INSTITUTIONAL EQUITY RESEARCH

Rajasthan Ground Visit

Confident about Modi; mixed views on state governance

INDIA | STRATEGY 3 December 2018

After our recent MP visit, we went to Rajasthan to gauge the impact of central and state government policies, the health of the state’s economy, and the election mood. Combining Anjali Verma the two visits, we find that: (1) Central government policies have been beneficial and widely (+91 22 6246 4115) [email protected] acknowledged by the public, (2) Modi is the most favoured leader in rural regions and accredited for his good work/policies, (3) implementation of state/centre policies has been Neeraj Chadawar better in MP than in Rajasthan, (4) despite 15 years of incumbency, MP is likely to witness a (+91 22 62464116) close fight between BJP and INC, favouring BJP, (5) in Rajasthan, historical trend of change of [email protected] government every five years and angst with the ruling BJP favours a Congress win, but we received mixed feedback – indicating a close fight between BJP and Congress. (Note – we are Raag Haria not predicting the MP and Rajasthan election outcome – this is feedback that we received from the people of these states).\ Feedback from Rajasthan – Still a long way to go We met with farmers, daily wagers, residents, businesspersons, shopkeepers, and government officials during our 800km Rajasthan road visit. Key takeaways/feedback: (1) Historical trend (government change every five years) is likely to be one of the factors influencing voters’ decision‐making during the upcoming state elections. (2) We received mixed feedback on BJP’s governance in Rajasthan – one of the key reasons that could lead to INC (Congress) gaining assembly seats and for BJP losing them. (3) People complained about lack of jobs (including government), lack of water availability, corruption, lack of proper road infrastructure, and unfulfilled election promises. (4) SC’s ban of sand and bajri (gravel) mining in Rajasthan has had a serious employment and income effect on labourers for the last one year. We saw hordes of daily wagers sitting jobless across Rajasthan and in large numbers. This section blamed the existing government for its condition and said it would vote for Congress en mass. (5) Demonetisation and GST have affected businesses and in general demand is weak. Gradual improvement expected. (6) Central government policies were well applauded. However, execution was not up to the mark and responses were not as positive as from the people of the MP region. a. PMAY: Pukka houses are being constructed. Some complained that their applications have been rejected (reasons unconfirmed). b. Swachh Bharat: People were extremely appreciative of this initiative of the government and all of them claimed to have built toilets with the Rs 12,000 subsidy that it received from the government. c. PM Ujjwala Yojana: Most people have received gas connections, but also widely complained about Rs 1,000 upfront payments to buy cylinders. This is a considerable amount to spend at a time, they said. d. Aadhar card/PM Jan Dhan Bima Yojana: Most people we met have Aadhar Cards and receive Aadhar‐linked benefits. They have wide‐scale access to bank accounts. e. Digital India: We were positively surprised with villagers appreciating “Digital India” resulting in minimum leakages and assured benefits. f. PM Modi is loved by rural Rajathan/MP; rural denizens are confident that they will vote for Modi in 2019. They said that he has brought meaningful benefits to their lives. (7) Businessmen unhappy about weak business activity after demonetisation and GST, government approvals still taking long, widespread corruption. Swing factors in the upcoming Rajasthan elections (BJP won 163/200 seats in 2013): (1) Lack of jobs and employment opportunities – to favour Congress. (2) No change in BJP’s CM candidate – to benefit Congress. (3) Formation of Rashtriya Loktantrik Party (RLP) will eat into Jat votes, which favoured BJP in 2013. (4) Damp business sentiments to favour Congress. (5) Reasonable scope of infrastructure development and improving basic amenities. (6) Promise of farm loan waiver to support Congress. (7) Modi influence to favour BJP. (8) Disciplined BJP election machinery. (9) BJP being favoured after the release of the Congress’ candidates list. Page | 1 | PHILLIPCAPITAL INDIA RESEARCH

RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Our travel across Rajasthan • 800km GROUND VIEW visit to Rajasthan. We started with Jaipur (capital of Rajasthan), a part of Dhundhad region where Jat and Rajput communities are dominant. • We than headed towards Tonk, where there is a neck‐in‐neck fight between young INC leader Sachin Pilot and BJP’s minority candidate Yunus Khan. • We also headed to Mewar region where the incumbent BJP holds 43 out of 48 seats. Here, we covered Bhilwara, Chittorgarh, and Udaipur districts. • On the last day, we covered Marwar region where BJP is sitting on 42 out of 46 seats; here too Jats and Rajputs are dominant. Here, we covered Sirohi, Pali, and Jodhpur districts. • We met with farmers, daily wages workers, shopkeepers, politicians, residential people, traders, and female entrepreneurs. • Our aim was to get a perspective on the economic, business, political, and sentiment‐driven impact of the state and central government’s policies that were rolled out in the last five‐years.

