economy and markets - emerging scenario february 2009

Indicus Analytics Laveesh Bhandari

Economy and MarketsEconomy and Markets

Emerging Scenario Feb 2009Emerging Scenario Feb 2009

Presentation to SIAMPresentation to SIAM


Emerging ScenarioEmerging Scenario

November 2008November 2008 International demand downInternational demand down Asset markets down Asset markets down

• may go down furthermay go down further Pessimism takes rootPessimism takes root Government has little Government has little

flexibilityflexibility Investment to take a big hit Investment to take a big hit

next yearnext year Employment growth nil or Employment growth nil or

negativenegative No consensus on what to doNo consensus on what to do

Uncertainty: 6-12-18-24 Uncertainty: 6-12-18-24 months?months?

February 2009February 2009 International demand International demand worsenworsen Asset markets Asset markets bottommed bottommed

out (excl. real estate)out (excl. real estate) Acceptance not pessimismAcceptance not pessimism Government has little Government has little

flexibilityflexibility Public investmebt to increase Public investmebt to increase

substantiallysubstantially Employment growth nil or Employment growth nil or

negativenegative Loosen fiscal; controlled on Loosen fiscal; controlled on

monetary sidemonetary side Uncertainty remainsUncertainty remains


What’s the Good News?What’s the Good News?

Agriculture growth upAgriculture growth up• Two years of good monsoonsTwo years of good monsoons

Rural growth picking upRural growth picking up Government wages and salaries increaseGovernment wages and salaries increase Demographic dividend continuesDemographic dividend continues Basics unaffectedBasics unaffected

• Food, FMCG, Education, HealthFood, FMCG, Education, Health Prices under control !Prices under control !


Growth ExpectationsGrowth Expectations

GDP Growth

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

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

GDP at factor cost Agriculture and allied activities Industry Services


Major Forces – Sectoral ImpactMajor Forces – Sectoral Impact

What has affected What has affected the mostthe most

Sectors (Private Sector Sectors (Private Sector Companies only)Companies only)

Overall PessimismOverall Pessimism BFSI, E&I, IT, ManufacturingBFSI, E&I, IT, Manufacturing

Stock market fallStock market fall BFSIBFSI

InflationInflation Manufacturing, PharmaManufacturing, Pharma

Falling RupeeFalling Rupee Manufacturing, BFSI, ICTManufacturing, BFSI, ICT

High interest ratesHigh interest rates ManufacturingManufacturing

Credit CrunchCredit Crunch BFSIBFSI


Sectoral Impact …1Sectoral Impact …1SectorsSectors ImpactImpact ExplanationExplanation

BFSIBFSI ModerateModerate

Public sector and large firm dominance, net Public sector and large firm dominance, net employment growth not high because of public employment growth not high because of public

sector natural rationalizationsector natural rationalization

Education, training Education, training NoneNoneGrowth affected esp. in consultancy, surging demand Growth affected esp. in consultancy, surging demand

to continue in educationto continue in educationEnergy generation & Energy generation &

supplysupply Moderate Moderate Infrastructure growth continuesInfrastructure growth continues

HealthHealth NoneNoneSlowdown has not hit yet, demand continues to grow, Slowdown has not hit yet, demand continues to grow,

may be affected next yearmay be affected next year

HospitalityHospitality SevereSevereSeverely impacted - international and domestic tourism Severely impacted - international and domestic tourism

as well as biz. Travel affectedas well as biz. Travel affectedITIT Moderate Moderate International slowdownInternational slowdown

ITESITES Moderate Moderate Domestic demand growing though large fall in Domestic demand growing though large fall in

international contractsinternational contractsFood products & Food products &

beveragesbeverages Moderate Moderate Small scale sector taking a big hit, ongoing industry Small scale sector taking a big hit, ongoing industry

rationalizationrationalizationFurnitureFurniture SevereSevere Slowdown had commenced last yearSlowdown had commenced last year

Chemicals & pharmaChemicals & pharma ModerateModerateLimited growth expected; growth in pharma but Limited growth expected; growth in pharma but

reduction in chemicalsreduction in chemicals


Sectoral Impact … 2Sectoral Impact … 2Machinery equipment Machinery equipment

& others& others ModerateModerateEngineering affected as new orders dry up. SSI Engineering affected as new orders dry up. SSI

sector most affectedsector most affectedMinerals & metal Minerals & metal

productsproducts ModerateModerate Ongoing rationalizationOngoing rationalizationMtor vehicles & Mtor vehicles &

accessoriesaccessories ModerateModerate Auto sector hit by falling demandAuto sector hit by falling demandPaper and publishing Paper and publishing

& printing related & printing related activitiesactivities ModerateModerate

International market drying up, but domestic International market drying up, but domestic market expected to remain strong due to market expected to remain strong due to

educationeducationRubber & plasticRubber & plastic ModerateModerate exports dry upexports dry upTextile & garments, Textile & garments,

apparelapparel HighHigh New hriing expected to fall furtherNew hriing expected to fall furtherMining & ExtractionMining & Extraction HighHigh Large projects generally delayedLarge projects generally delayedAccounting & Accounting &

communication communication equipmentsequipments HighHigh

Direct impact of slowdown, SSI sector impacted Direct impact of slowdown, SSI sector impacted significantlysignificantly

Real Estate & Real Estate & ConstructionConstruction SevereSevere

Smaller towns push it in the positive, negative in Smaller towns push it in the positive, negative in metros and larger citiesmetros and larger cities

TradeTrade SevereSevereOrganized retail takes a big hit, smaller and Organized retail takes a big hit, smaller and

wholesale trade saves the daywholesale trade saves the day

Transport, Storage & Transport, Storage & CommunicationCommunication ModerateModerate

Rationalization had commenced since beginning Rationalization had commenced since beginning of the year in transport, communications of the year in transport, communications

coninues to growconinues to grow


Consumers to watch outConsumers to watch outBecome more ‘attractive’Become more ‘attractive’ Public sector staffPublic sector staff Rural IndiaRural India Rural trade, transportRural trade, transport Northern and easternNorthern and eastern

Become less ‘attractive’Become less ‘attractive’ IT/ITES/BPO segments stagnate or fallIT/ITES/BPO segments stagnate or fall Export oriented – Jewellery, Garments, Light Export oriented – Jewellery, Garments, Light

engineeringengineering Financial and Real Estate sectorFinancial and Real Estate sector Southern and western IndiaSouthern and western India


Shallow spending powerShallow spending powerPer Capita Income & Savings

-50

0

50

100

150

200

250

300

1 7 14 21 28 34 40 46 53 59 66 72 78 84 90 96

Household Percentiles based on economic status

Amou

nt (R

s.Th

ousa

nd)

Per Capita Income Per Capita SavingsSource: Market Skyline of India, 2008


Similarities within Consumer groupsSimilarities within Consumer groupsPercentage share of expenditure on different items by each percentile

0%

20%

40%

60%

80%

100%1 13 25 37 49 61 73 85 97

Household Percentile

% s

hare

of e

xpen

ditu

re

Cons. Services, entertainment, rent,fuel, toiletries and Misc.

Education

Medical

Clothing & Footwear

Durables

High Value Food

Basic Food


Geographical SpreadGeographical Spread

Source: DistrictGDP of India


Thank YouThank You

economy and markets - emerging scenario february 2009

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