A guide to INDIA - Lloyd's of London/.../India/20120105_Market_Intelligence_India.pdf ·...

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A guide to INDIA

1

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FULL NAME / CAPITAL CITY: Republic of India / New DelhiPOPULATION / LANGUAGE: 1,156m / Hindi 41%, Bengali 8%, Telugu 7%, Marathi 7%, Tamil 6%, Urdu 5%, Gujarati 5%, Kannada 4% (2001

Census). Note: English is the most important language for national, political, and commercial communication

GDP (PPP): US$ 3862bn (Global Ranking # 4) (2010)

FDI STOCK (INWARD): US$ 158bn (Global Ranking # 24) (2009)

MAIN EXPORT PARTNERS: UAE 13%, US 13%, China 6% (2009)

MAIN IMPORT PARTNERS: China 11%, US 7%, Saudi Arabia 5%, UAE 5%, Australia 5%, Germany 5%, Singapore 4% (2009)

MAIN EXPORTS: Petroleum products, precious stones, machinery, iron and steel, chemicals, vehicles, apparel

MAIN IMPORTS: Crude oil, precious stones, machinery, fertilizer, iron and steel, chemicals

EASE OF DOING BUSINESS: Global Ranking # 134 (2011)

COMPETITIVENESS: Global Ranking # 51 (2010 / 2011)

NATURAL HAZARDS: Droughts; flash floods, as well as widespread and destructive flooding from monsoonal rains; severe thunderstorms; earthquakes

A Guide to INDIA > Key Facts > 1 of 5

Source: CIA World Factbook (www.cia.gov); Competitiveness Index (www.weforum.org); ease of doing business index (www.doingbusiness.org)

© Lloyd’s

Country name: Republic of IndiaCapital: New DelhiPopulation: 1.2bnGDP: US$ 1.8tn (2010 actual.) (10th largest in world)

GDP change: 8.8% real growth rate (2010)

Projected Growth: 7.3% (2011)

Source: CIA World Factbook (May 2011), IHS Global insight

Background:India is one of the world's most promising emerging markets. Its economy has tremendous potential, and business and investor interest has soared in the last decade. The country's recent economic performance has retained traction, and growth dipped only slightly, even during the sharp global economic recession and severe drought in 2009, and during the current global economic weakness.

The development of India's world-class information technology industry has coincided with the start of a second wave of economic reform. India's economic development has been fairly unusual for a rapidly developing emerging market, with growth in the services sector outpacing that of the rest of the economy. As a result, the GDP share of manufacturing—which is responsible for generating mass employment in most rapidly developing economies — has remained largely unchanged. Although India's manufacturing sector has reignited in recent years, thanks in part to the emergence of its export-oriented sub-sector, services will continue to be India's leading growth sector.

In any case, India's growth fundamentals are now on a relatively solid footing and can support strong sustainable expansion for the foreseeable future. Nevertheless, inflows of foreign direct investment, crucial to spurring the development of manufacturing, remain relatively low, particularly compared to neighbouring China.

Investment, both domestic and foreign, has been stifled by intrusive market regulation, poor infrastructure, inflexible labour-market practices, and recurring fiscal deficits, which have crowded out private investment, although these trends are improving. Therefore, reform remains essential to unlocking the economy's full potential and propagating growth across the whole country, which forms the central platform of the current Singh administration.

Although constraints and risks to growth certainly abound, they are likely to be gradually mitigated as policy reforms continue in response to the needs of expanding domestic employment and creating a globally competitive economy. The outcome of India's 2009 national elections, in which the ruling United Progressive Alliance coalition retained a solid majority, in general bodes well for the future of reform, privatization, deregulation, and infrastructure spending over the medium term.


China

1.3bnUS$ 5.9tn (2010 actual) (2nd largest in world)

10.4% real growth rate (2010)

9.3% projected growth (2010)

Comparison

President: Pratibha PatilPrime Minister: Dr. Manmohan Singh Minister of Finance: Shri Pranab Mukherjee

© Lloyd’sSource: IHS Global Insight, The Economist


Summary

• India has a well-diversified export profile. The leading export category is textiles and garments, complemented by gems and jewellery, and the export of machinery and chemicals. Even further diversification exists in India's total foreign-exchange earnings profile when service exports are included. India's dynamic service exports feature IT-and-related services, as well as financial, medical, and legal services.

