Motilal Oswal Financial Services

COPE

The Economy Observer

11 June 2020

2QCY20 – India’s Quarterly Economic Outlook

A glimpse at the country’s economic data amid COVID-19



In the wake of the Coronavirus (COVID-19) pandemic, the world has turned topsy-turvy since early-2020. Not

surprisingly then, our FY21 economic forecasts have also undergone dramatic revisions. We now expect the Indian

economy to contract ~4.7%/3.5% YoY in real/nominal terms this year, marking their first contraction in 41/65 years.

Notwithstanding the massive contraction in economic activity, we believe that retail inflation could remain at ~5% in

FY21 vis-à-vis 4.8% last year (primarily led by food prices). However, current account balance could move from a deficit

of ~0.9% in FY20 to a surplus of ~0.4% of GDP this year. The

INR

is expected to range between 74-75 against the USD

and average ~74.8 in FY21 v/s 70.9 last year.

Our

economic activity index (EAI)

for India suggests ~30% YoY contraction in Apr’20, on account of the national

lockdown. With economic activity gradually opening up from May’20, we believe that real GDP could contract 15-20%

YoY in 1QFY21. It also implies an output loss of about ~INR24t (or ~12% of FY20 GDP) in FY21.

Finally, although India’s fiscal stimulus is the lowest compared to 20 other major nations, the fiscal deficit of the

central government could come in at 7.0-7.5% of GDP this year, following the 4.6% last year and marking the highest

deficit in three decades. Including states, the

combined fiscal deficit

is expected at 11-12% of GDP, the highest in at

least the past five decades since availability of data.

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Everything has changed since

Jan’20:

Real GDP

grew 3.1% YoY in

4QFY20,

marking the slowest growth in 11 years. Not

only did the government revise growth estimates in the first three quarters of FY20

downwards, but also the nominal GDP growth at 7.2% was the slowest in 48 years.

Due to the COVID-19 crisis, we believe India’s real/nominal GDP could contract

~4.7%/3.5% this year, marking their first contraction in 41/65 years.

CPI inflation:

With the CPI basket heavily influenced by food items, the headline

inflation is expected to average ~5% in FY21, slightly higher than 4.8% last year. The

core inflation, however, could ease from 4% to 2.3% this year.

Foreign trade and exchange rate:

With weak global and domestic economic activity

and the crash in crude oil prices, we believe the net impact on India’s external

account would be positive. Consequently, we expect India to post its first current

account surplus in 18 years in FY21. With foreign capital inflows, India’s foreign

exchange reserves could witness further build-up. Accordingly, we expect the INR to

remain stable at 74-75 against the USD and average 74.8 in FY21.

Actual data

FY19

11.0

6.1

3.4

6.25

69.9

(2.1)

(3.4)

Jun’20 forecasts

1QFY21F 2QFY21F 3QFY21F 4QFY21F

(19.2)

(3.2)

2.3

5.3

(20.7)

(4.8)

1.3

4.6

6.4

5.7

4.3

3.6

4.00

3.75

3.50

75.5

74.5

74.0

75.0

1.4

(0.6)

(0.2)

1.1

n/a

# Estimates for FY20/F = Forecasts

Source: MOFSL

India’s real/nominal GDP

could contract ~4.7%/3.5%

this year, marking their first

contraction in 41/65 years.

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

(3.5)

(4.7)

5.0

3.50

74.8

0.4

(7.3)

Nikhil Gupta

– Research analyst

(Nikhil.Gupta@MotilalOswal.com); +91 22 3982 5405

Yaswi Agrawal

– Research analyst

(Yaswi.Agrawal@motilaloswal.com); +91 22 7193 4196

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

~20% YoY in

1QFY21, decline by

~4.7% in

FY21

Inflation

likely at ~5% in

FY21; Core inflation,

however, to ease

substantially

India’s fiscal

deficit could top ~12%

of GDP – the highest

in at least

48 years

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

but also discuss the three main themes that are likely to play out in 2020. These

themes have helped shape our forecast.

