Macro update

Feb 2017
Major Policy Actions

Demonetization of Rs.1000 and Rs.500 Notes with effect from 9th November 2016
Aims to curb corruption and black money
Demonetization The move is aimed at promoting digital transactions and is expected to lower the
inflation

Aimed at improving Indias Ease of Doing Business Rank

Would facilitate faster turnaround of business
Bankruptcy Bill Would facilitate creditors in taking timely and effective action against defaulting
borrowers

Marks a major step towards implementation of Indias most ambitious indirect

Goods and Services tax reform
Tax Bill Aims to bring the indirect taxes under one umbrella
On a company level, it reduces the effective tax paid by producers

2
 Revised GDP Growth forecast post Demonetization
FY16-17 GDP Growth Estimate
Current Previous
Fitch 6.90% 7.40%
Goldman Sachs 6.80% 7.90%
Ambit Capital 3.50% 6.80%
Care Ratings 7.3%-7.5% 7.80%
Emkay Global 6.50% 7.40%
ICRA 7.50% 7.90%
ICICI Securities 7.40% 7.80%
RBI 7.1% 7.6%

With the effect of demonetization, the consumer demand is expected to fall, given the fact
that the country is cash based economy. The rural demand in particular is expected to fall in
the near future. Hence, as a result certain investment banks have reduced their GDP
forecasts

3
 Highlights from the Economic Survey
GDP components 2016-17 (f) 2015-16

Investment demand -0.20%

6.10%
Private consumption 6.50%
7.30%
Services 8.80%
9.90%
Industry 5.20%
8.20%
Agriculture 4.10%
0.76%
GVA at basic prices 7%
7.20%
-2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%

Agriculture sector is expected to do well in FY16-17 on the back of good monsoon despite the effect of
demonetisation
The Budget has announced the Governments willingness to continue the recent trend of high public spending in the
light of contracting private spending
Market interest rates expected to be lower in FY2017-18 due to demonetisation
Government debt to GDP ratio in 2016 seen at 68.5 percent down from 69.1 percent in 2015
The average consumer price index (CPI) inflation rate declined to 4.9% in 2015/16 from 5.9% in 2014/15 and are likely
to remain below the RBIs target of 5% for 2016-17
Demonetisation to affect growth rate by 0.25-0.5%, but to have long-term benefits
GST, other structural reforms should take the trend growth rate to 8-10% in the next few years

4
Highlights from the Union Budget
Fiscal management
Total budget expenditure: Rs 21 trillion
Fiscal deficit for FY18 pegged at 3.2% of GDP
Revenue deficit for FY18 at 1.9%
Financial Sector
Foreign Investment Promotion Board will be abolished in 2017-18. The plan to dismantle the FIPB
indicates that almost all sectors attracting FDI will move into automatic approval route.
An expert committee will be constituted to study and promote creation of an operational and legal
framework to integrate spot market and derivatives market in the agricultural sector, for commodities
trading. e- NAM will be an integral part of the framework
Relief for category I and II foreign portfolio investors (FPIs) from tax liability arising out of sale of assets
or shares in a foreign company due to redemption of an investment within India
Rs.10,000 crores will be provided for recapitalization of Banks in 2017-18
Infrastructure
A total allocation of Rs.39, 61,354 crore has been made for infrastructure and allocation for Railways is
Rs.1, 31,000 crore
allocation for highways increased from 57,976 crores in 2016-17 to 64,900 crores in 2017-18

5
Highlights from the Union Budget

Capital Markets
No announcement on application of LTCG on trading
Systematically important NBFCs above a certain net worth will be categorized as qualified institutional buyers
by SEBI. This will help the initial public offering market become stronger and channelize more investments
Online registration of financial market intermediaries such as mutual funds, brokers and portfolio managers
will be initiated
Common applications for registration and opening of bank and demat accounts and the issue of a Permanent
Account Number for foreign portfolio investors
A bill on the resolution of financial firms is to be introduced in the Parliament for setting up of a Securities
Appellate Tribunal
Listing and trading of Security Receipts issued by a securitization company or a reconstruction company will be
permitted on stock exchanges registered under the Security Exchange Board of India (SEBI). This will enhance
capital flows into the securitization industry and effectively deal with bank non-performing assets
No postponement announcement of GAAR implementation. GAAR will come into force from 1st April 2017
LTCG will applicable for sale those equity shares acquired on or after 1st October 2004 if securities transaction
tax was not paid at the time of acquiring them (with exception to IPO, FPO , rights issue and bonus issue)

