India, Redefining Its Growth Path 2019

India:
Redefining
its growth
path
August
August
2019 2019
home.kpmg/in
home.kpmg/in
Urbanisation and infrastructure push
Municipal cadres and decentralisation,
Amalgamate urban and rural development,
Urban mobility
Global manufacturing hub

• Upgrade infrastructure enablers
• Enabling policy for high-end manufacturing
Promotion of the
start-up ecosystem
and MSMEs
• Integration in GVCs
• Establish R&D linkages
• Vocational trainings
Social uplift
• Predictive analytics for monitoring and
interventions in welfare programmes
• Integrate public and private healthcare
delivery systems
Taxation
• Mechanism for mitigating tax litigation
• Certainty of tax rates
• Inter-agency co-operation and alignment
Sustainable development
• Climate resilience in project planning
• Stricter monitoring and control against pollution
• Improving water efficiency
Agriculture
• Digital farming
• Modernise agri-marketing infra and create
direct farmer to consumer market infra
• Clusters for agri. and
processed food
exports
Healthcare
• Infrastructure investments for
increased healthcare penetration
• Home care to drive growth
• Digital healthcare solutions
Education
• Education policy
• Vocational education
• Entrepreneurship enablers
USD5
trillion by
2025 Power and energy
• Structural solution for the
bankruptcy situation
• Sustainable energy
• Reduce dependence on oil imports
Tourism
• Village-based tourism model
• Encourage travel and tourism start-ups
• Region-based customised tourism plan
• Develop tourism-trails by linking
locations with common themes
Financial • Continue to incubate

fintech ecosystem
services • Liquidity for NBFCs

Released at the Mindmine Summit 2019
Table of contents
Foreword
Introduction 04
02
01
The path for India to become a USD5 trillion economy

Urbanisation and infrastructure push 09
06
Global manufacturing hub 11
Promotion of the start-up ecosystem and MSMEs 13
Social uplift 15
Taxation 16
Sustainable development 17
20
02
Sector opportunities
Agriculture 21
Healthcare 23
Education 25
Power and energy 27
Tourism 29
Financial services 31
34
03
Trade
04
Industry expectations
05
37
Conclusion 38
01 India: Redefining its growth path
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
02
Foreword
Globally, economic volatility is on The next five years could have
an upswing amid rising trends of momentous significance, bridging
inward looking policies and trade the urban-rural divide, catalysing
wars. Increased exports and foreign consumer consumption and fuelling
direct investments are critical for growth in agriculture, healthcare,
GDP growth and employment. education and infrastructure, among
Hence, India’s focus on facilitating others. As technology seeps into
policies with reference to trade all aspects of the country’s milieu,
and investments in India must a future of converging digital
continue to increase, even in the technologies beckons.
face of protectionist tendencies
While the focus is on bringing
in other economies. The country
structural changes through targeted
is at an inflection point as political
policy interventions to enhance India’s
stability, supportive demographics,
global competitiveness, bilateral and
technological leaps and enlightened
multilateral initiatives across regions
policymaking converge to create a
are expected to play a defining role in
conducive climate for growth.
shaping the success of reforms.
In the last five years, the Government
Opportunities – including cross-
of India has provided a sustained
border collaborations – are blooming
policy impetus. India has thus
even as business models shift and
embarked on a path of structural
technological undercurrents sweep
reforms and pivotal legislation
across the ecosystem. Further, with
in investments, taxation and
trade deficit under the government’s
infrastructure, helping the economy
scanner, the potential for recalibrating
to maintain healthy growth. The
trade by growing in existing trade
country has to travel further on the
regions and building new trade
path to unravel its true potential. The
partnerships is vast.
recently presented Budget underlines
the government’s intent of India This report analyses the key facets
embarking on a path to become a of six themes – infrastructure,
USD5 trillion economy by 2025. manufacturing, MSMEs and the
start-up ecosystem, business-friendly
A young India’s pulsating aspirations
policies, social uplift and taxation
are setting the bar high for the
– across agriculture, healthcare,
government, making the youth the
energy, financial services, tourism and
centre of focus of policymaking.
education.
Arun M. Kumar Akhil Bansal

Chairman and CEO Deputy CEO
KPMG in India KPMG in India
04
Introduction
The global economy is largely global manufacturing hub, efforts
under stress, with several countries have to be focussed on strengthening
grappling with the impact of the infrastructure, building a digital
on-going trade wars and domestic ecosystem and integrating into global
political pressures. According to supply chains.
IMF, the global economy is expected
India also needs to adopt agility in
to grow at 3.2 per cent in 2019 due
its policy and regulatory framework
to headwinds such as weak trade
to introduce reforms across land,
prospects, slow investments, falling
labour and administration, while also
fiscal stimulus, ongoing policy
ensuring access to funds for MSMEs
normalisation and rising disinflationary
and start-ups and managing farm
pressures.
distress and fiscal deficit. Hence,
While India’s recent decisive election India’s long-term growth leans on
mandate helps ensure political structural changes. Moreover, since
stability and continuity, the country the government is pursuing a fiscal
is suffering domestic sluggishness. consolidation path, the private sector
While these economic challenges is likely to drive growth in all major
cannot be ignored and do impact the sectors. At the same time, public
short-term health of the economy, investments in roads, highways
they also present long-term and affordable housing is expected
opportunities for India to undertake to continue to boost infrastructure
structural changes which could development.
facilitate its emergence as a global
Over the last five years, the
powerhouse.
government had made continuous
The country’s economy is currently efforts to drive stability in new
under stress given the consumption systems and enable the ease of doing
slowdown, decelerated growth across business. It is now imperative for the
many sectors, and liquidity stress government and industry to work
in the non-banking financial sector. together to boost private consumption
While addressing these challenges, and investments and pave the path for
it has also become imperative for long-term stability and growth.
the government and private sector
to focus on its country’s long-term
goals to unlock its full potential. To
achieve its target of emerging as a
01
The path
for India to
become a
USD5 tril ion
economy
Union Budget 2019-20

articulated the ambition of a
$5 trillion economy
Post elections this year, the ruling introduced such as Goods and Budget 2019 levies significant
government returned to power Services Tax (GST), Insolvency importance on building the
with a decisive mandate, paving and Bankruptcy Code (IBC), momentum for investments,
way for continuity of policy and an single-window clearance, digital especially private investments,
impetus to progressive reforms, applications and clearances, and providing necessary push for
good governance and competitive relaxation of FDI norms, leading to increasing and creating jobs,
federalism. With a stable an uptick in economic growth and improving the demand and
government back at the helm, raising the country’s EoDB rank by boosting exports. For instance,
India may continue to strengthen 65 places to 77, globally. Some of the government has announced
its position as the world’s growth these policies can be streamlined investments worth USD715 billion
engine. This is further reflected further to catapult India into the top across railway infrastructure by
in the recently presented Union 50 EoDB rankings01. 203005 and expansion of corporate
Budget 2019 where the focus has tax of 25 per cent to companies
India is expected to be the third-
been on furthering growth. with INR400 crore from currently
largest economy in the world
INR250 crore06. A social stock
India is witnessing a rapid economic by 2030, driven by favourable
exchange enabling easy funding for
ascent as the geo-political and trends.02 The country’s economic
social enterprises will give a push to
economic compass gradually shifts transformation is likely to continue
several welfare schemes.07
to Asia. Even against an uncertain to be led by a rising middle class
macroeconomic backdrop globally, and rapid urbanisation, which can
India’s influence is spreading further fuel consumption.
beyond its traditional sphere in the
Although, India’s economy
Asia-Pacific.
witnessed a downturn during
India is one of the few large the second half of FY19, political
economies where economic certainty coupled with favourable
growth and sustainable interest rates and income support
development are moving in to the farmers, is pegged to push
complementary directions. The the capacity utilisation and private
country’s rapid strides reflect in consumption in the country. With 01. Narendra Modi wants India among top 50 on ease
of doing business index, double economy to $5trillion,
its improved rankings on indices a smooth runway laid down over Hindustan Times, 19 November 2018
such as the World Bank’s Ease the last few years, India is set to 02. India to be third largest economy by 2030, Business
of Doing Business (EoDB) Index, take off to become a USD5 trillion Today, 6 April 2019
03. Narendra Modi wants India among top 50 on ease
Global Innovation Index, Global economy by 2025.03 of doing business index, double economy to $5trillion,
Competitiveness Index, Global Hindustan Times, 19 November 2018
This is reflective from KPMG
Healthcare Access and Quality 04. Agile or irrelevant – Redefining resilience - India CEO
in India’s survey which states Outlook 2019, KPMG, Accessed on 12 July 2019)
index and Climate Change
that around 94 per cent CEOs in 05. Budget stresses on massive infra investments to
Performance Index. become USD 5 trn economy, The Economic Times,
India are confident in the growth 5 July 2019
Over the last five years, various prospects of their company04. 06. Companies with turnover of Rs 400 cr to pay
lower corporation tax of 25%, Business Standard,
policy reforms have been 5 July 2019
07. Budget 2019: Social Stock Exchange may see a
chicken-and-egg scenario, Business Today,
6 July 2019
08
India — A USD5 trillion economy by 202508,09,10,11,12,13,14,15,16,17,18
USD1 USD2 USD3 USD5 USD10

tril ion tril ion tril ion tril ion tril ion
58 years 8 years 4 years 5 years 8 years
2008 2016 2020P 2025P 2035P
USD1.4 trillion USD1 trillion USD4 trillion

investment in digital economy consumer
infrastructure by 2025 expenditure
by 2024 by 2025
Enter top 50 114 million

