Economy and Markets

Emerging Scenario Feb 2009

Presentation to SIAM

Indicus Analytics Laveesh Bhandari

 Emerging Scenario
November 2008
 International demand down
 Asset markets down
• may go down further
 Pessimism takes root
 Government has little
flexibility
 Investment to take a big hit
next year
 Employment growth nil or
negative
 No consensus on what to do
 Uncertainty: 6-12-18-24
months?
Indicus Analytics
February 2009
 International demand worsen
 Asset markets bottommed
out (excl. real estate)
 Acceptance not pessimism
 Government has little
flexibility
 Public investmebt to increase
substantially
 Employment growth nil or
negative
 Loosen fiscal; controlled on
monetary side
 Uncertainty remains
Laveesh Bhandari
 What’s the Good News?

 Agriculture growth up
• Two years of good monsoons
 Rural growth picking up
 Government wages and salaries increase
 Demographic dividend continues
 Basics unaffected
• Food, FMCG, Education, Health
 Prices under control !

Indicus Analytics Laveesh Bhandari

 Growth Expectations

GDP Growth
12%

10%

8%

6%

4%

2%

0%
2004-05 2005-06 2006-07 2007-08 2008-09* 2009-10*
-2%

-4%

-6%

-8%

GDP at factor cost Agriculture and allied activities Industry Services

Indicus Analytics Laveesh Bhandari

 Major Forces – Sectoral Impact

What has affected Sectors (Private Sector

the most Companies only)

Overall Pessimism BFSI, E&I, IT, Manufacturing

Stock market fall BFSI

Inflation Manufacturing, Pharma

Falling Rupee Manufacturing, BFSI, ICT

High interest rates Manufacturing

Credit Crunch BFSI

Indicus Analytics Laveesh Bhandari
 Sectoral Impact …1
Sectors Impact Explanation
Public sector and large firm dominance, net
employment growth not high because of public
BFSI Moderate sector natural rationalization
Growth affected esp. in consultancy, surging demand
Education, training None to continue in education
Energy generation &
supply Moderate Infrastructure growth continues
Slowdown has not hit yet, demand continues to grow,
Health None may be affected next year
Severely impacted - international and domestic tourism
Hospitality Severe as well as biz. Travel affected
IT Moderate International slowdown
Domestic demand growing though large fall in
ITES Moderate international contracts
Food products & Small scale sector taking a big hit, ongoing industry
beverages Moderate rationalization
Furniture Severe Slowdown had commenced last year
Limited growth expected; growth in pharma but
Chemicals & pharma Moderate reduction in chemicals

Indicus Analytics Laveesh Bhandari

 Sectoral Impact … 2
Machinery equipment Engineering affected as new orders dry up. SSI
& others Moderate sector most affected
Minerals & metal
products Moderate Ongoing rationalization
Mtor vehicles &
accessories Moderate Auto sector hit by falling demand
Paper and publishing & International market drying up, but domestic
printing related market expected to remain strong due to
activities Moderate education

Rubber & plastic Moderate exports dry up

Textile & garments,
apparel High New hriing expected to fall further
Mining & Extraction High Large projects generally delayed
Accounting &
communication Direct impact of slowdown, SSI sector impacted
equipments High significantly
Real Estate & Smaller towns push it in the positive, negative in
Construction Severe metros and larger cities
Organized retail takes a big hit, smaller and
Trade Severe wholesale trade saves the day
Rationalization had commenced since beginning
Transport, Storage & of the year in transport, communications
Communication Moderate coninues to grow

Indicus Analytics Laveesh Bhandari

 Consumers to watch out
Become more ‘attractive’
 Public sector staff

 Rural India

 Rural trade, transport

 Northern and eastern

Become less ‘attractive’

 IT/ITES/BPO segments stagnate or fall

 Export oriented – Jewellery, Garments, Light

engineering
 Financial and Real Estate sector

 Southern and western India

Indicus Analytics Laveesh Bhandari

 Shallow spending power
Per CapitaIncome&Savings
300

250
Amount(Rs.Thousand)

200

150

100

50

0
21

53
14

28

34

40

46

59

66

72

78

84

90

96
1

-50
Household Percentiles based on economic status

Source: Market Skyline of India, 2008 Per Capita Income Per Capita Savings

Indicus Analytics Laveesh Bhandari

 Similarities within Consumer groups
Percentage share of expenditure on different items by each percentile

100% Cons. Services, entertainment, rent,

fuel, toiletries and Misc.
Education
80%
%shareof expenditure

Medical
60%
Clothing &Footwear

40%
Durables

20% High Value Food

0% Basic Food
1

13

25

37

49

61

73

85

97
Household Percentile

Indicus Analytics Laveesh Bhandari

 Geographical Spread

Source: District
GDP of India

Indicus Analytics Laveesh Bhandari

 Thank You

Indicus Analytics Laveesh Bhandari