March 18, 2014

India: The first 100 days from May 16

Sachchidanand Shukla SVP - Economist - Institutional Equity Research sachchidanand.shukla@axiscap.in 91 22 4325 1108 Shiv Nanda, AVP - Consumer 1 shiv.nanda@axiscap.in 91 22 4325 1124

From Elections to Independence day

18 MAR 2014

Thematic Report

Opinion polls and markets seem to have already elected a new stable government led by Narendra Modi. It has also sneered at AAP and the third fronts ability to engineer a fractured mandate. We discuss the key factors (personalities and states etc) on which the above premise and expected outcome hinges Markets also seem to be factoring in:
Return to fiscal prudence: Huge government borrowings of Rs 5 trn+ threaten to crowd out private investments and vitiate the interest rate cycle. If the new government articulates its roadmap of returning towards fiscal prudence, investor confidence will favor India, easing pressure on Indias sovereign rating and currency Improved investment climate: Easier FDI/ investment climate, divestments, faster clearances, key reforms such as GST, etc

That any new government has to decisively implement a huge list of reforms is a given. The question is, how markets will judge the new leadership in the first 100 days, which will give it confidence of kickstarting a virtuous cycle. Thus, in this report, we identify some of the softer issues, which unless tackled will make the euphoria over change of guard largely ephemeral:
Mindset: What are the few big transformational ideas which can restore faith in the India story? Can the government think like a facilitator vs. a landlord? Will it give importance to skilling our labor force vs. simplistic dole-outs? Articulation of intent: Inclusiveness (will it embrace states) and decentralized decision making; can it identify newer engines of growth (urbanization, revival of manufacturing, tourism?), employment (tax breaks for investments that create new jobs, Construction, Textiles?) and infrastructure (create state owned land bank companies which will auction these ready parcels for infra projects, creation of an Infrastructure Ministry to obviate oversight from dozens of ministries, Railways?) Credibility: Budget will be the first litmus test can it send a bold message through complete diesel deregulation? Can consistency in tax policy become a hallmark? Can the government restore the credibility of institutions?

Contents

18 MAR 2014

Thematic Report

Page Political math: What is being factored in First 100 days: Policy direction Appendix
Governance deficit, economic weakness beckons leadership change Momentum in BJPs favor Indias other Balance of Payments problem Election schedule Current Lok Sabha Composition Election History Distribution of Lok Sabha seats and ruling parties Regional parties have witnessed big traction 20 21 22 23 24 25 26 27

4 11

Political math: What is being factored in

Possible scenarios for BJP-led NDA based on opinion polls

18 MAR 2014

Thematic Report

Core* NDA 230

Possible post election allies** YSR Congress 12 TDP 10

Swingers/outside support TMC 26 Others# 20

PM

Scenario:

High probability

1
NDA 200 YSR Congress 12 TDP 10 TMC 26 BJD 14 TRS 6

Scenario:
Medium probability

2
NDA 180

Scenario:

Low probability

3
At this point, political momentum is shifting towards the NDA

*Note: NDA comprises of BJP, Shiv Sena, SAD & LJP, ** Seat projections are average of mean predictions by CSDS and Nielsen survey #includes independents and other smaller parties

Third front (+ UPA ) may not be the feared party spoiler after all

18 MAR 2014

Thematic Report

Mentored by leaders of the Left and regional parties, a non-Congress and nonBJP front took shape in February 14 Importantly, Jayalalithaas AIADMK has already broken the alliance with Left in TN TMC & BSP have decided to stay away from this front, weakening the core 2 other important members Naveen Patnaik s BJD (13 LS seats) and AGP have also distanced themselves from the coalition, impacting prospects Extrapolating opinion poll indications, we find that third front + UPAs seat count will not be sufficient to form a government, even if one assumes that all possible candidates come on board (refer chart on RHS) Key Risks:
BJP faltering in UP (<40 seats) INC doing better than expected

Core allies

P a rty Lea d er Left (4 parties) Tota l

SP JD (U) JD (S) JVM Tota l Mulayam Singh Nitish Kumar Deve Gowda

P roj. sea ts* Existing sea ts 29 25 23 25

17 6 5 2 30 22 20 1 2 45

Extended allies (pre/post elections)

core + extended
INC UPA allies TRS RJD BJD DMK Tota l
AAP

53

70

Swing possibilities/ outside support

K. Chandrashekar Rao Lalu Prasad Naveen Patnaik

110 15 8 10 16 16 175
8

206 23 2 4 14 18 267
0

Desperate combinations

Total
Source: Times Now, Nielsen, CNN-IBN, Axis Capital

236

337

Note: Projected seats is the most optimistic projection among opinion poll surveys

~15 parties, 4 PM aspirants and lack of common ideological space make it a seemingly unlikely proposition.
6

Fourth front: The Last Mile enablers or party spoilers?

