Download India has recently overtaken Japan in 2013 (GDP

INCREDIBLE INDIA:
A BILLION OPPORTUNITIES
by
Susmita G Thomas
Ambassador of India
Turkey
June 13, 2013
IMPORTANT PARAMETERS: INDIA’S
STORY
India Story
Turkey
Construction & Furniture
WHAT IS THE
INDIA STORY?
Even though the world has
just discovered it, the India
growth story is not new!
It is continuing for over 25 years
TODAY’S INDIA….IS AN EMERGING ECONOMIC POWERHOUSE
Straddles traditional Sea
routes through Indian
Ocean connecting Asia /
Europe / Middle East
Enjoys relatively high
cost arbitrage for
manufacturing &
services industries in
developed world
Fast -growing educated
motivated young population
(urban and rural) ; median age
27 yrs; consumption well
below optimum levels
India among Top 15
countries in terms of
GDP at constant prices
Third largest economy in the world
in terms of GDP at Purchasing
Power Parity (PPP) (After US &
China)
India has recently overtaken
Japan in 2013 (GDP – PPP)
Has huge manpower base (1.2 bn) ,
diversified natural resources &
relatively strong macro-economic
fundamentals
28 YEARS OF GROWTH
(%)
Average annual GDP growth
10
8.9
8
6.0
6
3.5
4
2
1.0
0
1900-1950
1950-1980
1980-2002
2002-2007
GDP
growth
forecast
in
2012-13
is 6.0%
& 201314 at
7.2%
POPULATION GROWTH IS SLOWING
(%)
2.5
2.2
2.1
2.0
1.8
1.5
1.5
1.0
1.0
0.5
0
1901-1950
1951-1980
1981-1990
1991-2000
2001-2010
Sources: 1900-1990: Angus Madison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)
POPULATION IS TURNING MIDDLE CLASS!
22%
(m)
32%
8%
400
368
300
200
220
100
0
65
1980
2000
Source: The Consuming Class, National Council of Applied Economic Research, 2002
2011
POVERTY IS CONSISTENTLY DECLINING
(%)
50
40
1% of India’s
population(10 million)
has been crossing
poverty line each year
for 25 years
46
30
26
20
16
10
0
1980
2000
2010
Equals ~ 250m
PER CAPITA INCOME HAS BEEN
CONSISTENTLY INCREASING!
US$ ppp
1,178
1980
3,650
Source: World Bank
2012
LITERACY IS RISING
(%)
100
80
80
65
52
60
40
17
20
0
1950
Source: Census of India (2001)
1990
2000
2010
WHERE DO WE STAND TODAY?
Growth fell to 6.7% in 08-09; 7% in 09-10, still 6% in 2012
GDP growth predicted at 6.9 to 7.2% in 2013-2014
Growth is still in positive integers
 Pain has been less than in China
 Competitive companies have recovered faster.
 Risk of protectionism has receded
 Recovery has been among the global front-runners
HUGE CHANGES HAVE TAKEN PLACE SINCE ECONOMIC
REFORMS IN 1991…
Consistent economic
growth of 8-9% in
recent years
• 8.5% in 2010-11 and 6.9% in 2011-12
• Growth likely to return to 9% by 2013-14
Strong Balance of
Payments
• Strong Balance of Payments leading to
steady accumulation of India’s foreign
exchange reserves $318.4 billion (Oct 2011)
Stable Foreign
Exchange Reserves
• Enhanced economic performance has been
major contributor towards increased Forex
reserves Offer adequate security against
currency crisis and monetary instability
INDIA CONTINUES ON THIS PATH OF DRAMATIC GROWTH …
AS A RESULT INDIA WILL
EMERGE AS A “TOP 4”
WORLD ECONOMIES BY
2025 (GDP US$ BN)
INDIA HAS UNPRECEDENTED RISE IN EXTERNAL TRADE ….
•
•
•
•
•
Strong domestic consumption linked with
buoyant international trade in goods &
services . (52 % growth 2011-12) @US$160
Bn exports
Indian products with cost advantage adds
an edge to Indian companies
Imports by India include petroleum
products, minerals machinery and
electronic goods
India ranks 21 in leading global exporters
(2009) & 14 among global importers
In commercial services trade India is at
12th rank in global exporters India
exported 87 bn $ of commercial services
in 2009
INDIA NOW IS AN ATTRACTIVE INVESTMENT DESTINATION…
•FDI inflow for the period April 2000- August 2011 reached $
219billion
•UNCTAD’s World Investment Prospects Survey 2010-12 ranks
India second most favored investment destination (after China,
Brazil, United States & Russian Federation)
•Singapore (9%), USA (7%), UK (5%), Netherlands (4%), Cyprus
(4%), Japan (4%), Germany, France & UAE are among the top ten
investors
•Ranked third in A.T. Kearney FDI Confidence Index 2010
•Construction (including Roads & Highways, Housing & Real
Estate) are among sectors attracting high FDI equity (7%)
INDIA NOW ATTRACTIVE INVESTMENT DESTINATION….
