Focus on India (IBR 2013)
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Focus on India (IBR 2013)

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Short report assessing the outlook for the Indian economy over the next 12 months.

Short report assessing the outlook for the Indian economy over the next 12 months.

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Focus on India (IBR 2013) Focus on India (IBR 2013) Presentation Transcript

  • Focus on: India Grant Thornton International Business Report 2013
  • 1% Focus on: India 6.1% global accountancy +growth 120+growth + 6.1%10.4% in 2012 10.4% in 2012 10.4% gi globally globally globally 120 120 organisations Audit, Tax and Audit, Tax Audit, Tax and as recognised and oviding services forand Advisory and Advisory and Advisory 5.8% in ssetAustralia managers, by Wall Street nd administrators, 6 remains a key ets trade partner 6.1% $4.2bn $4.2bn Introduction 5.8% edge funds,$4.2bn 120 revenues 1.2 billion inhabitant revenues ecial purpose vehiclesrevenues 10.4% gro bal India is an emerging economy of more than 1.2 billion 6.1% it the and Advis nd mutual funds GDP OverUS$1.8trn,in globally in 2 120+ of people. In 2012, its was Ranked making than More than More More than Australia 10th largest in the world. the top 6 Audit, Tax and m One of the trade partner $4.2b 15,000 15,000 15,000 3.1% 1.9% 4.7% 11.9% 67.7% ast growth 4.5% in 2014 forecast growth in 2014 countries where our forecast growth in 2014 where our countriesWe are the fastest growing accounting network 5.2% professional work together professional work together 13.9% forecast growth in 2013 13.1% 63.8% 6.9% 4.7% forecast growth in 2013 4.5% 11.9% 67.7% 2012 11.9% forecast growth in 2014 2012 2012 60% 67.7% forecast growth in 2014 in major markets ces Economy Auditors worldwide countries where our remains a key top clients 3.3% 60% trn $1.8trn $1.8trn ‘large six’ my 400 of the One business of our member firms’ professional work together interviews worldwide asset managers, fund administrators, 400 business hedge funds, and mutual funds We are the fastest g accounting ne revenu worldwide $4.2bn 15,0 43% 70% gross domest revenues Audit expect to optimistic of businesses 2012 for economic increase outlook More than investment 15,000 by Wall Street More than world Above the 1.2 billion inhabitants and growing special purpose vehicles interviews Audit, Tax $1.8 and Advisory 400 Auditors business Auditors 2012 xpanded by countries whe professional work Drawing on data as the ‘large six’ sources such Combined Economist global Australia Unit (EIU), the International Monetary Fund Intelligence global accountancy revenues of remains a keythe Grant Thornton International Business (IMF) and organisations trade recognised $300m One of the of our member firms’ as partner this short report considers the outlook for Report (IBR), in financial services rs, by Wall Street for the economy, including the expectations ‘large six’ rs, s, global accountancy of 400 businesses interviewed in India, and more cles 1.2 billion inhabitants 1.2 over the past 12 months. growing and growing andbillion inhabitants and growing organisations than 12,500 globally, ds operate in financial services as recognised Over Providing services for 2012 We are the fas accounting professional work together 8.4% 8.4% interviews accounting network 6.9% 5.2% % countriesWe are the fastest growing where our 38% Auditors Over 60% 43% 70% gross 43% 70% gross domestic product product accountancydomestic product global top 400 BRIC average expect to optimistic clients expect to optimistic business by organisations increase operate in financial services increase outlook outlook of our member firms’ in 2012 Above the Economy as recognised 43% Talent 70% gross domestic produc dome ic product Above the top clients expanded by increase outlook shortage needs to create by Wall Street 38% 38% hampers 12 Talent India India of businesses % investment BRIC average needs to create 100 Over million jobs of businesses for economic for economic investment interviews of businesses $1.8tr $1 trn $1.8trn worldwide India expect to optimistic for economic 3.3% 1.2 1.2 billion inhabitants and growing inhabitants inhabitants growth 100 100 operate in financial services BRIC average investment Above the shortage hampers growth 38% needs to create million jobs in 2012 Talent shortage hampers growth BRIC average India needs to create 100 million jobs million jobs Focus on: India 2