18 MAR 2014

Thematic Report

Banking on the Masses

West Bengal has highest LS seats at 42 TMC won 43% of seats in GE 2009 Withdrew support to UPA in 2012 after demands (rollback of diesel price hike, FDI in retail) unmet Despite negative press, Mamata Banerjee CM, ruling TMC remains WB (Trinamool Congress) strong in the state 4th

Momentum on her side.

Tamil Nadu has the 6th highest LS seats at 39 After a disappointing show in 2009 LS elections, AIADMK won the 2011 assembly election by securing a simple majority Polls indicate momentum could benefit the party in the upcoming general J. Jayalalithaa CM, elections

Tamil Nadu (AIADMK)

Emotive appeal
Andhra Pradesh sent 37 MPs to the parliament However, with bifurcation of Andhra Pradesh into Telengana & Seemandhra ,YSR will be aiming to get a bulk of the 25 seats in Seemandhra capitalizing on emotive appeal of joint AP Y.S Jaganmohan Reddy *Note: seat projections based on the most optimistic among poll surveys

The dark horse

Major angst brewing against INC and SP (ruling party) due to riots, which could swing the electorate towards the next formidable opposition Though BSP lost in 2012 assembly elections, there is no significant erosion in loyal support base A Congress-BSP tie up could put a spoke in the wheel for BJP in UP as it would lead to a consolidation of Muslim and Dalit votes

leader (YSR Congress)

Mayawati leader (BSP)

If the NDA only manages to gather180-200 seats, forging alliances with large regional parties will be pertinent in the backdrop of Indias other Balance of Payments problem (ref appendix)
7

Swing states for BJP to hit 200!

18 MAR 2014

Thematic Report

Uttar Pradesh (UP): Strong comeback and polarization after Muzaffarnagar riots, and ruling SPs bungling on governance also helps Bihar (BH): Nitish has lost ground, BJP gaining momentum and has tied up with Paswans LJP and has managed to sway members from RJD too

5 25
Maharashtra (MH): Tie ups with RPI and an understanding with MNS on contesting LS polls ,as long as it does not upset its equation with SS, will be a positive

80 40

25

29
48 42

14 21

42

Andhra Pradesh (AP): Limited presence of BJP hence YSR Congress or TDP alignment key. TRSs reluctance to ally with INC is a key positive

Note: Numbers represent Lok Sabha seats for that state

Direct fight BJP vs. INC
BJP vs. regional parties Regional parties slugfest

28 39
Tamil Nadu (TN): Ruled by AIADMK, a former BJP ally. The party has a clear edge, but has joined the 3rd front. Importantly, some other influential entities ie PMK & DMDK have also allied with BJP

170-180 seats will see direct competition between BJP and INC. However, mission 272 rests on delivering in states such as UP & Bihar where it is a multi-cornered fight
8

Uttar Pradesh the big fight!

18 MAR 2014

Thematic Report

Tailwinds for BJP

6 mn new voters (5% of total UP electorate),
of which most are located in urban areas where BJP has traditionally been strong
communal riots
Region: Rohailkhand No of seats: 11 Upper hand: BSP Insight: Bi-polar contest between Modi and one of the other three BSP, SP and INC

Headwinds for BJP

Versus others, BJP has averaged the
lowest seat to vote conversion (0.8x) over the past 3 general elections in UP
Secular votes could move from a declining Congress to BSP

BJPs prospects have strengthened after the

INC-BSP potential pre-poll alliance:

Region: Upper Doab No of seats: 15 Upper hand: BJP Insight: Strong support from upper middle class and Jats

Region: Avadh No of seats: 18 Upper hand: BSP, BJP

Region: Lower Doab No of seats: 11 Upper hand: SP Region: Bundelkhand No of seats: 4 Upper hand: BSP & BJP

