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INDIAN ECONOMY AND TRENDS October 2012
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Macroeconomic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Macroeconomic Snapshot … (1/6)
MACROECONOMIC SNAPSHOT
• Consumer demand to boost economic growth
• Moody’s retains “stable” outlook for India based on economic reforms announced by government
• Foreign exchange reserves at US$ 294.81 billion for the week ending September 28, 2012
• Grant Thornton Global Dynamism Index: India fifth best country in the world for dynamic growing businesses
GDP: April 2012 - June 2012 (US$ Billion)
Source: Ministry of Finance and CSO
IIP: Monthly Growth Rate (per cent)
Source: Ministry of Finance and RBI
6.5 6.5 6.5 6.5
2.4
-1.8
0.1
2.7
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
May-12 Jun-12 Jul-12 Aug-12
GDP IIP
India-Economy and Trends October 2012
19.28
28.14
31.04
35.38
44.93
67.00
0.00 20.00 40.00 60.00 80.00
Construction
Social & Personal Services
Agriculture
Manufacturing
Finance & Real Estate
Trade, Hotel & Transport
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Macroeconomic Snapshot … (2/6)
• Government to aim for 8.2 per cent growth rate in the 12th Plan Period (2012-2017)
• Target for infrastructure investment in the Plan Period is at US$ 1 trillion
• Control fiscal deficit and regain growth momentum
• India remains among the fastest growing economies globally
GDP: April 2012- June 2012 (per cent)
Source: Business Standard
GDP: Growth Country-wise (per cent)
Source: World Bank
MACROECONOMIC SNAPSHOT
India-Economy and Trends October 2012
Country 2007 2008 2009 2010 2011
India 9.8 3.9 8.2 9.6 6.9
USA 1.9 -0.4 -3.5 3 1.7
China 14.2 9.6 9.2 10.4 9.3
Japan 2.2 -1 -5.5 4.4 -0.7
Brazil 6.1 5.2 -0.3 7.5 2.7
Russia 8.5 5.2 -7.8 4.3 4.3
7.6
5.5
4
2.3
0.5
-0.4
-2 0 2 4 6 8
China
India
Russia
US
Germany
Euro zone
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Macroeconomic Snapshot … (3/6)
Government Deficits (per cent)
Dr. Manmohan Singh, Prime Minister of India
Source: Ministry of Finance
MACROECONOMIC SNAPSHOT
India-Economy and Trends October 2012
We should accelerate
growth to reach
around 9 per cent by
the end of the 12th
Plan Period
Inflation: Price Index (per cent)
4
6
8
10
12
Apr-12 May-12 Jun-12 Jul-12 Aug-12
General Food
Fuel & Power Manufactured
Government Expenditure in US$ Billion
6.05
0.78
1.84
3.06
4.35
0
1
2
3
4
5
6
7
Apr-12 May-12 Jun-12 Jul-12 Aug-12
Source: Ministry of Finance
97.7
28 37.1
51.5
97.4
34
43.6
61.3
20
40
60
80
100
May-12 Jun-12 Jul-12 Aug-12
Fiscal Deficit Revenue Deficit
Source: Ministry of Finance
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Macroeconomic Snapshot … (4/6)
• India was the highest recipient of FII inflows in Asia at US$11.76 billion for the January to August 2012 period
• FDI flows remained buoyant and increased compared to June to touch US$ 1.76 billion for July 2012
• Offshore bond funds have been encouraged by higher interest rates and higher foreign investment
limits in bonds by the government
Top FDI Inflows into India (per cent of Total)
(April 2000- August 2012)
Foreign Investment: FII & FDI (US$ Billion)
Source: SEBI and DIPP
MACROECONOMIC SNAPSHOT
India-Economy and Trends October 2012
1.86
1.32 1.24 1.76
-0.96
0.61 0.21
2.48
-2.0
-1.0
0.0
1.0
2.0
3.0
Apr-12 May-12 Jun-12 Jul-12
FDI FII
38
10 9 7 6
4 4 3 2 1
0
10
20
30
40
Source: SEBI and DIPP
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Macroeconomic Snapshot … (5/6)
• Remittances from Non-resident Indian’s (NRIs) may touch US$ 75 billion in fiscal 2012-13 • NRIs deposited US$ 7.37 billion in domestic banks during the April-July 2012-six times more than for
same period of previous year • NRI remittances had jumped 19 per cent in 2011-12 to touch US$ 66 billion
Top Recipients of International Remittances (US$ Billion) Exchange Rate Comparison
Source: CBEC
MACROECONOMIC SNAPSHOT
India-Economy and Trends October 2012
NRI Deposits Rise
69.00 70.35
69.95
69.30
68.8
82.50 86.00 86.20 86.30
88.05
51.50
53.10 55.55
54.90 55.85
40.0
50.0
60.0
70.0
80.0
90.0
Apr-12 May-12 Jun-12 Jul-12 Aug-12
Euro Pound Dollar
64
62
24
23
14
0 10 20 30 40 50 60 70
India
China
Mexico
Philippines
Egypt
Source: World Bank and The Wall Street Journal
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Macroeconomic Snapshot … (6/6)
