january 2015 - India Brand Equity Foundation

Report
INDIAN ECONOMY AND TRENDS
JANUARY 2015
For updated information, please visit www.ibef.org
1
INDIAN ECONOMY AND TRENDS

Strengths………………………….3

Trends…………………………….11

Reforms……………………………22

Outlook…………………………….36
JANUARY 2015
For updated information, please visit www.ibef.org
2
STRENGTHS
INDIAN ECONOMY AND TRENDS
LARGE & SKILLED LABOUR FORCE SUPPORTS INDIAN ECONOMY
National
Skill
Development
Corporation (NSDC) to provide
training to 3.3 million students this
year
It currently provides training in 33
sectors
About USD200 million proposed
for NSDC in the 2014-15 budget
Working
age
population*
expected to increase from 58 per
cent in 2001 to 64 per cent by
2021
Skilled labour force
The NSDC
initiative
High
competency
Second largest number
engineers and scientists
Second
largest
Englishspeaking population in the world
Home to educational institutes
of global repute – IITs and IIMs
Low
average
salary
USD5,000–10,000 p.a.
Large &
Skilled
Labour
Force
Expanding
workforce
Age
demographics
The average age predicted to be
29 years in 2020, lower than
China and the US
of
of
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
Large pool
Number of engineering colleges
has increased from 1,511 in
2006-07 to 3,345 in 2014-15
Source: *Working age refers to age group of 18-65
JANUARY 2015
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4
INDIAN ECONOMY AND TRENDS
CHEAP AND SKILLED LABOUR MAKES INDIA MOST FAVOURED DESTINATION
FOR OUTSOURCING
India has more than 20 CMM
(Capability Maturity Model) level
5 companies
Indian 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
Policy push
Seeding stage
1980s
Airline
companies,
such
as,
British
Airways set up back
offices in India
JANUARY 2015
1990s
Liberalisation
in
1991
GE 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
Growth stage
2000s
Entry of IT majors
BPO becomes the
mainstream industry
in India
All big Indian IT
companies, such as
Infosys and HCL,
entered
the
BPO
segment
India emerges as one
of the biggest players
in the outsourcing
industry
The
decade
of
unprecedented growth
in the services sector
Top destination
In 2008, India claimed
~65 per cent of all
offshored IT business
and ~43 per cent of
business process work
India
leads
the
outsourcing market
Indian
outsourcing
market
stood
at
USD20.8 billion in 2013
The global outsourcing
market expected to hit
USD233 billion by 2020
Service sector constitutes
~60 per cent of Indian
GDP
For updated information, please visit www.ibef.org
5
INDIAN ECONOMY AND TRENDS
SPENDING BY MIDDLE CLASS POPULATION DRIVING GROWTH
Spending by global middle class
USD21.
3 trillion
USD35.
0 trillion
USD55.
7 trillion
The household consumption expenditure levels grew at a
CAGR of 12.5 per cent to USD1.1 trillion in 2011
0%
11%
23%
India
Rising per capita consumption and population will further
boost the aggregate consumption
Europe
By 2020, India projected to be the world’s third largest
middle class consumer market behind China and the US
38%
29%
20%
19%
19%
Asia Pacific
(excluding China &
India)
China
18%
4%
North America
13%
18%
Cenrtal & South
America
26%
17%
Middle East &
North Africa
10%
7%
7%
4%
2009
6%
4%
4%
1%
2020
1%
2030
India has a very dynamic consumer market driven largely by
the huge middle class population
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 ecommerce 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
1%
Source: “The Emerging Middle Class in Developing Countries”, Homi Kharas, OECD
JANUARY 2015
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6
INDIAN ECONOMY AND TRENDS
DIVERSIFIED ECONOMY PROVIDING VARIOUS INVESTMENT OPPORTUNITIES
Sector-wise GDP share in 2013-14 ( per cent of GDP)
Mining & quarrying
2%
Construction
Electricity, gas &
2%
water supply
7%
26%
Community, social &
13%
Trade, hotels, transport
& communication
personal services
India has a diversified economy with no individual sector
accounting for more than 25 per cent share
Various major sectors, such as consumers, infrastructure
and automobile, are poised for strong growth
Availability 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
15%
21%
Manufacturing
Financing, insurance, Real
Estate & Business services
Key snapshots of some sectors
Hyundai and Honda export
cars from India to
European and other Asian
countries
Since the liberalisation in
the telecom sector, the
sector witnessed huge
investments
Indian textile exports in 2013
are estimated to be around
USD40 billion, with garments
accounting for 40 per cent
All major auto companies
have their factories in India
The telecom sector
attracted USD1.3 billion
foreign investment in 201314
India overtook Germany
and Italy to become the
second largest exporter of
textiles in 2013
Indian e-commerce
industry expected to grow
from USD11 billion in 2014
