GDP and Fiscal deficit Strong agriculture and consumption growth; FY14 fiscal deficit lower at 4.5%

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1 GDP and Fiscal deficit Strong agriculture and consumption growth; FY14 fiscal deficit lower at 4.5% PhillipCapital (India) Pvt. Ltd. 30 May 2014 GDP output remains subdued: Q4 FY14 GDP came in at 4.6% (PC estimate: 4.5%; Consensus: 4.7%) similar to last quarter and 20bps higher than last year. Positive surprise came from strong growth in Agriculture and Private consumption, other segments remained stable as last quarter. FY14 growth is at 4.7% vs. 4.5% last year. Positive surprise from agriculture, No pick up seen in Industry and Services: Agriculture sector recorded a strong growth of 6.3% owing to good monsoon and low base effect. Full year growth for Agri at 4.7% is higher than our expectation of 4%. Industrial GDP for Q4 is at 0.5%, negative growth in mining ( 0.4%) and manufacturing ( 1.4%) and strong electricity output (7.2%). FY14 growth for industry GDP is at 0.1% in line with expectations. Services in Q4 grew by 5.8% vs. 6.4% last quarter and 5.8% a year ago; full year growth stands at 6.2% vs. 6.3% last year in line with expectations. Construction output growth remained stable and negligible at 0.7%; full year growth at 1.7%. Trade, hotels, transport & communication recorded growth of 3.9% vs. 2.9% last quarter and 4.8% a year ago, FY14 growth for this heavy weight GDP segment is at 3% vs. 5.1% last year. Financing, insurance, real estate and business services growth of 12.4% was ahead of our expectations, full year growth at 12.9% vs. 10.9% last year (positive impact from FCNRB flows). Growth in Community, social and personal services expectedly stood low at 3.3% due to poor government spending, full year growth at 5.6% vs. 5.3% last year. Consumption surged, Investments remained weak: Private consumption (PFCE) grew by a robust 8.2% vs. 2.8% in the previous quarter and 8.3% a year ago. We will partially attribute strong consumption growth to election spending. Government spending (GFCE) growth expectedly weakened to 0.4% vs. 1.1% last year. Investments (GFCF) de grew by 0.9% GCF growth stood at 2.2% vs. 3.2% last quarter. Exports recoded strong growth of 10.5% and imports by 3.7%. Quarterly revisions: Q4 FY13 GDP is revised lower to 4.4% from 4.8%, Q1FY14 revised to 4.7% from 4.4%, revised to 5.2% from 4.8%, Q3FY14 revised to 4.6% from 4.7%. Revisions have been done for Services and Agriculture sector. FY14 fiscal deficit stands lower: Fiscal deficit for FY14 is at 4.5% of GDP vs. 4.6% in the revised targets presented at the time of budget (Feb 14). Lower fiscal deficit is led by weaker plan spending in Feb Mar; plan expenditure is lower by Rs 224bn (0.2% of GDP) vs. the revised estimates and Rs 1022bn (0.9% of GDP) vs. the budgeted estimates. Receipts are lower by Rs 106bn (0.1% of GDP) vs. revised estimate and Rs 675bn (0.6% of GDP) vs. the budgeted estimate. Tax collections were weaker for income tax, excise, and service tax when compared with revised estimate. Disinvestment targets for FY14RE were achieved. FY15 fiscal deficit estimate is at 4.6% of GDP. FY15 GDP growth retained at 5.2%: We retain FY15 GDP estimate at 5.2%, improvement expected in industry and services sector. Private consumption should decline to 3 5% levels in H1 from the unexpectedly higher levels seen in Q4. Investments should pick up marginally and gradually in H1 from the current negative trend. Manufacturing output is also expected to remain weak in the first half. Overall, improvement expected in 2HFY15, positive decisions by the government will take a few quarters to reflect in macro numbers. Real GDP growth (YoY) Agriculture growth (YoY) % Industry and Services growth (YoY) % Industry Services Source: CSO, RBI, PhillipCapital India Research Anjali Verma ( ) anverma@phillipcapital.in Please refer to Disclosures and Disclaimers at the end of the Research Report.

