INDIA:

Quest
for
INDIAN
ECONOMY
AND TRENDS

Economic Superpower

Satish Kumar Chauh

13D105
Sem - VI 1

INDEX

INDIAN ECONOMY AND TRENDS

Strengths
Trends
Reforms
Outlook

STRENGTH

LARGE & SKILLED LABOUR FORCE SUPPORTS

INDIAN ECONOMY
AND
TRENDS
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

Working
age
population*
expected to increase from 58 per
cent in 2001 to 64 per cent by
2021
The average age predicted to be
29 years in 2020, lower than
China and the US

Skilled labour force

The NSDC
initiative

High
competency

Expanding
workforce

of

Second
largest
Englishspeaking population in the world
Home to educational institutes
of global repute IITs and IIMs
Low
average
salary
USD5,00010,000 p.a.

Large &
Skilled
Labour
Force
Age
demographics

Second largest number

engineers and scientists

of

Expected to be home to 25 per

cent of the worlds 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 2015-16
Source: *Working age refers to age group of 18-65

CHEAP AND SKILLED LABOUR MAKES INDIA MOST

INDIAN
ECONOMY
AND TRENDS
FAVOURED
DESTINATION
FOR OUTSOURCING
India
India has
has more
more than
than 20
20 CMM
CMM
(Capability
(Capability Maturity
Maturity Model)
Model) level
level
55 companies
companies
Indian
Indian BPOs
BPOs handle
handle 56
56 per
per cent
cent of
of
the
worlds
business
process
the worlds business process
outsourcing
outsourcing

Indian
Indian outsourcing
outsourcing market
market
expected
expected to
to grow
grow to
to USD50
USD50 billion
billion
by
by 2020
2020 from
from its
its current
current worth
worth of
of
USD20.8
billion
USD20.8 billion

Policy push

Seeding stage

1980s
Airline
companies,
such
as,
British
Airways set up back
offices in India

1990s
Liberalisation
in
1991
GE sets up office in
India
industries
Private
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
Service sector
sector constitutes
constitutes
~60
~60 per
per cent
cent of
of Indian
Indian
GDP
GDP

SPENDING BY MIDDLE CLASS POPULATION

INDIAN ECONOMY
ANDGROWTH
TRENDS
DRIVING
Spending by global middle class
USD21.
3 trillion
0%

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

11%
23%
India

38%

Europe

29%
20%

19%

19%

4%
13%
18%
26%
17%
10%
7%

7%

4%
1%
2009

4%
1%
2020

Asia Pacific
(excluding
China & India)
China

18%

6%
4%
1%
2030

India has a very dynamic consumer market driven largely

by the huge middle class population

North America
Cenrtal &
South America

Rising per capita consumption and population will further

boost the aggregate consumption
By 2020, India projected to be the worlds third largest
middle class consumer market behind China and the US
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

Middle East &

North Africa

The consumer service industry is emerging as a sunrise

industry and attracting investments

Sub-Saharan
Africa

The e-commerce sector is one of the sectors which has

witnessed large investments

Source: The Emerging Middle Class in Developing Countries, Homi Kharas, OECD

DIVERSIFIED ECONOMY PROVIDING VARIOUS

INDIAN ECONOMY AND TRENDS
INVESTMENT OPPORTUNITIES
Sector-wise GDP share in 2014-15 ( per cent of GDP)
Mining &
quarrying

Electricity, gas
&

Construction

water supply

Community, social &

personal services

2% 2%
9%
31%
15%
17%

Manufacturing

Trade, hotels, transport

& communication

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

24%
Financing, insurance, Real
Estate & Business services

Key snapshots of some sectors

Hyundai
Hyundai and
and Honda
Honda export
export
cars
cars from
from India
India to
to
European
European and
and other
other Asian
Asian
countries
countries

Since
Since the
the liberalisation
liberalisation in
in
the
the telecom
telecom sector,
sector, the
the
sector
sector witnessed
witnessed huge
huge
investments
investments

Indian
Indian textile
textile exports
exports in
in 2015
2015
are
are estimated
estimated to
to be
be around
around
USD40
USD40 billion,
billion, with
with garments
garments
accounting
accounting for
for 40
40 per
per cent
cent