to USD20 billion in 2015
Indian pharmaceuticals
industry expected to
expand at a CAGR of 23.9
per cent to USD55 billion
by 2020
Source: Planning Commission
JANUARY 2015
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7
INDIAN ECONOMY AND TRENDS
CONDUCIVE ENVIRONMENT FOR INVESTMENT
Strong
financial
regulatory
system
Robust
Indian
banking
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
 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
 BSE is the world’s largest stock exchange in terms of number of listed companies; NSE takes the third spot in terms
Prominent
stock
exchange
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
 India currently ranks 142 on the Ease of Doing Business list
Ease of
doing
business
 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
JANUARY 2015
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8
INDIAN ECONOMY AND TRENDS
SPIRIT OF ENTREPRENEURSHIP
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 country
USD1.6 billion start-up fund set by the Government of India
One stop e-portal for all licenses set up by the government
Process of applying for Industrial License & Industrial Entrepreneur Memorandum made online on a 24×7 basis through eBiz
portal
Validity of industrial licence extended to three years
The 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
JANUARY 2015
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9
INDIAN ECONOMY AND TRENDS
RISING INVESTMENTS IN THE INDIAN MARKET
Flipkart raised USD1.7 billion in 2014
The company was valued at USD11 billion after the recent
money raising
In 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
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
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
Source: News articles
JANUARY 2015
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10
TRENDS
INDIAN ECONOMY AND TRENDS
INDIA ON GROWTH PATH SUPPORTED BY KEY REFORMS AND HIGHER
INVESTMENTS
GDP growth at factor cost ( per cent)
9.7
14
12
9.3
9.2
10
8.4
6.8
GDP and components – growth ( per cent)
6.7
6.4
4.5
4.7
8
6
4
2
0
-2
According to the World Bank, Indian economy is estimated
to expand 6.4 per cent during FY15
Higher investment in the infrastructure sector, key reforms
in taxation, coal mining auctions, among others would boost
the economy
Current decrease in crude prices would support narrow
deficits
The government plans to spend USD1 trillion on
infrastructure during FY12–17
GDP at factor cost
Agriculture, forestry & fishing
Industry
Services
Growth in the Indian economy is mainly supported by
growth in the service and industry sectors
The government would introduce Goods and Services Tax
(GST), which would create substantial savings for
companies on logistics. This would positively affect on
industrial production
Major contributors were the finance and real estate sectors,
which witnessed double-digit growth in the last 7–8 years
Source: Monthly Economic Report, Ministry of Finance, Aranca Research; PE: preliminary estimates ;1R: First Revision; AE: Advanced Estimates
JANUARY 2015
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12
INDIAN ECONOMY AND TRENDS
COUNTRY TO RECORD HIGHEST FOODGRAIN PRODUCTION IN FY 2014
Production of major agricultural crops (in Million Tonnes)
120
244
234
100
259
300
264
257
250
218
80
200
60
99
40
89
81
96
81
105
87
105
95
106
94
150
Rice
Wheat
Total Pulses
96
100
20
Total Foodgrains (RHS)
50
15
18
15
20
18
17
0
0
FY09
FY10
FY11
FY12
FY13
FY14*
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, respectively
Foodgrain production increased at a CAGR of 2.4 per cent from 234 million tonnes in FY09 to an estimated 264 million tonnes in
FY14
Major 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 FY14
India ranks second in the production of rice, sugarcane, potatoes, wheat, garlic and tomatoes
During FY13, Indian household spent USD20.3 billion on food, indicating good business opportunity
The country has estimated highest ever foodgrain production of 264 million tonnes during FY14
Source: Monthly Economic Report, Ministry of Finance, Aranca Research
JANUARY 2015
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13
INDIAN ECONOMY AND TRENDS
IMPROVING TRADE BALANCE (1/2)
Export-import and trade balance (USD Billion)
Oil and non-oil imports (USD Billion)
600
-250
500
-183
-190
400
300
-137
-118
-110
-119
489
200
304
100
-200
185
370
288
179
251
306
491
450
313
300
0
-150
-100
334
327
155
164
165
FY12
FY13
FY14
285
264
210
201
94
87
106
FY09
FY10
FY11
-50
0
FY09
FY10
Exports
FY11
Imports
FY12
FY13
FY14
Trade balance (RHS)
Oil imports
Non-Oil imports
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
Source: Provisional data as per the Press Note of the Ministry of Commerce and Industry, Aranca Research
JANUARY 2015
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14
