CHANGING DIMENSIONS OF BUSINESS

ENVIRONMENT IN INDIA

BY: ANSHUL, ARUSHI, ASHISH

• Overview of the economic environment of India

• An account of the Social initiatives taken up by the government

• The emerging new dimensions in the business environment of our country

• The following sectors covered to capture the changing business environment:– Information technology– Telecom– Automobile

INTRODUCTION

FINANCIAL DEPRESSION & ITS IMPACT

• Began in 2007 in industrialized nations

• Led to significant slowdown in GDP growth during 2008-09

• Fiscal expansion in 2009-10 by policy makers

• Economy showed good growth in 2009-10,despite crisis.

2009-10 STORY

• 7.9% growth in last two quarters with 7.2% overall growth

• Industry and service sector particularly grow by 8.2 and 8.7%

• Agriculture output decline by 0.2%• Manufacturing growth rate almost double after

continuous decline since last eight quarters• Recovery in growth rate of fixed capital

formation

Cont..

• Decline in growth rate of government and private final consumption, but rise in private investment demand.

• Rise in merchandise export growth, after decline of twelve continuous months

KEY INDICATORS OF ECONOMY

SECTORIAL INVESTMENT GROWTH RATE AT 2004-05 PRICES

CONT…

BEHAVIOR OF PRICES AND INFLATION

• Concentrated inflation in 2009

2009-10 2008-09

Overall 7.3

Food-inflation( 25.4)

19.8 8.6

Non food(53)

2.4 6.7

Food items Fuel and power commodity

Manufactured and primary non-food

67% 12% 21%

FOOD INFLATION

• Supply side bottlenecks• Hype leads to hoarding. This is indicated b

shortfall in availability/production ratio

Jan 13,2011

Jan 20,2011

Jan 27,2011

Feb 3,2011

Feb 10,2011

Feb 17,2011

16.91% 15.52 15.57 17.05 13.07 11.05

IMPLICIT DEFLATOR• Ratio of GDP at current price to GDP at constant price• Covers service sector which contributes 57%

• Implicit deflator for consumer inflation is ratio of PFCE at current price to PFCE at constant prices

2005-06 2006-07 2007-08 2008-09 2009-10

Implicit deflator

4.7 5.6 5.3 7.2 3.6

2005-06 2006-07 2007-08 2008-09 2009-10

Consumer Implicit deflator

2.9 5.9 4 7 6.4

CONT…

UPDATES FOR 2010-11

• GDP growth at 9.2 % against 7.2 last year• Industrial sector growth at 9.4 as compared to 9.2

last year• According to CII survey, 50 ( out f 127 ) sectors grew

by 39% entering excellent growth category as compared to 29 last year

• Service sector to grow by 10% as compared to 8.8% last year led by trade and transport segment

• Agriculture and allied to grow by 5.7% as compared to -0.2 last year

GDP GROWTH• Change in base year to 2004-05 by CSO

• Overall GDP growth same but some sectorial changes

• GDP growth at 7.2%, downside risk contained by likelihood of better rabi crop, policy stimulus

• GDP growth at market price of 2004-05 during 2008-09 and 2009-10 considerably low than at factor cost due to the role of fiscal stimulus

GLOBAL RECOVERY• According to IMF, decline in world output by 3.2% in 2009 to be followed by

growth of 2.1% in 2010

• Developing economies to register growth of 6.1% in 2010 after modest growth of 2.1% in 2009

• Concern that the growth may loose momentum once the stimulus is withdrawn

• Developed economies face problems of high unemployment, growing fiscal deficit and tight credit availability

• Developing economies face challenge to contain monetary growth, inflation, and exchange rate uncertainty during to increased capital flows

BROAD BASED RECOVERY

SECTOR WISE GROWTH

Agriculture and allied

Industry Service

2004-05 18.9 28 53.2

2009-10 14.6 28 57.2

OVERALL QUARTERLY TREND

SECTORIAL QUARTERLY TREND IN GDP

PER CAPITA GROWTH

Demand side growth of GDP, growth contribution and relative share at 2004-05 market price(per cent)

Private final consumption (Annual growth and share at 2004-05 prices)

