11 indian economy and trends for updated information, please visit january 2015

11

INDIAN ECONOMY AND TRENDS

For updated information, please visit www.ibef.org

JANUARY 2015

22For updated information, please visit www.ibef.org

Strengths………………………….3

Trends…………………………….11

Reforms……………………………22

Outlook…………………………….36


JANUARY 2015

STRENGTHS


LARGE & SKILLED LABOUR FORCE SUPPORTS INDIAN ECONOMY


JANUARY 2015

National Skill Development Corporation (NSDC) to provide training to 3.3 million students this yearIt currently provides training in 33 sectorsAbout USD200 million proposed for NSDC in the 2014-15 budget

Second largest number of

engineers and scientists

Second largest English-

speaking population in the world

Home to educational institutes

of global repute – IITs and IIMs

Low average salary of

USD5,000–10,000 p.a.

Working age population*

expected to increase from 58 per

cent in 2001 to 64 per cent by

2021

The average age predicted to be

29 years in 2020, lower than

China and the US

Expected to be home to 25 per

cent of the world’s skilled

workforce by 2025

1.5 million graduates pass out

every year

250 million people expected to

join the Indian workforce by

2030

Number of engineering colleges

has increased from 1,511 in

2006-07 to 3,345 in 2014-15

Skilled labour force

Large pool

Source: *Working age refers to age group of 18-65

The NSDC initiative

High competency

Age demographics

Expanding workforce

Large & Skilled Labour Force


CHEAP AND SKILLED LABOUR MAKES INDIA MOST FAVOURED DESTINATION FOR OUTSOURCING

JANUARY 2015

1980sAirline companies, such as, British Airways set up back offices in India

1990sLiberalisation in 1991GE sets up office in India

• Private industries allowed in the telecom sector (National Telecom Policy)Multiple liberalisation reforms set up the foundation for strong growth

2000sEntry of IT majorsBPO becomes the mainstream industry in IndiaAll big Indian IT companies, such as Infosys and HCL, entered the BPO segmentIndia emerges as one of the biggest players in the outsourcing industryThe decade of unprecedented growth in the services sector

In 2008, India claimed ~65 per cent of all offshored IT business and ~43 per cent of business process work India leads the outsourcing marketIndian outsourcing market stood at USD20.8 billion in 2013The global outsourcing market expected to hit USD233 billion by 2020

Seeding stage

Policy push

Growth stage

India has more than 20 CMM

(Capability Maturity Model) level

5 companiesIndian outsourcing market

expected to grow to USD50 billion by 2020 from its current worth of

USD20.8 billion Indian BPOs handle 56 per cent of

the world’s business process outsourcing

Service sector constitutes ~60 per cent of Indian

GDP

Top destination



SPENDING BY MIDDLE CLASS POPULATION DRIVING GROWTH

JANUARY 2015


USD21.3 trillion

USD35.0 trillion

USD55.7 trillion

2009 2020 20301% 1% 1%

4% 4% 4%

7% 7% 6%

26%17%

10%

4%13%

18%

19% 19%18%

38%

29%

20%

0%

11%

23%

India

Europe

Asia Pacific (exclud-ing China & India)

China

North America

Cenrtal & South America

Middle East & North Africa

Sub-Saharan Africa

Source: “The Emerging Middle Class in Developing Countries”, Homi Kharas, OECD

India has a very dynamic consumer market driven largely by the huge middle class population

The household consumption expenditure levels grew at a CAGR of 12.5 per cent to USD1.1 trillion in 2011

Rising per capita consumption and population will further boost the aggregate consumption

By 2020, India projected to be the world’s third largest middle class consumer market behind China and the US

By 2030, India likely to surpass both countries with an aggregated consumer spending of nearly USD13 trillion

Increasing young population, rise in disposable income and change in lifestyle is driving the consumer market

Sophisticated and innovative public and private services launched to cater to rising customer needs. For example, private cab services such as Uber, Ola Cabs and e-commerce websites like Flipkart, Myntra, Snapdeal, etc

The consumer service industry is emerging as a sunrise industry and attracting investments

The e-commerce sector is one of the sectors which has witnessed large investments

Spending by global middle class


DIVERSIFIED ECONOMY PROVIDING VARIOUS INVESTMENT OPPORTUNITIES

JANUARY 2015


Source: Planning Commission

India has a diversified economy with no individual sector accounting for more than 25 per cent shareVarious major sectors, such as consumers, infrastructure and automobile, are poised for strong growthAvailability of a large number of investment avenues mitigates the risk of being exposed to a limited number of sectors, which can be adversely impacted during a downturn

Sector-wise GDP share in 2013-14 ( per cent of GDP)