USD360 billion
rank in ease middle-income
investment in
of doing households
agri-rural sector
business by 2025
Set up 1,50,000
50,000 new
99 Smart Cities Health and wellness
start-ups by
by 2025 centers by 2022;
2024; seed start up
75 new medical
fund of INR200 billion
institutes by 2022
175GW of Double national 100 new

renewable energy highways length airports by 2024;
capacity installed, by 2022; 60,000 Modernise 400
cumulatively kms by 2024 railway stations
On the other hand, the rising climate for global investors. The Despite political stability, India
aspirations, ambitions and foreign direct investment (FDI) still has to navigate through
impatience of a young, growing inflow grew at a CAGR of about global uncertainty. However,
Indian population are raising the 13 per cent during FY15-FY18.17 the government seems to be in
benchmarks of performance for The FDI inflow is expected to grow a much better position to scale
the central and state governments. faster given the ongoing trade up its existing schemes such as
Such aspirations are increasingly wars and the likely shift of some ‘Ayushman Bharat’, ‘Skill India’,
acting as catalysts for governmental manufacturing away from China. ‘Make in India’ and ‘Digital India’.
policymaking and intervention.
Additionally, India plans to expand The core themes that are expected
To fulfil such aspirations, the its trade relations with emerging to propel India’s growth story are
government laid the groundwork economies such as Africa, Latin 1) an infrastructure push, 2) the
in its last five years to usher India America and ASEAN to diversify country’s emergence as a global
into a new world of strategic its trade partner portfolio. Further, manufacturing hub, 3) promotion
and economic opportunities. to help enhance the proportion of of micro, small and medium
The government is increasingly value-added exports, India plans to enterprises (MSMEs) and the
focusing on building a collaborative, focus on bringing in more foreign start-up ecosystem, 4) social uplift,
integrated ecosystem to improve firms and increasing outbound 5) taxation and 6) sustainable
the investment and business shipments. development.
08. Report of the Working Group on USD 5 trillion Indian Economy, 12. BJP pledges to invest Rs 100L crore in infrastructure, The 16. BJP election manifesto: Highlights, The Hindu, 8 April 2019
Department for Promotion of Industry and Internal Trade, Times of India, 9 April 2019 17. India needs a force to reach its $10 trillion potential and become
January 2019 13. BJP woos farmers, traders, The Deccan Herald, 9 April 2019 a global role model, The Economic Times, 19 February 2019
09. Modi’s $10 trillion dream, The Financial Express, 8 April 2019 14. BJP manifesto: 60,000 kilometres of highways to be built in 5 18. Fact Sheet On Foreign Direct Investment (FDI), DIPP, 12 March
10. Startup Vision 2024: Govt proposes 50,000 new businesses, years, Business Today, 8 April 2019 2019
Rs 1,000 crore fund, major tax sops and more, The Financial 15. NITI Aayog calls for establishment of 1,50,000 Health and
Express, 25 April 2019 Wellness Centres under Ayushman Bharat, Business Standard,
11. Renewable Energy Industry in India, IBEF, April 2019 20 December 2018
Urbanisation and infrastructure push

India’s urban population is An ambitious project worth INR5.5
estimated to reach 40 per cent trillion of the government is to Amalgamate urban and
of the total population by 2030. link more than 60 rivers through rural development
The government has undertaken a network of reservoirs and
an urbanisation programme canals across India.21 The project • Villages that are classified
as ‘large’ and ‘very large’ due
that envisages 700–900 million presents massive opportunities
to their population threshold
square metres of urban space for international firms for feasibility
or non-agriculture population
to be developed every year to studies, project management, mix miss out on infrastructure,
accommodate this growing surveys and project execution. housing or employment policies
number.19 This further gets impetus from the that are planned for urban
government’s recent step to form a areas; therefore, development
Given rapid urbanisation, the
new ministry Jal Shakti to unify all of towns/villages should be
country has immediate investment
the departments related to water planned as urban clusters/hubs
requirements in basic services, to bridge the rural-urban divide.
management.22
transport infrastructure, supply
chain and energy segments. Higher Further, with projects such as Dedicated missions
impetus is likely to be placed on the 1,300-km trilateral India-
creating municipal cadres that Myanmar-Thailand highway, India • Augment municipal revenues,
offer provisions of involving lateral will increasingly become a part both tax and non-tax, through
experts across departments and of the developing Regional Value dedicated missions.
decentralising local bodies with city Chains (RCVs). For instance, mature • Consolidated urban mission with
municipal authorities to be apex India-ASEAN connectivity will have a single funding line linked to
bodies. Furthermore, the pace of cumulative gains of over 2 per cent urban reforms as compared to
urbanisation calls for bridging the of India’s GDP.23 projects and utilisation.
vast urban-rural divide.
For India to bolster its infrastructure,
investments worth USD4.5 trillion KPMG’s views
are required by 2040.20 Despite a
Given that India is one of the most
ramp-up in investments, there is Establish municipal cadres and
increase decentralisation at city rapidly urbanising countries in the
massive scope for investments
level world, there is a pressing need to
across areas such as housing,
redefine policies, regulations, and
water management, transport
incentives to foster the creation
infrastructure, and waste collection. • State governments should
professionalise municipal of essential urban infrastructure
Other potential investment areas
cadres to improve governance for enhancing the quality of
are renewable energy, port capacity,
and strengthen local bodies; living. Partnerships between the
economic corridors, information
furthermore, impetus has to government and the private sector
and communication technology
be given to allow lateral entry need to be recalibrated, particularly
(ICT) infrastructure, airports and of experts across different in terms of the sharing of risk and
smart cities. departments and projects. access to funding. The advent of
Greater emphasis is likely to • Decentralise city-level local fourth-generation technologies like
be placed on expanding the bodies through greater AI and the innovative utilisation
existing financing sources, delegation of funds and of big data are expected to
creating innovative public-private responsibilities, autonomy multiply the benefits arising from
partnership models and attracting of revenue mobilisation and investments in infrastructure.
investments. The other key themes flexibility of urban planning; this
will support the government’s Elias George
can be technology sharing from
smart city mission. Partner and National Head -
foreign firms, enabling institutions
Infrastructure, Government and
dedicated to infrastructure
Healthcare, KPMG in India
financing and ensuring efficient
project implementation.
19. India has undertaken most comprehensive, planned 21. Know all about PM Modi’s ambitious Rs 5.5 lakh crore river- 23. India-ASEAN: co-creating the future, KPMG, February 2019
urbanisation prog, The Economic Times, 9 April 2018 linking project, India TV, 30 March 2018 Please mention the member firm
20. India will need $4.5 trillion till 2040 for infrastructure 22. Jal Shakti ministry could be a step in the right direction to fight
development, Money Control, 31 October 2018 India’s water crisis, Money Control, 9 June 2019
10
Global manufacturing hub

