10 August 2020

10 August 2020

Asia-Pacific Equity Strategy

India Strategy: Are we on the cusp of a multi-year bull cycle - Is
year FY21 = FY03?

Venugopal Garre India has not seen a sustained positive macro cycle for over 10 years. From the death of the
+65-6230-4651 previous strong macro upcycle in India from FY04-FY10, equity investors are patiently
venugopal.garre@bernstein.com
waiting for the next one, but the cycle has stayed elusive. With macro back to historic lows –
Ranjeet Jaiswal seen in the FY01-FY03 phase – the debate on the potential for the next large cycle has
+91-22-6842-1442 commenced. Similarities of the current situation with that in FY03 is being cited as a reason
ranjeet.jaiswal@bernstein.com for this discussion. We throw in our thoughts on this debate.
Ankit Agrawal The similarities: Start with the fact that everything is weak now. Macro was weak for several
+91-22-6842-1441 years (starting FY97), banking NPA was high, real estate was in a downturn. Rural economy
ankit.agrawal@bernstein.com
which was weak due to monsoons trending down from 1999-2002 improved from 2003.
Interest rates and inflation had moderated, and several important reforms were announced.
The post 2003 script: After the 1991 liberalization, India went through a phase of capacity
creation in various Industries but there were significant constraints in Infra, which was
addressed from the late 90s as infra was opened for private investments. Supply shortages
in various other end markets were addressed through reforms, helping trigger an increase
in investment rates as demand increased. A global recovery, resurgence in service exports
(penetration led) and ability to push commodity exports were other support factors.
Consumer savings rate was high, consumer leverage and leverage in general was stepped
up, while increasing land prices helped in wealth transfer to a broader economy. Inflation
returned but was managed due to high-income growth. It was the convergence of several
factors that helped fuel a long macro upcycle which ended post the global financial crisis.
Why we believe easy gains of 2003 may not repeat: One of the largest challenges is that
execution on reforms is weak, diluting the impact of several decisions. With lower returns,
limited access to resources, private sector is not keen to participate in Infra and the easier
Infra catch-up build is already behind. Smart cities, mass transport systems are new scripts,
but execution is weak and volatile. Inability to scale-up manufacturing and focus of Indian
companies on traditional products makes it difficult for exports to scale-up meaningfully.
New script - Manufacturing, Agriculture, New economy and Mean reversion: Every cycle has
a new script and mean reversion in some end markets. Following aspects are discussed 1)
low interest rates can fuel asset purchases – mean reversion in Real Estate, 2) Make in India
focus can drive easy gains (in several end markets) but in low value added assembly jobs, 3)
New economy end markets are seeing investments which will accelerate unorganized to
organized shift, create jobs at the bottom of the pyramid but also disrupt the unorganized
players, 4) Agri focus (APMC reform) and push for increase in rural incomes is good if
executed well and a redistribution of Agri incomes will help lift pressure on Govt balance
sheet, but focus on irrigation is more important.
In our view, the new scripts are interesting, can help create some jobs, but are not game
changers – we expect a rebound in macro in 2HFY21/ FY22 but currently see less room for a
multiyear bull macro cycle.

Analyst Page Bernstein Events Industry Page

See Disclosure Appendix of this report for important disclosures and analyst certifications www.bernsteinresearch.com
Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

DETAILS
Macro cycles are tough to predict – more so because cycles never announce their entry, it has to be inferred through an
assessment of the state of macro, sustainability of recoveries which often shape up and last for short periods, relevance of
reforms and execution capabilities. When a number of positive factors converge, a cycle emerges and sustains itself. With
macro situation weak and back to the FY01-FY03 levels – the similarity is driving a view that we could be heading back into the
next large macro cycle. This debate is not on the near-term shape of the recovery – U or V does not matter; this is more on
whether GDP growth can inch up from current levels back to 7-8% levels and sustain there for several years. We present data
and our qualitative view, based on our interpretation of various macro data points.

#1: Macro was extremely weak in the 2001-2003 phase

GDP growth has completed a full cycle, where we are now back to FY01-03 levels. Macro was weak even before COVID
commenced, driven by the prolonged challenges in the financial sector, weak execution from the Government on various
initiatives and several distortions in the economy led by demonetization first and then the implementation of GST and then
central elections. COVID will push GDP to a negative growth in FY21 but there will be a catch up rebound in FY22 similar to that
seen in the post GFC phase.

