India in 2013A quick recovery is a must

Produced by the Accenture Institute for High Performance

An annual review of key macroeconomic and sectoral trends

Content1. Introduction 1

2. This could be the year that 2

3. Calendar of events 3

4. Macro trends for 2013 4

5. Key themes for the year ahead 5 Fiscal prudence and inflation management

are needed to avoid stagflation 5

Getting more out of existing capital will prove critical 6

Rural consumption will continue to drive domestic demand 7

Domestic reforms will be critical to India’s global competitiveness 8

Increased trade liberalization will set the stage for more balanced business growth 9

6. Spotlight 10 Can India capitalize on demographic change? 10

7. Sector outlook 12 Automotive 12

Banking 12

Chemicals 13

Defense 14

Education 14

Fast-moving consumer goods (FMCG) 15

Healthcare 15

Information Technology 16

Infrastructure 16

Media and Entertainment 17

Oil and gas 17

Pharmaceuticals 17

Power 18

Real estate 19

Retail 19

Telecommunications 20

8. References 21

The year 2013 will test Indian policymakers and industry leaders alike. During 2013, India’s gross domestic product (GDP) is expected to remain in the range of 6-6.5%–well below India’s potential as a leading emerging economy.

As 2013 unfolds, India will likely continue to face challenging macro-economic conditions. India’s deteriorating fiscal situation and high inflation are cases in point. Barring fiscal restraint and new sources of revenue, India’s annual fiscal deficit may increase to 6 percent of gross domestic product (GDP) in 2013.1 Moreover, inflation is expected to remain above 6 percent – especially in sectors such as industrial raw materials and food.

The 6-plus percent levels of inflation will provide little incentive to the Reserve Bank of India (RBI) to reduce interest rates substantively. Reduction in interest rates by 25 to 50 basis points due to monetary interventions by the RBI may not free up sufficient capital to invigorate the “animal spirits” in India.2

Stubborn inflation and a restrained credit environment are likely to continue to depress business leaders’ confidence as well as appetite for substantial investment in 2013. For instance, in the third quarter of FY2012-13, the Confederation of Indian Industry’s Business Confidence Index fell below 50 points, down from 55 and 51.3 points in the first and second quarters respectively.3 Many corporations are expected to delay substantial long-term capital investment (CapEx) during 2013 and focus on realizing greater returns from their existing investments rather than striving to expand quickly.

The situation on the external front is challenging too. India must rein in its current account deficit before the imbalance leads to further volatility in the rupee. The nation’s capacity

to digest a larger current account deficit has increased over the last two decades. But its trade deficit is now testing these new limits. India’s trade deficit continues to be much higher than in the previous fiscal year, owing to falling exports and accelerating gold imports, and we expect this scenario to continue during the first quarter of 2013.

Such a scenario may compel global investors to press the “caution button” in 2013 vis-a-vis India, even with recent reforms aimed at liberalizing foreign investment in certain sectors. This could lead to erratic flows of foreign direct investment (FDI) and portfolio investments. Such flows could in turn worsen volatility of the rupee and complicate the picture for Indian companies’ domestic and global expansion plans.

But amid India’s gray clouds is a silver lining: bright spots that could drive business and economic growth. To the relief of industry, growth in consumption in rural India has pressed on. Between FY2009-10 and FY2011-12, rural consumption per capita in India grew annually at the jaw-dropping rate of 19 percent4. For the first time in the last 25 years, incremental cumulative rural spending exceeded incremental cumulative urban spending during that period. We expect this trend to continue in 2013, marked by growth in non-agricultural job opportunities across India’s hinterlands, especially in the construction, telecommunications and financial services industries. Moreover, with a rising number of Indian companies acquiring the capabilities needed to profitably serve India’s rural markets, job opportunities in the non-agriculture space could multiply.

Beyond rising incomes and consumer demand in rural areas, India also has the potential to develop new sources of growth in 2013 by deepening its engagement with the global economy.

Reforms in late 2012 to liberalize FDI in key sectors (such as multi-brand retail) could further encourage foreign investors to snap up medium-term investment opportunities in 2013. In fact, enthusiastic about recent reforms, major global investors are beginning to consider ramping up investments in India’s equity markets.5 However, it’s not just about external investment flowing into India. Indian companies also have more opportunity to tap into sources of growth abroad. New foreign trade agreements (FTAs) are creating fresh opportunities for Indian companies to diversify their growth model by seizing opportunities in foreign markets in 2013.

Like 2012, the coming year will test the nerves of business strategists and, most important, strategy execution teams. While some cash-rich public sector firms and large, financially stable conglomerates may continue cautious expansion, many companies will focus on tapping new markets, improving productivity, preserving margins and managing volatility.

In this report, we present ideas that can help businesses in India and elsewhere prepare for the new realities of India’s changing macroeconomic and business environment. As always, we offer these ideas as starting points for lively dialogue about new business directions.

We invite your comments— and we look forward to the ensuing discussions.

Please feel free to contact us at: raghav.narsalay@accenture.com and mamta.kapur@accenture.com

Introduction

1

• National mobile roaming charges are eliminated, allowing people to use mobile devices freely across states without having to change their numbers

• Basel III norms are implemented by banks across the country, making the largest of them more stable

• SEBI guidelines of a mandatory 25 percent public shareholding in listed companies comes into effect with the aim of improving investor confidence in the equity market

• The GPS-aided air traffic management and navigation system GAGAN becomes operational, helping major airline operators to cut fuels costs by as much as 20 percent

• ASEAN and India sign an FTA on services and investments that might boost trade in the region by US$20 billion by 2015

• The Bharat Broadband project is launched, connecting 250,000 village panchayats (councils) with fiber optic networks

This could be the year that

2

Calendar of events

January 2013• Direct cash transfer scheme for

subsidies goes live

February 2013• Insurance regulator IRDA discloses

Bancassurance guidelines

• Nationwide mobile number portability comes into effect

• Indo-French joint-venture SARAL satellite launches

March 2013• State elections held in Nagaland,

Tripura and Meghalaya

• National mobile roaming becomes free

April 2013• Basel III implementation deadline

comes for banks

• New airline operator dedicated for North-East India starts operationsMay 2013

• Indian Navy brings home first of the eight P-8I maritime surveillance aircrafts from Boeing

• State elections held in Karnataka

June 2013• Companies comply with

SEBI guideline of 25 percent public shareholding

July 2013• GPS-aided air traffic management

and navigation system GAGAN becomes operational

August 2013• The ASEAN and India sign FTA on

services and investments

• Old mobile handset models that do not comply with new radiation norms are phased out

September 2013• India’s first unmanned lunar landing

mission, Chandrayaan II, is launched

• First phase of the US$1.5 billion Koradi supercritical thermal power plant project is commissioned