Region: Poorvanchal No of seats: 21 Upper hand: BSP & BJP Insight: Bi-polar contest between Modi and one of the other three BSP, SP and INC

Mission 272 hinges on BJPs performance in Eastern UP

9

Political alliances: Momentum in BJPs favor

18 MAR 2014

Thematic Report

CNN-IBN CSDS survey projects NDAs seat count at 176

Poll survey projects NDAs seat count to increase to ~220

Naveen Patnaik of BJD distances himself from 3rd front BJP forms pre-poll alliance with LJP in Bihar to garner Muslim votes TRS rejects alliance with Congress in AP TMCs political engagement with Anna Hazare may eat into AAPs votes AIADMK, which is expected to be a big winner in TN, calls off alliance with 3rd front DMDK and PMK in TN have entered into negotiations with BJP over forming a pre-poll alliance Arrangement in Haryana ensures 2 cornered fights between 3 parties (including BJP) and the Congress

Plenty of positive developments for BJP in the run up to elections

10

First 100 days: Policy direction

The first 3 months: Markets await a change in mindset of govt, not incrementalism!

18 MAR 2014

Thematic Report

Mindset
Paradigm shifts in thinking? Govt as landlord to facilitator for pvt sector Remove fear psychosis in the bureaucracy and private sector Restore respect for institutions & institutionalization of processes Strong PMO that leads and coordinates effectively between various ministries and catalyzes execution

Articulation of intent
Spell out new engines of
Employment:: Construction, tax breaks for investments that create jobs: textiles?) Growth : Urbanization, Revival of Manufacturing (Spl Enclaves), SMEs Infra: Creation of a separate Infra ministry? Govt owned Land bank corporations for Infra projects? Railways as a big capex driver?

Credibility
Emphasize consistency in tax policy
Budget will be the first litmus test for the new government. Can articulate on subsidy management (esp diesel deregulation) and realistic revenue measures

Inclusiveness
Dialogue with states, decentralization of power to address GST/DTC, Land acquisition, Mining, APMC GST: Provide momentum post Oct after the 14th Finance Commission report Dole out vs. Skilling/Soft Infra, health/education / Use food & education vouchers ?

No magic economic wand. Implementation of new ideas eg Manufacturing Revival or new Urbanization wave etc will take years. It is just the change in mindset that can spark a new momentum
12

Policy tilt towards the middle path due to coalition politics

The middle path

18 MAR 2014

Thematic Report

Left wing policies No privatization No FDI in retail/insurance Spike in social spending Job reservations

Financial sector reforms, bond markets, Bank licensing Divestments/privatization Infra creation (Railways, DFC), new urban centres Stable tax regime Calibrated FDI in Insurance/defense Capital market sops Repeal of socialist schemes such as MNREGA & Food security not possible but implementation can be tweaked, eg states can be given voluntary exit in return for increased allocation for skill development, infra spending etc

Right wing policies Complete privatization Labor reforms Raise defense spending

Swingers 111

Anti-BJP 206

BJP 208

13

Budget will be the litmus Test: Focus to be on quality vs. quantity

18 MAR 2014

Thematic Report

Restate revenue realistically Provide for GST compensation to states to get them on board

Tackle subsidies Guarantees to keep food & fertilizer subsidy elevated. Hence: Deregulate diesel DCT in LPG/ Kerosene Initiate food & education vouchers

Bind govt to firm fiscal targets - FRBM II

FY15E Fiscal Deficit at 4.1% with overoptimistic revenue & underestimated expenditure

Rating Agencies / Investors

New govt can peg higher at ~4.5% but initiate qualitative changes

14

A realistic budget by the new govt?