• The UK and India are among the top investors in each other’s economies bringing significant long term benefits to both. According to the UKTI, the UK is the largest European investor in India and the fourth largest internationally. Likewise, India is the third largest investor in the UK.

India: Major Trading Partners, 2010

EXPORTS IMPORTS

Country Billions of US$

Percent Share

Country Billions of US$

Percent Share

US 27.5 13.2 China 44.0 12.9

UAE 25.0 12.0 UAE 22.0 6.4

China 17.7 8.5 US 20.4 6.0

Hong Kong 8.9 4.3 Saudi Arabia 19.6 5.7

Singapore 8.7 4.2 Australia 15.9 4.7

Germany 6.4 3.1 Singapore 13.3 3.9

United Kingdom 6.4 3.1 Iran 13.3 3.9

Japan 5.0 2.4 Germany 12.4 3.6

Netherlands 4.5 2.2 Indonesia 11.1 3.2

Belgium 4.4 2.1 Hong Kong 9.7 2.8

India: Top-10 Sectors Ranked by Value Added

2010 2011 % Change % of GDP

US$ BN (Real terms) (Nominal)

Agriculture 269.7 5.2 17.0

Construction 124.5 6.0 7.8

Wholesale Trade 123.7 10.1 7.8

Retail Trade - Total 107.0 8.4 6.7

Public Admin. and Defense 97.9 6.9 6.2

Banking and Related Financial 72.0 7.9 4.5

Real Estate 67.0 7.2 4.2

Business Services 60.2 9.3 3.8

Health and Social Services 57.0 7.0 3.6

Education 40.0 7.2 2.5

Top-10 Total 1,019.0 64.2

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Source: Wikipedia, IHS Global Insight

NEW DELHI

• New Delhi is the capital city of India. It serves as the centre of the Government of India and the Government of the National Capital Territory of Delhi. It is situated within the metropolis of Delhi. It is one of the nine districts of Delhi Union Territory. The total area of the city is 42.7 km2. New Delhi hosts 134 foreign embassies and high commissions.

• The wider metropolitan area of Delhi is home to 16.8m people, the second largest in India after Mumbai.

• The foundation of the city was laid on 15 December 1911. It was planned by two leading 20th century British architects namely Sir Edwin Lutyens and Sir Herbert Baker. The new Capital was christened "New Delhi" in 1927, and subsequently inaugurated on 13 February 1931, by British India's Governor-General Lord Irwin.

• It is one of the fastest growing cities in the world and has a total population of nearing three hundred thousand residents. New Delhi is one of the world’s top global cities.

• In a report jointly prepared by Institute for Competitiveness and Confederation of Indian Industry, the city is listed as the best to live in India.

• According to Mercer, New Delhi is the most expensive city in India for expatriates in terms of cost of living. New Delhi is known for its wide, tree-lined boulevards and is home to numerous national institutions, museums and landmarks.

• Connaught Place, one of northern India's largest commercial and financial centres, is located in the northern part of New Delhi. Adjoining areas such as Barakhamba Road and ITO are also major commercial centres. The government and quasi government sectors are the primary employers in New Delhi.

• The city's service sector has expanded due in part to the large skilled English-speaking workforce that has attracted many multinational companies. Key service industries include information technology, telecommunications, hotels, banking, media and tourism.

© Lloyd’s


Source: Wikipedia, IHS Global Insight

MUMBAI

• Mumbai (formerly known as Bombay) is the Capital of the Indian state of Maharashtra. Maharashtra is the 2nd largest state in India both in terms of population and geographical area. Population of Maharashtra alone is around 100 million (Census 2001) which is about 9.4% of total population of India.

• It is the most populous city in India, and the fourth most populous city in the world, with a metropolitan area population of approximately 20.5 million. Along with the neighbouring urban areas, including the cities of Navi, Mumbai and Thane, it is one of the most populous urban regions in the world.

