India: how much energy

June 20, 2014
Issue No: 14/25
Asia Economics Analyst
Economics Research
India: How Much Energy?
India is a large importer of energy—in FY14, its net energy imports were
6.3% of GDP. Without energy imports, we calculate it would have run a
current account surplus of 4.6% of GDP.
We project India’s energy imports for the next decade. According to our
projections, annual energy imports could rise to US$230 billion by FY23
from US$120 billion currently, driven by economic growth, greater
industrialization and urbanization.
Despite an increase in energy intensity, our projections show that energy
imports as a share of GDP have likely peaked, and can moderate over the
next decade, based on the assumption of subdued commodity prices.
Energy imports can be reduced further by switching from oil to natural gas
and improving conservation. We show that reforms in the energy sector
could reduce India’s annual energy import bill by US$40 billion by FY23.
Energy imports in a reform scenario could come down to about 4% of GDP,
from 6.3% of GDP currently.
We show that if India were to improve its energy efficiency by 15% over the
next ten years, it could save US$32 billion annually by FY23. Conservation
measures include reducing transmission and distribution losses, using
more energy efficient appliances, and stricter emission standards for
vehicles.
The reduction in energy imports as a share of GDP could improve India’s
current account on a structural basis, which in turn could be positive for
the INR over the medium term.
Andrew Tilton
+852-2978-1802 andrew.tilton@gs.com
Goldman Sachs (Asia) L.L.C.
Goohoon Kwon, CFA
+82(2)3788-1775 goohoon.kwon@gs.com
Goldman Sachs (Asia) L.L.C., Seoul Branch
Tushar Poddar
+91(22)6616-9042 tushar.poddar@gs.com
Goldman Sachs India SPL
Li Cui
+852-2978-0784 li.cui@gs.com
Yu Song
+86(10)6627-3111 yu.song@ghsl.cn
Beijing Gao Hua Securities Company Limited
MK Tang
+852-2978-6634 mk.tang@gs.com
Jonathan Sequeira
+852-2978-0698 jonathan.sequeira@gs.com
Maggie Wei
+852-2978-0106 maggie.wei@gs.com
Vishal Vaibhaw
+91(22)6616-9376 vishal.vaibhaw@gs.com
Goldman Sachs India SPL
Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification
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The Goldman Sachs Group, Inc. Global Investment Research

June 20, 2014 Asia Economics Analyst
Goldman Sachs Global Investment Research 2
How Much Energy?
The Energy Problem
On July 30th 2012, India’s northern electricity grid broke down due to overdrawing by
states, plunging an estimated 640 million people into darkness. As factories couldn’t
operate, homes remained dark, and people were stuck in elevators, the realization dawned
that the Indian economy just could not grow without the country resolving its energy
problem. India has a fifth of the world’s population, but only a 30th of its energy. It just
doesn’t produce enough to meet its needs. Hence, it has to import energy – oil, gas, and
increasingly coal. In FY14, India’s net energy imports were 6.3% of GDP. Without energy
imports, all else being equal, we calculate it would have run a current account surplus of
4.6% of GDP.
Exhibit 1: India’s current account deficit is mainly due to
energy imports…
Exhibit 2: …driven largely by Oil
Source: CIEC, Goldman Sachs Global Investment Research Source: Haver, Goldman Sachs Global Investment Research
It is not only the direct cost of fuel that matters, but also the environmental cost, and the
security of energy supplies. Taking these into account gives the ‘all-in-cost’ of energy.
India’s predominant use of more polluting coal, which meets more than 50% of its energy
needs, and its import dependence means that its all-in-cost of energy is high and rising.
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13
Percent of GDPPercent of GDP
Current account balance:
With energy imports
Without energy imports
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Korea India ASEAN Japan China US
PercentPercent
Oil imports as a share of GDP (2013):