EXHIBIT 1: GDP growth is back to 2000-2002 levels

25 10

20 8

15 6

10 4

5 2

- -
Mar-92
Mar-93

Mar-95
Mar-96

Mar-99
Mar-00

Mar-03
Mar-04

Mar-07
Mar-08

Mar-11
Mar-12

Mar-14
Mar-15

Mar-18
Mar-19
Mar-94

Mar-97
Mar-98

Mar-01
Mar-02

Mar-05
Mar-06

Mar-09
Mar-10

Mar-13

Mar-16
Mar-17

Mar-20

Nominal GDP YoY Real GDP YoY RHS

Source: RBI, Bernstein analysis

As almost every aspect of the economy is weak, there has been a slowing of growth in both capex and consumption. This was
the case in the FY01-03 phase as well, when capex and consumption weakness converged. This is usually bound to happen
when there are no growth drivers in the economy – how will income levels move up? how will wealth transfer happen through
asset inflation? These impacts eventually put pressure on Government balance sheets, as social spends dominate, reducing the
availability of funds for corporates.

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

EXHIBIT 2: Capex and consumption have both slowed and back to 2001-2003 levels

45

40

35

30

25

20

15

10

-5

-10
Mar-92
Mar-93
Mar-94
Mar-95
Mar-96
Mar-97
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Gross capital formation YoY Personal final consumption expenditure YoY

Source: RBI, Bernstein analysis

#2: Interest rates and inflation were at similar levels and supportive
Interest rates have seen a sharp moderation with policy rate bottoming at 4.5% in FY04 from 7-8% in FY00. Inflation was
broadly in check in the 4-6% range as demand side pressures were limited. This is the situation now as well with sharp cut in
policy rates from RBI and inflation is in a similar range as it was in that phase. Forex reserves are in surplus and there is adequate
liquidity in the financial system.

EXHIBIT 3: Interest rates back to historic lows EXHIBIT 4: Inflation has moderated but a tad higher
than the 2000-2003 levels.
9

16%
8
14%

7 12%

10%
6
8%

6%
5
4%
4 2%

0%
3
May-01
May-02
May-03
May-04
May-05
May-06
May-07
May-08
May-09
May-10
May-11
May-12
May-13
May-14
May-15
May-16
May-17
May-18
May-19
May-20
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20

Repo rate(%) Inflation rates

Source: RBI, Bernstein analysis Source: RBI, Bernstein analysis

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

#3: Banking sector NPA was high but improving

The state of the banking sector, government fiscal deficit, situation with various institutions such as state distribution companies
were similar. Non-performing assets were at similar levels although they were on a declining trend. Key sectors which were the
drivers for the high NPA in early 2000's were largely associated with priority sectors mainly Agriculture and small enterprises
due to weak rain fall from1999 to 2002. Rainfall started normalizing in 2003 – which reduced the stress in the farm sector.
While the current NPA increased led by both Infra and Industrial sectors.

EXHIBIT 5: NPA cycle in the last 20 years

Banks: Gross NPA, in %

15.7
14.4 14.7
12.7
11.4 11.2
10.4
9.3 9.3
8.8
7.2 7.5

5.2
3.8 4.3
3.3 3.1 3.2
2.5 2.2 2.2 2.4 2.4
Mar-97

Mar-99

Mar-01

Mar-03

Mar-05

Mar-07

Mar-09

Mar-11

Mar-13

Mar-15

Mar-17
Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

Mar-12

Mar-14

Mar-16

Mar-18

Sep-19
Source: RBI, Bernstein analysis

#4: Weak monsoons until FY03 impacted rural economy but that improved post that, but no one can predict this
Another aspect that has impacted the FY00-03 phase was the convergence of several years of below trend monsoons and that
impacted the rural sector. Monsoons have been patchy in the past few years and although this has been much better in 2019 as
well as now. This has ensured that one part of the economy is in much better shape than it was at that phase.
Government has an intent to increase rural incomes through APMC reforms – allowing farmers to sell in other than the
designated markets. That said – what is required is not APMC reforms – there must be more serious efforts at execution of
Irrigation projects. This would help reduce dependence on monsoons which is the primary source of volatility in farm incomes.
Irrigation has been the largest disappointments in India and we still don’t see this becoming a more relevant theme. APMC
reforms is more about redistribution of farm incomes – if there is no income in weak monsoon phases then this redistribution is
a less relevant theme in such a phase. This brings us to the important aspect – a sustained macro upturn is also dependent on
luck – as we have to pray that monsoons don’t disappoint. In the 2003-2007 phase monsoons in general were fine – can this
phase repeat again? No one knows.