• Mumbai lies on the west coast of India and has a deep natural harbour. As of 2009, Mumbai was named an Alpha world city. Mumbai is also the richest city in India, and has the highest GDP of any city in South, West or Central Asia

• Mumbai lies on the west coast of India and has a deep natural harbour. As of 2009, Mumbai was named an Alpha world city. Mumbai is also the richest city in India, and has the highest GDP of any city in South, West or Central Asia

• It became a strong base for the Indian independence movement during the early 20th century. When India became independent in 1947, the city was incorporated into Bombay State. In 1960, following the Samyukta Maharashtra movement, a new state of Maharashtra was created with Bombay as the capital. The city was renamed Mumbai in 1996.

• Mumbai is the commercial and entertainment capital of India, it is also one of the world's top 10 centres of commerce in terms of global financial flow, generating 5% of India's GDP, and accounting for 25% of industrial output, 70% of maritime trade in India (Mumbai Port Trust & JNPT),and 70% of capital transactions to India's economy.

• Mumbai is home to important financial institutions such as the Reserve Bank of India, the Bombay Stock Exchange, the National Stock Exchange of India, the SEBI and the corporate headquarters of numerous Indian companies and multinational corporations.

• It houses some of India's premier scientific and nuclear institutes like BARC, NPCL, IREL, TIFR, AERB, AECI, and the Department of Atomic Energy. The city also houses India's Hindi (Bollywood) and Marathi film and television industry.

• Mumbai's business opportunities, as well as its potential to offer a higher standard of living, attract migrants from all over India and, in turn, make the city a diverse melting pot of many communities and cultures.

© Lloyd’sSource: Census India, (2011), http://www.censusindia.net

2009 Population by state

Kolkata

Mumbai

Chennai

Hyderabad

ABOUT POPULATION BY STATE:

• India’s population is expected to increase from 1,029 million to 1,400 millionduring the period 2001-2026, an increase of 36% in 25 years at a rate of 1.2% annually (Census India, 2001).

• According to the 2011 Census of India (provisional), the current population is estimated to be 1,210 million.

• Out of the total population increase of 371 million between 2001- 2026 the share of workers in the age group 15-26 years in this total increase is 83%.

• India’s population in 1901 was about 238 million, which has increased by more than four times in 110 years to reach a population of 1,210 million in 2011.

• Decadal Growth Rate of population during 2001/2011 of the six most populous States, (i.e. Uttar Pradesh, Maharashtra, Bihar, West Bengal, Andhra Pradesh and Madhya Pradesh), have all declined during 2001/2011 compared to the previous decade (1991/2001).

TOP STATES LEGEND

State Population in million in % of totalUttar Pradesh 200 16.5%Maharashtra 112 9.3%Bihar 104 8.6%West Bengal 91 7.5%Andhra Pradesh 85 7.0%Madhya Pradesh 73 6.0%Tamil Nadu 72 6.0%Rajasthan 69 5.7%Karnataka 61 5.1%Gujarat 60 5.0%TOTAL 1,210 100.0%

LOW HIGH

Bengaluru

Jaipur

New Delhi

MA

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UP Uttar Pradesh

MA Maharashtra

BI Bihar

WB West Bengal

AP Andrah Pradesh

MP Madhya Pradesh

A Guide to INDIA > States and Key Cities > 1 of 9

© Lloyd’s

MAHARASTRA

Mumbai

Maharashtra is the 2nd largest state in India both in terms of population and geographical area. Population of Maharashtra is around 100 million (Census 2001) which is about 9.4% of total population of India.

The Gross State Domestic Product at current prices for 2009/2010 is estimated at US$189bn and contributes about 14.7% of GDP. It is expected to grow by 10.5% during 2010/2011.

Mumbai, the state capital and the financial capital of India, houses the headquarters of most of the major Indian corporate & financial institutions.

The literacy rate in Maharashtra is 77% as against 65% at national level as per Census 2001. The state has attracted 20% of FDI Industrial (approved) projects in India.

India’s main stock exchange, capital market and commodity markets are based in Mumbai. The two most important financial institutions namely Reserve Bank of India(India’s central bank) and the Bombay Stock Exchange are headquartered in Mumbai.

