|
|
Indian Economy - An Overview
India
- home to approxtimately 1 billion
people with a fledgling middle class of
approximately 350 million is offen seen as
one of the largest emerging markets on the globe. it is sagnificant to not- that a middle class
population of 350 million is more than the
entire population of the USA and close that
of the European Union. This provides India
with distinct cutting edge. If we are to
add population of those markets with which
India has preferential trade or free trade
arrangements, the market size is sure to
cover more than one-fourth of the world
population.
When looked at the Indian consumer market, not only that it
has a significant size of middle class
population, it also has 54% of population
below the age of 25 years, i.e. a head count
of over 500 million people, guaranteeing the
future growth of availability of labour,
productivity and consumerism.
Goldman Sachs, renowned consulting group has put Brazil,
Russia, India and China or in short BRIC as the
group of countries which has started taking full
charge of growth of the global economy. Considering
the recent studies conducted on BRIC, India would
overtake most of the G-8 countries in a few decades
time from now starting with UK, Italy, France and
Germany by the year 2025.
Most major trading nations in the world have always looked at India
as a group of markets displaying different consumer
preferences but governed by a single over arching
trade regime. When calculated in terms of Purchasing
Power Parity (PPP), India has the 4th largest
economy in the world with a Gross Domestic Product
(GDP) of over US$ 3.8 trillion (Source : World
Bank), inching closer to take over Japan (US$3.9
trillion - Source : World Bank) for the third
position.
Currently, the Indian economy is growing at a rate
which is second only to the Chinese in the world of
emerging markets. Emboldened by a sustained economic
growth over a long period, the Government of India
has made premature re-payment of US$ 3 billion of
high cost loan to the World Bank and the Asian
Development Bank with the possibility of other
similar loans being repaid prematurely. This
squarely indicates the prevailing confidence in
India
In recent past, vigorous growth over a strong market
economic fundamental has characterized developments
in the Indian economy in the financial year 2006-07
(financial year in India runs from 1st of April to
31st of March next year). Despite some concerns on
inflation, a quick estimate puts the growth of GDP
at 9.2%. The Asian Development Bank has predicted
that India is likely to grow by more than 9% for the
period 2007-12. This type of predictability is of
essence to industry movers in the form of Foreign
Direct Investment or as trading initiative.
In the first three quarters of financial year 2006-07,
export posted a growth of 36.3% with a volume of US$
89.5 billion. The same figures for imports were
36.2% and US$ 131.2 billion respectively, out of
which approximately US$ 44 billion was the cost of
import of oil and natural gas. At the end of March
2007, India's foreign exchange reserve touched
US$198 billion.
According to a report recently released by Forbes, India has
36 billionaires with the combined assets of US$ 192
billion, the highest figures in Asia.
It is not easy to profile Indian economy in limited words
and, therefore, the author's intention is to give
the readers only an overview of the same in the
following paragraphs. Following are key developments
in some selected sectors of the Indian economy:
AGRICULTURE
India is largely an agricultural society with a large
population depending on agricultural and allied
industry for its. livelihood and sustenance. With
the second largest arable land area in the world,
India is the largest producer of milk, pulses,
sugarcane and tea. It produces more than 33 million
tons of fruits and 62 million tons of vegetables.
The total size of food market in India is estimated
to be US$92 billion with that for processed food
to be
US$30 billion.
India is the leading livestock country in the world. It
ranks first In the cattle (including buffaloes)
population, second in goats and fourth in the sheep
population.
Looking at the competence of major players in food processing
industry in Turkey, India offers an excellent
opportunity for setting up food processing units.
INDUSTRY
The index of Industrial production for the period April -
November 2006 reveals a strong sustained growth of
the Indian industry. The general index on industrial
production shows a rise of 10.6% in the firsts
months of the financial year 2006-07 against 8.3%
growth seen in the corresponding period of the last
financial year. The industrial sectors that have
displayed growth much higher compared to the growth
in the corresponding period of previous financial
year are basic metals (20.4%), transport equipment
(16.3%), machinery equipment (14.1 %}, non-metallic
products (13.7%), cotton textiles (13.1%), rubber
and plastic products (11.9%), metal products (6.8%)
and wool (6.6%).
AUTOMOBILES
India is not only a huge market for the passenger
car sector; it is also one of the major players in
the global auto components business. The auto
industry was worth 34 billion US dollar in 2006
growing at a CAGR of 14% over the past five years.
