India

SEB MERCHANT BANKING – COUNTRY RISK ANALYSIS December 11, 2008

Analyst: Rolf Danielsen. Tel: +46-8-7638392. E-mail: rolf.danielsen@seb.se

India appears to weather the global crisis better than many peers but will soon see growth fall below
trend to less than 6% a year. However, some observers express concerns following political turmoil
in Pakistan and the terrorist attack in Mumbay, which the government sees related to its neighbour.

Country Risk Analysis

dêçïíÜ=ÇÉÅÉäÉê~íÉë=Äìí=ëí~óë=ÅäÉ~ê=çÑ=~åó=Åçää~éëÉ=ëÅÉå~êáçK==cêçã=íÜÉ=êÉÅçêÇ=
VIUB=ÖêçïíÜ=ê~íÉ=~ÅÜáÉîÉÇ=áå=OMMSI=fåÇá~Ûë=éÉêÑçêã~åÅÉ=Ü~ë=ãçÇÉê~íÉÇ=~åÇ=áë=äáâÉäó=
íç=éçëí=åç=ãçêÉ=íÜ~å=TIUB=áå=íÜÉ=ÅìêêÉåí=óÉ~êK=páåÅÉ=íÜÉ=ëìããÉêI=áåÇáÅ~íçêë=çÑ=
áåÇìëíêá~ä=~Åíáîáíó=Ü~îÉ=ëÜçïå=ëáÖåë=çÑ=íê~áäáåÖ=~ë=áåÇìëíêá~ä=áåîÉëíãÉåíë=áå=é~êíáÅìä~ê=
Ü~îÉ=êÉ~ÅíÉÇ=íç=ÄÉ~êáëÜ=áåîÉëíçê=ëÉåíáãÉåí=êÉÑäÉÅíÉÇ=áå=íÜÉ=ëíÉÉé=Ñ~ää=çÑ=fåÇá~Ûë=ëíçÅâ=
ã~êâÉíI=ïÜáÅÜ=Ü~ë=ãçîÉÇ=áå=é~ê~ääÉä=ïáíÜ=ëÉîÉê~ä=çíÜÉê=ÉãÉêÖáåÖ=ã~êâÉíë=ëÜ~êÉ=
éêáÅÉëK=^í=íÜÉ=ë~ãÉ=íáãÉ=Éñéçêí=ÖêçïíÜ=Ü~ë=ïÉ~âÉåÉÇ=~ë=ã~áå=ã~êâÉíëI=åçí=çåäó=áå=
íÜÉ=rp=~åÇ=bìêçéÉI=Äìí=~äëç=áå=`Üáå~=~åÇ=íÜÉ=êÉëí=çÑ=^ëá~=Ü~îÉ=äçëí=ëíÉ~ãI=ïÜáäÉ==
éäìããÉíáåÖ=çáä=éêáÅÉ=Ü~ë=ëÉåí=ÇÉã~åÇ=çå=~=Ççïåï~êÇ=é~íÜ=~äëç=áå=íÜÉ=jáÇÇäÉ=b~ëí=
ïÜÉêÉ=íÜÉ=r^b=Ü~Ç=ÄÉÅçãÉ=fåÇá~Ûë=ã~áå=Éñéçêí=ã~êâÉíK==qÜÉ=éáÅíìêÉ=ÅçìäÇ=Ü~îÉ=
ÄÉÉå=ïçêëÉ=Äìí=Ñçê=ëíáää=êÉëáäáÉåí=ÇçãÉëíáÅ=ÅçåëìãÉê=ÇÉã~åÇ=ÄçäëíÉêÉÇ=Äó=~=ëíêçåÖ=
Ü~êîÉëí=áå=~ÖêáÅìäíìêÉI=íÜÉ=äáîÉäáÜççÇ=çÑ=íÜÉ=ã~àçêáíó=çÑ=fåÇá~å=ÜçìëÉÜçäÇëK===
= =
içïÉê=çáä=éêáÅÉë= GDP growth
Åçåí~áå=íÜÉ=ÅìêêÉåí=
~ÅÅçìåí=ÇÉÑáÅáíK==qÜÉ= 10%
êáëâ=çÑ=~å=
8%
ìåÅçåíêçääÉÇ=êáëÉ=çÑ=
íÜÉ=ÅìêêÉåí=~ÅÅçìåí= 6%
change