Hyundai and Honda export cars from India to

European and other Asian countries

The telecom sector attracted USD1.3 billion

foreign investment in 2013-14

Since the liberalisation in the telecom sector, the sector witnessed huge

investments

Indian e-commerce industry expected to grow from USD11 billion in 2014 to USD20 billion in 2015

Indian textile exports in 2013 are estimated to be around

USD40 billion, with garments accounting for 40 per cent

India overtook Germany and Italy to become the

second largest exporter of textiles in 2013

All major auto companies have their factories in India

Indian pharmaceuticals industry expected to

expand at a CAGR of 23.9 per cent to USD55 billion

by 2020

26%

21%15%

13%

7%

2% 2%

Mining & quarrying

Community, social & personal services

Manufacturing

Electricity, gas & water supply

Trade, hotels, transport& communication

Financing, insurance, Real Estate & Business services

Construction

Key snapshots of some sectors


Strong financial

regulatory system

RBI is among the best central banks in the world

It controls the monetary policy of India and acts as a watchdog over the banking system

SEBI acts as the regulator of the twin stock exchanges – the BSE and NSE

Indian regulatory system was applauded for its strong mechanisms that weathered the 2008 global crisis

Robust Indian banking system

Indian banking system is a huge network of 151 commercial banks with more than 100,000 branches

Seventeen Indian banks rank in the top 500 global banks list, with SBI at the top among the Indian banks

In line with the recent ‘Jan Dhan Yojna’ initiative, more than 110 million new bank accounts were opened

A strong banking system creates a strong investment environment and increases liquidity

CONDUCIVE ENVIRONMENT FOR INVESTMENT


JANUARY 2015

Prominent stock exchange

BSE is the world’s largest stock exchange in terms of number of listed companies; NSE takes the third spot in terms

of number of transactions

India entered the elite club of world’s 10 largest stock markets

In 2014, net foreign investment in equity and debt markets was USD16.1 billion and USD26.3 billion, respectively

Ease of doing business

India currently ranks 142 on the Ease of Doing Business list

The new government has set up a mandate to rise to the 50th place on this list in the next two years

New measures taken by the government to facilitate business like digitisation and a one-stop licensing system

would significantly boost India’s ranking

Rise in investment interests from global companies is a sign of improvement in the economy and the process


SPIRIT OF ENTREPRENEURSHIP

JANUARY 2015


The year 2014 saw a spurt of start-ups in India, with more than 1,200 new ventures being set up

Over USD5 billion were invested in Indian start-ups in 2014 with more than 300 deals

Innovation in education, affordable healthcare and competitiveness of small businesses are seen as important trends in the emerging entrepreneurial activity

Dynamic entrepreneurs are launching new businesses across the country, selling products online, providing healthcare, education, communication to the growing aspiring population of the Indian middle class

E-commerce and the service industry saw highest investments in 2014

Rapid growth in the use of the Internet, and mobile and online shopping as well as the success of online retailers, such as Flipkart and Snapdeal, has made the Indian start-up space a favoured destination for investors across the world

Government has taken initiatives to boost entrepreneurship in the countryUSD1.6 billion start-up fund set by the Government of IndiaOne stop e-portal for all licenses set up by the governmentProcess of applying for Industrial License & Industrial Entrepreneur Memorandum made online on a 24×7 basis through eBiz portalValidity of industrial licence extended to three yearsThe Technology Incubation and Development of Entrepreneurs (TIDE) scheme was launched and revised, and extended to 2017 to assist institutions of higher learning to strengthen their technology incubation centres and enable young entrepreneurs to initiate technology start-up companies for commercial exploitation of technologies developed by them


RISING INVESTMENTS IN THE INDIAN MARKET

JANUARY 2015


L Capital Asia, the private equity fund sponsored by the LVMH Group, will make a couple of investments worth

around USD50 million each in India this year

Ratan Tata invested in Snapdeal, Bluestone and UrbanLadder.com in 2014, signalling huge potential in the

Indian online retail industry

Amazon has pledged USD2 billion of investment in its Indian arm

Venture capital investors are expected to raise USD2 billion in 2015

The company was valued at USD11 billion after the recent money raising

Flipkart raised USD1.7 billion in 2014The company was valued at USD11 billion after the recent

money raisingIn two rounds of funding in 2014, Flipkart raised around

USD2 billion

SoftBank pumped in USD627 million in e-commerce company Snapdeal

Invested USD210 million in taxi service provider Ola Cabs

Source: News articles

TRENDS

1212

2006-07 2007-08 2008-09 2009-10PE

2010-11 2011-12 2012-13(1R)

2013-14(AE)