INDIAN ECONOMY AND TRENDS
IMPROVING TRADE BALANCE (2/2)
Top five Importing commodities ( per cent) (FY 2014)
Top five exporting commodities ( per cent) (FY 2014)
Oil and Minerals
29.7
40.3
Precious or semiprecious Stones
Precious or semiprecious Stones
Nuclear reactors
Vehicles and parts other
than rail
Electrical Machinery
3.8
54.4
13.3
Organic Chemicals
6.5
13.0
Nuclear reactors
Organic Chemicals
4.1
Others
6.8
Oil and Minerals
20.6
3.8
Others
3.8
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
Source: Department of Commerce, EIA, Aranca Research
JANUARY 2015
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15
INDIAN ECONOMY AND TRENDS
INCREASING FOREIGN CURRENCY ASSETS
Foreign Currency Assets (USD Billion)
299
275
242
FY08
FY09
255
FY10
FY11
261
261
FY12
FY13
278
FY14
293
Nov'14
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
Source: Monthly Economic Report, Ministry of Finance, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
16
INDIAN ECONOMY AND TRENDS
IIP GEARING TOWARD THE RIGHT AND POSITIVE DIRECTION
Industrial Production – General Index ( per cent)
10.4
Index of Industrial Production (IIP) strengthened 1.9 per
10.5
cent for the period of April to October 2014
8.5
8.2
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
2.9
2.8
2.2
positive changes are expected due to key reforms under
1.1
approval and increasing investment in infrastructure
-0.1
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
IIP for the month of November, 2014 increased
Apr to
Nov'14
drastically by 3.8 per cent
Index of Industrial Production four out of nine components ( per cent)
14
12
10
General index
8
Mining
6
Manufacturing
4
Electricity
2
Basic goods
0
-2
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
Apr to Oct'14
-4
Source: Monthly Economic Report, Ministry of Finance, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
17
INDIAN ECONOMY AND TRENDS
GROWTH OF EIGHT CORE SECTOR NECESSARY FOR OVERALL GROWTH IN
INDUSTRIAL PRODUCTION
Total production growth (per cent) in core infrastructure commodities
9.4
6.6
5.5
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
6.5
cent), followed by Coal of (8.5 per cent)
5
These eight industries contribute ~38 per cent to the
3
2.6
industrial production
The
thermal
power
sector
witnessed
increased
investment as India targeted capacity addition of 174.9
FY09
FY10
35
30
25
20
15
10
5
0
-5
-10
-15
-20
FY11
FY12
FY13
FY14
Apr to
Nov'14
GW by 2022
Production growth ( per cent) in eight core infrastructure commodities
Coal
Crude oil
Natural Gas
Refinery Products
Fertilizers
Steel
Cement
Electricity
FY11
FY12
FY13
FY14
Apr to Oct'14
Source: Monthly Economic Report, Ministry of Finance, Aranca Research
JANUARY 2015
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18
INDIAN ECONOMY AND TRENDS
RISING INVESTMENTS IN INFRASTRUCTURE AND DEVELOPMENT PROJECTS
 Outlay of USD3.8 billion is planned for highways for the current year
Road and
Highways
 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
 Indian Railways plans to award projects worth USD1 trillion through the PPP model
Railways
 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
 Investment worth USD1 trillion is planned for the infrastructure sector during FY2012–17
Construction
 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
JANUARY 2015
For updated information, please visit www.ibef.org
19
INDIAN ECONOMY AND TRENDS
INFLATION MEETING THE CENTRAL BANK’S TARGET
All commodity Inflation and repo rate (per cent)
12
8.0
10
8
7.5
8.0
8.0
Inflation components (per cent)
7.8
6.8
9
8
7
6
5.3
5
6
4
4
21 20
15
14
13
11
6
10
7
11
12
8
5
5 6
4
2
2
1.3
10.9
9.7
7.5
4.8
1
0.0
0
0
April'10
April'11
April'12
April'13
All Commodities
April'14
Nov'14
Repo Rate
Jan'15
2
1
3
-1
-5
April'11
April'12
April'13
April'14
Nov'14
Primary Articles Food articles Fuel and Power Manufactured Product
RBI has targeted a 6 per cent inflation by January 2016
Inflation 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 Index
The 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 market
The government restricted gold imports from time to time to control the FX rate
Seeing inflation under control, RBI on January 15, 2015 decreased Repo Rate by 25 bps
Source: Monthly Economic Report, Ministry of Finance, Aranca Research
JANUARY 2015
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20
REFORMS
INDIAN ECONOMY AND TRENDS
INCLUSIVE INDIA – THE GROWTH AGENDA
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
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%
1. Social service
India has renewed its growth strategies to target rising inequality as well as overall well-being of Indians
Inequality as measured by the Gini coefficient, a measure of statistical dispersion, dropped from 36.8 in 2010-11 to 33.4 in 2011-12
Inequality 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
