000
-20%
-40% 0
2020-21 Prov. 2021-22 BE 2020-21 Prov. 2021-22 BE
Revenue Deficit Fiscal Deficit
FY2020 FY2021 FY2022 FY Apr
Source: CGA; ICRA research Source: CGA; ICRA research

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 INFLATION
EXHIBIT 24: The YoY CPI inflation hardened to a six-month high 6.3% in May
• The YoY CPI inflation hardened to a six-month high 6.3% in May 2021 from 4.2% in
2021 from 4.2% in Apr 2021; likely to ease to around 6.0% in June 2021
April 2021, exceeding our forecasts, with the state-level restrictions reigniting supply-
15%
side constraints.
• Going forward, a normal southwest monsoon, projected by the IMD, should help to 12%
contain the food inflation, especially in cereals and pulses. However, edible oil prices 9%
are likely to remain high. The recent cut in import duties on edible oils and incentives 6%
to augment domestic productivity could improve the demand-supply balance over 3%
the medium-term.
0%
• With high global prices of commodities such as iron ore, copper, steel, etc. as well as
an increase in logistics costs, the core-CPI inflation may remain relatively sticky, and -3%
display a limited correction in the coming months.
• The phased unlocking at the state level may temper the CPI inflation to around 6.0% CPI Core-CPI* Food & beverages
in June 2021. We now expect the CPI inflation to average at least 5.4% in FY2022. *Since the detailed data for March-May 2020 is not available, we have not excluded prices for petrol
• A rate hike and stance change could get upfronted to Q3 FY2022, if the CPI inflation and diesel of vehicles in the calculation of the core-CPI index for the YoY inflation rates; Source: NSO;
is entrenched around the 6% upper threshold in the next two prints. CEIC; ICRA research
• The YoY WPI inflation hardened to a series-high 12.9% in May 2021 from 10.5% in
April 2021, driven by the double whammy of high global commodity prices and a very
low base. Moreover, the YoY core-WPI inflation increased sharply to a fresh series-
high 10.0% in May 2021 from 8.4% in April 2021, partly reflecting the low base.
• The core-WPI inflation is expected to climb further to a new series-high 10.4-10.9% in
June 2021, and sustain in double-digits until September 2021. However, we expect
the headline WPI inflation to recede modestly to 11.9-12.3% in June 2021, as the base
starts to normalize.
EXHIBIT 26: A rate hike and stance change could get upfronted to Q3 FY2022, if
EXHIBIT 25: The YoY WPI inflation hardened to a new series-high 12.9% in May 2021
the CPI inflation is entrenched around the 6% upper threshold in the next two
from 10.5% in Apr 2021, driven by the double whammy of high global commodity prices
prints
and a very low base
15% 6.5%
12%
9% 5.5%
6% 4.5%
3%
3.5%
0%
-3% 2.5%
-6%

Repo MSF Reverse Repo CRR

WPI WPI-Core
Source: RBI; CEIC; ICRA research
Source: Office of the Economic Advisor, Ministry of Commerce and Industry, GoI; ICRA research

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SECTORAL TRENDS

EXHIBIT 27: On a pan-India basis, rainfall has exceeded the Long Period Average (LPA) EXHIBIT 28: Spatial distribution of the monsoon rainfall (during June 1-28, 2021)
reveals normal precipitation in the East and Northeast and South Peninsula, and
since mid-May 2021; with a swift progress across most of the country, rainfall in the
monsoon season (June-September) stood at 116% of LPA till June 28, 2021 excess rainfall in the Northwest and Central regions
Mm Above/below LPA
40 35%
30 30%
20 25%
10 20%
0 15%
-10
10%
-20
5%
-30
0%
East & Northwest Central South Peninsula All India
Northeast
June 1 - 28, 2021
Cumulative Deviation from Normal Weekly Deviation from Normal
Source: IMD; CEIC; ICRA research
Source: Indian Meteorological Department (IMD); CEIC; ICRA research