ÇÉÑáÅáí=ëáåÅÉ=ä~íÉ=OMMT=
~ë=íÜÉ=áãéçêí=Äáää= 4%
íÜêÉ~íÉåÉÇ=íç=
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2%
êÉîÉåìÉë=Äó=~=ïáÇÉ= 0%
ã~êÖáåI=~ééÉ~êë=åçï=
2002 2004 2006 2008
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tÜáäÉ=ÜáÖÜ=çáä=éêáÅÉë= Real growth (% ) Forecast
~í=íÜÉ=ÄÉÖáååáåÖ=çÑ=
OMMU=ïáää=ÅäÉ~êäó=áãé~áê=íÜÉ=íê~ÇÉ=Ä~ä~åÅÉ=Ñçê=íÜÉ=ÅìêêÉåí=óÉ~êI=íÜÉ=íêÉåÇ=íçï~êÇ=~å=
ìåëìëí~áå~ÄäÉ=ÇÉîÉäçéãÉåí=Ü~ë=äáâÉäó=ÄÉÉå=~êêÉëíÉÇK=qÜ~í=áë=ä~êÖÉäó=ÇìÉ=íç=íÜÉ=íìêåJ
~êçìåÇ=áå=ÖäçÄ~ä=éêáÅÉë=Ñçê=çáä=~åÇ=çíÜÉê=ê~ï=ã~íÉêá~äë=Äìí=çåJÖçáåÖ=Éñé~åëáçå=çÑ=
fåÇá~Ûë=ëÉêîáÅÉë=ëÉÅíçê=Ü~ë=~äëç=éêçîÉÇ=ãçêÉ=êÉëáäáÉåí=íç=íÜÉ=íìêãçáä=áå=íÜÉ=ÖäçÄ~ä=
ÉÅçåçãó=íÜ~å=ÉñéÉÅíÉÇK=qÜÉ=ÅçåíáåìÉÇ=áåÑäçï=çÑ=êÉãáíí~åÅÉëI=áå=é~êí=êÉÅçêÇÉÇ=~ë=
Å~ëÜJïáíÜÇê~ï~äë=Ñêçã=íÜÉ=ä~êÖÉ=ëíçÅâ=çÑ=åçåJêÉëáÇÉåíá~ä=fåÇá~å=ÇÉéçëáíë=ïáíÜ=
ÇçãÉëíáÅ=Ä~åâëI=Ü~ë=~äëç=ÜÉäéÉÇ=ëí~ÄáäáòÉ=íÜÉ=ÅìêêÉåí=~ÅÅçìåí=Ä~ä~åÅÉK==kÉîÉêíÜÉäÉëëI=

important your attention is drawn to the statement on the back cover of this report which affects your rights.
SEB Merchant Banking Country Risk Analysis December 11, 2008

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çÑ=damFI=ìé=Ñêçã=ANO=ÄáääK=áå=OMMTK==qÜ~í=áåÅêÉ~ëÉ=íçÖÉíÜÉê=ïáíÜ=~=êÉîÉêë~ä=çÑ=~í=äÉ~ëí=
ANM=ÄáääK=Ñêçã=íÜÉ=ATM=ÄáääK=çÑ=~ÅÅìãìä~íÉÇ=éçêíÑçäáç=áåÑäçïë=çîÉê=íÜÉ=OMMPJOMMT=
éÉêáçÇI=ÅçìäÇ=Ü~îÉ=éêÉëÉåíÉÇ=~=ã~àçê=éêçÄäÉã=íç=íÜÉ=Ä~ä~åÅÉ=çÑ=é~óãÉåíëK==cçêÉáÖå=
ÇáêÉÅí=áåîÉëíçêë=Ü~îÉ=ÅçãÉ=íç=íÜÉ=êÉëÅìÉI=ÜçïÉîÉêI=ÇçìÄäáåÖ=íÜÉáê=íçí~ä=åÉíJáåÑäçïë=íç=
~å=Éëíáã~íÉÇ=AOO=ÄáääK=áå=OMMUKI=íÜìë=ÜÉäéáåÖ=ÅçåëçäáÇ~íÉ=íÜÉ=Ä~ä~åÅÉ=çÑ=é~óãÉåíë=~åÇ=
êÉëíçêÉ=Å~äã=áå=íÜÉ=ÑçêÉñ=ã~êâÉíK===
=
qÜÉ=êìéÉÉ= Current account deficit
ïÉ~âÉåë=Ñêçã=
ìåëìëí~áå~ÄäÉ=ÜáÖÜëK= 2%
få=ãáÇJOMMUI=íÜÉ=
1%

% of GDP
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ÉñÅÜ~åÖÉ=ã~êâÉí= 0%
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2003 2005 2007 2009
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OMMT=~åÇ=áå=É~êäó= Current account forecast
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ÅÜ~åÖÉÇ=~åÇ=ëìÄëÉèìÉåíäó=ÑçêÅÉÇ=íÜÉ=ÅÉåíê~ä=Ä~åâ=çå=íÜÉ=ÇÉÑÉåëáîÉK===^ë=áå=çíÜÉê=
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2
SEB Merchant Banking Country Risk Analysis December 11, 2008