Exhibit 3: King Coal dominates India’s energy consumption
Source: BP Statistical Review of World Energy June 2013
As a new government formulates its economic and energy policy, we think that a focus on
energy reforms will be critical. We forecast India’s energy demand over the next decade,
project how much it would need to import, and then quantify savings from switching to
cheaper energy sources as well as greater conservation efforts.
I. A Rise in India’s Energy Demand
We forecast India’s net energy imports could increase to $230 billion by FY23 from $120
billion currently. We projected separately imports of key energy inputs of coal, oil, and gas,
which together account for all of energy imports. For the period 2014-2017, we use the
supply-demand estimates of our energy team. From 2017 onwards, as we expect India to
enter a more energy intensive phase of growth, driven by greater industrialization,
electrification, and urbanization, we think its demand for energy will increase significantly
more rapidly than in the previous decade. Therefore, we used the energy elasticity of
demand of China from 2001-2010 as a benchmark, given a similar per capita income
compared to what we expect for India in 2017, to derive demand forecasts for each energy
source.1
To our knowledge, this is the first attempt at long term forecasts for energy import
demand in value terms for India.
Interestingly, even with a large energy elasticity of demand, India’s energy imports as a
share of GDP may have peaked already. Our projections show the share of energy imports
declining very gradually to 4.9% of GDP from 6.3% of GDP currently. This is despite our
energy demand projections being higher than other agencies. A primary driver of this is
our commodity team’s view that oil prices will remain subdued. Oil comprises 80% of
energy imports and stagnant oil prices have a large impact on India’s energy bill. Further,
our longer term projections for thermal coal prices are also benign.
1
We used an energy elasticity of demand of 1.2%, 0.7% and 1.5% for coal, oil and gas respectively with
an assumption of 7% real GDP growth.
Oil
30%
Natural Gas
9%
Coal
53%
Hydro electricity
5%
Nuclear energy
1%
Renewables
2%
India's Energy Consumption (2012):

Exhibit 4: A gradual decline in energy imports as a share of GDP
Source: PPAC, CEIC, Goldman Sachs Global Investment Research
II. Constraints in Production
India’s domestic supply of energy can increase only gradually, given natural resource and
environmental constraints. India’s proven oil and gas reserves are small. In oil, it has only
0.3% of global reserves compared to a consumption share of 4.2%. In gas it has 0.7% of
reserves compared to a consumption share of 1.6%. Indian basins are generally considered
unprolific. The fastest growth in supply can be in coal, where India has ample reserves, and
policy initiatives can increase supply. We used our mining team’s projections for coking
and non-coking coal volume growth of about 5% on average. For crude we assume a 2%
growth in domestic supply, based on our energy team’s forecasts. Similarly, there are
limits to natural gas production, as we discuss below. While renewables like wind and solar
are likely to see a significant increase in supply, in part due to policy responses, we think
given their low starting share of 2%, they are unlikely to represent a large source of supply
for our forecast horizon. Given capacity constraints and barring spectacular discoveries or
technological improvements, imports will likely remain the key source of energy over the
next decade.
0
2
4
6
8
0
2
4
6
8
FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY21 FY23
Percent of GDPPercent of GDP
India's energy import demand*:
Projections
*includes oil, gas and coal demand

Exhibit 5: Coal and gas imports likely to increase more than oil
Switching to Natural Gas
One potential area of savings would be a switch to natural gas from oil. Natural gas is only
9% of energy consumption. This compares with the average global gas consumption of
24%. The world is switching to gas, and we believe India also needs to make that shift. Gas
can not only be cheaper than oil, but is also much cleaner. Our estimates show that if India
were to increase its share of gas from 9% currently to 16% by FY23, it could save US$8
billion annually by FY23.
0
50
100
150
200
250
0
50
100
150
200
250
FY14 FY23 (E)
US$ billion
US$ billion
India's energy demand from import:
Gas
Coal
Oil
Box 1: Lessons from the US Shale Revolution1
The discovery of plentiful gas deposits under shale rocks in the US, known as shale gas, has been the biggest
discovery in the energy space in a generation. Improvements in technology to allow for horizontal drilling and
breaking up the rock to release the gas, known as fracking, have transformed the US energy landscape. From
being one of the largest importers of energy in the world, the US can become a large exporter of gas.
Shale gas has been truly transformational. It accounts for 30% of US gas consumption, up from merely 1% just a
decade ago. It is cleaner and cheaper than its alternatives. Gas prices have fallen from $7 to $3-3.5 a unit in the
last 5 years. Power generation is increasingly moving towards gas and away from more polluting coal. US
industrial units and households are now getting much cheaper fuel. The US is now liquefying its surplus gas and
exporting it overseas.
Not only have oil and gas prices come down, but emissions have fallen, as gas has replaced more polluting coal
and oil, and reliance on import partners have declined. So, there’s been a reduction in direct cost of fuel as well as
its environmental costs, while energy security has improved.
How did the US get there? Shale gas exists in many other parts of the world, but nowhere has the success of the
US been replicated thus far. This is due to a number of reasons. First, it has provided generous tax incentives to
develop shale energy. Second, there has been a lot of technological innovation – especially in horizontal drilling
and breaking up the rock to release the gas by subjecting it to a stream of water, known as ‘fracking’. Third, huge
capital expenditures have been directed at upstream exploration on their land, as they get to benefit from the
eventual revenues. Fourth, the market structure in the US is highly competitive with hundreds of companies
competing with each other. This not only spawns innovation, but also more investment. Finally, the supporting
infrastructure, including a vast network of pipeline capacity, allows for easy transportation.
Compare this with India where high taxes and unstable policies, technological restrictions and lack of engineering
expertise, dominance of state-owned players and lack of competition, and no private ownership of rigs, is
hampering investments both by private players and foreign. While proven shale reserves in India are small, we
feel the lessons from the US can be applied to the natural gas industry.
1
see Oil on the boil-again? Top of Mind, September 6, 2012; Where will the shale gale blow next?, Fortnightly Thoughts, January
31, 2013

