More Related Content Similar to Opportunities and Challenges in the Indian market (20) More from Partha Bose (6) Opportunities and Challenges in the Indian market3. Did You Know…
India is World’s largest producer of Milk,
Spices, Pulses, Chillies and Lemon
World’s largest consumer of
Gold, Tea and Sugar
India is the largest producer of movies in the world
with over 950 movies a year, followed by USA
India produces 3M+ graduates, with 440K of
technical graduates and 300K of post graduates
per annum
Indian Railways is the world's largest
commercial or utility employer with
more than 1.6 M employees
With 150,000 post offices, India has the
largest postal network in the world
3
70% percent of India's population, 56% of income,
64% of expenditure and 33% of savings come from
rural India
India is the world’s fastest growing mobile market added about 190M new mobile connections taking
the total to 545M (51% YoY growth) in 2009
© 2011 IBM Corporation
4. India is on its way to become the second largest economy by 2050
1
Booming Consumption &
Demographic Dividend#
3
Broad based growth across
Industries and Geos
• Household income to rise 3x
by 2025
• Middle class to increase from
50 M to 600 M by 2025
• $500B to be invested on building
infrastructure
• Median age of 25.3 yrs
• 65% of working population
2
• All major industries growing at
>10% (2010-13)
• 60 cities witnessing substantial
growth
Vibrant corporate sector
with global ambitions
Strong political commitment
& action
4
• Entrepreneur at the center of India
growth model
• Despite 7 Prime Ministers and 6
governments since 1991, reform
agenda continues
• 79 “Billion-$” companies as of ‘09
• Target of $200B from exports to 26
new markets in 2yrs
• 75 cross-border deals in ’09
• 47 Indian companies in Forbes
2000
India at a glance*
Real GDP
Population
FDI
Services as % GDP
GDP per capita
4
#Base data as of 2005
* Data as of 2009. Source: EIU
$1.1T
1.2 B
$18.2B
55%
$1,100
© 2011 IBM Corporation
5. 1
Robust consumption growth, favorable demographics, growth of
household incomes and the changing shape of the income pyramid
will drive future growth
Favorable demographics
Increased urbanization
Percentage of rural vs. urban population in India
Median age of population of major countries 2009
44.2
Rural
40.2
38.4
36.7
34.1
Urban
Japan
UK
Russia
USA
China
Brazil
26%
28%
30%
31%
36%
74%
28.6
72%
70%
69%
64%
1990
2000
2009
2015E
2025E
25.3
India
3x increase in consumption by 2025
Rise of middle class
Share of population in each income bracket
Share of average household consumption
755
928
1,107
1,278
1,429
6%
2%
4%
1%
2%
9%
18%
19%
41%
Annual household
income
>$25K
$10K-25K
32% $5K-10K
43%
Middle Class
%, million of people
$1K
4%
3%1%
11%
$2K
$3K
$6K
7%
5%
2%
9%
6%
3%
13%
5%
12%
6%
36% $2K-5K
5%
42%
35%
22% <$2K
1995
2005
12%
56%
54%
1985
19%
2015E
2025E
5 Source: The rise of India’s consumer market, McKinsey 2007, CIA World Factbook
1995
2005
34%
2015E
9%
6%
Healthcare
Education
Communication
20%
17%
93%
80%
Discretionary
spending
Ave. Household
Income
%,, US Dollars
Transportation
11%
3%
10%
5%
Personal Pdcts