18 MAR 2014

Thematic Report

(R s b n) Gro ss T ax R ev enue Net T ax R ev enue No n- T ax R ev enue T o tal R ev enue R ec eip t Exp enditure Interest Payments Defence Subsidies Food Fertilizer Petroleum No n Pl an Exp enditure No n Pl an C ap ital Exp Pl an Exp enditure T o tal Exp enditure R ev enue Defic it

F Y14 RE 11, 589 8, 360 1, 932 10, 293 3,801 1,248 2,555 920 680 855 10, 277 872 4 , 755 15, 904 3, 703

Budgeted Yo Y 14 R E/ 14 BE (6) (5) 12 (3) 3 7 11 2 3 32 4 (26) (14 ) (4 ) -

F Y15 L ik el y New go v t 13, 4 32 9, 504 1, 800 11, 304 4,270 1,300 2,793 1,200 800 700 11, 272 1, 000 5, 24 4 17, 516 4 , 368

F Y15 BE 13, 792 9, 864 1, 807 11, 671 4,270 1,344 2,557 1,150 680 634 11, 078 1, 001 5, 553 17, 632 3, 829

Yo Y C hange 15BE/ 14 R E 19 18 (6) 13 12 8 0 25 (0) (26) 8 15 17 11 -

~13.4% nominal GDP growth and assumed tax buoyancy of 1.4x is very optimistic Aggressive assumptions though Surcharge on rich retained to help garner some revenues

Food Rs 267 bn overdue rolled over Does not consider gas price hike (impact of ~Rs 120 bn), + ~Rs 340 bn worth of subsidy rolled over Fuel subsidy provided for = Rs 250 bn. Eventual subsidy may be higher by ~250 bn.

% of GDP
F isc al Defic it

(3. 3)
5, 24 5

(3. 4 )
5, 612

(3. 0)
5, 286

Deficit reduction of 0.5% in FY15 largely revenue driven and hence any shortfall will need corresponding cut in plan expenditure yet again

% of GDP
Source: budget documents, Axis Capital

(4 . 6)

(4 . 4 )

(4 . 1)

The new government will have to present a budget with realistic numbers and yet demonstrate its commitment to fiscal consolidation
15

Reforms bucket list for the next government

18 MAR 2014

Thematic Report

Coal

Opening up of coal sector for private players for merchant mining Enabling environment for Coal India to take firm coal pricing decisions Provide faster environment/forest clearance to captive coal blocks Coal block allocation - Implement policy to auction coal blocks through competitive bidding Railway infra: Faster implementation of 3 mega railway projects (~100 km each) can augment coal supply by ~300 MTPA

Oil & Gas

Faster E&P approvals to promote domestic oil/gas production

Subsidy Rationalization: Diesel Deregulation/ restart DBT in cooking fuel subsidy Rationalization of state specific taxes on crude to provide level playing field to all refineries

Power

SEB financials: Ensure regular tariff hikes and reduction in T&D losses in SEBs through regular monitoring by the Finance Ministry and using the influence of PSU lenders Reduction of T&D losses Incentivize state governments to reduce power theft Clearances: ~9GW of coal/hydro generation capacity stalled on account of fuel/clearances/financing issues Faster environmental/forest clearance for transmission lines

Infrastructure

Govt. to kick start infra investments via EPC model e.g. Roads - 15,000 kms of NHDP yet to be bid (With a D:E of 0.6x, NHAI has requisite funding) Revive interest in BOT projects: Approximately INR 100 bn worth of road projects stuck for premium renegotiation Ports Kick start tendering (e.g. 4th terminal of JPNT port) Metro - Contracts for Ahmedabad, Pune, Jaipur, Mumbai (Phase II and III), Bangalore (Phase II) and Delhi (Phase III) city Airport - Award contracts for new airports (New Mumbai + 16 other)

16

What do markets want to see on Infra financing

18 MAR 2014

Thematic Report

Restarting construction This can only happen by the new govt. on EPC basis. Note, there are hardly any PPP projects in Gujarat (e.g. Jyoti Gram project is a prime example of EPC working well)

Monetizing existing assets by giving them to private cos. will ensure better use of the assets while unlocking money for the govt. to create new assets with long term risk capital!
Use of carrot and stick approach to deal with defaulting cos. and lax banks Power: Improving viability of SEBs through a disciplined approach of regular tariff hikes and reduction in T&D losses through modernization. While SEBs is a state subject, Central govt can force these measures through Finance Ministry/ RBI by curbing lending to SEBs
Coal India can increase production by at least 10% from existing mines without new capacity

Roads: The govt. has the funds to finance new assets - Example: NHAI has 15,000 kms of roads yet to award under the NHDP. Total cost expected to be Rs 1.8 trn. Even if NHAI were to undertake entirely on EPC, they can fund the same. Cash balance of Rs 110 bn with annual premium payments of Rs 100 bn; Net debt of Rs 64 bn only Railways 300 kms of railway linkage can help increase supply by 300 MT this needs to be done urgently. Railways are also an easy place to start as can easily demonstrate impact in 2 years itself Secondary financing IIFCL / Infra debt funds have been a good initiative trying to match long term funding for long gestation projects however, they are only looking to finance completed projects post 1 year of operations currently and those good assets banks are not willing to sell (theyd rather sell loans for assets under construction)
Currently secondary financing not working as over-regulated - Relaxation of norms needed; must leave economics to the market

17

What can the government do over a longer term?