October 2013• India’s first Mars Orbiter mission

is launched

• Mumbai’s offshore container terminal is commissionedNovember 2013

• Tata Motor’s compressed air-powered car is launched

• India receives delivery of aircraft carrier INS Vikramaditya from Russia

December 2013• Bharat Broadband project

becomes operational

2013

20143

Source: Economist Intelligence Unit, December 2012 Source: Economist Intelligence Unit, December 2012

Macro trends for 2013

Source: International Monetary Fund, October 2012 Source: Economist Intelligence Unit, December 2012

Foreign direct investment (FDI) flows

Current account

Economic growth

Industrial production(% change year-on-year)

2008

2008

2008

2006

102.0

2.0% -5

500

-120

00

0%

0

204.0

4.0% -4

1,000

-100

306.0

6.0% -3

1,500

-80

408.0

8.0%-2

2,000

-60

5010.0

10.0%

-1

2,500

-40

6012.0

12.0%

-0

3,000

-20

3,500

-0

2009

2009

2009

2007 2010

2010

2010

2008 2011

2011

2011

2009 2012

2012

2012

2010 2013

2013

2013

2011 2014

2014

2014

2012 2015

2015

2015

2013 2016

2016

2016

2014 2017

2017

2017

2015

FDI outflows FDI inflowsReal GDP growth percentage (year -over-year)

Current account balance as percentage of GDP

Nominal GDP (US$ billion)

Current account balance (US$ billion)

US$

bill

ion

US$

bill

ion

US$

bill

ion

Perc

enta

ge

Perc

enta

ge

4

Key themes for the year ahead

Given the last four quarters of high inflation and stagnating growth, India now faces the threat of stagflation. In December 2012, the government lowered its original GDP growth forecast of 7.6 percent for FY2012-13 to 5.7-5.9 percent.6

India’s rising fiscal deficit continues to be a drag growth. The deficit could reach 5.9 percent of GDP for FY2012 – far exceeding the government’s annual budget projections of 5.3 percent.7 And while wholesale price-based inflation during 2013 may prove lower than expected because of a higher base effect, the real story will merit careful examination. Inflation of prices for food, fuel and raw materials could become a permanent feature of the Indian growth story. For instance, annual inflation on primary articles has remained above 9 percent since the onset of the global financial crisis in 2008, and this trend is expected to continue in 2013 despite slower growth.8 Moreover, utility prices will likely remain high owing to increases in fuel prices during 2013.9

The expanding deficit is raising the government’s borrowing requirements, putting pressure on market liquidity and thus making it costlier for the government to finance growth. Additionally, moderately high level of inflation may not provide the central banking authority with enough room to reduce interest rates beyond 25-50 basis points. Consequently, borrowing costs will probably remain high and credit markets will continue to be restrained.

As a result, India is now an outlier when compared to other emerging markets on macroeconomic indicators, including inflation and fiscal deficit. For instance, India’s fiscal deficit as a percentage of GDP in 2013 will likely remain nearly three times higher than deficits in other key emerging markets, such as Brazil and China. Furthermore, consumer price inflation will probably continue to hover above 7 percent in 2013—substantially higher than in China and Brazil, where rates are forecasted to hold at 4.8 and 5.7 percent, respectively.10

During 2013, India’s fiscal situation must stabilize. Recent disinvestments by the government in some state-run firms, as well as the lowering of oil subsidies in September, are steps in the right direction.11 But more needs to be done through the active involvement of the private sector.

To help the economy achieve fiscal stability and moderate inflation, government will need to abstain from inflationary budgetary spending ahead of the 2014 elections. The state and central governments will have to summon up the courage to embrace expenditure reforms. Given that the Indian government is one of the largest organized purchasers of raw materials and finished products in the nation, it will need to show greater willingness to foster transparency in government procurement through the use of IT and globally accepted procurement norms.

Fiscal prudence and inflation management are needed to avoid stagflation

Business imperatives• Work with suppliers to plug inflationary pressure points along the supply chain.

• Develop public-private partnership (PPP) models to create profitable business opportunities and to help governments achieve efficiency in their spending.

• Improve business processes to cut costs along the value chain.

5

A healthy rate of gross fixed capital formation (the creation of physical assets) was instrumental in keeping the Indian growth story going strong through the first shock to global demand during 2008-2010. However, this cylinder in India’s growth engine has begun to sputter under the continuing threat of domestic stagflation and an uncertain global economy. For instance, total investments in new infrastructure projects, as well as the total number of new infrastructure projects, reached a three-year low in India during the quarter ending December 2012.12

There’s only a modest chance that 2013 will see a reversal of this negative trend. First, business confidence will likely remain shaky in the year ahead. In spite of ongoing reform efforts, confidence in India’s business environment continues to

degenerate. Even after a substantial decline in mid-2012, quarter-on-quarter business confidence continued to slip in late 2012, according to a recent survey.13 Second (and perhaps most important), financing new long-term capital investments will remain costly in 2013. Despite a possible increase in the central banking authority’s power to lower interest rates,14 sustained high inflation will probably hold commercial lending rates – the interest rate charged by commercial banks on rupee-denominated loans – at their elevated level. Those rates are expected to hold steady at around 9-10 percent, compared to around 7 percent in China and 3 percent in the United States.15

Securing better returns on existing capital spending through efficient project commissioning and through

enhancement of existing plants’ productivity will therefore be critical to boosting GDP and company balance sheets. With cash-on-hand in an uncertain and credit-restrained environment,16 companies in India will need to execute a more nuanced agenda in the year ahead. They will have to sharpen their focus on near-term projects to improve returns on existing investments and commit to enhancing operational efficiency and labor productivity via new business technologies and improved business process management.

Getting more out of existing capital will prove critical

Business imperatives• Enhance operational efficiency of capital expenditure through better

procurement and supply chain management.

• Invest in cutting-edge technologies and new outsourcing opportunities (such as cloud-based enterprise services) to redesign workflows and speed up project execution.

• Identify areas to leverage the power of product, process and business model innovation.