6
Highlights from the Union Budget Capital market effects

Capital Markets
Transfer of Rupee Denominated bonds by a non-resident to another non-resident will be exempted from capital
gains tax
Concessional tax rate of 5% will be extended to the interest paid on rupee denominated bonds issued by an Indian
company to a non-resident investors up to 30th June 2020 effective retrospectively from AY2016-17
Government will put in place a revised mechanism and procedure to ensure time bound listing of identified CPSEs
on stock exchanges. The shares of Railway PSEs like IRCTC, IRFC and IRCON will be listed in stock exchanges

SME Sector
Tax for MSME companies with turnover of up to Rs. 50 Cr. is reduced from 30% to 25% while turnover limit
for compulsory audits is increased to Rs. 2 Cr.
the businesses that have turnover up to Rs 2 crore, under section 44AD of the Income Tax Act, income
would be presumed to be 6% of the total turnover of the assesse, instead of 8% only if gross receipts are
received through digital means

7
 Economic fundamentals
GDP Growth Rate Trade data Exports Imports
9.0% 60.0%
8.5% 8.4% 7.7% 38.6%
8.0% 7.7%
7.5% 7.5% 40.0%
7.0% 44.1%
6.5% 20.0%
7.30%
6.0% 12.9%
5.5%
5.0% 5.5% 0.0%
4.5% 4.6%
-6.9%
4.0% 10.3%
-20.0%
Jun-2011

Jun-2012

Jun-2013

Jun-2014

Jun-2015

Jun-2016
Dec-2011
Mar-2011

Dec-2012
Mar-2012

Dec-2013
Mar-2013

Dec-2014
Mar-2014

Dec-2015
Mar-2015
Sept-2011

Sept-2012

Sept-2013

Sept-2014

Sept-2015

Sept-2016

Jun-2011

Jun-2012

Jun-2013

Jun-2014

Jun-2015

Jun-2016
Dec-2011
Mar-2011

Dec-2012
Mar-2012

Dec-2013
Mar-2013

Dec-2014
Mar-2014

Dec-2015
Mar-2015

Dec-16
Sept-2011

Sept-2012

Sept-2013

Sept-2014

Sept-2015

Sept-2016
GDP in Q2 FY grew at 7.3% faster than 7.1% growth recorded Current Account Deficit as % of GDP
in Q1 FY17 backed by strong performance in the farm sector 8.0%
and higher Government spending. 7.0% 6.8%
6.0%
The Current Account Deficit (CAD) narrowed to 0.6% of GDP in 5.0%
the second quarter of FY17 to US$3.4 billion on account of 4.0%
lower trade deficit. This is lower than the CAD of 1.7% of GDP 3.0% 3.8%
1.7%
in the same quarter last year. CAD is expected to be between 1- 2.0% 2.2%
0.6%
1.0%
1.5% of the GDP in the current fiscal 0.0%
Exports have grown in each of the last three quarters after Jun-2011

Jun-2012

Jun-2013

Jun-2014

Jun-2015

Jun-2016
Dec-2011
Mar-2011

Dec-2012
Mar-2012

Dec-2013
Mar-2013

Dec-2014
Mar-2014

Dec-2015
Mar-2015
Sept-2011

Sept-2012

Sept-2013

Sept-2014

Sept-2015

Sept-2016
falling for 5 consecutive quarters between Q2-15 and Q3-16

Sources : CMIE 8
 Economic fundamentals
Index of industrial production ( %y-o-y change) Y-o-Y Inflation
15.0%
12.00% 7.2%
11.5%
10.00% 9.87% 10.0%
8.00%
5.0% 7.6% 6.4%
6.00% 5.71% 3.3%
4.00% 0.0%
2.00% 3.39%
0.00% -5.0%
-5.1%
-2.00%
-3.37% -10.0%
-4.00%