18 MAR 2014

Thematic Report

Encash assets
Value of government owned land: US$ 1.2 trn Value of PSUs: US$ 600 bn Only 50 of the 223 PSUs are listed Non PSU stakes: US$10 bn SUUTI stake in 19 companies including ITC, L&T, Axis Bank, and puts on HZL, Balco, VSNL, etc Auctioning invaluable national resources Coal mines, oilfields, telecom spectrum, etc

Manage P&L
Income PSUs dividends: > US$5 bn GST, DTC and service taxes can add up to 2% of GDP and substantially to tax collection over the next few years if implemented successfully across India Expenditure Cut in oil subsidies by diesel deregulation Save 10-15% of money spent on subsidies by implementing DCT Food & Education vouchers

Propel growth Kick start infrastructure spending

Dedicated rail freight corridor, Bullet Trains Urbanization wave - Creation of new cities, new airports and ports Untangle the power sector, restructure SEBs and fix fuel supply issues Urban infrastructure, e.g. metro-rail, bullet trains Revamp the energy sector

Attract domestic investments

Single window clearances, transparent laws and administration Fast tracking skill development institutes, New bank licenses

Attract FDI
Clear policies for accessing Indian consumer and financial markets Transparent policies for exploiting natural resources: coal, iron ore, oil, shale gas, etc Consistent tax policies

In a demand constrained world, India has the luxury of supply side issues which are addressable through domestic policy changes
18

Appendix

Politics

Governance deficit, economic weakness beckons leadership change

25,000

18 MAR 2014

Thematic Report

1987-1990
Corruption became a big issue with the Bofors scandal break out. 3 prime ministers within 3years India faced a BoP crisis leading the country to pledge its gold with the IMF Interest rates during this period were 20%+

1991-96

1996-99
Coalition politics was at its worst with the country seeing 3 prime ministers in 3 years Fiscal deficit jumped to 6%+ from 4% in 1996 Intl. sanctions imposed post Indias peaceful nuke tests Kargil war

1999-04

2004-09

2009-14

2014

20,000

15,000

10,000

INC with the help of left parties formed the government This period was marked by a significant liberalization drive, industrial delicensing and tariff reforms

1st time a united front of parties managed to form a government This phase saw capital gains waiver, several PSU divestments and reforms in telecom and power sector UPA I reaped the benefits of a global upturn & reforms of the previous govt

?
Numerous scandals, corruption & policy paralysis Persistent inflation Growth rates <5% Fiscal deficit worrisome

5,000

Oct-84

Oct-87

Oct-88

Oct-91

Oct-94

Oct-98

Oct-01

Oct-04

Oct-05

Oct-08

Oct-11

Oct-85

Oct-86

Oct-89

Oct-90

Oct-92

Oct-93

Oct-95

Oct-96

Oct-97

Oct-99

Oct-00

Oct-02

Oct-03

Oct-06

Oct-07

Oct-09

Oct-10

Oct-12

Oct-13

GDP growth Sensex CAGR

5.3
43%

7.3
25%

6.7
-1%

8.1
9%

8.4 11%

5
2%

Oct-14

20

Momentum in BJPs favor

States
Uttar Pradesh Maharashtra Andhra Pradesh West Bengal Bihar Tamil Nadu Madhya Pradesh Karnataka Gujarat Rajasthan Odisha Kerala Assam Jharkhand Punjab Chhattisgarh Haryana Delhi Jammu and Kashmir Uttarakhand Himachal Pradesh Others (incl. UT)

18 MAR 2014

Thematic Report

Seats
80 48 42 42 40 39 29 28 26 25 21 20 14 14 13 11 10 7 6 5 4 19

BJP seat count 2009

10 9 0 1 12 0 16 19 15 4 0 0 4 8 1 10 0 0 0 0 3 4

2014 proj
44 19 0 1 24 0 24 15 19 20 2 1 5 12 3 8 6 1 0 4 4 4

Change
34 10 0 0 12 0 8 (4) 4 16 2 1 1 4 2 (2) 6 1 0 4 1 0

Risk

Taking a cue from BJPs performance in the recent state assembly elections and poll surveys, we believe the party could comfortably squeeze 70 seats from its stronghold states (Gujarat, Rajasthan, Madhya Pradesh and Chhattisgarh) alone!