6

Rural India will continue to lead domestic consumption growth in 2013—not just because it accounts for nearly 70 percent of India’s population, but also because it now commands the majority share of Indian consumption17. In 2012, rural areas in India laid claim to 56 percent of India’s income, 64 percent of consumer expenditure and 33 percent of India’s savings18. Rural India’s share of consumption of popular consumer goods and durables stood at 30-60 percent, and sales to rural India are growing steadily.19

Between FY2009-10 and FY2011-12, rural consumption per capita in India grew annually at 19 percent — two percentage points higher than its urban counterpart. In incremental terms, spending by rural India during these two years reached INR 3,750 billion (US$67 billion), significantly higher than the INR 2,994 billion (US$58 billion) spent by urbanites.20

Strong growth in rural consumption is expected to continue in 2013, as a result of across-the-board increases

in country dwellers’ household incomes. Key contributing factors to rural income growth in 2013 will include increases in non-farm job opportunities and government-initiated employment generation schemes. Manufacturing in rural areas could create at least half a million jobs in rural areas. A paradigm shift in focus from relief work to integrated natural resource management in schemes such as the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) may bring in a larger number of collective and productivity-enhancing ventures. For example, efficiency in rainwater harvesting, fallow-land cultivation and watershed projects could improve under MNREGS in the coming year. This will open doors to more sustainable and productive sources of income for many small farmers being currently bypassed.21

New programs, such as the cash-transfer scheme currently being piloted across 51 districts in 16 states, will also create savings for

poor people by reducing the hidden transaction costs, such as transport, that recipients often face when trying to access and receive benefits. Under this initiative, government subsidies for 29 of 42 welfare schemes will be transferred directly into beneficiaries’ bank accounts. The electronic cash transfers will be based on the 12-digit unique identification number (Aadhaar). If implemented well, the program will enhance the efficiency of welfare schemes, because it will enable the government to reach out to identified beneficiaries and ensure that they receive the services and support owed them. Through this cash transfer program, the government plans to deposit INR 3.2 lakh crore (US$58 billion) in the bank accounts of 10 crore poor families by 2014. A meager 5 percent savings in the form of non-incurred transaction costs leaves about US$3 billion available as additional annual funds that needy people can spend or invest.

Rural consumption will continue to drive domestic demand

Business imperatives• Build a strategy for rural market entry and growth that leverages businesses’

existing footprint in traditional Indian consumer markets.

• Develop a corporate social responsibility (CSR) strategy that can help build infrastructure and relationships that have the potential to benefit future business initiatives.

• Invest in nascent technologies (such as GPS and context-based technologies) that can improve the efficiency of far-flung rural supply chains.

7

Reforms in late 2012 have helped renew global interest in the Indian economy. With much fanfare, the Indian government passed new measures to liberalize foreign investment in key sectors, such as retail.22 These reforms sent a loud and clear message to the international community: “India is increasingly open for business.” Even as Parliament debated the reforms before passing them, FDI in India more than doubled, rising to US$4.62 billion in September 2012, up from US$2.26 billion in August 2012.23

Signaling an appetite for reform and a more transparent regulatory environment will help promote international business confidence in India in the near term and in the country’s long-term prospects. Indeed,

the global community continues to point to corruption and government bureaucracy as two of the top three challenges to doing business in India, according to the World Economic Forum’s 2012-2013 Annual Competitiveness Report.24 Sending the message that India is willing to address these key impediments would go a long way toward improving the country’s near-term prospects.

Passing new reforms in contentious areas such as those involving natural resources could be difficult in the coming year, owing to electoral dynamics. Yet action can be taken towards promulgating reforms wherein substantive progress has already been made. For instance, states and the central government can collectively work to implement

a goods and services tax, which could abolish additional layers of taxation during 2013. Similarly, the central ministries could work with the National Investment Board to expedite projects worth more than INR 1,000 crore by setting timelines for project approval for the relevant ministries.

Moreover, business can help guide India’s next round of reforms and encourage foreign companies to capitalize on the country’s changing regulatory and business environment. Experienced Indian companies can help allay foreign reservations about pursuing opportunities in India. For instance, they could demonstrate to foreign partners the value of gaining a first-mover advantage in India, especially in untapped consumer markets.

Domestic reforms will be critical to India’s global competitiveness

Business imperatives• Encourage foreign confidence by supporting the quick implementation of new

FDI rules.

• Partner with government to demonstrate commitment to a stable and transparent regulatory environment.

• Proactively engage foreign partners to make them aware of the new opportunities created by regulatory change in India.

8

Unlike most Asian economies, India’s economic rise has been driven primarily by domestic consumption. However, an over-reliance on domestic consumption to fuel business or macroeconomic growth is risky. In fact, the Economist Intelligence Unit forecasts that because of structural shifts in the Indian economy, growth in domestic consumption is unlikely to return to the pre-2008 rate of above 20 percent.25

The stage is set for Indian businesses to accelerate their transition to a more diversified growth model in 2013 – one based on a balance of domestic and foreign demand. In recent years, India has taken steps to deepen its integration with the global community, particularly in the area of trade. The country continues to lead

major Asian economies in the number of established FTAs and is negotiating to expand trade agreements with large economies such as China and Canada.26 Perhaps most important for Indian enterprises, the country is aggressively liberalizing trade ties with high-growth neighboring economies in Southeast Asia and Africa. Take the FTA in goods between India and the Association of Southeast Asian Nations (ASEAN) that went into effect in 2011. Implementation of this agreement immediately boosted trade flows between India and the ASEAN by a staggering 41 percent in FY2011-12.27 With a new FTA in services and investments set to come on line in 2013, the nation’s globally competitive services industry stands to make substantive gains. The government anticipates that the

deal may help increase trade with the ASEAN by 20 percent by 2015.28

In 2013, Indian businesses have the opportunity to position themselves for more balanced, long-term growth. The continued deepening of trade ties with high-growth neighboring economies, as well the potential for moderation in rupee volatility, all bode well for India Inc.’s ability to pursue a global and diversified growth strategy in the coming year.

Increased trade liberalization will set the stage for more balanced business growth

Business imperatives• Determine which capabilities will translate into a differentiated competitive

position abroad.

• Assess regional mergers and acquisitions (M&A) targets for inorganic expansion into regional markets.

• Redesign operating models to position for global growth.

9

India’s favorable demographic profile is often cited as one of the country’s key economic strengths. It’s estimated that the country will host the world’s largest working-age population by 2020, surpassing that of China. Perhaps more important, India’s ongoing demographic transformation could add as much as 2 percent to the country’s annual growth in per capita GDP over the next two decades, according to the IMF.29

However, realizing the full benefits of demographic change, including its potential to accelerate GDP and income growth, will not be easy. India already needs innovative solutions to expand critical aspects of its economy – including education, healthcare and job creation – to meet the nation’s current requirements. With a population that is expected to continue expanding through 2030, the pain of these existing shortcomings will only grow more acute if the necessary action is not taken now to address the nascent demands of demographic change.30

One step in the right direction is to begin addressing the finer points of demographic change in India. Business strategies and policy reforms must take into account the significant local variations in demographic profiles. At the state level, for instance, managing demographic change is not only about addressing the needs of a growing working-age population. Many states, especially in the south, are also set to experience a spike in the number of older dependents (individuals aged

over 60). By contrast, the majority of states in the north will continue to see an increase in the number of young dependents (persons under age 15) and an explosion in the number of individuals entering the workforce. As a result, solutions sensitive to local demographic shifts are now required from business and policymakers if India is translate its demographic advantage into economic growth.