1) While the first contraction in India’s economy in FY21 in four decades is almost

unanimously believed, it remains to be seen if it will beat the post-independence

worst decline of 5.2% in FY80. The output lost due to COVID-19 could also be very

substantial at INR24t, ~12% of FY20 GDP.

2) Although economic activity would decline substantially, inflationary pressures

would remain alive in CY20/FY21. Higher inflation would be entirely due to food

items, retail prices of which have grown faster amid the lockdown and are

unlikely to retreat quickly as the economy opens up. Core inflation, however,

could ease significantly.

3) Although the government’s economic package amounting to 10.5% of GDP

included actual fiscal spending worth ~1.3% of GDP in FY21, the fiscal deficit of

the central government could still be at 7.0-7.5% of GDP this year on account of

the massive shortfall in receipts. Including states, the combined fiscal deficit is

expected to at 11-12% of GDP – the highest in

at least

the past five decades.

I. Expect real GDP to contract ~20% YoY in 1QFY21, decline by ~4.7% in FY21

India’s real GDP grew 3.1% YoY in

4QFY20,

marking the slowest growth in 11 years

but definitely much better than the market consensus of 1-2% growth. Although

private consumption and investments’ growth/decline was in line with expectations,

fiscal spending and agricultural activities led to better-than-anticipated 4QFY20

growth. The situation, however, is certain to deteriorate substantially in 1QFY21.

The three key themes:

Preliminary estimates

reveal that India’s EAI for

GVA contracted ~31% in the

first month of FY21.

Our in-house

economic activity index (EAI)

suggests that India’s EAI-GVA contracted

~31% YoY in Apr’20

(Exhibit 2).

Apr’20 was by far the worst month in terms of

economic activity due to the national lockdown led by the COVID-19 outbreak. The

decline of ~31%, thus, appears to be better than expectations. Industrial activities

contracted almost two-thirds (including an estimated fall of ~80% in construction

activities), while the services sector (notwithstanding ~21% YoY growth in fiscal real

spending) shrank by one-fifth in the first month of FY21. Farm activities also

declined slowly; however, non-farm GVA declined faster at ~34% in Apr’20.

Exhibit 3:

… led by massive contraction in non-farm sector

(pp)

4.4

1.0

0.1

(4.2)

Agri

3.7

1.8

0.9

Industry

1.7

(0.1)

(5.8)

Services

(0.6)

(17.5)

Exhibit 2:

India’s economic activity fell ~31% YoY in Apr’20…

EAI-GVA (% YoY)

5.7 5.8 4.6 6.3

5.6 5.7 4.2 7.0 4.4

2.8 1.3

(12.9)

(30.9)

Apr-19

Jul-19

Oct-19

Jan-20

Apr-20

Apr-19

Feb-20

Mar-20

Apr-20

Contribution of different components to EAI-GDP growth

Source: Various national sources, CEIC, MOFSL

Please refer to our earlier report for details

11 June 2020

A comparison of new

nominal GDP forecasts vis-

à-vis our Jan’20 forecasts

reveal that the output loss

in FY21 could be as high as

INR24t or ~12% of FY20

GDP.

Accordingly, we believe that real GDP could contract ~20% YoY in 1QFY21, marking

the worst-ever quarter in India’s post-independence history. Further, we also

believe that India could enter its first technical recession since independence by

posting two consecutive quarters of contraction

(Exhibit 4).

There could be small

growth of ~1% YoY in 3QFY21, followed by 4-5% growth in 4QFY21. Consequently,

we expect the Indian economy to shrink ~4.7% YoY in FY21, marking its first

contraction in four decades and comparable to the post-independence worst

decline of 5.2% in FY80. A comparison of the new nominal GDP forecasts vis-à-vis

our Jan’20 forecasts reveal the output loss in FY21 could be as high as INR24t or

~12% of FY20 GDP.