JANUARY 2015
Source: Economic Survey 2013-14 *RE: Revised Estimates BE: Budget Estimates
For updated information, please visit www.ibef.org
22
INDIAN ECONOMY AND TRENDS
PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) – A SCHEME FOR FINANCIAL
INCLUSION (1/2)
About
PMJDY was launched in August 2014 under the supervision of
the Finance Ministry
This scheme was launched to make available basic financial
services to the weaker sections (income wise) of the society
The government aims to ensure that low income society takes
the benefit of savings bank account, need-based credit,
remittance facility, insurance and pension
The government aims to achieve at least one saving banks
account for every household, financial literacy, and access to
credit, insurance and pension facilities
Key Statistics
As of January 12, 2015, there were 111.6 million bank
accounts
Total account balance was USD1,438 million
A total of 94.1 million RuPay debit cards have been issued
The target was to achieve 100 million accounts by January 26,
2015, which was achieved well before the set date
Benefits
To Account Holder:
By opening an account a beneficiary would get a RuPay debit
card and an in-built accident insurance coverage of nearly
USD1,650
All government benefits would be transferred to the account
of beneficiary to avoid unnecessary delay
An Indian citizen above the age of 10 years can open an
account with zero balance, which would enhance awareness
regarding financial services
An account holder can take a loan of nearly USD80 after six
months of opening of an account
Banking 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
economy
More people would become aware of financial services
Government benefits would be transferred without
unnecessary delay and transfer would be made to the
concerned individual/s
Source: Pradhan Mantri Jan Dhan Yojana Website, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
23
INDIAN ECONOMY AND TRENDS
PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) – KEY STATISTICS (2/2)
Rural vs. urban bank accounts (in million)
Bank type wise accounts (in million)
3.5
Public
Sector
banks
19.7
45.1
Regional
Rural
banks
Rural
66.5
Urban
88.5
Bank type wise account balance (in million)
84
Bank type wise number of RuPay debit cards (in million)
Public
Sector
banks
226
1,128
Private
Banks
11.2
2.7
Public
Sector
banks
Regional
Rural
banks
Regional
Rural
banks
Private
Banks
Private
Banks
80.2
Source: Pradhan Mantri Jan Dhan Yojana Website, Aranca Research All data as on January 12, 2015
JANUARY 2015
For updated information, please visit www.ibef.org
24
INDIAN ECONOMY AND TRENDS
PRADHAN MANTRI SANSAD ADARSH GRAM YOJANA (PMSAGY) – A SCHEME
FOR RURAL DEVELOPMENT
About
Main objectives
The scheme was launched in October 2014 under the
Developing a process for the development of gram
supervision of the Department of Rural Development
panchayats
PMSAGY is an Indian government initiative to open the door
To improve the standard of living and quality of life of all the
for good politics and develop a demand-driven rather than
sections of the people by:
supply-driven village
Improving basic amenities
Main objective of the scheme is to improve basic amenities,
Higher productivity
productivity, human development, and holistic development of
Better standard of living
gram panchayats
Enhancing livelihood opportunities
Sansad (MP) is free to select any village except their own and
Reducing disparities
in-law’s village
Widening social mobilisation
Key Insights
To develop local governance in a way that motivates and
Scheme targets to cover 2,500 villages by 2019
inspires neighbouring gram panchayats
Apart from MPs, many influential and famous personalities and
To present identified Adarsh Grams as schools of local
companies have adopted villages under this scheme
development to train other gram panchayats
Sachin Tendulkar adopted a village in Andra Pradesh
ICICI Bank adopted a village in Gujarat
Source: PM India Website, Department of Rural Development, Aranca Research
JANUARY 2015
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25
INDIAN ECONOMY AND TRENDS
SMART CITIES AND BULLET TRAINS – BUILDING A NEW INDIA
Smart Cities
Government of India plans to build 100 smart cities and
modern satellite towns near the existing cities
Need for new smart cities arose due to increasing number of
people in the urban areas wanting a better livelihood and
lifestyle
According 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 cities
USD83 million has been allocated for the digital India
initiative
FDI norms have been relaxed
The 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 cities
Employment is expected to rise 10–15 per cent
Seven new smart cities and a 1,500 km industrial corridor
across six states have been planned with an investment of