2015E

9.79.2

6.8

8.49.3

6.7

4.5 4.7

6.4

For updated information, please visit www.ibef.org

INDIA ON GROWTH PATH SUPPORTED BY KEY REFORMS AND HIGHER INVESTMENTS

JANUARY 2015


Source: Monthly Economic Report, Ministry of Finance, Aranca Research; PE: preliminary estimates ;1R: First Revision; AE: Advanced Estimates

According to the World Bank, Indian economy is estimated to expand 6.4 per cent during FY15Higher investment in the infrastructure sector, key reforms in taxation, coal mining auctions, among others would boost the economyCurrent decrease in crude prices would support narrow deficitsThe government plans to spend USD1 trillion on infrastructure during FY12–17

GDP growth at factor cost ( per cent)

2006-07 2007-08 2008-09 2009-10PE

2010-11 2011-12 2012-13(1R)

2013-14(AE)-2

0

2

4

6

8

10

12

14

GDP at factor cost Agriculture, forestry & fishing

Industry Services

GDP and components – growth ( per cent)

Growth in the Indian economy is mainly supported by growth in the service and industry sectorsThe government would introduce Goods and Services Tax (GST), which would create substantial savings for companies on logistics. This would positively affect on industrial productionMajor contributors were the finance and real estate sectors, which witnessed double-digit growth in the last 7–8 years


COUNTRY TO RECORD HIGHEST FOODGRAIN PRODUCTION IN FY 2014

JANUARY 2015


Source: Monthly Economic Report, Ministry of Finance, Aranca Research

Scanty rainfall in FY10 affected foodgrain production. Orissa, Jharkhand and Bihar faced a deficit of 55 per cent, 47 per cent and 28 per cent, respectivelyFoodgrain production increased at a CAGR of 2.4 per cent from 234 million tonnes in FY09 to an estimated 264 million tonnes in FY14Major growth was observed in production of pulses, which rose at CAGR of 6.1 per cent from 15 million tonnes in FY09 to an estimated 20 million tonnes in FY14India ranks second in the production of rice, sugarcane, potatoes, wheat, garlic and tomatoesDuring FY13, Indian household spent USD20.3 billion on food, indicating good business opportunityThe country has estimated highest ever foodgrain production of 264 million tonnes during FY14

Production of major agricultural crops (in Million Tonnes)

FY09 FY10 FY11 FY12 FY13 FY14*0

20

40

60

80

100

120

0

50

100

150

200

250

300

9989 96

105 105 106

81 81 87 95 94 96

15 15 18 17 18 20

234218

244259 257 264

Rice Wheat Total Pulses Total Foodgrains (RHS)


IMPROVING TRADE BALANCE (1/2)

JANUARY 2015


Source: Provisional data as per the Press Note of the Ministry of Commerce and Industry, Aranca Research

Lower demand in the US and Europe affected exports negatively, widening trade deficits in FY13

During FY09–14, exports rose at a CAGR of 11 per cent, while imports rose at a CAGR of 8.2 per cent

India’s trade balance reached a negative USD190 billion in FY13, which improved 27.8 per cent to a negative USD137 billion in

FY14

Decreasing crude prices by more than half in six months would support India to narrow trade deficit as oil imports comprise ~37 per

cent of the total imports

Export-import and trade balance (USD Billion) Oil and non-oil imports (USD Billion)

FY09 FY10 FY11 FY12 FY13 FY140

100

200

300

400

500

600 -200

-180

-160

-140

-120

-100

-80

-60

-40

-20

0

185 179251

306 300 313304 288370

489 491 450

-118-110

-119

-183 -190

-137

Exports Imports Trade balance (RHS)

FY09 FY10 FY11 FY12 FY13 FY14

94 87 106155 164 165

210 201264

334 327 285

Oil imports Non-Oil imports


IMPROVING TRADE BALANCE (2/2)

JANUARY 2015


Source: Department of Commerce, EIA, Aranca Research

During 2013, India’s petroleum imports comprised 20 per cent from Saudi Arabia, 22 per cent from other Middle East countries and

14 per cent from Iraq

Of the total exports, oil contributes ~21 per cent

During FY14 export of oil and minerals increased to USD64.7 billion from USD62.1 billion a year earlier

The automobile industry contributed 4.1 per cent to total exports. India is the seventh largest producer of automobiles in the world

Top five Importing commodities ( per cent) (FY 2014) Top five exporting commodities ( per cent) (FY 2014)

40.3

13.06.8

6.5

3.8

29.7

Oil and MineralsPrecious or semi-precious StonesNuclear reactorsElectrical MachineryOrganic ChemicalsOthers

20.6

13.3

4.1

3.83.8

54.4

Oil and MineralsPrecious or semi-precious StonesVehicles and parts other than railNuclear reactorsOrganic ChemicalsOthers