The three main sectors which contribute to Maharashtra’s income are:

• Services 61% (2009/2010)

• Industry 29% (2009/2010)

• Agriculture and allied activities 10% (2009/2010)

Some samples of leading companies, which are based in Maharashtra are:

• Reliance Industries Ltd – One of India’s largest conglomerates, which include activities ranging from petrochemicals, telecommunications & finance.

• ICICI Bank – India’s largest private sector bank

• Bharat Petroleum – India’s largest refining and petroleum retailing unit

• Larsen & Toubro – India’s largest engineering & construction conglomerate

KEY TAKEAWAYS

• Mumbai is the financial capital of India

• Home to India’s stock exchange

• 61% of income in services sector

MA

BIWB

AP

MP

UP

UP Uttar PradeshUP Uttar Pradesh

MA MaharashtraMA Maharashtra

BI BiharBI Bihar

WB West BengalWB West Bengal

AP Andrah PradeshAP Andrah Pradesh

MP Madhya PradeshMP Madhya Pradesh


Source: http://mahades.maharashtra.gov.in, “Economic survey of Maharashtra 2010/2011, (2011); http://www.ibef.org, “Maharashtra” 2010

© Lloyd’s

TAMIL NADU

Tamil Nadu is considered to be the most industrialised state in the country, also known as the ‘yarn bowl’ of the country. It is the seventh most populous state in India.

The Gross State Domestic Product for 2008/2009 is about US$ 73.7bn.

The three major cities in Tamil Nadu are Chennai, Coimbatore and Madurai.

Key industries in Tamil Nadu are IT, textile, engineering and automotive. Tamil Nadu is also a favourite tourist destination.

The state attracted cumulative FDI inflows of US$ 5.7bn between April 2000 and May 2010 and is amongst the states which attract the highest levels of FDI.

Tamil Nadu is the second-largest software exporter by value in India after Karnataka.

The automotive industry contributes about 8% Gross State Domestic Product, providing direct employment opportunities to about 300,000 people.

Some samples of leading companies, which are based in Tamil Nadu are:

• Madura Coats – Supplies threads to clients such as Levi’s, Tommy Hilfiger

• Ford Motor – main manufacturing plant has a capacity of 100,000 vehicles annually and is located close to Chennai. Ford Motor Company has invested US $500m to double capacity of the plant to 200,000 vehicles

• Amalgamations Group – One of India’s largest engineering conglomerates headquartered in Chennai

• Bharat Heavy Electricals (BHEL) – Principal activities include manufacture and distribute electrical, electronic, mechanical and nuclear power equipment

• Cognizant Technology Solutions – Business Process Outsourcing (BPO) services, IT consulting services

KEY TAKEAWAYS

• Tamil Nadu is the most industrialised states

• Second largest IT hub

• Major textile & engineering hub of South India

Chennai

MA

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BI BiharBI Bihar





Source: http://www.ibef.org, “Tamil Nadu” 2010; http://www.cmie.com

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DELHI

Delhi is the capital of the Republic of India and also a state for administrative purposes. It is one of the largest metropolis in the country. It is home to the union government of the country and state government offices, hence is often referred to as the political capital of the country.

The Gross State Domestic Product of Delhi for 2007/2008 was US$ 35.8bngrowing at an average rate of 15% over the last decade.

Key industries which are drivers of the Delhi economy are financial institutions, food processing, Information Technology Enabled Services (ITES), consulting and tourism.

Due to its importance as a capital city, it is an important centre for trade and commerce with key industry associations.

Some samples of leading companies & organisations, which are based in Delhi are:

• DLF – One of India’s largest construction company in the real estate sector. In 2008/2009 total revenue of the company was US$ 615m.

• National Agricultural Cooperative Federation of India (NAFED) –Headquartered in Delhi with its objective to promote cooperative marketing of agricultural produce to benefit the farmers

• NASSCOM – It is the premier trade body and chamber of commerce of the IT and Business Process Outsourcing (BPO) industry in India, and is headquartered in New Delhi

KEY TAKEAWAYS

• Delhi is the political capital of India

• Major sectors are consulting & tourism

• Important centre for trade and commerce and key associations

New Delhi

MA

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MP

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BI BiharBI Bihar





Source: http://www.ibef.org, “Delhi” 2010; http://www.cmie.com

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ANDHRA PRADESH

Andhra Pradesh is on the south-eastern coast of India. Hyderabad is the capital of the state and houses many banking and financial institutions.