Growth in major industrial groups in 2009-10

STRONG GROWTH Automobiles, rubber and plastic products, wool and silk textiles, wood products, chemicals and miscellaneous manufacturing

MODEST GROWTH Nonmetallic mineral products;

NO GROWTH Paper, leather,food and jute textiles

SLUMP Beverages and Tobacco products

Manufacturing companies growth

• Improvement in cost structure• Growth in production of capital goods• Favorable base effect and mild inflation

helped in recovery• Declining trend in man-days lost due to

strikes and lockouts

SAVINGS• In 2009-10 GDS at current prices at 18,11,583 crores , about

32.5% of GDP down from 36.4% in previous year• Fall in public savings from 5% to 1.4%

BOP DEVELOPMENTS• Exports from India have increased by 26.8 per cent year-on-year (y-o-y) to

touch US$ 18.9 billion in November 2010, urging the Government to exude confidence that overall shipments in 2010-11 may touch US$ 215 billion.

• For the April-November 2010 period, exports have grown by 26.7 per cent to US$ 140.3 billion, while imports totaled up to US$ 222 billion, expanding 24 per cent

• The net foreign fund investment crossed the US$ 100 billion mark on November 8 2010, since the liberalization policy was implemented in 1992.

• FIIs have made investments worth US$ 4.11 billion in equities and poured US$ 667.71 million into the debt market.

• Data sourced from SEBI shows that the number of registered FIIs stood at 1,738 and number of registered sub-accounts rose to 5,592 as of November 10, 2010.

• Portfolio investments comprising FII,GDR,ADR witnessed large inflows of $17 billion during I quarter of 2009 as compared to net outflow of $ 5 billion during same period in 2008

FDI• Growth

• FDI in various sectors(Apr-Oct 2010)

April 2000 – Dec 2010

April - Oct 2010

2009 2008

$179.45 billion

$12.39 billion $ 21 billion $14.1 billion

Service sector Telecommunication

Metallurgical industries

Power sector

$2163 million $1062 million $920 million $729 million

FOREIGN EXCHANGE RESERVE• Increase by $31.5 billion to $283.5 billion in end

December 2009. In this $11.2 billion was on Bop basis, while $20.3 was due to devaluation of dollar

• As on December 17, 2010, India's foreign exchange reserves totaled US$ 294.60 billion, an increase of US$ 11.13 billion over the same period last year, according to the Reserve Bank of India's (RBI) Weekly Statistical Supplement.

MONETARY POLICY• After outbreak of recession RBI has followed

an accommodative monetary policyEarly Recovery of growth momentumMeet Unprecedented borrowing requirements of

government• Transmission of monetary policy measures

continue to be sluggish an differential across various segments of financial markets.

• Lending rates decline but not enough

BANK CREDIT• Demand remained muted during 2009-10

• Decline in credit-deposit ratio• Sectorial deployment of gross bank credit

Retail – no growthAgriculture – sameIndustry. Personal loans and Services decelerated

April-June, 2009 July-September Till jan-2010

negative 0 to 1.8 8.7

DEPLOYMENT OF BANK CREDIT BY VARIOUS SECTORS

• Negative growth in personal loans particularly in Advances against fixed depositsCredit cards outstandingConsumer durables

• Significant increase in non-bank credit by 50000 crores during april-nov,2009

FISCAL POLICY DEVELOPMENTS

• Fiscal expansion in the form of tax relief to boost demand and increase public expenditure

• Increase in fiscal deficit from

• Fiscal stimulus amounted to 3.3 % of GDP in 2008-09 and 3.9% in 2009-10

2007-08 2008-09 2009-10

2.6 5.9 6.8

CONT…

• Borrowing limit of state government enhanced by 100 basis points

• Central plan expenditure• Composition of fiscal stimulus

Reduction in indirect taxes Increase in public expenditure on programs like NREGA and

rural infrastructure• Implementation of sixth pay commission and debt-relief

to farmers• GDP growth rate and rise in private consumption demand

INFRASTRUCTURE• India’s spending accounts for just 4% of GDP• India will be a high growth economy over the next decade• For growth rates to be sustainable, commensurate

development in infrastructure is imperative• Today, India’s infrastructure capacity is woefully

inadequate• Need of the hour: significant private-sector participation• Government expects an increase in the share of private

sector investment from 19% in 10th plan to around 30% in 11th plan

• Over the next 5 years, the government’s investment target is $1.5 trillion

INFRASTRUCTURE contd...• Have a practical and flexible public private participation

framework• Much can be achieved through a right combination of political

will and reforms for land acquisition and environment clearances• Total investment envisaged under National Highway