Medium risk High risk Low risk

Total

543

116

216

Source:

21

Indias other Balance of Payments problem

18 MAR 2014

Thematic Report

West Bengal: Mamata had demanded ~Rs 660 bn (Rs 220 bn p.a interest moratorium for 3 years) before she walked out of UPA

Bihar: Attempts to entice Nitish Kumar demanded a special package for Bihar and was wooed with Rs 340 bn package in lieu of political support

Andhra Pradesh: Cabinet has accorded 'special category' status for 5 years to Seemandhra, The package entails minimum funding of Rs 500 bn over the next 5 years alongside tax incentives

UP: The SP was wooed with ~Rs 200 bn package in 2012 in lieu of outside support to the UPA

There is a already clamor for grant of special status (~ Rs 1 tn worth of funds pa) from the above states, which has been used by the Centre to woo regional parties. Seemandhras inclusion in the existing 11 Special Category States will raise such demands from a horde of other states like Odisha, Jharkhand, Chhattisgarh, Rajasthan
22

Election schedule

18 MAR 2014

Thematic Report

S tate Uttar Pradesh Maharashtra Andhra Pradesh West Bengal Bihar Tamil Nadu Madhya Pradesh Karnataka Gujarat Rajasthan Odisha Kerala Assam Jharkhand Punjab Chhattisgarh Haryana Delhi Jammu and Kashmir Uttarakhand Himachal Pradesh Arunachal Pradesh Goa Manipur Meghalaya Tripura T o tal
Source ECI, Axis Capital

S eats 80 48 42 42 40 39 29 28 26 25 21 20 14 14 13 11 10 7 6 5 4 2 2 2 2 2 54 3

7- Ap r

9- Ap r

10- Ap r 10 10

12- Ap r

17- Ap r 11 19 4 7 10 28 20 11

24 - Ap r 12 19 6 7 39 10

30- Ap r 14 17 9 7

7- M ay 15 25 6 7

12- M ay 18

6 9

17 6

26 5 10 20 5 5 1 10 7 1 3 5 3

6 4 13 7

2 5 4

2 2 1 2 1 6 7 92 1 7 119 117 89 64 41

*Note: We have not given the election schedule for states with a single Lok Sabha seat

23

Current Lok Sabha composition

18 MAR 2014

Thematic Report

S. No P a rty/Ind ivid u a l 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Indian National Congress(INC) Bharatiya Janata Party(BJP) Samajwadi Party(SP) Bahujan Samaj Party(BSP) Janata Dal (United) (JD(U)) All India Trinamool Congress(AITC) Dravida Munnetra Kazhagam(DMK) Communist Party of India (Marxist)(CPI(M)) Biju Janata Dal(BJD) Shiv Sena(SS) All India Anna Dravida Munnetra Kazhagam(AIADMK) Independent(Ind.) Nationalist Congress Party(NCP) Telugu Desam Party(TDP) Rashtriya Lok Dal(RLD) Communist Party of India(CPI) Rashtriya Janata Dal(RJD) Shiromani Akali Dal(SAD) Jammu and Kashmir National Conference(J&KNC)