The key growth areas identified in Andhra Pradesh are IT/ ITES, pharmaceuticals, bio-technology amongst other sectors.

The bio-technology market size in 2008/2009 stood at US$ 475m (18% oftotal Indian bio-technology industry). It is also considered as a bulk drug capital of the country, as half of the top 10 pharmaceutical companies in the country are based here.

Despite strong pharmaceutical and a growth markets in bio-technology, agriculture remains and important sector in the state’s economy. Andhra Pradesh is also considered as being a mineral rich state.

Some samples of leading companies, which are based in Andhra Pradesh are:

• Mahindra Satyam - Provides software solutions to electronics and electrical equipment manufacturers, aerospace and defence companies

• Microsoft India – Microsoft’s largest software development centre outside US

• Dr Reddy’s Laboratories - It ranks among the top 15 generics players in the world (revenues of US$ 958m) and first pharmaceutical company in Asia-Pac (outside Japan) to be listed in NYSE

• Insurance Regulatory and Development Authority – The National agency for regulation of Insurance is headquartered in Hyderabad

KEY TAKEAWAYS

• Major sectors are IT & Pharmaceuticals

• Mineral rich state

• Insurance regulator (IRDA) is based in Hyderabad

HyderabadMA

BIWB

AP

MP

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BI BiharBI Bihar





Source: http://www.ibef.org, “Andhra Pradesh” 2010; http://www.aponline.gov.in; http://www.cmie.com

© Lloyd’s

KARNATAKA

The capital of Karnataka is Bengaluru formerly known as “Bangalore”.

Karnataka’s Gross State Domestic Product at 2008/2009 prices was about US$ 59bn, and it averaged at 11.8% growth in the last ten years.

It is home to some of India’s leading IT / ITES companies, and Bengaluru is often referred as “Silicon valley of India”. The state also is home to some of the premier life science institutions such as Indian Institute of Science and National Centre For Biological Science.

Some samples of leading companies, which are based in Karnataka are:

• Wipro Technologies: Based in Bengaluru, it provides BPO, software solutions and other consulting solutions to global companies around the world

• Infosys: Infosys is a competitor in the same space as Wipro

• Bharat Earth Movers: manufactures a wide range of products such as earth moving equipments with revenues of US$ 825m in 2009/2010

• United Breweries: It is India’s largest brewer with a turnover of US$ 400m in 2009/2010. The group is also in the Aviation sector and owns Kingfisher airlines

KEY TAKEAWAYS

• Bengaluru is seen as the Silicon Valley of India

• Leading sectors are IT, Pharmacy and Automotive

Bengaluru

MA

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BI BiharBI Bihar





Source: http://www.ibef.org, “Karnataka” 2010; http://www.cmie.com

© Lloyd’s

GUJARAT

Gujarat is known as the ‘Petro capital of India’. The capital of Gujarat is Gandhinagar named after Mahatma Gandhi.

The city of Surat is known for its domination in the diamond industry as a major centre of diamond cutting and polishing.

The Kandla port is one of the country’s largest ports. The world’s largest ship breaking yard in the world is located in Alang, Bhavnagar.

Some samples of leading companies, which are based in Gujarat are:

• Parle – one of India’s largest manufacturer of biscuits, confectionary and juices

• Arvind Mills – one of the top producers of denim in the world and largest producer in Asia

• Reliance Industries – The largest grass-root refinery in the world is owned by Reliance which is situated in Jamnagar refinery

KEY TAKEAWAYS

• Major centre of diamond cutting and polishing

• Major centre for India’s refinery sector

• Largest ship breaking yard

Gandhinagar

MA

BIWB

AP

MP

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BI BiharBI Bihar





Source: http://www.ibef.org, “Gujarat” 2010; http://www.cmie.com

© Lloyd’s

UTTAR PRADESH

Lucknow

Uttar Pradesh is the most populous state in India. The capital of Uttar Pradesh is Lucknow.

