The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011-12.
In addition, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009.
Furthermore, the number of millionaire households in India will grow from 2,86,000 to 6,94,000 between 2011-2020, at a growth rate of 143 per cent, as per a study by the Deloitte Center for Financial Services. Among emerging markets, India is likely to have the highest per capita wealth among millionaires with US$ 4.25 million — placing it ahead of the US. In comparison to other BRIC (Brazil, Russia, India and China) nations, India is likely to experience the largest growth at 405 per cent in total wealth held by the millionaires.
The Economic Scenario
India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010-12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012' by the United Nations Conference on Trade and Development (UNCTAD). India's FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January-June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year.
Non-resident Indian (NRI) inflows in the first quarter of 2011-12 has witnessed a rise of 38 per cent as compared to the same period in 2010-11. NRIs invested US$ 1.54 billion in various NRI deposit schemes during April-June 2011.
Private equity (PE) investments in India stood at US$ 6.14 billion in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by Chennai-based Venture Intelligence. The rise in the value of the deals so far (June 2011) recorded a growth of 52 per cent, as compared to US$ 4.04 billion raised during 2010.
India's foreign exchange (Forex) reserves have increased by US$ 1.6 billion to register US$ 318 billion during the week ended August 19, 2011, according to data released by the Reserve Bank of India (RBI). The increase in Forex is largely attributed due to valuation changes.
The Government has approved fund raising worth Rs 60,950 crore (US$ 13.24 billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011.
India's merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago, according to Mr Rahul Khullar, Commerce Secretary. Exports in the referred period increased on back of demand for engineering and petroleum products, gems and jewellery and readymade garments.
Brief Sectoral Update
The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials. India currently holds the 12th position in Asia and 68th position in the list of overall in the list of the world's most attractive tourist destinations, as per the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF).Foreign tourist arrivals (FTAs) during the period January-June 2011 were 2.91 million with a growth of 10.9 per cent.
Moreover, India's domestic air traffic has been registered as the second highest rate after Brazil, according to global figures for June 2011, compiled by the International Air Transport Association. India's domestic traffic grew by 14 per cent in the same period as against Brazil's 15.1 per cent.
Furthermore, the Indian Railways has recorded earnings worth Rs 24,756.18 crore (US$ 5.37 billion) in the first quarter of 2011-12, as compared to Rs 22,074.92 crore (US$ 4.79 billion) during the same period last fiscal, registering an increase of 12.15 per cent. An increase of 12.61 percent in the total goods earnings and 10.52 per cent in the total passenger revenue earnings have been recorded during April-June 2011.
The Indian automobile industry, the seventh largest in the world, has currently estimated to have a turnover of US$ 73 billion, accounting for 6 per cent of its GDP, and is expected to record a turnover of US$ 145 billion by 2016. India's automobile industry is expected to grow by 11 to 13 per cent in the fiscal year ending March 2012, according to Pawan Goenka, President, SIAM. The Indian automakers sold 143,370 cars in June 2011, added SIAM.
Demand for two-wheelers has increased by 16 per cent in June 2011 to over 880,000 units, as compared to 761,000 units in June 2010, according to data released by six of the eight domestic two-wheelers manufacturers.
The growth of Indian agriculture and allied sector was a top agenda in Budget 2011-12 presented by Mr Pranab Mukherjee, the Union Finance Minister. He has estimated that the agriculture and allied sector would grow by 6 per cent in 2011-12.
In addition, sales of tractors continue to post sturdy growth numbers on the back of favourable monsoons and increased use of farm equipment for construction work. As many as 482, 256 tractors were sold in the domestic market in 2010-11. The sales are expected to increase by 15 per cent to 554,594 in 2011-12.
The number of subscribers using their mobile phones to access Internet is estimated to touch 46 million in September 2011, according to a report published by the Internet and Mobile Association of India (IAMAI) and market research firm IMRB, representing a 15 per cent growth quarter to quarter. There are about 40 million mobile Internet users as of June 2011 of which about 30 million are termed as active users.
Software as a Service (SaaS) is estimated to grow by 20.7 per cent in 2011 amounting close to Rs 538 crore (US$ 116.85 million) as compared to 2010 where it was close to Rs 445 crore (US$ 966.60 million), according to IT advisory firm Gartner Inc.Approximately 75 per cent of SaaS delivery can be regarded as cloud services as per Gartner, which is on its way to exceed 90 per cent by 2015. Customer relationship management (CRM) is the largest market for SaaS, which is expected to reach Rs168.83 crore (US$ 36.67 million) in 2011 to represent 32 per cent of the total CRM market.