Travelled 800 kms across Rajasthan over three days

Source: Hindusthantimes

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan and MP visit – Central government policies a hit, wherever they were well executed

A little while ago, we travelled 1,000km within Madhya Pradesh (Click here for our report: Madhya Pradesh Election Visit: Freebies working, but not for long). More recently, we traversed Rajasthan, covering 800km.

We received an upbeat response on all the central government policies: 1. PMAY was most appreciated due to the scheme’s large quantum; constructing pukka house is a dream come true for this section of the population 2. Most people we met had Aadhaar cards and all the benefits were now through DBT (directly transferred to beneficiary’s bank accounts). We met people who appreciated ‘Digital India’. We consider this a meaningful Across Rajasthan, we saw numerable daily wagers awaiting for jobs, sitting / standing achievement by the BJP government that is resulting in leakage minimization on the streets and adding to fiscal savings and wider coverage of beneficiaries. 3. Financial inclusion has been fairly successful – while some complained of being illiterate and the distance they had to travel, we were told that the rural public is now well serviced/catered to by banks vs. before. 4. Under Swachh Bharat scheme, rural areas of MP and Rajasthan have received Rs 12,000/house subsidy to construct toilets. We were told that all the houses have made use of this money and women have benefitted significantly as a result. 5. Under Ujjwala Yojana, most people we met have received gas connections, as an outcome of this, women are now unwilling to work on primitive chullahs.

We received a very positive response about central and state government policies from MP vs. Rajasthan – reflecting the condition of state governance. Despite 15 years of anti‐incumbency in MP, we received a good feedback about Shivraj Singh Chauhan (BJP’s ruling CM) while it was mixed for Rajasthan’s state politics. Based on our conversations with the regional population, a close contest is likely between Congress and BJP in MP as well as Rajasthan.

Rajasthan elections – On 7th December, 200 assembly seats will be contested in Rajasthan; the verdict will be out on 11th December 2018. For the last 20 years, Rajasthan has a tradition of changing the government in every assembly election. This, along with certain governance issues and unfulfilled promises, has caused anti‐ incumbency. The ruling BJP government was on the back foot a few months ago, as anti‐incumbency was very strong. However, in the last 15 days, the BJP has gained Rajasthan seed corporation offices seen prominence. Rallies headed by Prime Minister Narendra Modi and Chief Minister across state Vasundhara Raje are receiving a huge response among masses – which shows that the BJP, especially Modi, continues to be popular in the desert state of Rajasthan. Unemployment, drinking water, private and public sector jobs, corruption, and lack of good roads are the biggest issues where the anger among people is substantial.

Congress is leading a campaign under the leadership of former chief minister Ashok Gehlot and young leader Sachin Pilot. INC’s manifesto has promised loan waivers within 10 days of government formation (similar to MP) – this will be a strong positive factor favouring Congress along with anti‐incumbency. Farmers and youth are the top agenda for the Rajasthan Congress Campaign.

While it is difficult to predict the outcome of these elections, it is likely to be a close one. There is clarity that Congress is likely to gain seats in both MP and Rajasthan while BJP will lose the thumping majority it received in 2013.

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

PM Narendra Modi – The Tall Leader Irrespective of the place we visited and the people we met in rural Rajasthan and MP, we received a consensus feedback that in Lok Sabha elections, they would vote for Modi for all the good work he has done. Modiji ko hi vote dengey, 2019 main tho modiji hi aayengey – we were told by all. PM has a very clean image, the image of a doer, and was well respected by rural India.

Policies introduced by the central BJP have been very effective in uplifting the social structure of these states. Rural India feels empowered and better off under this regime. We have been of the view that the central BJP government along with states has adopted a holistic approach to bring development across rural India through the sectoral focus in sovereign spend (Click here for our April 2018 report titled Sovereign Expenditure Analysis: Centre + States = Together, We Triumph) .

BJP’s Manifesto – ‘Rajasthan Gaurav Sankalp’ – was released by CM Vasundhra Raje and Finance Minister Arun Jaitley. Here are the key highlights: • BJP has promised 30,000 new government jobs every year • 5mn employment opportunities over the next five years • Rs 5,000 allowance for the educated jobless • Doubling of farmers’ income • Taking‐up of the Eastern Rajasthan Canal Project on a priority basis • Expansion of co‐operative loans for the agriculture sector and disbursing loans worth Rs 1,000bn over the next five years • Setting‐up a Rs 2.5bn for rural start‐ups • Setting‐up a Yog Bhawan in every district • The manifesto also mentioned efforts to curb cow smuggling in the state • Benefits focused around tribals and dalits: Dr. Ambedkar chairs at govt. universities and e‐libraries and expenditure of Rs 50bn in the next five years for the development of tribal sub‐plan areas • BJP also stated recommending the inclusion of ‘Meena’ and ‘Mina’ in the list of ST and constructing memorials of tribal leaders • Various promises on industries, tourism, women, welfare, social justice, youth and journalists were also included in the manifesto • CM Vasundhra Raje claimed her government fulfilled 630 out of the 665 promises made in the party’s 2013 manifesto