Fixed gas prices have discouraged investment and innovation by the private sector. In May
2010 the government raised the gas price to $4.2. This compares to an imported price of
$13-$14 a unit. The previous government proposed $8.4 a unit for domestically produced
gas effective from April 1, 2014, but the decision was postponed due to the elections. India
needs to free up gas prices to make it market-determined. Industry would need to become
more efficient if they pay market prices for their gas. Japan and South Korea pay market
prices, and yet have some of the most competitive industries.
A second issue we believe would be important for the gas sector is to have stable tax
policies. The government allowed for a 7 year tax holiday in the production sharing
contract for gas producers. However, in 2008-09, this was changed to be not applicable for
the gas sector, but only to oil. In another example, the UK based company Cairn invested in
an oil block in Rajasthan and entered into a production sharing contract with the state-
owned ONGC such that the latter would hold a 30% stake in the company, and pay all
royalties to the government. The policy was changed when Cairn’s assets in India were
acquired by a different company. According to the new policy, the acquiring company
would have to pay 70% royalty to the government – to the extent of Cairn India’s share in
the enterprise.
This lack of clarity on taxation and retrospective changes can hinder production. Since
India’s hydrocarbon base is unproven and unprolific, fiscal incentives can be important for
foreign and domestic investors.
Third, public investments in oil and gas blocs can be made more accountable. A large
number of blocs which have been auctioned under the New Exploration Licensing Policy
(NELP) have seen little exploration. Greater accountability can ensure that there is more
rationality in auctions so that the private sector is not crowded out.
III. Living within your means
Given the shortage of energy, India needs to emphasize conservation of energy. India is
using a lot of energy to produce energy due to inefficiencies in production. While the
global average is that 1 unit of energy input produces 4.3 units of energy, India only
produces 2.8 units for a unit input.
Exhibit 6: India’s energy efficiency needs improvement Exhibit 7: Power transmission and distribution losses are
very high in India
Source: IEA, Goldman Sachs Global Investment Research Source: WDI, Haver
0 1 2 3 4 5 6 7
Japan
US
Singapore
Taiwan
Korea
Indonesia
Thailand
India
China
Index, Japan =1
Primary energy supply per GDP
Less energy efficiency
0
5
10
15
20
25
0
5
10
15
20
25
India Brazil Russia Indonesia South
Africa
World Malaysia EU US China Japan Korea
PercentPercent
T&D losses as a share of electricity generation (2011):