India produces about USD9.4 Further, many global companies are
trillion in goods and services. looking to shift their supply chains
Manufacturing, which accounts for away from China because of the India has the potential to benefit
around 17 per cent of the country’s ongoing trade tensions, and India from the ongoing trade wars, and
GDP, is estimated to contribute 25 is emerging as a clear choice. For leverage the change that various
per cent by 2025.24 instance, India and the U.S. are international companies are looking
discussing to move capacities of to make for their manufacturing
By improving the ease of doing
around 200 U.S. companies out of bases away from China. However,
business further, strengthening
China and set up an alternative base unlocking the full potential of this
the Companies Act 2013 and
in India.28 opportunity would depend on
introducing a new industrial India’s investment in upskilling and
policy, India’s position as a India has a rich talent pool of reskilling its existing workforce
global manufacturing hub is engineers, a young workforce, given the dynamic environment and
likely to strengthened. India can and cost-effective labour. The emerging technologies. We should
also emerge as a research and country also offers a huge market, also look at investments from China
development (R&D) hub and supported by rising disposable where China has key advantages to
knowledge centre. For instance, a income. However, key growth build manufacturing scale in India.
European firm has recently set up
drivers of India’s emergence as a Additionally, India’s position as a
its global R&D centre in India.25
manufacturing hub is likely to be the global manufacturing hub can be
Additionally, the government’s convergence of digitalisation and fortified through its emergence as
development of industrial corridors manufacturing and the subsequent an R&D hub and knowledge centre.
is aimed at creating a favourable productivity leap.
Vinodkumar Ramachandran
environment for industrial
However, with more than 50 per Partner and Head – Automotive and
development. The government
cent of India’s population under the Industrial Markets, KPMG in India;
is bound to further invest in
age of 25, the government has to Global Leader for Industry 4.0
creating clusters or networks. The
create jobs and upskill and reskill
emphasis on initiatives such as
the workforce given changing
‘Make in India’, ‘Digital India’ and
requirements and emerging
‘Skill India’, as well as a favourable
technologies. The government
foreign investment policy will
plans to augment its existing ‘Skill
support India’s position as a global
India’ initiative to provide vocational
manufacturing hub.
training to 400 million people by
In India, 60 per cent of formal 2022.29
employment relies on middle-skill
Creating jobs and skilling youth
jobs that are prone to automation.26
are of utmost importance for the
With Industry 4.0 and digitalisation
government to deliver on its vision
gaining momentum, the country
of inclusive growth.
is expected to focus on upskilling
and reskilling the workforce on
emerging technologies such as
24. U.S.-India partnership – road to prosperity, KPMG, January
artificial intelligence (AI), machine 2019
learning (ML), internet of things 25. Swiss company wants to make India its manufacturing,
(IoT), big data and analytics. R&D hub, Business Standard, 6 January 2019
26. How AI will transform India’s job scene, Business Line, 6
According to KPMG’s India CEO November 2018
27. Agile or irrelevant – Redefining resilience - India CEO Outlook
Outlook 2019 report, about 88 per 2019, KPMG, Accessed on 12 July 2019
cent of CEOs in India are personally 28. US Companies May Shift Manufacturing From China To
leading the technology strategy of India, But Demand Say In Regulations, Inc 42, 29 April 2019
29. Government plans skill vouchers to make youth more skilful,
their companies.27 The Economic Times, 4 March 2019
12
KPMG’s views
Adopt emerging technologies Place higher focus on Implement direct service delivery
infrastructure for urban mobility using data and analytics (D&A)
• The government has identified
five sectors, i.e., infrastructure, • Rapid urbanisation is exerting • The government needs to
transportation, healthcare, pressure on major cities for increasingly leverage an
education and agriculture for mobility and systemic city evidence-based policy using
adopting AI; infrastructure planning. D&A to strengthen the delivery
development is bound to lay of citizen services.
• Therefore, higher authority
the foundation for other sectors’
needs to be provided to city • Furthermore, data from GST,
growth, and hence, AI adoption
municipal bodies. Aadhaar and Ayushman Bharat
in infrastructure will play a
can be leveraged for effective
key role, especially for asset
service delivery.
management.
KPMG’s views
Aggressively upgrade Build an enabling policy to

infrastructure enablers facilitate high-end manufacturing
• With increasing focus on the • The need of the hour in the country • For instance, implementing
‘Make in India’ initiative, is job creation, which mainly can policies which will support luxury
the government needs be driven by the manufacturing car manufacturing rather than
to aggressively upgrade sector. Additionally, with the completely knocked down (CKD)
infrastructure enablers changing technological landscape, operations.
across sectors such as the manufacturing sector needs
industrials, specifically in the • Further impetus has to be
to have an enabling policy that
automotive sector where the given on improving ease of
encourages high-end manufacturing
key megatrends are BS VI doing business and training
in the country.
and Electric Vehicles (EVs). on emerging technolgies to
The country needs massive encourage Industry 4.0 adoption.
infrastructure overhaul if it needs
to target 30 per cent vehicles as
EVs by 2030 and 100 per cent
by 2047.
Promotion of the start-up

ecosystem and MSMEs
In recent years, the Indian government has already created
start-up ecosystem has grown a seed start-up fund of USD2.85 MSME’s are the cornerstone for
exponentially. India is the third- billion. It plans to launch many new resilient economic growth. The
largest start-up ecosystem with an initiatives such as easing regulatory ambition of a USD5 trillion economy
estimated start-up base of 7,500 at requirements, setting up 500 will require unleashing the potential
the end of 2018.30 new incubators and accelerators, of MSMEs. It will require data
providing collateral-free credit up driven identification of challenges
Driven by the adoption of emerging and taking mid-term to long-term
to INR5 million and creating 100
technologies across sectors, approach towards easing out
innovation zones.32
increasing domestic demand, capital availability, lowering cost
availability of funding options and Apart from that, the MSME of doing business, focusing on
increasing government support, sector is critical for India’s future productivity enhancement, adoption
India has established a successful growth. India has the highest of ‘standards’ and a concerted
start-up ecosystem. Also, many number of MSMEs after China, effort towards trade enhancement
Indian start-ups have grown into contributing around 45 per cent to through internal and global value
international businesses in the past manufacturing output, 40 per cent chain integration.
few years, reflecting the maturity of to the total exports and 8 per cent
Indian start-ups. to the GDP which should reach Raman Sobti
50 per cent of exports and 12 per Partner and National Leader –
With a target to establish 50,000 KPMG Enterprise, KPMG in India
cent contribution to GDP.33 Though
new start-ups by 202431, the
an organised MSME sector with a Vivek Aggarwal
Indian start-up ecosystem is
national data centre for MSMEs and Partner, Government Advisory -
getting significant thrust from the
skill sets seems like a way forward. IGH, KPMG in India
government. To achieve this, the
30. Scaling up start-ups, Business Line, 22 January 2019 32. What Startups Want From The New Government, Inc 42, 23
31. Startup Vision 2024: Govt proposes 50,000 new businesses, Rs May 2019
1,000 crore fund, major tax sops and more, Financial Express, 33. What Startups Want From The New Government, Inc 42, 23
25 April 2019 May 2019
14
To promote the MSME sector,

the government plans to provide Organise the MSME sector Introduction of Indian
USD14 billion credit to MSMEs Commercial Service
• Implementation of a national
under its Credit Guarantee Scheme rating system for ranking of • Create an Indian Commercial
and create 150 technology MSMEs, which is accepted by Service, similar to the Indian
centres by 2024.33 These centres both government and private Foreign Service, to promote
would provide training to MSMEs buyers as well as financial Indian exports, especially SME
and expose them to emerging institutions. exports.
technologies such as AI, robotics,
• Nationwide repository of MSMEs
IoT, VR and blockchain. to enable targeted interventions; Startup ecosystem and
nation-wide repository of academic collaboration
India is on its way to become
a trillion-dollar digital economy employees of MSMEs with their
• Set-up more startup ecosystem
through growing consumer skill sets.
hubs
demand and expanding digital
Establish R&D linkages • Encourage academic
infrastructure, and the adoption of
collaborations, providing testing
emerging technologies. Start-ups • Partnerships between R&D hubs and access to easy funds
and MSMEs are set to play a crucial facilities/institutes and MSMEs/
role in this development. This clusters should be promoted
presents massive opportunities
• Create fund/s for R&D in new
for strategic partnerships with
technologies for startups
international players for exchanging
technologies, building and Encourage adoption of MSMEs
modernising infrastructure, building
academic tie-ups and developing • Large private sector companies
skills. should be encouraged to adopt
MSMEs and mentor them and
then integrate them within their
value chains.
KPMG’s views • Incentivise corporates to
incubate startups
Fix the inverted duty structure
and promoting integration in Promote vocational trainings
global value chains (GVCs)
• School-level vocational training
• Subsidies, industrial policies, programmes to promote
tariff and non-tariff barriers in practical experience at an early
certain sectors distort incentives, age; students to be linked with
resulting in a competitive the nearest MSME clusters for
disadvantage; this also hinders vocational trainings.
the link between GVCs, as
a tariff on the full product Launch funds
each time it crosses a border
compounds the cost of trade and • Impact investment fund for
is cumbersome administratively. socially and environmentally
conscious small businesses
in India.
Implement standards and
encourage reporting Dedicated organisation for export
• Complexities and no promotion
benchmarking of standards • A concerted effort and
across regions, makes it difficult dedicated organisation should
for exports. be established for export
• Transition from ‘reporting less promotion. This organisation can
to avoid hassles’ to ‘reporting as leverage Indian Embassies and
required to gain benefits’. Consulates aggressively.
Social uplift
India’s growth is closely tied
to consumption and domestic KPMG’s views
demand. Although the country
is seeing rapid urbanisation and Use predictive analytics for
increasing disposable income, it is monitoring and interventions in
imperative for the country to bridge welfare programmes
the social divides. • Schemes such as the Holistic
A majority of the population who Nourishment Scheme
work in the agriculture sector and (POSHAN Abhiyaan) to make
the unorganised sector are deprived India malnutrition free by 2022
that converge with various
of basic facilities, infrastructure
government programmes
and financial protection. During the such as Anganwadi Services,
last five years, the government has Scheme for Adolescent Girls,
launched various programmes to National Health Mission (NHM),
uplift the lower income class. The Clean India Mission and Public
programmes included Ayushman Distribution System can benefit
Bharat (healthcare insurance), significantly from the use of
Pradhan Mantri Kisan Samman predictive analytics and create
Nidhi Yojana (INR6,000 yearly to evidence-based policies.
small farmers) and Jan Dhan Yojana
(bank accounts).
Integrate public and private
Over the next five years, the healthcare delivery systems
government plans to further bridge
the social divide. It aims to offer • The ambitious scheme of the
a monthly pension of INR3,000 government, i.e., Ayushman
for farmers and workers in the Bharat (health insurance
unorganised sector,34 extend the scheme) requires a significant
Pradhan Mantri Kisan Samman thrust to encourage private
sector participation to increase
Nidhi Yojana to all farmers,35 and
penetration.
reduce the malnutrition level
through POSHAN Abhiyaan.36 It • Government support and
will also ensure the availability of policies in terms of land
banking services within five kms acquisition, budgetary grants
of every individual, a pucca house and favourable PPP policies can India’s growth story will be
boost the healthcare delivery shaped on the basis of our ability
for every family, electrification of all
system. to increase penetration of health
households and access to safe and
potable drinking water.37 insurance, financial inclusion, and
access to basic facilities for all,
regardless of their social status.
This focus on bridging the rural-
urban and rich-poor gap can be
helped with leveraging technology
to introduce innovative solutions,
especially for monitoring the
welfare programmes and creating
evidence-based policy-making.
Nilachal Mishra
34. Rs 3,000 pension for workers in unorganised sector, The 36. Poshan Abhiyan scheme lags behind its target, DowntoEarth, Partner, Government Advisory - IGH,
Economic Times, 1 February 2019 24 May 2019 KPMG in India
35. Centre lifts landholding limit, extends PM-KISAN scheme to all 37. BJP manifesto highlights: The 75 promises for India, The
farmers, The Hindu, 8 June 2019 Economic Times, 8 April 2019
16
Taxation Organise the MSME sector
The tax changes introduced in the