On the one hand, states with booming populations of young people would benefit by ensuring that this age cohort is productive and healthy. Improving pediatric healthcare would be a good place to start. Moreover, training programs must reach many people while also building the skills that businesses are hungry for. Gujarat’s “ICreate” (International Centre for Entrepreneurship and Technology) project is an example of this kind of initiative. ICreate is a world-class incubation center that seeks to provide an ecosystem for young entrepreneurs who want to develop new ideas and products through the use of technology. The project will be guided by leaders from academia and industry. The state government has also launched 20 superior technology centers to provide specialized industry-led training using state-of-the-art technology. Each center is related to a specific industry, such as automotive servicing and solar technology.31

On the other hand, growth and the competitiveness of Indian companies will also depend on how well the spike

in older populations is managed (see Figure 1). In fact, it’s estimated that India will host the world’s largest population of individuals aged over 65 by 2020, with disproportionate growth in the country’s older dependents occurring in southern states.32 Ensuring that these individuals remain a valuable part of the workforce will be critical for economic growth and business competitiveness. Older individuals who leave the workforce earlier on could place a heavy dependency burden on the country’s working population. Perhaps more important, many of India’s older workers are among the most able to provide India’s younger workers with critical on-the-job training. In this case, government and businesses can learn from their counterparts in European countries that have aging populations. For instance, a UK-based BMW plant implemented 70 process changes on its assembly line to accommodate its aging workforce. The result: productivity improved 7 percent, bringing it on par with assembly lines staffed by younger workers.33

In 2013, government, business and civil society need to collectively accelerate efforts to manage India’s demographic transition. To do so, they will have to continue developing and implementing localized strategies. And they will need to recognize that there is no one-size-fits-all solution to using India’s demographic transition to spur growth.

Can India capitalize on demographic change?

Spotlight

10

Figure 1: Old-age dependencyPercentage of population aged over 60 (select states)

Source: ADB Working Paper. “Demographic Dividends for India: Evidence and Implications Based on National Transfer Accounts”, December 2011

0 5 10 15 20

Uttar Pradesh

Assam

Madhaya Pradesh

Bihar

Haryana

Maharashta

Gujarat

Orissa

Andhra

West Bengal

Himachal

Tamil Nadu

Kerala

1971

2010

2026

11

AutomotiveSuperbikes market to gear upThe demand for superbikes and luxury sports cars is expected to gain greater momentum in 2013. High-end automotive manufacturers have begun to test the market in recent years and are now looking to launch newer models to expand with the growing market. Austrian motorcycle maker KTM’s partnership with Bajaj Auto could bring forth at least two new high-powered motorcycles in the 350cc range, one under each brand.34

Yamaha, having already launched a line of superbikes, will focus on consolidating its presence in the high-powered segment during 2013 and will update its existing models.

Car prices to rise across the boardIn spite of volatile demand patterns, all major Indian car manufacturers plan to raise prices in 2013. Maruti has announced that it will increase prices across all its models. Prices could reach as high as US$360 for certain models. While Maruti has stated that currency fluctuations are the reason for the hike, General Motors has attributed the price hikes to a rise in input costs. Toyota, Honda and Volkswagen have also decided to increase prices on all their models by 1-3 percent.35

Government to slow efforts to drive demand for hybrid carsIn mid-2012, as part of the National Electric Mobility Mission Plan 2020, the Indian government formulated a US$4 billion investment plan to boost production of electric and hybrid vehicles to meet its target of having 6 million electric vehicles on the market by 2020. While the government plans to contribute close to US$2.4 billion, auto companies will need to make up the remainder of the total. But the government’s decision to invest in boosting supply in the coming year will no longer be complemented by efforts to drive demand for electric and hybrid vehicles. In April 2012, the government withdrew its plan to provide subsidies of US$2,500 per unit for electric and hybrid vehicle buyers.36

SUVs may continue on a strong growth trajectorySport utility vehicles (SUVs) constitute the only automotive segment that is continuing to grow at a furious pace in India. Forecasts suggest that the SUV segment will grow by almost 50 percent in 2013, after having expanded by 56 percent in the first half of 2012. Consumers are increasingly preferring SUVs for their high ground clearance and relative sense of security. The next year will see the launch of many more SUVs and multi-purpose vehicles (MPVs) such as the Ford EcoSport, Nissan’s version of the Renault Duster and Maruti’s XA Alpha.37

BankingRush of capital injection into Public Sector Unit (PSU) banksThe central government has decided to fully invest the US$3 billion provisioned in the budget for the current fiscal year into public sector banks to meet the upcoming Basel III capital requirements.38 The three banks that need the most capital because of growing non-performing assets (NPAs) are Indian Overseas Bank, Central Bank of India and Bank of Maharashtra.

Improved transparency for better asset qualityBeginning January 1, 2013, it became mandatory for public and private banks to share information relating to credit, derivatives and un-hedged foreign currency exposures among themselves.39 The RBI believes that effective information sharing among banks before sanctioning of new loans or renewing of existing loans can help reduce the incidence of non-performing assets. In addition to information sharing, the RBI has proposed a joint lending mechanism for corporate debt that will help prevent borrowers from seeking multiple loans from different banks against inadequate collateral. Loans under the joint lending agreements are provided by a consortium of state-run banks, which in the case of loans that go bad, insulate individual banks from bearing the entire brunt of the non-performers.40

Sector outlook

12

New banking licenses to be awardedThe RBI last issued two new banking licenses back in 2002. It will most likely award new licenses in 2013 after the Parliament approves the Banking Laws Amendment Bill. According to the bill’s draft norms, new promoters will require a minimum capital of US$90 million to be eligible for licenses. Other than awarding new licenses, the amendment will give the RBI more power to regulate banks, raise voting rights for investors in banks and allow state-owned banks to raise capital through bonus and rights issues.41

Innovations to promote inclusive bankingIn 2013, Indian bank account holders will be able to access their accounts, transfer funds, check balances and request checkbooks by simply dialing *99# on their mobile phones. This new technology is available for even the most basic mobile handsets and is part of the government’s financial inclusion program. The National Payment Corporation of India has already rolled out this service through public sector telecom service providers such as BSNL and MTNL for customers of 23 banks, and expects other private telecom providers to be included in the short term.42

ChemicalsLegislation may be simplifiedThe Indian chemical industry has had difficulty increasing its exports to the European Union over the past couple of years, owing to the new REACH legislation that governs and regulates the production and safe use of chemicals.43 With many Indian companies being unable to meet the REACH requirements, the Department of Chemicals and Petrochemicals drafted the National Chemical Policy 2012 to provide direction and guidance to the industry overall. The policy clearly states the need for integrated chemical legislation that will seek to replace the multitude of laws currently governing chemical production and use in India. The coming year could witness a greater effort by the government to unify many of these regulations.44