INCREASING FOREIGN CURRENCY ASSETS

JANUARY 2015



The fall in oil prices from USD113 per barrel in January 2013 to USD51 per barrel as of January 2015 has helped India to increase

foreign currency assets to USD293 billion as of November 2014

Moreover, Indian currency got strengthened against USD in FY14 compared to FY13 when it was trading at all time high of ~INR69

per 1USD

Rapidly rising exports compared with imports has supported a rise in foreign assets. Exports rose at a CAGR of 11 per cent during

FY09–14, while imports increased at a CAGR of 8.2 per cent for the corresponding period

Foreign Currency Assets (USD Billion)

FY08 FY09 FY10 FY11 FY12 FY13 FY14 Nov'14

299

242255

275261 261

278293


IIP GEARING TOWARD THE RIGHT AND POSITIVE DIRECTION

JANUARY 2015



Industrial Production – General Index ( per cent) Index of Industrial Production (IIP) strengthened 1.9 per

cent for the period of April to October 2014

Electricity grew the most (10.7 per cent) for April to

October 2014, followed by basic goods (7.6 per cent)

Although there are small positive changes in IIP, heavy

positive changes are expected due to key reforms under

approval and increasing investment in infrastructure

IIP for the month of November, 2014 increased

drastically by 3.8 per cent

Index of Industrial Production four out of nine components ( per cent)

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Apr to Oct'14

-4

-2

0

2

4

6

8

10

12

General index Mining Manufacturing Electricity Basic goods

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Apr to Nov'14

8.5

2.8

10.4 10.5

8.2

2.9

1.1

-0.1

2.2


GROWTH OF EIGHT CORE SECTOR NECESSARY FOR OVERALL GROWTH IN INDUSTRIAL PRODUCTION

JANUARY 2015



Total production growth (per cent) in core infrastructure commodities Eight core infrastructure industries reported a growth

of 4.3 per cent during April to October 2015

The highest growth was reported by Electricity (10.5 per

cent), followed by Coal of (8.5 per cent)

These eight industries contribute ~38 per cent to the

industrial production

The thermal power sector witnessed increased

investment as India targeted capacity addition of 174.9

GW by 2022

Production growth ( per cent) in eight core infrastructure commodities

FY11 FY12 FY13 FY14 Apr to Oct'14-20

-10

0

10

20

30

40

Coal Crude oil Natural Gas Refinery Products Fertilizers Steel Cement Electricity

FY09 FY10 FY11 FY12 FY13 FY14 Apr to Nov'14

3

5.5

6.6

5

6.5

2.6

9.4


Road and Highways

Outlay of USD3.8 billion is planned for highways for the current year

Infrastructure development worth USD19 billion is planned during 2012–17

Completed 100 public private partnership projects (PPPs) and 165 more PPPs are under construction

Investment of USD31 billion in national highways is expected in the next five years

Railways

Indian Railways plans to award projects worth USD1 trillion through the PPP model

Budget 2015 lays emphasis on diamond quadrilateral network of high-speed rails to connect major metro cities and

business centres

Projects worth USD40 billion have been approved for establishing rail connectivity between major ports

RISING INVESTMENTS IN INFRASTRUCTURE AND DEVELOPMENT PROJECTS


JANUARY 2015

Construction

Investment worth USD1 trillion is planned for the infrastructure sector during FY2012–17

Investment worth USD650 billion is estimated in the urban infrastructure over the next 20 years

The government is under process to launch urban development mission to develop 500 cities with a population of

more than 100,000

Thermal Power and Renewable Energy

The government is targeting a capacity addition of 88.5 GW by 2017 and 86.4 GW during 2017–22 in the thermal

power sector

The government aims to have 20,000 MW of solar power by 2022

Source: Make in India, Aranca Research


INFLATION MEETING THE CENTRAL BANK’S TARGET

JANUARY 2015



RBI has targeted a 6 per cent inflation by January 2016Inflation for November 2014 came down to 0.0 per cent supported by easing of fuel and food prices as these two components are substantial part of the Consumer Price IndexThe government curbed exports of some of the foodgrains (potatoes and onions). In July 2014, the government sold five million tonnes of rice in the open marketThe government restricted gold imports from time to time to control the FX rateSeeing inflation under control, RBI on January 15, 2015 decreased Repo Rate by 25 bps

All commodity Inflation and repo rate (per cent) Inflation components (per cent)