Development Programme is $59 billion• Roads are accounted to for 15% of India’s infrastructure

investment in the XI plan• Govt plans to spend $63 billion in railways in the Plan • Union Govt has undertaken a capacity expansion plan for ports

with an outlay of Rs 55,800 crore till 2014 through its National Maritime Development Programme

FOCUS ON CAPACITY ADDITIONS• Power sector emerged as a major focus area for the

Govt: expected to account for 40% of the $500billion stated to be needed for investment in infrastructure during 2007-12

• Nuclear power segment is witnessing a lot of interest from public and private companies in India and abroad

• Renewable energy is expected to get a major push in light of the concerns over climate change

• Recent initiatives – trading through energy certificates, mandatory purchase of a certain percentage of power from renewable sources

• Fuel availability and quality is an issue to be addressed

ENERGY SECURITY• India is endowed with great natural wealth of hydro power

sources, fossil fuels, wind energy potential and minerals • There is an enormous hydropower potential of about

155,000 MW of which only 37,000 MW has been tapped • Plants set up over 50,000 MW of nuclear power capacity

comprising over 50 reactors in the next two decades open up huge opportunities for the Indian industries

• Consequent to NSG clearance, India signed bilateral agreements on nuclear cooperation with France, the US, Russian federation, Kazakhastan, Namibia, Mongolia, Argentina & Canada

OIL AND PETROLEUM SECTOR• Around 75% of the total oil consumption in India being

met through imports• Dependence on imports for petroleum continues to be

high (acc to eco survey)• Increasing economic growth will cause energy demand to

grow exponentially• Government is encouraging national oil companies to

aggressively pursue equity oil and gas opportunities overseas

• Total installed capacity of refineries increased to 177.97mt annually as on April 2009

NEW DIMENSIONS FOR OIL & GAS

ENVIRONMENT – THE NEW DIMENSION (CASE-I)

• MOEF grants clearance to SAIL for mining iron ore from Chiria reserves in Jharkhand with specific conditions.

• Conditions stipulated by the Ministry include that– Only mining and primary and secondary crushing would

take place in the forest area, – Mining in the diverted area will be done in phases– SAIL will earmark at least 2% of net profit for corporate

social responsibility in Chiria region– There should be zero discharge into Koena river– Steps should be taken to ensure that the river does not get

polluted– Forest roads should not be used by SAIL during night time

ENVIRONMENT – THE NEW DIMENSION (CASE-II)

• Permission to set up $12billion integrated steel plant in India, by POSCO was long due

• MOEF finally granted permission to POSCO to set up the steel plant in India

• The Union environment and forests ministry has, however, granted conditional clearance to the project, which involves setting up a steel plant, a captive power plant, and a captive port.

• It has imposed 28 additional conditions while giving environmental clearance

ENVIRONMENT – THE NEW DIMENSION (CASE-III)

• Mettur-based Madras Aluminium Company (MALCO) of the Vedanta Group accused of indulging in “blatant violations” of all laws at the eco-sensitive Shevaroyan Hills

• The study pointed out that the land being mined was once an ideal grass land.

• It has led to the change in the rainfall pattern as the Shevaroyan Hills were a natural catchment and water retention area during South West Monsoon.

• The mining was so intense that the height of the hills was even reduced by about 100 feet

• Huge craters and lack of the mandatory green belt around the core area have not been reclaimed and developed.