ëÉåëáíáîáíó=çÑ=íÜÉ=ÇçãÉëíáÅ=éêáÅÉ=äÉîÉä=íç=íÜÉëÉ=~åÇ=çíÜÉê=ëÜçÅâëK=eçïÉîÉêI=íÜÉ=ìëÉ=çÑ=
íÜÉ=ÇçãÉëíáÅ=ïÜçäÉ=ë~äÉë=áåÇÉñ=EtmfF=áå=íÜÉ=~ÄëÉåÅÉ=çÑ=~=êÉäá~ÄäÉ=ÅçåëìãÉê=éêáÅÉ=
áåÇÉñ=E`mfFI=ã~ó=ÄÉ=ÄÉÖìáäáåÖ=áå=íÜáë=ÅçåíÉñíK==
= WPI
cáå~åÅá~ä=ëÉÅíçê= (weekly wholesale price index)
ÇÉîÉäçéãÉåíë=ÅçìäÇ= 13
éêÉëÉåí=~=ÑìíìêÉ=ïáäÇ=
Å~êÇK==bîÉå=íÜçìÖÜ=êÉÅÉåí= 11

% change pa.
ÅêÉÇáí=~åÇ=ãçåÉí~êó=
ÇÉîÉäçéãÉåíë=åÉîÉê= 9
Policy interest rate
íÜêÉ~íÉåÉÇ=íç=êìå=çÑÑ=
ÅçìêëÉ=áå=íÜÉ=êÉÖìä~íÉÇ= 7
ã~êâÉíI=íÜÉ=ëíêìÅíìêÉ=çÑ=
5
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Source: Reuters Ec oWin

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cáëÅ~ä=éçäáÅáÉë=ïÉ~âÉå=çåÅÉ=~Ö~áåK=pìÅÜ=~=Ä~åâáåÖ=ëÉÅíçê=êÉÑçêãI=ÜçïÉîÉêI=
ïçìäÇ=êÉèìáêÉ=~=ãçêÉ=ê~éáÇ=êÉëçäìíáçå=íç=íÜÉ=ÖçîÉêåãÉåíÛë=äçåÖJëí~åÇáåÖ=ÄìÇÖÉí=
éêçÄäÉãë=íç=ÑêÉÉ=Ä~åâë=Ñêçã=íÜÉáê=çÄäáÖ~íáçåë=íç=Äìó=ÖçîÉêåãÉåí=ÇÉÄíK==^ë=åçíÉÇ=
~ÄçîÉI=áí=áë=äáâÉäó=íÜ~í=íÜÉ=ÅçåëçäáÇ~íáçå=çÑ=íÜÉ=ÑáëÅ~ä=ÄìÇÖÉí=ïáää=ëìÑÑÉê=~=ëÉíJÄ~Åâ=áå=
OMMUJMV=EÑáëÅ~ä=óÉ~ê=ÉåÇáåÖ=j~êÅÜFK=tÜáäÉ=Éëíáã~íÉë=î~êóI=ãçëí=çÄëÉêîÉêë=ÉñéÉÅí=íÜÉ=
ÇÉÑáÅáí=çÑ=íÜÉ=íçí~ä=éìÄäáÅ=ëÉÅíçê=ÄìÇÖÉíI=áåÅäìÇáåÖ=íÜÉ=ÑÉÇÉê~ä=ÖçîÉêåãÉåíI=êÉÖáçå~ä=
ëí~íÉ=ÖçîÉêåãÉåíë=~åÇ=ÖçîÉêåãÉåí=çÑÑJÄ~ä~åÅÉ=íê~åë~ÅíáçåëI=íç=áåÅêÉ~ëÉ=Äó=ëçãÉ=O=
éÉêÅÉåí~ÖÉ=éçáåíë=çÑ=dam=íç=UIRB=çÑ=damK==qÜ~í=í~âÉë=áåíç=~ÅÅçìåí=NF=íÜÉ=ÜáâÉ=áå=
éìÄäáÅ=ëÉÅíçê=ï~ÖÉë=Äó=ãçêÉ=íÜ~å=OMB=~ë=êÉÅçããÉåÇÉÇ=Äó=íÜÉ=páñíÜ=m~ó=
`çããáëëáçå=E~=ÅçããáííÉÉ=ãÉÉíáåÖ=çåÅÉ=~=ÇÉÅ~ÇÉ=íç=ëÉí=åÉï=éìÄäáÅ=ëÉÅíçê=ï~ÖÉëFI====
OF=çÑÑJÄ~ä~åÅÉ=çáäJëìÄëáÇáÉë=ã~áåäó=êÉä~íÉÇ=íç=ÉåÉêÖóI=ïÜáÅÜ=ëç~êÉÇ=áå=íÜÉ=Ñáêëí=é~êí=çÑ=
OMMULMV=~åÇ=PF=çíÜÉê=éçêâ=Ä~êêÉä=éçäáÅáÉë=~ë=íÜáë=ÄÉáåÖ=~=éêÉJÉäÉÅíáçå=ÄìÇÖÉí=ÄÉÑçêÉ=