Moreover, we also estimate that while India’s nominal GDP growth eased to 48-year

low of 7.2% in FY20, it is likely to contract ~3.5% this year, marking its first

contraction in 65 years

(Exhibit 5).

Exhibit 4:

Nominal output loss could be as high as INR24t (or

~12% of FY20 GDP) in FY21…

Real GDP (3QFY20 = 100)

Jan'20 forecasts

126

112

Q3FY20 Q4FY20 Q1FY21F Q2FY21F Q3FY21F Q4FY21F

New forecasts

Exhibit 5:

…and nominal GDP could contract for the first

time in 65 years

(10)

Nominal GDP growth (% YoY)

FY 51

FY 61

FY 71

FY 81

FY 91

FY01

FY11

FY21F

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

II. Inflation likely at ~5% in FY21; Core inflation, however, to ease substantially

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

broadly expected that inflationary pressures would also subside substantially.

Inflation, however, has shown different movements in different nations.

While

inflation in China, India and South Korea has risen sharply in 2020, it has eased in

Russia, Thailand, Italy and Spain

(Exhibit 6).

Exhibit 6:

Comparison of CPI-inflation in 2019 and 2020 in various developing and developed economies

8.0

5.8

3.5

1.3

-1.0

(% YoY)

Jan-Apr 2019

Jan-Apr 2020

2% inflation target

CH HK IN^ ID MY PH RU SAf# TW

^ Apr’20 headline inflation was not published officially

CA FR DE

# 1QCY19/1QCY20

ES UK US

Source: CEIC, CSO, MOFSL

11 June 2020

The large upward swing in

India in Jan-Apr’20 vis-à-vis

2019 could be attributed to

the fact that the share of

food items is the highest at

~40% of CPI.

One of the primary reasons, in our view, for these differences in inflation is the

composition of the consumer price index (CPI), and particularly, the weight of the

food items in the CPI. With a large part of the world under lockdown, only essentials

were bought and sold, which were affected by the disturbances in the value chains.

The large upward swing in India in Jan-Apr’20 vis-à-vis 2019 could be attributed to

the fact that the share of food items is the highest at ~40% of the CPI

(Exhibit 7).

Exhibit 7:

Weight of food items in CPI basket highest for India at ~40%

Weight: Food (% of CPI)

37.0

34.4 35.5

39.6

17.2

20.1

23.7

30.0

27.3 28.4

26.2

12.9 13.0 13.8

16.5 16.5

19.5 21.1

8.8

9.1

SAf

IT#

# Food & beverages

Source: CEIC, CSO, MOFSL

Consequently, when we forecast India’s inflation, these idiosyncrasies matter.

Although the headline inflation for Apr’20 was not published officially, our estimates

– based on the limited published data – suggest that it could have risen sharply from

5.9% in Mar’20 to 6.8% in Apr’20; it is also expected to stay high at 6.3% in May’20

as well

(Exhibit 8).

Headline inflation in Apr-May’20, thus, could be much higher than

earlier forecasts. From Jun’20, however, as the supply chains are re-established and

economic activity opens up, the headline inflation could fall lower than the previous

forecasts (made in Jan’20).

Exhibit 8:

Headline CPI-inflation is expected to be lower-

than-previous-forecast from Jun’20…

8.0

7.0

6.0

5.0

4.0

3.0

(% YoY)

Old (Jan'20) forecasts

New (Jun'20) forecasts

Exhibit 9:

…however, it could still be the highest in FY21 vis-

à-vis the past five years

(% YoY)

5.9

5.5

4.9

Headline CPI

Core CPI*

5.8

4.7

4.3 4.5

3.6

4.5

3.4

4.8

4.0

5.0

2.3

Apr’20 headline inflation not published officially (MOFSL est.: 6.8%)

Source: CSO, MOFSL

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

Nevertheless, due to much higher than otherwise headline inflation in Apr-May’20

(almost entirely run by food inflation), inflation could be ~5% in FY21 vis-à-vis 4.8%

last year

(Exhibit 9).

