India Business Forecast Report Q2 2009

Publication Date	February 2009
Publisher	Business Monitor
Product Type	Report
Pages	70
ISBN Number	not applicable
Product Code	BMI03427

Buy this product or for assistance call +44 20 7060 7474

PDF £250.00$416 | €280

FAX Order above formats by FAX

Summary

Harder Times Ahead We foresee India following the rest of the world in entering a period of below-trend growth (estimated at 7.0-7.5%) in 2009 after a series of boom years in which large capital inflows pressed GDP growth to 9.0% and beyond. While the Indian economy is less reliant on external demand than its east Asian neighbours, reduced capital inflows will have a marked effect on domestic consumption and investment levels. With the leeway for increased government spending impaired by India's chronic fiscal deficits, it will be more reliant on monetary stimulus. While India's solid macroeconomic fundamentals bear promise of continued strong growth over the long term, we believe trend growth will be hampered by inadequate investment in education and infrastructure.

We maintain our core view that a National Democratic Alliance (NDA) minority government led by the conservative Bharatiya Janata Party (BJP) will gain power in the upcoming national elections in spite of the unexpectedly strong performance of the ruling Indian National Congress Party in state elections in Q408. On the foreign policy front, we expect New Delhi to maintain pressure on Pakistan to rein in the links between its security services and Kashmiri separatist groups. While New Delhi is likely to be cautious about any US-led proposal to solve the Kashmir issue, we expect the political alignment of New Delhi and Washington's interest in foreign policy and security issues to continue, in spite of domestic opposition from Communists and Hindu nationalists.

We are forecasting GDP growth to slow to 5.0% in FY2009/10 (April-March), following a 6.3% expansion in FY2008/09, as a reduction of capital inflows brings the economy back to more sustainable growth levels after three fiscal years of breakneck expansion. With economic growth slowing markedly and prices falling, we believe the Reserve Bank of India will continue its monetary easing, albeit less aggressively than in Q408. While the current account deficit is set to narrow, the sharp reversal in capital inflows should continue to weigh on the rupee over 2009, with the central bank only intervening to smooth the decline of the unit.

We maintain that without more substantial improvements to India's rudimentary infrastructure, it will not be able to achieve annual GDP growth at 8-9% as targeted. The budget for FY2009/10 maintained power, national highways and rural infrastructure as the main beneficiaries of government spending, but we believe public investment in infrastructure will fall well short of India's immense needs. Nonetheless, we see a higher potential in public-private partnerships (PPP), which have shown some initial success. However, we do not believe that India has, or will have any time soon, the adequate policy and regulatory framework to double the degree of annual infrastructure investment from 4.5% to 9.0% of GDP over the next five years as targeted.

Content

Executive Summary
- Harder Times Ahead
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Risk Of Policy Paralysis After Elections
- We maintain our core view that a National Democratic Alliance (NDA) minority government led by the conservative
- Bharatiya Janata Party (BJP) will gain power in the upcoming national elections
- Table Political Overview
- Foreign Policy
- New Delhi To Maintain Pressure On Islamabad
- India will maintain pressure on Pakistan until it has received a credible assurance that Islamabad will rein in the
- links between its security services and Islamic militants opposed to Indian rule in Kashmir
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Resilience To Global Downturn Challenged
- We are expecting GDP growth to slow to 5.0% in FY2009/10 (April-March), following a 6.3% expansion in FY2008/09,
- as a reduction of capital inflows brings the economy back to more sustainable growth levels after three fiscal years of
- breakneck expansion
- TABLE ECONOMIC ACTIVITY
- Monetary Policy
- Pace Of Rate Cuts To Slow In 2009
- We expect monetary easing to continue in 2009 as policymakers seek to cushion a marked slowdown in economic
- growth, although the pace of interest rate cuts will not be as aggressive as in Q408
- Table MONETARY POLICY
- Balance Of Payments
- Reduced Capital Inflows Increase Risk To Current Account
- We see increasing risks in Indias seemingly chronic current account deficit in spite of an anticipated improvement
- in FY2009/10 on the back of a falling bill for oil imports
- Table BALANCE OF PAYMENTS
- Investment Climate
- Labour Discrimination Diminishes Maharashtras Allure
- The implementation of job quotas for local residents will decrease the allure of investing in Maharashtra to the
- favour of neighbouring Gujarat and other states vying for the position as Indias foremost manufacturing centre
Chapter 3: 10-Year Forecast
- The Indian Economy To 2018
- Governance And Infrastructure Holding Back Growth
- India is, together with China, often heralded as one of the rising economic superpowers of the 21st century
- TABLE Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
- China
- A Seismic Upheaval In 2009?
- One of the biggest and least discussed wild cards that could rear its head in 2009 is dramatic political
- upheaval in China
- United States
- Europe
- Big Trouble For European Banks In 2009
- The deteriorating global macroeconomic outlook, high levels of leverage, and a broken business model will combine
- to spell trouble for the financial services sector in 2009
- table: Banks Leverage Ratios
- table: Assets As % of Home Country GDP
- table: Assets As % of Home Country GDP When Euro zone Is Considered Home Country
- table: Exposure As % of Tot al Exposure To Region
- table: Banks Foreign Exposure (US$ mn)
- TABLE: Exposure As % of National GDP
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- Market Orientation
- TABLE: ASIA, FDI ANNUAL INFLOWS
- TABLE: BMI TRADE RATINGS
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: Key Sectors
- Oil & Gas
Executive Summary
- Between 2007 and 2018, we are forecasting an increase in Indian oil production of just 7.4%, with crude volumes
- peaking in 2011 at 950,000b/d, then falling steadily to 860,000b/d in 2018
- Table: India Oil & Gas Historical Data & Forecasts
- Telecoms
Executive Summary
- Following its fall from fifth position in our previous update, India remains steady in eighth place in BMIs latest
- set of Business Environment Rankings for Asia
- Table: Telecoms Sector Mobile Historical Data & Forecasts
Chapter 7: BMI Global Assumptions
- Global
- TABLE: GLOBAL ASSUMPTIONS
- Economic Activity
- Table: GLOBAL AND REGIONAL REAL GDP GROWTH, % chg y-o-y
- Monetary Policy
- TABLE: DEVELOPED STATES, REAL GDP GROWTH FORECASTS
- TABLE: EMERGING MARKETS, REAL GDP GROWTH FORECASTS
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- TABLE: EMERGING MARKET EXCHANGE RATES