We emphasize three sources of conservation –reduction of transmission and distribution
(T&D) losses, more use of energy-efficient electric appliances, and savings from higher
emission standards for vehicles.
India’s T&D losses are very high at 24%, which is nearly double the average of developing
countries. Some large states like Bihar and Jharkhand lose nearly half of all electricity that
is produced due to theft, technical and distribution losses.
We estimate that reducing T&D losses from the current 24% to 15% by FY23 can save the
economy US$13 billion annually, or 0.3% of GDP.
One way to reduce T&D losses is to privatize distribution. After power distribution was
privatized in Delhi in 2002, T&D losses fell from 52% in the pre-reform era in the early
2000s to 19% by 2010-11. Bhiwandi, an industrial town in Maharashtra, witnessed a sharp
fall in T&D losses to 18% currently from 48% in 2007 after distribution was privatized.
Similarly, Nagpur also witnessed a meaningful reduction in T&D losses after the
privatization of power distribution.
A Standards and Labeling program can be very effective in reducing energy needs. In India,
the scheme was launched in May 2006 and is being used for 12 appliances, of which only 4
have been made compulsory. The mandatory products are frost-free refrigerators, room air
conditioners, distribution transformers, and tubular fluorescent lights. We believe these
standards need to be extended to all major appliances and equipment. More importantly,
awareness needs to be raised among consumers, involving them in S&L programs. There
is a need to narrow the gap between the best achievable technologies and present 5 star
technologies for various appliances. The example of Japan (see Box 3) shows the efficiency
gains that can be achieved.
Box 2: Power reforms in Gujarat
In 2001, Gujarat’s power sector had major problems. It had large operating losses, T&D losses were about 35%, power
cuts were frequent, and the private sector was not investing.
The Gujarat government, under Chief Minister Modi, went about reforming the sector by first getting its finances in
order. The electricity board restructured debt which had been incurred at interest rates of 18% or more and
renegotiated power purchase agreements with private suppliers. The government plugged leakages in distribution.
Power theft ranged between 20% in urban areas and 70% in rural areas. It passed a law against power theft, set up
police stations, and hired 500 retired army personnel to check power offenders. Unmetered power supply, which some
rural areas were getting, was stopped altogether. There is no free power in Gujarat today.
In 2002, the Gujarat government unbundled power generation, transmission, and distribution, to better manage
operations and increase efficiency. A key reform was to separate the feeder line that supplied power to the rural areas
into two – one to supply power for agricultural needs, and other for household and other needs. Since the price for
power used for agriculture was much lower, villagers used this subsidized supply for household needs. Now, the rural
residents had higher power bills to pay than in the past, but once they were assured of uninterrupted power, they were
willing to pay up.
The state power regulator revised power tariffs every year, which reduced the gap between the average cost of power
and the user price. The state electricity board turned from a loss to a profit. Private players are now investing in
Gujarat, with a third of total capacity to be installed coming from the private sector. T&D losses have fallen from 35%
to 20%.
Source: Gujarat Urja Vikas Nigam Limited (GUVNL)

Exhibit 8: A sharp reduction in T&D losses after the
privatization of power distribution
Exhibit 9: Efficiency gains in Japan after the ‘Top Runner’
Program
Source: CEA, Delhi Government’s Economic Survey, Torrent Power Source: Energy Conservation and Renewable Energy Dept. of Japan
We estimate that if electric appliances become more energy efficient, overall savings from
sales of these appliances could be US$2 billion annually by FY23.
Stricter emission standards for vehicles can also be a significant source of savings. We
estimate that moving from the current standard (Bharat IV) to higher standards (Bharat VI)
could lead to US$6 billion of annual fuel savings by FY23.
Finally, an extensive program of educating people on energy conservation needs to be
followed. Energy education at various levels, especially at the primary and secondary
school level, as well as more generally with the help of print, TV, and internet mediums,
can increase conservation.
0
20
40
60
80
0
20
40
60
80
India Delhi Bhiwandi Nagpur
PercentPercent
T&D losses:
Before Privatization
After Privatization
FY02
FY12
*Privatization year: Delhi -2002, Bhiwandi-2007, Nagpur-2011
750
850
950
1050
1150
1250
750
850
950
1050
1150
1250
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Kilo Watt HourKilo Watt Hour
Average power consumption of air conditioner in Japan after energy efficiency standard introduced:
30% improvement