The total number of vehicles sold exceeds 9 million
and is expected to grow further. According to the
industry experts, if the current trends continued,
the Indian auto manufacturers-should be able to sell
more than 10 million vehicles in the present
calendar year. India is the 2nd largest two-wheelers
market in the world. India is the 4th largest
commercial vehicle market in the world. The current
market size of passenger cars put India at the 11th
spot which is expected to move upward to the 7th
rank by 2016.
satisfy the ever growing demand of energy in India. Indian
Oil Corporation Limited has planned to invest US$6
billion in a refinery in Ceyhan producing 15 MTPA of
refined petroleum products. Over end above, Indian
Oil Corporation Limited is close to concluding an
agreement with the promoters of Trans Anatolian
Pipeline Company (TAPCO) of Turkey to take 12.5%
stake in the US$1.5 billion pipeline from Samsun to
Ceyhan
GEMS AND JEWELLERY
India is the largest diamond cutting and polishing center in
the world, with predicted growth of between 15% and
20% for many years to come. Overall export from this
sector was approximately US$ 16 billion last year.
According to a study by the consulting firm
MrKinsey, the branded jewellery market in India
would reach US$2.28 billion by 2010, over and above,
market for the non-branded jewellery is worth
approximately US$10 billion. Accounting for 20% of
world consumption of gold, India is the largest
consumer of the yellow metal.
Destination wise, the majqr market for Indian gems and jewellery in
terms of importance are USA, UAE, Hong Kong,
Belgium, Israel, Japan, Thailand, UK, Singapore and
Korea. The US accounts for 29 per cent of the total
exports from India in this sector.
INFORMATION TECHNOLOGY
India's prowess in the Information Technology sector has
been proved time and again in the world market. It
is expected that this sector would reach a figure of
US$ 54 billion by the year 2008, with a Cumulative
Annual Growth Rate (CAGR) of 21.1%. The total number
of professionals employed in the Information
Technology and Enabled Service sectors is estimated
io exceed 1.2 million. Few interesting facts in this
seotoi me as follows:
(a) Google, the word's largest search engine has set up a Research
and Development Center in Bangalore.
(fed i he US based chip maker Intersil is in the process of setting
up of a Design Center in India
(c) Mobile phone giant Nokia has set up three R&D labs in India.
(d) Leading Web portal Yahoo carries out R&D work in Bangalore.
(e)IBM has one ol the 8 worldwide innovation labs in
India.
Closely following the growth in the software sector, the
Indian PC market gre. 24% last year. India has
proven its significant presence in the
cyber-industry over and over; again. Business
Process Outsourcing (BPO) has been one of the
main-stays of the industry. This includes both back
office operations and research and development
outsourcing. The later has been growing with a
remarkable pace recently. It includes all segments
of various industries.
The installed capacity of
the automotive industry has been growing at a
compounded annual rate of over 16 per cent since
2001 -02. It produced a wide variety of vehicles
including 1.7 million four wheelers (passenger
cars, light, medium and heavy commercial vehicles,
multi-utility vehicles such as jeeps) and over 8
million two and three wheelers (scooters,
motor-cycles, mopeds, and three wheelers) in
2005-06.
India automobile sector has witnessed investments coming in
from various world leaders both for manufacturing and research and development.
Mercedes, BMW, Porche, Audi,
Bentley and Rolls Royce
are already selling in India. In addition, German
luxury car maker Audi AG is preparing to enter as
well. This is not including those companies which
have manufacturing facility in India such as Nissan,
Toyota, Honda, Hyundai, GM, etc. The Indian
automobile major TATA is already in the Turkish
market with Mahindra & Mahindra trying to do the
same. Mahindra & Mahindra has emerged as the 4th
largest tractor brand in the US in the 1 5-90 horse
power segments.
India's competitive advantage does not come from cost alone.
It is about Full Service Supply (FSS) capability. As
products life cycles and lead time for product
developments shrink, Indian manufacturers have
evolved from build to print to customize offerings.
AUTO-COMPONENTS
The Indian auto component industry is likely to almost
double to US$ 18.7 billion by 2009 and reach about
US$ 40 billion by 2014. Its globally competitive
auto component manufacturing sector has been much in
demand with global auto majors. A number of them
source critical components from India, with engine
parts making up nearly a third of all exports:
• Engine parts (31 per cent)
• Drive transmission and steering parts (19 per
cent)
• Body and chassis (12 per cent)
• Suspension and braking parts (12 per cent)
• Equipment (10 per cent)
• Electrical parts (9 per cent)
• Others (7 per cent)
In 2006, components worth US$2 billion were exported by
Indian companies, 75 per cent of which were bought
directly by car companies. The original equipment
manufacturers (OEMs) include firms like General
Motors, Ford Motor Company, Cummins International,
Bosch. Volkswagen, BMW, MAN (trucks) and JCB
(earthmoving equipment) amongst others.
