28-09-2016 Presented By: Aurobinda Prasad Vice President Kotak Commodities Services Pvt. Ltd. 022-66528894 Aurobinda.gayan@kotakcommodities.com

Kharif 2016-17 Crop Prospects and Inflation Outlook

46% - food and beverages share in CPI Higher vegetables and pulses price- kept 2016 YTD inflation higher Sugar retail price hit Rs. 40/Kg Non-food inflation- muted; thanks to fuel price- globally low

Oil & Commodity Price collapsed; crude down 15% in past 2 years Fiscal deficit –narrowed down De- bottleneck in supply chain Last year drought, this year Normal monsoon- better crop prospects 2015 avg. CPI : 4.91%, YTD 2016 : 5.48%; Coming three months – critical Kharif Harvesting to pull prices down

YTD 2016 avg. inflation= 7% 2015 avg. inflation= 4.10% Food inflation fell to 8.23% in August vs. 11.82% in July Vegetable inflation – sharp decline from 28.05% in July to 0.17% August ( Excess supply) Should there be a rate cut in October or December? 0.25% likely – December!!!!

Repo rate steady @ 6.5%- since April Last two years- Repo rate & statutory rates – dropped gradually Central bank’s endeavor- to keep the interest rate lower- inflation target below 4% in 2017 We expect the Reserve Bank of India (RBI) to lower rates by 25bps in Q4 16, to 6.25%

Kharif Crop Sowing Crosses Normal Sowing Area as on 23rd September   Kharif Crop Sowing Crosses Normal Sowing Area  as on 23rd September Acreage under pulses higher: - government’s effort to push farmers Oil seed acreage up- specifically Soybeans and Mustard seed Sugar cane- acreage down, farmers are still reluctant – arrears issue Cotton sowing – down- June rainfall , whitefly attack- last year crop damage Crop Area sown in 2016-17 Area sown in 2015-16 Change Rice 387.04 377.35 3% Pulses 145.84 112.93 29% Coarse Cereals 189.58 183.59 Oilseeds 189.16 183.71 Sugarcane 45.77 49.6 -8% Jute & Mesta 7.59 7.73 -2% Cotton 102.55 115.98 -12% Total 1067.53 1030.89 4% Lakh Ha In total acreage up by 4%, good indication, eye on YIELD

Area and Yield- is expected to be better   1st Advance Estimates of production of major Kharif crops for 2016-17  Food grains: Production of Kharif Food grains estimated at 135.03 million tonnes a new record, up by 9% from last year, also 7.65 million tons higher than 5 years average production Oil seeds: 23.36 million tons Soy bean:  14.22 million tonnes/ Industry expects around 10 million tons Groundnut:  6.50 million tonnes Castor seed: 1.73 million tonnes Cotton: 32.12 million bales ( 1 bale= 170 kgs)/ We expect around 34 million bales Sugar cane: 305 million tonnes. Three consecutive years production is set lower “ Estimated production of most of the crops during current Kharif season is projected to be higher as compared to their production as per 4th Advance Estimates for 2015-16” Area and Yield- is expected to be better

South West Monsoon- Set to withdraw   South West Monsoon- Set to withdraw Earlier projection 104% LPA: IMD, SKYMET, Global agencies As of latest report – monsoon is recorded around 97% - Weak LA NINA Note: 96 to 104%- Termed as Normal monsoon Dispersion of rain – better this year- good for crops- sowing/Yield Delay in monsoon withdrawal - Hope to reach towards 98+%, 10 days left- likely better rain in south peninsula region

Viewpoints Overall expectation is positive for 2016-17 Kharif crop   Viewpoints Overall expectation is positive for 2016-17 Kharif crop Record food grain production in 2016-17 Pulses production may rise. Rabi crop is expected to improve- ample water in the reservoir and adequate soil moisture Inflation to subside - food inflation to ease in next two quarters , avg. below 6%

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