Box 3: Energy efficiency programs in Japan
Japan is only 16% energy self-sufficient. It is the 3rd largest importer of crude oil, and imports all of its gas and most of its
coal. Given the high degree of energy dependency, Japan has followed energy efficiency rigorously to increase its energy
security. Japan has improved its energy consumption efficiency by 37% over the past 30 years. As a result, the amount of
primary energy that Japan uses per unit of GDP is amongst the lowest in the world.
#1 Energy Conservation Act in 1979:
The Act is the foundation of Japan’s energy efficiency and conservation policy. There has been a series of major revisions
in this law responding to changing needs. The act includes all major sectors, such as industrial, residential, commercial,
and transportation.
#2 Top Runner Program, 1999:
This established stringent energy efficiency standards for 18 energy intensive products – including cars, ACs, TVs,
computers, and heaters. The goal was to manufacture products with efficiency standards better than the highest available
globally. This program was very successful in increasing energy efficiency. In each appliance, significant improvement in
energy consumption was achieved. In TVs, there was an improvement of 25% between 1997 and 2003 due to innovation,
with the annual power consumption amount falling from 140kWh to 104kwh. For ACs, the improvement was 30%, for
refrigerators it was over 50%, and so on. Japanese product labels were required to say how much energy the product
would save.
#3 Tax incentives and subsidies on loans for energy efficient houses and buildings:
The government gives tax incentives to reduce the consumption of energy. Tax breaks are given for residents who
conduct energy-saving renovation work (eg, change to double sash window) on their existing dwelling. Fixed property tax
can be reduced by 1/3rd, and deductions can be made on the annual income tax amount.
#4 Labelling and star rating:
An appliance standard and labeling program has been the major energy efficiency policy tool to increase the efficiency of
electrical appliances in Japan since 2000. Provision of energy efficiency information on electric appliances is required for
product manufacturers, importers, and retailers. The fuel efficiency labeling system was introduced in January 2004 to
promote the public awareness of energy efficient vehicles.
#5 Public awareness:
Japan has followed an active system of energy related education. In primary and secondary schools, such education is
provided and various kinds of practical research are conducted. Select universities have been chosen to be the base for
research and practice of energy education. Workshops and training sessions are organized for teachers to disseminate
best practices in energy education.
#6 Energy audits:
The government encourages energy conservation by providing a free energy audit service targeting factories and
business establishments.
Source: IEA, Energy Conservation and Renewable Energy Dept. of Japan

IV. Gains from Reforms
We estimate that India could reduce its annual energy imports by US$40 billion by FY23 by
switching from oil to gas, and by an improvement in energy efficiency of 15% (see Exhibits
10 and 11). With reforms, India’s energy import demand could fall by about 1% of GDP by
FY23 compared to our base case, to 4.0% of GDP. The improvement in the current account
would be directly attributable to an increase in national savings, due to lower energy
imports as a share of GDP.
Exhibit 10: Energy reforms can reduce imports
Exhibit 11: A breakdown of energy savings
Source: CEIC, Goldman Sachs Global Investment Research
We believe the risks to our projections are balanced. If India could achieve 25% energy
conservation, similar to Japan, the gain would be much larger and India could reduce its
annual import bill by US$65 billion. Similarly, if oil and gas prices were to come off
materially, it could have a large impact on India’s energy import bill. On the other hand, if
commodity prices were to rise significantly and India were unable to reform its energy
sector, then energy imports could be much larger.
0
50
100
150
200
250
0
50
100
150
200
250
FY97 FY99 FY01 FY03 FY05 FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY21 FY23
US$ billionUS$ billion
India's energy import demand*:
Base case
With reforms**
Projections
**includes oil, gas and coal demand
** If energy efficiency will increase by 15% with use of energy saving technique and an increase in share of natural gas from 9%
currently to 16% by FY23
230 (8)
(13)
(6) (2) (11)
190
Net energy
imports
(Without reforms)
Switching from oil
to gas
Reducing T&D
losses
Stringent emission
standard
Efficient electric
appliances
Others Net energy
imports
(With reforms)
Net energy import (FY23):
US$ billion