BJP Karyalaya (Office), Jaipur, Rajasthan

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14‐15,000 tribal people gathered for Vasundhra Raje’s rally in Udaipur district on 27th November2018

Rajasthan Congress (INC) Manifesto ‘Jan Ghoshna Patra’ Key highlights: • The Congress has promised to offer farm‐loan waivers within 10 days of being elected in the state • Rs 3,500/month allowance for unemployed youth • Providing lifetime free education to girls and women of the state and a 24X7 women helpline • Setting up of a start‐up fund • Exemption of agricultural equipment and tractors from GST • Promoting organic farming • Promoting cultivation of export‐oriented crops • Efforts to bring petrol and diesel under GST • Availability of wheat to BPL families at Rs 1/kg • Expedite work on rail network • Introduction of journalists’ protection act • Legislation for the protection of journalists in the state is also promised in the manifesto

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Feedback from farmers and rural Rajasthan on government policies

Crop insurance and farm‐loan waivers The scheme is operated through Agriculture Insurance Company of India, United India Insurance Company, New India Insurance Company, and Bajaj Allianz GIC in Rajasthan. The notified insurance company directly deposits the claim amount in the farmers account through DBT.

Rajasthan farmers insured under Pradhan Mantri Fasal Bima Yojana Premiums Gross Farmers Farmers Area Insured Sum Insured Farmers State GoI Premium Claim Paid Benefited Insured (mn) (ha) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (Rs mn) (mn) Kharif 2017 5.3 6,095,634 100,616 2,327 7,515 7,515 17,357 13,784 2.0 Rabi 2017 2.9 3,032,970 76,248 1,450 2,105 2,105 5,660 2,138 0.4 Source: Ministry of Agriculture, GoI, PhillipCapital India Research

The Rajasthan BJP government has waived off farm loans twice in their five‐year regime, totalling about Rs 300bn. In FY19, the loan waiver worth Rs 8.5bn (0.9% of GSDP) was announced, benefitting nearly 3mn farmers across 33 districts of Rajasthan (Rs 50,000 waived for each farmer for loans taken from co‐operative banks). In FY18, Rs 200bn worth of farm loans were waived off.

Farmers covered in PMFBY in Rajasthan (mn) Funds allocated for PMFBY (Rs bn) 10.0 140 130 9.2

120 111 8.0 100 94

80 6.0 6.0 60

40 4.0 FY17 FY18 FY19* FY17 FY18

Source: PIB, PhillipCapital India Research

Pradhan Mantri Jan Dhan Yojana and Bhamashah Yojana The Pradhan Mantri Jan Dhan Yojana (PMJDY) is a financial inclusion scheme of the government, which aims to increase access to financial services among the people. In Rajasthan, PMJDY has been linked with the state‐sponsored ‘Bhamashah Scheme’. This is a state sponsored end‐to‐end welfare benefits’ delivery scheme. Launched in 2008, the scheme was introduced to empower women. It is a family based programme, where each family is issued a Bhamashah card and the benefits are availed through this. So far, more than 15mn families have been enrolled under this scheme.

GV Feedback: We interacted with farmers and daily wage workers from Jaipur, Chittorgarh, Tonk, Jodhpur. Most of these people have access to banking facilities and receive all the benefits (like cylinder subsidy, crop insurance) in their bank accounts. They appreciated this scheme.

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Accounts opened under PMJDY in Rajasthan vs. India Beneficiaries in Rural Beneficiaries in Urban Balance in Beneficiary No. of RuPay Cards Areas (mn) Areas (mn) Accounts (Rs bn) Issued (mn) Rajasthan 14.30 9.41 62.73 18.34 India 196.66 135.67 842.37 261.67 Source: Ministry of Finance, GoI, PhillipCapital India Research

Bhamashah Swasthya Bima Yojana The state government launched the ‘Bhamashah Swasthya Bima Yojana’ – a cashless scheme aimed at providing healthcare services to BPL families classified under RSBY. The scheme covers nearly 8.8mn families and has an insurance coverage of up to Rs 0.3mn. Under this scheme, 1.7mn insurance claims of Rs 9.2bn have been sanctioned by insurance companies as of December 2017.

GV feedback: These benefits are being received by the people of Rajasthan however this policy was not highlighted as the prominent one during our interactions. Most of the people said medicines are not available on time.