RISE OF GLOBALLY COMPETITIVE
PRIVATE COMPANIES
THE ECONOMY
IS GROWING
EVEN IN REAL,
NONTRADTIONAL
WAYS!
GLOBALLY RANKED HUMAN RESOURCES
SKILLED ENGLISH SPEAKERS
“By 2010 India will have world’s largest
number of English speakers”
“When 300 million Indians speak a word in a
certain way, that will be the way to speak it.”
Professor David Crystal
Cambridge Encyclopedia of the English Language
WHERE ARE WE GOING?
India no. 2 in 2050
India’s GDP will exceed
that of
Italy, France, Germany & Japan
by 2040
PER CAPITA INCOME
On a ppp basis
($000)
37,000
40
30
20
16,800
5,800
10
2,100
3,050
0
2000
2005
2020
2040
2066
INDIA WILL BE MORE MIDDLE CLASS WITH
INCREASED PURCHASING POWER
West of the
KanpurChennai line
East of the
KanpurChennai line
50%
50%
2020
2040
32%
22%
8%
1980
2000
2010
Kanpur-
HIGH NET WORTH INDIVIDUALS 20.5% &
GROWING
HOW THE WORLD VIEWS INDIA
COMPARING INDIA & TURKEY
Parameter
India
Turkey
Factor
Population millions
1240
78
15.9x
Population growth %
1.4%
1.19%
1.17x
Area million sq kms
3.29
0.78
4.21x
GDP Billion US$
1850
773
2.4x
GDP growth 2011-12
6.9%
8.5%
0.81x
Inflation rate 2011-12
9.55%
6.33%
1.51x
Labor force millions
487
27
18x
FDI 2011-12 Bn US$
46.8
15.7
3x
Per capita USD
1388
10362
0.134x
US$1=
55 INR
1.78 TRY
TRADE VARIED, INDEPENDENT OF ANY ONE OR VOLATILE ITEM,
TOUCHED US$7 BILLION IN 2011….
RELATIONS ROBUST, STRONGER TRADE LINKS SHOWS POTENTIAL FOR
HUGE ECONOMIC GROWTH…
Political
• Tradition of Presidential / Prime Ministerial visits
• Broad alignment on all global issues
• Robust joint forums exist to further causes
• FTA being finalized at highest levels
Commercial • Bilateral trade is varied and not biased or
dependent on any specific commodities
Trade
• India has signed Free Trade Agreements (FTA)
with SAARC, ASEAN , Singapore, South Korea,
Sri Lanka and Bhutan (amongst others)
• FTA with Turkey is currently under discussion.
SECTOR SNAPSHOTS:
CONSTRUCTION
&
FURNITURE
CONSTRUCTION
COMPETITIVENESS OF INDIA'S INFRASTRUCTURE LAGS BEHIND GLOBAL
BENCHMARKS…
Roads Quality
Rail Road Quality
OVERALL COMPETITIVENESS OF INDIA'S
INFRASTRUCTURE
Quality of overall infrastructure
POTENTIAL PVT SECTOR IN INFRASTRUCTURE IS SIGNIFICANT
IN NEXT 10 YEARS…
Planning Commission Data on Infrastructure Investment in India
Parameter
10th Plan 200207
11th Plan 2007-12
12th Plan 201217
Infrastructure
Spending
US$225 Bn
US$ 500 Bn
US$ 1 trillion
127%
100%
Growth over
prev plan
THUS CREATING SIGNIFICANT OPPORTUNITIES FOR PVT SECTOR IN
XIITH PLAN 2014-17….
Sector
Planned
Power generation
100 GW
Highways
57,000 kms
Power
10 UMPPS, total 100 GW
Renewable Solar Energy
22,000 MW by 2022
Wind energy
49,000 MW by 2022
Railways
MRTS in major cities and 22 stations in
PPP
Ports
24 capacity expansion projects, mega
container terminals, mechanized berth
Airports
18 new ones on EPC basis
Oil & Gas
60.3 MMTPA refining capacity. 26.3
MMTPA LNG capacity
RESULTING IN SIGNIFICANT OPPORTUNITIES FOR
PRIVATE SECTOR….
National Highway Dev Program
Expressways
State Highway Development
Remaining NHs
20527
6,355
10,000
20,529
Total
57,411
CONSTRUCTION ADVANTAGE INDIA
The Indian construction industry has been on a high growth trajectory for more than a decade,
led by buoyancy in sectors such as real estate and infrastructure.
The Union Budget 2012-13 has
allocated US $883 billion (INR
50
Lakh
crore)
to
the
infrastructure sector, reflecting
the Government of India (GoI)’s
strong focus on the development
of India’s infrastructure.
High growth
in
construction
sectors
Availability
of skilled
manpower
Strong
government
focus
India produces more than 0.4
million engineers every year.
Moreover, India’s cost of skilled
labour is the lowest in the world,
with an entry-level engineer
available at an average cost of
about US$ 8,000 per annum.
Advantage
India
Government expenditure on
infrastructure is likely to result in
increased construction
expenditure of nearly US$ 253.
94 billion (INR 12,189 billion)
between 2008–09 and 2012–13).