Jul-12

Jul-13

Jul-14

Jul-15

Jul-16
May-12

Nov-12

May-13

Nov-13

May-14

Nov-14

May-15

Nov-15

May-16

Nov-16
Jan-12
Mar-12

Sep-12

Jan-13
Mar-13

Sep-13

Jan-14
Mar-14

Sep-14

Jan-15
Mar-15

Sep-15

Jan-16
Mar-16

Sep-16
0.97%
-6.00%
Jul-12

Jul-13

Jul-14

Jul-15

Jul-16
Apr-12

Apr-13

Apr-14

Apr-15

Apr-16
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16
Oct-12

Oct-13

Oct-14

Oct-15

Oct-16
CPI growth WPI growth

Industrial activity, as measured by the Index of Industrial Production (IIP), rose by 5.71% in November
2016 from 1.9% drop in October 2016
The increase is important especially since industrial activity was expected to drop post
demonetisation
Retail inflation in December, benefited from a sharp decline in vegetable prices and the possible
adverse impact of the note ban on the bargaining power of producers of perishables

9
 Economic fundamentals
Indian Consumer Statistics Urban Consumer Statistics
110
105 101.2
104.9
105 100.9
103.3 103.4
103.4 100 100.2
103.3 99.6
100 97.7 100.6 92.3
96.5
96.5 100.9 95 99.2
95
94.6 96.0 92.4
95.1 92.5
90 90
Jul-16
Apr-16

May-16

Jun-16

Nov-16
Jan-16

Feb-16

Mar-16

Jan-17
Aug-16

Sep-16

Dec-16
Oct-16

Jul-16
Jun-16
May-16
Apr-16

Nov-16

Dec-16
Jan-16

Aug-16
Feb-16

Mar-16

Sep-16

Jan-17
Oct-16
Consumer Sentiments Consumer Expectations Current Economic Conditions Consumer Sentiments Consumer Expectations Current Economic Conditions

Consumer sentiments at the all-India level were down 0.18%

Rural Consumer Statistics
at 95.25. This can be attributed to a 0.3% fall in the index of 110
consumer expectations to 95.95. Meanwhile, the index of 106.9
105.0 108.9
current economic conditions was steady at 94.14. 105 105.0 96.5
Sentiments were stable across regions. In urban India,
100
consumer sentiments index and its constituents- the index of 103.8
105.0
current economic conditions and the index of consumer 95 94.9
expectations were steady at 91.86, 91.63 and 92.01, 91.3
respectively. 90
Rural consumer sentiments index and its constituents i.e. the

Jul-16
Apr-16

May-16

Jun-16

Nov-16
Jan-16

Feb-16

Mar-16

Aug-16

Sep-16

Dec-16

Jan-17
Oct-16
index of current economic conditions and the index of
consumer expectations stood unchanged at 97.45, 95.31 and Consumer Sentiments Consumer Expectations Current Economic Conditions
98.81, respectively

10
 Economic fundamentals
Unemployment Rate
14
11.7 12.5
12 10.8 11.2
10.0 10.5 10.2 10.3
9.6 9.8 9.8
10 9.3 9.1 8.8 9.2 9.1
8.7 8.4 8.2 8.4 8.7 8.9 8.2
8.1 8.0 7.4 7.6 7.6 7.7
8 7.2 7.2
6.6 6.2 6.8 5.5 6.0 6.0
6 5.2 5.1

4
2
0
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17

India Urban Rural

The Unemployment Rate in India remained unchanged in January 2017 compared to the previous month. It has fallen
by 11.4% on m-o-m basis in December 2016, while it rose in November 2016 by 3%. Unemployment rate has fallen by
41.1% since hitting a high in May-16
Unemployment rate has decreased each month since August 2016

11
 Economic fundamentals
Exchange Rate 10 Year Government Bond Yield
110.0 10.0%
100.0 9.5% 9.11%
90.0 9.0%
80.0 8.5%
8.0% 8.33%
70.0
7.5%
60.0 7.0%
50.0 6.5%
40.0 6.0%
Jun-2011

Jun-2012

Jun-2013

Jun-2014

Jun-2015

Jun-2016
Dec-2011
Mar-2011

Dec-2012
Mar-2012

Dec-2013
Mar-2013

Dec-2014
Mar-2014

Dec-2015
Mar-2015
Sept-2011

Sept-2012

Sept-2013

Sept-2014

Sept-2015

Sept-2016
Dec-16
5.5% 6.64%
5.0%

Jun-2011

Jun-2012

Jun-2013

Jun-2014

Jun-2015

Jun-2016
Dec-2011
Mar-2011

Dec-2012
Mar-2012

Dec-2013
Mar-2013

Dec-2014
Mar-2014

Dec-2015
Mar-2015
Sept-2011

Sept-2012

Sept-2013

Sept-2014

Sept-2015

Sept-2016
Dec-16
Rupees per US dollar Rupees per Pound Sterling
Rupees per Euro Rupees per 100 Japanese Yen