Mukhyamantri Jal Swawlamban Abhiyaan (MJSA) MJSA was launched by the state government to overcome the problems of shortage of fodder and potable water. The scheme is launched across 295 blocks of 33 districts and aims to make 21,000 villages self‐reliant in water. So far, 12,056 villages have been covered in the first three phases with an additional 4,000 villages to be covered in the fourth phase.

GV feedback: Mixed feedback. Some people said that they have received water supply during BJP’s rule, while others complained of serious water issues. People complained of irregular water supply even in cities. People said that this scheme is not powerful enough to solve the serious water availability issues of Rajasthan.

Mukhyamantri Rajshree Yojana MRY was launched by the state government in 2016‐17 with an aim to improve the health and education standards for girls in the state. Under this scheme, a grant of Rs 50,000 is provided to parents of the eligible child in six installments. So far, more than a million girls have benefited through this scheme.

GV feedback: Very good feedback across state, but this scheme is not big enough to attract masses.

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan assembly history In the 2013 assembly elections, the BJP government won with a striking 163 seats, up 85 seats from the 2008 assembly elections (when it won 78 seats). The BJP gained remarkable vote share of 12% (46% in 2013 vs. 34% in 2008) in 2013, driven by anti‐incumbency and the Modi effect. The ruling party during the 2008 elections, the INC, saw a drop of 3% in vote share. Historically, in the last four assembly elections, the INC’s vote share was bound tight – in the rage of 34‐37%; 1998 was the only year when an opposition INC received a vote share of 45%.

Election History of Rajasthan Assembly Rajasthan BJP INC Others IND Total Seats Party Won 2013 163 21 9 7 200 BJP 2008 78 96 12 14 200 Congress 2003 120 56 11 13 200 BJP 1998 33 153 7 7 200 Congress Source: India Votes, PhillipCapital India Research

Vote Share history of Rajasthan (%) Rajasthan BJP INC Others IND Total % Party Won 2013 46.0 33.7 11.9 8.4 100 BJP 2008 34.3 36.8 13.9 15.0 100 Congress 2003 39.2 35.6 13.8 11.4 100 BJP 1998 33.2 45.0 7.4 14.4 100 Congress Source: India Votes, PhillipCapital India Research

In 2013, BJP won almost all (32 out of 34) SC seats and 113 out of 141 general seats.

2013 Assembly Election Schedule‐wise Seats Schedule BJP INC BSP NPP IND NUZP Total GEN 113 17 3 1 6 1 141 SC 32 0 0 1 0 1 34 ST 18 4 0 2 1 0 25 Total 163 21 3 4 7 2 200 Source: India Votes, PhillipCapital India Research

Around 122 seats (between all the parties) were won with a margin of less than 15% in the 2013 elections, out of which 41 seats were won by all parties with a thin margin of less than 5%. In 2013, 16 seats were won by independent candidate and other parties, out of which 13 seats were won with a margin of less than 15%.

In upcoming elections, the newly formed party – Rashtriya Loktantrik Party (RLP) headed by Hanuman Beniwal (ex‐BJP) is fighting on 57 out of 200 assembly seats and is likely to influence Jat votes that favoured BJP in the 2013 elections.

2013 assembly election victory margin Number of seats Margin (%) BJP INC BSP NPP SP NUZP IND Total > 25% 22 0 0 0 0 0 0 22 > 15% < 25% 49 4 0 0 0 1 2 56 > 5% < 15% 66 8 2 1 0 1 3 81 < 5% 26 9 1 3 0 0 2 41 Total 163 21 3 4 0 2 7 200 Source: India Votes, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Seat dynamics In 2013, BJP performed well in all five regions of Rajasthan. In Mewar, it captured 43 out of 48 seats, while in Dhundhad and Marwar regions, it was able to convert 95 out of 112 seats. Shekhawati was the region where most of the independent candidates were elected in 2013; out of 22 seats here, BJP won 12 seats and Congress won 4.

Region‐wise seat distribution in 2013 assembly elections Region Total BJP INC BSP NPP SP NUZP IND Bikaner 18 13 2 0 0 0 2 1 Dhundhad 66 53 7 1 4 0 0 1 Marwar 46 42 4 0 0 0 0 0 Mewar 48 43 4 0 0 0 0 1 Shekhawati 22 12 4 2 0 0 0 4 Total 200 163 21 3 4 0 2 7 Source: India Votes, CSDS, PhillipCapital India Research

In 2013, all communities voted for BJP. The party won 13 out of 14 seats, in which the Gujjar community is dominant, while out of 100 seats (in Dhundad, Marwar, Mewar region) where Jats and Rajputs are dominant, BJP was able to capture 83 seats.