Core inflation, however, is expected to ease substantially

from 4% in FY20 to 2.3% this year – the lowest at least in a decade.

11 June 2020

III. India’s fiscal deficit could top ~12% of GDP – the highest in at least 48 years

Almost a month ago, the Honorable Prime Minister announced a COVID-19 support

package amounting to INR20t (or ~10% of GDP). When the Honorable Finance

Minister provided details of the package over the next five days, more clarity

emerged making it clear that the actual fiscal stimulus was only ~INR2.5t (or 1.3% of

GDP). When we

compare

it with 19 other major nations in the world, we find that

India’s fiscal stimulus is the lowest. We, however, also argue that India’s fiscal space,

measured by the average fiscal balance in the past three years, is also the lowest

and the intensity of the COVID-19 pandemic – measured by confirmed cases per m

persons – is also not very high. This, however, does not imply that India’s fiscal

deficit will remain low.

Corporate taxes could fall

~30% – from INR5.6t to

INR3.9t (lowest in 8 years),

while GST receipts are

expected to decline ~20% –

from INR6t last year to

INR4.7t in FY21.

As mentioned above, we expect India’s nominal GDP to contract for the first time in

65 years in FY21, which would obviously have adverse implications on the tax and

non-tax receipts. We believe that corporate tax and GST (goods and services tax)

receipts could be the worst-affected this year, as losses could be offset in the

former; while GST is not levied on essentials, it is much higher on luxury items.

Accordingly, corporate taxes could decline ~30% – from INR5.6t to INR3.9t (lowest in

8 years), while GST receipts are expected to fall ~20% – from INR6t last year to

INR4.7t in FY21

(Exhibit 10).

Including the sharp hike in excise duties on fuel items,

gross tax receipts are likely to drop ~9%, while net taxes could decline 12% in FY21.

Including the fiscal stimulus of INR2.5t and the savings on fuel subsidies, we believe

that the central government’s fiscal deficit could stand at ~7.3% of GDP in FY21.

Exhibit 10:

Center’s fiscal deficit could stand at ~7.3% of GDP in FY21 without any further stimulus

INR trillion

FY18

FY19

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

Total receipts

15.6

16.7

19.3

Net tax receipts

12.4

13.2

15.0

Gross tax receipts

19.2

20.8

21.6

Corporate tax

5.7

6.6

6.1

Personal income

4.1

4.6

5.6

GST

4.4

5.8

6.1

Customs duties

1.3

1.2

1.3

Excise duty

2.6

2.3

2.5

Other tax

1.1

0.2

0.1

Non-tax revenue

1.9

2.5

3.5

Non-debt capital

1.2

1.0

0.8

Disinvestment

1.0

0.8

0.7

Total spending

21.4

23.1

27.0

Fiscal deficit

5.9

6.5

7.7

Deficit (% of GDP)

3.4

3.8

Nominal GDP

171.0

189.7

204.4

Tax buoyancy may or may not be affected based on special factors mentioned

FY21

Pre-COVID

Est.

19.2

14.7

22.6

6.6

5.6

6.7

1.1

2.4

0.2

3.0

1.5

1.4

27.1

8.0

3.5

224.4

Jun’20 Est.

14.8

11.9

18.4

3.9

4.6

4.7

1.0

4.0

0.2

2.3

0.7

0.5

29.0

14.2

7.3

196.3

Source: RBI, MOFSL

The center’s fiscal deficit

would cross 7% of GDP for

the first time post-

liberalization, and would be

more than double the

target of 3.5% of GDP.

If so, the center’s fiscal deficit would cross 7% of GDP for the first time post-

liberalization, and would be more than double the target of 3.5% of GDP

(Exhibit

11).