ASIA-PACIFIC EQUITY STRATEGY BERNSTEIN 4

Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

EXHIBIT 6: Monsoons supported in the 2003-2007 phase

7
6 5.6
4
2 2 2 2

0
-1 -2
-3
-4 -5
-8 -8 -7
-9
-12
-14 -14

-19
-22
1997

2001

2002

2005

2006

2007

2010

2011

2015

2016

2019
1998

1999

2000

2003

2004

2008

2009

2012

2013

2014

2017

2018
Departure in Rainfall from LPA (%)

Source: IMD, Bernstein analysis, Note: 2003 denotes FY04

#5: Several reforms were announced in that phase as well as now

Merely announcing reforms does not help. Execution has to be intense and this has been disappointing. I can write 100 pages,
highlighting why execution is poor but the sake of brevity – let me highlight a few. Have you heard of DFC – execution has been
so slow and several years of delays have happened already. What about bullet train – an old story but we haven't been able to
award as yet. Andhra state decided to stall an under-construction city and now apparently has three cities - and this is not a pro
capex event – there is no capex now. Maharashtra decided to stall some projects – which were under construction for a scrutiny
last year. In power sector – Government spent energies on importing LED chips from China – and called this as an achievement
– the main reform state discom restructuring failed – Yes, Uday scheme failed. Government had to again fund state discoms –
there is no future for these discoms, in our view. We can go on – but our key message is that reforms on paper are less relevant
unless they are executed. There were a few sectors such as Roads/Rail – which executed well for a few years, but that story has
also slowed now.
Let's now compare reforms across these two time periods. Reforms were the backbone for the recovery in India at that time –
some landmark reforms were announced across power sectors, oil and gas, roads, airports, telecom. The delicensing of power
was a key driver and in addition it was easier to get access to resources – Coal, land etc. In some way, a high ROE triggered a
rush of fund flows and this helped raise investment rates. This also helped in lifting exports – in a generally conducive trade
environment. IT also went through phase 2 of recovery after the challenges post the dot com bust. Efficiency in the economy
also increased with mobile penetration increasing.

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

EXHIBIT 7: Reforms undertaken in 1999-2004

Sector Reforms Year Comments

Paved the way for setting up of

Power Power Delicensing 2003 CPP plants & private sector entry
into the sector

Roads Commencement of NELP rounds 1999 Increased investments in E&P

Multi decade investments in Roads

Roads Commencement of NHAI Golden quadrilateral 1999
and Highways commenced

Roads NHAI made as regulator for Roads 1999

Roads Introduced private sector BOT template for Roads 1999

Bailout of state utilities under one time settlement State discoms started with cleaner
Power 2001
scheme, Unbundling of sector balance sheets

APRDP scheme announced to help reduce AT&C

Power 2001
losses and improve state discom financials

Power CERC - Regulator for power sector set up 1999

This was rolled back eventually -

Oil & Gas Partial deregulation of Petrol/Diesel in April 2002 2002
and reinstated in 2014

Significant scale up in refining

Refinery sector delicensed and allowed to Import
Oil & Gas 2002 capacity - India became an
crude
exporter of crude

Privatisation of Delhi/Mumbai Airports, New

Airports 2000 Completed successfully in 2006
Airports , Hyderabad and Bangalore

New telecom policy announced (shift to revenue Significant development of private

Telecom 1999
share model) telecom sector

Government's monopoly on International data and Significant development of private

Telecom 1999
voice traffic removed telecom sector

First Defence procurement policy announced

Defence 2003 No progress even in 2020
(DPP1)

Source: Government of India, Bernstein analysis

Current phase of reforms is different

The only main reform in this phase is GST – although it has not helped in increasing the tax base. Infra oriented reforms were not
executed well, and it failed to increase flows from private sector. Make in India failed to deliver. What is happening now is that
there are renewed attempts at scaling manufacturing (labor law tweaks, likely license for imports, import duty increases etc.).
these are early days, but this could help bring in low end assembly jobs in several end markets – consumer electronics/white
goods etc. It may stop at this point, as India is not looking much into the future by not creating its own companies. Take the case
of Defence where an increase in FDI (Foreign direct investment) limit is meant to help foreign companies- who will never be

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

relevant exporters, It will create some jobs in India. Companies with capabilities in India are being ignored. We believe the nature
of reforms do not appear as game changers – but it’s a moving space as we need to keep watching for tweaks to reforms or
new ones.