SOCIAL SECTOR INITIATIVES• The National Rural Employment Guarantee Scheme (NREGS):

– launched in February 2006 in 200 most backward districts in the first phase

– was expanded to 330 districts during 2007-08. – the coverage was extended to all rural districts of the country in

2008-09. – at present, 619 districts are covered under the NREGS. – during the year 2008-09, more than 4.51 crore households were

provided employment under the scheme. – during the year 2009-10, 4.34 crore households have been provided

employment under the scheme.– out of the 182.88 crore person days created under the scheme

during this period, 29 per cent and 22 per cent were in favour of SC and ST population respectively and 50 per cent in favour of women.

Swarnjayanti Gram Swarozgar Yojana (SGSY):

– launched in April 1999 after restructuring of the Integrated Rural Development Programme (IRDP) and allied programmes.

– it is a self-employment programme for the rural poor. – the objective is to bring the assisted swarozgaris above

the poverty line by providing them income-generating assets through bank credit and Government subsidy.

– the scheme is being implemented on a cost-sharing basis between the Centre and States of 75:25

– up to December 2009, 36.78 lakh self help groups (SHGs) had been formed and 132.81 lakh swarozgaris have been assisted with a total investment of Rs 30,896.08 crore

Swarna Jayanti Shahari Rozgar Yojana (SJSRY):

– the Government has recently revamped the SJSRY with effect from April 1, 2009

– the scheme provides gainful employment to the urban unemployed and underemployed poor, by encouraging the setting up of self-employment ventures by the urban poor

– also provides wage employment and utilizes their labour for construction of socially and economically useful public assets

RURAL MARKETS OFFER PROMISE

• The year 2009 was all about recovery and revival from the recession that struck the Indian economy in the year 2008

• However, the FMCG wasn’t impacted as badly as certain other sectors did

• Partly, it was also because of the their focus toward the rural markets as potential markets

• Increasing rural demand helped the FMCG industry grow at an estimated 17-18% despite the economic uncertainty

• 53% of FMCG market is in rural and 59% of the consumer durables market is in the rural region

• Rural India has become the growth driver

CORPORATE SOCIAL RESPONSIBILITY• CSR is the deliberate inclusion of public interest into corporate

decision-making

• A company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates.

• Companies express this citizenship – through their waste and pollution reduction processes– by contributing to educational and social programs

• The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

CORPORATE SOCIAL RESPONSIBILITY

• ACC has embarked wholeheartedly on a new path of promoting the use of Alternate Fuel and Raw Materials (AFR).

• The aim is to pursue conservation of the earth’s mineral resources through waste management solutions.

• ACC pioneered the utilization of blast furnace slag, a toxic waste from steel plants, and deployed it into the cement manufacturing process to convert it to make Portland Slag Cement (PSC).

• It also uses the Hazardous waste generated by the surrounding industries as an alternate fuel

• The biomass from the near by region has also been used as a replacement for the coal used in their kiln

SERVICE SECTOR• It comprises the sub-sectors trade, hotels, transport

and communications; financing, tourism, insurance, real estate etc

• As against a growth of 9.8 per cent in 2008-09 it grew at 8.7 per cent in 2009-10.

• While there has been a significant dip in the growth of community social and personal services in 2009-10, the other sub-sectors have either retained their growth momentum or improved upon it.

TRAVEL AND TOURISM• The World Tourism Organization acknowledges

that tourism is the fastest growing economic sector, bringing foreign exchange earnings to countries and creating jobs

• Indian tourism industry is experiencing a period of strong growth, driven by – burgeoning Indian middle class– Growth in high spending foreign tourists– Coordinated government campaigns to promote

‘Incredible India’

EMERGING DIMENSIONS OF TOURISM

TOURISM

ECO TOURISM

MEDICAL TOURISM

ADVENTUROUS TOURISM

RURAL TOURISM

SPIRITUAL TOURISM

MICE TOURISM

INDIAN IT SECTOR

•The Indian Information Technology sector can be classified into the followingbroad categories - IT Services, Engineering Services, ITES-BPO Services and EBusiness.

•IT Services can further be categorized into Information Services (IS) outsourcing,packaged software support and installation, systems integration, processingservices, hardware support and installation and IT training and education.

•The rapid growth in the sector is a consequence of access to trained English speaking professionals, cost competitiveness and quality telecommunicationsInfrastructure, 24 x 7 services to their global customers.

