Industry Synopsis

Automobile

The "Automobile Industry" is one of the key drivers of economic growth of the nation. Indian Automobile industry is one of the largest as well as the fastest growing amongst the automobile industries in the world. Today, almost every global auto major has set up facilities in the country to take the advantage of the low cost and skilled labors.

The automobiles sector is divided into four segments -

  • Two-wheelers (mopeds, scooters, motorcycles, electric two-wheelers)
  • passenger vehicles (passenger cars, utility vehicles, multi-purpose vehicles)
  • commercial vehicles (light and medium-heavy vehicles)
  • Three wheelers (passenger carriers and good carriers)

The auto sector reported a robust growth rate of 26 percent in the last two years (2010-2012). The sector has shown a moderate growth of 12 percent in 2012. From a long-term perspective, rising incomes, improved affordability and untapped markets present promising opportunities for automobile manufactures in India. The Government recognizes the impact of the sector on the nation’s economy, and consequently, the Automotive Mission Plan 2016 launched by it seeks to grow the industry to a size of US $145bn by 2016 and make it contribute 10 percent to the nation’s GDP.

India is emerging as a strong automotive R&D hub with foreign players like Hyundai, Suzuki, General Motors setting up base in India. This move is further enhanced by Government’s support towards setting up centres for development and innovation.

According to the Confederation of Indian Industry, auto sector currently employs 78.78 Lac people. 58% of these are in the passenger car segment. However, there is an increasing demand for skilled professionals in the domain of effective service delivery, spares management and support functions. ITIs and Polytechnics provide 5.3 lacs graduates every year, but there is an urgent need for updating courses to keep up with changing trends in technology, manufacturing, and processes.

BFSI

The present size of Indian Banking Industry is Rs 64 trillion (US$ 1.17 trillion) & is governed by the Banking Regulation Act of India, (1949). As of now, public sector banks account for 70 per cent of the Indian banking assets.

According to an IBA-FICCI-BCG report, Indian banking industry will be the third largest in the world by 2025. According to the report, its assets size poised to touch USD 28,500 billion by the turn of the 2025. Currently 41% of the adult population in India don’t have bank account. This combined with the opportunity of expansion of base in “rural market” has a huge potential for growth in banking sector.

The Indian life insurance industry is estimated to grow at a compounded annual growth rate (CAGR) of 14.1 per cent, and reach US$ 111.9 billion in 2015 from US$ 66.5 billion in 2011. (report by BRIC data) This would make India the third-largest market for life insurance in the world by 2015. India’s present position is at number 12, among top global markets for life insurance. Number of policies sold is expected to increase to 85.21 million in 2015 from 53.23 million in 2010.

In the non-life insurance industry, health insurance is the second largest segment in India; with players in both the public and private sectors playing an active role. The Indian health insurance industry has seen major growth in the past 6 years. The Indian health insurance industry is expected to grow at a CAGR of 37.2% from FY’2011 - FY’2016; with surging medical costs, rising population and increased awareness among consumers in the country.

The banking and insurance industry is challenged by competitive pressures, changes in customer loyalty, stringent regulatory environment and entry of new players, all of which are pressuring the organizations to adopt new business models, streamline operations and improve processes.

Chemical & Petrochemical

The chemical industry contributes significantly to the economic stability and development of a country. It provides key linkages to several industries like engineering, automotive, consumer durables, food processing, etc. The global chemicals industry sales was of approximately USD 2.5 trillion in 2010. The Indian chemical sector was estimated to stand at US $91 billion in 2011 and has the potential to reach US $134 billion by 2015.

Growth potential of the chemical sector is immense & It is one of the fastest growing domestic sector. A recent report by global consultancy firm McKinsey suggests that around $350bn of the estimated $1tn world specialty chemical industry would move eastwards to Asia to meet manufacturing costs and downstream demand.

The Indian petrochemical industry is presently valued at $40bn and is expected to grow at 12-15% annually over the next five years. According to a report from the Associated Chambers of Commerce and Industry of India (Assocham), the sector currently employs more than 10 lakh people.

Construction & Real Estate

Next to Agriculture, Real Estate is the second largest employer in the economy. It comprises of four sub-sectors – housing, retail, hospitality, and commercial. Responsible for 7-8 percent of global cement production, India is the second largest cement market in the world, and also an exporter to 30 countries.

With a market size of USD 66.8bn, the Real Estate sector contributes around 5 percent to the nation’s GDP. The demand for residential space is projected to grow sharply at a CAGR of 19 percent in 2010-2014. Currently, there are few big players like DLF and Unitech that drive this segment.

