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Indian Economy Overview

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Indian Economy Overview

August, 2012

India has been the favoured investment destination in Asia, according to a report by Mecklai Financial. India has received inflows worth US$ 11 billion in equities and US$ 4.7 billion in debt investments on a year-to-date basis. "The Indian financial markets have witnessed favouritism among the investing diaspora compared to its Asian counterparts such as South Korea, Taiwan, Thailand and Indonesia," stated the report.

India has emerged as the fifth most favourable destination for international retailers, outpacing UAE, Russia, Indonesia and Saudi Arabia, according to A T Kearney's Global Retail Development Index (GRDI) 2012. "India remains a high potential market with accelerated retail growth of 15-20 per cent expected over the next five years," highlighted a report by A T Kearney.

India will serve as Asia's fastest growing exporter and importer with annualised growth averaging 5 per cent and 7 per cent over the next five years, according to HSBC Global Connections report.

Further, India has become the first country in the world to introduce national standards for organic textiles. Indian Standards for Organic Textiles (ISOT) will be introduced in the National Standards for Organic Production (NPOP) as part of the Foreign Trade Policy. There are over 1,000 branded organic products produced in India and each one is backed up with certification and traceability.

The country has been ranked second in the Global Innovation Efficiency Index, a metric to assess the innovation landscape in different countries. INSEAD and the World Intellectual Property Organization (WIPO) published a report titled 'Stronger Innovation Linkages for Global Growth' which benchmarks the performance of different countries in addressing the gaps in the innovation cycle.

In the field of concentrated solar heating (CSH) India has become the world leader, with 80 different CSH applications in practice, according to the Ministry of New and Renewable Energy (MNRE).

Meanwhile, India is set to become the world's second largest steel producer. With modernisation programmes of various public and private companies, the country will soon rise to second place, as per Dr Manmohan Singh, Prime Minister of India. Currently, with 74 million tonnes annual production in 2011, India is the fourth largest producer.

The Economic Scenario

Indian economy outlook was presented as being positive and robust by Zinnov Management Consulting. Both multinationals as well as Indian companies aspiring for growth should continue to focus on the long-term view, with which they established their presence in the country, according to Praveen Bhadada, Director (market expansion), Zinnov.

"India is expected to be more than US$ 5 trillion (current market price) economy by FY20," as per a report released by Dun & Bradstreet. Investment activity is expected to accelerate, which will help the Indian economy to grow faster, highlights the report. Maharashtra, Gujarat, Andhra Pradesh and Tamil Nadu will be among the most progressed states in the country by FY20.

India Inc is on a high growth path and has doubled its revenue in five years to a little over Rs 50,000 billion (US$ 899.28 billion). In the past five years, companies have grown in profit and size in metal industries, technology, telecom, power, refining, automobiles, banking, pharmaceuticals and finance.

Some of the other important economic development India is as follows:

  • India has become a key contributor in global research and of growth in the Asia-Pacific (APAC) region, playing host to one-third of top 1,000 research and development (R&D) spenders in the world, according to a Zinnov study titled 'Global R&D Benchmarking Study'
  • The Indian cloud market estimated at US$ 535 million in 2011 is expected to grow more than 70 per cent in 2012 and almost 50 per cent in the next three years, according to International Data Corporation (IDC)
  • The Government of India has approved 14 foreign direct investment (FDI) proposals worth Rs 1,584.11 crore (US$ 284.91 million), including that of Abhijeet Power Ltd to bring in FDI worth Rs 674 crore (US$ 121.22 million) and CLSA Singapore's proposal to invest Rs 225 crore (US$ 40.47 million)
  • Foreign institutional investors (FIIs) have infused Rs 4,800 crore (US$ 863.31 million) into stock markets during August 1-10, 2012 - the highest ever on a year to date basis, according to the data available with the Securities and Exchange Board of India (SEBI)
  • The total merger and acquisitions (M&A) and private equity (PE) deal value in July 2012 stood at US$ 2 billion, from US$ 1.4 billion in the previous month due to an increase in outbound deals, as per Raja Lahiri, Partner, Transaction Advisory Services, Grant Thornton India. "PE/ VC deal space continued to see activity in the e-commerce/ Internet space and in renewable energy. Companies which have cash will drive M&A deal momentum going forward, since the time offers good deal opportunities in terms of valuation," highlighted Lahiri