  • Providing services for asset managers, Focus on: India fund administrators, hedge funds, organisation as recognise by Wall Stree special purpose vehicles and mutual funds Economy Economy expanded by The Indian economy grew by just 3.3% in 2012, the slowest pace in a decade and well below the previous norm of 9% in the years leading up to the global financial crisis. The USA and UAE buy 27% of India’s 13.9% exports. The economy continues to run a huge trade deficit with China which 13.1% accounts for 11.9% of imports but just 4.7% of exports, of which refined 4.7% petroleum oil63.8% and diamonds (16%) 4.5% (11%) are the major contributors. Key indicators • economic growth moderated to 4.4% in April-June, down from 4.8% in the previous three-month period and below consensus expectations • agriculture sector expansion of 2.7% due to a better monsoon and a sharp pickup in government spending (10.5% year on year) were the major growth drivers • however, output in both the mining and manufacturing sectors contracted year on year • Ranked in the consumer price measure of the top 6 $300m the top 6 asset managers, fund administrators, in major markets hedge funds, top client operate in financial servi US UAE Singapore China 67.7% Others 8.4% 13.1% 6.9% 4.7% 63.8% 11.9% 5.8% 8.4% 4.5% 67.7% 6.9% forecast growth in 2013 11.9% 6.1% forecast growth in 2014 Ranked in the Australia top 6 Import originations (2012) Australia remains a key trade partner 5.8% 5.8% revenues of $300m One of the 6.1% 6.1% One of the US UAE Saudi Arabia China Others forecast growth in 2013 forecast growth in 2013 remains a key hedge funds, by Wall Street special purpose trade partner mutual vehicles and funds forecast growth in 2014 forecast growth ‘large six’ in 2014 global accountancy ‘large six’ Source: Ranked in accountancy Indian Ministry of Commerce & Industry (2012) organisations global Australia Providing services the in organisations key for as recognised 6 remains managers, asset Ranked top as recognisedaadministrators, by Wall Street in major markets Australia Providing services for fund trade partner 2012 of our member firm in 2012 13.9% inflation ticked back up to 9.8% in major markets in September from 9.5% in August remains a key 2% 5.2% in major markets trade partner as retail prices for food and fuel 8.4% 13.9% continue to climb 5.2% 6.9% Combined global • the budget deficit in April-July 8.4% 13.1% 13.9% widened to Rs 3.4trn (US$60.1bn), Combined global 6.9% 11.9% or 62.8% of the full fiscal year target, 4.7% 13.1%5.1% 67.7% 63.8% and is now forecast to widen to 4.5% of GDP across the year, up from 4.9% in financial11.9% services 4.7% in 2012. 63.8% 2012 67.7% 4.5% in financial services revenues of 60% 5.2% 5.2% The rupee has fallen by approximately 25% against the US dollar since May this year, fuelling close to double-digit inflation and swelling the current account deficit. 3.3% Export destinations (2012) Over Focus on: India 3 1.2 billion inhab Over
  • 13.9% 13.1% pro $ 5.2% 8 8.4% re 6.9% 6 M 1 2012 2014 2015 2016 2017 Source: Economist inhabitants 1.2 billionIntelligence Unit (2013) and growing Consumer price inflation 120+ $1.8trn 120+ Real GDP growth 400 business interviews countries where our Audit, Tax 43% 70% gross domestic and countries where our product optimistic of businesses expect to Audit, and Advisory Tax and professional work together for economic increase outlook investment Above the 38% Talent 2013 BRIC average India and Advisory professional work together 10.4% 10.4 global 5.8% operate in financial services w forecast growth in 2013 top clients A 4 6.1% in 2012 an 11.9% remains a key 3.3% Au 67.7% Economy 2014 in Australia 4.7% p6 6.1% forecast growth in 2014 growth our member firms’ of expanded by 63.8% d in 5.8% 6.1% 60% forecast co forecast growth in 2014 4.5% Australia 67.7% remains a key trade partner ‘large six’ $1.8trn 11.9% Growth and inflation forecasts 10 1 forecast growth in 2014 One of the 5.8% 4.7% 1.2 billion inhabitants and growin 400 business $300m interviews 43% 70% gross domestic product of businesses optimistic expect to for economic investment increase outlook Above the BRIC average 38% needs to create India million jobs 100 revenues of One of the Talent growth shortage hampers in major of slower growth in both mature and trade partner investment, but the economy is expected to phasemarkets emerging economies. Despite this, Indian gather pace this year, with expansion of exporters are recovering their zeal, helped 5.8% forecast, picking up to 6.1% in 2014 by improving business and consumer and 6.7% in 2015. Whilst an improvement Combined global sentiment in the United States. Exports are on 2012, growth is forecast to remain well forecast to expand by 12.3% this year, below pre-crisis levels threatening job rising to 12.9% in 2014 although a further creation prospects for the millions of slowing of global growth is a significant young Indians entering the labour market. in downside risk. Reforms have been made to free up keyfinancial services 2012 sectors such as aviation and retail to foreign investment and the new global accountancy Companies Bill should increase organisations transparency. However, as recognised 2% more could be done to liberalise the Providing services for 5.2% asset managers, economy, from deregulation of protected 8.4% 8.4% by Wall Street 13.9% sectors and reforming labour laws, to fund administrators, forecast growth forecast growth hedge funds, breaking up state monopolies and 6.9% in 2013 6.9% special purpose vehicles 2013 in 13.1% investing in key transport, ICT and and mutual funds Over energy infrastructure. 