Indian Rupee depreciated 0.5% against the US Dollar,

while it appreciated 0.9% against the Pound, 2.8% on
Government Securities with RBI
the Euro and 6.9% against the Japanese Yen on a
Total worth of Notes RBI can offer as of Rs. 7 lakh MoM basis in December 2016. The Rupee has
November 22, 2016 Crore depreciated by 7% against the Yen on a yearly basis
Worth of Notes offered as of November 22, Rs. 4.3 Lakh The bond yield fell by 7.4% in the third quarter of
2016 Crore 2016 on a QoQ basis. The yield is the lowest since Q1
Worth of Notes left with RBI as of Rs. 2.7 Lakh 2011
As per RBI, the claims of RBI on Government are
November 22, 2016 Crore
Rs.6,370 billion
Source: Economic Times\Bond Shortage at RBI

12
Economic fundamentals
Foreign Exchange Reserve
390.0 15.0%
13.7% 372.00
370.0 360.30
10.0%

%Y-o-Y change
350.0
US$ Billion

330.0 5.0%
-8.2%
310.0 0.0%
290.0 276.3
-5.0%
270.0

250.0 -10.0%

Dec-16
Sept-2012

Dec-2012

Sept-2013

Dec-2013

Sept-2014

Dec-2014

Sept-2015

Dec-2015

Sept-2016
Mar-2011

Jun-2012

Mar-2012

Jun-2013

Mar-2013

Jun-2014

Mar-2014

Jun-2015

Mar-2015

Jun-2016
Total foreign exchange reserves YoY growth

The foreign exchange reserves has reduced by 3.1% in December 2016 (US$ 11.7 billion)
on Q-o-Q basis but has increased by 2.3% on Y-o-Y basis

13
 Economic fundamentals
General government gross debt(% of GDP)* Expected Reduction in general government
90.0 debt (% of GDP) 2009-2019(E)*
100%
80.0
80%
2009 2019E
70.0
78.7 60%
60.0
66.1
50.0 40%
59.3
40.0 20%
30.0 0%

South
Egypt
Brazil

Malaysia

Turkey

Philippines
Hungary

Morocco

Mexico

Colombia

Indonesia

Chile
India

China

Thailand
Poland

Korea

Russia
Peru
Argentina

Taiwan
20.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
2015E
2016E
2017E
2018E
2019E
2020E
As per the IMFs October 2015 survey Indias government gross debt as a percentage of GDP is expected to
consistently fall from 78.7% in 2001 to an estimated level of 59.3% in 2020 which implies prudent fiscal discipline
by the government.
A look at the change in general government debt as a percentage of GDP for various Emerging Market (EM)
economies indicate that India is expected to reduce this number by 12% on an absolute basis by 2019 as compared
to 2009; which is only second to Philippines which is expected to reduce it by 15.6% by 2019.

Source: *IMF World Economic Outlook, October 2015 14

**CMIE
 Economic fundamentals
Top 10 Sectors FDI INFLOWS (Amount in Rs. Cr.)
Net FDI inflow in US$ billion
FY16 FY17-Apr-Sep
Services Sector 45,415 35,368 60.0
55.6
Computer Software & Hardware 38,351 6,903 50.0 46.6 45.2 43.2
Trading 25,244 9,936
Automobile Industry 16,437 4,865 40.0 34.3 36.0
Chemicals (Other Than Fertilizers) 9,664 3,561
30.0
Hotel & Tourism 8,761 3,497
Telecommunications 8,637 18,659 20.0
Power 5,662 3,744
Drugs & Pharmaceuticals 4,975 4,270 10.0

