india positive economic outlook
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Indian Economy poised to overcome the current sentiment of a downturnTRANSCRIPT
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Zinnov Management Consulting
The Indian Promise Why it still holds…
20th June, 2012
Skeptics question India’s potential…
2
“Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment grade rating”
“Misguided policy approach focused on consumption is to be blamed for the steep fall in the growth momentum”
“The country faces an awkward combination of slow growth and elevated inflation and is a constant worry for foreign investors”
“Indian stock market does not present attractive prospects for investors in the near term amid sluggish domestic & global economic outlook”
Standard & Poor’s
Morgan Stanley
Fitch Ratings
Goldman Sachs
…enough reasons to counter! Favorable demographic dividend will pay in the long run 1
Indian technology consumption is exploding 2
GST implementation will accelerate economic growth 3
Indian MNCs and vast base of SMBs will be impossible to ignore 4
Large states in India are already booming 5
Indian non-metro markets hold tremendous untapped potential 6
Infrastructure improvements are on the rise 7
Indian Media & Entertainment industry will outpace major global markets 8
Rising education level is making large base of Indians employable 9
Tremendous growth in philanthropy 10
3
1 Favorable Demographic Dividend will pay in the long term
4
Source: Goldman Sachs Report: ‘India’s Rising Labour Force’
“Our analysis suggests demographics alone may contribute about 4 percentage points of annual GDP growth for the next two decades, from increases in labour force, higher
productivity due to urbanization and having the right age structure”
To Increase by 250%
Consumption of Food and Beverages
4x increase expected
Spending on Housing and Appliance
5x increase expected
Education and Healthcare Spending
Potential for urbanization much greater than China, Japan, Russia and the US
Additional 175 mn people
Urban Population
In contrast, china to add 15 mn people; Japan to go 3 mn short
110 mn additions; 50% in the most productive age group of 30-40 years
Labour Force
Indian technology consumption is exploding (1/2)
5
Source: Comscore, Google, Edelweiss, Avendus, Zinnov Analysis; Press Articles
Mobile Phone Users
Greater than France and the UK, combined
Over 800 mn
Number of Debit Cards
Over 400% increase in the last 5 years
Over 228 mn
People making online
Transactions To grow over 250% by 2015 Over 15 mn
Facebook Users Second largest Facebook nation
worldwide after the US Over 51 mn
Internet Users Second largest in the
world after China Over 123 mn
2
Indian technology consumption is exploding (2/2)
6
Source: Comscore, Google, Edelweiss, Avendus, Zinnov Analysis
Domestic IT market, currently greater than
USD30 bn, is growing faster than exports
E-commerce market expected to surpass $23 bn
within 4 years; second fastest growth worldwide
With almost 4 fold growth, online advertising market
expected to reach $1.55 bn by 2015
Cloud computing expected to grow at more than 2X
the worldwide rate; revenues to touch $5 bn by
2015
170 mn Aadhar (Unique ID Cards) already
allocated
Online travel penetration (28%) higher than that in China, Japan, Italy, Spain,
and Singapore
Multiple startups already approaching $B+ sizes
2
GST implementation will accelerate economic growth
India’s GDP is expected to increase by 0.9% -1.7%
post GST’s implementation
Gains from
GST
While export gains are expected to vary between 3.2% to 6.3%, imports are set to benefit by 2.4% to
4.7% Combined effect of FDI in retail and implementation
of proposed GST is expected to raise Indian
FMCG industry’s size to $47 bn by 2013
7
Source: NCAER, FICCI-Technopak report
3
Indian MNCs and vast base of SMBs will be impossible to ignore (1/2)
8
Source: Forbes, Zinnov Analysis
Indian Companies in Forbes Top 2,000
Number of Companies in Forbes Top 2,000
61
33 28
India Brazil Russia
Potentially 175 Indian companies can make it to the
list by 2020
4
Indian MNCs and vast base of SMBs will be impossible to ignore (2/2)
9
Source: Forbes, Zinnov Analysis
Russia 8 Mn
Brazil 14 Mn
US 26 Mn
India 45 Mn
50+ Mn China
SMB’s share…
~16.0 Mn
~1.3 Mn
~29.7 Mn
Medium enterprises 100-1000
employeess
Small enterprises
11-100 employees
Micro enterprises
1-10 Employees
in total GDP 17%
in all enterprises 99%
in total workforce 40%
in total manufacturing output 45%
in total exports of India 40%
4
Uttar Pradesh (UP) GDP: $70.4 bn
Maharashtra GDP: $138.4 bn
Andhra Pradesh (AP) GDP: $68.2 bn
Tamil Nadu (TN) GDP: $69.9 bn
Gujarat GDP: $65.2 bn
Large states in India are already booming
India’s top 5 states by population can jointly accommodate the combined population of
Brazil, Mexico, Philippines, Vietnam and Egypt
10
Source: Business Standard, MOSPI