11.9% ‘large six’ Australia The global economy is adjusting to the High inflation will continue to dampen the topmoney andremains newkey end of easy 6 has entered a a consumer spending and business forecast growth in 2013 6.1% 11.9% global accountancy Over organisations as recognised by Wall Street 60% of our member firms’ top clients operate in financial services Ranked in 5.8% 4.5% 13.1% The outlook for the Indian economy remains difficult. When working 4.7% for the IMF in 2005, the new head of the Reserve Bank of India, 67.7% 63.8% 4.5% Raghuram Rajun, warned of the looming danger of the global financial crisis. His fears were dismissed, but the hope is that he will prove as shrewd in the months to come as he battles the twin dangers of a sliding rupee and slower growth. Ranked in the top 6 in major markets Combined global revenues of 6.9% 2012 8.4% $300m 5.2% in financial services Providing services for asset managers, hedge funds, fund administrators, special purpose vehicles 13.9% and mutual funds in 2012 Economic outlook Economy expanded by 3.3% Focus on: India Focus on: India 4 glob We are th accoun We are acco
  • as Providing services for services in financial gnised India asset managers, Focus on: Street fund administrators, recognised One of the ‘large six’ by Wall Street 2012 global accountancy organisations hedge funds, as recognised special purpose vehicles services for Providing 1.2 billion asset managers, 1.2 billion Over by Wall Street and mutual funds inhabitants and growing fund administrators, Business growth and investment The tough economic outlook has undoubtedly dampened Indian business optimism over recent quarters and this has clear knock-on effects for growth: the more confident executives are in the economy, the more likely they are to invest in the growth of their operations. Indian business optimism has averaged net 70% over the past four quarters, well below pre-crisis levels (97% in 2007) and down even on the 2009 figure (83%). special purpose vehicles However, it remains well above the BRIC average (33%). Business leaders expect to increase investment in plant and machinery over the next 12 months which should add to the long-term potential of the Indian economy. 2013 average investment expectations stand at net 43%, above the BRIC average (38%) but still below pre-crisis levels (56%). Indian businesses are also bullish about the growth of their own operations. Over the past four quarters, net 73% of business leaders have indicated that they expect profits to rise. This is up from 72% in 2012 is and well above the BRIC average (58%). Over 60% 0% Economy $1.8trn 60% hedge funds, and mutual funds 400 business Net of businesses of ourpercentage12 months) expecting an increase member firms’ in profits (next interviews Net percentage of business leaders indicating optimism for their economy (next 12 months) mber firms’ 100% of businesses 80% 70% ncial services 60% 50% expect to optimistic for economic 3.3% 3.3% increase outlook 38% 40% 30% 2007 Talent India 2008 2009 2010 2011 2012 2013 shortage hampers Source: Grant Thornton IBR 2013 needs to create growth in 2012 in 2012 BRIC average 100 million jobs India BRIC of our member firms’ 90% $1 43% 70% 43% interviews 70% for econom gross expect to optimisti pect optimistic expect to of businesses of businesses operate in financial services operate in financial services investment Above the 100% 400 business interviews 400 business 43%Economy domestic product 70% gross top clients top clients lients expanded by by expanded 90% 1.2 billion inhab 80% 70% increase increase increase outlook for economic investment investment outlook Above the 60% Above 38% the 50% 40% Talent shortage hampers 30% 38% India average BRIC BRIC average needs to create Talent100 India growth 20% million jobs shortage India hampers BRIC 10% growth 2007 2008 2009 2010 2011 2012 2013 Source: Grant Thornton IBR 2013 needs to create 100 million jobs Focus on: India 5
  • Focus on: India Economy expanded by 3.3% of our member firms’ 43% 70% g optimistic top clients of businesses expect to for economic increase outlook operate in financial services investment Above the 38% Employment and the demographic transition India is expected to become the most populous country in the world by 2030, adding some 230m people of working age to the population. Rising rates of higher education mean not all of these people will need a job straight away but this may be mitigated partially by higher rates of women entering the workforce. in 2012 Either way, the economy will probably need to create 100m jobs over the next decade alone to satisfy these additional hands*. Leaving aside potential social unrest, the danger if these jobs are not created, is that India will lose the benefits of its