The Gross State Domestic Product (GSDP) of Uttar Pradesh is 7% (2007/2008) of India. Uttar Pradesh is the largest producer of wheat in India, contributing about a third of the country’s production.

Tourism represents a major contributor to the GSDP for Uttar Pradesh, as the Taj Mahal, India’s most visited monument is located in Agra.

Some samples of leading companies, which are based in Uttar Pradesh are:

• Atlas Cycles: a leading bicycle manufacturer in the country manufacturing bicycles of all kinds from kids cycle, mountain bikes and sports bikes

• ITC Limited: one of India’s foremost consumer goods companies, ranging from a product line of cigarettes, apparel and food products

• Spice Global: the first company to launch cellular telephone service in India, having a diversified portfolio of finance, entertainment and TV ventures

• Bajaj Hindustan: one of the largest sugar and ethanol manufacturers in India and all the plants are located in the state

KEY TAKEAWAYS

• Major sectors are IT & Pharmaceuticals

• Taj Mahal world heritage site

• Houses some of the top co-op organisations

UP

MA

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Source: http://www.ibef.org, “Uttar Pradesh” 2010 b) http://www.cmie.com

© Lloyd’s

WEST BENGAL

The capital of West Bengal is Kolkata (formerly “Calcutta”) with a Gross State Domestic Product of around 8% (2007/2008) compared to other Indian states. Calcutta was the old capital of India during the British Raj and was then moved to Delhi in the early 19th century.

West Bengal has the largest brackish-water resources for shrimp farming and leading exporter of shrimps in India, which is the largest exporter of shrimps in the world.

West Bengal is the second largest tea growing state in India after Assam and accounts for around a quarter of India’s tea production. West Bengal is also known for being a leading exporters of finished leather goods.

Some samples of leading companies, which are based in West Bengal are:

• Tata Tea Limited – It is the largest brand of tea in India headquartered in West Bengal

• Shyam Steel – Headquartered in Howrah, it is a lead manufacturer of steel re-bars and structures with a turnaround of over US$ 220m in 2009/2010

• Arcelor Mittal – is the world’s number one steel company, and its designing and engineering centre in Kolkata serves the entire design needs of Arcelor Mittal, globally

KEY TAKEAWAYS

• Second largest tea producer in India

• Leading exporter of Shrimp

• Major exporter of leather goods

Kolkata

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BI BiharBI Bihar





Source: http://www.ibef.org, “West Bengal” 2010, b) http://www.cmie.com

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Gross Domestic Product (GDP)(nominal GDP levels in billion US$ ; Real GDP change)

9.1%8.5% 8.4% 8.6% 8.8% 9.0%

7.9%

9.6%

5.1%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2007 2008 2009 2010 2011 2012 2013 2014 20150%

2%

4%

6%

8%

10%

12%

Economics & Politics> Economic Outlook > 1 of 2

GDP SIZE IN US$ BN GDP GROWTH

Source: IHS Global insight, IMF world economic outlook

REAL GDP SIZE (US$ BN) AND GROWTH CURRENT KEY ECONOMIC ISSUES

• India is the 10th largest economy in the world and4th largest in PPP terms

• Growth forecasts of 8% a year for at least the next 5years

• Economic liberalization, including industrialderegulation, privatization of state-owned enterprises,and reduced controls on foreign trade andinvestment, began in the early 1990s

• This has served to accelerate the country's growth,which has averaged more than 7% per year since1997

• The UK is one of the largest European investors inIndia and India the third largest investor in the UK,with bilateral trade in 2010 standing at GBP 13bn

© Lloyd’s

ECONOMIC MOMENTUM IN INDIA IS DECELERATING• Following aggressive monetary tightening, the Indian economy will undergo moderation in the short term to below 8% growth• India’s growth momentum will likely return to its historical trend, expanding upward of 8.0% over the medium term and maintaining

healthy growth averaging 6.5% through the long term• The development of India's world-class IT industry, coupled with the ongoing economic reforms, will further facilitate India's

increasing integration into the global economy• Growth in the services sector will continue to outpace the rest of the economy, with manufacturing also growing