1
Draft Report of the Committee on Financial Sector Reforms, Government of India Planning
Commission, New Delhi, 2007
3
SEB Merchant Banking Country Risk Analysis December 11, 2008

ÖÉåÉê~ä=ÉäÉÅíáçåë=áå=^éêáä=OMMVK==qÜÉ=ä~ííÉê=áåÅäìÇÉë=~äëç=ãìÅÜ=ÇáëéìíÉÇ=ÇÉÄí=êÉäáÉÑ=Ñçê=
Ñ~êãÉêë=ïÜáÅÜ=ïáää=Åçëí=íÜÉ=ÖçîÉêåãÉåí=ëçãÉ=MIQB=çÑ=dam=~åÇ=ï~ë=ÇÉêáÇÉÇ=~ë=
éçéìäáëí=Äó=íÜÉ=çééçëáíáçåK=tÜ~í=ã~ó=ãáíáÖ~íÉ=íÜÉ=Ñáå~ä=Ñ~ääçìíI=ÜçïÉîÉêI=~êÉ=íÜÉ=
êÉÅÉåí=Çêçé=áå=íÜÉ=çáä=éêáÅÉI=ãìÅÜ=ÄÉäçï=íÜÉ=éêÉëÉåí=êÉÖìä~íÉÇ=éìãé=éêáÅÉ=çÑ=
ATMLÄ~êêÉä=ïÜáÅÜ=ëÜçìäÇ=äçïÉê=íÜÉ=ÖçîÉêåãÉåíÛë=çÑÑJÄ~ä~åÅÉ=ÉñéÉåëÉëK==fí=ã~ó=~äëç=
ÄÉ=ìåÑ~áê=íç=Åçãé~êÉ=íÜÉ=OMMULMV=ÄìÇÖÉí=ïáíÜ=íÜÉ=OMMTLMUI=~ë=íÜÉ=ëíêçåÖ=êÉëìäí=çÑ=íÜÉ=
ä~ííÉê=ï~ë=áå=é~êí=íÜ~åâë=íç=çåÉJçÑÑ=éêçÑáíë=Ñêçã=éêáî~íáò~íáçå=ë~äÉëK==tÉ=åçíÉ=íÜ~í=
ÇÉëéáíÉ=íÜÉ=áåÅêÉ~ëÉ=çÑ=íÜÉ=ÇÉÑáÅáí=áå=OMMUJMVI=íÜÉ=ÖçîÉêåãÉåí=ÇÉÄí=ê~íáç=ïáää=ÅçåíáåìÉ=
Ñ~ääáåÖ=íç=TPB=çÑ=dam=Ñêçã=TVB=çÑ=dam=çÑ=íÜÉ=éêÉÅÉÇáåÖ=óÉ~êK==
=
eçï=ïáää=fåÇá~=ãÉÉí=íÜÉ=çåÖçáåÖ=ÉÅçåçãáÅ=~åÇ=Ñáå~åÅá~ä=ïçêäÇ=Åêáëáë\==lîÉê=
íÜÉ=êÉÅÉåí=íïç=ÇÉÅ~ÇÉëI=~åÇ=áå=íÜÉ=éÉêáçÇ=OMMPJOMMUI==fåÇá~=Ü~ë=ÄÉÅçãÉ=~=ãìÅÜ=ãçêÉ=
çéÉå=ÉÅçåçãóK==“léÉååÉëëÒ=åçï=ëí~åÇë=~í==çÑ=ãçêÉ=íÜ~å=ORB=EÅçìåíÉÇ=~ë=Éñéçêíë==
êÉä~íáîÉ=íç=damFK=qÜ~í=áë=äçïÉê=íÜ~å=`Üáå~Ûë=PTB=Äìí=~äãçëí=íïáÅÉ=~ë=ÜáÖÜ=
“çéÉååÉëëÒ=~ë=íÜÉ=rpK=kÉîÉêíÜÉäÉëëI=fåÇá~Ûë=ÇáîÉêëáÑáÅ~íáçåI=áåÅäìÇáåÖ=áåíç=ëÉêîáÅÉëI=
~åÇ=Ä~ä~åÅÉÇ=ëíêìÅíìêÉ=çÑ=ÇçãÉëíáÅ=ÇÉã~åÇI=áå=é~êíáÅìä~ê=ÄÉíïÉÉå=Åçåëìãéíáçå=~åÇ=
áåîÉëíãÉåíëI=ëÜçìäÇ=ÜÉäé=áí=ïÉ~íÜÉê=íÜÉ=ÇÉÉéÉåáåÖ=ïçêäÇ=Åêáëáë=ÄÉííÉê=íÜ~å=éÉÉêëK==
^ééäóáåÖ=íÜÉ=ÉÅçåçãáÅ=ïçêäÇ=ãçÇÉä=ÇÉîÉäçéÉÇ=Äó=íÜÉ=lbc=ElñÑçêÇ=bÅçåçãáÅëF=ïÉ=
ÑáåÇ=íÜ~í=ÉîÉå=áå=~=ïçêëí=Å~ëÉ=ëÅÉå~êáç=dam=ÖêçïíÜ=ëÜçìäÇ=êÉã~áå=èìáíÉ=êçÄìëíI=
åÉîÉê=Ñ~ääáåÖ=ÄÉäçï=RIUB=çå=~å=~ååì~ä=Ä~ëáëI=ïÜáäÉ=`Üáå~I=áå=Åçåíê~ëíI=ïáää=Çêçé=íç=
ÄÉäçï=RB=ÖêçïíÜ=ê~íÉë=Ñçê=íïç=ëìÄëÉèìÉåí=óÉ~êëK==qÜÉ=ä~ííÉê=êÉéêÉëÉåíë=~=ëíÉÉéÉê=
Çêçé=áå=ÖêçïíÜI=íÉëíáÑóáåÖ=íç=`Üáå~Ûë=ÜáÖÜÉê=ÇÉéÉåÇÉåÅÉ=çå=ëéÉÅáÑáÅ=Éñéçêí=ã~êâÉíë=
áåÅäìÇáåÖ=ÅçåëìãÉê=ÖççÇë=áå=íÜÉ=lb`a=ÅçìåíêáÉëK===
=