All
All major
major auto
auto companies
companies
have
their
factories
have their factories in
in India
India

The
The telecom
telecom sector
sector
attracted
attracted USD1.3
USD1.3 billion
billion
foreign
investment
foreign investment in
in
2014-15
2014-15

India
India overtook
overtook Germany
Germany
and
and Italy
Italy to
to become
become the
the
second
largest
exporter
second largest exporter of
of
textiles
textiles in
in 2015
2015

Indian
Indian e-commerce
e-commerce
industry
has
industry has grown
grown from
from
USD11
billion
USD11 billion in
in 2014
2014 to
to
USD20
USD20 billion
billion in
in 2015
2015
Indian
Indian pharmaceuticals
pharmaceuticals
industry
industry expected
expected to
to
expand
at
a
expand at a CAGR
CAGR of
of 23.9
23.9
per
per cent
cent to
to USD55
USD55 billion
billion
by
by 2020
2020
Source: Planning Commission

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 worlds 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 worlds 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 Indias ranking
Rise in investment interests from global companies is a sign of improvement in the economy and the process

INDIAN ECONOMY
AND TRENDS
SPIRIT OF ENTREPRENEURSHIP
The year 2015 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 2015 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 2015
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 247 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

INDIAN
ECONOMY AND
TRENDS
RISING INVESTMENTS
IN THE
INDIAN MARKET

Flipkart
Flipkart raised
raised USD1.7
USD1.7 billion
billion in
in 2014
2014
The
company
was
valued
at
USD11
billion
The company was valued at USD11 billion after
after
the
recent
money
raising
the recent money raising
In
In two
two rounds
rounds of
of funding
funding in
in 2014,
2014, Flipkart
Flipkart raised
raised
around
USD2
billion
around USD2 billion

SoftBank
SoftBank pumped
pumped in
in USD627
USD627 million
million in
in eecommerce
company
Snapdeal
commerce company Snapdeal
Invested
Invested USD210
USD210 million
million in
in taxi
taxi service
service provider
provider
Ola
Cabs
Ola Cabs

Amazon
Amazon has
has pledged
pledged USD2
USD2 billion
billion of
of investment
investment
in
in its
its Indian
Indian arm
arm

Venture
Venture capital
capital investors
investors are
are expected
expected to
to raise
raise
USD2
billion
in
2015
USD2 billion in 2015
The
The company
company was
was valued
valued at
at USD11
USD11 billion
billion after
after
the
recent
money
raising
the recent money raising

LL Capital
Capital Asia,
Asia, the
the private
private equity
equity fund
fund
sponsored
sponsored by
by the
the LVMH
LVMH Group,
Group, will
will make
make aa couple
couple
of
investments
worth
around
USD50
million
of investments worth around USD50 million each
each
in
in India
India this
this year
year

Ratan
Ratan Tata
Tata invested
invested in
in Snapdeal,
Snapdeal, Bluestone
Bluestone and
and
UrbanLadder.com
in
2014,
signalling
huge
UrbanLadder.com in 2014, signalling huge
potential
potential in
in the
the Indian
Indian online
online retail
retail industry
industry

Source: News articles

10

TRENDS

TRENDS

INDIA ON GROWTH PATH SUPPORTED BY KEY

INDIAN ECONOMY AND TRENDS
REFORMS AND HIGHER INVESTMENTS

According to the World Bank, Indian economy is estimated to expand 6.4 per cent
during FY16
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 FY1217
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 doubledigit growth in the last 78 years

Source: Monthly Economic Report, Ministry of Finance, Aranca Research; PE: preliminary estimates ;1R: First Revision; AE: Advanced Estimates

12

RISING INVESTMENTS
IN INFRASTRUCTURE
AND
INDIAN
ECONOMY AND
TRENDS
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 201217

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 FY201217

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 201722 in the thermal
power sector
The government aims to have 20,000 MW of solar power by 2022

Source: Make in India, Aranca Research

13

REFORMS

INDIAN
ECONOMY
INCLUSIVE
INDIA AND
THETRENDS
GROWTH AGENDA
Central governments expenditure on social services (% of total expenditure)
200910