EXHIBIT 8: Reforms done in 2014 -2020

Sector Reforms Year Comments

New scheme to reform utilities (Uday) announced

Power State utility reforms 2014
and implemented

Failed to follow up on initial focus on auctions.

Power Coal auctions commenced
Policy focus on renewables increased -
Power
Target set at 175 GW by 2022
Power Focus on efficiency - EESL was set up
2014
Coal supply remains a constraint
Renewable capacity increased to 24GW
2014
(Capacity as on Nov 18)
Sharp increase in LED volumes. Perhaps the only
2015/16
positive step in power sector

Reduced returns for regulated utilities in Reduced the returns for regulated utilities.
Power 2014/18
2014 Marginal moderation in 2018

Macro GST 2017 Structural reforms - Not much for capex

Driving potential consolidation through asset sales
Macro Bankruptcy law 2017
- may take 2-3 years for asset sales
Roads Hybrid annuity models for Roads/Water 2015/16 Benefits have already accrued
Oil & Gas Deregulation of Diesel prices 2014

Manu- Make in India program launched (Import Managed to push low end assembly for electronic
2015
facturing substitution) products - after increasing import duties

Defence DPP policies tweaked 2016 Limited/No progress in Private participation

Water River cleaning programs announced 2014 Limited progress - some orders awarded
Smart cities 100 smart cities announced 2015 Progress (investments in only a few)
Rural
Implementation of toilets in rural areas 2014 Significant progress made
sanitation

Real Mass housing program launched, 20mn

2014 Limited progress
Estate new houses by FY22

The ones chosen for O&M and development

through PPP model are Lucknow, Ahmedabad,
Airport Privatisation of Airports 2018
Jaipur, Mangaluru, Thiruvananthapuram, and
Guwahati.
Government has prepared the plan and yet to
release the official draft for public comment.
Chemicals National Chemical Policy 2019
Vision is to increase the share of GDP from 2% to
6% of GDP

A total of $6.7bn allocated in 3 government

Consumer Incentivising manufacturing of Consumer schemes to incentivise electronics and
2020
Electronics electronics component manufacturing exports and production
in the country.

A new law to be formulated to provide more

Abolition of APMC act and new central law
Agriculture
for marketing of Agri produce
choices to farmers to sell their produce at better
2020 prices. The law will facilitate free inter-state trade
and establish a framework for e-trading of
agriculture produce

A total of 44 central labour laws to be subsumed

into 4 codes for simplification and rationalisation
Macro Labour laws 2020
of relevant provision - making labour laws more
business friendly.

Source: Government of India, Bernstein analysis

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

#6: Household savings rate was high and consumer leverage increased
Household savings was higher at 25% levels in FY02 vs at 18% of GDP levels now helping provide a sufficient buffer for growth

EXHIBIT 9: Household Savings rate

30

25

20

15

10
Mar-97

Mar-98

Mar-01

Mar-02

Mar-06

Mar-07

Mar-10

Mar-11

Mar-15

Mar-16

Mar-19
Mar-95

Mar-96

Mar-99

Mar-00

Mar-03

Mar-04

Mar-05

Mar-08

Mar-09

Mar-12

Mar-13

Mar-14

Mar-17

Mar-18
Household savings rate(%)

Source: RBI, Bernstein analysis

Higher savings in FY02 ensured that household leverage remained low in FY02 (3% of GDP) which has now been increased to
10% of GDP. There are several end markets where leverage has increased – from Autos to consumer durables and unsecured
loans etc. A further consumer leverage is not a solution to drive economic growth – it is more about the nature of jobs India
manages to create, as that dictates the shape of the consumer pyramid – which will influence demand patterns.