The shift away from oil imports to coal and gas imports has clear investment implications.
Our energy analysts think this could be positive for gas importers (see India Rising -
Energy: Reforms, better demand, operating leverage, May 29, 2014).
The largest impact, though, could be felt on India’s current account, and therefore the INR.
Given the gains in terms of national savings, lower import dependency, and a lower
environmental footprint, energy reforms will be a critical area to watch.
Tushar Poddar, Vishal Vaibhaw
Box 4: Energy Sector Reforms:
1) A stable policy regime to attract private/foreign players: Uncertainty about production sharing
contracts can be avoided. There can be greater clarity on taxation, royalty, transfer pricing among others.
2) Increase use of natural gas: The use of natural gas instead of oil and gas should be incentivized by
promoting its use in vehicles, converting thermal plants to gas, and more use of gas as raw material for
industrial use as well as for city usage.
3) Public investments in oil and gas blocs can be made more accountable: A large number of blocs
auctioned through the NELP remain unexplored.
4) Market-determined energy prices: Natural gas prices should be market determined to incentivize greater
production and shift away from oil to gas. Energy taxation across states can be harmonized to reduce
distortions.
5) Coordination among various ministries: Coordination among the various ministries in the energy space
can help to remove bottlenecks. Coordination between the center and various state governments can also
help in addressing energy imbalances across states.
6) Reduce T&D losses: Privatizing distribution can help. Further, sub-transmission and distribution networks
need to be modernized. The R-APDRP program in urban areas is useful by establishing reliable and
automated data collection and greater use of IT. Smart Grid initiatives are also necessary.
7) Energy efficiency in equipment and transport: Use of ‘super-efficient’ electric appliances and fuel
efficiency labeled equipment should be encouraged like the ‘Top Runner’ program in Japan. More stringent
auto emission standards can reduce energy usage.
8) ‘Energucation’: There is a need to focus on energy education at various levels, especially at the primary and
secondary school level, as well as more generally with the help of print, TV, and internet mediums to increase
energy conservation.

Appendix: Our calculations of energy-related savings
A) Saving from reduction in imports bill with increase in natural gas
consumption:
According to our estimates, if India increased its natural gas consumption share in the
overall energy mix from current 9% to 16%, switching away from more costly oil, it would
demand 3 trillion cubic feet by FY23. The cost of consuming an incremental amount of gas
at the import price of $13/mmbtu would be US$17 billion. Instead, if India consumed an
equivalent amount of oil, at a cost of $100/bbl, import cost would be US$25 billion.
Therefore, the savings could be $8 billion annually in energy imports by FY23.
B) Savings from reduction in T&D losses:
To estimate this, we first projected annual average electricity generation over next ten
years by using our GDP growth projections and the sensitivity that every 1% increase in
real GDP can increase power demand by 0.8 percent point. This sensitivity could go up as
more homes are electrified. We assume that T&D losses in India will reduce from 24%
currently to 15% through FY23. Total savings in value could be US$13 billion annually
using an average power tariff of Rs.5/unit and current exchange rate.
C) Savings from energy efficient appliances
We first projected demand for key appliances through FY23 using estimates of total sales
of these electric appliances in 20102
. We then estimated total savings if the current
weighted per unit energy consumed by these appliances is reduced by 50% by FY23. Total
savings in value could be US$2 billion by FY23 using an average power tariff of Rs.5/unit.
D) Savings from stricter emission standards:
We used our estimates of net oil imports over the next decade and assumed 30% of that
will be consumed by the transport sector. We assumed that with stricter emission
standards across all vehicles, approximately 15% of fuel savings could happen by FY23,
which is equivalent to 8mtoe. Total savings in value could be US$6 billion by FY23. One
caveat is that total fuel saving may differ if the share of transport demand in overall oil
imports were to increase. This could happen through an increase in numbers of vehicles, a
change in type of vehicles (e.g. large vs small) or alternate transport arrangements (such as
more use of railways with the opening up of freight corridors).
2
Potential Savings from Selected Super-Efficient Electric Appliances in India, June 2011, Prayas Energy
Group