India base case India worst case

Risk scenarios
China base case China worst case

10,0
% annual GDP
growth

5,0

0,0
2008 2009 2010 2011
China appears more sensitive than India to shocks of a worst case
scenario based on a sharp cut-backs in US/EU consumer demand.
=
=
mçäáíáÅ~ä=ÉîÉåíë=ã~ó=ëÜçÅâ=ãçêÉ=íÜ~å=íÜÉó=áãé~ÅíK==qÜÉ=êÉÅÉåí=íÉêêçêáëí=~íí~Åâ=áå=
jìãÄ~óI=ïÜáÅÜ=Å~ìëÉÇ=íÜÉ=ÇÉ~íÜ=çÑ=ëÉîÉê~ä=ïÉëíÉêå=ÑçêÉáÖåÉêëI=Ü~ë=ÑçÅìëÉÇ=
~ííÉåíáçå=çå=íÜÉ=ÖÉåÉê~ä=ëÉÅìêáíó=éêçÄäÉãë=çÑ=fåÇá~K==qÜÉó=éêÉî~áä=áå=íÜÉ=ÅçìåíêóJ=ëáÇÉ=
ïÜÉêÉI=ÜçïÉîÉêI=íÜÉó=ÅêÉ~íÉ=ãìÅÜ=äÉëë=áåíÉêå~íáçå~ä=ãÉÇá~=êÉ~ÅíáçåëK==pç=Ñ~ê=áå=OMMUI=
íÜáë=áåíÉêå~ä=íÉêêçêáëí=~Åíáîáíó=Ü~ë=êÉéçêíÉÇäó=Åä~áãÉÇ=ëÉîÉê~ä=íÜçìë~åÇë=îáÅíáãëK==
eçïÉîÉêI=íÜáë=áë=~å=çäÇ=éêçÄäÉãI=áåÅäìÇáåÖ=íÜÉ=ÇÉÅ~ÇÉë=çäÇ=k~ñ~äáíÉ=ãçîÉãÉåí=
ïÜáÅÜ=~ÇÜÉêÉë=íç=ëçãÉ=âáåÇ=çÑ=~=Åçããìåáëí=áÇÉçäçÖóK==qÜÉ=î~êáçìë=ÉñíêÉãáëí=
ãçîÉãÉåíë=êÉÅêìáí=ã~áåäó=Ñêçã=ã~êÖáå~äáòÉÇ=ÉíÜåáÅ=~åÇ=êÉäáÖáçìë=Öêçìéë=~åÇ=íç=
ëçãÉ=ÇÉÖêÉÉ=Ñêçã=íÜÉ=ä~êÖÉ=Å~ëíJäÉëë=ìåÇÉêÅä~ëë=áå=íÜÉ=Åçìåíêó=ëáÇÉK==få=Åçåíê~ëí=íç=
íÜÉ=ãçêÉ=Ü~ïâáëÜ=~ííáíìÇÉ=çÑ=áíë=éêÉÇÉÅÉëëçêI=íÜÉ=éêÉëÉåí=ÖçîÉêåãÉåí=Ü~ë=éìêëìÉÇ=~=
éçäáÅó=çÑ=áåÅäìëáçå=íçï~êÇ=íÜÉëÉ=ÉäÉãÉåíë=çÑ=ëçÅáÉíóK=kçïI=íÜÉ=jìãÄ~ó=~íí~Åâë=
ÅçìäÇ=èìÉëíáçå=íÜáë=ëçÑíJ~ééêç~ÅÜ=~åÇ=é~îÉ=íÜÉ=ï~ó=Ñçê=Ü~êÇJäáåÉ=~ííáíìÇÉë=áå=íÜÉ=
ÑìíìêÉK==oÉÅÉåí=ÄóJÉäÉÅíáçåëI=ÜçïÉîÉêI=ïÉêÉ=ìåÉñéÉÅíÉÇäó=ïçå=Äó=íÜÉ=áåÅìãÄÉåíI=
áåÇáÅ~íáåÖ=íÜ~í=íÜÉ=ÉäÉÅíçê~íÉ=ã~ó=åçí=Ñ~îçê=~=ÅÜ~åÖÉK===^é~êí=Ñêçã=íÜ~í=áëëìÉI=~=
Åç~äáíáçå=ÖçîÉêåãÉåí=Ñêçã=íÜÉ=éêÉëÉåí=êáÖÜí=çÑ=ÅÉåíÉê=çééçëáíáçå=ïçìäÇ=ìåäáâÉäó=