PERSISTENT PRICE PRESSURES REMAIN A KEY POLICY CONCERN• The Reserve Bank of India (RBI) has been steadily tightening monetary policy since March 2010, with the latest hiking of reserve

requirements and policy interest rates implemented on 25 October 2011• It appears price pressures are broadening: price increases are not just affecting raw material but also manufactured goods • CPI inflation is expected to remain elevated over the near term, at 9.1% in 2011 and 7.3% in 2012, higher than registered since

2000

INDIA’S EXTERNAL FINANCES CONTINUE TO SHOW STRENGTH• External accounts remain healthy, IT and related services are expanding rapidly, transforming parts of the country into export

platforms, as well as generating employment and boosting consumer demand. • Software exports constitute 2% of GDP, but the IT and related services not only include software, but also business-process

outsourcing activities such as accounting, procurement, insurance management, legal services, human resources etc... • The current account will continue to incur deficits of less than 3% of GDP in each year over the medium term. The positive structural

changes in the external sector have resulted in the ongoing accumulation of foreign-exchange reserves.

Source: IHS Global Insight

Economics & Politics> Economic Outlook > 2 of 2

© Lloyd’s

INDIA HAS TRANSFORMED INTO A GLOBAL IT POWERHOUSE IN A DECADE

• India has transformed a £2bn industry into a £30bn industry over the last decade

• Indian exports in IT have grown by about 35% a year for the last 11 years

• The sector has survived 2 global downturns – the Dotcom bust in 2000 and the Global Financial crisis of 2008/9

• The ICT industry contributes 6.1% of GDP, about 5 times its contribution of 10 years ago

BESPOKE SOLUTIONS GROWING RAPIDLY, 13% GROWTH DURING GLOBAL SLOWDOWN

• Domestic market and the appetite for new products and technologies to create bespoke solutions is growing rapidly

• The IT sector experienced an overall growth of about 13%, with 6% in exports, amounting to over $70bn in revenues,during the global slowdown

CONTINUING SHIFT TO BUSINESS PROCESS OUTSOURCING

• The IT and related services not only include software exports, but also business-process outsourcing (BPO) activities. Activities such as accounting, procurement, insurance management, legal services, human resources, medicalservices, and other internal corporate control functions are also included.

• Hardware accounted for 21% of total revenue; BPO accounted for 18%; and engineering and R&D accounted for 18%.India's indigenous IT firms are booming

• Some of the leading companies — Infosys and Wipro and the service subsidiaries of large conglomerates such asReliance and Tata — are emerging as global competitive brands.

Source: UKTI , Nasscom

Economics & Politics> Key Sectors > IT and related Services

© Lloyd’sSource: IHS Global Insight

OPENING OF INDIAN ECONOMY IN THE 1990’S LED TO REFORMS

• The opening up of the Indian economy in the 1990s led to a series of financial-sector reforms, prominent being thebanking and capital market reforms

• The banking system is relatively healthy, and access to capital is very good. Financial sector offerings are available inthe equity market, debt market, money market, derivative market, mutual funds, money market mutual funds, banking, andinsurance

BANKING SYSTEM DOMINATED BY PUBLIC SECTOR BANKS

• The banking system is dominated by public-sector banks, namely the State Bank of India, and nationalized banks; otherparticipants include development, private, and foreign banks

• There are six fully foreign banks in India, and the overall market is expanding at 15% per year

• New private sector banks reflect the high growth in the private sector; meanwhile the public-sector banks areslumping. Over the years, reforms in the equity markets have brought India's bourse to the standards of the majorglobal equity markets

INDIAN STOCK EXCHANGE HAS THIRD LARGEST INVESTOR BASE IN THE WORLD

• Today India's stock exchange has over 25 million shareholders (third-largest investor base in the world after the UnitedStates and Japan). The capital market is significant for degree of development, volume of trading, and tremendous growthpotential

• The debt market has undergone considerable changes in the last few years. Previously characterized by regulatedinterest rates, limited players, and lack of trading, the markets have become more integrated and less regulated

Economics & Politics> Key Sectors > Financial Services

© Lloyd’sSource: UKTI, IHS Global Insight

LIGHT MANUFACTURING AND AUTOMOBILES

• Low-cost labour and a large domestic consumer market make India an attractive location for lightmanufacturing investors from a range of industries. Indian industry produces practically all goods