EXHIBIT 10: Consumer leverage during FY02 was low as compared to current levels

Household debt as % of GDP(%)

12

10

0
CY 98

CY 01

CY 03

CY 06

CY 08

CY 10

CY 13

CY 15

CY 18
CY 99

CY 00

CY 02

CY 04

CY 05

CY 07

CY 09

CY 11

CY 12

CY 14

CY 16

CY 17

CY 19

Household debt as % of GDP(%)

Source: CEIC, Bernstein analysis

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

Penetration of key consumer products were much lower at that phase and several end markets including Autos (2Ws) have seen
a sharp catch up. Discretionary can still be a driver but pace of growth is also dependent on growth in GDP per capita.

EXHIBIT 11: Penetration in key consumer products and slower GDP growth provide little room for further upside

2,014

76.7
60.1
42.8
37.3 762
31.0 30.4
15.5 14.0 16.5
10.3 9.3 9.5
5.8 2.4 5.6 2.3 6.3 3.3

Motorcycle

Passenger Car
Microwave Oven

Refrigerator
Colour TV Set

Cooker
Air Conditioner

Washing Machine

GDP per Capita ( USD)

Freezer

Penetration (%) in FY01 Penetartion(%) in FY18

Source: Euromonitor, Bernstein analysis

#7: Global environment was conducive

Export growth in merchandise started picking up in FY03 mainly led by export of fuel products and Iron & Steel products. It is
not that easy now to become large exporters – given that some countries such as Bangladesh/Vietnam has taken over in
several end markets as relevant exporters. We do not see much of a theme in refined products exports and our Make in India
initiatives are largely low-end assembly jobs in businesses set up by foreign companies- who will not export.

EXHIBIT 12: Exports growth started picking up from 2001-2002- we do not see this as a major driver now.

70%

60%

50%

40%

30%

20%

10%

0%

-10%

-20%

-30%
2002

2003

2004

2005

2006

2007

2008

2017

2018

2019
1998

1999

2000

2001

2009

2010

2011

2012

2013

2014

2015

2016

Growth in goods exports Growth in services exports

Source: WTO, Bernstein analysis

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Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com 10 August 2020

WHY WE EXPECT A MACRO REBOUND BUT NOT A MULTIYEAR BULL CYCLE

 Our summary view is that, a lot of the new scripts are interesting but mostly driving job creation at the bottom of the
pyramid. The scale of impact on the economy is not as high, as was seen in the FY04-FY10 phase, as that time the catch up
was of a tremendous scale, after years of limited investment. India is not building capabilities but only inviting foreign
companies to set up bases and provide jobs to the population, a good initiative but less impactful because these foreign
vendors will not be large exporters, hence by not allowing Indian companies to build capabilities, India is ensuring that there
is low possibility of it benefitting from exports in the long term. We also observe that the nature of capex required in these
manufacturing facilities is low – these are buildings with tables and basic tooling (which are also imported)
 New economy to a large extent is now dominated by foreign companies – India again missed the opportunity here. Now the
new economy gains for India is not about creation of a large sector but will stem from the efficiency it can deliver to the
foreign corporates and value it can deliver to consumers through an enhancement of efficiency across the supply chains.
These gains are important but not large enough to become drivers of a cycle.
 In Agriculture, the most important aspect is to reduce dependency on monsoons and not about where farmers can sell. It is
a relevant initiative, but the priority should be on certainty of crop output and for this, irrigation spread must increase. In
irrigation, it is not about allocation of funds but its execution of projects which is more important.
 Real estate is a cycle which can reappear. But we do not see a large price led value growth, as consumer incomes have not
scaled up much in the recent years. However, leverage led growth is possible in a positive sentiment phase
 Investments in Infra are dependent on Government. Private sector barring a few companies have low interest. Its proven to
be a risky area for investments and companies that invested in the past cycle are yet to unwind past mistakes.
 Consumer spends can be a support – but consumer spends will have to be enhanced only through leverage – if jobs are
being created at the bottom of the pyramid, the alteration of the income pyramid may make the gains from manufacturing
as less relevant for consumption spends. There are several end markets where India has seen a scale up in penetration,
2Ws for example and this was different in early 2000's when there was significant room for scale up. For the next decade,
we do expect a scale up in consumer durables – in specific categories within the constraints of a slow pace of growth in
per capita incomes and concentration of wealth at the top.
While we expect macro to revive on a low base in FY22, we are still not a believer of a multiyear strong macro cycle which had
emerged from FY04. The sins of the past decade will take more time to unwind, in our view.

