Macro PPT_UBI_HNI summit_28.05.2024_.pptx

Presentation on India macroeconomic outlook

1. India macro outlook: In a sweet spot 28-05-2024 BANKING RESEARCH TEAM

2. India is an island of stability in a volatile world Source: CEIC, Bloomberg and UBI research Despite geopolitics led spike in commodity prices and risk aversion, India remains an outlier vs G4 peers across asset classes

3. India is an island of stability in a volatile world Source: CEIC, Bloomberg and UBI research Despite geopolitics led spike in commodity prices and risk aversion, India remains an outlier vs G4 peers across asset classes

4. All stars have aligned together for the Indian economy Policy reforms by government and RBI support macro stability Capex and credit cycle taking off after a decade Banks well positioned for higher credit demand Inflation has been relatively well behaved on proactive policy steps Low external sector vulnerability on reserve buffers, services exports boost World looking at India as a key growth engine attracting capital flows

5. Source: CEIC , UBI research Is 8% GDP growth the new normal for Indian economy? GDP growth has spiked to 8% in Q1-Q3 FY24 while GVA lag % y/y Macros stay favourable amid contained inflation % y/y

6. Source: RBI, IMF and UBI research Geopolitical risks on close watch given impact via commodity price channel; RBI geo-political risk indicator However, global risks to domestic growth in focus Global growth slowdown likely to weigh on domestic growth; % y/y

7. Key event in focus – Election results on 4th June 2024 Sectors – Key winners post elections assuming political stability Sectors are identified based on BJP Manifesto Defence Railways Renewables Civil aviation Electronics & semiconductors Tourism Railways Digital infra

8. *Government estimates; Source: Viksit Bharat@2047 report and UBI research Viksit Bharat 2047 – how attainable is the aim? Opportunity sizing as India transitions to become developed economy   Unit FY15 FY24 FY31* FY48* GDP USD trn 2.0 3.6 7.0 30.0 Per capita GDP USD 1580 2500 4000 ~20,000 Investment USD trn 0.7 1.2 2.5 10.5 Investment % of GDP 34.3% 33.7% 35.0% 35.0% Exports USD trn 0.46 0.79 1.58 8.67 Exports % of GDP 21.9% 23.0% 22.5% 28.9% Bank credit USD trn 1.1 2.0 3.9 16.7 Bank credit % of GDP 52.0% 55.7% 55.7% 55.7% Assumptions for the Viksit Bharat 2047 trajectory appear credible; only condition is India is required to stay on high growth path

9. Sunrise sectors in focus with boost from government Semiconductors, renewables and infra to drive capex in the coming years Source: CRISIL, UBI Research   Rs lakh crore FY24E FY25P FY19-23 FY24E- 28P FY24E- 28P CAGR FY24E-28P/ FY19-23 A. Industrial (I +II+III) 5.4 17-19% 19.6 31-33 8-10% 1.7 I. Emerging 0.5 70-80% 0.4 5-7 70-80% 14.5   Semiconductors and electronics 0.3 35-40% 0.4 3 55-60% 7.5   EV capex 0.2 1.2-1.3x 2       Battery manufacturing 14-16x 0.4       Solar modules 30-35% 0.2 15-20% 5.2 II. PLI 0.5 45-50% 0.6 2 NM 3.8 III. Conventional 4.4 5-7% 18.6 24 5% 1.3 B. Infrastructure 14 14-16% 45.5 85-88 10-12% 1.9   Roads 3.8 11-13% 13.3 24 11-13% 1.8   Power 2.9 35-40% 10.8 22 13-15% 2   Railways 2.9 7-9% 8.8 17 8-10% 1.9   Urban infra 2.4 3-5% 5.7 13 8-10% 2.2   Other infra 2 8-10% 6.9 12 9-11% 1.7   Total (A+B) 19.4 9-11% 65.1 115-125 9-11% 1.8

10. Source: CEIC , AMFI and UBI research Till FY23, Households shifted savings away from deposits towards equities Share of deposits in household financial savings under downward pressure; HH financial savings by asset class Rising flows into MFs by households SIP Flows in MFs (Rs. Crore)

11. Repayment in RE 2023-24 and BE 2024-25 is net of recovery of Rs.78,104 Cr & Rs. 1,23,604 Cr respectively from GST Compensation Fund, * assuming growth of 10.5% in GDP; Source: Budget documents, UBI research We are Positive on longer dated Gsecs Fiscal Indicators Parameter FY15-20 FY21 FY22 FY23 FY 24(RE) FY 25(BE) FY 26* FD (% of GDP) 3.8 9.2 6.8 6.4 5.8 5.1 4.5 FD (Rs. Lakh Crore) 6.3 18.2 15.8 17.4 17.3 16.8 16.3 of which Net Market Borrowing (Rs. Lakh Crore) 4.4 10.3 7.0 11.1 11.8 11.8 11.8 RBI’s bountiful surprise of Rs 2.11 lakh crore is strongly favourable for bond market outlook

12. Thank You ! The views expressed in this report are personal views of the author(s) and do not necessarily reflect the views of Union Bank of India. Nothing contained in this publication shall constitute or be deemed to constitute an offer to sell/ purchase or as an invitation or solicitation to do so for any securities of any entity. Union Bank of India and/ or its Affiliates and its subsidiaries make no representation as to the accuracy; completeness or reliability of any information contained herein or otherwise provided and hereby disclaim any liability regarding the same.