April'10 April'11 April'12 April'13 April'14 Nov'14 Jan'150

2

4

6

8

10

12

0

1

2

3

4

5

6

7

8

9

1.3 10.9 9.7 7.5 4.8 0.0

5.3

6.8

8.07.5

8.0 8.0 7.8

All Commodities Repo Rate

April'11 April'12 April'13 April'14 Nov'14

21

15

10

5

-1

20

11 11

6

1

14 13 12

8

-5

6 75

42

Primary Articles Food articles Fuel and Power Manufactured Product

REFORMS


INCLUSIVE INDIA – THE GROWTH AGENDA

JANUARY 2015


Source: Economic Survey 2013-14 *RE: Revised Estimates BE: Budget Estimates

India has renewed its growth strategies to target rising inequality as well as overall well-being of IndiansInequality as measured by the Gini coefficient, a measure of statistical dispersion, dropped from 36.8 in 2010-11 to 33.4 in 2011-12Inequality in India is not as much as in other emerging economies. Among the BRICS (Brazil, Russia, India, China and South Africa) nations, the Gini coefficient in South Africa was the highest at 0.63, followed by Brazil (0.55 in 2012), China (0.43) and Russia (0.40)The new government has launched various new schemes such as Jan Dhan Yojna, Pradhan Mantri Aadarsh Gram Yojna and Direct Benefit Transfer Scheme

Central government’s expenditure on social services (% of total expenditure)Item 2008-09 2009-10 2010-11 2011-12 2012-13 RE 2013-14 BE

1. Social service

a. Education,sports,youth affairs 4.3% 4.2% 4.6% 4.7% 4.4% 4.4%

b. Health & family welfare 2.1% 2.0% 2.0% 2.0% 1.8% 2.0%

c. Water supply, housing, etc. 2.5% 2.4% 2.4% 2.1% 1.9% 2.2%

d. Information & broadcasting 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%

e. Welfare of SCs/STs and OBCs 0.4% 0.4% 0.6% 0.6% 0.5% 0.6%

f. Labour & employment 0.3% 0.2% 0.2% 0.3% 0.3% 0.3%

g. Social welfare & nutrition 1.2% 0.9% 1.0% 1.3% 1.1% 1.2%

h. North-eastern areas 0.0% 0.0% 0.0% 0.0% 1.6% 1.8%

i. Other social services 1.6% 1.7% 1.7% 0.2% 0.2% 0.2%

Total 12.5% 11.9% 12.6% 11.4% 11.9% 12.8%

2. Rural development 4.6% 3.8% 3.5% 2.9% 2.5% 2.6%

3. PMGSY 0.9% 1.1% 1.9% 1.5% 0.7% 1.3%

4. Social services, rural development, and PMGSY 18.0% 16.8% 18.0% 15.8% 15.1% 16.7%


PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) – A SCHEME FOR FINANCIAL INCLUSION (1/2)

JANUARY 2015


Source: Pradhan Mantri Jan Dhan Yojana Website, Aranca Research

PMJDY was launched in August 2014 under the supervision of the Finance MinistryThis scheme was launched to make available basic financial services to the weaker sections (income wise) of the societyThe government aims to ensure that low income society takes the benefit of savings bank account, need-based credit, remittance facility, insurance and pensionThe government aims to achieve at least one saving banks account for every household, financial literacy, and access to credit, insurance and pension facilities

AboutTo Account Holder:

By opening an account a beneficiary would get a RuPay debit card and an in-built accident insurance coverage of nearly USD1,650All government benefits would be transferred to the account of beneficiary to avoid unnecessary delayAn Indian citizen above the age of 10 years can open an account with zero balance, which would enhance awareness regarding financial servicesAn account holder can take a loan of nearly USD80 after six months of opening of an accountBanking facilities, such as checking account balance and transferring funds, are available even on mobile phones

To Economy:Cash inflow to the banking sector and, in turn, to the economyMore people would become aware of financial servicesGovernment benefits would be transferred without unnecessary delay and transfer would be made to the concerned individual/s

Benefits

As of January 12, 2015, there were 111.6 million bank accountsTotal account balance was USD1,438 millionA total of 94.1 million RuPay debit cards have been issuedThe target was to achieve 100 million accounts by January 26, 2015, which was achieved well before the set date

Key Statistics


PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) – KEY STATISTICS (2/2)

JANUARY 2015


Source: Pradhan Mantri Jan Dhan Yojana Website, Aranca Research All data as on January 12, 2015

Rural vs. urban bank accounts (in million) Bank type wise accounts (in million)

88.5

19.7

3.5

Public Sector banks

Regional Rural banks

Private Banks

1,128

226

84Public Sector banks


Private Banks

66.5

45.1Rural

Urban

80.2

11.22.7

Public Sector banks


Private Banks

Bank type wise account balance (in million) Bank type wise number of RuPay debit cards (in million)