EXHIBIT 29: With the early monsoon rainfall, reservoir storage on a pan-India basis has EXHIBIT 30: Reservoir storage was lower than the year-ago levels in the Northern,
commenced an uptrend and stood at 31% of Full Reservoir Level (FRL) as on June 24, Eastern, Central and Western regions, while it was higher in the Southern region as
2021, while mildly trailing the year-ago levels (33%) on June 24, 2021
% of FRL % of FRL
100% 50%
90%
80%
70% 40%
60%
50% 30%
40%
30% 20%
20%
10% 10%
0%
0%
Northern Eastern Western Central Southern Total
FY2020 FY2021 FY2022 25-Jun-20 24-Jun-21
Source: Central Water Commission (CWC); CEIC; ICRA research Source: CWC; CEIC; ICRA research

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EXHIBIT 31: The 3rd Advance Estimates (AE) of crop production released on May 25, EXHIBIT 32: Despite the early rainfall, sowing of kharif crops as on June 25, 2021 trailed
2021, indicated a healthy rise in FY2021, relative to final estimates of FY2020 for (rabi the year-ago level by 21.6%, led by cotton, oilseeds, coarse cereals and pulses,
and kharif) crops such pulses, oilseeds, sugarcane and rice whereas rice, sugarcane, and jute and mesta recorded a rise
Growth (%) YoY Growth (%)
10% 4.4%
16% 0.4% 0.6%
0%
12%
-10%
8%
-20% -16.7%
-21.6% -17.5%
4% -30%
0% -40% -35.5%
-0.3%
-4% -50%
-48.2%
Wheat Rice Coarse Pulses Oilseeds Cotton Sugarcane -60%
Cereals Cotton Oilseeds Total Coarse Pulses Jute & Sugarcane Rice
Kharif Production Rabi Production cereals Mesta
Source: Department of Agriculture, Cooperation and Farmers Welfare, Ministry of Agriculture, ICRA research Source: Department of Agriculture, Cooperation and Farmers Welfare, GoI; ICRA research

EXHIBIT 33: Low base boosted the IIP growth to a series-high 134.4% in Apr 2021; the
index was a marginal 0.1% higher than the pre-Covid i.e. Apr 2019 level, driven by
electricity and mining, amid a mild dip in manufacturing; among the use-based
categories, intermediate goods exceeded the Apr 2019 level, whereas capital goods and
consumer durables sharply trailed the Apr 2019 levels
15%
10%
EXHIBIT 34: The core sector output reported a 56.1% YoY expansion in Apr 2021,
on the back of a low base; however, relative to the Apr 2019 level, it declined by
3.0%, led by steel, crude oil, coal, cement, fertilizers and refinery products, partly
offset by an improvement in performance of electricity
10%

Growth relative to Apr 2019 (%)

Growth relative to Apr 2019 (%)

5% 5%
0.1% 0.2% 0.2%
0% 0%
-5% -0.1%
-5%
-10%
-15% -10%
-20% Sectoral-based Use-based
-15%
-20%

Source: NSO; Office of the Economic Adviser, GoI; CEIC; ICRA research Source: NSO; CEIC; ICRA research

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EXHIBIT 35: Cement output witnessed a mild TTM growth of 2.8% in Apr 2021, after a EXHIBIT 36: After a gap of 12 months, steel output posted a turnaround to a TTM
gap of 13 months growth of 4.2% in Apr 2021
TTM Growth (%) TTM Growth (%)
20% 10%
15%
5%
10%
5% 0%
0%
-5% -5%
-10%
-10%
-15%
-20% -15%

Source: Office of the Economic Adviser, GoI; ICRA research Source: Office of the Economic Advisor, GoI; ICRA research

EXHIBIT 37: The pace of TTM growth in the output of the predominant producer, CIL, EXHIBIT 38: Electricity generation rose by 5.9% on a TTM basis ending May
rose to 1.1% in May from the mild 0.1% in Apr 2021 2021; ICRA expects electricity demand to grow by 6.0% in FY2022 (-0.8% in
FY2021)
TTM Growth (%) TTM Growth (%)
10% 20%
8%
15%
6%
10%
4%
5%
2%
0% 0%
-2% -5%
-4% -10%