Household Pdcts
Housing
Apparel
25%
Food & beverage
2025E
© 2011 IBM Corporation
6. 2
The growth will also be enabled by the rising private sector with
world-class companies and global ambitions
Flurry of M&A Deals since 2007
Year
Deal Size
($B)
Deal Type
Steel
Jan 2007
12.2
Outbound
4
Telecom
Feb 2007
11.1
Inbound
13
Telecom
March 2010
10.7
Outbound
Metals
Feb 2007
6.0
Outbound
Pharma
June 2008
4.5
Outbound
32
E&U
Jan 2009
2.8
Outbound
1
4
6
Telecom
Nov 2008
2.7
Inbound
Banking
Feb 2008
2.4
Domestic
Automotive
March 2008
2.3
Outbound
E&U
May 2007
1.7
Outbound
Number of billion dollar companies
(by revenue)
79
147% increase
>$10 B
$5-10 B
$2-5 B
$1-2 B
Industry
Acquirer
Target
Company
27
35
21
1998
2008-09
Number of cross border deals increased from 26 in 2002 to 75 in 2009
6
Source: McKinsey Report, Rediff India, “Largest M&A deals in India”, LiveMint, “Outbound deals to boost M&A in 2010”, Reserve bank of India, “Indian Investment Abroad”
© 2011 IBM Corporation
7. 2
India has a healthy base of globally competitive companies across
sectors
Global
Rank*
Company
Industry
Sales
($B)
Global
Rank*
Company
Industry
Sales
($B)
1
Reliance Industries
Oil & Gas Operations
34.03
21
987
ITC
Food, Drink & Tobacco
3.65
2
150
State Bank of India Group
Banking
22.63
22
989
Wipro
Software & Services
4.98
3
152
Oil & Natural Gas
Oil & Gas Operations
24.04
23
997
Bank of India
Banking
3.62
4
207
Indian Oil
Oil & Gas Operations
51.66
24
1002
Hindustan Petroleum
Oil & Gas Operations
5
317
NTPC
Utilities
9.63
25
1037
GAIL (India)
Utilities
4.69
6
329
Icici Bank
Banking
15.06
26
1057
NMDC
Materials
1.42
7
463
Tata Steel
Materials
32.77
27
1059
Canara Bank
Banking
4.19
8
508
Bharti Airtel
Telecom Services
6.73
28
1085
Power Grid of India
Utilities
1.15
9
582
Steel Authority of India
Materials
9.82
29
1157
Tata Motors
Capital Goods
8.54
10
689
Reliance Communications
Telecom Services
4.26
30
1184
Bank of Baroda
Banking
3.56
11
773
Larsen & Toubro
Capital Goods
7.3
31
1324
Power Finance
Business Services
1.26
12
795
Bharat Petroleum
Oil & Gas Operations
27.71
32
1332
Axis Bank
Banking
2.2
13
796
Bharat Heavy Electricals
Capital Goods
4.81
33
1350
Union Bank of India
Banking
2.66
14
808
HDFC-Housing Devel
Banking
2.21
34
1380
Grasim Industries
Construction
4.23
15
834
Tata Consultancy Svcs
Software & Services
5.7
35
1462
Indian Overseas Bank
Banking
2.25
16
848
Hindalco Industries
Materials
14.87
36
1522
Sun Pharma
Industries
Drugs & Biotechn
0.82
17
864
HDFC Bank
Banking
3.09
37
1529
Mahindra & Mahindra
Consumer Durables
5.92
18
883
DLF
Diversified Financials
3.5
38
1629
Allahabad Bank
Banking
1.81
19
891
Infosys Technologies
Software & Services
4.16
39
1659
Indian Bank
Banking
1.56
20
7
121
946
Punjab National Bank
Banking
4.15
40
1663
Syndicate Bank
Banking
2.2
*Source: Forbes- global 2000 Note: List is indicative and not exhaustive, March 2009
25.43
© 2011 IBM Corporation
8. 3
Growth is well distributed across the country - 60 cities in India are
witnessing substantial growth
Tier 1 “Megacities” (3 cities)
Population > 10 M
80,000+ households with income > $11K