KPMG’s views
2019 interim budget are expected
to prevail. A full income tax rebate
Mechanism for mitigating tax
for those earning up to INR5 lakh
litigation
per annum, an increase in the
standard deduction from salaries • The government may evolve
to INR50,000, the removal of tax a mechanism for mitigating
on notional rent on a second house tax litigation in India, which
and a hike in the TDS threshold limit continues to be a sore point
are expected. for both Indian and foreign
companies; this could be done
The government is anticipated to by allowing the taxpayer and the
simplify GST by doing away with Tax Department to settle a tax
the two top rates of 18 per cent and issue, which is a norm in the
28 per cent. GST tax slabs could be western world.
merged into two main rates from
the current four. Simplification of Certainty of tax rates
the GST process and lowering time
spent for tax compliance to one • Following the global trend
hour per month is expected.38 on lowering of corporate
tax rates and maintaining
It is also likely that the existing competitiveness, India should
Income Tax Act, 1961 would be move to a simple tax rate
overhauled as a new direct tax code structure — single corporate
(DTC) is under drafting stage39. tax rate of 25 per cent with no
The new draft will seek to improve surcharge and cess.
tax compliance and bring more • The Minimum Alternate Tax
assessees into the tax net and (MAT) should be withdrawn
make the system more equitable and Dividend Distribution Tax
for different classes of taxpayers. (DDT) should be replaced with
The new draft may also try to lower withholding tax.
the corporate tax rate and phase • The tax rate for foreign
out the remaining tax exemptions companies should also be
that lead to litigation, thus making correspondingly lowered from
businesses more competitive. the current rate of 40 per cent
(plus surcharge and cess). It is hoped that the remodelling of
the tax structure, through further
simplification of the GST structure
Inter-agency co-operation and and promulgating a new Direct
alignment Taxes Code, is likely to make the
Indian tax system more equitable
• There is a need for a formal for all classes of taxpayers. There is
and a closer alignment between also the hope that lower tax rates
customs/GST and transfer for all corporates and indeed, all
pricing (TP). taxpayers, along with a fair, rational
• India should do away with and even handed tax administration
different prices (ALP) adopted will help Indian businesses become
for direct tax and indirect tax more competitive in the global
38. View: Will the new direct tax code act as a stimulus in purposes for simple principle/ space.
lifting the economy, The Economic Times, 1 August 2019) rationality.
39. New direct tax code draft by July-end, Livemint, 24 May
Hitesh Gajaria
2019 Head of Tax, KPMG in India
Sustainable development
India, with its sheer size, varied additional carbon sink of 2.5 -3 billion
demographics and development tonnes of CO2 equivalent through Improving water efficiency
agenda, has to continually manage forest and tree cover.43
the balancing of economic growth • Whether it is agricultural
On the other hand, according to
and environmental sustainability. productivity or industrial
KPMG’s India CEO Outlook 2019
productivity, India’s water usage
Though, India’s focus is moving report, climate change has emerged
efficiency –productivity/KL, is the
towards sustainable development as the greatest threat globally in lowest, thereby requiring special
such as generating 175 GW of 2019.44 attention.
renewable energy by 2022, smart
Moreover, 15 out of 20 most polluted
cities, electric vehicles, energy Public procurement to include
cities in the world are in India45 serious
efficiency initiatives and moving to sustainability
health risks. To tackle pollution
BS VI emission norms, challenges
levels, the government will launch a
such as gender equality, clean • In most countries, public
special National Control of Pollution procurement is the biggest
energy, biodiversity, pollution, water
programme in 102 top polluted cities purchaser and a defined
crisis and waste management
of India. INR460 crore has been methodology to integrate
remains to be resolved. The latest
allocated for the same with an aim to sustainability can transform most
2019 Sustainable Development
support city civic administrations for of the industry. For instance,
Goals (SDG) report suggests that
tackling city specific pollution.46 circular economy in water
India slipped in the global rank from and waste management can
110 to 115.40 Overall, while development and address the country’s resources’
growth remains the underlying agenda problems.
Additionally, China, India and the
of the government over the coming
U.S. account for the largest shares
years, the focus will be more towards Fostering gender equality
of global SDG performance gaps
sustainable development.
with India representing 23.1 per • With more inclusion of women
cent of the total achievement gap in the workforce, India’s GDP
on Zero Hunger. Hence, India’s KPMG’s views
can have a positive impact.
improvement across the goals can
bring the world closer to the SGD Climate resilience in
targets.41 every project planning
The government, therefore, India has to balance its economic,

