Indian Economy and Industies…
The Indian economy is the fourth largest economy of the world on the basis of Purchasing Power Parity (PPP). It is one of the most attractive destinations for business and investment opportunities due to huge manpower base, diversified natural resources and strong macro-economic fundamentals. Also, the process of economic reforms initiated since 1991 has been providing an investor-friendly environment through a liberalised policy framework spanning the whole economy. The growing importance of India in the global economy is well documented. A bird’s eye view of the Indian economy from the perspective of being one of Asia’s strongest and largest components brings to the fores some challenges that overlap both the geographies.
With the country’s largest development financial institutions (DFIs) like ICICI and IDBI having been converted into banking entities, the term DFI has lost its relevance in the country. Institutions that today have replaced them in playing a vital role in long-term financing and project financing are the NBFCs, which have their relative specializations, for example, HDFC (mortgage loans), IDFC (infrastructure loans), PFC, REC (power project finance) and Mahindra Finance, Shriram Transport (auto loans). The trend of segmental monopoly is now changing with banks entering long term finance and FIs also meeting the medium and short – term needs of the business masses. NBFCs are now recognised as complementary to the banking system capable of absorbing shocks and spreading risks at times of financial distress. The RBI also recognises them as an integral part of the financial system and is trying to improve their credibility in the financial sector
Higher penetration, per capita consumption, increasing population base, and rising household income continued to drive the growth in the FMCG sector in FY08. The Rs 700 bn FMCG sector grew by 12% YoY in 2007. Rural regions, where nearly 70% of India’s population resides, accounted for 34% of the off take for FMCG products. Since urban regions are already matured, the rural region is expected to be the key growth driver. In urban areas, introduction of newer, convenience and higher end products propelled the growth. However, concerns with respect to the increasing competitive environment, input cost pressures and infrastructure bottlenecks continued to worry.
The importance of the tourism and hospitality industry for the Indian economy is apparent. As per WTTC, Indian tourism demand will grow at 8.8% from 2004-13, which would place the country as the third-most rapidly growing market in the world, after Montenegro and China. However with tourist arrivals of 4 m as compared to China’s 45 m, Singapore’s 7.5 m and Spain’s 55 m, the number is very small amidst a huge supply crunch. In the long term, for the growth of the industry to be sustained, issues like poor infrastructure, high levels of taxation need to be solved. Land development, less of paper and legal work, faster execution is needed to meet the growing demand. Adding rooms at a faster pace would also stabilise the room rates and not have a negative effect on potential demand in the future.
The Indian Entertainment and Media industry is projected to grow from an estimated Rs. 437 billion to Rs. 1 trillion in 2011, translating into a cumulative growth of 18 percent over the next five years. The Indian economy continues to perform strongly and one of the key sectors that benefits from this fast economic growth is the E&M industry. It also grows faster than the nominal GDP during all phases of economic activity due to its income elasticity wherein when incomes rise; more resources get spent on leisure and entertainment and less on necessities.
There is a gap between the Energy requirement and availability, which is shown by above figure and this gap is increasing showing the rise is demand compared to supply. The demand is increasing due to increase in disposable income and the increased standard of life. Lot of capital goods and infrastructure companies are entering into power generation and/or distribution directly or through joint venture like Crompton Greaves, Larsen and Toubro Ltd., GVK Infrastructure etc. This will enhance the existing capacity and achieving the target of capacity addition in 11th plan.
Retailing in India is gradually inching its way to becoming the next boom industry. The whole concept of shopping has altered in terms of format and consumer buying behavior, ushering in a revolution in shopping. India is the second largest consumers of whisky after the United States. However, India has the large opportunity for exports of wine, considering the willingness of western aficionados to try out different types of wine.
The Indian IT services sector has been in the doldrums since the start of FY2008 with the sector under-performing the market. The appreciating rupee and the worries of a slowdown in the US economy has impacted the performance of the sector.
However there has been a spring in the stride of IT industry. The companies’ focus is now changing to higher end services. They are now shifting their attention from the current services to more innovative products and services. Not only that but also the already existing companies where the investors are finding value and segregating them from the traditional IT-ITES players are at added advantage. These are companies that either have a domestic focus or are in the niche segments or are product focused or are benefited by the egovernance initiatives.