Community‐wise seats distribution in 2013 assembly elections Region Dominant Community Total BJP INC BSP NPP SP NUZP IND Bikaner SC & Jat 18 13 2 0 0 0 2 1 Dhundhad, Jat & Rajputs 100 83 11 1 4 0 0 1 Marwar & Rajputs & ST 46 42 3 0 0 0 0 1 Mewar Rajputs, Jat, Gujjars 14 13 1 0 0 0 0 0 Shekhawati Jat 22 12 4 2 0 0 0 4 Total 200 163 21 3 4 0 2 7 Source: India Votes, CSDS, PhillipCapital India Research

Low ‐margin seats • 37 out of 200 assemblies in 2013 election were won by a thin margin of less than 7,000 votes. • Out of these 37 seats (24 for BJP, 7 for INC), 10 seats were won on very thin margins of less than 3,000 votes. These thin‐margin seats are: 5 in Dhundhad, 2 in Marwar, 1 each in Shekhawati, Bikaner, and Mewar regions.

2013 assembly elections: Critical seats with nominal margins Critical Seats with Nominal Margins Marging (%) BJP INC BSP NPP IND Total < 7,000 votes 24 7 1 3 2 37 < 3,000 votes 5 3 0 2 0 10 Source: India Votes, PhillipCapital India Research

2013 assembly elections: Critical seats with margins of less than 3,000 votes Margin Party Seats Won Bikaner Dhundhad Marwar Mewar Shekhawati BJP 5 0 2 2 1 0 INC 3 1 1 0 0 1 < 3,000 Votes BSP 0 0 0 0 0 0 NPP 2 0 2 0 0 0 IND 0 0 0 0 0 0 Total 10 1 5 2 1 1 Source: India Votes, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

What are the low‐margin seats saying? • 17 out of 37 low‐margin seats are from Dhundhad region where Jat and Rajputs are dominant. • 20 low margin seats are in areas where Jats and Rajputs are dominant while only two low‐margin seats are where Gujjars are dominant.

2013 assembly elections: Region‐wise seats with nominal margins (less than 7,000 votes) Party Bikaner Dhundhad Marwar Mewar Shekhawati Total BJP 3 12 5 4 0 24 INC 1 2 1 2 1 7 BSP 0 0 0 0 1 1 NPP 0 3 0 0 0 3 SP 0 0 0 0 0 0 NUZP 0 0 0 0 0 0 IND 1 0 0 0 1 2 Total 5 17 6 6 3 37 Source: India Votes, CSDS, PhillipCapital India Research

2013 assembly elections: Community‐wise seats with nominal margins (less than 7,000 votes) Party SC & Jat Jat & Rajputs Rajputs & ST Rajputs, Jat, Gujjars Jat Total BJP 3 14 6 1 0 24 INC 1 3 1 1 1 7 BSP 0 0 0 0 1 1 NPP 0 3 0 0 0 3 SP 0 0 0 0 0 0 NUZP 0 0 0 0 0 0 IND 1 0 0 0 1 2 Total 5 20 7 2 3 37 Source: India Votes, CSDS, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan Macros Rajasthan’s economy has been seeing a CAGR of 7% over the last six years (FY12‐18) (vs. national growth of 8%). The economy expanded by 7% yoy in FY18. Sectoral growth is led by services, agriculture, and industry, which contributed 49%, 23%, and 20% of the state’s GSDP in FY18, respectively. The services sector has been growing at a CAGR of 8%, followed by industry (6%) and agriculture (3%) over the last six years. The agriculture sector employs a majority of the state’s population in the rural areas (68%), while employment within the urban areas and population is dominated by manufacturing/public & financial services/trading/construction at 25%/23%/21%/14%.

Rajasthan ranks sixth amongst the nineteen key states that will incur high fiscal deficits. While efforts have been made by the state to reduce its fiscal deficit, the burden of the recently announced farm‐loan waivers could lead to the state breaching the proposed target of 3% (proposed FY19 FD/GSDP: 2.98% ‐ pre‐loan waivers announcement). However, the state has only expensed Rs 2bn of the Rs 8bn waivers announced in FY18. The state had also announced farm‐loan waivers worth Rs 200bn in FY17. While majority of Indian states have nearly eliminated their revenue deficits, Rajasthan still continues to be one of the 12 states to remain in revenue deficit (proposed FY19 RD/GSDP: 1.86%).