•world leaders including General Electric, British Airways, American Express, and Citibank, have outsourced call centre operations to India.

The following are some of the strengths of the Indian IT sector:

· Highly skilled human resource;· Low wage structure;· Quality of work;· Initiatives taken by the Government (setting up Hi-Tech Parks andimplementation of e-governance projects).· Many global players have set-up operations in India like Microsoft, Oracle, Adobe, etc.

· Following Quality Standards such as ISO 9000, SEI CMM etc.;· English-speaking professionals;· Cost competitiveness;· Quality telecommunications infrastructure.

Government Initiatives:

•The Foreign Trade Policy 2004 - 2009 permits import of all kinds of computers(except second hand computers) in India without any licenses.

•The Software Technology Parks of India (STPI) have been set up by the Ministry of Information Technology, Government of India and the International Technology Park in a joint project by the State Government.

•An industrial park, known as Electronic City was set up in 1991 taking more than a hundred electronic industries including Motorola, Infosys, Siemens, ITI, and Wipro, in an area of around 330 acres.

•Recognizing the potential of this sector, the government has provided manyincentives including a tax holiday up to 2010 and competitive duty structures.

•In addition to the central government incentives, respective state governments have also developed attractive incentive packages to target investors.

•The government is also actively trying to reduce international communication cost. The telecommunications ministry has already started phased liberalization programme.

•Financial institutions and venture capitalists in the country are willing to provide funds at competitive rates for expansion in ITes businesses.

•All these factors collectively create a number of opportunities in the IT sector.

•The Information Technology (IT) sector in India is amongst the fastest growing in the country and the world. It is expected that by the year 2012, IT software and services industry will account for 8 per cent of India’s GDP and 39 per cent of total exports.

•The Indian domestic IT market grew by 29% in the financial year 2009-10 toreport revenues of Rs 308, 810 crore.

Information Technology:

•The revenue of the information technology sector has grown from 1.2 per cent of the gross domestic product (GDP) in FY 1998 to an estimated 5.5 per cent in FY 2009.

IT / ITes Export Trends:

•Exports contribute nearly 65% of the Indian IT sector revenue.

•The United States and Britain are the biggest markets for India's booming software exports, accounting for about 80 percent of the country's $12-billionexports per year.

•ITeS/BPO exports grew by over 32 per cent from the previous year collecting revenues of US$ 10.9 billion in FY 2009.

Key Players:The following are India’s Tier 1 companies in the IT sector:· Tata Consultancy Services Ltd.· Wipro Technologies Ltd.· Infosys Technologies Ltd.· Satyam Computer Services Ltd.

The other key players include the following:· IBM· HCL· Patni· Polaris· Cisco· KPIT Cummins· Kanbay· accenture

· Cognizant· Mphasis

•Karnataka dominates other Indian states in terms of attractiveness as an IT destination with the city of Bangalore being at the topmost.

• All the big banners like HSBC, Dell, Microsoft, GE, Hewlett Packard, and several Indian multi national firms like Infosys Technologies, Wipro who have set up their offices in the city.

• The state of Andhra Pradesh, backed by the emergence of the city of Hyderabad as a major IT hub, ranks as the second IT hub of India.

• This is followed by the state of Tamil Nadu and Maharashtra.

•The city of Chennai in Tamil Nadu is emerging as a global capital for business process outsourcing (BPO) and is propelling Tamil Nadu to the number one position in IT exports.

Growth of the Indian IT Sector:

• The Indian IT-BPO sector is estimated to reach a target of US$ 60 billion inexports and US$ 78-80 billion in overall software and services revenues by 2012.

• India's information and communication technology market is estimated n to grow20.3 per cent annually to reach US$ 24.3 billion by 2011.

•The Indian IT and ITeS market is estimated to grow at the rate of over 16 per cent to become a US$ 132 billion industry.

• significantly, the domestic market alone is expected to become over US$ 50 billion. Simultaneously, the IT and ITeS exports are estimated to more than double to US$ 78.62 billion by 2012.

•The domestic BPO segment is growing annually at a rate of nearly 35 - 40 %.

