ECONOMIC ANALYSIS

India & Reliance Industries Limited

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Table of Contents

Economic Analysis3

Impact of Global Recession on Indian Economy5

Reliance Industries Ltd6

Vulnerability Analysis8

SWOT Analysis10

Competitive Landscape10

References12

Appendices13

India & Reliance Industries Limited

Economic Analysis

India is the world's second most populated country and one of the fastest growing economies. While India has a diverse economic system, the farming industry, such as forestry and fishing, still accounts for around 17 % of GDP and utilizes about 60 % of the employees. The services industry is now the most dynamic industry, accounting for over 50 % of GDP, with telecoms and technological innovation registering particularly rapid growth. India's huge, skilled employees makes it a popular choice for worldwide companies seeking to delegate perform, and there also has been a manufacturing growth nowadays driven by the efficient use of technological innovation (Country Report - India 2010).

Real GDP (on an expenditure basis) got off to a poor start in 2012/13, growing by 3.9% year on year in the first quarter of the fiscal year; the comparable figure on a factor-cost output basis was stronger, at 5.5%. Moreover, massive power outages that struck India in late July and a deficient monsoon will have a negative impact on growth in the second quarter. The slowdown in private consumption is particularly worrying; high-frequency data, including vehicle sales and growth in same-store sales of major retailers, indicate that private consumption is likely to remain weak. High interest rates continue to deter capital investment and the RBI is unlikely to ease monetary policy unless inflationary pressures abate. In view of the weak first-quarter expenditure data, we have revised down our forecast for real GDP growth in 2012/13 for the third consecutive month, to 5.8%. Growth in private consumption (which accounts for more than one-half of nominal GDP) is forecast to decelerate, from 5.5% in 2011/12 to 4.7% in 2012/13. Weak business and confidence will limit investment growth, which will slow to 4.8% in 2012/13. The need for fiscal consolidation means that government consumption growth will remain at around 5%. India is better insulated from international trends than many other emerging-market economies, but weak growth in the EU will continue to hamper Indian export growth and to serve as an additional constraint on investor enthusiasm. The external balance will subtract very slightly from real GDP growth in 2012/13.

In 2013/142017/ 18 real GDP growth will average 7.4% a year as India's strong fundamentals—hig savings and investment rates, rapid workforce growth and a quickly expanding middle class—ensure a return to a healthier economic performance. But growth in the latter part of the forecast period will remain below potential, constrained by poor economic policymaking, shortages of skilled labour, infrastructure bottlenecks and the difficulties involved in moving resources from low-productivity agriculture to high-productivity manufacturing. (The 5 year analysis of the Indian Economy can be further analyzed by the data provided in the Appendices).

Inflationary pressures remain worryingly high, with wholesale prices up by 7.6% year on year and consumer prices increasing by 10% in August. The food component carries a weighting of ...