Commercial space demand is arising from metro cities like Delhi-NCR, Mumbai and Bengaluru, and will see an upward trend at a CAGR of 7 percent between 2010 and 2014. Few large players dominate the market and hold pan-India presence. However, the overall business in this domain is witnessing a shift from sales to lease and maintenance.

CMA predicts that cement production of one million tonnes will generate downstream employment for 50,000 people. According to the 'Real Estate and Construction Professionals in India by 2020' study by Royal Institute of Chartered Surveyors (RICS) in November 2011, there is a demand-supply gap in the order of 82-86 percent in the number of professionals and the skill sets for the core, namely civil engineering, architecture and planning. The study indicates a supply-demand gap of 44 million core professionals by 2020.

Consumer Durables

The consumer durables market is divided into two segments – consumer electronics, also known as the brown goods (television, digital camera, audio-video systems, computers, electronic accessories, etc) and consumer appliances or the white goods (air conditioners, refrigerators, microwave ovens, other household appliances, etc.).

The industry size for consumer durables stands at Rs 350 billion (as on March 2012). The sector rides and relies on the state of the country’s economy. With household incomes in top 20 cities across India expected to grow at 10 percent annually over the next eight years, the Indian consumer is likely to spend more on both utility and luxury consumer goods.

Estimates provided by Corporate Catalyst India (CCI) indicate that the consumer durables market is expected to double at 14.8 per cent CAGR to USD12.5 billion in FY15 from USD6.3 billion in FY10. Further, demand from rural and semi-urban areas is expected to expand at a CAGR of 25 per cent to USD6.4 billion in FY15 from USD2.1 billion in FY10.

All major companies in this sector have elaborate expansion plans for the near future. Japan’s Panasonic plans to invest USD208 million by 2014 by setting up manufacturing units and an advanced R&D centre. Samsung plans to invest USD94 million to expand capacity by 2012. Market leader LG has outlined around USD292 million for enhancing production capacity and strengthening its LG brand shop network by 2012.

Engineering

The engineering sector in India provides direct and indirect employment to over 4 million skilled and non-skilled workers (according to Corporate Catalyst India; June 2011). Though a diverse industry, it can be divided into two broad categories:

  • Heavy engineering segment – This accounts for bulk of all engineering goods production in India and is responsible for producing high-value products like heavy electrical, heavy engineering and machine tools, and automotive parts. Due to the high capital investment it requires, this segment is dominated by bigger, organized market players. It provides products to almost every major end-user industry.
  • Light engineering segment – This segment is responsible for medium to low technology products like casting and forging components, medical and surgical equipments, and industrial fasteners (high tensile and mild tensile steel fasteners). Light engineering goods find their use in the heavy engineering industry.

An opportunity in form of Engineering Services Outsourcing (ESO) presents itself before this sector. It is estimated that the global engineering services spend will reach US $850 bn by 2020, with 180 billion expected to flow through the outsourcing channel into vendor countries. India can bring home about 25–30 per cent of this outsourced revenue.

Government's focus on infrastructure development is expected to keep demand for the engineering sector high. Continued growth of manufacturing sector and favourable regulatory policies would further propel the sector’s growth. Engineering Services Outsourcing (ESO) services from India has the potential to exceed US $40bn by 2020, and with the right support from Government and other stakeholders, can impact the engineering sector as a whole.

FMCG

Fast Moving Consumer Goods (FMCG) goods are all consumable items (other than groceries/pulses) that one needs to buy at regular intervals. These are items which are used daily, and so have a quick rate of consumption, and a high return. FMCG can broadly be categorized into three segments which are:

  • Household items as soaps, detergents, household accessories, etc,
  • Personal care items as shampoos, toothpaste, shaving products, etc and finally
  • Food and Beverages as snacks, processed foods, tea, coffee, edible oils, soft drinks etc.

The burgeoning middle class Indian population, as well as the rural sector, present a huge potential for this sector. The FMCG sector in India is at present, the fourth largest sector with a total market size in excess of USD 13 billion as of 2012. This sector is expected to grow to a USD 33 billion industry by 2015 and to a whooping USD 100 billion by the year 2025. This sector is characterized by strong MNC presence and a well established distribution network. In India the easy availability of raw materials as well as cheap labour makes it an ideal destination for this sector. There is also intense competition between the organised and unorganised segments and the fight to keep operational costs low.