4
SEB Merchant Banking Country Risk Analysis December 11, 2008

ÜÉê~äÇ=~=ëÜ~êé=ÅÜ~åÖÉ=áå=ÉÅçåçãáÅ=éçäáÅáÉë=áå=éêáåÅáéäÉ=Äìí=ïçìäÇ=éêçÄ~Ääó=ëí~åÇ=~=
ÄÉííÉê=ÅÜ~åÅÉ=çÑ=áãéäÉãÉåíáåÖ=íÜÉãK==
=
m~âáëí~åI=fåÇá~Ûë=çäÇ=åÉãÉëáëW=fåÇá~Ûë=Åä~áã=íÜ~í=Öêçìéë=Ñêçã=m~âáëí~å=ïÉêÉ=
ÜÉ~îáäó=áåîçäîÉÇ=áå=íÜÉ=jìãÄ~ó=~íí~Åâë=~åÇ=~ääÉÖÉÇäó=êÉÅÉáîÉÇ=ëìééçêí=Ñêçã=
ÉäÉãÉåíë=ïáíÜáå=m~âáëí~åÛë=ëÉÅìêáíó=ëÉêîáÅÉëI=ëÉÉã=íç=ÄÉ=Ö~íÜÉêáåÖ=ëìééçêí=Ñêçã=rp=
~åÇ=çíÜÉê=ÅçìåíêáÉëK==qÜ~í=ÅçìäÇ=çåÅÉ=~Ö~áå=ê~áëÉ=ÄçêÇÉê=íÉåëáçåë=áå=íÜÉ=ÇáëéìíÉÇ=
éêçîáåÅÉ=çÑ=h~ëÜãáêI=~åÇ=áå=íÜÉ=ïçêëí=çÑ=Å~ëÉë=çìíêáÖÜí=ï~ê=ÄÉíïÉÉå=íÜÉ=íïç=
åìÅäÉ~êJ~êãÉÇ=åÉáÖÜÄçêëK==eçïÉîÉêI=íÜáë=íÉåëáçå=Ü~ë=ÄÉÉå=çå=~åÇ=çÑÑ=Ñçê=ã~åó=
ÇÉÅ~ÇÉë=~åÇ=ïÉ=ÄÉäáÉîÉ=íÜ~í=ëìÅÜ=~=ëáíì~íáçå=ã~ó=ÅçåíáåìÉ=Ñçê=~=äçåÖ=íáãÉ=ëíáääI=ïÜáäÉ=
åÉîÉê=ÖÉííáåÖ=çìí=çÑ=ÅçåíêçäK==qÜÉ=ïçêëí=ÉÑÑÉÅí=ïçìäÇ=éêçÄ~Ääó=ÄÉ=íç=Çáëíê~Åí=íÜÉ=
~ííÉåíáçå=çÑ=íÜÉ=fåÇá~å=ÖçîÉêåãÉåí=Ñêçã=çíÜÉê=Öç~äëI=ëìÅÜ=~ë=íÜÉ=åÉÉÇ=íç=ÅçåíáåìÉ=
ÉÅçåçãáÅ=êÉÑçêãë=áåÅäìÇáåÖ=çÑ=íÜÉ=Ñáå~åÅá~ä=ëÉÅíçêK==
JJGJJ=
fåÇá~Ûë=ÖêçïíÜ=Ü~ë=Ñ~ÇÉÇ=Åçãé~êÉÇ=ïáíÜ=áíë=ÄäáëíÉêáåÖ=éÉêÑçêã~åÅÉ=çîÉê=ëÉîÉê~ä=
óÉ~êëI=Äìí=ïáää=äáâÉäó=êÉã~áå=êÉ~ëçå~Ääó=ëíêçåÖ=~í=~=äÉîÉä=ÜáÖÜ=ÉåçìÖÜ=íç=ÑÉåÇ=çÑÑ=
êáëâë=çÑ=ãçìåíáåÖ=ëçÅá~ä=íÉåëáçåëK=qÜ~í=ë~áÇI=êÉÅÉåí=ÉîÉåíë=~äëç=éêçîÉ=íÜ~í=fåÇá~=áë=