•The revenues generated by the BPO's are almost $1.18 million and the domestic market is expected to reach $13 billion by the end of the financial year 2011.

• If it continues to grow by the current rate then by the end of the financial year 2012 then IT and IT enabled services will reach nearly US$330 million.

•The electronics hardware is growing at over 30% and is expected to grow rapidlyin the coming years and is estimated to be US$64 billion by 2012.

•According to a recent World Bank study, India is the preferred location for software vendors for its quality and cost.

• India has strong UNIX base which provides opportunity for the development of products for internet based applications.

INDIAN TELECOM SECTOR

•The first wind of reforms in telecommunications sector began to flow in 1980s when the private sector was allowed in telecommunications equipment manufacturing.

• In 1985, Department of Telecommunications (DOT) was established. It was an exclusive provider of domestic and long- distance service.

•In 1986, two wholly government-owned companies were created: the Videsh Sanchar Nigam Limited (VSNL) for international telecommunications and Mahanagar Telephone Nigam Limed (MTNL) for service in metropolitan areas.

•Cellular services can be further divided into two categories: Global system for mobile communications (GSM) and Code Division Multiple Access (CDMA).

• The GSM sector is dominated by Airtel, Vodafone, Idea Cellular, while the CDMA sector is dominated by Reliance and Tata Indicom.

Operator No. of subscribers(million)

Market share (%)

Bharti airtel 93.923 24

Reliance 72.999 18.5

Vodafone Essar 68.769 17.6

BSNL 52 13.3

Idea Cellular 38.9 9.9

Tata Teleservices 35.12 9.0

Aircel 18.4 4.7

MTNL 4.4 1.1

Spice communications 4.13 1.1

Others 3.15 .8

Total 391.761 100

•The Indian telecom sector is characterized by stiff competition among 10 national level players and two government owned firms.

•In spite of a difficult pricing environment, Indian telecom sector is attractive. The key reason is vast population of India of over 1 billion which makes it as one of the biggest telecom market in the world.

•After USA and Chine, India is third biggest telecom market in the world.

•The year 2009, saw the Indian telecom sector add 170 million phone connections to take the total subscriber base to 550 million.

• The year 2009 saw telecom players shift from per minute billing to per second billing.

Recent Development

•The month of April 2009 saw India wireless subscriber base that currently stands at 250.93j million surpassing that of the US to become the second wireless network in the world.

•The mobile telecom market is forecast to grow at compound annual growth rate of around 15 percent between 2009-10 and 2013-14.

•Additionally, with 3G auctions held on feb13,2010 is expected to set in motion the quick adoption of 3G enabled handsets.

Service provider

Rural subscriber

Urban subscriber

Total Rural (%)

Urban (%)

Total (%)

Airtel 33.78 71.42 105.2 25 22 23

BSNL 29.64 53.52 83.16 22 16 18

Reliance 16.35 64.39 80.75 12 20 17

Vodafone 24.83 51.62 76.45 18 16 16

Idea 19.8 27.29 47.09 15 8 10

Tata 2.96 35.12 38.08 2 11 8

Aircel 8.82 12.98 21.8 6 4 5

MTNL - 8.16 8.16 0 2 2

BPL 2.31 2.31 0 1 1

Sistema .07 1.23 1.3 0 0 0

HFCL 0 .54 .54 0 0 0

Total 136.26 328.58 464.84 100 100 100

Service provider

GSM CDMA Market share (GSM)%

Market share (CDMA)%

Bharti 102.37 NA 31 NA

Vodafone 76.45 NA 23 NA

BSNL 49.1 5.27 15 5

Idea 47.08 NA 14 NA

Reliance 25.42 54.19 8 55

Aircel 21.8 NA 7 NA

MTNL 4.3 .31 1 0

BPL 2.3 NA 1 NA

Tata NA 37.12 NA 38

Sistel NA 1.19 NA 1

HFCL NA .38 NA 0

Total 328.82 98.46 100 100

Manufacturing•Latest figures from the Department of Telecom (DOT) indicate that revenue from the telecom manufacturing sector is set to cross the US% 7.5 billion mark in fiscal 2009-10. The Indian telecom equipment manufacturing sector is set to become one of the largest globally by 2011.