• India is one of the countries that
is expected to emphasise on environmental and social agendas
is likely to be most affected by
transition towards a more Circular climate change. Whether it is to achieve the next phase of
Economy - developing new policies physical risk, health risk or food sustainable growth. As the
or enhancing existing policies, security, India will have high country is facing extreme climatic
especially across mining, resources exposure. Hence across all the changes it is critical to embed
consumption, production efficiency, government’s planning process, climate resilience when planning
there needs to be an integration government projects. Focussing
waste and water management and
of climate resilience. on transition towards a circular
technology adoption.
economy – with policies across
With various initiatives already Stricter monitoring and control
mining, resources consumption,
against pollution
in place, India is committed to production efficiency, and waste
meeting its target of reducing the • Air pollution, water pollution and water management. While
emissions intensity of its GDP by and land degradation due doing so making sure of social
33-35 per cent by 2030 from its to chemicals, etc. is posing progress by providing better living
2005 level,42 non-fossil fuels’ share irreversible damage and hence conditions would help India achieve
to 40 per cent of the total electricity should be attended on priority. growth in a sustainable manner.
generation capacity and creating
Santhosh Jayaram
40. The Sustainable Development Goals Report 2019, United 44. Agile or irrelevant – Redefining resilience - India CEO Outlook Partner and Head - Sustainability
Nations, Accessed on 19 July 2019 2019, KPMG, Accessed on 12 July 2019
and CSR Advisory,
41. The Sustainable Development Goals Report 2019, United 45. India has 15 out of 20 most polluted cities in world, Business
Nations, Accessed on 19 July 2019 Standard, 5 March 2019 KPMG in India
42. Climate change looking beyond the Paris Agreement, Ministry 46. Centre to launch anti-pollution programme in 102 cities, The
of External Affairs, 2 May 2019 Week, 9 July 2019
43. India to achieve climate goals before schedule, The Economic
Times, 3 December 2018
18
02
Sector
opportunities
Agriculture
In India, 60 per cent of rural On the investment side, there
households depend on the are plans to attract investments
agriculture sector and associated worth INR25 lakh crore in the The agricultural sector forms
activities, but the sector contributes agri-rural sector and enable the Digital
the basefarming
of the Indian economy
just 17 per cent to the country’s creation of 10,000 new Farmer and it is an opportune time to
GDP. However, with increasing Producer Organisations (FPOs).05 invest further in its development.
focus from the government, Additionally, short-term interest- While providing large scale
agriculture is expected to grow at a free loans of up to INR1 lakh will employment opportunities, the
CAGR of 12.2 per cent to USD1.26 be facilitated. The sector will also sector also supports various allied
trillion by 2023.01 A time-bound get a boost from its recent agri- segments, which can further the
programme focused on creating export policy, which is estimated country’s growth. Unlocking the
well-functioning markets, improving to increase the agriculture export full potential of the agricultural
productivity and cutting waste can to increase to USD60 billion in the sector would depend on utilising
support this growth. next five years and USD10 billion in technology, creating Farmer
the next 10 years.06 Producer Organisations (FPOs),
During the last five years, the
strengthening infrastructure
government has launched various The advent of technology and its
and modernising agri-marketing
policies and initiatives to double adoption across the agriculture
systems.
farmer’s income by 2022, focusing value chain provide the necessary
extensively on increasing the thrust to the government’s Srinivas Kuchibhotla
minimum support price (MSP). To initiatives. Opportunities exist Partner, TS-Deal Strategy and
ensure the efficient realisation of across areas such as farm Restructuring,
MSP for the next five years, the mechanisation, soil management KPMG in India
government plans to strengthen the and crop forecasting techniques,
existing initiatives such as e-NAM biotechnology to increase crop
(an online trading platform for agri. yields, farming-as-a-service,
commodities), GrAMs (village e-mandis and usage of emerging
agriculture markets) and Pradhan technologies such as data analytics
Mantri AASHA Yojana (to ensure and AI.
remunerative prices to farmers).02
The agri-tech sector is flourishing
The government has recently and the vibrant start-up ecosystem
adopted the route of direct cash in India supports its growth,
transfers to farmers. For instance, presenting immense opportunities
in interim budget 2019, the for cross-border collaborations and
government launched a scheme partnerships. Further, investments
Pradhan Mantri Kisan Samman in the efficient supply-chain and
Nidhi Yojana to directly credit cold-chain infrastructure are likely
INR6,000 a year into the accounts to boost the country’s agriculture
of farmers with up to 2 hectares of sector.
land.03 This will be further extended
to all the farmers. Additionally, small
and marginal farmers will be offered
pensions post 60 years of age04.
01. U.S.-India partnership – road to prosperity, KPMG, 04. Rs 3,000 pension for workers in unorganised sector,
January 2019 The Economic Times, 1 February 2019
02. All you wanted to know about PM-AASHA, Business 05. BJP manifesto highlights: The 75 promises for India,
Line, 17 September 2018 The Economic Times, 8 April 2019
03. BJP aims to benefit all farmers under PM Kisan 06. India’s exports performance ‘extremely good’, but I’m
Samman Yojana, The Economic Times, 15 April 2019 not fully satisfied, Livemint, 26 December 2018
22
KPMG’s views
Modernise agri-marketing Create infrastructure clusters
infrastructure and create direct for agriculture and processed
farmer to consumer market food exports
Digital farming infrastructure
• For the government’s focus to • The government’s recent
• The government recently set-up agriculture export policy would
double farmer income by 2022,
an INR2,000 crore Agri-Market require investment in creation of
digital technologies will be
Infrastructure Fund to upgrade agri-export zones; for instance,
pivotal; emerging technologies
and develop rural markets for Maharashtra announced the
such as AI, IoT, predictive
agricultural goods; however, set-up of six clusters to boost
analytics and blockchain can
allocation of the funds to the state’s farm exports; similar
increase productivity, effective
projects implemented through a initiatives need to be taken by
distribution, soil management,
public-private partnership mode the other states in India.
and achieve higher yield.
will play an important role.
• Currently, less than 1 per cent
of the farmers sell their produce
directly to consumers, and
hence, the need of the hour
is to create infrastructure to
facilitate farmers to sell directly
to consumers.
Healthcare
Recognised as the country with the Ayushman Bharat scheme
affordable medical procedures, and introduce public private
low-priced drugs and cost-effective partnerships to the sector. Such Providing quality, affordable
infrastructure, the Indian healthcare steps will be critical for reaching the medical care across all regions
industry is expected to grow three- last mile in healthcare. and social strata is vital to
fold to USD372 billion by 202207, sustain the growth momentum
With plans in place to upgrade or
making it one of the top-three of the country, which currently
create 160 tertiary care centres,
healthcare markets in the world08. struggles with adequacy of
create 150,000 new primary
facilities. Focusing on upgrading
Rapid economic growth, changing health centres15 and a potential
the healthcare and wellness
demographics, increasing incomes requirement of 1.75 million new
infrastructure in India, can
and a surge in lifestyle diseases beds by 2025, the healthcare
translate into opportunities
will give a boost to the addressable infrastructure segment will require
for the direct supply of high-
market in the healthcare delivery investments of USD200 billion by
technology, specialised medical
segment. More hospital beds, 202416.
equipment, new wellness
reducing prices of medical devices,
The increasing number of products, thereby supporting the
growing medical tourism and
healthcare facilities translate into larger ‘Make in India’ programme.
greater health awareness are some
opportunities for the direct supply Using technology can not only
of the other drivers.
of high-technology, specialised improve diagnostics, but also
India is expected to witness medical equipment, products and ensure effective management
significant penetration of systems. Make in India’s focus on of epidemics and help design
recently launched healthcare enhancing R&D efforts in medical precise-targeted wellness and
programmes.09,10 The Ayushman devices can provide a further thrust care interventions.
Bharat health insurance scheme to the industry.
Nilaya Verma
has admitted over 1.8 million
Moreover, to achieve the ideal Partner and Leader
beneficiaries. Meanwhile, the price
doctor: patient ratio of 1:1,000, Markets Enablement
control regime has brought 1,084
the government has collaborated
essential medicines under the
with Asian Research and Training
regime with benefits worth USD1.5
Institute for Skill Transfer to add one
billion.11 The PM Bhartiya Jan
million skilled healthcare providers
Aushadhi Kendra has opened 4,300
to the workforce by 2022.17
centres,12 and Amrit Pharmacies
that provide drugs for cancer As the implementation of various
and cardiovascular diseases at a reforms gains momentum, India is
discount of 60-90 per cent.13 bound to be on track to achieve its
goal of making quality healthcare
Also, there are plans to increase
accessible and affordable to
healthcare expenditure to 2.5
everyone.
per cent of GDP by 202514, enrol
500 million individuals onto
07. Invest India, Accessed on 22 May 2019 13. Government committed to providing best healthcare
08. Healthcare, IBEF, January 2019 facilities, The Quint, 29 November 2018
09. Limping healthcare in India, The Pioneer, 8 October 14. Budget 2018: India’s Healthcare Crisis Is Holding back
2018 National Potential, India Spend, 30 January 2018
10. 53 Months of Transforming India, Transforming India,16 15. National Health Protection Scheme: Now let the meds
November 2018 kick in, The Economic Times, 26 February 2018
11. HEALTHY INDIA-STRONG INDIA Swastha Bharat-Sabal 16. Healthcare, IBEF, January 2019
Bharat, Press Information Bureau, 7 June 2018 17. 1 mn skilled healthcare providers likely by 2022:
12. Centre may open 5,000 more Jan Aushadhi stores by Institute, Business Standard, 26 May 2017
March 2019, Sunday Guardian, 10 November 2018
24
KPMG’s views
Infrastructure investments
for increased healthcare
penetration
• India faces an acute shortage

of healthcare infrastructure,
especially across rural areas
and Tier II and Tier III cities.
The country is likely to have a
potential requirement of 1.75
million new beds by the end-
2025. With the government’s
ambitious scheme Ayushman
Bharat, healthcare penetration
may be driven by rural areas and
private sector participation has to
play a vital role in the country’s
healthcare infrastructure.
Home care to drive growth
• The home healthcare market in

