1. © 2013 CRISIL Ltd. All rights reserved. State Of The Nation Economy. Sectors. Companies September 13, 2013 1

2. © 2013 CRISIL Ltd. All rights reserved. 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 CRISILs 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 2

3. © 2013 CRISIL Ltd. All rights reserved. Agriculture bounty 3 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 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 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 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

4. © 2013 CRISIL Ltd. All rights reserved. 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% 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 4 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 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 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) 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

5. © 2013 CRISIL Ltd. All rights reserved. Demand slowdown hurts the most 5 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 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 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. 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

6. © 2013 CRISIL Ltd. All rights reserved. GDP growth at decadal low of 4.8% 6 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% 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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