PRADHAN MANTRI SANSAD ADARSH GRAM YOJANA (PMSAGY) – A SCHEME FOR RURAL DEVELOPMENT

JANUARY 2015


Source: PM India Website, Department of Rural Development, Aranca Research

The scheme was launched in October 2014 under the

supervision of the Department of Rural Development

PMSAGY is an Indian government initiative to open the door

for good politics and develop a demand-driven rather than

supply-driven village

Main objective of the scheme is to improve basic amenities,

productivity, human development, and holistic development of

gram panchayats

Sansad (MP) is free to select any village except their own and

in-law’s village

About

Developing a process for the development of gram

panchayats

To improve the standard of living and quality of life of all the

sections of the people by:

Improving basic amenities

Higher productivity

Better standard of living

Enhancing livelihood opportunities

Reducing disparities

Widening social mobilisation

To develop local governance in a way that motivates and

inspires neighbouring gram panchayats

To present identified Adarsh Grams as schools of local

development to train other gram panchayats

Main objectives

Scheme targets to cover 2,500 villages by 2019

Apart from MPs, many influential and famous personalities

and companies have adopted villages under this scheme

Sachin Tendulkar adopted a village in Andra Pradesh

ICICI Bank adopted a village in Gujarat

Key Insights


SMART CITIES AND BULLET TRAINS – BUILDING A NEW INDIA

JANUARY 2015


Source: PM India Website, Department of Rural Development, Aranca Research

Government of India plans to build 100 smart cities and modern satellite towns near the existing citiesNeed for new smart cities arose due to increasing number of people in the urban areas wanting a better livelihood and lifestyleAccording to United Nations, Indian urban population is expected to touch 843 million by 2050

In Budget 2015; USD1.2 billion has been allocated for smart citiesUSD83 million has been allocated for the digital India initiativeFDI norms have been relaxedThe PPP model to be used to upgrade infrastructure in 500 urban areas

India aims to invest USD1.2 trillion over the next 20 years in transportation, energy and public security to build smart citiesEmployment is expected to rise 10–15 per centSeven new smart cities and a 1,500 km industrial corridor across six states have been planned with an investment of USD100 billionRelaxation in FDI norms for construction is expected to improve the government’s efforts in developing smart cities

Smart Cities

The Indian rail system is the world’s largest passenger carrierConsidering the importance of Railways in India, the government announced a diamond quadrilateral network of high-speed rail in Budget 2015A diamond quadrilateral rail line would cover major metro cities and growth centres of the countryThe objective of this high-speed rail network is to reduce journey hours and take the rail system to international standardsThis project would comprise seven routes, including Mumbai-Ahmedabad, Howrah-Haldia, New Delhi-Patna, and Hyderabad-ChennaiThe government is considering to implement this project through the PPP modelAt present, the Mumbai-Ahmedabad route is under feasibility study by experts from France and Japan and is expected to be completed by 2015Apart from the bullet trains to be run at a speed of 350 km per hour, national transporter is also considering a semi-high speed rail between Delhi and AgraSemi-high speed trains would run at a speed of 160 to 200 km per hour

Bullet trains – A diamond quadrilateral rail project


MAKE IN INDIA – SHAPING UP INDIAN MANUFACTURING (1/2)

JANUARY 2015


Source: Make in India Website, News Articles, Aranca Research

The Make in India campaign was launched in September 2014The campaign is set of plans to cut red tape, develop infrastructure and create a business-friendly environmentAt present, manufacturing share in the GDP is 15 per cent and the government aims to reach 25 per centThe objective of the campaign is to make India a better place to do business and create employment opportunities which would result in better purchasing power

AboutThis campaign would boost up manufacturing activity. Key reforms would support the decrease in the cost. For example, Goods and Service Tax (GST) would create substantial savings for a company operating in the logistics segmentBoost in manufacturing activity would lead to increased employment, thus improving the purchasing powerSelf-reliability on indigenous products would control trade deficitsIndian products would enter international markets due to improved cost structure

Main objectives

eBiz portal has been made available 24*7 for online application of Industrial License and Industrial Entrepreneur MemorandumValidity of the Industrial License has been extended to three yearsIndustrial licensing has been removed for most of the components of defence productsState government has been asked to launch self-certification and third-party certification under the Boilers ActAll returns are turned into online filling in unified formItems having dual use in military and civilian applications have been deregulatedClearance process turned onlineSelf-certification has been introduced for all non-risky and non-hazardous businesses

New process: New de-licensing and deregulation measures


Defense

Policy on defence sector has been liberalised

FDI cap raised from 26 per cent to 49 per cent

Portfolio investment in the defence sector has been permitted up to 24 per cent under the automatic route