India is still at a nacsent stage
where currently metro and Tier
I cities contribute the highest.
The future growth looks
promising, but it will depend
upon factors such as adoption
from Tier II and III cities,
regulations, comprehensive
insurance coverage and
partnership between hospitals
and home healthcare firms.
Digital healthcare solutions
• Owing to low accessibility of

expertise outside larger cities,
digitalisation and technology-
based solutions can be the way
forward. Also, for increasing
penetration in rural areas,
technology start-ups are likely
find higher footing in the
healthcare market.
Education
With more than half of the Indian Technology is gaining traction
population under the age of across sectors, and the education
25 years, the government has sector is no different. For instance, Reaping the benefits of its
identified education as a priority India is looking to provide smart demographic dividend, would
sector. India has 260 million classes in secondary schools. require India to invest significantly
students across 800 universities To promote research orientation in its human capital. Enhancing
and over 39,000 colleges, but among students, the National the learning outcomes in schools,
the enrolment ratio is low.18 The Digital Library of India, which introducing Industry relevant
emphasis on the sector will not only provides access to e-books and courses in higher education
help create jobs, but also increase leading journals free of cost has and offering relevant vocational
the country’s growth potential by already been launched in higher training for those who can’t /
making the workforce educated. educational institutes.22 don’t purse higher education,
would enhance employment
The government has recently This push towards technology
opportunities for people joining
announced various schemes or provides tremendous opportunities
the workforce. Adoption of
initiatives for the primary and for collaboration with the private
technology can act as a game
secondary education sectors sector and global players, especially
changer in driving key structural
such as the Prime Minister within the online education
changes in the Indian education
Innovative Learning Programme, space. Many technology start-ups
system.
establishment of National Institutes providing courses on AI, VR, Big
for teacher training and opening of Data have entered the market, and Narayanan Ramaswamy
200 new Kendriya and Navodaya there is scope for partnerships Office Managing Partner -
Vidyalayas by 2024.19 For higher across the value chain. Kolkata, Leader – Education
education, India plans to have an and Skill Development,
Also, with the government planning
investment of INR1 trillion through KPMG in India
to set up National Institutes of
the Revitalising of Infrastructure
Teacher Training, there would be
and Systems in Education (RISE)
massive opportunities for global
scheme20, which will focus on
players in developing training
increasing the number of seats
courses or certifications for
in premier central institutes for
classroom effectiveness.
law, engineering, science and
management by at least 50 per cent The government’s attention
over the next five years. towards the education sector with
considerable focus on digitalisation
Additionally, the government
and technology adoption is a step
plans to launch a Study in India
in the right direction as the sector’s
programme to make India
growth is essential to propel India
an education hub for foreign
on its path to become a developed
students.21
economy by 2047.23
18. India-U.S. partnership, Road to prosperity, KPMG, 21. Degree of benefits: Why government is pushing hard
January 2019 for its ‘Study in India’ initiative, The Economic Times,
19. Alert for teachers! Modi govt plans training institute 12 May 2019
to improve education quality, Business Today, 08 Apr 22. Free National Digital Library with 1.70 cr books opened,
2019 Deccan Herald, 19 June 2019
20. BJP manifesto highlights: The 75 promises for India, 23. PM Modi asks top officials to prepare 100-day agenda;
Economic Times, 08 Apr 2019 job, education, health sectors on focus, Business
Today, 15 April 2019
26
KPMG’s views
Education policy
• Focus on preparing a road

map for a new education
policy, particularly with
respect to a learning outcome-
based school education
programme.
Vocational education
• Industry needs to be at the

core of vocational education
and skill development.
• The need of the hour is
to revamp the traditional
vocational education and
short-trem courses that are
aligned to industry agenda.
• Furthermore, services need
to be given a thrust.
Entrepreneurship enablers
• Incubation centres need to

be initiated at a large scale,
particularly in rural India.
• Focus on holistic facilitation
from policy interventions
to creating an enabling
ecosystem to handholding
young entrepreneurs.
Power and energy

Demand for power is significant, Additionally, with India aiming
especially from the manufacturing to increase the share of electric
sector. Another demand driver vehicles to 30 per cent by 2030, Reduce dependence on oil
is the government’s impetus to there will be significant demand for imports
provide 100 per cent electricity to the battery market.29
everyone by 202224, supported by • India’s import dependency of
The sector will further get a boost crude oil was 82.59 per cent
various progressive measures to
from India’s focus on establishing during FY19 and India’s oil
increase power generation capacity
itself as a global manufacturing demand is estimated to grow at
and improve distribution.
hub. To address increasing a CAGR of 4 per cent during
India will surpass China as the demand, foreign participation is 2016–2030 as compared to the
world’s largest energy growth likely to increase across generation global average of 1 per cent;
market by mid-2020s.25 To fulfil and transmission assets, this is likely to increase the oil
dependence.
growing demand and reduce equipment supply and technology
overdependence on fossil fuels, partnerships, and nuclear and clean • The government’s current
especially crude oil, India plans to coal technologies. steps such as piped gas supply,
increase renewable capacity to promoting the use of CNG
175GW by FY22 and 275GW by and increasing the share of
KPMG’s views renewables in the energy mix
FY27 from the current 72 GW.26
needs to be further strengthened.
Within solar energy, the recent rent-
a-roof policy will aid the segment Structural and durable
to generate 40GW power through solution for bankruptcy
solar rooftops projects by 2022.27
Sustainability has become an
India is expected to attract • To address the losses situation
of power companies where 75 abiding theme in the Indian
investments worth INR11.5 trillion energy and resources sector. The
until 2022 across the thermal, power companies have a debt
of around INR2.2 lakh crore, country’s focus on transitioning
hydro, nuclear and renewable towards renewable energy, would
the government needs to look
segments.28 To achieve the targets, beyond the UDAY scheme for have a significant impact to the
development and investment more structured and long-term quality of lives for Indians. It is
across areas such as smart grids, solutions. therefore critical to have an agile
solar panels, efficient distribution electricity system to balance
• State governments need to
and the adoption of emerging the power demand and supply
enforce strict measures to curb
technologies such as AI, IoT, big equation. At the same time,
thefts, improve collections and
data and machine learning is likely reduce ground-level corruption. efforts should be made towards
to gain traction. reforming the thermal power
generation and distribution, to
Sustainable energy
24. 100% electrification by 2022 possible on back of solar manage seasons when wind and
mini grids, Capital Business, 14 May 2019
• Managing an orderly transition hydropower generation dips.
25. India to be world’s largest energy growth market by
mid-2020s, Business Standard, 15 February 2019 towards a sustainable energy
Anish De
26. Power sector finally looking up, rapid demand growth sector is the way forward.
spells an opportunity, The Economic Times, 5 January Partner and National Head -
2019 • Will require major structural Energy and Natural Resources,
27. Serious Policy Push Needed to Get India’s Rooftop
reforms, rewriting of contracts KPMG in India
Solar Market to the Next Level, Mercom India, 8 May
2019 and overhaul of energy markets,
28. Power sector finally looking up, rapid demand growth including the fuel markets.
spells an opportunity, The Economic Times, 5 January
2019
29. Government finally wakes up: Sets a realistic goal of
30% electric vehicles by 2030 from existing 100%
target, Financial Express, 8 March 2018
28
Tourism
India is one of the largest tourism Additionally, there are plans in place KPMG’s views
markets in the world, with 10.56 to use Yoga as a tool to promote
million foreign tourist arrivals in tourism by expanding yoga health Village-based tourism model
2018. The number is expected to hubs. The medical tourism segment
rise to 30.5 million by 2028.30 The is also gaining traction in India, • The village-based tourism
tourism industry that created 14.62 and it is expected to touch USD9 model can boost tourism by
million jobs in the past four years billion by 202033, driven by low-cost USD25 billion, creating 100,000
was estimated at USD91.3 billion in healthcare services. To further village-level entrepreneurs in
the process; initiatives need to
2017 and is expected to double by support this, the government
be taken by state governments
2027.31 has recently launched a medical and collaborate with social
visa category to simplify the visa organisations to identify
Various initiatives have been
application process. development issues; also, public
taken during the last few years to
promote tourism, including Atithi Tourism offers various benefits, and private firms should plan,
build and modernise heritage
Devo Bhava, Incredible India 2.0 helping earn foreign exchange,
sites and monuments in villages.
and Swadesh Darshan. develop infrastructure and
small businesses and generate
In the coming years, the Encourage travel and tourism start-ups
employment. Besides, a positive
government will identify sites of
experience for foreign tourists • Technology start-ups are key
cultural and natural importance and
helps to enhance India’s image growth drivers shaping the
will focus on their comprehensive
as a culturally rich, geographically tourism sector; various
development, including developing international and domestic
diverse and thriving economy.
transport, hotels, restaurants, firms are introducing innovative
entertainment around the sites. services and products for
The government has committed personalised experiences; given
to improving the facilities to an The Indian tourism sector has the growth potential, huge tie-up
international standard in all the been witnessing steady growth, opportunities exist for global
37 UNESCO-designated heritage especially from domestic travel. firms as technology partners.
sites in India32 while developing To foster the next phase of Region-based customised
infrastructure around these sites growth for the sector and to boost tourism plan and outreach
so that the local economies can international traffic, we must
flourish. look at improving infrastructure • Indian states should be tagged to
countries or regions where they
These initiatives present a and safety across the nation.
should lead tourism promotion,
significant opportunity for the Additionally, engaging with start-
including supporting policymaking
private sector and international ups can help bring in innovative and encouraging region-specific
players to collaborate with solutions for personalised exports.
the government to identify experiences for travellers.
development issues as well as plan, Jaideep Ghosh
build and modernise heritage sites. Partner and Leader,
Leisure and Sports,
KPMG in India
30. Indian Tourism and Hospitality Industry Analysis, Indian 32. India gets its 37th WORLD UNESCO World Heritage
Brand Equity Foundation, April 2019 Site, PIB, 30 June 2018
31. India-U.S. partnership, Road to prosperity, KPMG, 33. India wants to make medical tourism a $9 billion
January 2019 industry by 2020, CNN, 15 February 2019
30
Develop tourism-trails by linking