ENERGY
The petroleum and natural gas sector is estimated
worth US$ 90 billion in India. India's crude
refining capacity will increase from 127 MTPA to
141.70 MTPA by the end of 2007. India imports about
75% of its requirement of crude petroleum. However,
with the help of 25 refineries having 2.5 million
barrel per day of refining capacity, it continues
to have a net exportable surplus in refined
petroleum products. By 2010, India is projected to
emerge as the 4th largest consumer of energy, after
the US, China and Japan.
MEDIA & ENTERTAINMENT
The current size of the industry as a whole is estimated
US'8 billion and is expected to grow at a CAGR of
14%. The film, entertainment and television segment
dominate the industry followed by the print, radio
and music segments. The Indian film industry is the
largest in the world with
pyeı I
000 films produced in the year 2006. The animation
business in India is also growing at a rate
exceeding 20% per annum. Indian print media industry
brings out
about 900 news publications for a combined
readership of 200 million. Television has dominated
the entertainment and media industry and continues
to have the potential to do 50 even in the future.
With over 200 million households, TV connection is
there for about half of them. With an average
household size of 4-5, the potential lor advertiser
is immense. About 61 million households are
connected through cables and satellites giving rise
to a fledgling domestic cable and satellite
industry. More than 300 channels are beamed into
Indian sky for cable satellite users to view. A
Price-WaterCooper study suggests that there will be
a boom in a radio industry with 22% growth resulting
in trebling the current size to US$ 146 million by
2009.
PHARMACEUTICAL AND HEALTHCARE
The size of the Indian pharmaceutical industry is
approximately US$9 billion (on the basis of
revenue). India is emerging as a strong and key
global player in both generic medicine and
formulation alike. The Indian pharmaceutical
industry has the higher number of manufacturing
plants approved by Food and Drug Administration
(FDA), anywhere outside the USA. It has the largest
number of Drug Master File (DMF) as well.
The healthcare market is also undergoing a strong and
qualitative transformation. The healthcare market is
expected to grow from US$22.2 billion at present to
US$50 billion by 2012. The competence of Indian
doctors and healthcare practitioners could be judged
from the fact that a very large number of doctors
and healthcare practitioners in both the USA and the
UK are from India.
REAL ESTATE
The Real Estate and Construction is US$14 billion industry
in India. The global real estate consultants Knight
Frank has ranked India 5th in the list of 30
emerging markets and has predicted an impressive
growth of 20% for the organized retail estate
sectors in India. Merrill Lynch has said in a study
that the number of malls in Murnbai, Bangalore, New
Delhi, Hyderabad and Puns will grow to 250 by the
year 2010 as against 50 now.
RESEARCH AND DEVELOPMENT
India is poised for more than 125 Fortune 500
companies for conducting their research and
development there. These include research and
development into frontier areas of satellite
fabrication, mobile telephon/, nano-technology,
bio-technology. IT hardware, pharmaceuticals, etc.
As an indication of India's strength in the frontier
areas of research and development, 65 institutions
in India are engaged in carrying out only the
genetic engineering research. India is one of the 6
countries in the world to manufacture and launch its
own satellite. India has launched satellites for
other countries jncl Germany and Korea as well.
Swedish bus and truck maker Volvo has opened the
technology center and a product development unit in
Bangalore. A number of semi-conduc-tor companies,
both fab and fabless have either set up or
outsourced their research and development in India.
Such work includes ab-initio design, CAD, simulation
testing and fabrication. New sectors growing at a
fast rate include cutting edge technologies such as
embedded software, nano-technology, avionics, etc.
STEEL
India is among the 10 top global suppliers of aluminium and
steel in the world. About 35 million ton of steel is
produced in India. It is the largest producer of
sponge iron in the world. In some of the recent
developments, India's private sector steel giant
TATA Steel has been given approval to start
construction of its US$ 103 million ferrochrome
steel plant at Richards Bay in South Africa. TATA
has also acquired NATSTEL of Singapore, Corus Steel
and has planned for further acquisitions in Vietnam
and Thailand. All these have made it the 5th largest
steel company in the world. MittaI Steel which
recently acquired Arcelor is the fastest growing
steel manufacturing company in the world. They have
many more acquisitions planned in coming years.
Another steel maker ESSAR is also making new inroads
by expanding its production capacity both in India
and abroad.