Other highlights of Rajasthan’s economy • Rajasthan is the seventh most populous state in the country, with a population of nearly 70mn people. The state’s population has been increasing at an average pace of 26% since 1991. • Rural population accounts for nearly 75% of the state’s total population with nearly 52mn people residing in rural areas. • The demographics of Rajasthan have changed little over the years, with the majority of the state’s population still residing in rural areas. The states urban population stands at 17mn people. However, this population has grown at a faster pace than the rural population at an average pace of 33% vs. an average increase of 24% in the rural population since 1991. • Nearly 18% (12mn people) of Rajasthan’s population are classified as schedule caste while 13% (9mn people) are classified as schedule tribe. • Sex ratio in the state has changed little; from 919 females/thousand males in 1991 to 928 females/thousand males in 2011. The child sex ratio worsened, falling from 909 in 2001 to 883 in 2011 (females/thousand males). However, the rural child sex ratio fares better than urban at 892 vs. 874 (females/thousand males) in 2011. • While significant progress has been made in terms of literacy in the state from a mere 38% in 1991 to 66% in 2011, the state continues to lag behind. Male literacy stands at 79% while female literacy is at a mere 52.12% • Poverty reduction in Rajasthan has been amongst the fastest in India. Rajasthan currently ranks 18th on the World Bank Poverty Index with 15% of its population below the poverty line (10mn people). • Poverty rates have declined sharply in both rural/urban areas, falling by 25%/19% from 41%/30% in 1994 to 16%/11% in 2012, respectively. • Rajasthan has seen a shift of population demographics in terms of migration from rural to urban areas to a certain degree. This is largely on the back of a booming services sector creating opportunities in the urban areas.

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan GSDP growth rate (yoy %) CAGR GSDP growth (FY12‐FY18) 8% 9% Rajasthan India 7% 8% 6% 7% 5% 6%

4% 5% 4% 3% 3% 2% 2% 1% 1% 0% 0% FY13 FY14 FY15 FY16 FY17 FY18 Agriculture Services Industry GSDP/GDP

Source: RBI, CSO, State Budget Document, PhillipCapital India Research

Rajasthan GSDP components (Rs bn) Rajasthan % share of GSDP Agriculture Industry Services (rhs) 60% Agriculture Industry Services 1600 3400 50% 1500 3200

1400 3000 40% 1300 2800 30% 1200 2600

1100 2400 20% 1000 2200 10% 900 2000

800 1800 0% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

Rajasthan fiscal deficit and revenue deficit as a % of GSDP

Fiscal Deficit Revenue Deficit (rhs) 12 1.0

10 0.5 8 0.0 6 4 ‐0.5 2 ‐1.0

0 ‐1.5 ‐2 ‐2.0 ‐4 ‐6 ‐2.5 ‐8 ‐3.0 FY14 FY15 FY16 FY17 FY18 FY19BE

Source: RBI, PRS, State Budget Document PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan GSDP & its components (Rs bn) FY12 FY13 FY14 FY15 FY16 FY17 FY18 Agriculture 1,191 1,226 1,336 1,373 1,365 1,404 1,459 Industry 927 937 923 1,051 1,167 1,236 1,294 Mining & Quarrying 184 323 351 407 457 471 487 Manufacturing 667 533 490 555 615 664 695 Electricity, gas, water etc. 76 81 82 89 95 101 112 Services 2,052 2,182 2,359 2,514 2,687 2,911 3,177 Construction 436 427 451 457 478 486 504 Financial Services 136 148 165 182 197 218 240 Transportation 165 188 198 210 228 252 279 Rail 24 32 38 39 45 51 58 Road 140 154 160 169 181 198 218 Air 1 1 1 2 3 3 3 Trade 437 475 508 543 591 647 722 Trade & Repair Services 410 448 481 517 564 618 691 Hotels & Resturants 28 27 27 26 27 29 31 GSVA 4,170 4,345 4,618 4,938 5,219 5,551 5,930 Taxes on Products 326 388 424 478 567 688 767 Subsidies on Products 147 187 179 199 204 249 277 GSDP 4,348 4,546 4,862 5,217 5,581 5,990 6,419 Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