Healthcare & Pharma

Healthcare and pharmaceuticals are two distinct industries, but they are interdependent and are subject to similar trends. Both benefit from ageing populations and major medical discoveries which fuel scientific advances, and offer new benefits to consumers.

Pharma and healthcare are expected to witness robust hiring and salary hikes in the range of 10-15% in year 2012. India will see the largest number of merger and acquisitions (M&As) in the pharmaceutical and healthcare sector in the coming years, according to consulting firm Grant Thornton.

Healthcare

The Indian healthcare industry is showing a strong upward trajectory and the sector is expected to touch US $ 238.76 billion by 2020. The healthcare industry in India has witnessed a remarkable growth of 12% per year, since 2008. This growth has been fuelled by increase in the average life expectancy and average income levels, as well as rising awareness about health insurance among consumers.

India provides the best-in-class treatment at affordable prices as compared to countries like USA and UK. According to industry estimates, the market size of medical tourism in India is growing at over 25 per cent annually at over US$ 2.5 billion.

Pharmaceuticals

The Indian pharmaceutical market is expected to touch US $ 74 billion in sales by 2020 from US $ 11 billion in 2012. The pharmaceutical market has grown at 15.7% during 2011, with major growth drivers being in the area of anti- diabetics, derma and vitamins.

India is fast becoming a global hub for all pharmaceutical manufacturing and research, and Indian generics today constitute nearly a fifth of global supplies. India tops the world in exporting generic medicines worth US $ 11 billion. Generics are expected to continue to dominate the market while patent-protected products are likely to constitute 10 per cent of the market till 2015, as per a McKinsey report.

The Indian pharma industry is expected to witness robust growth, with an increasing middle-class population, improvements in medical infrastructure and the establishment of IP rights. India has a vast pool of trained pharmaceutical scientists, doctors and researchers, so joint collaborative research for new drug discoveries along with joint intellectual property rights are new areas being pursued.

The need of skilled manpower in the pharmaceutical industry ranges widely from R&D, Quality Assurance (QA), Intellectual Property (IP), manufacturing to even sales and marketing. Pharmaceutical industry has the potential to attract talent even during global financial meltdown, as the industry is virtually recession proof. The Pharma sector is expected to add 273,500 jobs at the entry and junior levels, in the year 2012.

Biotechnology

Over 350 companies operate in the biotechnology sector in India, some of the major players being - Biocon, Serum Institute of India and Panacea Biotech.

The biotechnology industry which stood at US$ 4 billion in FY 2010-11, is expected to reach over US $ 11.6 billion by 2017, according to a report of Global Industry Analysts, Inc.

The biopharma industry, which constitutes 60 per cent of the biotech industry in India, was at US $ 2.3 billion in 2010- 11. Vaccines, insulin, erythropoietin and monoclonal antibodies have been the mainstay of the biopharma segment.

The largest revenue share of the biotechnology industry comes from exports, this reflects the continued focus of Indian biotech companies on international markets. Segments such as bio-pharma, bioinformatics and bio-services represent a substantial chunk of the export market. Bio-industrial and bio-agriculture generate the major share of revenues for the domestic market.

IT & ITES

Information Technology (IT) is defined as the design, development, implementation and management of computer- based information systems, particularly software applications and computer hardware. Today, it has grown to cover most aspects of computing and technology. The largest firms globally include IBM, HP, Dell and Microsoft.

The Information Technology-Enabled Services (ITES) industry provides services that are delivered over telecom or data network to a range of external business areas. Examples of such business process outsourcing (BPO) include customer service, web-content development, back office management and network consultancy etc.

Today IT and ITeS sectors lead the economic growth in terms of employment, export promotion, revenue generation and standards of living. As per NASSCOM estimates, IT/ITeS sector (excluding hardware) revenues are estimated at USD 87.6 billion in FY 2011-12; and the industry is expected to grow by 19 per cent during FY 2012-13. IT/ITeS industry has led India's economic growth and this sector's contribution to the national GDP has risen from 1.2 per cent in 1997-98 to an estimated 7.5 per cent in 2011-12.

The IT/ITeS sector has led to employment opportunities, both direct and indirect, of nearly 2.8 million and around 8.9 million respectively. This growth is expected to increase to more than 14 million (direct and indirect) by 2015 and to around 30 million by 2030. The market size of the industry is expected to rise to USD 225 billion by 2020 considering India's competitive position, growing demand for exports, Government policy support, and increasing global footprint.