Forecast Tables
Real GDP Growth (year-over-year)
GS Consensus GS Consensus
Asia ex-Japan 6.3 6.1 6.1 6.6 6.3
China 7.7 7.3 7.3 7.6 7.1
India 4.7** 5.5** 5.4** 6.5** 6.0**
South Korea 3.0 3.7 3.6 3.8 3.7
Hong Kong 2.9 3.9 3.3 4.4 3.5
Taiwan 2.1 3.5 3.2 3.9 3.6
ASEAN 5.0 4.0 4.4 5.0 5.2
Singapore 4.1 3.7 3.8 4.2 4.0
Malaysia 4.7 5.1 5.3 5.2 5.1
Thailand 2.9 -0.5 1.3 3.8 4.1
Indonesia 5.8 5.3 5.3 5.3 5.7
Philippines 7.2 6.3 6.4 6.5 6.3
USA 1.9 2.2 2.2 3.1 3.1
Euro area -0.4 1.1 1.1 1.5 1.5
Japan 1.5 1.5 1.5 1.2 1.2
*GS estimates for annualized growth rate of potential output from 2013-16
**Fiscal year basis, 2013 is India FY14 (Q2 2013-Q1 2014).
Source: Consensus Economics, Goldman Sachs Global Investment Research.
0.8
3.7
4.5
4.0
5.0
6.0
6.0
2.3
1.1
7.7
6.0
3.8
4.0
2013
2014 2015 Potential
Growth*
Consumer Prices (year-over-year)
GS Consensus GS Consensus
Asia ex-Japan 4.0 3.8 3.7 3.9 3.9
China 2.6 2.6 2.5 3.0 2.9
India 9.5* 8.0* 7.7* 7.0* 7.1*
South Korea 1.3 1.6 1.9 2.7 2.5
Hong Kong 4.3 4.3 3.9 3.8 3.6
Taiwan 0.8 1.4 1.2 1.8 1.8
ASEAN 4.0 4.3 4.3 4.5 4.2
Singapore 2.4 2.4 2.2 3.5 2.7
Malaysia 2.1 3.1 3.3 2.6 3.6
Thailand 2.2 2.2 2.4 2.7 2.8
Indonesia 6.4 6.4 6.2 6.7 5.7
Philippines 2.9 3.8 4.2 3.5 3.9
USA 1.5 1.8 1.8 1.9 1.9
Euro area 1.4 0.6 0.7 1.1 1.2
Japan 0.4 2.7 2.6 1.6 1.8
**Core inflation target
***ECB aims to maintain inflation rates "below, but close to, 2% over the medium term"
Source: Consensus Economics, Goldman Sachs Global Investment Research.
-
-
0.5-3.0 **
3.5-5.5
*Fiscal year basis, 2013 is India FY14 (Q2 2013-Q1 2014); 8.0% as the inflation target by March 2015 recommended by
the Monetary Policy Framework Committee
2013
2014
2.0
2.5-3.5
-
3.0-5.0
2.0
2.0***
2015 Inflation
Target/Range
3.5
8.0*
-

Forecast Tables (continued)
Policy Interest Rates (percent)
Current
Jun 19 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Asia ex-Japan
China 3.12 3.20 4.00 4.25 4.25 4.50 4.50 4.50 4.50
India 8.00 8.00 8.00 8.25 8.50 8.50 8.50 8.25 8.00
South Korea 2.50 2.50 2.50 2.50 2.50 2.50 2.75 2.75 3.00
Hong Kong - - - - - - - - -
Taiwan 1.9 1.9 1.9 2.0 2.0 2.0 2.1 2.3 2.3
ASEAN
Singapore - - - - - - - - -
Malaysia 3.00 3.00 3.00 3.25 3.50 3.50 3.50 3.50 3.50
Thailand 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.25 2.75
Indonesia 7.50 7.50 7.50 7.50 7.75 8.00 8.00 8.00 8.00
Philippines 3.50 3.50 3.75 4.00 4.00 4.00 4.00 4.00 4.00
USA 0.08 0.08 0.13 0.13 0.13 0.13 0.13 0.13 0.13
Euro area 0.15 0.25 0.15 0.15 0.15 0.15 0.15 0.15 0.15
Japan 0.07 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Policy interest rates: China: 7-day repo, India: repo rate; Korea: 7-day repo; Malaysia: overnight policy rate;
Thailand: 1-day repo, Philippines: repo rate, Indonesia: 1-month SBI rate, Taiwan: rediscount rate; USA: Fed funds effective rate;
Euro Area: Main refinancing operations: fixed rate; Japan: Overnight call rate.
Source: Goldman Sachs Global Investment Research.
2014F 2015F
Exchange Rates (local currency units per USD)
Current 3-Month Horizon 6-Month Horizon 12-Month Horizon
Jun 19 Forward Forecast Forward Forecast Forward Forecast
Asia ex-Japan
China 6.15 6.18 6.16 6.19 6.15 6.22 6.15
India 59.33 60.10 58.50 61.12 61.00 63.21 63.00
South Korea 1017 1022 1010 1026 1050 1034 1070
Hong Kong 7.8 7.8 7.8 7.8 7.8 7.8 7.8
Taiwan 30.0 29.9 30.0 29.8 29.8 29.7 29.5
ASEAN
Singapore 1.25 1.25 1.25 1.25 1.23 1.25 1.22
Malaysia 3.21 3.23 3.25 3.24 3.23 3.28 3.20
Thailand 32.5 32.6 34.0 32.8 34.0 33.1 33.5
Indonesia 11809 11940 12400 12127 12700 12538 13000
Philippines 43.8 43.8 44.5 43.9 44.0 44.0 43.5
Euro area* 1.35 1.35 1.38 1.35 1.34 1.35 1.30
Japan 102.0 102.0 103.0 101.9 107.0 101.7 110.0
* USD per Euro
Source: Goldman Sachs Global Investment Research.