0.5-1 million SMBs per city
Delhi
Mumbai
Kolkata
36 cities with
population >1M
Tier 2 “Climbers” (12 cities)
Ahmedabad Hyderabad
Bangalore
Jaipur
Chandigarh
Ludhiana
Population > 1 M
10,000-80,000 households with income >$11K
Coimbatore
Pune
0.1-0.5 M SMBs per city
Chennai
Surat
Ernakulam
(in 2005)
Vadodara
Tier 3 “Mainstream” (45 cities)
Agra
Cuttack
Kanpur
Patiala
Ahmednagar
Dehradun
Kolhapur
Patna
1,000-10,000 households with income >$11K
Alwar
Durg & Raipur Madurai
Rajkot
10K-50K SMBs per city
Ambala
Ghaziabad
Meerut
Ranchi & JSR
Amritsar
Guwahati
Moradabad
Salem
Aurangabad
Hisar
Muzafarnagar Trivandrum
Bellary
Hubli
Mysore
Trichy
Bhavnagar
Indore
Nagpur
Valsad
Bhopal
Jalandhar
Nasik
Varanasi
Noida
Vijaywada
Bhubhaneshwar Jalgaon
Bokaro
Kanchepuram Panipat
Vishakhapatnam
Other smaller towns and Rural areas
8
Source: McKinsey, 2009
*Note: Cities market in Blue have population more than a million
© 2011 IBM Corporation
9. 3
Clusters of competency exists across these cities
Emerging Clusters
Key Industries
1
9
Source: McKinsey, IBM Analysis 2009
Iron & Steel, Power
Southern Jharkhand – Jamshedpur, Ranchi
Iron & Steel, Auto & Ancilliaries, Power
10
Delhi, Noida, Gurgaon (NCR)
Infrastructure, Power, C&P, Multipurpose SEZ, IT/ITeS
11
Kutch-Saurashtra (Jamnagar-Rajkot)
Chemicals, Textiles, Petrochem, SEZ, Power, Food
Cochin-Trivandrum
Chemicals SEZ, IT/ITeS, Smart City
Coimbatore-Tirupur
Textiles, Iron & Steel, IT/ ITeS
Bhopal-Indore-Nagpur
Industrial Products, Electrical Machinery, Thermal Power, ITITeS, Health, Manufacturing-SEZ, Education, Cargo Hub
Chandigarh-Ludhiana-Amritsar-Jalandhar
Textiles, Industrial Products, Auto Ancilliaries, IT/ ITeS
Guwahati, Digboi, Numaligarh
Oil & Gas
17
Kanpur, Lucknow, Agra, Allahabad
Industrial Products, Leather, Tourism, Electrical, Auto
18
Mangalore-Kudremukh-Udupi
Chemicals, Iron & Steel, Mining, Education, IT/ITeS
19
Hyderabad-Secundarabad
IT/ITeS, Pharma
Jaipur –Ajmer-Bhilwara
Tourism, Textiles, Banking, IT/ ITeS, Power, Industrial
Products
21
13
Raipur-Bilaspur
20
12
Chemicals SEZ, IT/ITeS
16
Major clusters of
manufacturing
activity are emerging
in various Tier II cities
Haldia-Kolkata
15
4
Iron & Steel, Refinery, IT/ ITeS
14
3
Paradip-Bhubaneshwar
13
5
Iron & Steel, Chemicals, Pharma SEZ, Power
12
2
Vishakapatnam
9
6
Chemicals, Auto-SEZ, Textiles, Iron & Steel, Power, IT/
ITeS, Industrial Products
8
8
Chennai-Sriperambadur, KancheepuramTrichy
7
11
IT/ ITeS, Electrical Machinery, Textile, Chemicals,
Electronics
6
9
Bangalore-Mysore
5
7
Banking, C&P, Iron & Steel, Power, Auto, Auto Components,
Food Industry, IT/ITeS
4
14
Mumbai-Pune-Nasik
3
1
Chemicals, Textile, Gems-SEZ, IT/ITeS
2
10
Ahmedabad-Baroda-Surat
Goa
Tourism, Pharma & Biotech–SEZ
© 2011 IBM Corporation
10. Over the years, despite changing government, the economic
reform process continues
4
Birth of a democracy
1950 - 1975
Starting of the Green Revolution
Focus on 5 year plans and
social empowerment
Focus on macro stability
Dominant politiacl party: Indian
National Congress(INC)
1959-. India become the
largest manufacturer of
2/3wheelers in the world.