As per the Economic Survey 2011-12, the IT/ITeS industries has added 7.96 lakh jobs in one year, in the period ending September 2011. According to NASSCOM, employee base in the rural areas is expected to increase by over 10 times by 2013-14, compared to 5000 in 2009-10. According to a customer poll conducted by Booz and Co, India is the most preferred destination for engineering offshoring, which are encouraging foreign companies to offshore complete product responsibility to Indian ITeS companies.

More recently, online retailing, cloud computing and e-commerce are leading to rapid growth in the IT industry. Online shopping is fast gaining popularity with the emergence of internet retailing and e-commerce. According to the Internet and Mobile Association of India (IAMAI) the number of Internet users in the country is more than 121 million, out of which 17 million are online shoppers. Increasing internet penetration and affordability for personal computers has led to this rapid numbers, and these are expected to triple by 2015.

Media & Advertising

The Media & Entertainment Industry in India is expected to reach Rs 1,457 billion by 2016 as per the FICCI-KPMG report. The industry achieved a growth of 12% in 2011 and is projected to grow at a CAGR of 15 percent over the next five years. The Indian Media & Entertainment (M&E) sector is growing rapidly, especially with new age technology and the rapid rise of digital media. Digital media includes cable digitisation, wireless broadband, direct-to- home (DTH), digitisation of film distribution and internet usage.

The media industry can be categorized into the following categories;

  • Television :- Valued at Rs 329 billion (US$ 5.76 billion) in 2011, the television (TV) industry is expected to expand at a compounded annual growth rate (CAGR) of 17 per cent through 2011-16 to touch Rs 735 billion (US$ 13 billion), according to report by FICCI-KPMG.
  • Radio :- The radio industry with around 36 FM radio operators, is estimated at Rs 1,200 crore (US$ 210 million). The Government plans to increase number of private FM radio channels to around 839, from the present 245.
  • Print : - Print media is being driven mainly by growth in the regional markets, with an increasing literacy rate in this market. An estimated growth of 10 per cent is anticipated till 2015.
  • Films
  • Music

Television remains the dominant medium in this sector. However new media as animation & VFX, digital advertising, and gaming - are fast grabbing a larger share of the market. Advertising spends across media amounted to Rs 300 billion in 2011, which was 41 percent of the M&E industry’s revenues. Advertising revenues saw a growth of 13 percent in 2011, versus 17 percent witnessed in 2010.

Flourishing DTH, cable digitisation and launch of new digital platforms for content delivery have completely changed the face of media distribution over the last 5 years. These media along with other online platforms have made digital advertising a major player in the market. Digital advertising is expected to grow at a CAGR of 30 per cent during 2011-16.

Retail

Retail industry can be classified into two broad categories – organized retail and unorganized retail.

  • Organised retail - Those traders/retailers who are licensed for trading activities and registered to pay taxes to the government.
  • Unorganised retail - It consists of unauthorized small shops - conventional Kirana shops, general stores, corner shops among various other small retail outlets - but remain to be the radiating force of Indian retail industry.

Retail industry, being the fifth largest in the world, is one of the sunrise sectors with huge growth potential and accounts for 14-15% of the country’s GDP. Comprising of organized and unorganized sectors, Indian retail industry is one of the fastest growing industries in India, especially over the last few years.

According to the Global Retail Development Index 2012, India ranks fifth among the top 30 emerging markets for retail. The recent announcement by the Indian government with Foreign Direct Investment (FDI) in retail, especially allowing 100% FDI in single brands and multi-brand FDI has created positive sentiments in the retail sector.

Telecom

The progress and the changes in telecom have been astronomical, with new and cheaper technologies taking birth almost each year. With an addition of 18 million subscribers every month and contributing to nearly 2% of the Indian GDP, Indian telecom industry is considered to be the largest telecom markets of the world. Driven by wireless communication, the telecommunications industry is recognized as a key to the rapid growth and modernization of the economy and an important tool for socio-economic development for a nation.

India has the world's second largest mobile phone users with over 903 million as of January 2012. It has the world's third largest Internet users with over 121 million as of December 2011. India has become the world's most competitive and one of the fastest growing telecom markets.

According to analysts, the sector would generate employment opportunities for about 10 million people – direct employment for 2.8 million people and indirect employment for about 7 million. The total revenue of the Indian telecom sector grew by 7% to 283,207crore (US$ 56. 5 billion) in 2011, while revenues from telecom equipment segment stood at 117,039 crore (US$ 23. 35 billion). The expected revenue from VAS will be around US$ 4.0 billion by 2015.