Inorganic growth to intensifyWith limited growth opportunities within the country and globally, Indian companies will sharpen their focus on M&A to expand and diversify their portfolios and to explore new markets. Inorganic growth will likely be an important strategic move for an industry saddled with rising input costs, stiff competition and a sluggish global economy. Indian companies are already actively exploring internal and foreign investment. For example, in December 2012, Clariant Chemicals

offloaded its textile, chemicals, paper specialties and emulsions businesses to US-based SK Capital for about US$550 million. Gulf Oil, a part of the Hinduja Group, acquired US-based specialty chemicals company Houghton International for US$1.05 billion in November 2012. This M&A trend will probably continue into the next year.45

R&D may see government pushPer the 12th Five Year Plan (which covers 2012-2017), the Indian government set out a six-point roadmap for enhancing the role of R&D in the chemicals sector. The roadmap calls for a chemical sector council for innovation, dedicated innovation centers in universities, an autonomous US$100 million chemicals innovation fund and an outreach program to include and involve innovators and researchers across the country in the national innovation program. The next year could see most of these action plans implemented.46

13

DefenseMega deals in the near-term pipelineIn December 2012, India’s Ministry of Defense cleared numerous large defense deals, promising many more in the pipeline. In the coming year, India and Israel will probably decide on multiple joint weapons development programs, including missiles, defense systems and radar systems. The next year may see India finalize a US$127 million contract to fit the Indian Navy’s indigenous aircraft carrier (currently under construction) with long-range surface-to-air missile systems. In addition to Israel, India already has many upcoming defense deals in the pipeline with the Ukraine, France, Singapore and Italy that may be finalized before the general elections.47

Shipbuilding to attract significant investmentThe Indian government allowed PPPs in the defense sector back in 2011. Since then, the Mazagon Dock, India’s biggest naval shipyard, entered into a joint venture with shipbuilders Pipavav Defence & Offshore Engineering. Mazagon Dock has a pipeline of orders estimated at about US$18 billion, which includes manufacturing of six SSK Scorpene submarines (P75) under transfer of technology from French warship manufacturer DCNS. With the opening up of the defense sector to private investment, a host of domestic private players have entered the market while simultaneously attracting investment from multinational companies. DCNS has already decided to invest close to US$250 million in 2013, to buy a

minority stake in Pipavav. Even the Japanese conglomerate Mitsubishi has expressed interest in acquiring a stake in Larsen and Toubro’s shipbuilding subsidiary.48

EducationRush of investments in higher educationWith the education sector opening up to 100 percent FDI, private education could witness a massive surge in new investments. Large business groups have already drafted plans for setting up universities across the country. The UK-based Vedanta Resources Group has been in talks with the Odisha state government to develop a Vedanta University that will spread across 6,000 acres and that will receive an estimated investment of more than US$3 billion. Reliance Industries is also planning to kick-start its Reliance University project and has identified 800 acres of land on the outskirts of Vadodara in Gujarat for setting up the infrastructure.49 Private equity players have also shown keen interest in the education sector, owing to the increased government spending and private players’ growth plans.

Vocational skills development gains international interestThe government’s 12th Five Year Plan clearly stated the intent to set up 1,500 new industrial training institutes and 5,000 skills development centers through a PPP model, the gradual implementation of which will begin in 2013.50 This decision has intensified international interest in India’s skills development sector. To illustrate, the European Union

has decided to invest US$7.5 million in a development project in India up to 2020.51 The EU will provide technical assistance in skills development in India in exchange for employment and social policy support. Moreover, the Australian Council for Private Education and Training signed a memorandum of understanding with the National Skill Development Corporation to exchange information and perspectives on education, training and skills development.52 The government of Switzerland has also expressed interest in collaborating with the Maharashtra state government to help the latter bridge its “skill gap at the middle organizational level.”53

Deadline nearing on Right to Education ActThe Indian government has been unwavering in its decision to meet the March 2013 deadline for enforcing the Right to Education (RTE) Act. However, it might be extended by another two years to address infrastructural shortcomings. Several states, including Bihar and Uttar Pradesh, are lagging behind in meeting the deadline for implementation of the RTE law and are failing to achieve significant targets in requirements such as teacher-student ratio, school infrastructure and teacher qualifications.54

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Fast-moving consumer goods (FMCG)Industry majors bullish on strong growthDespite fragile consumer demand, rising input costs and escalating inflation, the FMCG segment witnessed strong growth (15-20 percent) in 2012. All major players, including ITC, Hindustan Unilever, Dabur, Godrej and Marico, expect additional such growth in the new year. Godrej has decided to focus on the FMCG sector for the next decade, with an eye toward growing its consumer products business tenfold over the period.55 Robust rural consumption will continue to encourage big players to further explore India’s hinterland in search of new markets, channels and product innovations.

Online shopping to become more customer-centric Internet buying skyrocketed in 2012, with Indian consumers purchasing everything from diapers and books to houses and even groceries online. E-commerce revenues reached US$14 billion, with 2013 earnings expected to be even higher.56 Significant online discounts will continue to attract consumers, as will the ease of shopping, easier return policies and convenient navigation on websites and loyalty programs. While 52 e-commerce companies received over US$700 million of venture capital in 2012, the easy flow of money into

the sector does not mirror the return on investments or margins achieved by these firms. Some experts believe that these companies will require at least six to seven years to break even.57 Innovations such as cost optimization through warehouse and logistics management are expected to revolutionize the e-commerce market and enable companies to improve profit margins.

Direct selling guidelines comingThe Indian government is expected to provide guidelines on direct selling to help companies operate seamlessly and reduce the incidence of fraudulent schemes that victimize consumers. Direct selling—the marketing and selling of products directly to consumers instead of through a fixed retail location—has been present in India for more than a decade but has been out of the limelight. The Ministry of Corporate Affairs has assembled a committee responsible for drafting a regulatory framework for the direct marketing sector, and the final guidelines are expected during 2013.58 The industry will likely witness 20 percent year-on-year growth over the next few years.

HealthcareGovernment expenditure to incentivize private investmentThe Indian healthcare market is set to enjoy about 20 percent year-on-year growth, reaching an estimated value of US$100 billion by 2015.59 Meanwhile, the Indian government has decided to increase health

expenditure to 2.5 percent of GDP by the end of the 12th Five Year Plan period, up from the existing 1.4 percent. In addition, the government has allocated US$18 million in the 2012-2013 budget for dispensing essential medicines for free in public health facilities.60 Healthcare major Apollo Hospital is adding 3,000 beds to its hospital chain in the next three years at an investment of US$327 million.61 Private equity funds quadrupled their investment in India’s primary healthcare sector in 2012, with Goldman Sachs, Warburg Pincus, Sequoia Capital and the Government of Singapore Investment Corp investing over US$520 million. In 2013, the interest in healthcare is only expected to rise, and experts forecast investment to surpass US$1 billion.62