2 30 May 2014 / INDIA EQUITY RESEARCH / INDONOMICS: GDP, Fiscal deficit GDP at factor cost at constant price (by income) YoY growth rate (%) Q1FY13 Q2FY13 Q4FY13 Q1FY14 Q3FY14 Q4FY14 FY14 FY15E Agriculture Industry Mining and Quarrying Manufacturing Electricity, gas and water supply Services Construction Trade, hotels, Transport, & Comm Financing, Insurance, Real Estate& business services Community, social, and personal services GDP at Factor cost Source: CSO, PhillipCapital India Research GDP at market price at constant price (by expenditure) As % of GDP YoY growth rate Q4FY13 Q1FY14 Q3FY14 Q4FY14 FY14 Q4FY13 Q1FY14 Q3FY14 Q4FY14 FY14 Private Final Consumption Exp % 5.6% 2.8% 2.8% 8.2% 4.8% Government Final Consumption Exp % 12.9% 0.1% 3.6% 0.4% 3.8% Gross Capital Formation % 5.1% 0.3% 3.2% 2.2% 2.5% Gross Fixed Capital Formation % 2.8% 3.1% 0.2% 0.9% 0.1% Change in Stock % 1.2% 3.7% 0.8% 0.9% 1.6% Valuables % 32.6% 31.1% 41.1% 20.9% 31.6% Net Exports Source: CSO 2 of 5

3 30 May 2014 / INDIA EQUITY RESEARCH / INDONOMICS: GDP, Fiscal deficit Central government fiscal account (Rs bn) Revenue Receipts 2,630 3,052 3,439 4,337 5,399 5,447 5, % of BE 100.0% 101.4% 98.7% 102.5% 102.8% 96.9% 99.7% 101.3% 98.6% 100.8% 98.6% Tax Revenue 1,869 2,249 2,700 3,515 4,375 4,477 4,594 5,728 6,319 7,411 8,160 % of BE 99.7% 99.6% 98.5% 101.6% 101.3% 96.1% 98.8% 101.6% 98.4% 99.9% 97.6% Non tax Revenue , ,160 2,215 1,243 1,377 1,992 % of BE 100.8% 107.0% 99.4% 106.3% 109.7% 100.8% 103.4% 100.6% 99.7% 106.2% 103.1% Non debt capital Receipts % of BE 104.9% 99.4% 97.3% 108.5% 108.1% 54.7% 101.8% 112.1% 109.3% 107.0% 109.3% Recovery of loans % of BE 103.6% 98.9% 103.4% 109.2% 113.4% 63.5% 145.8% 141.7% 118.5% 105.4% 115.7% Other Receipts % of BE 110.7% 108.1% 67.1% 101.1% 107.4% 21.3% 94.6% 100.5% 100.8% 107.9% 106.6% Total Receipts 3,460 3,705 3,576 4,402 5,838 5,514 6,062 8,299 7,887 9,195 10,553 % of BE 101.1% 101.1% 98.6% 102.5% 103.2% 96.0% 99.8% 101.8% 99.0% 101.1% 99.0% Non Plan Expenditure 3,498 3,663 3,638 4,130 5,080 6,060 7,163 8,216 8,849 9,951 11,104 % of BE 99.2% 99.4% 99.7% 101.0% 101.2% 98.1% 101.4% 100.0% 99.2% 99.4% 99.6% On Revenue Account 2,828 2,972 3,266 3,716 4,218 5,565 6, % of BE 99.3% 100.3% 100.2% 102.6% 102.1% 99.1% 101.9% 100.0% 98.9% 99.3% 99.5% of which interest payments 1,243 1,265 1,318 1,496 1,715 1,905 2, % of BE 99.8% 100.5% 101.3% 102.3% 99.7% 98.9% 96.4% 97.5% 98.9% 98.5% 99.3% On Capital Account % of BE 98.6% 95.9% 95.8% 88.4% 97.0% 88.1% 96.4% 100.0% 102.3% 100.4% 100.2% of which loans disbursed % of BE 85.6% 97.4% 84.0% 91.8% 90.3% 99.0% 66.1% 97.2% 84.1% 99.9% 81.6% Plan Expenditure 1,221 1,322 1,401 1,700 2,056 2,755 3,022 3,774 4,135 4,143 4,531 % of BE 100.5% 96.2% 97.5% 98.4% 99.1% 97.3% 95.9% 95.5% 96.9% 96.5% 95.3% On Revenue Account ,119 1,425 1,736 2,352 2,538 3,124 3,341 3,294 3,525 % of BE 100.6% 97.6% 98.0% 98.5% 98.9% 97.3% 96.0% 95.5% 96.5% 95.9% 94.8% On Capital Account ,005 % of BE 100.4% 93.6% 95.3% 97.9% 100.0% 97.5% 95.3% 95.4% 98.8% 99.0% 97.0% of which loans disbursed % of BE 102.2% 93.5% 101.0% 99.3% 104.5% 99.5% 99.5% 96.7% 84.8% 96.9% 100.0% Total Expenditure 4,719 4,984 5,039 5,830 7,136 8,815 10,185 11,989 12,984 14,094 15,635 % of BE 99.5% 98.5% 99.1% 100.2% 100.6% 97.8% 99.7% 98.6% 98.5% 98.5% 98.3% Fiscal Deficit 1,260 1,280 1,463 1,428 1,298 3,301 4,123 3,690 5,097 4,899 5,081 % of BE 95.3% 91.9% 100.1% 93.7% 90.4% 101.1% 99.6% 92.0% 97.7% 94.0% 96.9% Revenue Deficit ,470 3,326 2,449 3,847 3,635 3,603 % of BE 98.4% 93.4% 103.1% 96.4% 87.5% 102.4% 101.1% 90.7% 97.4% 92.9% 97.3% Primary Deficit ,396 2,007 1,343 2,373 1,779 1,306 % of BE 22.5% 10.8% 90.4% 110.2% 147.2% 104.3% 103.1% 83.8% 96.3% 87.1% 90.4% Source: CGA 3 of 5