Moreover, now that the states have been allowed to expand their deficit by up

to 2pp of the GDP (based on several conditions), considering the shortfall in the

center’s devolution (on account of its revenue shortfall) and the states’ own taxes, it

is highly probable that the states’ fiscal deficit could also rise from the budgeted

2.5% to ~4.4% of GDP this year. Our estimates (based on 18 states) suggest that it

11 June 2020

expanded from the budgeted 2.6% to ~3% of GDP in FY20. Overall, thus, the

combined (center + states) fiscal deficit could stand at 11-12% of GDP in FY21, the

highest since the data became available in the 1970s

(Exhibit 12).

Exhibit 11:

Center’s FY21 fiscal deficit could be highest in

30 years (% of GDP)

Center's fiscal deficit (% of GDP)

BEs

Jun'20 Est.

Exhibit 12:

Combined fiscal deficit could top 12% of GDP –

highest in five decades (% of GDP)

Combined fiscal deficit (% of GDP)

7.3

3.5

Source: RBI, MOFSL

Finally,

although the above estimates suggest the center’s fiscal deficit at ~7.3% of

GDP this year, the estimates are highly correlated with the economic activity

(measured by nominal GDP growth). Therefore, we also provide a sensitivity analysis

of India’s combined fiscal deficit vis-à-vis the nominal GDP growth. In case, nominal

GDP contracts 5% (as against our forecast of 3.4%), the combined fiscal deficit could

rise to 11.9% of GDP, while lower GDP contraction (of say, 1%) could reduce the

deficit to ~11% of GDP in FY21

(Exhibit 13).

Exhibit 13:

Sensitivity analysis suggests combined fiscal deficit would stand at 11–14% of GDP in FY21

INR trillion, unless mentioned

otherwise

Total receipts

Gross taxes

Net taxes

Government spending

Center's fiscal deficit

Center's deficit (% of GDP)

States' fiscal deficit

States' deficit (% of GDP)

Combined fiscal deficit

Combined fiscal deficit (% of GDP)

Nominal GDP

FY19

Actual

16.7

20.8

13.2

23.1

6.5

3.4

4.8

2.5

11.2

5.9

189.7

FY20 Prov

17.5

20.1

13.6

26.9

9.4

4.6

6.2

3.1

15.6

7.7

203.4

FY21BE

22.5

24.2

16.4

30.4

8.0

3.5

6.1

2.7

14.1

6.3

224.9

-5.0%

14.7

18.1

11.8

29.0

14.4

7.4

8.7

4.5

23.0

11.9

193.2

FY21F (Nominal GDP change)

-3.5%

-1.0%

+1.0%

+3.0%

14.8

15.1

15.3

15.5

18.4

18.8

19.1

19.5

11.9

12.2

12.4

12.6

29.0

14.2

13.9

13.7

13.5

7.3

6.9

6.7

6.4

8.6

8.5

8.4

8.3

4.4

4.2

4.1

3.9

22.8

22.4

22.1

21.8

11.6

11.1

10.7

10.4

196.3

201.4

205.4

209.5

Source: CSO, RBI, MOFSL

11 June 2020

Detailed economic projections

Exhibit 14:

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

unit

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

8.2

5.8

3.6

4.7

5.1

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

7.2

7.4

15.0

10.4

9.7

4.7

17.6

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

6.6

7.3

9.3

10.2

12.1

8.4

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

(0.7)

7.0

3.4

FY21F

2,626

(3.5)

61.3

14.1

28.1

27.1

18.5

19.7

(3.4)

18.5

24.7

13.9

6.4

56.7

(4.7)

(6.0)

8.5

(10.5)

(9.6)

(4.2)

(9.7)

(4.5)

(0.7)

(13.0)

(11.9)

(17.9)

(0.9)

5.3

(5.2)

(7.2)

(11.7)

(2.8)

(6.9)

FY22F

2,854

10.1

61.9

14.3

28.9

27.9

19.1

20.9

9.8

18.6

25.0

13.9

6.7

56.5

7.6

6.5

7.1

12.9

12.1

11.4

15.9

7.3

4.5

10.0

9.0

13.0

6.8

6.5

7.8

8.1

15.7

10.3

5.6

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

4.13

4.67

5.67

8.13

(6.82)