Private sector investment to intensify in rural locationsBangalore-based Narayana Hrudayalaya Hospitals, which currently has 14 facilities with 6,000 beds across seven states, is planning to invest close to US$900 million to set up a chain of 100 low-cost specialty hospitals in rural areas and at least three more cities in India. The low-cost hospital chain will constitute 30,000 beds added over the next five years.63 Eye-care chain Eye-Q, which currently operates 20 specialty eye hospitals, is expected to invest US$30 million into the construction of 80 new hospitals by 2015 as it looks to expand its presence across rural India. 64

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Medical tourism to maintain strong growth trajectoryMedical tourism is expected to intensify in India during 2013. According to a report by RNCOS, India’s share in the global medical tourism industry will reach around 3 percent by the end of the year. The segment could generate revenue of about US$3 billion by 2013, expanding at a compound annual growth rate (CAGR) of around 26 percent during 2011–2013. Even the number of medical tourists is expected to grow at a CAGR of over 19 percent during the same period, reaching 1.3 million by the end of 2013. Major domestic healthcare players such as Apollo and Fortis reportedly have obtained 10 percent of their revenues from the medical tourism segment.65

Information TechnologyIT exporters look eastSluggish economic recovery in India’s traditional export markets such as the US and Western Europe have compelled Indian IT and IT enabled service (ITeS) providers to look east to other emerging economies. Exports to markets such Russia, the Philippines, some African countries and the Asia Pacific region are expected to grow steadily in the coming year. The Asia Pacific market is growing at 18 percent year-over-year and is expected to account for 8 percent of total IT-ITeS exports by the end of 2013. However, competition from countries such as China, Vietnam, Poland, Brazil and Egypt will present a tough challenge for India in these emerging markets, where it has yet to establish a strong presence.66

National optic fiber network ready for rolloutThe government’s US$4 billion national optic fiber network project, also known as the Bharat Broadband Project, is expected to roll out toward the end of 2013.67 The project aims to bring broadband services through fiber optic cables to 250,000 village panchayats as part of a last-mile connectivity initiative. Commercial testing is already under way in 61 village panchayats for the project, which will be executed as a public-private partnership. While companies such as BSNL, RailTel and PowerGrid will be responsible for laying out 2.5 million km of fiber throughout the country, private players will be able to sell services using the network.68 The project will serve as the backbone for a host of e-governance, telemedicine and e-education services delivered by private and government-owned content creators.

Infrastructure Private sector interest in roads losing steamMany road infrastructure projects under way in India were put on the back burner in 2012 owing to the general economic slowdown. The government’s goal of building 20 kilometers (km) of highways per day hit a major roadblock when it was able to award contracts for only 1,100 km out of the targeted 8,800 km.69 Close to 50 different road infrastructure projects worth US$9 billion and totaling 5,000 km are up for sale in the secondary market, because the debt-ridden companies want to offload projects that they had won but are now finding tough to execute.70 Even prestigious projects such as the Golden Quadrilateral have experienced prolonged delays.71

Government regulations to revive investment profileThe Planning Commission’s US$1 trillion commitment to infrastructure projects for the 12th Five Year Plan period is already facing hurdles, with investors unwilling to bet on the sector. To overcome the low confidence levels, India’s government is exploring the possibility of modifying regulations and guidelines to attract investors. The government will set up a national investment board to monitor and advise ministries on expediting infrastructure projects in their respective industries, especially for projects with investments in excess of US$180 million. At present, more than 100 projects over this investment threshold have been delayed owing to regulations.72

Multi-brand retail to boost domestic infrastructureThe approval of FDI (for the purchase of majority stakes) in India’s multi-brand retail sector may present a major opportunity for the construction and infrastructure sector. It is estimated that an investment of close to US$12 billion will be required to create robust back-end infrastructure such as warehouses and cold storage facilities. According to a government stipulation, 50 percent of FDI into multi-brand retail must be allocated to the creation of such back-end infrastructure and will thus drive infrastructure demand.73

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Media and EntertainmentSlow yet steady rise in FDIThe government’s decision to raise the FDI ceiling to 74 percent from 49 percent in broadcast carriage services will boost India’s cable TV sector. In August 2012, the government approved an FDI proposal worth US$180 million from US entertainment giant The Walt Disney Company. Disney would bring in foreign equity for expansion of its existing business, in addition to making new downstream investments in other companies. Disney already has a stake in UTV, and will likely kick-start new projects in 2013 in segments such as media networks, parks and resorts, studio entertainment, consumer products and interactive media. Research suggests that the boost provided by fresh foreign investment will help the industry grow by almost 17 percent year-over-year, reaching an estimated US$32 billion by 2016.74

Digitization to include non-metrosCable television digitization was partially implemented in three out of the four Indian metropolitan cities meeting the much-extended deadline of October 31, 2012. The Information and Broadcasting Ministry has set itself an aggressive target of March 2013 to achieve similar cable TV digitization in 38 additional cities with populations of more than 1 million. The third phase of this initiative seeks to digitize TV across the whole nation by the end of 2014. However, it is unlikely that these targets will be met, as estimates suggest that the number of cable TV subscribers will reach just over 60 million by 2015. More than 20 percent

of urban subscribers and close to 40 percent of rural subscribers may have difficulty affording the service, and thus may be unable to bear the cost associated with migrating to digital cable TV.75

Oil and gasGas gaining prominence With gas demand expected to grow by 14 percent over the next five years, India aims to increase its liquefied natural gas (LNG) handling capacity to 50 million tons a year by 2017 from 13.5 million tons.76 While oil and gas account for 22 percent and 9 percent of India’s energy mix at present, respectively, the share of gas in the mix is expected to reach 20 percent by 2025. Many of India’s gas power plants are having difficulty satisfying the growing demand. As a result, the government is exploring the possibility of increasing imports of natural gas from countries like the US as well as Australia.77 Bharat Petroleum Corporation Ltd. plans to invest an additional US$8.2 billion during 2012-2017 to enhance its refining capacity and upstream operations. Having discovered significant gas reserves in Mozambique, BPCL is expected to set up two LNG plants, each with 5 million tons per annum capacity.78 Even the Gas Authority of India aims to increase its purchase of spot cargoes of LNG in 2013 from 16-17 to 25.