USD100 billion
Relaxation in FDI norms for construction is expected to
improve the government’s efforts in developing smart cities
Bullet trains – A diamond quadrilateral rail project
The Indian rail system is the world’s largest passenger carrier
Considering the importance of Railways in India, the
government announced a diamond quadrilateral network of
high-speed rail in Budget 2015
A diamond quadrilateral rail line would cover major metro
cities and growth centres of the country
The objective of this high-speed rail network is to reduce
journey hours and take the rail system to international
standards
This project would comprise seven routes, including MumbaiAhmedabad, Howrah-Haldia, New Delhi-Patna, and
Hyderabad-Chennai
The government is considering to implement this project
through the PPP model
At present, the Mumbai-Ahmedabad route is under feasibility
study by experts from France and Japan and is expected to
be completed by 2015
Apart 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 Agra
Semi-high speed trains would run at a speed of 160 to 200
km per hour
Source: PM India Website, Department of Rural Development, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
26
INDIAN ECONOMY AND TRENDS
MAKE IN INDIA – SHAPING UP INDIAN MANUFACTURING (1/2)
Main objectives
About
The Make in India campaign was launched in September 2014
The campaign is set of plans to cut red tape, develop
infrastructure and create a business-friendly environment
At present, manufacturing share in the GDP is 15 per cent and
the government aims to reach 25 per cent
The 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
This 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 segment
Boost in manufacturing activity would lead to increased
employment, thus improving the purchasing power
Self-reliability on indigenous products would control trade
deficits
Indian products would enter international markets due to
improved cost structure
New process: New de-licensing and deregulation measures
eBiz portal has been made available 24*7 for online application of Industrial License and Industrial Entrepreneur Memorandum
Validity of the Industrial License has been extended to three years
Industrial licensing has been removed for most of the components of defence products
State government has been asked to launch self-certification and third-party certification under the Boilers Act
All returns are turned into online filling in unified form
Items having dual use in military and civilian applications have been deregulated
Clearance process turned online
Self-certification has been introduced for all non-risky and non-hazardous businesses
Source: Make in India Website, News Articles, Aranca Research
JANUARY 2015
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27
INDIAN ECONOMY AND TRENDS
MAKE IN INDIA - GIVING NEW SHAPE TO INDIAN MANUFACTURING (2/2)
 Policy on defence sector has been liberalised
 FDI cap raised from 26 per cent to 49 per cent
Defense
 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
Construction
 100 per cent FDI under automatic route is permitted in construction, operation and maintenance for specified
infrastructure projects in railways
 For construction sector, norms easing are underway
Insurance:
Insurance
and Mining
Ordinance
 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
JANUARY 2015
For updated information, please visit www.ibef.org
28
INDIAN ECONOMY AND TRENDS
CLEAN GANGA AND ECO-FRIENDLY REFORMS
Clean Ganga
Initially India launched Ganga Action Plan (GAP) in 1986
covering Uttar Pradesh, Bihar and West Bengal
This was followed by National Ganga River Basin Authority,
which was formed in 2009 with the objective to reduce
pollution
National 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 approach
To 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 Ganga
Initiatives:
Ganga Guard Corps has been set up to prevent people from
polluting Ganga
In Budget 2015, Government has allocated USD334 million for
cleaning 2,525 km long Ganga river
Major Initiatives
To maintain the quality of Yamuna river following initiatives
are done:
Fine of USD82 for throwing Puja offerings into the
river
Fine of USD820 for dumping wastes
Real Estate and Construction activities are banned on
the banks of the river Yamuna
Swachh Bharat
The campaign was launched on October 02, 2014
India’s biggest cleanliness campaign as 3 million government
employees, schools and college students had participated
The 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 sanitation
Safe drinking water, establishing waste disposal system, and
clean roads & lanes
Cost:
USD32.2 billion of expenditure is estimated
Of this, USD22 billion would be spent on building toilets in
villages