100 per cent FDI is allowed in the defence sector for modern and state-of-the-art technology on a case-by-case

basis

Railways 100 per cent FDI under automatic route is permitted in construction, operation and maintenance for specified

infrastructure projects in railways

MAKE IN INDIA - GIVING NEW SHAPE TO INDIAN MANUFACTURING (2/2)


JANUARY 2015

Construction For construction sector, norms easing are underway

Insurance and Mining Ordinance

Insurance:

Increase in the FDI limit from 26 per cent to 49 per cent

Foreign companies are permitted to open branches in India to write reinsurance business

Mining:

Ordinance has been issued for auctioning of mines containing minerals

Source: Make in India Website, News Articles, Aranca Research


CLEAN GANGA AND ECO-FRIENDLY REFORMS

JANUARY 2015


Source: Clean Ganga Mission Website, News Articles, Aranca Research

Initially India launched Ganga Action Plan (GAP) in 1986 covering Uttar Pradesh, Bihar and West BengalThis was followed by National Ganga River Basin Authority, which was formed in 2009 with the objective to reduce pollutionNational Mission of Clean Ganga (NMCG) was formed in 2011 with following main objectives:

To promote inter sectoral co-ordination for effective planning and management for controlling pollution in Ganga and rejuvenation of the river by adopting river basin approachTo ensure minimum ecological flows in to the river to maintain the quality

In the last three decades, India has spent nearly USD8.4* billion on cleaning GangaInitiatives:Ganga Guard Corps has been set up to prevent people from polluting GangaIn Budget 2015, Government has allocated USD334 million for cleaning 2,525 km long Ganga river

Clean GangaTo maintain the quality of Yamuna river following initiatives are done:

Fine of USD82 for throwing Puja offerings into the riverFine of USD820 for dumping wastesReal Estate and Construction activities are banned on the banks of the river Yamuna

Major Initiatives

The campaign was launched on October 02, 2014India’s biggest cleanliness campaign as 3 million government employees, schools and college students had participatedThe objective of the campaign is to make India clean place to live by providing sanitation to all places in next five years

Target:Making all towns, villages and cities clean and providing them with good sanitationSafe drinking water, establishing waste disposal system, and clean roads & lanes

Cost:USD32.2 billion of expenditure is estimatedOf this, USD22 billion would be spent on building toilets in villages

Swachh Bharat


BETI BACHAO BETI PADHAO SCHEME

JANUARY 2015


Source: vikaspedia.in, news articles, Aranca Research

The government to launch `Beti Bachao, Beti Padhao' (BBBP) scheme on January 22, 2015The scheme was issued to address the issue of declining sex ratioThe government has set out USD16 million for this scheme for 2014-15USD7.4 million and USD6.6 million will be allocated in 2016 and 2017It will be under the Ministry of Women and Child Development (WCD)

AboutThe child sex ratio in India dropped from 927 girl children for every 1,000 boys in 2001 to 919 girls for every 1,000 boys in 2011This brought to the fore the need to bring in steps to improve the sex ratioThe main objectives of the scheme are

Prevent gender biased, sex selective eliminationEnsure survival & protection of the girl childEnsure education of the girl child

Strengthening the implementation of Preconception and Pre-Natal Diagnostic Techniques (Prohibition of Sex Selection) Act, 1994 (PC&PNDT Act) with strict punishments in case of violations

Main objectives

Scheme targets to cover 2,500 villages by 2019A toilet in every girls’ school in 100 vulnerable districtsA state-level innovation fund to promote best practices in improving child sex ratio and gender inequitiesThe 2014-15 Budget also proposed that the Ministry of Road Transport and Highways will spend USD8 billion on pilot testing a scheme for safety of women on Public Road TransportSetting up "Crisis Management Centres" in all the districts of Delhi in all government and private hospitals in 2015

Key Insights


STATES BOOSTING GROWTH BY INNOVATIVE METHODS

JANUARY 2015


Over the years, many Indian states have come up with reforms at the state level Developing states, such as Sikkim, Bihar, Gujarat, Goa, have shown higher growth during 2004–13 compared with developed states like Maharashtra and Karnataka

Innovative initiatives by states

Seminars/ Summits

Vibrant Gujarat: The biennial investors’ summit held in Gujarat witnessed a huge success in 2015. The summit saw participants from over 100 countries. The summit provides enormous prospects to the State to display its strengths, growth potential, initiatives taken to improve governance, investor friendly climate and art & culture of Gujarat. More than USD400 billion worth of MoUs were signed in the summit

Single Window Clearance Mechanism

Telangana: Implementation of Single Window Act with deemed clearancesRajasthan: Implementation of Single Window Act with time- bound clearancesMadhya Pradesh: Madhya Pradesh Investment Facilitation Act passed in 2008 set up a single window clearance secretariat for investment facilitation