• Indian states viz. Delhi, Bihar, Chhattisgarh, and Goa, grew at more than 10% Y-o-Y in 2011
• In Jan 2012, Gujarat, witnessed
signing of 2,700 MoUs in a single day at the Global Investors’ summit
• Maharashtra, UP, AP, TN and Gujarat contributed over 48% to the country’s GDP in 2011; the states also have the highest number of factories in India
5
Indian non-metro markets hold tremendous untapped potential
IIT Joint Entrance Examination (JEE) topped by students from non-metros
nine times in the last eleven years
Since 1990, five out of the total six Indian Olympic medalists have been
from non-metros
Nearly 60% Indian international cricketers in the last decade hailed
from non-metro cities
Growth in rural FMCG markets (17.2%) outpaced urban markets (16.5%) in
Q1-2012; the former to grow tenfold and reach $100 bn by 2025
Indian Non-metros Rising to Prominence
11
Source: Cricinfo, Nielsen, Press Articles, Zinnov Analysis
6
Infrastructure improvements are on the rise
Note: 1. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Sarva Siksha Abhiyan (SSA), National Rural Health Mission (NRHM), Pradhan Mantri Gram Sadak Yojana (PMGSY), Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Rajiv Gandhi Drinking Water Mission (RGDWM), Accelerated Irrigation Benefit Programme (AIBP), Indira Awas Yojana (IWY) 12
Source: Ministry of Railways, DIFF, Planning Commission; CIA World Factbook, World Bank
MGNREGA 27.9
SSA 13.9
NRHM 12.4 PMGSY
11.6
JNNURM 8.7
RGDWM 8.3
AIBP and other water resources
programme 8.3
IWY 7.4
Others 26.0
100% = $ 124.5 bn
Government Spending on Development Programs1 – Eleventh Five Year Plan ($bn)
Gro
wth
in In
fra
stru
ctu
re
Projected infrastructure investments grew 2.5 times from 10th to 11th five
year plan
Employment to 41 mn households during 2010-11 under MGNREGA
Projected investment in 11th five year plan; over $78 bn for road and $64 bn
for railway infrastructure
51.73% annual growth in FDI in construction since 2005
Delhi Metro supporting greater daily ridership than Taipei Metro; per km
installation cost 1/4th of the latter
Third largest road network, highway density more than thrice that of China and Brazil
Fourth largest railways network, additional 20,000 km railway track to be laid by 2020
7
Rising education level is making large base of Indians employable
13
Source: Census 2011, World Bank and UGC Report, Finance Minister Speech (FY 2013)
India had 700,000 fresh technical graduates in 2011, compared with China’s 600,000 and
the US’s 70,000
2010 2011
Fresh Technical College Graduates
Growth: 27% Literacy level increased by 9.21% in the past 10 years
to reach 74.04% in
2011
National Skill Development Policy framed
by GOI to cater to needs of the
industry for skilled workers
Number of Universities
increased from 364 to 654 from
2004-05 to 2010-11
Government decided to set
up 6,000 model schools at the block level to benchmark excellence
Enrollments for higher education
increased by 103% in the last decade
99% villages have primary
schools within 1 km radius
Rising Education Levels in India
8
Indian Media & entertainment industry will outpace major global markets
14
Source: FICCI, PWC, Ernst and Young, Sports Media – SportsPro, RNI
Television and Newspapers Indian Cinema Indian Premier League
Largest movie making industry worldwide
1,100 movies produced per year compared with
700 in Hollywood
20 mn people go to movies everyday
More than 600 TV channels
More than 82,000 newspapers
7 times higher circulation than US newspapers
Brand value ~ 4 Bn
160 mn + viewers world over
Higher valuation than NBA
9
Tremendous growth in philanthropy
Philanthropy in India
Fastest Growing HNI population in
all of Asia
Top 20 billionaires doubled their
combined wealth since 2008
50% increase in private charitable
spending since 2006
Having increased 5 times since 2006, corporate giving
totals $1.5 bn
Over 3.3 mn NGOs active in India as
against 1.5 mn in the US; 700 opening every day on an
average1
15
Source: Bain & Co Note: 1) During last three years
10
16
India promises a positive outlook
Consumer spending contributes 60% to
GDP – shielded from external
influence
Declining debt to GDP ratio – 67.6%1 in 2012 as opposed
to 84% in 2004
$12.3 Bn FII investments from
Jan to May 2012, as against $8.3 Bn in
2011
Similar slowdown in peers such as China and Brazil, indicate
external influence to be the cause of slow
growth; raises questions on rating
downgrade on account of latter
India’s Strong Economic Fundamentals
Source: RBI, IMF, Press Articles Note: 1) IMF Estimates
Low external Debt to GDP ratio of 20% (Dec 2011) renders default
highly unlikely; it is 3/5th compared with Russia and less than 1/5th compared with
the US
Total gross savings equivalent to 1/3rd
of total GDP
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Zinnov Management Consulting
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