TELECOMMUNICATIONS
The number of telephone users registered is approximately
190 million, counted up to December 2006. Growth of
the total phone subscription sustained largely on
the growing mobile phone communication. India is
adding approximately 6 million mobile connections
every month and the total mobile connections stand
at approximately 1 50 million. It is expected to
increase to 250 million by the year 2009-10. Almost
all the international names are present in the
Indian telecom market but. Indian domestic
companies still retain the lead. The call-charges
for mobile connectivity are as low as 0.025 YTL (ur
USD 0.020) per minute.
TEXTILES
Textile sector is a US$ 36 billion industry in India. It
boasts about 25% share of world trade in cotton yarn
and fabrics. It is expected that it would reach
potential size US$ 85 billion by 2010, with a
domestic market size of US$ 45 billion.
Production of fabrics increased by 9.25 per cent in the
financial year 2005-06 and, up to November 2006, by
8.20 per cent over the corresponding period of the
previous year.
In US dollar terms, the value of exports increased by 21.8 per cent
in 2005-06 and 11.7 per cent up to September 2006.
Already, the Government's Textile Policy looks at textile
and apparel exports of US$ 50 billion by 2010-of
which garments will bring in US$25 billion. The main
markets lot indian textiles and apparels are the US, UAE, UK, Germany, Fiance,
Italy, Russia, Canada, Bangladesh and Japan.
A series of progressive measures have been planned to
strengthen the textile sector in India:
• Technology Mission on Cotton (TMC)
•
Technology
Up-gradation fund Scheme (TUFS)
• Reduction in customs duty on import of
state-of-the-art machinery
• Debt Restructuring Scheme
• Setting up of Apparel Training and Design Centres
(ATDCs)
• 100 per cent Foreign Direct Investment {FDD in
the textile sector under automatic route.
MULTINATIONALS IN INDIA
Some of the major Fortune 500 companies in India are ABB,
Allianz, ABN Amro, Alstom, British Petroleum, BASF,
Bombardier, CISCO, Coca-Cola, Citigroup, Dupont,
Electrolux, Ford, Federal Express, GE, GSK, General
Motors, HSBC, Honeywell, IBM, Intel, Johnson &
Johnson, Lafarge, LG, Metlife, MICO, Microsoft,
Nestle, IMovartis, Pepsico, Philips, Pfizer,
Prudential, Saint Gobain, Samsung, Sony, Shell,
Siemens, Toyota, Unilever, Vis teon, Volvo,
Whirlpool etc.
Some of the major German companies in India are Abicor
Binzel, Adidas Marketing, Baerlocher Additives,
Bajaj Allianz, Basf Baumuller, Bayer, Beiersdorf,
Bosch Group, Braun Medical. Burgmann, Carl Bechem,
Carl Zeiss, Daimler Chrysler, DHL Express, DMG,
Durr, Fichtner. Henkel, Kluber Lubrication, Knorr
Bremse, Lahmeyer International. Lapp, Pharmaplan
Schuler Steag Encotec Stollberg, Suspa Pneumatics,
Wurth Zeppelin Mobile Systems, Zwick Roell etc.
Some of the major British companies in India are Aviva,
Barclays, BP, British Telecom, Cable & Wireless,
Cadbury India, Cairn Energy, GSK Pharmaceuticals,
HSBC, ICI India, Johnson Matthey, Logica CMG,
Marconi Telecom, Marks & Spencer, P&O Ports,
Reuters, Scope International, Shell India, Standard
Chartered Bank, Tesco, Unilever, Virgin ntlc etc.
INDIAN MULTINATIONALS
Altogether Indian companies have acquired assets worth US$24
billion in the first nine months of FY 2006-07.
The figure for the whole of 2005 was US$18 billion. Continental Engine, Suridrarn Fasteners (SFL), Tata Motors,
Ranbaxy, Dr Reddy's Laboratories, Asian Paints,
Bharat Forge, Essel Propack, Tata Consultancy
Services (TCS), Infosys, Wockhardt, Cadila Health.
Apollo Healthcare, Sun Pharma, Hindalco, Wipro,
Aditya Birla, United Phosphorus, Indian Oil
Corporation Limited,
ÖNGC,
Tata Steel, Mit-tal Steel, ESSAR, APTECH etc. are
some of the Indian companies who have major
interests and assets in countries other than
India. They are truly Indian multinationals.
It is very important to understand that unlike many
other economies, India's economic growth is mainly
driven by the domestic market. However, since the
past decade, foreign trade too has started playing
an increasingly significant role in the improved
economic scenairo.
Kaynak:
S. K. VERMA
|