Construction Development 727 414 -

FY12 FY13 FY14 FY15 FY16 FY17

Net FDI inflow %y-o-y

As per the data released by Organization for
Economic Co-operation and Development (OECD), 60
37.74
29.49
FDI flows have slowed to most emerging markets 40
15.91 20.31
including India this year 20
2.96
0
The recent trend in India has been broadly in line
-20 -7.85-6.80 -8.78
with other major emerging market economies, which -22.44 -20.67
-11.55
-40 -26.54
have witnessed a visible slowdown in their FDI -43.22
-60 -45.41
inflows -57.39
-80
The total FDI announced in greenfield projects since China Indonesia India Russia Brazil
May 2014 is close to US$ 138 billion compared to 2014 2015 H1'2016 (Jan-June)
US$177 billion between 2009-2014
Sources : CMIE 15
**Total FDI, Department of Industrial Policy and Promotion (http://dipp.nic.in/English/Publications/FDI_Statistics/FDI_Statistics.aspx), Data till November 2016 for FY17
Financial Times, India tops global FDI league for the second year running
 Economic fundamentals
TOP 10 Countries - FDI INFLOWS (Amount in USD Million) Top 10 States FDI INFLOWS (Amount in Rs. Cr.)
FY16 FY17-Apr-Sep FY16 FY17-Apr-Sep
Mauritius 8,355 5,850 Maharashtra 62,731 68,409
Singapore 13,692 4,680 Delhi - NCR 83,288 23,415
U.K 898 964 Tamil Nadu 29,781 4,136
Japan 2,614 2,795 Karnataka 26,791 7,216
U.S.A 4,192 1,437 Gujarat 14,667 2,462
Netherlands 2,643 1,615 Andhra Pradesh - Telangana 10,315 7,204
Germany 986 588 West Bengal 6,220 208
Cyprus 508 381 Kerala 589 2,199
France 598 183 Rajasthan 332 753
UAE 985 355 Punjab & Himachal Pradesh 177 39

With the government focusing on enhancing services exports and relaxing norms in the
sector, Foreign Direct Investment (FDI) inflows into the service sector has seen a jump by
over two and a half times to US$ 5.28 billion in the April-September period of the current
fiscal
The government has taken several measures such as fixing timeliness for approvals and
streamlining procedures to improve ease of doing business in the country
A strong inflow of foreign investments would help improve the countrys balance of
payments situation and strengthen the rupee value against other global currencies,
especially the US dollar
16
 Market fundamentals
Close PE Ratios
S&P BSE Sensex Activity Turnover (Rs. Cr.)
35,000 24
22 22.5 21.19 100000
22
30,000 29,182.95 90000 92,122
20 64,764
80000

PE Ratio
25,000 18 69,858
27,655.96 70000
20,000 16
60000
14
15,000 50000
17,823.40 12
40000
10,000 10 34,852
30000
Jul-13

Mar-15
Jun-11

Jun-16
Apr-12

May-14
Nov-11

Sep-12

Feb-13

Dec-13

Aug-15

Nov-16
Jan-11

Jan-16
Oct-14

FII (foreign institutional investors) net inflows into equity

markets stood at Rs. 16,301 Cr. so far in FY16-17 compared to S&P BSE Major Indices Performance
a net outflow of Rs. 35,005 Cr in the debt segment.
200
Domestic inflows into equities were quite strong, largely 180
driven by continued robust savings by retail investors in 160
140
equities through mutual funds. 120
The PE for the Sensex has come down from 22.1 in Aug-15 to 100
80
around 21.2 in Jan-17. As per some experts the valuations of 60
Indian companies at this level is pretty attractive specially 40
when compared to a PE value of 23.6 registered in Jan-11
Bankex has given better returns as compared to oil and real
estate indices indicating some weakness in these physical BSE Sensex BSE Oil & Gas BSE Realty BSE Bankex
assets

Sources :BSE website 17

 Market Fundamentals
Sensex Vs other major global indices 170
Sensex Vs. Asian Indices
210
190 150
170
130
150
130 110
110 90
90
70 70
50 50
May-11

May-12

May-13

May-14

May-15

May-16
Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16
Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

May-11

May-12

May-13

May-14

May-15

May-16
Jan-11

Sep-11
Jan-12

Sep-12
Jan-13

Sep-13
Jan-14

Sep-14
Jan-15

Sep-15
Jan-16

Sep-16
Jan-17
Sensex HangSeng Nikkei 225 FTSE 100 S&P 500 Index Sensex Bursa Malaysia SET -Thailand KOSPI-Korea

Sensex Vs Brics
200
Stock markets underperformed DMs and EMs
150 by 5% and 8% in dollar terms in 2016
BOVESPA of Brazil has risen by 49.2% in the
100 last one year compared to 12.5% for S&P BSE
Sensex. The average YoY growth for major
50
BRICS indices is 16.5%
May-11