1952: First general
elections
1965 - Green
revolution started
Socialist regime
1975 - 1990
License Raj creates a closed
economy
Focus on growth, technology
adoption and macro stability
Monopoly of PSUs
Dominant political parties: INC,
Janata dal
1976: Compulsory
birth control
introduced.
1977: Coca-cola and
IBM leave India
Key Indices
GDP growth rate
GDP Mix (%)
(Agri.: Industry: Services)
Life Expectancy
10
Liberalization
IT/ITeS industry starts to take
shape
Six-fold increase in Sensex*
Focus on Privatization,
disinvestment and PPP
Dominant political parties: INC,
Bharatiya Janta Party (BJP),
Communist Party of India
1991 - Economic
liberalization
program initiated
2000 - Birth of its
billionth citizen.
The Growth Years
2000 - 2009
Growth led by service sector and IT
exports with policies aimed at
reducing deficits and debts
The emergence of Indian MNCs
Setting up of SEZs, telecom
infrastructure etc.
Coalition governments with
emergence of regional parties
2008 - Indo-US 2009 – ISRO
civilian nuclear launches first
agreement
moon probe
1995 : Internet in
2001 - mobile
India
telephone service FDI
norms revised
2009* - India
surpasses China as
largest exporter of
cars
3.5%*
4.3%
5.7%
7.2%
47 : 20 : 33*
31: 26 : 43
27: 26 : 47
19: 28 : 53
1,004M (1.8%)
1,166M (1.5%)
Population (Growth) 613M (2.2%*)
Literacy#
Liberalization
1990 - 2000
47.2%*
53y*
838M (2.1%)
49.3%
60y
57.2%
61.0%
63y
65y
Note: Average for the period used except for population, literacy & life expectancy which are at the end of the period; # Adult literacy rate (% of pop over 15);
Life expectancy is in years Source: EIU, World Bank, * Estimates for lack of granular data
© 2011 IBM Corporation
11. 4
The country has built strong economic fundamentals, that also
helped it remain resilient to the financial crisis
Decreasing debt as a % of GDP
Recovering GDP Growth (%)
9.1
6.1
5.5
6.8
7.7
8.0
8.2
59
59
8.0
61
61
61
’10E
‘11E
’12E
59
55
53
’90
’07
’08
’09
’10E
‘11E
’12E
’13E
Sufficient Foreign Exchange Reserves ($ B)
274
254
275
317
350
385
’07
’08
’09
’13E
Appreciating Exchange Rate (USD/INR)
437
41
44
’07
’08
48
46
45
44
43
’10E
‘11E
’12E
’13E
18
5
’90
’90
’07
’08
’09
’10E
‘11E
’12E
’13E
’90
Increasing GDP per Capita ($)
1051
1100
1100
1270
’07
’08
’09
’10E
1460
1670
’09
Reducing Consumer* Inflation (%)
1910
9.0
6.4
8.3
10.9
10.7
5.7
5.2
5.2
‘11E
’12E
’13E
322
’90
‘11E
’12E
’13E
’90
’07
’08
’09
’10E
Note:CPI – Consumer price Index; Year 2010-13 are forecasted values
11 Source: The Economist Intelligence Unit (EIU)
© 2011 IBM Corporation
12. 4
India showed resilience during the current crisis, remaining
largely unscathed
Strong Banking fundamentals
- The RBI (Reserve Bank of India) maintained a tight leash on treasury operations
- Low exposure to overseas foreign assets
- Banks not allowed to borrow >200% of NW
Measured liberalization of the economy
- PSUs (Public Sector Units) showed strong growth
- Few sectors have 100% FDI
- Banking and Insurance; 76% and 26% FDI allowed
Growth driven by domestic consumption with lower dependency on global trade
- Private consumption in India drives > 50% of India’s GDP
- India relies on external trade for about 20% of its GDP
Government moves helped demand and fuel economic expansion
- Monetary measures exercised by government which pushed for lower interest rates, expanded
credit, and reduced excise duties, all of which have boosted growth
- Strong foreign exchange reserves maintained by the government; in excess of $250B throughout
12
Source: Reserve Bank of India, Live Mint- “To hell and Back” Sep 2009, Investing Contrarian
© 2011 IBM Corporation
13. Some hard challenges remain and the government is taking actions to
address majority of these
Illiteracy & Education Quality
Governance, delivery system &
implementation
Low adult literacy rates of 61%
Low public spending on education (3.2% of GDP)
Centralized provision of public services
Low number of universities (480 in 2009 -10) - bill