•India is estimated to record hightest growth in the Asia-Pacific region with a handset production of more than 51 million.

• Nokia reached production volume of 125 million in over two years of operations at its manufacturing unit in Tamil Nadu.

•TRAI estimates that the country will need about 350000 telecom towers by 2010, as against 125000 in 2001.

•This has in turn attracted many leading global telecom equipment manufacturers to set up their base in India.

Telecom Equipment Manufacturers

•Nokia Siemens Networks (NSN) is shifting its global services business unit headquarters from Munich to India.

•Nokia set up its manufacturing plant in Chennai.

•Samsung has set up its GSM mobile manufacturing base in Manesar.

•Motorola has established a manufacturing plant in Sriperumbedur.

•Sony Ericsson has set up GSM Radio base station manufacturing facility in Jaipur and R&D centre in Chennai.

•LG Electronics set up plant of manufacturing GSM mobile phones near Pune.

INDIAN AUTOMOBILE SECTOR

INTRODUCTION• India continues to consolidate its position on the global front

being one of the world’s top 10 auto-producing countries.

• India, the seventh largest vehicle producing nation in the world.

• According to a study by global consultancy firm Ernst & Young, the Indian market will clock the fastest compound annual growth rate between 2009 and 2020, more than double that of China and the triad of North America, Europe and Japan.

• India's CAGR between 2009 and 2020 is expected to be 14 per cent compared with China's 6 per cent.

AUTOMOBILE

2 WHEELER 3 WHEELERPASSENGER

VEHICLECOMMERCIAL

VEHICLE

MOTORCYCLE SCOOTERS SCOOTERETTES MOPEDS

I.C.V. M.C.V. H.C.V.

The Key Players…

Bajaj Auto, 24.4%

TVS Motors, 17.7%

Yamaha, 3.8%

Others, 5.8%

Honda Motors, 8.5%

Hero Honda, 39.8%

Maruti, 50.37

Hyundai, 19.17

Tata Motors, 17.19

Honda, 5.33

Others, 5.73

Commercial vehicles

TATA Motors, Ashok Leyland, Swaraj Mazda,Mahindra & Mahindra ,Force motors, Eicher Motors

Passenger vehicle

TATA Motors, Maruti Udyog, Honda Motors, Toyata, Skoda, Mahindra & Mahindra, Daimler Chrysler, Hindustan Motors

Two Wheeler Hero Honda, Bajaj Auto, Honda Motors, TVS Motors, Yamaha , Kinetic Motors

Three Wheeler Bajaj Auto, Piaggio India

Passenger vehicleTwo wheeler

The automobile industry in India 9th largest automobile industry . 2nd largest two-wheeler market, 11th largest Passenger Cars producers. 4th largest in Heavy Trucks.

2nd largest tractor manufacturer.annual production of over 2.3 million units.The monthly sales of passenger cars in India

exceed 100,000 units.

SCOOTERS - SCOOTERETTESMOTORCYCLE

TWO WHEELER

Indian 2-Wheeler Market

Motorcycle 50% 30% 13% 4% 1% 2% <1% - <1%

- 15% 28% - 2% 46% 9% <1% -

- - 82% - - - 8% 10% -

India is now the second largest two-wheeler market in the world

Passenger cars Multi Purpose Vehicle

Passenger Vehicle Market

Indian Passenger Vehicle Market

Passenger Cars

52% 17% 19% - 1% 5% 2% 2% 2% 1% - <1% <1%

Utility Vehicles

2% 18% 1% 42% 21% 1% 10% 1% <1% - 4% - <1%

Multi Purpose Vehicles

100% - - - - - - - - - - - <1%

4th largest Passenger Vehicle Market in Asia

Light Commercial VehicleHeavy Commercial Vehicle

Medium Commercial Vehicle

Commercial Vehicle Market

Indian Commercial Vehicle Market

Medium & Heavy CV - Trucks

64% 24% - 8% - 3% - <1% <1%

Buses – L, M & HCV

40% 30% 7% 5% 10% 6% 1% 1% -

Light & Small Comm Veh – Trucks

59% <1% 32% 4% 3% 3% <1% - -

TATA Motors dominates over 60% of the Indian Commercial Vehicle Market. It is also the World’s fifth largest Medium & Heavy commercial vehicle manufacturer.