ASIA-PACIFIC EQUITY STRATEGY BERNSTEIN 10

ASIA-PACIFIC EQUITY STRATEGY

Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com

EXHIBIT 13: How various economic indicators have fared in the past 25 years
Parameters FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Industry Indicators ( YoY Growth(%) for all except PMI indicator)

Factory Output- IIP 6.0 6.7 4.0 6.6 5.0 2.7 5.7 7.0 11.7 8.6 12.9 15.5 2.5 5.3 8.2 2.9 1.1 3.3 4.0 3.4 4.6 4.4 3.8 -0.8
Consumer durable 4.6 7.8 5.6 14.1 14.5 11.5 -6.3 11.6 21.5 16.2 25.3 33.1 11.1 17.0 14.2 2.6 2.0 5.6 4.0 3.4 2.9 0.8 5.5 -8.7
Consumer non-durable 6.6 4.8 1.2 3.2 5.8 4.1 12.0 5.8 12.0 8.6 12.2 10.2 -4.9 1.4 4.2 5.9 2.8 3.7 3.8 2.6 7.9 10.6 4.0 0.0
Capital goods 11.5 5.8 12.6 6.9 1.8 -3.4 10.5 13.6 26.2 18.1 23.3 48.5 11.3 1.0 14.8 -4.0 -6.0 -3.7 -1.1 3.0 3.2 4.0 2.7 -13.8
Core industries -5.4 -2.8 -8.4 -4.9 -3.1 -4.8 -5.8 -5.5 -5.7 3.9 8.4 5.2 2.8 6.7 6.5 5.0 3.8 2.6 4.9 3.0 4.8 4.3 4.4 0.3
Coal production -3.5 3.6 -2.1 3.1 3.6 4.2 4.5 5.1 6.2 6.6 6.0 6.2 8.0 8.1 -0.2 1.3 3.2 1.0 8.0 4.8 3.2 2.6 7.4 -0.4
Steel Production -5.9 -1.4 -13.1 -6.0 -3.4 -6.8 -8.9 -7.7 -9.8 7.0 12.8 6.8 1.9 6.0 13.2 10.3 7.9 7.3 5.1 -1.3 10.7 5.6 5.1 -1.4
Cement production -8.3 -5.4 -12.4 0.9 -6.9 -8.1 -5.7 -6.2 -11.0 12.4 9.1 8.1 7.2 10.6 4.5 6.7 7.5 3.7 5.9 4.6 -1.2 6.3 13.3 3.8
Oil Consumption 7.4 7.2 3.1 0.4 3.7 3.5 3.6 1.4 6.7 6.8 3.6 3.2 2.3 5.0 6.0 0.9 4.5 11.6 5.4 5.9 3.4 0.2

Rainfall - Departure from LPA 3.4 2.2 4.0 -4.4 -7.8 -7.8 -19.2 2.3 -13.8 -1.3 -0.4 5.7 -1.7 -21.8 2.0 1.6 -7.1 5.6 -11.9 -13.8 -2.6 -5.0 -9.0 9.0