High
growth
potential
Easy
availability of
raw material
Modern
technology
India is the fifth-largest producer
of crude steel in the world (2008),
with a production volume of 54.5
million tonnes.
OVERVIEW OF CONSTRUCTION INDUSTRY….
Construction sector has been growing at CAGR of
11.1% over the last eight years consistently
Construction sector accounts for 9% of GDP today
All values in Billion USD
PROPOSED INVESTMENTS IN MAJOR SECTORS IN 2012-17
REQUIREMENTS OF HUMAN RESOURCES FOR
CONSTRUCTION BY 2022….
Category
No. of million man years required
Engineers
3.72
Technicians
4.32
Support Staff
3.65
Skilled Workers
23.35
Unskilled/ semiskilled workers
56.96
Total manpower
92
To sustain the growth of construction India needs an additional 4 million
workforce
CONSTRUCTION MATERIALS
•
•
•
•
•
•
•
Increased Government expenditure on infrastructure will result in increased
construction expenditure of ~ US$ 253.94 billion in 2008–13.
Growth of construction materials industry directly linked to Indian economy,
growing with investments in infrastructure/ related sectors.
Construction equipment market divided into 4: - earth-moving equipment,
material-handling equipment and cranes, concrete equipment and road-building
equipment.
200 Indian manufacturers service construction equipment market.
Production of cranes &lifts/escalators is to rise by 20.3% and 11.9%,
respectively in 2012-13
Equipment sales expected to grow by 26% over previous year.
Currently, the equipment market is largely import driven, with India importing
construction machinery worth US $181 million in 2009, up by 55 per cent over
2008.
BASE COSTS OF CONSTRUCTION MATERIALS….
INDIRECT TAXES….
CONSTRUCTION – POLICY AND REGULATORY FRAMEWORK
•The GoI has permitted 100 per cent FDI in construction and development projects to attract more investment. Some of
the key specifications are US$ 2 million limit on lump sum payments under the automatic route.
•Royalty to be levied as 5 per cent on domestic sales and 8 per cent on exports, net of taxes.
•The depreciation on general plant and machinery is proposed at about 15 per cent.
•Specific initiatives by the GoI that positively impact the engineering sector are Tariff protection on capital goods has been
removed.
•Various initiatives are focussed on infrastructure development and construction.
•The GoI has also introduced initiatives to increase power generation and improve the quality of power supply.
•Custom duties on various equipment have been reduced.
CONSTRUCTION - OPPORTUNITIES
•The roads and bridges sector will continue to be a major demand driver for the construction industry, with the National
Highway Development Program (NHDP) expected to generate orders worth US$ 55 billion over the next five years.
•In addition, the maintenance of national and state highways and other roads is likely to create demand for road construction
and maintenance-related equipment and materials.
•Increased government focus on the development of greenfieldports and airports and capacity expansion at existing ports is
expected to maintain a consistent demand for construction equipment and materials.
•Other demand drivers include water and irrigation projects, urban infrastructure development, urban transportation projects,
and water supply and sanitation projects.
•Capacity expansion in the steel, cement, oil refining and power sectors to meet growing infrastructure investments in India, is
also expected to generate demand for construction equipment.
•The equipment rental business is another opportunity driver, with the industry expected to double in size to 16 per cent by
2015.
•The export opportunity is expected to grow on the back of rising cost pressures on developed countries and due to the
emergence of low-cost competitive suppliers and original equipment manufacturers (OEMs) in India.
FURNITURE
FURNITURE: TWO SECTORS
Office Furniture
Market size US$ 1.2 billion, 70% Organized
Growing 15-20% in 2007-08
Home Furniture
Market size US$ 8 billion10% organized; 90% not
Growing at 10-12%.
Negligible entry/exit barriers Duties on medium density fiber boards; none on finished goods of same
Raw material is easily available like solid wood, particle board, ply wood ; Investment needed for improving manufacturing facilities
Market requires trendy designs; products suited to lifestyle: Finished goods imported from far East & Europe Market price sensitive
Green furniture is upward trend in B2B segment as move towards LED certified / Green buildings
Consumer appreciates functionality , design and novel color combos Aesthetics & functionality important factors for consumer choice
FURNITURE: THE FUTURE
Favorable outlook : large size, evolving westernized tastes, middle class population of 400 million+; increasing
purchasing power, CSIL Milano ranks India as one of 14 largest furniture markets in the world
Total furniture market @US$ 9.2 billion, growing at 30% CAGR(organized sector =15% of whole industry)
Branded furniture market, residential & commercial valued at US$1.3 billion(2008)Expected US$3.7 billion in 2013
(KPMG report)
Currently only 10,500 furniture importers Main imports from Italy, Germany, Spain and Malaysia.
100% foreign ownership in Indian single brand retail ventures allowed: importers require no prior license or
permission, need valid IEC (Import Export Code from DGFT) foreign brands like IKEA are entering India
Turkey with intricate wood-work invited to enter the lucrative Indian market: similarity of designs & tastes will
give Turkey an edge over others in the designer & architect niche market.
CAUTION!