• Target of US$500 billion exports by 2015 achievable: Government • Export target for 2012-13 at US$ 360 billion • Focus also on improving trade with developing countries • Share of South-South trade in global trade flows at 42 per cent
Total Trade (US$ Billion) Trade: Export & Import (US$ Billion)
Source: Ministry of Finance, and CSO
MACROECONOMIC SNAPSHOT
India-Economy and Trends October 2012
24.46 25.68
25.07 22.44
22.3
37.95 41.94
35.37
37.93
38.01
20
25
30
35
40
45
Apr-12 May-12 Jun-12 Jul-12 Aug-12
Exports Imports
62.41
67.62
60.44 60.37
60.31 60
61
62
63
64
65
66
67
68
69
Apr-12 May-12 Jun-12 Jul-12 Aug-12
Source: Ministry of Finance, and CSO
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Policy Thrust … (1/7)
• 51 per cent FDI in multi-brand retail allowed, subject to state governments’ permission • 100 per cent FDI already permitted in single brand retail • Up to 74 per cent FDI allowed in broadcasting sector • Foreign airlines can invest up to 49 per cent in domestic airlines • 49 per cent foreign investment (26 per cent FDI, 23 per cent foreign institutional investors) allowed in
power trading corporations
• Cabinet approves FDI in Insurance to 49 per cent from current level of 26 per cent subject to approval by Parliament
• 26 per cent FDI allowed in pension funds and linked to insurance sector. If Parliament approves hike in
insurance to 49 per cent then FDI levels in pension will also increase to 49 per cent automatically
Welcoming Foreign Direct Investment (FDI)
GROWTH ENABLERS
India-Economy and Trends October 2012
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Growth Enablers: Policy Thrust … (2/7)
• Reduction in withholding tax from 20 per cent to 5 per cent on foreign currency borrowing to help draw low cost funds into India
• Advance Pricing Agreement (APA) notified: Will allow companies to have an advance pricing agreement with Central Board of Direct Taxes for calculating prices of products between parent and subsidiary companies in international transactions
Business Friendly
India-Economy and Trends October 2012
GROWTH ENABLERS
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Growth Enablers: Policy Thrust … (3/7)
• Reserve Bank of India (RBI) relaxes guidelines for Indian companies to raise money overseas through External Commercial Borrowings (ECB) that will allow companies to either repay Rupee loans or fund new capital expenditure in Rupees
• RBI also allowed refinancing of bridge finance, or short-term credit taken by companies in the
infrastructure sector for importing capital goods, with an ECB under the automatic route • Infrastructure sector can seek trade credit, or short term loan, for up to a maximum period of five
years for importing capital goods, up from one-to-three years previously
External Commercial Borrowings
India-Economy and Trends October 2012
GROWTH ENABLERS
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Growth Enablers: Policy Thrust … (4/7)
• Subsidy disbursements: Direct cash transfers to beneficiaries to cut system leakages and reduce outgo • Fiscal consolidation urged Disinvestment • Approval for stake sale in four public sector units, many more in offing
Tax Breaks • Rajiv Gandhi Equity Saving Scheme launched. Will provide tax benefits for investments in mutual funds
and exchange traded funds, besides blue chip shares
Reforms Unleashed
India-Economy and Trends October 2012
GROWTH ENABLERS
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Growth Enablers: Policy Thrust- Infrastructure … (5/7)
• Infrastructure projects to be expedited: Single window mechanism for review and issue of clearances for major projects
• Special cell for petroleum and natural gas sector • Land policy being finalised to address infrastructure sector’s land acquisition concerns
Pushing Infrastructure for Growth
India-Economy and Trends October 2012
GROWTH ENABLERS
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Growth Enablers: Policy Thrust - Information Technology … (6/7)
• To increase revenues of IT and ITeS (Information Technology Enabled Services) Industry from US$ 100 billion currently to US$ 300 billion by 2020 & expand exports from US$ 69 billion currently to US$ 200 billion by 2020
• Promote innovation and R&D in cutting edge technologies and develop applications and solutions in location based services, mobile value added services, cloud computing, social media and utility models
• To provide fiscal benefits to small and medium sector units and startups for adoption of IT in value creation