Sea ts 206 116 22 21 20 19 18 16 14 11 9 9 9 6 5 4 4 4 3

S. No P a rty/Ind ivid u a l 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 All India Forward Bloc(AIFB) Indian Union Muslim League (IUML) Jharkhand Mukti Morcha(JMM) Jharkhand Vikas Morcha (Prajatantrik)(JVM (P)) Revolutionary Socialist Party(RSP) Telangana Rashtra Samithi(TRS) Yuvajana Sramika Rythu Congress Party(YSR Congress Party) All India Majlis-E-Ittehadul Muslimeen(AIMIM) All India United Democratic Front(AIUDF) Asom Gana Parishad(AGP) Bahujan Vikas Aaghadi(BVA) Bodoland Peoples Front(BPF) Haryana Janhit Congress (BL) (HJC) Janata Dal (Secular)(JD(S)) Kerala Congress (M) (KC(M)) Marumalarchi Dravida Munnetra Kazhagam(MDMK) Sikkim Democratic Front(SDF) Swabhimani Paksha(SWP) Viduthalai Chiruthaigal Katchi(VCK) Tota l

Sea ts 2 2 2 2 2 2 2 1 1 1 1 1 1 1 1 1 1 1 1 542

UPA
Source: ECI

NDA

Outside support to UPA

24

Election history

18 MAR 2014

Thematic Report

Year 1952 1957 1962 1967 1971 1977 1980 1984 1989 1991 1996 1998 1999 2004 2009
Source: ECI

Voter turnout 46% 55% 55% 61% 55% 60% 60% 64% 62% 57% 58% 62% 60% 58% 58%

INC seat count 364 371 361 283 352 189 351 414 197 244 140 141 114 145 206

BJP seat count 2 85 120 161 182 180 138 116

Government INC INC INC INC INC Lok Dal INC INC National Front^ INC+left United front# NDA NDA UPA + external support UPA + external support

Prime Minister Jawarlal Nehru Jawarlal Nehru Jawarlal Nehru Indira Gandhi Indira Gandhi Moraji Desai Indira Gandhi Rajiv Gandhi V.P Singh P.V. Narasimha Rao Deve Gowda Atal Bihari Vajpayee Atal Bihari Vajpayee Manmohan Singh Manmohan Singh

Party INC INC INC INC INC Janata Party INC INC Janata Dal INC Janata Dal BJP BJP INC INC

^ National front was a coalition of Janata Dal, BJP and Left, # Coalition of Janata Dal, Samajwadi party, Telugu Desam party and Left

25

Distribution of Lok Sabha seats and ruling parties

States Andhra Pradesh Arunachal Pradesh Assam Bihar Chattisgarh Delhi Goa Gujarat Haryana Himachal Pradesh Jammu & Kashmir Jharkhand Karnataka Kerala Madhya Pradesh Maharashtra Manipur Meghalaya Mizoram Nagaland Odisha Punjab Rajasthan Sikkim Tamil Nadu Tripura Uttar Pradesh Uttarakhand West Bengal Ruling Party INC INC INC JDU BJP INC BJP BJP INC INC J&K national conference Jharkhand Mukti Morcha INC INC BJP INC INC INC INC Naga Peoples Front BJD Shiromani Akali Dal INC Sikkim Democratic Front AIADMK CPI (M) SP INC All India Trinamool Congress
*543 elected seats and 2 nominated seats

18 MAR 2014

Thematic Report

26

Regional parties have witnessed big traction

18 MAR 2014

Thematic Report

P a rty Samajwadi Party Bahujan Samaj Party (BSP) Janata Dal (United) All India Trinamool Congress (AITC) DMK Biju Janata Dal (BJD) Shiv Sena AIADMK Nationalist Congress Party (NCP) Telugu Desam Party (TDP) YSR Congress Telangana Rashtra Samithi

Sta te Uttar Pradesh Uttar Pradesh Bihar West Bengal Tamil Nadu Odisha Maharashtra Tamil Nadu Tamil Nadu Andhra Pradesh Andhra Pradesh Andhra Pradesh

Lea d er Mulayam Singh Yadav Mayawati Nitish Kumar Mamata Banerjee M. Karunanidhi Naveen Patnaik Uddhav Thackeray J. Jayalalithaa Sharad Pawar Chandrababu Naidu Y. S. Jaganmohan Reddy K. Chandrashekar Rao

Lok Sa b ha Sea ts 22 21 20 19 18 14 11 9 9 6 2 2

Sea t sha re in sta te (% ) 28 26 50 45 46 67 23 23 19 14 5 5

Allia nce None None None None None Third front NDA Third front UPA Third front None None

27

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Axis Capital Limited has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval Axis Capital Limited, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of Axis Capital Limited. The views expressed are those of analyst and the Company may or may not subscribe to all the views expressed therein
This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

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