Overall Rajasthan GSDP & its components (YoY %) FY13 FY14 FY15 FY16 FY17 FY18 Agriculture 3 9 3 (1) 3 4 Industry 1 (1) 14 11 6 5 Mining & Quarrying 75 9 16 12 3 3 Manufacturing (20) (8) 13 11 8 5 Electricity, gas, water etc. 6 2 8 6 6 11 Services 6 8 7 7 8 9 Construction (2) 6 1 5 2 4 Financial Services 8 12 10 8 10 10 Transportation 14 6 6 9 10 11 Rail 34 17 4 14 14 14 Road 10 3 6 7 10 10 Air 81 (20) 59 93 1 1 Trade 8 7 7 9 9 12 Trade & Repair Services 9 7 7 9 9 12 Hotels & Restaurants (2) 0 (3) 4 7 7 GSVA 4 6 7 6 6 7 Taxes on Products 19 9 13 19 21 11 Subsidies on Products 27 (4) 11 3 22 11 GSDP 5 7 7 7 7 7 Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Overall Rajasthan GSDP components as a % share of GSDP FY12 FY13 FY14 FY15 FY16 FY17 FY18 Agriculture 27% 27% 27% 26% 24% 23% 23% Industry 21% 21% 19% 20% 21% 21% 20% Mining & Quarrying 4% 7% 7% 8% 8% 8% 8% Manufacturing 15% 12% 10% 11% 11% 11% 11% Electricity, gas, water etc. 2% 2% 2% 2% 2% 2% 2% Services 47% 48% 49% 48% 48% 49% 49% Construction 10% 9% 9% 9% 9% 8% 8% Financial Services 3% 3% 3% 3% 4% 4% 4% Transportation 4% 4% 4% 4% 4% 4% 4% Rail 1% 1% 1% 1% 1% 1% 1% Road 3% 3% 3% 3% 3% 3% 3% Air 0% 0% 0% 0% 0% 0% 0% Trade 10% 10% 10% 10% 11% 11% 11% Trade & Repair Services 9% 10% 10% 10% 10% 10% 11% Hotels & Resturants 1% 1% 1% 1% 0% 0% 0% GSVA 96% 96% 95% 95% 94% 93% 92% Taxes on Products 7% 9% 9% 9% 10% 11% 12% Subsidies on Products 3% 4% 4% 4% 4% 4% 4% GSDP 100% 100% 100% 100% 100% 100% 100% Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

Rajasthan budget account (Rs bn) FY16 FY17 FY18 FY19 (BE) Revenue Receipts 1,003 1,090 1,347 1,517 Tax Revenue 706 779 888 1,014 Non‐Tax Revenue 296 310 458 503 Capital Receipts 299 302 409 457 Total Receipts 1,302 1,392 1,756 1,973 Revenue Expenditure 1,062 1,181 1,429 1,571 Interest Paid 120 176 197 214 Capital Expenditure 235 216 328 401 Total Expenditure 1,297 1,397 1,757 1,972 Revenue Surplus/(Deficit) (without UDAY) (59.5) (91.1) (81.6) (54.5) Fiscal Deficit (without UDAY) (230.2) (239.5) (290.9) (280.1) Primary Deficit (without UDAY) (110.1) (62.7) (93.1) (66.0) Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

Rajasthan tax revenue break‐up (Rs bn) FY16 FY17 FY18 FY19 (BE) Total Tax Revenue 706 779 888 1,014 State's Own Tax Revenue 427 444 518 581 Taxes on Income ‐‐‐ Stamp Duty & Registration Fees 32 31 41 43 Goods & Service Tax (GST) ‐205 361 CGST ‐88 151 SGST ‐117 210 IGST ‐‐‐ Taxes on Commodities & Services 419 410 355 323 Sales Tax 263 286 195 156 State Excise 67 71 78 93 Taxes on Vehicles 32 36 43 49 Taxes on Duties & Electricity 19 7 35 25 Share in Central Taxes 279 336 370 433 Corporation Tax 88 107 113 125 Income Tax 61 75 96 108 Customs 45 46 27 25 Union Excise Duties 37 53 28 22 Service Tax 49 54 17 1 Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan revenue expenditure (Rs bn) FY16 FY17 FY18 FY19 (BE) Total Expenditure 1,062 1,393 1,429 1,571 Developmental Expenditure 752 943 975 1,038 Social Services 433 518 564 645 Education, Sports, Art 211 256 280 337 Medical, Public Health & Family Welfare 47 56 99 118 Water Supply & Sanitation, Housing & Urban Dev. 24 28 83 83 Welfare of SC, ST & OBC 10 14 14 16 Labour & Labour Welfare 5 5 6 6 Social Security & Nutrition 40 45 80 83 Economic Services 319 424 411 393 Agriculture & Allied 40 55 57 82 Rural Development 122 127 178 150 Irrigation, Flood Control & Energy 18 21 136 130 Industry & Minerals 3 5 4 3 Transport & Communications 15 19 24 17 General Economic Services 10 14 12 11 General Services 310 400 440 440 Grants‐in‐aid & Contributions 0 0 0 0 Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

Rajasthan capital expenditure (Rs bn) Capital Expenditure (Rs bn) FY16 FY17 FY18 FY19 (BE) Total Capital Outlay 220 185 195 227 Developmental Services 215 180 189 220 Social Services 60 62 83 94 Education, Sports, Art 2 1 6 8 Medical/Public Health 6 6 10 10 Water Supply & Sanitation 44 46 61 70 Housing ‐‐‐‐ Urban Development 5 11 ‐‐ Welfare of SC, ST & OBC 3 3 ‐‐ Economic Services 155 109 106 126 Agriculture & Allied 4 5 4 6 Rural Development 5 6 11 10 Irrigation & Flood Control 3 3 36 46 Energy 13 20 ‐‐ Industry & Minerals 94 43 0 5 Transport 1 0 47 53 Gen. Economic Services 30 26 8 6 General Services 4 5 6 7 Source: RBI, State Budget Document, NITI Aayog, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan population (‘000) Religion‐wise population as a % of total population