4 30 May 2014 / INDIA EQUITY RESEARCH / INDONOMICS: GDP Management Vineet Bhatnagar (Managing Director) Jignesh Shah (Head Equity Derivatives) (91 22) (91 22) Research Automobiles Economics Pharma Deepak Jain (9122) Anjali Verma (9122) Surya Patra (9122) Priya Ranjan (9122) Engineering, Capital Goods Retail, Real Estate Banking, NBFCs Ankur Sharma (9122) Abhishek Ranganathan, CFA (9122) Manish Agarwalla (9122) Aditya Bahety (9122) Neha Garg (9122) Sachit Motwani, CFA, FRM (9122) Paresh Jain (9122) Infrastructure & IT Services Technicals Vibhor Singhal (9122) Subodh Gupta, CMT (9122) Consumer, Media, Telecom Varun Vijayan (9122) Naveen Kulkarni, CFA, FRM (9122) Production Manager Vivekanand Subbaraman (9122) Metals Ganesh Deorukhkar (9122) Manish Pushkar, CFA (9122) Dhawal Doshi (9122) Dharmesh Shah (9122) Database Manager Cement Vishal Randive (9122) Vaibhav Agarwal (9122) Oil&Gas, Agri Inputs Gauri Anand (9122) Sr. Manager Equities Support Deepak Pareek (9122) Rosie Ferns (9122) Sales & Distribution Kinshuk Bharti Tiwari (9122) Sales Trader Execution Ashvin Patil (9122) Dilesh Doshi (9122) Mayur Shah (9122) Shubhangi Agrawal (9122) Suniil Pandit (9122) Kishor Binwal (9122) Sidharth Agrawal (9122) Dipesh Sohani (9122) SINGAPORE Phillip Securities Pte Ltd 250 North Bridge Road, #06 00 Raffles City Tower, Singapore Tel : (65) Fax: (65) JAPAN Phillip Securities Japan, Ltd 4 2 Nihonbashi Kabutocho, Chuo ku Tokyo Tel: (81) Fax: (81) THAILAND Phillip Securities (Thailand) Public Co. Ltd. 15th Floor, Vorawat Building, 849 Silom Road, Silom, Bangrak, Bangkok Thailand Tel (66) Fax: (66) UNITED STATES Phillip Futures Inc. 141 W Jackson Blvd Ste 3050 The Chicago Board of Trade Building Chicago, IL USA Tel (1) Fax: (1) Contact Information (Regional Member Companies) MALAYSIA Phillip Capital Management Sdn Bhd B 3 6 Block B Level 3, Megan Avenue II, No. 12, Jalan Yap Kwan Seng, Kuala Lumpur Tel (60) Fax (60) INDONESIA PT Phillip Securities Indonesia ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, Jakarta 10220, Indonesia Tel (62) Fax: (62) FRANCE King & Shaxson Capital Ltd. 3rd Floor, 35 Rue de la Bienfaisance Paris France Tel (33) Fax : (33) AUSTRALIA PhillipCapital Australia Level 37, 530 Collins Street Melbourne, Victoria 3000, Australia Tel: (61) Fax: (61) INDIA PhillipCapital (India) Private Limited No. 1, C Block, 2 nd Floor, Modern Center, Jacob Circle, K. K. Marg, Mahalaxmi Mumbai Tel: (9122) Fax: (9122) HONG KONG Phillip Securities (HK) Ltd 11/F United Centre 95 Queensway Hong Kong Tel (852) Fax: (852) CHINA Phillip Financial Advisory (Shanghai) Co. Ltd. No 550 Yan An East Road, Ocean Tower Unit 2318 Shanghai Tel (86) Fax: (86) UNITED KINGDOM King & Shaxson Ltd. 6th Floor, Candlewick House, 120 Cannon Street London, EC4N 6AS Tel (44) Fax: (44) SRI LANKA Asha Phillip Securities Limited Level 4, Millennium House, 46/58 Navam Mawatha, Colombo 2, Sri Lanka Tel: (94) Fax: (94) of 5

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