demographic transition – a one-off boost to growth as the proportion of people of working age rises (and peaks) relative to the proportion of dependents (those too young or old to work). The UN estimates that India’s dependency ratio will bottom out in 2040, from which point the proportion of people of working age (15-64) will begin shrinking relative to the proportion of the population (0-14 and 65+) they have to provide for. Creating enough jobs for India’s new workers over this period will therefore decide the trajectory of India’s growth path. The hiring plans of Indian businesses are encouraging. Expectations fell sharply during the financial crisis, slipping to just 28% in 2009, but have since recovered. Across 2013, net 68% of companies have indicated that they expect to add to their workforces, up from 64% in 2012 and well above the BRIC average (31%). However, Indian businesses are generally unimpressed by the standard of applicants: 58% say a lack of skilled workers is hindering their expansion plans, quite some way above the BRIC average (40%). Population projections for India Talent 1990 41.4 shortage hampers growth 58.6 BRIC average India needs to create 100 million jobs 2010 35.2 64.8 2030 52 31.9 68.1 2050 32.3 67.7 Dependents (0-15 and 65+) Working age (16-65) Source: UN Population Division (2012) * The Economist - ‘Wasting time’; 11 May 2013 Focus on: India 6
  • Focus on: India Net percentage of business leaders expecting an increase (next 12 months) Inflation and other growth constraints Inflation remains a major concern. It not only eats into disposable income and so dampens consumer spending but it also dissuades saving meaning gold imports have soared, further widening the current account deficit. Compounding this, a sinking rupee increases import prices. Consumer prices rose by 9.8% in September, up from 9.5% in August and the Reserve Bank of India has raised interest rates to 7.75%. For businesses which import, higher inflation means higher input prices; selling prices must be raised to keep turning over a profit; and wages must be raised to keep workers happy and productive. If wages do not keep pace with prices, then demand is likely to fall, acting as a further brake on growth. In India, net 64% of business leaders indicated an intention to raise prices in 2013, well above the BRIC average (39%). And 30% expect to raise worker salaries above the prevailing rate of inflation, double the BRIC average. This suggests a real danger of a ‘wage-price spiral’ taking hold: a vicious cycle where salaries rise to meet price increases forcing businesses to raise prices further to maintain real profits and so on. The more positive news from the fall in the rupee is that exports become relatively cheaper. And Indian businesses appear prepared to take advantage: 37% expect to increase exports over the next 12 months, well above the BRIC average (24%). Aside from inflation, Indian businesses are also having to contend with a range of other growth impediments, from a shortage of finance (64%), a lack of skilled workers (58% - see previous page), regulations and red tape (57%), a lack of demand (53%) and poor quality infrastructure (47%). In all these areas, business leaders in India feel more constrained than BRIC peers. 64 39 37 30 24 15 Selling prices Staff real salaries India BRIC Exports Source: Grant Thornton IBR 2013 Net percentage of businesses citing issue as a constraint on growth (next 12 months) 64 58 Cost of finance 57 Lack of skilled workers 42 Bureaucracy 47 40 37 53 40 Lack of demand 26 ICT infrastructure 47 26 Transport infrastructure India BRIC Focus on: India 7
  • IBR 2013 methodology The Grant Thornton International Business Report (IBR) is a quarterly survey of approximately 3,300 senior executives in listed and privately-held businesses all over the world. Launched in 1992 in nine European countries, the report now interviews more than 12,500 business leaders in 45 economies on an annual basis, providing insights on the economic and commercial issues affecting companies globally. The data in this report are drawn from interviews with chief executive officers, managing directors, chairmen and other senior decision-makers from all industry sectors. Q3 data is drawn from 3,300 interviews (100 in India; 375 in the BRICs) conducted in September 2013. 2013 data is drawn from over 12,500 interviews (400 in India; 1,500 in the BRICs) conducted between November 2012 and September 2013. To find out more about IBR, please visit: www.internationalbusinessreport.com. Dominic King Grant Thornton International Ltd Global research manager T +44 (0)207 391 9537 E dominic.king@gti.gt.com Vidya Mohan Grant Thornton India LLP Vice president, Markets T +91 22 6626 2600  E vidya.mohan@in.gt.com  © 2013 Grant Thornton International Ltd. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton International Ltd (GTIL) and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions. www.gti.org CA1309-01