locations with common themes
• Encourage private sector
participation through the
government’s Swadesh
Darshan Scheme i.e. integrated
development of theme based
tourist circuits such as eco-
tourism, coastal tourism, winter
tourism, wildlife tourism, desert
tourism and religious and
spiritual/yoga tourism. This
will require the government
to maintain heritage sites and
build required infrastructure to
facilitate a smooth and
memorable experience for
tourists.
Financial services
Robust economic growth and an sector and plans to increase the
increase in disposable incomes FDI to 100 per cent in the insurance
Liquidity for NBFCs
have led to the growth of the broking segment is expected to
financial services segment in India. further attract global players to • RBI, over the last few months,
The total lending and deposits enter the Indian market.37 incentivised banks to lend
increased at a CAGR of 11 per cent to NBFCs and HFCs through
The increase in digitisation,
and 12 per cent, respectively, for measures such as credit
technology adoption and surge enhancements to NBFCs/HFCs,
FY07–18.34
in mobile banking provide reducing statutory liquidity
Over the last five years, the opportunities for global and Indian ratio (SLR), risk-weighted bank
government launched various fintech companies with expertise in lending and increasing banks’
schemes to enhance financial new age technologies such as ML, exposure to single NBFCs;
inclusion, resulting in an 80 per cent AI and cloud-based technologies as however, the government needs
banked population. However, there financial services firms now focus to focus more on providing
still remains a 190 million unbanked on enhancing customer experience, higher financing access to
population35; therefore, the current providing customised offerings and smaller NBFCs.
schemes need further impetus. streamlining their operations.
The government identified
infrastructure development as a KPMG’s views
key theme for economic growth The momentum of financial sector
while encouraging private sector Continue to incubate reforms needs to be sustained
participation, thereby boosting the fintech ecosystem to unlock the full potential of the
credit requirement. Additionally, Indian economy. While managing
• Several financial institutions
the government plans to provide the current stress in the system,
are collaborating with start-ups
USD14 billion credit to MSMEs efforts should be made towards
across areas such as open
under its Credit Guarantee Scheme banking, payments, lending structural changes which can
by 2024.36 and wealth management; this benefit the country in the long-
emphasises the importance of term. Investments in financial
On the other hand, the mutual fund a robust start-up ecosystem, awareness and technology
industry and insurance industry and hence, it is imperative adoption, along with policy
have also shown considerable to provide funding support, changes would help the financial
growth in recent years. industry collaborations, regulatory system match the pace
incubation centres and of the financial market growth.
Increasing awareness along with
innovation zones.
the growth in the young middle Gayathri Parthasarthy
class population could attract Partner and National Head –
global insurance and mutual fund Financial Services,
companies to enter the Indian KPMG in India
market. Also, a favourable policy
environment such as an increase in
the FDI limit to 49 per cent from the
earlier 26 per cent in the insurance
34. Banking Sector in India, India Brand Equity Foundation, 36. BJP manifesto highlights: The 75 promises for India,
April 2019 The Economic Times, 8 April 2019
35. At 190 mn, India has second largest unbanked 37. Govt mulls 100% FDI in insurance broking; insurers’
population: World Bank, Business-Standard, 11 June 19 cap to stay at 49%, October 2018
32
03
Trade
Global trade is facing a headwind, India’s import-export dynamics04

growing by around 4 per cent in
2018, down from 5.25 per cent 489 491
466 470
in 2017, owing to trade tariffs, 450 448
reciprocal measures resulting 370 381 384

154 58 40 6 212 48 141
in trade wars, slower economic

growth, and policy normalisation 306 300 314 310 304 297
across developed countries.01 India
44 37 19 16 16 13 11 140
262 276
250
too, witnessed a slowdown in its
exports during this period. Mineral fuels and oils
FY 19 (Apr-Feb)
FY 11
FY 18
FY 16
FY 17
FY 12
FY 13
FY 14
FY 15
Gems and jewellery
The trade deficit in recent times
Nuclear reactors, boilers, machinery
has been a cause of concern for Imports Exports and mechanical appliances
the government — the deficit Vehicles and parts and accessories
has expanded to USD15.33 Organic Chemicals
billion in April 2019 as compared Pharmaceutical products
to USD13.72 billion in April 2018 Electrical machinery, equipments and parts
and USD10.89 billion in March Others
2019.02 Overall, despite exports
and imports growing at the same
rate of 9 per cent, the country’s
Further, a recently announced diversify its trade partner portfolio.
trade deficit reached a record high
agri-export policy is estimated to For instance, India is in discussions
of USD176 billion in 2018–19.03
increase agriculture exports to with Africa to create a free trade
Buoyancy in global trade has been
USD60 billion in the next five years agreement.07 To further underline
the primary driver behind India’s
and USD100 billion in the next the importance of expanding the
export performance, much more
10 years.05 To achieve this target, trade relations, the Prime Minister
than other factors such as currency
India is preparing a strategic road of India had invited the leaders of
movements, or an increase in the
map to promote five categories i.e. BIMSTEC nations for his swearing-
country’s export competitiveness.
plantation crops, meat, fisheries, in ceremony in 2019. Similarly, last
However, India could benefit agriculture and horticulture.06 year, leaders from ASEAN were
from the ongoing trade wars. The government is also working invited for the Republic Day parade.
Recently, India’s exports to China towards an incentive package for
Subsequently, with the focussed
have increased for products on labour intensive sectors such as
region-based and product-based
which China has imposed tariffs leather.
approach, India is seriously
on the U.S. Additionally, many
On account of trading partners, 40 looking to reduce its trade deficit
multinational firms are looking to
per cent of India’s current exports and benefit from supply chain
shift their capacities away from
are to China/Hong Kong, the U.S., efficiencies. For instance, India
China and India is the frontrunner.
UAE, the U.K. and Singapore. collaborates with West Asia for
India’s emergence as a global
Going forward, the government food products, while diamonds
manufacturing hub will further
plans to expand its trade relations with Russia.08
bolster its position. This will likely
with emerging economies such as
impact the outward shipments
Africa, Latin America and ASEAN to
positively.
The current trade in India is mainly
driven by mineral fuels and oils,
gems & jewellery, machinery,
vehicles, organic chemicals and
pharmaceutical products. However,
going forward, the government
plans to promote service exports,
01. Economic Buzz: World Economic Growth Likely To Be 06. India’s exports performance ‘extremely good’, but
and has approved an action plan Around 3.75% In 2019, JM Financial, 19 February 2019 I’m not fully satisfied: Suresh Prabhu, Livemint, 26
for 12 champion services sectors, 02. Trade Deficit widens to $15.33 billion in April, The December 2018
including IT, tourism, hospitality, Economic Times, 16 May 2019 07. India’s partnership with Africa is free of conditionalities,
The Economic Times, 29 May 2019
03. India’s trade deficit reaches a record high of $176
transport and logistics while billion in 2018-19, Business Standard, 15 April 2019 08. India’s strategy is to increase exports for higher market
establishing an INR50 billion 04. Department of Commerce, Accessed on 28 May 2019 share, The Economic Times, 25 February 2019
dedicated fund. 05. India’s exports performance ‘extremely good’, but

I’m not fully satisfied: Suresh Prabhu, Livemint, 26
December 2018
36
On the policies front, the