Interest in shale rising rapidlyThe state-owned Oil and Natural Gas Corporation (ONGC) will launch a technology partnership with US-based ConocoPhillips for the exploration of shale oil and gas resources in India. ONGC is in the early stages of shale gas exploration and is looking to cooperate with experts in exploration

through joint studies in targeted areas. So far, ONGC has drilled four exploratory wells in the Damodar Basin, which may contain about 35 trillion cubic feet of gas, 8 trillion of which experts deem recoverable.79

End of premium fuelsPremium fuels like Speed, Xtramile and Power marketed by the major oil companies saw demand plunge as prices rose in 2012. Because these products are categorized as branded fuels, the government refused to subsidize them and decided not to exempt them from the high excise duty. With sales drying up, companies may decide to scrap the production and sale of these premium branded fuels in 2013.80

PharmaceuticalsChronic disease drugs gaining shareWith rising income levels in India, standard of living is also improving in urban and rural areas alike. But changing lifestyles are coming with a higher incidence of lifestyle-related, chronic diseases such as diabetes, heart attacks and cancer. The coming year will witness a rapid growth in such diseases as well as in the market for drugs developed to address them. In 2012, the acute therapeutic drug segment grew by almost 12 percent, while the chronic segment expanded by just over 20 percent.81 Chronic therapies now contribute 50 percent of US-based Lupin’s Indian revenues, up from about 33 percent five years ago.82

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Cheaper generics to comeIn 2011, drug patent expiries led to a global loss of market value totaling US$270 billion, and that number is expected to hit US$430 billion by 2016.83 India could benefit from the patent cliff, with its exports expected to reach US$25 billion by 2014-2015.84 But the Indian government has chosen to leverage the competence of Indian manufacturers in the generic drugs segment to provide consumers with access to affordable medicines. In December 2012, the National Pharmaceutical Pricing Policy declared that it would bring 348 essential drugs under price control.85 Moreover, the Ministry of Health launched a scheme that will give patients access to free generic drugs in all Indian hospitals by April 2013.86 The government has also ordered state governments to stop issuing licenses for the manufacture or sale of drugs on the basis of their brand name. Pharmaceutical companies will no longer be able to sell generic fixed dose combination drugs under their branded names, so these medicines will automatically come under price control. 87

Stringent FDI approvals to weaken international interestForeign investments in India’s pharmaceuticals sector will now require approval from the Foreign Investment Promotion Board, the government decided in December 2012. All foreign investments in existing domestic firms will be subject to clearance by the board, regardless of share of investment. The move intends to address concerns over the rising prices for essential drugs that came with the entry of multinational

companies into India. However, it will make the sector considerably less attractive for foreign investors. Moreover, buyers of Indian firms producing essential drugs will need to continue manufacturing the medicines after acquisition until the Competition Commission of India decides otherwise.88

Private companies participating in government schemes for rural penetrationIndian pharmaceutical companies such as Cipla, Ranbaxy, Dr. Reddy’s Labs and Lupin might soon be part of the government’s ambitious Jan Aushadhi project, which aims to set up stores selling affordable generic drugs to low-income consumers. In an attempt to commercialize the project and meet growing demand, the government will seek to bulk-procure generic drugs from private sector players. As of 2012, there were 117 Jan Aushadhi stores across the country; the plan calls for expanding that number to at least 600 by 2014 and to 3,000 by the end of the 12th Five Year Plan period.89

PowerCoal shortage will continue to worry power companiesDespite numerous government initiatives to strengthen India’s power sector, the short supply of coal will continue to trouble domestic power companies. Estimates suggest that India will not be able to meet internal demand for coal through indigenous supplies until 2022.90 Moreover, the coal supply shortfall is projected to

increase to about 120 million tons by FY2013.91 The world’s largest coal miner, Coal India, recently signed 35 fuel supply agreements (FSA) that were pending for more than a year. These FSAs will help revive operations of many power units across the country that were facing severe input shortages. However, even Coal India will be unable to supply its customers solely through indigenous production; thus it will have to depend on imports to some extent. Imported coal will be supplied by Coal India on a cost-plus basis. This means that consumers will have to pay for the cost of imported coal plus any additional expenditures incurred by Coal India in handling the material.

Focus to sharpen on renewable energy The central government wants to derive 15 percent of the country’s energy from renewable sources by 2020. The government proposes to create 30,000 megawatts (MW) of fresh generating capacity from renewable sources during the 12th Five Year Plan period, raising overall renewable power capacity to about 56,000 MW.92 Under the national tariff policy, Maharashtra made it mandatory for all power utilities in the state to procure 0.5 percent of their energy from solar projects annually from 2013 to 2016.93

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Grid interconnectedness to improveEfforts are under way to improve the connections among India’s five regional power grids. The National Power Highway project will help link the five grids to facilitate smooth transfer of power capacity among them, allowing one grid’s surplus to plug another’s deficit. The project is set to be completed by 2014.94

Real estateRegulations to support growth of low-cost housingIn December 2012, the RBI permitted realty firms and housing finance companies to borrow up to US$1 billion through external commercial borrowing instruments to fund low-cost housing projects. Even slum rehabilitation projects will be eligible to raise such funds. The funds raised may be used to develop low-cost housing projects or to provide loans of up to US$45,000 to individuals who buy units priced at US$55,000 or less. The move seeks to incentivize the development of low-cost housing options for the economically disadvantaged. While international investors are excited about the prospects of investing in residential real estate in India, developers continue to feel apprehensive about the projects’ low margins.95

Implementation of Real Estate Regulation Bill still uncertainThe Indian government has drafted the Real Estate Regulation Bill, which is expected to provide a uniform regulatory environment to enforce disclosure, fair practice

and accountability norms and to fast-track dispute resolution in real estate transactions. However, the government has set no definite time frame for approval and implementation of the bill.96

Retail real estate to boomThe government’s nod to FDI in multi-brand retail will be a major driving factor for increased activity in the retail real estate segment in 2013. Major cities will see the addition of close to 9.5 million square feet of retail mall space in 2013, with Mumbai, NCR-Delhi, Bangalore and Chennai accounting for 70 percent of the total retail space absorption.97 Absorption rate is forecasted to reach 6.8 million square feet in 2013 and 7.1 million square feet in 2014, as mall developers work to meet global retail standards for design and dimension.

RetailFDI rules come with risksIn December 2012, the Parliament passed a bill allowing 51 percent FDI in India’s multi-brand retail sector, opening up the sector to international retail majors. While FDI in single-brand retail was already permitted, outside investment in multi-brand retail has excited retail investors, consumers and real estate developers. However, a deeper look into the bill may dampen the mood.98

For one thing, the Department of Industrial Policy & Promotion says that 30 percent of the value of manufactured/processed products purchased by multi-brand retail giants should be sourced from Indian “small industries,” whose total investment in plant and machinery does not exceed US$1 million. The 30-percent

procurement requirement will have to be met with the first instance of FDI entry as an average of five years’ total value of the products purchased. The government believes that this stipulation will benefit small and medium-size enterprises (SMEs) and farmers by enabling them to sell directly to retailers. Yet the requirement seems to really be about pacifying the large voting block comprising small traders and farmers. This unusual procurement clause has already made foreign retail giants apprehensive about investing in India.

In addition, at least 50 percent of total FDI brought in must be invested in back-end infrastructure needed for activities such as processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage and warehousing. This percentage must be achieved within three years of the first tranche of FDI, with a minimum of US$100 million brought in by the foreign investor. While this clause has excited India’s real estate and infrastructure sectors, it is already spawning further concerns among retail investors about high sunk costs and overall financial feasibility.

