Indias National Export Credit Agency Investor Presentation 1 - PowerPoint PPT Presentation

India’s National Export Credit Agency Investor Presentation 1

Presentation Outline Exim Key Credit Highlights The India Story The Exim Bank Story Appendix 2

Exim Key Credit Highlights 3

Exim Key Credit Highlights  Set up under an Act of Parliament in 1981 by the Government of India 1 India: Strong Macro  100% owned by the Government of India (“GoI”) . backed by supportive policy Environment  An Instrument of Government policy as India’s official Export Credit Agency . 5 2  Assists GoI in policy formulation and project selection under Economic Management Exim: India’s engine Strength Proxy to Sovereign for growth of Diplomacy. International Trade  International investment grade ratings at par with Sovereign and BBB+ rating by JCR . Policy Role at Financial Highlights National Level  Policy Business Guaranteed / Insured by the Sovereign . 4 3  Strong regulatory capital position.  Strong access to multiple sources of liquidity, both onshore and offshore. 4

The India Story 5

India: Strong Macro backed by supportive Policy Environment Resilient GDP Growth (1,2,3)  World’s 6th largest economy based on nominal GDP in CY 2017. (2) o Nominal GDP for CY 2017: ~US$ 2.6 tn. (2)  World’s 3rd largest economy based on GDP measured in PPP terms in CY2017. (2) o GDP in PPP terms for CY 2017: ~US$ 9.5 tn. (2)  India jumped up 23 notches to the 77 th position from 100 during 2017- 18 on the World Bank’s ‘Ease of Doing Business’ Index 2019.  GDP growth for Q2 2018-19 (Jul-Sep) estimated at 7.1%, as against 8.2% in Q1 2018-19 (Apr-Jun) and 7.7% in Q4 2017-18 (Jan-Mar) . (3)  Favorable demographic profile: 66% of the population is between the age of 15 to 64 years . (4)  Growth in India has been majorly driven by an upswing in consumption and investment. (4) 6 Source: (1) Institute of International Finance (IIF); (2) IMF World Economic Outlook October 2018 & January 2019 Update. Data for CY; (3) Ministry of Statistics and Programme Implementation (MOSPI); (4) World Bank Database; FYxx means financial year ended March 31, 20xx.; E- Estimated ; F – Forecast; P – Projected.

Indian Economy: Key Economic Indicators General Government Debt (% of GDP) (1) Current Account Deficit (2) Currency Movement (4)(6) Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Indian Rupee Russian Ruble Brazilian Real Chinese Yuan Inflation Rate (2)** Key Macroeconomic Metrices 9.3% Key Parameters FY10 FY14 FY18 Change 5.8% 4.9% Gross National Saving (% of GDP) (3) 33.7 32.1 30.0 # (210 bps) 4.5% 3.6% 3.8% Gross Domestic Investment (% of GDP) (3) 36.3 33.8 30.6 # (320 bps) 5.2% Gross Fixed Capital Formation (% of GDP) (3) 31.7 31.2 29.5 ## (270 bps) 1.2% 1.7% 2.9% 2.2% Capital Expenditure (3)(5) 9.4 12.0 12.3 ## 30 bps Fiscal Deficit (% of GDP) (3) 3.3 ## 6.5 4.5 (120 bps) FY14 FY15 FY16 FY17 FY 18 FY 19 Revenue Deficit (% of GDP) (3) 5.2 3.2 2.2 ## (100 bps) (Dec) FDI Inflows (US$ bn) (2) 37.7 36.0 61.0 69.44% -3.7% Exchange Rate (INR/US$, avg.) (2) 47.4 60.5 64.4 6.45% CPI WPI Source: (1) Institute of International Finance (IIF) Database; (2) Reserve Bank of India, Press Release and Online Database (accessed online on 30/01/2019; (3) Central Statistics Office; (4) Bloomberg (Rebased to 100); 7 (5) % of Total Expenditure for FY10 & FY14 and % of Budget estimate for FY19; # Data pertains to FY17 Revised Estimates; ## Data pertains to Budget Estimates/ Advance Estimates of FY19 ; ** Base year for CPI Inflation FY14-FY19 is 2012=100; (6) INR: Indian Rupee; RUB: Russian Ruble; BRL: Brazilian Real; CNY: Chinese Yuan; IDR: Indonesian Rupiah; PHP: Philippines Peso

Sound External Sector Trend of Services Trade (2) Trend of Merchandise Trade (1) (US$ bn) (US$ bn) India’s Export Pattern (1) India’s Import Pattern (1) 165 58 32 36 31 25 22 13 68 US$ 314 bn FY 2014 FY 2014 US$ 450 bn 41 31 63 37 22 33 18 22 47 FY 2018 US$ 303 bn FY 2018 42 38 37 36 28 27 25 23 47 109 75 52 40 39 32 27 22 64 US$ 466 bn Gems & Jewellery Chemicals Petroleum Products Petroleum Products Gems & Jewellery Electronics Items Textiles Base Metals Agri & Allied Products Chemicals Machinery Ores & Minerals Machinery Transport Equipments Others Base Metals Agri & Allied Products Others  Merchandise trade (exports + imports) as percentage of GDP stood at 29.7% in FY18. (1) India’s share in global merchandise trade stood at 2.1% (2017). (3)  India emerged as the 20 th largest merchandise exporter in 2017; and accounted for 1.7% of global merchandise exports in the same year. (3)  India is the 9 th largest exporter of services in 2017, accounting for 3.4% of global services exports. (3) 8 Source: (1) MOCI/IIF; (2) Balance of Payment Statistics, RBI; (3) World Trade Organization (accessed on 30/01/2019).