KPMG’s views
government has recently taken
measures such as setting up trade
promotion bodies in 15 countries09
Provide greater and more strategic market access to balance
and recapitalisation of Export-
out trade issues
Import Bank of India10.
With India’s dedicated efforts on • There is a need to push the Indo-Pacific agenda and play a leading role
building bilateral or multilateral in regional associations such as BIMSTEC, where the trade potential is
expected to be as high as USD250 billion, compared to the current trade
relationships, organising
of USD40 billion; greater access to this market becomes even more
customised outreach, and policies/
crucial in the backdrop of growing protectionism in export destinations
initiatives, the country stands to such as the U.S. and EU.
benefit significantly from outward
shipments and FDI inflow, which is • To neutralise the recent announcement of GSP termination, India needs to
expected to reach USD100 billion by identify additional sectors/products, where it can provide greater market
access to the U.S. without large-scale negative impact on domestic
2020.11
employment levels; sectors such as electrical machinery and equipment,
From an import standpoint, U.S. aircraft, spacecraft and parts, defence equipment, and education could be
sanctions on Iran could potentially some of such sectors.
boost oil prices and increase
inflation. India should have a clear
strategy to line up alternate sources Expedite the overall infrastructural development agenda to
to make up for the likely shortfall in drive greater connectivity
supplies so that it does not create a
• Investing in connectivity projects with ASEAN countries will be crucial;
major negative impact on its already
additional focus towards improving infrastructure and digital connectivity
high import bill.
in Africa through the Asia Africa Growth Corridor will help India get
The combination of external factors, access to new markets and substantiate its role in international
i.e., the rapidly evolving global and development.
regional geopolitical landscape • The government should define a clear policy for promoting land banks as
as well as trade wars and internal a viable financing mechanism to aid infrastructure projects.
challenges such as industry
complexities ensuing trade-related
issues have necessitated the need
for India to take a more holistic Leverage technology to build manufacturing excellence for
approach to push its international driving export competitiveness
trade agenda.
• India needs to shift from labour-intensive to capital- and technology-
intensive exports.
• This necessitates the need to focus on upskilling and re-skilling the
workforce through partnerships with government, industry and academia.
09. Commerce Ministry to set up trade promotion bodies

in 15 countries, PIB, 19 December 2018
10. Cabinet approves recapitalisation of Export-Import
Bank of India, PIB, 16 January 2019
11. Suresh Prabhu confident of meeting $100-billion FDI
target by 2020, The Economic Times, 9 March 2019
Industry expectations
With a decisive mandate, the manufacturing units to acquire land should continue to support by
expectations from the government and gain scale. Similarly, labour law addressing tax and compliance
are also high. The industry is reforms can enhance the overall concerns, providing funding and
pinning hopes on integrated productivity and competitiveness increasing collaboration with foreign
business approval processes, land of Indian manufacturing. This players. With an increasing share of
and labour reforms, up-skilling and becomes even more important FDI in the services sector, start-ups
employment, tax friendly laws and when many firms are looking to and MSMEs will play a critical role.
process simplification. shift their capacities away from Hence, a simplified and transparent
China. regulatory landscape and approval
Higher emphasis is expected
process should be facilitated.
on the government’s idea of On the other hand, to support the
‘minimum government, maximum dynamic nature of the economy, The government is also expected
governance’. The need of the businesses and technologies to reduce corporate tax, which was
hour is consolidated ministries across industries, human capital earlier done for small companies
for smoother policymaking and will be the driving force of growth. only. This can further provide
investments. For instance, within Hence, the government’s ‘Skill impetus to foreign firms looking to
the power and energy sector, there India’ programme must be invest and add capacities in India.
are different ministries for coal, further expanded to facilitate
Overall, with a stable government
natural gas and renewables. A academic-industry collaboration
at the helm, India is expected to
consolidated ministry of energy and for developing enhanced skills and
accelerate its journey to realise its
environment is likely to be more training modules based on industry
full economic potential.
effective. The consolidation can requirements. This can be further
also serve the purpose of having developed by formalising it under
an integrated data centre, which the corporate social responsibility
will help in making evidence-based (CSR) rules. Also, given that
policies and decisions. private education institutions are
typically less inclined towards
However, industry leaders also
post-graduation programmes other
need to change their approach
than management and engineering
towards data-driven decision-
due to commercial considerations,
making. For instance, 74 per cent
mandating and incentivising the
CEOs in India override data-driven
programmes where there is paucity
insights because they found
of talent can help bridge the current
those to be contrary to their own
skill gap.
experience or intuition.1
Consequently, the start-up
Further, for Indian manufacturing to
ecosystem and MSMEs in
take off smoothly, the government
the country will get access to
has to revise arcane land and labour
the required talent. To further
laws. Land reforms can help Indian
accelerate growth, the government
01. Agile or irrelevant – Redefining resilience - India CEO

Outlook 2019, KPMG, Accessed on 12 July 2019)
38
Conclusion
A strong foundation has been laid Therefore, digitally connecting usher the country in a new world
for India over the years enabling it rural India will be of paramount of unprecedented economic and
to strengthen its position as a global importance as a 10 per cent strategic possibilities and help
powerhouse. Therefore, despite increase in broadband penetration achieve its USD5 trillion aspiration.
global uncertainties, the outlook for in the country could lead to 1 per This will further get bolstered by
India looks positive, mainly owing cent increase in the GDP.1 closer collaboration between small
to the continuity of the political and medium enterprises, and
On the international trade front, the
scenario in the country. entrepreneurs beyond boundaries.
ongoing trade tensions present an
The outcome of reforms is opportunity for India to reduce its India is headed in the right direction
getting more pronounced and key trade deficit. To capitalise on this, toward realising its true potential.
economic parameters are likely to the government plans to support However, for its economy to truly
reflect positive changes over time. MSMEs with a target of 50 per cent progress and evolve, a collaborative,
This will largely depend on the contribution to exports from the flourishing and congruent
development across key sectors current 40 per cent. Additionally, ecosystem and framework has to
such as healthcare, education, a focus on 12 services sectors, be built as well as maintained to
agriculture and infrastructure. The including IT, tourism, hospitality, usher the country into a world of
continuity of policy can provide a transport and logistics, along with numerous opportunities.
thrust to these sectors, thereby the agriculture sector, is likely to
Evidently, 62 per cent of Indian
strengthening the ecosystem lead the way for India’s export
CEOs intend to increase investment
and creating a healthy investment outlook. However, higher impetus
in disruption detection and
environment. has to be placed on the quality
innovation processes.2
of Indian exports and create a
Consequently, there needs to be a
mechanism to standardise regional
focussed effort by the government
benchmarks.
to create jobs. Moreover, up-skilling
and re-skilling the workforce will be Furthermore, India’s increasing
extremely vital due to the dynamic focus on bilateral and multilateral
nature of industries and changing relations, not just across trade
technological landscape. but on R&D, technology and
skill development is expected to
01. Broadband For All, 4 Mn Jobs By 2022: Industry

Welcomes National Digital Communications Policy
2018, Inc 42, 28 September 2018
02. Agile or irrelevant – Redefining resilience - India CEO
Outlook 2019, KPMG, Accessed on 12 July 2019
IN OUR ABILITY TO TRIUMPH OVER
ANYTHING IN OUR SPIRIT OF
UNDYING ENTHUSIASM OUR DRIVE
TO ACHIEVE THE EXTRAORDINARY
UNMOVED BY FEAR OR CONSTRAINT
WE’RE DRIVEN BY JOSH AND IT
SHOWS
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. THIS ADVERTISEMENT FEATURES KPMG INDIA EMPLOYEES
Acknowledgements
We are sincerely grateful to the following people for extending their support to
prepare this report.
Nilaya Verma
Pooja Ahluwalia
Anupriya Rajput
Shveta Pednekar
Sharon D’silva
KPMG in India’s contact:
Nilaya Varma
Partner and Leader
Markets Enablement
T: +91 124 669 1000
E: nilaya@kpmg.com
home.kpmg/in
Follow us on:
home.kpmg/in/socialmedia
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we
endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will
continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the
particular situation.
© 2019 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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India, Redefining Its Growth Path 2019

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India:

Global manufacturing hub

Financial • Continue to incubate

services • Liquidity for NBFCs

The path for India to become a USD5 trillion economy

Arun M. Kumar Akhil Bansal

Union Budget 2019-20

India — A USD5 trillion economy by 202508,09,10,11,12,13,14,15,16,17,18

USD1 USD2 USD3 USD5 USD10

2008 2016 2020P 2025P 2035P

USD1.4 trillion USD1 trillion USD4 trillion

Enter top 50 114 million

175GW of Double national 100 new

Urbanisation and infrastructure push

Global manufacturing hub

Aggressively upgrade Build an enabling policy to

Promotion of the start-up

To promote the MSME sector,

Taxation Organise the MSME sector

The tax changes introduced in the

The government, therefore, India has to balance its economic,

• India faces an acute shortage

Home care to drive growth

• The home healthcare market in

Digital healthcare solutions

• Owing to low accessibility of

• Focus on preparing a road

• Industry needs to be at the

• Incubation centres need to

Power and energy

Develop tourism-trails by linking

Global trade is facing a headwind, India’s import-export dynamics04

reciprocal measures resulting 370 381 384

in trade wars, slower economic

dedicated fund. 05. India’s exports performance ‘extremely good’, but

On the policies front, the

09. Commerce Ministry to set up trade promotion bodies

01. Agile or irrelevant – Redefining resilience - India CEO

01. Broadband For All, 4 Mn Jobs By 2022: Industry

This document is meant for e-communication only. (020_THL0819_SP)

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