80000 Rural Urban Total Muslim, 9.1% 70000

60000 Christian, 0.1 % 50000 Hindu, 88% 40000 Sikh, 1.3% , 0 30000 , 0 Jain, 0.9% 20000

10000 Not 0 Stated, 0.1% 1981 1991 2001 2011

Source: RBI, CensusIndia, PhillipCapital India Research

Rajasthan literacy rate (%) Rajasthan poverty rate (%)

70% Rural Urban Overall 45% 41% 60% 38% 40% 36% 34% 50% 35% 30% 30% 30% 40% 25% 30% 20% 16% 15% 20% 15% 11% 10% 10% 5% 0% 0% 1981 1991 2001 2011 1994 2005 2012

Source: World Bank , RBI, CensusIndia, NITI Aayog, PhillipCapital India Research

Rajasthan rural employment break‐up (‘000) Rajasthan urban employment break‐up (‘000) Transport, St orage & Financial/Ins Agri, 7% Comm., 3% urance, 1% Public/Admin Mining, 1% Wholesale/R , 16% etail/Trade Public/Admin etc., 5% , 4% Financial/Ins Manufacturi urance, 6% ng, 25% Construction, Transport, St 20% orage & Agri, 61% Comm., 7% Electricity, 2 Electricity, 0 % % Wholesale/R Manufacturi etail/Trade ng, 5% etc., 21% Construction, 14% Mining, 1%

Source: RBI, CensusIndia, NITI Aayog, PhillipCapital India Research

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rajasthan economic/social statistics FY14 FY15 FY16 FY17 FY18 Total Food‐grain Production (Lakh MT) 207.19 196.44 182.87 231.04 225.82 IIP 115.89 117.98 119.25 112.11 128.24 WPI 2.6% 3.1% 2.1% 5.0% 1.3% Installed Power Capacity (MW) 14372 15908 17440 18677 19537 FY14 FY15 FY16 FY17 Length of Nat. Highways (kms) 7180 7646 7886 7906 Length of Roads (in the state) (kms) 226124 241243 248156 254279 Railway Route (kms) 5872 5870 5898 5893 Despoits by Schedule Comm. Banks (Rs bn) 2013 2355 2589 3137 Credit by Schedule Comm. Banks (Rs bn) 1753 2030 1875 2128 Credit to Agri Sector (Rs bn) 508 564 660 759 Credit to Industry (Rs bn) 670 761 399 422 Personal Loans (Rs bn) 318 380 475 569 Social Sector Expenditure (Rs bn) 419 548.2 674.7 743.3 Per Capita Income (Constant) (Rs) 61053 64522 68048 72072 Source: RBI, CensusIndia, NITI Aayog, State Government, CEA, PhillipCapital India Research

Rajasthan’s Educational Indicator Rajasthan India Literacy Rate 66% 74% Dropout Rate 4.4% 4.1% Student/ Classroom 21 27 Pupil /Teacher 17 23 Source: CensusIndia, GoI, PhillipCapital India Research *as per 2011Census

Workforce distribution of schedule caste population (%) SC Megh Bairwa Balai Thori Baori Chamar Koli Khatik Bhangi Overall SCs Cultivators 58 55 49 45 44 43 30 23 9 44 Agricultural Laborers 19 17 16 31 34 20 16 13 14 21 HHI Workers 2 1 2 1 2 5 6 5 5 3 Other Workers 21 27 33 23 20 32 48 60 72 32 Source: CensusIndia, PhillipCapital India Research *as per 2011Census

Workforce distribution of schedule caste population (%) ST Mina Damor Bhil Garasia Seharia Dhanka Overall STs Cultivators 75 73 64 60 24 15 69 Agricultural Laborers 10 15 18 18 66 15 14 HHI Workers 1 1 1 1 1 2 1 Other Workers 15 11 17 21 9 68 16 Source: CensusIndia, PhillipCapital India Research *as per 2011Census

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RAJASTHAN GROUND VISIT ‐ INDIA STRATEGY UPDATE

Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year. Rating Criteria Definition BUY >= +15 Target price is equal to or more than 15 of current market price NEUTRAL ‐15 > to < +15 Target price is less than +15 but more than ‐15 SELL <= ‐15 Target price is less than or equal to ‐15.

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