External Debt vis-à-vis External Reserves External Reserves : 403.1% 393.1% 390.8% 371.1% 360.7% External Debt 301.4% FC Assets : External 268.6% Debt 69.3% 73.5% 75.4% 66.8% 73.7% 63.4% 61.9% Volatile Capital Flows: 87.0% 85.8% 86.9% 86.2% 94.3% 90.4% 92.3% 80.1% 71.3% 78.5% 78.5% 72.0% 74.3% External Reserves 68.2% FCA: Short-term debt (US$ bn) FY13 FY14 FY15 FY16 FY17 FY 18 FY 19 (Apr-Sep) External Debt 409.4 446.2 474.7 485.0 471.3 529.7 510.4 External Reserves 292.0 304.2 341.6 360.2 370.0 424.5 400.5 External Debt External Reserves FY 13 FY 18 FY 13 FY 18 2% 1% 2% Commercial 5% Foreign 6% 4% 5% Borrowings 11% 9% Currency Short Term 34% 14% 38% Assets Gold Non Resident 24% 17% Multilateral SDRs / Reserve 19% 24% 89% 94% Bilateral Tranche Trade Credit India has the 7 th largest total reserves in the world [3]  9 ( 1) ‘Volatile Capital Flows’ is defined to include cumulative portfolio inflows and short -term debt (RBI). For FY18, Volatile Capital Flow data pertains to end- Jun’18; (2) Volatile Capital Flows to Reserves ratio peaked at 97.4% in September 2013; (3) Source: RBI/Ministry of Finance, Government of India; [3] Source: https://data.worldbank.org/indicator/FI.RES.TOTL.CD?view=chart&year_high_desc=true accessed on 30/01/2019.

India’s Twin Balance Sheet Problem  Investment-GDP Ratio soared by 11% points to 38% in four years to FY08.  GNPA Ratio for Scheduled Commercial Banks (SCBs) soared from 2.3% as on March 31, 2008, to 10.8% as on September 30, 2018. GNPA ratio for Public Sector Banks  Expectations of sustained double digit growth by corporates. (PSBs) as on September 30, 2018 was 14.8%*.  In three years to FY09, bank credit doubled.  SCB’s GNPA Ratio projected to decrease to 10.3% by March 2019 and that of PSBs is  Indian companies aggressively acquired companies overseas (e.g.: TATA Steel’s projected to decline to 14.6%*. acquisition of Corus Steel, Hindalco’s acquisition of Novelis Inc).  Bunching of bad loan recognition due to previous regulatory forbearance.  Not a systemic failure - exogenous factors / delay in recognition. Bad-Loan- Pre Global Financial Crisis Encumbered Banks Post Global Financial Crisis Resolution  Accommodative monetary policy tightened due to rise in inflation: o Repo rates increased from 4.75% in April 2009 to  Asset Quality Review (AQR). 8.50% in October 2011.  Schemes - 5:25 Flexible Refinancing, Strategic Debt Restructuring (SDR), Scheme for  INR Depreciation added to the stress in FC debt servicing: Sustainable Structuring of Stressed Assets (S4A) - withdrawn w.e.f. February 12, o USD/INR depreciated from 52.97 in February 2013 to 68.36 in August 2013. 2018.  In 2013, 33% of corporate debt was owed by companies with ICR < 1; increased to  The Insolvency and Bankruptcy Code, 2016 (IBC). above 40% in late 2016.  Announcement of INR 2.11 tn capital infusion into PSBs, including re-capitalisation  Capacity Utilization in Industry declined from 80.9% in Q3FY10 to 73.8% in Q1FY19. bonds of INR 1.35 tn (INR 820 bn capital already allocated to PSBs). In July, GOI infused INR 113 bn in 5 banks (PNB, Allahabad Bank, Andhra Bank, IOB and Corporation Bank). INR 420 bn to be infused by March 2019. 10 Source: RBI Economic Survey 2016-17 & 2017-18, Bloomberg Database. * Financial Stability Report, RBI, December 2018; # Monetary Policy Report, RBI, October 2018

Economic, Institutional and Structural Reforms  Make in India .  Liberalisation of FDI-25 Focus Sectors .  Relaxed FDI Norms: 100% permitted in single-brand retail and c onstruction development.  Aadhaar backed Direct Benefit Transfer (DBT) .  The Real Estate (Regulation and Development) Act, 2016 (RERA) .  The Insolvency and Bankruptcy Code, 2016 (IBC) .  The Banking Regulation (Amendment) Act, 2017 .  Constitution of Monetary Policy Committee (MPC) under the Monetary Policy Framework Agreement .  Currency Exchange (Demonetisation) .  Goods and Service Tax (GST) .  Bank Recapitalisation Bonds .  Targets set by N K Singh Committee on Fiscal Discipline: o Debt-to-GDP ratio of 40% for Central Government, 20% for State Governments and fiscal deficit of 2.5% of GDP by FY23 .  India jumped up 23 notches to the 77 th position from 100 during 2017- 18 on the World Bank’s ‘Ease of Doing Business’ Index 2019: o Among the top 10 performers consecutively for the second year o India decreased border and documentary compliance time for both exports and imports  Moody's upgrades India's Government bond rating to Baa2(stable) from Baa3(positive): o Based on the reforms carried out, India’s structural credit strength and global competitiveness have improved. 11