• To create a pool of 10 million additional skilled manpower in Information Communication Technology (ICT) sector
Information Technology Policy 2012 Announced
India-Economy and Trends October 2012
GROWTH ENABLERS
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Growth Enablers: Policy Thrust- Aviation … (7/7)
• India looks to allow unlimited flights from ASEAN capitals to New Delhi under “India-ASEAN Open Sky Agreement”
• Likely to be extended to cities like Mumbai,
Chennai, Kolkatta • Unlimited flights to 18 tourist destinations in
India to continue
Creating a Regional Hub Air Travel Market* (US$ Billion)
Source: Euromonitor and The Wall Street Journal
* Forecast for 2016
India-Economy and Trends October 2012
GROWTH ENABLERS
176
64
53
44
41
37
30
29
28
24
0 50 100 150 200
USA
China
UK
Japan
Canada
India
Australia
Germany
Russia
France
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Investment
• ONGC Videsh Limited (OVL) bought US energy company Hess Corp’s stake in a producing Azerbaijan field and the Baku-Tbilisi-Ceyhan pipeline for US$ 1 billion
• Indian Oil Corporation (IOC) setting up first refinery overseas in Sri Lanka with an investment of around US$ 4 billion.
• Oil India is in talks with Carrizo Oil & Gas to soon acquire stake in Niobrara Shale in North Eastern Colorado
• Oil and Natural Gas Corporation (ONGC), IOC and Oil India Limited (OIL) have made a joint US$5 billion bid for buying stake in six Canadian oil sands assets of US energy giant Conoco Phillips
Indian companies invest in energy sector
India-Economy and Trends October 2012
GROWTH ENABLERS
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Research & Development (R&D)
• The US$ 14.2 billion engineering R&D market in India to touch US$ 42 billion by 2020 clocking a CAGR of 14 per cent*
• Indian R&D service providers grew 16 per cent in 2011-12, captive centres of MNCs grew at a CAGR
of 11 per cent • Chinese telecom equipment Huawei will invest US$ 150 million in its R&D centre in Bengaluru • Google’s India hub is the largest outside US, supports 750 million advertisements across 40 languages a
month
Growth in R&D
India-Economy and Trends October 2012
GROWTH ENABLERS
* Zinnov Management Consulting study
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Manufacturing
• Volkswagen Group owned Scania AB and the world’s largest truck maker Daimler to roll out trucks for domestic market
• American car maker, Ford Motor Company, to invest over US$ 2 billion in a new factory in Gujarat and export Indian built engines to Europe
• Commercial vehicle maker, Eicher Motors, signs a joint venture agreement with US-based Polaris Industries to foray into personal vehicles
• Czech car maker Skoda to increase presence in India
• Yamaha Motor Co, Japan to use India as a key hub for motorcycles and scooters
• Honda of Japan to set up diesel engine plant in Rajasthan in fiscal 2012-13
Automobile Industry Takes Wings in India
India-Economy and Trends October 2012
GROWTH ENABLERS
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: IPR & Innovation … (1/2)
• India’s drug industry moving towards patents while strengthening the generic industry • India launches campaign to garner up to US$ 40 billion generic drug market that will emerge as several
patents end over the next three years • Piramal Healthcare to launch an orthopedic drug – its first patented product in Europe
India-Economy and Trends October 2012
GROWTH ENABLERS
Source: Euromonitor and The Wall Street Journal
Period Country
2005-10 India
2008 alone South Africa
2000-07 Argentina
2004-08 Colombia
2003-08 Brazil 278
438
951
1,426
3,488
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Growth Enablers: IPR & Innovation … (2/2)
• Infosys has filed 159 patents in the US Patent & Trademarks Office during the last five years. Company spends 2.1 per cent of revenues in R&D
• Tata Consultancy Services filed for 43 patents while Wipro and HCL Technologies applied eight and four patents, respectively
Geographical Indication (GI) • European Trade Council & German Tea Association to confer the GI status to “Darjeeling Tea” which
means blenders cannot mix other varieties and brand them as “Darjeeling Tea”
Information Technology
India-Economy and Trends October 2012
GROWTH ENABLERS
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Consumer Markets
• Arvind Lifestyle Brands, a subsidiary of the denim major Arvind, acquired business operations of British fashion retailers Debenhams, Next and American lifestyle brand Nautica in India from Planet Retail