Source: CIL; CEIC; ICRA research Source: CEA; CEIC; ICRA research

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EXHIBIT 39: On a TTM basis, tractor sales have displayed a robust growth of 43.0% in EXHIBIT 40: After contracting throughout FY2021, domestic motorcycle sales
May 2021, benefitting from buoyant rural demand in FY2021; given the high base, ICRA recorded a TTM growth of 5.5% in Apr 2021, which rose further to 17.7% in May
expects a modest volume growth of 1-4% for tractor sales in FY2022 2021; ICRA expects wholesales volume growth of ~11-13% in FY2022 on the low
TTM Growth (%) base of FY2021 (-10.7%)
50% TTM Growth (%)
40% 30%

30% 20%

20% 10%

10% 0%

0% -10%

-10% -20%

-20% -30%
-40%

Source: CMIE; ICRA research

Source: SIAM; ICRA research

EXHIBIT 41: Domestic scooter sales recorded a turnaround to a low TTM growth of 2.8% EXHIBIT 42: The TTM growth of PV sales stood at a healthy 26.6% in May 2021; we
in May 2021 from the contraction of 5.8% in Apr 2021; in FY2022, ICRA expects domestic expect PV sales to grow by ~17-20% in FY2022 (-2% in FY2021) on the back of
scooter sales to rise by ~10-12% in FY2022, led by a low base effect (-19.5% in FY2021) preference for personal mobility given the continued need for social distancing, low
base effect of H1 FY2021 and adequate financing availability
TTM Growth (%) TTM Growth (%)
20% 30%
10% 20%
0% 10%
0%
-10%
-10%
-20%
-20%
-30%
-30%
-40% -40%

Source: SIAM; ICRA research Data used does not include volumes of Tata Motors Limited from Apr 2020; Source: SIAM; ICRA research

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EXHIBIT 43: On a TTM basis, the contraction in sales of light commercial vehicles (LCVs: EXHIBIT 44: Similarly, the TTM de-growth in sales of medium and heavy commercial
truck segment) has narrowed to 11.5% in Q4 FY2021; for FY2022, ICRA projects the LCV vehicles (M&HCV: truck segment) narrowed to 16.8% in Q4 FY2021; ICRA projects a
volume growth at ~10-15% (-11.5% in FY2021), supported by the last mile transportation growth of ~40-45% in FY2022 (-16.8% in FY2021), on a low base, benefitting from
demand construction and infrastructure-related activities
TTM Growth (%) TTM Growth (%)
40% 60%
30% 40%
20%
20%
10%
0% 0%
-10% -20%
-20%
-40%
-30%
-40% -60%
-50% -80%

Source: SIAM; ICRA research Source: SIAM; ICRA research

EXHIBIT 45: Merchandise imports (in US$ terms) posted a turnaround to a TTM growth EXHIBIT 46: Merchandise exports (in US$ terms) reverted to a TTM growth of 4.4%
of 2.5% in May 2021 from the contraction of 6.5% in Apr 2021; however, this was lower in Apr 2021, which improved to 12.9% in May 2021 (-13.5% in May 2020), led by the
than the TTM growth recorded by merchandise exports (+12.9% in May 2021) recovery in demand from the advanced economies
TTM Growth (%) TTM Growth (%)
20% 15%
15%
10%
10%
5% 5%
0% 0%
-5%
-10% -5%
-15% -10%
-20%
-15%
-25%
-30% -20%

Source: Ministry of Commerce, GoI; ICRA research Source: Ministry of Commerce, GoI; ICRA research

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EXHIBIT 47: The merchandise trade deficit, on a TTM basis, widened from US$92.7 billion EXHIBIT 48: After contracting for 13 consecutive months on a TTM basis, cargo
in Jan 2021 to US$110.0 billion in May 2021, while remaining much narrower than the handled at major ports recorded a mild growth of 3.4% in May 2021 driven by
past trends coking coal, containers as well as other liquid shipments
TTM Trade Balance (in US$ billion) TTM Growth (%)
-60 8%
-80 6%
4%
-100
2%
-120
0%
-140
-2%
-160
-4%
-180
-6%
-200
-8%

