India Business Forecast Report Q4 2012

Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook

Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Time To Stand And Deliver
The administration of Indian Prime Minister Manmohan Singh has a small window of opportunity to deliver economic reform in the
coming months in a bid to re-energise the country's growth prospects Success on this front would not only help to ease investor and
rating agency concerns, but also bolster the Indian National Congress-led government's re-election chances in 2014
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
The Test Of Rising Prosperity
While India's 60-year-old democracy has withstood the test of poverty, the coming decade will show whether it can withstand the test
of rising prosperity Against a backdrop of economic growth, India's government will need to work even harder to combat poverty and
inequality; invest in education and infrastructure; and clamp down on corruption in order to satisfy an increasingly cognisant electorate
Meanwhile, icy relations with neighbouring Pakistan and growing competition with China will continue to dominate India's international
agenda Failure to address these shortcomings could see social disharmony and pockets of fundamentalism continue to ferment at the
grassroots level

Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Economic Growth: Down But Not Out
A modest growth print of 5 3% y-o-y in Q4 FY2011/12 (Jan-Mar) and soaring twin deficits in the fiscal and current accounts have
convinced consensus to dramatically de-rate India's economic outlook, with most calling for much weaker headline expansion in the
current fiscal year
TABLE: ECONOMIC ACTIVITY3
Monetary Policy
Calling For Further Easing In FY2012/13
Although not a given, we now expect the Reserve Bank of India to resume monetary easing in FY2012/13 (April-March) in a bid to inject
renewed vigour into the country's misfiring economy We are now pencilling in 50 basis points of cuts in the benchmark repo rate by
end-FY2012/13 and expect further loosening of the cash reserve requirement ratio
TABLE: MONETARY POLICY
Fiscal Policy
Does India Deserve Junk Status?
Fitch Ratings has become the latest ratings agency to question India's investment grade status on the back of stumbling economic
growth and a weak policy environment While we had expected the country's sovereign creditworthiness to come under the spotlight in
2012, our view remains that a full ratings downgrade is not on the cards this year
TABLE: FISCAL POLICY
Balance Of Payments
Sticking With Our Long-Term Bullish INR Call
Notwithstanding the potential for a final push lower, the Indian rupee looks set to embark on a steady appreciatory run over the medium
term Current levels are attractive given the currency's depressed valuations and our conviction that macro pressure will subside in the
months ahead With this in mind, we maintain our fundamentally bullish stance
TABLE: CURRENT ACCOUNT

Chapter 3: 10-Year Forecast
The Indian Economy To 2021
Failing To Recapture Its Previous Growth Form
Given the structural shift lower in domestic savings and productivity gains, we doubt whether the Indian economy will be able to
recapture its previous growth form in the range of 8 0-10 0% over our forecast period Instead, the government's reluctance to act on
fiscal consolidation and economic reform paint a more subdued picture for the country's prospects As such, we have downgraded our
long-term growth projections accordingly We now see real GDP growth averaging 6 8% out to FY2021/22 (April-March) versus 7 5%
previously
TABLE: LONG-TERM MACROECONOMIC FORECASTS

Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
Institutions
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
TABLE: ASIA, ANNUAL FDI INFLOWS
Infrastructure
TABLE: TRADE AND INVESTMENT RATINGS
TABLE: TOP EXPORT DESTINATIONS
Market Orientation
Operational Risk

Chapter 5: Key Sectors
Pharmaceuticals
TABLE: PHARMACEUTICAL SALES INDICATORS
TABLE: PRESCRIPTION DRUG SALES
TABLE: PATENTED DRUG SALES
TABLE: OTC MEDICINE SALES
TABLE: GENERIC DRUG SALES
Telecommunications
TABLE: FIXED-LINE
TABLE: INTERNET
TABLE: MOBILE
TABLE: MOBILE ARPU (INR)
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: FOOD & DRINK SECTOR KEY INDICATORS
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
TABLE: OIL & GAS SECTOR KEY INDICATORS
TABLE: DEFENCE & SECURITY SECTOR KEY INDICATORS
TABLE: FREIGHT KEY INDICATORS

Chapter 6: BMI Global Assumptions
Global Outlook
The Cycle Has Turned
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 49