åçí=áãéÉêîáçìë=íç=ÇÉîÉäçéãÉåíë=çÑ=íÜÉ=çìíëáÇÉ=ïçêäÇ=~åÇ=íÜ~í=éçäáíáÅ~ä=ÉîÉåí=êáëâ=áë=
åÉîÉê=Ñ~ê=~ï~óK=^ë=çíÜÉê=ÉãÉêÖáåÖ=ã~êâÉí=ÅçìåíêáÉë=fåÇá~=ïáää=ëìÑÑÉê=Ñêçã=íÜÉ=
ÅçåíáåìÉÇ=ã~äÑìåÅíáçåáåÖ=áåíÉêå~íáçå~ä=Å~éáí~ä=ã~êâÉíë=~åÇ=íÜÉ=ëäçïÇçïå=áå=Éñéçêí=
ã~êâÉíë=Äìí=ã~ó=~äëç=ÄÉåÉÑáí=Ñêçã=äçïÉê=ÉåÉêÖó=~åÇ=ê~ï=ã~íÉêá~ä=éêáÅÉë=áå=íÜÉ=åÉ~ê=
íÉêãK=tÉ=~äëç=ÄÉäáÉîÉ=íÜ~í=íÜÉ=äáâÉäó=ëÉíJÄ~Åâ=íç=íÜÉ=ÑáëÅ~ä=ÅçåëçäáÇ~íáçå=éêçÅÉëë=íÜáë=
ÅìêêÉåí=ÑáëÅ~ä=óÉ~ê=ÉåÇáåÖ=j~êÅÜ=OMMV=ïáää=ÄÉ=ÅçêêÉÅíÉÇ=Äó=íÜÉ=åÉï=ÖçîÉêåãÉåí=
ÑçääçïáåÖ=ÉäÉÅíáçåë=áå=^éêáä=OMMVI=êÉÖ~êÇäÉëë=ïÜç=ïáåëK==
qÜÉ=ëÉÅìêáíó=éêçÄäÉãëI=~ë=íê~ÖáÅ~ääó=áääìëíê~íÉÇ=Äó=íÜÉ=íÉêêçêáëí=~íí~Åâë=áå=
jìãÄ~ó=ä~ëí=kçîÉãÄÉêI=áë=~=äçåÖJëí~åÇáåÖ=áëëìÉI=ïÜáÅÜ=çÅÅ~ëáçå~ääó=êÉ~ÅÜÉë=íÜÉ=
ÜÉ~ÇäáåÉë=çÑ=íÜÉ=áåíÉêå~íáçå~ä=éêÉëë=ïÜÉåÉîÉê=áí=çÅÅìêë=áå=fåÇá~å=ãÉíêçéçäáí~å=ÅáíáÉëK=
^ë=ëìÅÜI=ïÉ=Çç=åçí=ëÉÉ=~=éêáåÅáé~ääó=åÉï=êáëâ=Ñêçã=íÜáë=ÉîÉåí=ìåäÉëë=áí=áë=ÑçääçïÉÇ=Äó=
~=ï~îÉ=çÑ=çêÖ~åáòÉÇ=~åÇ=éçëëáÄäó=ëí~íÉ=ëéçåëçêÉÇ=íÉêêçêáëã=çêáÖáå~íáåÖ=Ñêçã=
~Äêç~ÇK==^í=íÜáë=éçáåí=ïÉ=Çç=åçí=ÑáåÇ=íÜáë=êáëâ=Ü~îáåÖ=êÉ~ÅÜÉÇ=~å=~ä~êãáåÖ=äÉîÉä=óÉíK=
JJ==lîÉê=íÜÉ=ä~ëí=óÉ~ê=íÜÉêÉ=Ü~îÉ=ÄÉÉå=åç=ã~àçê=ÉñíÉêå~ä=ê~íáåÖ=ÅÜ~åÖÉëI=ÉñÅÉéí=íÜ~í=
çåÉ=ê~íáåÖ=~ÖÉåÅó=Ü~ë=éä~ÅÉÇ=äçÅ~ä=ëçîÉêÉáÖå=ÇÉÄí=áëëìÉë=çå=åÉÖ~íáîÉ=çìíäççâK==