Source: Ministry of Commerce, GoI; ICRA research Source: Indian Ports Association (IPA); ICRA research

EXHIBIT 49: The TTM decline in services exports eased from 6.5% in Feb 2021 to 4.4% in EXHIBIT 50: The pace of TTM contraction in services imports narrowed from 13.5%
Apr 2021, narrower than that for imports in Feb 2021 to 10.5% in Apr 2021; lagged pickup in cross-border tourism may
continue to dampen both services exports and imports in FY2022
TTM Growth (%)
TTM Growth (%)
30%
25%
25%
20% 20%
15% 15%
10%
10% 5%
5% 0%
-5%
0% -10%
-5% -15%
-20%
-10%

Source: RBI; ICRA research

Source: RBI; ICRA research

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EXHIBIT 51: The pace of TTM contraction in passenger traffic by domestic airlines EXHIBIT 52: On a TTM basis, railway freight traffic recorded a sharp 13.8%
narrowed to 48.6% in May 2021, while continuing to lag the performance of most other expansion in May 2021, benefitting from some shift from road transport amid the
indicators given the prolonged avoidance of air travel during the pandemic state-wise restrictions
TTM Growth (%) TTM Growth (%)
30% 15%
20%
10% 10%
0%
-10% 5%
-20%
-30% 0%
-40%
-50% -5%
-60%
-70% -10%

Source: Directorate General of Civil Aviation (DGCA); ICRA research Source: Indian Railways, GoI; ICRA research

EXHIBIT 53: On a TTM basis, the pace of contraction in diesel consumption narrowed to EXHIBIT 54: After a gap of 11 months, petrol consumption posted a TTM growth of
a marginal 0.03% in May 2021 from 3.0% in Apr 2021; we expect diesel consumption to 3.1% in Apr 2021, which improved to 7.5% in May 2021; a preference for social
grow by ~10% in FY2022 (-11.9% in FY2021), trailing the projected rise in petrol, with a distancing in personal mobility and easing restrictions would support a
shift to rail freight given record-high diesel prices consumption growth of ~14% in FY2022 (-6.8% in FY2021)
TTM Growth (%)
TTM Growth (%) 15%
10%
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
-15%
-20%

Source: PPAC, GoI; ICRA research

Source: PPAC, GoI; ICRA research

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ANNEXURE 1: Economic Relief from Pandemic: Measures announced on June 28, 2021
Scheme Period Amount (Rs. Cr.) Type
Loan Guarantee Scheme for COVID Affected Sectors 2021-22 1,10,000
Expansion of Emergency Credit Line Guarantee Scheme 2021-22 1,50,000 Guarantee
Credit Guarantee Scheme Through Micro Finance Institutions (MFIs) 2021-22 7,500
Total (A) 2,67,500
Additional Subsidy for DAP & P&K fertilizers 2021-22 14,775
Free food grains under PMGKY from May to November, 2021 2021-22 93,869
Announced Earlier
Reform Based Result Linked Power Distribution Scheme (Budget Announcement) 2021-22 to 2025-26 97,631
Total (B) 2,06,275
New Scheme for Public Health 2021-22 15,000
Revival of North Eastern Regional Agricultural Marketing Corporation (NERAMAC) 2021-22 77
Free One Month Tourist Visa to 5 Lakh Tourists 2021-22 100 Fresh Outlay for FY2022
Scheme for tourist guides/stakeholders 2021-22 -
Total (C) 15,177
Boost for Project Exports through NEIA 2021-22 to 2025-26 33,000
Boost to Export Insurance Cover 2021-22 to 2025-26 88,000 Outlay Spread over Multiple
Years
Broadband to each village through BharatNet PPP Model 2021-22 to 2022-23 19,041
Total (D) 1,40,041
Atma Nirbhar Bharat Rozgar Yojana 2021-22 - Extension (till March 31, 2022)
Grand Total (A+B+C+D) 6,28,993
Source: Ministry of Finance, GoI; ICRA research

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