201011

201112

201213

2013-14
RE

2014-15
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%

12.5%

11.9%

12.6%

11.4%

11.9%

12.8%

4.6%

3.8%

3.5%

2.9%

2.5%

2.6%

Item
1. Social service

Total
2. Rural development

3. PMGSY
0.9%
1.1%
1.9%
1.5%
0.7%
1.3%
India has renewed its growth strategies to target rising inequality as well as overall well-being of Indians
4. Social services, rural development, and
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
PMGSY
18.0%
16.8%
18.0%
15.8%
15.1%
16.7%
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
Source: Economic Survey 2013-14 *RE: Revised Estimates BE: Budget Estimates

15

PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) A

INDIAN ECONOMY AND TRENDS
SCHEME FOR FINANCIAL INCLUSION
PRADHAN MANTRI JAN DHAN YOJANA (PMJDY) A SCHEME FOR FINANCIAL
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, 2016, 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

16

MAKE IN INDIA SHAPING UP INDIAN

INDIAN ECONOMY AND TRENDS
MANUFACTURING (1/2)
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
Main objectives
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

Source: Make in India Website, News Articles, Aranca Research

17

MAKE
IN INDIA AND
SHAPING
UP INDIAN
INDIAN
ECONOMY
TRENDS
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

18

BIG
TICKET
REFORMSAND
BY THE
NEW GOVERNMENT
INDIAN
ECONOMY
TRENDS
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 countrys 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

19

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
PM Narendra
Narendra Modi
Modi visits
visits
Japan
and
US
in
first
Japan and US in first few
few
months
months of
of his
his tenure
tenure as
as
PM
PM

Had
Had heads
heads of
of all
all big
big
economies
visiting
India
economies visiting India
in
in 2014
2014 -- US,
US, China,
China,
Russia,
Russia, UK
UK

Indias
Indias Prime
Prime Minister
Minister
visits
visits Australia
Australia after
after 28
28
years
years

US
US President
President Barack
Barack
Obama
to
be
the
Obama to be the Chief
Chief
Guest
Guest for
for the
the Republic
Republic
Day
Day

Prime Minister visited the neighbouring countries like Myanmar, Bhutan, Nepal that were taken for granted for many years
Indian
Indian Prime
Prime Minister
Minister
visits
Nepal
after
visits Nepal after 17
17
years
years

Visited
Visited all
all the
the SAARC
SAARC
countries
and
proposed
countries and proposed
strengthening
strengthening of
of SAARC
SAARC

India
India proposed
proposed
investments
investments in
in Myanmar
Myanmar
and
and Bhutan
Bhutan to
to help
help them
them
in
in their
their development
development path
path

BRICS
BRICS bank
bank to
to be
be set
set up,
up,
with
an
Indian
to
head
with an Indian to head itit
for
for the
the first
first five
five years
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
US has
has shown
shown its
its
willingness
willingness to
to invest
invest US
US
41
41 billion
billion in
in India
India in
in next
next
3-4
3-4 years
years

Japan
Japan and
and China
China have
have
pledged
to
invest
pledged to invest USD30
USD30
and
and 25
25 billion
billion in
in India,
India,
respectively
respectively

Indian
Indian companies
companies ink
ink
USD2.1
USD2.1 trillion
trillion pact
pact to
to
buy
buy diamonds
diamonds from
from
Russia
Russia

India
India and
and Australia
Australia sign
sign
civil
nuclear
civil nuclear deal
deal an
an
important
important measure
measure for
for
Indias
Indias energy
energy prospects
prospects
Source: News articles, Aranca Research

20

OUTLOOK

INDIAN
AND
TRENDS
INDIA ECONOMY
TO LEAD THE
GLOBAL
GROWTH WAGON
Improving Business
sentiments
One stop online portal for
business clearances

Pace of reforms
9

Increasing investment in
start-ups
shows
the
confidence in economy

Inflation dropping below the

RBIs 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
November14

Ordinance on Insurance

Reduction in repo rate by

25 bps to boost economic
activities

Macro-economic factors

Deregulating diesel prices

GDP growth rate( per cent)

Ordinances on mines
Make in India campaign
Labor reforms

Increasing FDI caps

4
3

Increased Investment

USD1 trillion investment in

infra

0
-1
2013

2014
India

China

Japan

Brazil

2015
United States

2016
Eurozone

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

22

THANK YOU!