Industrial clusters Tamil Nadu: Creation of large scale automotive hubGujarat: Creation of Pharmaceutical hub, automotive hub

Labour reforms Maharashtra: Online labour management system to administer labour laws and provide range of labour management services onlineGujarat: Strong skill development initiatives through industry participation

Environment related compliances

Gujarat: Implementation of e- governance by the Gujarat Pollution Control Board

Decentralised Planning

Madhya Pradesh: Madhya Pradesh will be the first state to have Master Plans for all its villages by 2015-16. This is in the direction of state’s plan of decentralised planning


Labor law

New labour laws issued to end ‘Inspector Raaj’

Single window compliance window for companies

Schemes like Shram Suvidha Portal, a new web-based labour inspection system, unique account numbers for

members of Employees Provident Fund Organisation, new skill development and apprenticeship scheme launched

FDI

FDI limit in insurance sector raised to 49 per cent from 26 per cent

FDI in defence sector raised to 49 per cent, and to 100 per cent in railway infrastructure

These initiatives along with ‘Make in India’ campaign will bring in investments

BIG TICKET REFORMS BY THE NEW GOVERNMENT TO TRANSFORM THE ECONOMY


JANUARY 2015

Deregulation of diesel

The government deregulated diesel in October 2014

Will reduce the government subsidies as subsidy on diesel cost was USD10 billion in FY2014

Others

Direct Benefits transfer (DBT) scheme started to reduce delays and losses in the transfer of benefits

DBT expected to control misuse of LPG subsidy by ~15 per cent

Government approved USD7.1 billion rural electrification scheme, USD0.9 billion for strengthening of power

distribution and transmission in six North Eastern states and many other power sector reforms to achieve the target

of 24 x 7 electricity to all Indians by 2019

GST

Goods and Service Tax is the new tax system to be implemented to replace all indirect taxes

The government expects to implement GST by next year

GST is expected to add as much as two percentage points to the country’s GDP growth

Source: government websites, Make in India website, news articles, Aranca Research


BUILDING UP THE FOREIGN RELATIONS

JANUARY 2015


Mending foreign relations along with the growing India story has led to huge investment plans proposed by many countries

Prime Minister visited the neighbouring countries like Myanmar, Bhutan, Nepal that were taken for granted for many years

The neighbouring countries are vital for the safety of the country

The new government has realised the importance of building relationships with the world, especially neighbouring countries, for fostering development and stabilitySince the formation of the new government, the Prime Minister has engaged with many foreign countries such as the US, China, Japan, Australia

PM Narendra Modi visits Japan and US in first few months of

his tenure as PM

US has shown its willingness to invest US 41 billion in India in

next 3-4 years

Japan and China have pledged to invest USD30 and 25 billion

in India, respectively

Indian companies ink USD2.1 trillion pact to buy diamonds

from Russia

India and Australia sign civil nuclear deal – an important measure for India’s energy

prospects

India’s Prime Minister visits Australia after 28 years

US President Barack Obama to be the Chief Guest for the

Republic Day

Indian Prime Minister visits Nepal after 17 years

Visited all the SAARC countries and proposed strengthening of

SAARC

Had heads of all big economies visiting India in 2014 - US,

China, Russia, UK

BRICS bank to be set up, with an Indian to head it for the first

five years

India proposed investments in Myanmar and Bhutan to help

them in their development path

Source: News articles, Aranca Research

OUTLOOK


INDIA – TO LEAD THE GLOBAL GROWTH WAGON

JANUARY 2015


Pace of reforms

Deregulating diesel prices

Ordinance on Insurance

Ordinances on mines

Make in India campaign

Labor reforms

Increasing FDI caps

Improving Business

sentiments

One stop online portal for

business clearances

Reduction in repo rate by

25 bps to boost economic

activities

Increasing investment in

start-ups shows the

confidence in economy

Macro-economic factors

Inflation dropping below the

RBI’s target of 6 per cent

before scheduled

As per World Bank, GDP

growth rate of India is

estimated to out pace

China

IIP growth of 3.8 per cent

beats the estimate in

November’14

Increased Investment

USD1 trillion investment in

infra

USD1 trillion worth of

projects to be awarded by

the Indian Railway

Investment worth USD101

billion pledged by US,

China and Japan

`

2013 2014 2015 2016-1

0

1

2

3

4

5

6

7

8

9 GDP growth rate( per cent)

India China United States Eurozone JapanBrazil

Source: Economic Times, Aranca Research

3636

FOR MORE INFORMATION

11 indian economy and trends for updated information, please visit january 2015

Documents

indian economy indian

indian workforce

destination indian economy

cent of indian gdp

oecd india

updated information

global outsourcing market

indian bpos handle