Highlights of Recent Goldman Sachs Global Macro Research
Asia ex Japan
China’s changing growth: Trade spillovers to the rest of Asia May 8, 2014
Global expansion cycles and Asian exports—Now versus then Apr 17, 2014
Shock therapy: How EM Asia central banks respond to capital outflow pressures Apr 4, 2014
Low EM export beta? - Most likely nominal, not real Mar 13, 2014
The unwritten "rules" of EM Asia monetary policy Feb 21, 2014
Policy proactivity lies behind the resilience of the INR and IDR Feb 19, 2014
Export-led growth in Asia: Better short-term, challenged long-term Feb 7, 2014
Questions for the 2014 Asia-Pacific economics outlook Jan 3, 2014
Diverging fortunes—the emerging Asia outlook for 2014 Nov 21, 2013
Tooling up to analyze the Asian economies Oct 24, 2013
How emerging Asia reacts to higher US yields Sep 13, 2013
A deep dive into regional financial flows: Possible impact of US Fed tapering Sep 6, 2013
Cyclicality of Asian financial markets—seen from our Global Leading Indicator Jun 3, 2013
A redesigned MAP of emerging Asia data May 10, 2013
Greater China
China: Can China's economy move back to a sweet spot? Jun 11, 2014
China: China bond market: great long-term potential, tricky near-term challenges Jun 2, 2014
China: Macro at a cross-roads May 28, 2014
China: Higher term premium challenging monetary easing May 16, 2014
China: Employment conditions in China: Not bad yet, but worsening May 2, 2014
China: Cooling housing market a lasting headwind Apr 17, 2014
China: How policy loosening can push Chinese growth higher in Q2 Apr 10, 2014
China: Coding growth to help decode growth Apr 8, 2014
China: CNY: regime shift or a temporary bout of volatility Mar 24, 2014
China: Revising growth forecasts for China Mar 20, 2014
China: How fast are Chinese exports really growing? Mar 17, 2014
China: The implications of CNY band widening Mar 16, 2014
China: Gauging stress during financial deregulation Feb 18, 2014
A look at CNH flows via Hong Kong banks’ positions data Feb 5, 2014
Korea
Korea: Low inflation recovery bodes well for a rate cut Jan 24, 2014
Korea: Changes in our view—rate cut possibly this Thursday Jan 6, 2014
Korea: Less FX appreciation, more equity strength and a steeper curve Nov 15, 2013
Korea: Near-term outlook for the balance of payments and the KRW Oct 24, 2013
Korea: Growth upgrade on improving global demand and investment pickups Oct 4, 2013
India
India: The Modi Government's First 10 days Jun 4, 2014
India: Hope in the Air May 13, 2014
EM Macro Daily - India elections: The End of the Beginning Apr 11, 2014
How India can become the next Korea Mar 28, 2014
India: Adding 110 million jobs Mar 26, 2014
India: No 'banking' on growth Feb 14, 2014
ASEAN
Indonesia's tricky fiscal-monetary tradeoffs Jun 6, 2014
Indonesia’s rebalancing progressing at a faster pace Feb 12, 2014
Thailand’s political turmoil and its economic consequences Jan 16, 2014
Modeling the probability of Bank Indonesia’s next hike Dec 9, 2013
Indonesia: The path to sustainability is still fraught with risks Oct 4, 2013
ASEAN markets roiled—where do we go from here? Aug 22, 2013
ASEAN’s half a trillion dollar infrastructure opportunity May 30, 2013
Japan (this section is provided by our Japan Economics team based in Tokyo)
Japan: Demand for Japanese products down, even factoring in overseas production shift Jun 5, 2014
Japan: Female labor structure prevents Phillips Curve from changing its shape May 29, 2014
Japan: Reaffirming our outlook for a moderate decline in CPI May 14, 2014
Japan: Weakening correlation between forex and share prices, albeit stable based on intraday data Apr 17, 2014
Japan: Abenomics one year on: Portfolio rebalancing yet to gain traction Apr 11, 2014

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