Foodgrains production growth(%) 10.5 -3.2 5.4 3.0 -6.2 8.1 -17.9 22.0 -7.0 5.2 4.2 6.2 1.6 -7.0 12.1 6.1 -0.8 3.1 -4.9 -0.2 9.4 3.6 0.0 2.5
Power Demand growth(%) 6.1 2.7 5.2 7.6 5.6 3.0 4.4 2.5 5.7 6.8 9.3 7.1 5.1 6.9 3.7 8.8 6.5 0.4 6.7 4.3 2.6 6.2 5.0 1.3
Power Deficit(%) 11.7 8.0 6.0 6.2 7.8 7.6 9.0 7.0 7.2 8.5 9.6 9.9 11.1 10.1 8.5 8.5 8.7 4.2 3.6 2.1 0.7 0.7 0.6 0.5
Import (USD bn) 37.9 41.4 43.0 47.0 51.5 50.4 56.5 72.6 99.8 142.9 178.4 229.4 321.0 257.2 350.2 464.5 489.7 465.4 462.9 394.1 361.6 449.9 514.5 483.9
Growth(%) 9.3 9.2 3.7 9.3 9.7 -2.2 12.2 28.4 37.5 43.2 24.9 28.6 40.0 -19.9 36.2 32.6 5.4 -5.0 -0.5 -14.9 -8.2 24.4 14.3 -5.9
Export (USD bn) 33.1 35.0 33.4 35.7 42.4 43.4 49.3 59.0 76.6 99.6 121.8 150.2 194.8 164.9 226.4 302.9 296.8 314.8 322.7 268.0 264.5 299.2 324.8 324.2
Growth(%) 8.1 5.7 -4.5 6.7 18.8 2.3 13.6 19.7 30.0 30.0 22.3 23.3 29.7 -15.4 37.3 33.8 -2.0 6.1 2.5 -17.0 -1.3 13.1 8.5 -0.2
Forex Reserves 26.4 29.4 32.5 38.0 42.3 54.1 76.1 113.0 141.5 151.6 199.2 309.7 252.0 279.1 304.8 294.4 292.0 304.2 341.6 360.2 370.0 424.5 412.9 477.8
Current Account Deficit/ Surplus (
-14.8 -15.5 -13.2 -17.8 -12.5 -11.6 -10.7 -13.7 -33.7 -51.9 -61.8 -91.5 -119.5 -118.2 -127.3 -189.8 -195.7 -147.6 -144.9 -130.1 -112.4 -160.0 -180.3 -154.0
USD bn)
USD/INR 35.5 37.1 42.1 43.3 45.7 47.7 48.4 45.9 44.9 44.3 45.2 40.2 46.0 47.4 45.5 47.9 54.4 60.4 61.1 65.4 67.0 64.4 69.9 70.9
GCF Growth(%) -2.0 23.1 10.0 24.3 -3.2 15.3 5.3 16.0 40.8 21.1 21.7 23.6 4.6 15.9 19.9 12.0 6.9 -5.2 6.1 7.0 9.8 15.3 0.2 -3.5
Public ( GFCF) 2.9 3.7 14.0 7.8 5.3 9.7 5.0 13.5 17.5 21.1 25.2 18.2 19.8 13.1 12.0 4.9 9.2 10.6 11.3 18.0 5.5 6.6 16.9
Private (GFCF) 21.7 2.7 -5.0 0.1 -5.9 8.4 5.0 27.6 73.5 47.6 22.7 32.8 -18.3 13.3 23.2 4.7 17.1 6.9 15.0 11.6 -4.2 10.2 15.1
Household (GFCF) 8.5 40.3 35.4 27.3 4.8 30.6 -1.1 12.3 22.3 0.3 13.6 12.9 43.5 12.4 15.6 39.1 5.4 -3.3 6.8 -12.9 21.0 20.0 14.0
Consumtpion Expenditure 17.2 9.7 14.5 12.5 7.2 8.9 5.8 9.3 8.3 12.1 14.5 14.4 14.4 14.0 17.3 17.5 14.3 15.3 11.9 12.1 12.3 10.6 11.5 9.0

Food, Beverages and Tobacco 21.6 3.5 18.0 7.3 -2.7 7.6 0.8 6.6 4.3 10.2 11.1 13.5 11.5 13.9 16.4 14.6 15.7 17.1 9.7 6.1 16.3 6.1 5.8

Housing, water, electricity, gas and

9.9 12.9 12.0 15.6 16.0 9.9 7.3 7.9 8.1 9.3 13.1 15.5 16.9 13.0 16.9 14.8 14.8 13.1 9.8 5.8 6.9 9.8 10.0
other fuels
Transport 22.2 12.3 12.7 13.1 17.3 8.7 12.3 15.1 11.3 9.7 14.2 6.5 11.2 9.7 17.4 23.0 10.8 10.0 10.7 21.3 13.1 19.2 14.4
Credit Growth(%) 9.6 16.4 13.8 18.2 17.3 15.3 23.7 15.3 30.9 37.0 28.1 22.3 17.5 16.9 21.5 17.0 14.1 13.9 9.0 10.9 8.2 8.2 11.7 7.6
Gross NPA(%) 15.7 14.4 14.7 12.7 11.4 10.4 8.8 7.2 5.2 3.3 2.5 2.2 2.2 2.4 2.4 3.1 3.2 3.8 4.3 7.5 9.3 11.2 9.3
BERNSTEIN