4.18

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

11 June 2020

Exhibit 15:

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

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)

% pa

unit

USD/bbl

6.75

65.5

46.2

6.25

67.1

48.0

6.00

64.4

56.4

6.25

69.9

69.6

4.40

70.9

60.7

3.50

74.8

40.0

3.50

75.8

50.0

% YoY

13.1

10.1

7.5

9.5

77.7

97.1

(12.9)

10.1

15.3

8.2

72.9

41.4

27.3

9.2

6.2

10.0

75.5

117.3

14.5

10.5

10.0

13.3

77.7

99.9

9.4

8.9

7.9

6.1

76.4

60.3

6.7

7.5

(2.0)

69.7

(20.4)

10.3

8.9

9.0

69.7

% YoY

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

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

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

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

3.0

2.9

3.5

4.8

6.0

1.3

4.0

1.8

6.9

(1.7)

0.3

(0.4)

6.9

1.1

1.3

4.4

5.0

7.3

6.5

2.3

(0.4)

(7.5)

0.9

0.4

2.8

2.3

2.4

4.4

4.8

6.7

3.9

2.8

1.3

4.4

(3.4)

0.7

0.1

5.4

Unit

FY16

FY17

FY18

FY19

FY20

FY21F

FY22F

USD/ounce

1,150

1,259

1,286

1,263

1,462

1,700

1,600

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

Source: RBI, CSO, CEIC, MOFSL

11 June 2020

Exhibit 16:

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

(25.1)

(152.1)

127.0

639.7

320.5

42.8

35.8

319.2

214.4

664.7

472.6

129.4

28.2

192.2

130.7

64.8

42.1

0.1

1.9

20.7

8.6

(39.8)

(0.9)

2.1

3.1

(1.4)

30.5

17.8

7.3

10.5

11.4

1.2

31.3

10.3

11.1

FY21F

10.8

(113.6)

124.5

588.7

271.6

30.0

24.6

317.1

218.2

577.9

385.2

81.6

18.6

192.6

133.0

53.3

34.0

6.0

0.0

13.3

5.0

(64.1)

0.4

2.4

3.1

(2.4)

29.6

17.6

9.2

8.4

11.0

1.0

29.2

8.1

11.4

FY22F

(6.6)

(138.6)

132.0

653.5

315.7

42.7

26.2

337.8

233.6

660.1

454.3

111.5

20.7

205.9

141.5

64.1

36.0

5.0

0.0

23.1

8.0

(57.5)

(0.2)

2.2

2.9

(2.0)

30.0

17.0

8.0

9.0

11.3

1.6

30.2

8.7

11.2

7.2

6.9

7.2

7.6

8.0

Valuables include items related to gold, or any other precious metal

Source: RBI, CSO, CMIE, MOFSL

11 June 2020

Exhibit 17:

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

FY16

12,580

9.1

11,950

8.5

14,567

9,438

4.4

7,419

6.6

7,148

29.9

3,142

2,513

630

421

17,908

7.6

13.0

15,378

4.8

10,961

3.0

4,417

2,641

1,501

968

2,530

28.6

800

350

296

(5,328)

(3.9)

(3,427)

(2.5)

(911)

(0.7)

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)

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

14,796

(15.5)

7.5

14,146

(15.9)

18,301

11,896

(12.3)

8,418

(18.8)

9,883

1.6

2,900

2,250

650

500

29,048

8.1

14.8

25,748

9.6

18,948

9.0

6,800

3,000

2,179

1,763

3,300

(2.0)

1,000

600

(14,252)

(7.3)

(11,602)

(5.9)

(7,452)

(0.4)

(1.6)

(0.4)

(3.8)

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

*In

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

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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

11 June 2020

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be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not

to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,

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

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