has been passed allowing more foreign universities
Low transparency
Quality of education an issue
Poor Infrastructure
Historically, low investments on infrastructure
(only3-4% of GDP till 2008)
India’s
Challenges
Regulatory constraints regarding private-sector
participation
Challenges in executing to
planned outlays
Power outages remains an
issue
Fiscal Policy
Huge government deficit (5.5% of GDP)
Low govt. expenditures on health (1% of
GDP) and education (3.2% of GDP)
Environmental Quality
Low public awareness about environmental sustainability
Regulatory framework needs overhaul
13
Source: Nasscom, McKinsey, Fitch, EAC, Govt. of India
© 2011 IBM Corporation
14. MNCs leverage India’s potential multi-dimensionally
India market driving revenue growth and innovation for Philips
Aiming for 50% revenue contribution from emerging markets (India and China) by 2015
The Philips Innovation Campus in Bangalore also delivers 20% of embedded software globally
Philips has launched India specific products, from smokeless stoves for rural India to lighting and
kitchen appliances for the Indian consumer
India becomes a major production hub for Hyundai Small Cars
Hyundai re-engineered its supply chain for low cost small cars. Hyundai India a global manufacturing
hub and base of small cars
Hyundai buys 90% of auto components locally from Indian suppliers. The company is among the top
3 car manufacturers in the country
Penetrating domestic markets and leveraging India for exporting to other countries
Tailored products to suit Indian consumers (almonds preferred in India as compared to peanuts)
Innovative distribution strategy and advertisements that appeal to Indian consumers
Exports finished goods and innovative concepts to its other branches around the world
India to become a major export hub for LG worldwide
India is a key element of LG's global game plan - by 2015, India will be the 2 nd largest contributor to
LG’s revenue after the US
LG India is looking at exporting products to mature markets eventually growing its exports from 15% of
turnover to 30% by 2012
14 Source: McKInsey Quarterly, “The Right Passage to India”, 2005, India Briefing
© 2011 IBM Corporation
15. Successful companies in India have tailored their business model and
product offering to meet local requirements
Localizing the offerings
Menu customised to
Indian taste – McAloo
Tikki, Paneer Salsa
Wrap, and Chicken
Maharaja Mac
Advertisements with Indian flavor
Priced to suit Indian pockets with
burger price as low as 50 cents
Nokia developed its first
‘made-in-India’ handset
1100 model - in India
with India-specific
features like torch &
anti-slip exterior and at
low cost ($50 in 2003)
With more than 200 M units sold
worldwide, Nokia 1100 is world’s best
selling handset and went on to
become a success in India and other
developing countries as well
15 Source: IBM Analysis, 2009
Innovating on Supply chain
First company to
successfully introduce
and run regional
distribution model in India
Distributors worked directly with the
company thus ensuring better market
penetration and increased volume
Foray into retail
segment challenged
due to competition’s
strong brand equity and
wider distribution
network
Introduced e-choupal system - a twoway sourcing and distribution system
for farmers in remote villages, as well
as its cigarette and paan network
Altering price-value equations
Responding to local
competition, launched a
new brand Wheel at 30%
lower prices - accounts for
45% of its detergent
business in India
Through project Shakti, women
(~45,000) in self-help groups across
India became direct-to-consumer sales
distributors for HUL products
Tata Nano priced at
$2,000 - equivalent to
the price of a DVD
player option in a luxury
car. 200,000 vehicles
booked in first year
alone
Targeted at two wheeler buyers (~7M)
and second hand small car buyers
All major auto maker have now
announced plans to enter the
© 2011 IBM Corporation