May-12

May-13

May-14

May-15

May-16
Jan-11

Sep-11
Jan-12

Sep-12
Jan-13

Sep-13
Jan-14

Sep-14
Jan-15

Sep-15
Jan-16

Sep-16
Jan-17

Brazil Bovespa Russia (MICEX)

India (Sensex) China (Shanghai Composite Index)
South Africa (Jalsh)

18
 Indian Demographics (1 of 2)
Literacy rates Demographic dividend
Male Female % of dependent population % of working age population
70.0%
60.5%
55.7% 57.1%
64.6% 2011 80.9% 60.0%
50.0% 44.3% 42.9%
53.7% 2001 75.3% 39.5%
40.0%
39.39% 1991 64.1% 30.0%
20.0%
24.8% 1981 46.9%
10.0%
18.7% 1971 39.5% 0.0%
1991 2001 2011

Indias overall literacy rates increased from 64.8% as per the

2001 census to 73.0% in the 2011 census. Female literacy GDP per capita (in US$) and GDP growth rate**
rates increased by 10.9% compared to 5.6% for males in the
2600 12.0%
latest census. 2400
10.0%
With an increase in the population the proportion of working 2200
2000
age population (15-60 years) increased to 60.5% which makes 1800
8.0%

India one of the youngest nations in the world with a median 1600 6.0%
age of 27.3 years. It also makes India home to the largest youth 1400
4.0%
1200
population in the world*** 1000 2.0%
800
Indias GDP per capita is expected to grow at a CAGR of 5.7% 600 0.0%
during 2010-2020. A healthy GDP growth rate is expected to
bring a large section of Indias population above the poverty
line

*Sources CMIE 19
**IMF
***United Nations
 Indian Demographics (2 of 2)
Age Dependency ratio Age Dependency ratio global comparison
Age Dependency ratio Young Age Dependency ratio Old Age dependency ratio, old Age dependency ratio, young
50
Age Dependency ratio total
60.0%
56.3% 55.5% 54.7% 53.9% 53.1% 40
50.0%
30
40.0%
30.0% 20

8.4%
8.3%
8.2%
8.1%
8.0%

20.0% 10
48.3%

47.4%

46.5%

45.6%

44.7%
10.0% 0
0.0%
2010 2011 2012 2013 2014

Indian Workforce participation ratio

Indias Dependency ratio has been falling consistently since
female WPR male WPR
2010 and by 2050 this ratio is expected to fall below 50%
60
India has the second best young age dependency ratio
compared to major global economies and as per a UN report 50 57
52.61 52.62 53.3
51.61 51.68
India has the largest youth population in the world which can 40
act as a major boost to the economy as the labour market 30
expands 20
25.9 25.6 25.5
Over the years the female workforce participation has seen an 19.7 22.3
10
increase, however it is still lower than desired levels. Current 0
12.1
efforts of the government like Skill India and increased 1961 1971 1981 1991 2001 2011
expenditure on education is expected to boost this ratio

*Sources World Bank 20

Global
 Growth Prospects
Global growth again fell short of GDP (% Change)
expectations in 2015
9.0%
Decelerated to 3.1% from 3.4% in 2014.
Disappointing performance mainly 8.0%
reflected a continued growth
7.0%
deceleration in growing economies
Global growth is projected to edge up in 6.0%
the coming years, but at a slower pace
5.0%
than envisioned due to:
o Continued gains in major high- 4.0%
income countries
3.0%
o Gradual tightening of financing
conditions 2.0%
o stabilization of commodity prices
1.0%
o Gradual rebalancing in India &
China 0.0%
World European Emerging Developing China India United
Union markets Asia States

2013 2014 2015e 2016p 2017p 2018p

Growth to be Propelled by Emerging Markets led by India & China

Source: IMF, UN 22
 BRICS comparison
India vs major developing economies GDP growth

2013 2014 2015 2016F 2017F 2108F

Among the BRICS nations, India has the 10.0%
highest GDP growth rate projection
China is heading for a new normal
8.0%
growth rate which is significantly lower
than those recorded in the past two
decades 6.0%

Due to a steep fall in oil prices and

economic sanctions, Russian economy is 4.0%
facing challenges to revive growth
Brazil suffering from Stagflation and
2.0%
negative growth rate
South Africa is on the brink of recession
and is battling stagflation and is facing 0.0%
India China Russia Brazil South Africa
sub-2% growth in 2015
-2.0%