Utility Vehicles

Three wheelers

Indian 3-Wheeler Market

68% 24% 2% 1% 3% 3%

23% 40% 12% 13% 7% 6%

India is the largest three-wheeler market in the world

Passenger

Goods

Scooters India

60%

40%

Sub Segments

Future prospect of Indian Automotive Sector

• Maruti Suzuki India Ltd (MSIL) has announced an investment of US$ 411.45 million for setting up its third plant at Manesar in order to capitalise on the rapid growth of the Indian auto industry.

• This new production line–Maruti's sixth overall would have 250,000 units annual capacity.

• Volvo-Eicher Commercial Vehicles (VECV) has announced an investment of US$ 61.51 million for a new engine plant at its existing facility at Pithampur, Madhya Pradesh.

• With this, India will now become a global manufacturing hub for Volvo's new medium-duty engine platform, with the only other factory for the engine type being present in Japan.

•Mercedes Benz has met its single largest order—of 150 cars worth US$ 14.7 million—from the small industrial town of Aurangabad, Maharashtra.

•Indo-Russian commercial vehicle joint venture (JV) Kamaz Vectra Motors plans to more than double its annual capacity to 12,000 units at its Hosur plant by 2012 to capture the fast-growing market in India.

•Ashok Leyland and Japanese car maker Nissan Motor Co Ltd have announced the launch of three light commercial vehicles (LCVs) from 2011 through 2013. The auto makers also confirmed to be in talks to create a small car for the Indian market within the US$ 2,000 - US$ 6,000 price range.

•Tata Motors is in talks with a Canada-based company for its second generation gearless Nano.

•India Yamaha Motor Limited is also planning to tap the rural market, which currently accounts for around 15 per cent of its overall sale. The company has launched a new bike YBR 110 that will target the rural markets.

•Mahindra & Mahindra has revealed its plans to launch 8-10 new products, including a premium sports utility vehicle, across various segments by March 2012.

•BMW, the luxury car maker, is planning to infuse US$ 15.76 million in its Indian operations.

• Andreas Schaaf, President, BMW India, said that the company had invested US$ 24.77 million till September 2010 and this would be increased to US$ 40.53 million by the end of 2012. •Luxury carmaker Mercedes-Benz India will set up a new facility for building of city bus bodies at its Chakan plant in Pune. The new unit will become operational by mid-2011 and will have a capacity of 700 units a year.

•Mercedes Benz has also re-introduced its super premium sedan Maybach in India in 2011.

Technological EnvironmentWith the entry of global companies into the Indian

market, advanced technologies ,both in product and production processes have developed.

With the development or evolution of alternate fuels, hybrid cars have made entry into the market.

Major global players like audi, BMW,Hyundai etc have setup their manufacturing units in India.

Government initiatives regarding tax rebates has led to global players setting up their R&D centres in India.

Impact of Global Recession on Indian Car Industry

India is one of the few countries where car sales have been increasing in the course of the worldwide economic downturn.

Passenger car sales rose 31% to 115,067 units in July from 87,901 units a year ago.

The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car.

Some other Problems with Automobile Sector

• Effect of Rising Fuel Prices on Car Sales.

• The cars today are run on petrol, diesel and gas. The price hike of all the three has led to a serious problem. The rise in the price of the fuel has depreciated the sales of cars by 8%.

Business standardwww.bseindia.comwww.moneycontrol.comwww.rediff.comwww.indiatelecom.orgwww.trai.gov.inwww.telecomindia.comwww.dot.gov.inwww.india-telecoms.com

References

References

• Ministry of Heavy Industries & Public Enterprises (Department of Heavy Inuustries), Government of India

• BUSINESS STANDARD• CSO • IBEF• RBI

• SURVEY OF INDIAN INDUSTRY • ECONOMIC SURVEY 2009 - 10