Source: RBI, MOSPI, CEA, Ministry of Agriculture, Bernstein analysis

10 August 2020
11
ASIA-PACIFIC EQUITY STRATEGY

Venugopal Garre +65-6230-4651 venugopal.garre@bernstein.com

EXHIBIT 14: How penetration of different consumer discretionary products has evolved vis a vis per capita income
Household Penetration FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

Air Conditioner 4.1 4.6 5.2 5.6 5.8 5.8 6.0 6.6 7.3 7.9 8.4 8.9 9.5 10.1 10.8 11.5 12.2 12.9 13.6 14.2 14.9 15.5

Bicycle 45.4 47.2 47.8 45.6 43.9 43.7 48.0 49.9 50.7 51.1 51.3 51.1 50.7 50.6 50.9 51.2 51.6 52.0 52.4 52.8 53.2 53.6

Camera 0.2 0.2 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.7 1.1 1.5 1.8 1.9 2.0 2.0 2.0 2.1 2.2 2.2 2.3 2.3

Colour TV Set 24.3 25.9 27.5 29.2 31.0 31.6 34.1 37.3 40.8 44.7 45.9 50.2 55.0 60.2 62.5 64.7 66.9 69.0 71.0 73.0 74.9 76.7

Dishwasher 1.9 2.0 2.2 2.3 2.4 2.6 2.8 2.9 3.1 3.3 3.5 3.6 3.8 4.0 4.1 4.2 4.4 4.5 4.6 4.7 4.8 4.9

Freezer 1.0 1.4 1.7 2.0 2.4 2.7 3.0 3.4 3.8 4.2 4.8 5.3 6.0 6.7 7.5 8.3 9.3 10.3 11.2 12.1 13.0 14.0

Microwave Oven 4.1 4.4 4.8 5.2 5.6 6.0 6.5 7.0 7.5 8.0 8.6 9.2 9.9 10.5 11.2 11.9 12.6 13.4 14.1 14.9 15.7 16.5

Motorcycle 6.1 6.6 7.3 8.3 10.3 11.7 11.8 13.6 16.1 17.2 18.5 20.0 21.6 23.5 25.9 28.6 30.1 31.7 33.2 34.6 36.0 37.3

Passenger Car 1.1 1.4 1.6 1.9 2.3 2.5 2.6 2.6 2.6 2.7 2.9 3.2 3.5 3.9 4.3 4.7 5.0 5.2 5.5 5.7 6.0 6.3

Refrigerator 6.3 7.0 7.8 8.6 9.3 10.0 10.8 11.3 12.3 15.3 16.0 16.4 16.6 17.0 18.4 20.4 22.1 23.9 25.5 27.2 28.8 30.4

Washing Machine 2.1 2.4 2.7 3.0 3.3 3.5 3.8 4.2 4.6 5.0 5.4 5.9 6.4 6.8 7.3 7.8 8.1 8.3 8.6 8.9 9.2 9.5

Household savings rate(%) 17.3 19.6 21.1 23.6 23.2 25.1 24.1 25.0 25.7 25.6 25.2 24.4 25.1 26.7 24.8 24.6 23.6 22.5 20.3 19.6 18.0 18.1 19.2 18.2

Household Debt as % of GDP 2.2 2.2 2.6 3.1 3.6 4.6 6.4 8.0 9.7 10.2 9.9 10.0 8.8 8.8 8.6 8.8 9.1 9.2 9.7 10.1 10.9 11.3

Per Capita Income (constant 2010 US$) 712 727 758 810 827 852 869 922 979 1,040 1,107 1,174 1,193 1,268 1,358 1,410 1,469 1,545 1,640 1,752 1,876 1,987 2,086 2,169

Growth in per Capita Income 5.5 2.1 4.2 6.9 2.0 3.0 2.1 6.1 6.2 6.2 6.4 6.0 1.6 6.4 7.0 3.9 4.2 5.1 6.2 6.8 7.1 5.9 5.0 4.0

Source: RBI, CEIC, Euromonitor , Bernstein analysis

BERNSTEIN

10 August 2020
12
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