Growth Potential Story
India's consumption growth story is expected to maintain its course of about 14 per cent growth over the next three years driven by three factors-inclusiveness, mix changes and specific consumption categories, as per senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant in the report 'The Indian Consumer: a robust operator in an uncertain world'. India will emerge as the second largest steel producer by 2013 with an installed capacity of 120 million tonnes (MT), riding on high levels of growth, construction, housing, real estate, automobiles and agriculture, according to Mr Beni Prasad Verma, Steel Minister. The demand for steel in the country is growing at an average of 10 per cent, which may even exceed to 12 per cent in the near future.
In addition, the Indian banking sector is poised to become the world's third-largest in terms of assets over the next 14 years—with its assets poised to touch US$ 28,500 billion by 2025—according to a report titled ‘Being five-star in productivity — Roadmap for excellence in Indian banking’, prepared for the Indian Banks’ Association (IBA) by The Boston Consultancy Group (BCG), IBA and an industry body.
Investment in logistics sector in India is projected to grow annually at 10 per cent. India's logistics market achieved revenues of US$ 82.1 billion in 2010 and is expected to reach revenue worth US$ 90 billion in 2011. The logistics industry forecasts to generate revenues worth US$ 200 billion by 2020, as per Eredene Capital PLC's 2010-11 annual report.
India's engineering research and development (ER&D) providers is estimated to capture about 40 per cent share of global offshore revenues in 11 key verticals by 2020, according to a new report titled 'The Futures Report 2011', by Global Futures and Foresight (GFF).
India's power sector will generate revenue of Rs 13 lakh crore (US$ 282.36 billion) during the Twelfth Five Year Plan (2012-17), as per Mr P Uma Shankar, Secretary, Ministry of Power. The plan is to generate 17,000 mega watt (MW) power during the referred period.
The beauty business in India is set for a remarkable growth. The roughly Rs 7,000 crore (US$ 1.52 billion) organised and unorganised hair and beauty industry is growing at a compound annual growth rate (CAGR) of 35 per cent, on back of an increase in the number of households upgrading to a lifestyle involving higher consumption. At this rate, the industry has the potential to become Rs 30,000 crore (US$ 6.52 billion) business by 2015.
The Indian media and entertainment sector will grow to Rs 1.2 lakh crore (US$ 26.06 billion) by 2015, according to a report, 'Indian Entertainment and Media Outlook' by PricewaterhouseCoopers (PwC). From a size of Rs 30,650 crore (US$ 6.66 billion) in 2010, the television industry is expected to rise at a CAGR of 14.5 per cent to reach Rs 60,250 crore (US$ 13.08 billion) and will continue to hold the largest share of revenues within the sector in the next five years.
The BMI India Retail Report for the second-quarter of 2011 forecasts that total retail sales will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015.
India ranks first in the Nielsen Global Consumer Confidence survey released in January 2011. “India is one of the fastest growing markets in the world and the current consumer belief that recession would soon be a thing of the past has filled Indians with confidence,” said PiyushMathur, Managing Director, South Asia, The Nielsen Co. With 131 index points, India ranked number one in the recent round of the survey, followed by Philippines (120) and Norway (119).
Road Ahead
The Twelfth Five Year Plan (2012-17) is going to maintain its target growth rate at 9 per cent. The planning commission is due to firm up its approach to the Twelfth Plan on August 20, 2011, in a meeting chaired by Prime Minister Dr Manmohan Singh. The priority for resource allocation will continue to be the social sector and infrastructure. The Government of India has set ambitious targets for more than US$ 1 trillion to be invested in infrastructure over the Twelfth Five-Year period (2012-2017)—more than double the amount invested in the previous five-year period, according to Eredene Capital PLC's 2010-11 annual report. Eredene is a specialist investor in Indian infrastructure with a focus on ports, logistics and transportation.
Significantly, the Government has set an export target of US$ 292 billion for 2011-12, up 19 per cent from US$ 246 billion in 2010-11.
Moreover, the Government of India has been ranked fifth in wielding economic clout globally after the US, China, Japan and Germany, and ahead of European powers France and the UK, according to a study authored by Kaushik Basu, Chief Economist Advisor.
Major players in India's fast-moving consumer goods (FMCG) industry will continue to pursue acquisitions over the medium term, given the scope for expansion in under-penetrated product segments and geographies, as per a report by credit rating agency Crisil. For the global FMCG majors, India remains an attractive market, with its growing economy, large population that offers considerable scope for additional geographic penetration, particularly in the rural areas, and low per-capita consumption.
References: United Nations Conference on Trade and Development (UNCTAD), Ministry of Finance, Press Information Bureau (PIB), Media Report, Consolidated FDI Policy
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