-4.0%

Source: World Bank

 Commodities Outlook
Emerging market economies have been the main sources of commodity demand growth since 2000, as a result,
slower than expected growth prospects in these economies are weighing on commodity prices
Further slowdown in major emerging markets would reduce trading partner growth and global commodity demand
Gradual recovery in oil prices is expected over the course of the year, for several reasons
Beyond oil markets, all main commodity price indices are expected to fall in 2016 due to persistently large supplies,
and in the case of industrial commodities, slowing demand in emerging market economies

Crude Oil Prices (US$) IMF Global Commodity Price Index

120.0 190.0

100.0 170.0

150.0
80.0
130.0
60.0
110.0
40.0
90.0
20.0 70.0

0.0 50.0
2013 2014 2015e 2016p 2017p 2018p 2013 2014 2015e 2016p 2017p 2018p

World Bank Lowers 2016 Forecasts for their Global Commodity Prices ( Including Oil)
Source: IMF, UN, World Bank 24
 Key Growth Indicators
Inflation (% Change)
2013 2014 2015e 2016p 2017p 2018p Core inflation has remained broadly stable well below inflation
12.0% objectives. In many emerging market economies, notably those
10.0% with weak domestic demand, headline inflation has declined
8.0% There is a large scope for investments particularly in agricultural
6.0%
sector as capital formation is one of the cornerstones for the
economic development in a country
4.0%
Pace of fiscal consolidation needs to strike an appropriate balance
2.0% between debt reduction and imposing a drag on economic activity
0.0%
World European Emerging Developing China India United
Union markets Asia States

Total Investment (% of GDP) Gross Debt (% of GDP)

2013 2014 2015e 2016p 2017p 2018p 2013 2014 2015e 2016p 2017p 2018p
50.0% 120.0%

40.0% 100.0%

80.0%
30.0%
60.0%
20.0%
40.0%
10.0%
20.0%

0.0% 0.0%
World European Emerging Developing China India United European Emerging Developing China India United States
Union markets Asia States Union markets Asia

Growth to be led by Moderate Inflation, Increased Infrastructure Investments and Efficient Debt Management
Source: IMF, UN, World Bank 25
 Increasing Share in World GDP
Estimated % Share in world GDP (PPP), 2015* Indias share in world GDP (PPP current USD)*
9.0
China
Other 8.0
17.2
developing 7.0
8.2
countries 33.2 6.0
7.1 India 5.0 6.2
4.0
3.0
4.4
2.0
1.0
Developed
42.4 0.0
economies

2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012E
2013E
2014E
2015E
2016E
2017E
2018E
2019E
Currently within the emerging markets Indias share of global Relative GDP at MERs and PPPs in 2050 in US$**
GDP in PPP terms is only next to that of China with a 7.1%
share in 2015. With China slowing down, this share is expected
to increase
As per the IMFs October 2015 survey Indias share in world
GDP in PPP terms is expected to rise continuously from 4.4% in
2001 to approximately 8.2% by 2019. This estimate reiterates
the growth story of India.
India is expected to be the second largest economy in the world
by 2050 measured in terms of PPP just behind China and
surpassing USA. It is expected to be a US$42 trillion economy
by 2050.

Source: *IMF World Economic Outlook, October 2015 26

**The World in 2050 Will the shift in global economic power continue?, February 2015 (PwC Analysis)
 China: Great Dilemma
Quality of GDP Data:
Overexposure to Future growth
Many China observers believe the U.S. dollar cannot rely on debt
that local province officials and investment
systematically exaggerate alone
growth to secure promotions
High Over-
Stock market Crash of 2015:
Capital reliance on
The Chinese market fell by Outflows Investment
30% in three weeks between
June-July 2015 reflecting the
uncertainty of the Chinese High Rate
economy
of Export
Restriction on capital Corporate Orientated
outflows: Loan Economy
Tax cuts to
Default Slowing global
China has introduced
regulations in 2015 to restrict reduce company growth will make it
investments in overseas stock liabilities difficult to continue
markets and limit banks with the current
foreign exchange operations model
to restrict capital outflows

27
Major Global-Economic Issues

Negative
Interest
Rates

Geopolitical US Fed Rate

Issues Hike

Increase in Slowdown
Protectionism in China

Weak
Economic
Recovery

28
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