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State Of The NationEconomy . Sectors . Companies

September 13, 2013

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Wide coverage spanning more than 70 sectors.

Strong on-the-ground inputs through primary sourcing from over 4000 contacts

Ability to leverage upon cross-sectoral linkages

CRISIL’s unique analysis combining macro and micro

Sound macroeconomic research and forecasting capabilities

Team of economists with decades of experience in bridging economics and real world

Comprehensive study of 2481 firms (rated ‘BBB-’ or higher) accounting for

- 32% of banking credit to corporates

- 82% of CRISIL-rated debt

Two out of three sectors will experience lower revenue growth

Demand slowdown, the biggest source of vulnerability, impacts nearly a fourth of 2481 firms

Industry projected to grow at 1% in 2013-14

STATE OF THE

NATION

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Agriculture bounty

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Boost for exports

Weak currency, pick up in advanced economies

IT-ITES, pharmaceuticals, textiles and leather likely to benefit

Helps in paring the trade and current account deficit

Forex vulnerability is the least of the stress factors

Impacts only 6% of the 2,481 firms analysed

A caveat is in order: the universe of CRISIL-rated firms does not include many of the major debt-laden corporate groups

The Good

Timely, well-distributed monsoons

Farm GDP growth to accelerate to 4.5% from last year's 1.9%

Check food inflation

Boost rural consumption

Stimulate demand for tractors and two-wheelers

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Heavy burden of oil subsidies and declining growth in tax revenues will lead to slippages

Fiscal deficit likely to bloat to 5.2% of GDP, higher than budgeted 4.8%

Inflation rising

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Surging crude oil prices and weaker rupee to push WPI inflation beyond 6%

Rate cuts by RBI difficult

Stress in leveraged sectors such as infrastructure and real estate

Services segment weak

Spill-over of slower industry growth due to increased linkages between industry and services

Services growth of 6.5% in 2013-14, compared to 10% in the last decade

Firms stretched for liquidity

Liquidity pressures are a source of stress for 16% of the 2,481 companies analysed.

Large firms are impacted more acutely (27% of firms with operating income > Rs. 1000 crores affected)

The Bad

No scope for stimulus

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Demand slowdown hurts the most

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Two out of three sectors will experience lower revenue growth

Vulnerability to demand slowdown remains the most important source of stress for 25% of 2481 firms analysed

Larger firms more challenged: higher indebtedness and stress on interest cover

Industrial growth stays anemic

Industry will grow at a two-decade low of 1%

Investment climate weak

Infrastructure, capital goods, real estate, automobiles and transport operators likely to be the worst hit

Current account deficit (CAD) will keep rupee weak

Rupee could rebound to 60/$ by March 2014, as CAD declines to 3.9%,

Currency to remain significantly depreciated compared with last fiscal

– Upward pressure on inflation, fiscal deficit and input costs for corporates.

The Ugly

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GDP growth at decadal low of 4.8%

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If India gets lucky, and agriculture growth surges 6%, overall GDP could be a much better 5.2%

This happened in 2010-11 when, after a good monsoon, it had rocketed to 7.9%

Economy will stay in an L-Shaped trajectory

Economy will stay in an L-Shaped trajectory through this fiscal unlike the V-shaped recovery seen after the Lehman crisis in 2008

What does this add up to

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CRISIL Limitedwww.crisil.com

www.standardandpoors.com

CRISIL Limitedwww.crisil.com

www.standardandpoors.com