Key ratios 2008 Resilience

12

mçéìä~íáçå=EãáääáçåëF NMSP 10

GDP/capita ($) 942 6

Macro balance 4
Liquidity
GDP (change) 8% 2

Inflation 7%
Curr.acc. balance/GDP -3%
Absence of
Reserves/imports (months) 0 Information
event risk
Budget balance/GDP(*) -3%
India Average EM Russia
Government debt/GDP(*) 61%

bñíÉêå~ä=ê~íáåÖëW= mÉÉêëW Graph: India's risk profile like Russia's shows strengths
cáíÅÜW=___J= oìëëá~= on liquidity and infornation, but other parts of the
pCmW=___J `Üáå~= pentagon fall in line with or within average, meaning
bÖóéí= worse. Our estimate of event risk includes renewed risk of
instability in neighboring Pakistan.
(*) Central government only ===
=
=

5
SEB Merchant Banking Country Risk Analysis December 11, 2008

Key data: 2003 2004 2005 2006 2007 2008 2009 2010
GDP (bill. US$) 530 615 718 806 1012 1116 1198 1426
GDP/capita (US$) 482 551 633 701 866 942 996 1169
GDP (change) 7,4% 7,2% 9,1% 9,8% 9,3% 7,8% 6,5% 7,7%
Investments/GDP 26% 29% 31% 33% 35% 35% 36% 37%
Budget balance/GDP* -6,1% -4,5% -4,5% -3,7% -3,0% -3,3% -3,2% -2,9%
Govt debt/GDP** 66% 66% 66% 65% 62% 61% 61% 60%
CPI inflation (%) 3,7% 3,6% 4,5% 6,0% 6,5% 7,3% 5,7% 3,8%
Money demand (%) 9,1% 11,1% 10,9% 13,5% 15,3% 13,2% 13,1% 11,7%
Stock prices 3859 5567 7396 11442 15535
Interest rates 7,1% 6,2% 6,1% 6,9% 7,7% 7,9% 5,6% 6,3%
Exch. Rate ($) 47 45 44 45 41 43 46 43
Trade/GDP (%) 26% 30% 35% 38% 38% 43% 44% 42%
Oil price (Brent) $29 $38 $54 $65 $73 $96 $50 $53
Millions US $
Export of goods 60 895 77 939 102 175 122 963 151 331 179 992 198 523 229 890
Imports of goods 75 537 105 975 149 430 185 041 230 468 301 677 328 183 371 498
Other: 23 415 28 817 36 970 52 549 67 027 87 981 96 409 109 150
Current account 8 773 781 -10 285 -9 529 -12 110 -33 704 -33 251 -32 458
(% of GDP) 1,7% 0,1% -1,4% -1,2% -1,2% -3,0% -2,8% -2,3%
FDI 2 444 3 592 4 628 6 820 10 094 20 372 10 889 11 617
Loan repayments -14 653 -15 874 -17 809 -10 646 -22 046 -27 719 -30 876 -32 486
Net other capital flows 29 543 43 190 42 183 36 195 92 545 106 196 55 323 76 526
Balance of payments 26 107 31 689 18 717 22 840 68 483 65 145 2 086 23 199
Reserves UQ=UTM NNS=RRV NPR=OTS NRU=NNU OOS=SNN OVN=TRR OVP=UON PNT=MOM
Total debt 109 917 120 055 123 596 141 845 178 677 216 041 228 460 234 356
o/w short term debt 4 685 6 593 8 314 10 777 14 054 17 872 21 415 23 056
Sources: Oxford Economics and SEB estimates.
*) Excludes central government off-budget transactions. **) Excludes regional states debt (about 14%/GDP).

Rating history
Fitch (eoy) BB BB+ BB+ BBB- BBB-
S&P (eoy) BB BB BB+ BB+ BBB-
Type of government: Parliamentary Democracy
Next elections 2009
Other:
Latest PC deal None
Latest IMF arrangements 1993/SBA

E x c h a n g e ra te S to c k e x c h a n g e , T A IE X 5 0
5 0 1200 0
4 9 1100 0
4 8 1000 0
4 7 900 0
4 6 800 0
USD/INR

Index

4 5 700 0
4 4 600 0
4 3 500 0
4 2 400 0
4 1 300 0
4 0 200 0
3 9 100 0
00 01 02 03 04 05 06 07 08 00 01 02 03 04 05 06 07 08
S o u r c e : R e u t e r s E c o W in S o u r c e : R e u te r s E c o W i n

F o re ig n R e s e r v e s B S E 1 0 0 : p /e r a tio
350 40

300 35
250
USD (billions)

30
200
Ratio

25
150
20
100

50 15

0 10
00 01 02 03 04 05 06 07 08 00 01 02 03 04 05 06 07 08
S o u r c e : R e u te rs E c o W i n S o u rc e : R e u te rs E c o W in

6
SEB Merchant Banking Country Risk Analysis December 11, 2008

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