• Years of voluntary isolation from the world's exports required local companies to be self-sufficient, leading towidespread inefficiencies. Now, with the market universally exposed to foreign manufacturing entrants, Indianindustry has been forced to become more productive

• International conglomerates Hyundai, Honda, Toyota, Ford, and GM have quickly entered the automobile market,challenging domestic market leader Maruti

• In other industries, smaller entrants are rapidly making their mark in newly successful industries such as autoparts, as well as India's traditional products like textiles and garments and jewellery

PHARMACEUTICALS

• The Indian pharmaceutical industry is one of the fastest growing sectors of the Indian economy and has made rapidstrides over the years

• Long self-sufficient, the industry has gained global recognition as a producer of low-cost, high-quality bulk drugsand formulations

• The industry has adapted its business model to the 2005 amendment of India’s patent law that reinstated productpatents for the first time since 1972

• In the last few years, several pharmaceutical companies have engaged in commercially viable R&D activities andbecome significant players in the international market. Leading Indian companies include Ranbaxy Laboratories, Dr.Reddy Laboratories, Nicholas Piramal, Cipla, and Biocon

Economics & Politics> Key Sectors > Manufacturing/Pharmaceuticals


ALREADY LARGE AND GROWING CONSUMER OF ENERGY

• India is the world’s 5th largest consumer of energy, and its demand for petroleum products is growing by more than 6%per year

OIL CONSTITUTES INDIA’S PRIMARY ENERGY CONSUMPTION

• Oil comprises about 33% of India’s primary energy consumption at present

• The majority of India’s oil reserves are roughly 4.7 billion barrels

• Two large government-owned companies – Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited (OIL)produce over 80% of India’s crude oil and natural gas, which provides 28% of India’s overall oil needs

HEAVY INVESTMENT IN RENEWABLES

• 65% of electricity is generated by Thermal plants, 22% by hydroelectric power plants 10.7% by other renewable sources,and 3% by Nuclear

• Wind energy has also been heavily invested in as well as solar power. By 2022 there is a plan to generate 22,000 MW ofSolar Power, 2/3 of that currently produced by nuclear stations

THE UK IS THE LARGEST INTERNATIONAL INVESTOR IN THE OILD & GAS SECTOR

• Due to policy and regulatory reforms, the power sector will generate opportunities for the UK in a number of areas

• These include: Energy efficient technologies; nuclear energy; renewables – offshore wind, biomass and solar

Economics & Politics> Key Sectors > Energy


Economics & Politics> Political OutlookANTI CORRUPTION AGITATION STALLS REFORMS

• Protests over corruption scandals since late 2010 and over a controversial piece of anti-corruption legislation - the JanLokpal Bill 2011 - have significantly slowed down the government's ability to pass crucial reforms

• While this has dented investor confidence in the short term, there is a possibility that the recent agitation could havepositive effects on the ways that India will be able to address corruption in the future

• Previously under-reported, the issue of corruption has increasingly been taken up by the media, and even though thecurrent draft of the anti-graft bill is insufficient to tackle the various causes of corruption, it still marks some progress

GOVERNMENT’S ANNOUNCEMENT TO CARVE OUT SEPARATE TELANGANA STATE SPARKS PROTESTS

• Protests broke out across India after the government announced its intention to initiate the process of carving out aseparate Telangana state from the central Indian state of Andhra Pradesh in December 2009

• The announcement has raised hopes and fears among the myriad ethnic, religious and cultural minorities in the country

• Given the complexity of the matter, which could serve as a precedent for other regions seeking separate statehood,progress should not be expected soon. On 15 November, Uttar Pradesh chief minister Kumari Mayawati announced herintention to introduce into the state's legislative assembly a proposal to divide the current state into four smaller units

INDIA AND PAKISTAN REVIVE PEACE PROCESS

• India and Pakistan announced their return to peace talks on 10 February 2011, on hold since the 2008 Mumbai attacks

• The announcement, in which both sides said that they had agreed "to resume dialogue on all issues", represented asignificant move that has been welcomed by the international community

• However, as expected, there have been no advances on the key point of disagreement, the territorial dispute over Kashmir

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