• Tata Sons acquired electronics and durables retailer Infiniti Retail Ltd and the Indian subsidiary of
Australian retail chain Woolworths, for A$35 million • The personal computer market in India registered an increase of 15.7 per cent at 2.86 million units
during April-June 2012 over the corresponding period of 2011
India-Economy and Trends October 2012
GROWTH ENABLERS
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Growth Enablers: Inclusive Growth … (1/2)
• By 2025, the Indian rural market is expected to grow more than tenfold to become a US$ 100 billion opportunity: Hindustan Unilever
• Per capita monthly consumption in rural India grew 19 per cent during 2009-10 to 2011-12 outpacing
growth in spending by urban India for the first time • Over the years production of vegetables, fruits and livestock, which are priced higher, have gone up
faster than food grains, delivering higher incomes to farmers • Rapid rise in rural wages: rates have risen by about 20 per cent year-on-year for the last three years* • Rural poverty dropped to 26 per cent in 2011-12 says census data on household expenditure from 41
per cent in 2004-05 due to rise in wages, government transfers and higher farm produce prices
India-Economy and Trends October 2012
GROWTH ENABLERS
*Morgan Stanley
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Growth Enablers: Inclusive Growth … (2/2)
• Mutual funds to partner public sector banks to seek higher rural participation to meet regulations announced by the Securities & Exchange Board of India (SEBI) to move beyond traditional urban markets
MNCs tap rural India • Hindustan Unilever (HUL) to source 100 per cent tomatoes locally in 3 years. Ties up with
Maharashtra to provide technical expertise to farmers
• McDonalds potato supplier, McCain Foods India, to double crop area to 8,000 acres in Gujarat
Rural participation in markets
India-Economy and Trends October 2012
GROWTH ENABLERS
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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States of India
• Odisha emerged as a favourite destination with 27 per cent share in the total FDI proposed in 2011-12
• 10-fold increase in investment inflows witnessed across states in terms of average investment commitments by foreign firms during January 2008 - May 2012
• “Emerging Kerala”: Information technology and tourism fastest growing sectors in Kerala
India-Economy and Trends October 2012
STATES OF INDIA
Top 10 Investment Destinations (January 2008-
May 2012) US$ Billion
State Number of
Proposals
Proposed
Investment
Orissa 587 198.47
Chhattisgarh 997 136.96
Gujarat 2002 115.56
Madhya Pradesh 957 103.33
Andhra Pradesh 1776 101.80
Maharashtra 3277 90.74
Karnataka 941 87.19
West Bengal 813 87.05
Jharkhand 225 47.76
Tamil Nadu 1132 38.95
Source: Business Line
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Macro-Economic Snapshot
Growth Enablers Policy Thrust Investment Research & Development Manufacturing IPR & Innovation Consumer Markets Inclusive Growth
States of India
Outlook: Looking Ahead
Contents
INDIA-ECONOMY AND TRENDS October 2012
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Outlook: Looking Ahead
OUTLOOK: LOOKING AHEAD
• Government looks to unleash the next set of reforms to achieve over 8 per cent growth in the 12th Plan Period which commenced in April 2012
• Direct cash transfer of subsidies through the Unique Identification Number to benefit economy as it will eliminate wastage of subsidised items and control government expenditure
• The final draft of the Companies Bill 2011 stipulates that companies, subject to certain levels of profit, turnover or net worth, have to spend about 2 per cent of their average profit over three years towards Corporate Social Responsibility activities
• Government is expected to give a boost to commodity markets which will benefit farmers
• Capital market reforms to reassure FIIs who have heavily invested in the offing and is expected to benefit people across the country
• Amendment to the Pension Fund Regulatory Development Authority Bill will encourage foreign investments in the pensions sector and establish strong oversight over pension and social security products
India-Economy and Trends October 2012
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INDIA-ECONOMY AND TRENDS October 2012
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