Source: Clean Ganga Mission Website, News Articles, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
29
INDIAN ECONOMY AND TRENDS
BETI BACHAO BETI PADHAO SCHEME
About
The government to launch `Beti Bachao, Beti Padhao' (BBBP)
scheme on January 22, 2015
The scheme was issued to address the issue of declining sex
ratio
The government has set out USD16 million for this scheme for
2014-15
USD7.4 million and USD6.6 million will be allocated in 2016
and 2017
It will be under the Ministry of Women and Child Development
(WCD)
Key Insights
Main objectives
The 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
2011
This brought to the fore the need to bring in steps to improve
the sex ratio
The main objectives of the scheme are
Prevent gender biased, sex selective elimination
Ensure survival & protection of the girl child
Ensure education of the girl child
Strengthening the implementation of Preconception and PreNatal Diagnostic Techniques (Prohibition of Sex Selection)
Act, 1994 (PC&PNDT Act) with strict punishments in case of
violations
Scheme targets to cover 2,500 villages by 2019
A toilet in every girls’ school in 100 vulnerable districts
A state-level innovation fund to promote best practices in
improving child sex ratio and gender inequities
The 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
Transport
Setting up "Crisis Management Centres" in all the districts of
Delhi in all government and private hospitals in 2015
Source: vikaspedia.in, news articles, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
30
INDIAN ECONOMY AND TRENDS
STATES BOOSTING GROWTH BY INNOVATIVE METHODS
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 clearances
Rajasthan: Implementation of Single Window Act with time- bound clearances
Madhya 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 hub
Gujarat: Creation of Pharmaceutical hub, automotive hub
Labour reforms
Maharashtra: Online labour management system to administer labour laws and provide range of labour
management services online
Gujarat: 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
JANUARY 2015
For updated information, please visit www.ibef.org
31
INDIAN ECONOMY AND TRENDS
BIG TICKET REFORMS BY THE NEW GOVERNMENT TO TRANSFORM THE
ECONOMY
 New labour laws issued to end ‘Inspector Raaj’
Labor law
 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 limit in insurance sector raised to 49 per cent from 26 per cent
FDI
 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
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
 Goods and Service Tax is the new tax system to be implemented to replace all indirect taxes
GST
 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
 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
Others
 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
Source: government websites, Make in India website, news articles, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
32
INDIAN ECONOMY AND TRENDS
BUILDING UP THE FOREIGN RELATIONS
The new government has realised the importance of building relationships with the world, especially neighbouring countries, for
fostering development and stability
Since 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
Had heads of all big economies
visiting India in 2014 - US,
China, Russia, UK
India’s Prime Minister visits
Australia after 28 years
US President Barack Obama to
be the Chief Guest for the
Republic Day
Prime Minister visited the neighbouring countries like Myanmar, Bhutan, Nepal that were taken for granted for many years
Indian Prime Minister visits
Nepal after 17 years
Visited all the SAARC countries
and proposed strengthening of
SAARC
India proposed investments in
Myanmar and Bhutan to help
them in their development path
BRICS bank to be set up, with
an Indian to head it for the first
five years
The neighbouring countries are vital for the safety of the country
Mending foreign relations along with the growing India story has led to huge investment plans proposed by many countries
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
Source: News articles, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
33
OUTLOOK
INDIAN ECONOMY AND TRENDS
INDIA – TO LEAD THE GLOBAL GROWTH WAGON
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
Pace of reforms
Deregulating diesel prices
GDP growth rate( per cent)
9
Ordinance on Insurance
8
Ordinances on mines
7
Make in India campaign
6
Labor reforms
5
Increasing FDI caps
4
3
`
2
Increased Investment
1
USD1 trillion investment in
infra
0
-1
2013
2014
2015
2016
India
China
United States
Eurozone
Japan
Brazil
USD1 trillion worth of
projects to be awarded by
the Indian Railway
Investment worth USD101
billion pledged by US,
China and Japan
Source: Economic Times, Aranca Research
JANUARY 2015
For updated information, please visit www.ibef.org
35
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