Finally, India’s state governments have been given the authority to choose whether to allow FDI in their respective states. Moving forward, the FDI policy allows retailers to set up outlets with majority foreign investment only in cities with populations of more than 1 million. Although 53 cities meet this criterion, only 18 of those are in the 10 states and union territories that have agreed to permit FDI in multi-brand retail. Moreover, state governments continue to feel immense pressure from regional merchant associations to block entry of FDI into the multi-brand retail sector.

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Telecommunications

National Telecom Policy may ease mobility but increase call chargesIn May 2012, the government cleared National Telecom Policy (NTP) 2012, which abolishes roaming charges. Starting in 2013, mobile phone subscribers will be able to use the same number across the country without having to pay extra fees. The policy will be followed up by full mobile number portability, allowing users to retain their existing number if they change service providers across states. Telecom operators have responded to the new rules by saying that call rates may escalate in the coming year to make up for lost roaming charges. Roaming charges currently account for about 10 percent of the sector’s revenues.99 The government expects the policy to help it reach its goal of increasing rural penetration of telecom services from 39 percent to about 70 percent by 2017, and to 100 percent by 2020.

Regulations to simplify operations With the NTP 2012 gaining approval, telecom licenses have been uncoupled from the band spectrum made available to them. Operators will now be able to provide any kind of service based on any technology, removing earlier restrictions on usage of specific frequency bands for specific services. Starting in 2013, the government will also develop capabilities for online real-time submission and processing of license requests.100 The NTP 2012 replaces a 13-year-old policy from 1999.

4G services to be launched across the nationEven as the 3G subscriber base is expected to continue growing in 2013, 4G LTE services will be launched across the country by numerous service providers, including Airtel, Reliance, Videocon and Aircel. Airtel already offers 4G services but only in the cities of Kolkata, Bangalore and Pune. In the coming year, Airtel plans to launch 4G services in New Delhi and Mumbai.

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7. Ibid.8. Ibid.9. Ibid.10. Economist Intelligence Unit. “Country data.” Accessed 23

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15. Economist Intelligence Unit. “Country data.” Accessed 15 December 2012.

16. Economist Intelligence Unit. “Viewswire – India.” Accessed 11 December 2012.

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22. Ibid.23. Financial Express. “FDI inflow jumps more than two-

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27. Economic Times. “India-ASEAN conclude free trade agreement in services, investments.” 20 December 2012. http://economictimes.indiatimes.com/news/economy/foreign-trade/india-asean-conclude-free-trade-agreement-in-services-investments/articleshow/17695475.cms.

28 Ibid.29. IMF working paper. “The demographic dividend: Evidence

from the Indian states.” February 2011.30. LA Times. “Population crisis: Amid global population

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31. The Economic Times. “iCreate will promote next-generation entrepreneurship: Narendra Modi.” 4 April 2012.

32. Deccan Herald. “Experts call for better senior care; warn of dipping life expectancy.” 20 September 2012. http://www.deccanherald.com/content/280007/experts-call-better-senior-care.html.

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Indian chemicals industry. 2 March 2012.47. The Indian Express. “MoD clears mega deals for radars,

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Pipavav Defence for Rs 1,350 crore.” 15 December 2012.49. NDTV. “Reliance University is next big project: Nita

Ambani.” 20 January 2012.50. Economic Times. “Government to set up 1,500 new ITIs in

next 5 years.” 15 November 2012. 51. Hindu Business Line. “EU to invest Rs 42 cr in skills

development project in India.” 23 May 2012.52. Economic Times. “Australian body ACPET ties up with NSDC

to meet India’s skilling needs. 1 November 2012. 53. Economic Times. “Switzerland can help India fill ‘skill gap,’

says ambassador. 5 December 2012. 54. Economic Times. “No extension of deadline for enforcing

RTE Act: Pallam Raju.” 8 November 2012.55. Financial Chronicle. “Godrej to focus on FMCG, realty over

next decade.” 1 January 2013.56. Press Trust of India. “Online shopping touched new heights

in 2012, garnered $14 billion in revenue.” 1 January 2013.57. www.techcircle.vccircle.com. “Top 5 e-commerce trends in

2012.” 24 December 2012.58. Business Standard. “Centre may roll out direct selling

guidelines soon: Amway.”17 November 2012.59. Overseas India Facilitation Centre. “Healthcare in India.” 30

November 2012.60. Economic Times. “Government plans to supply essential

medicines free.” 24 August 2012.61. Economic Times. “Apollo Hospitals to have 150 multi-

specialty clinics by October, 2014.” 28 August 2012.62. Business Standard. “PE pours money into India health

care.” 30 December 2012.63. Hindu Business Line. “Narayana Hrudayalaya plans to set

up 100 low-cost hospitals.” 3 May 2012.64. The Financial Express. “Eye-Q to invest Rs 160 cr

investment to open 80 more hospitals.” 2 December 2012.65. www.ibef.org. “Healthcare industry.” Accessed 15 December

2012. 66. India Infoline. “Sector outlook 2013 for IT/ITeS sector: Dun

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68. CIOL. “National optic fiber network reality in 2013.” 30 March 2012.

69. Economic Times. “Highways hit roadblocks in 2012 as infrastructure sector lost its fancy with banks and financial institutions.” 27 December 2012.

70. The Times of India. “India Inc shuns govt road projects.” 20 December 2012.

71. Economic Times. “Delays reflect NHAI’s deficiency in project planning: Parliamentary Panel.” 9 December 2012.

72. The Financial Express. “Govt proposes PM-led National Investment Board to axe mega projects hurdles: Chidambaram.” 30 November 2012.

73. The Financial Express. “About Rs 64k cr investment needed for strong backend infra.” 17 November 2012.

74. India Infoline. “India’s entertainment & media industry to clock over Rs. 1,750 bn by 2016: CII-PwC.” 29 October 2012.

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chairman.” 19 December 2012.77. Hindu Business Line. “India in talks with US for LNG

imports.” 18 May 2012.78. Economic Times. “BPCL plans up to Rs 45,000 crore CapEx

by 2017.” 22 September 2012.79. Economic Times. “ConocoPhillips-ONGC partnership for

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80. Press Trust of India. “Indian Oil, BPCL, HPCL stop producing premium petrol, diesel.” 15 October 2012.

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82. Hindu Business Line. “Opportunities back home for Indian pharma.” Accessed 15 December 2012.

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branded drugs.” 16 October 2012.88. The Financial Express. “All FDI in domestic pharma cos to

be cleared by FIPB.” 3 December 2012.89. Economic Times. “Department of Pharmaceuticals to revive

Jan Aushadhi scheme.” 28 July 2012.90. www.domain-b.com. “Not possible to meet coal demand

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94. Economic Intelligence Unit. “Perspectives on India’s energy future.” 2012.

95. Business Standard. “RBI allows $1 bn ECB for promoting low-cost housing.” 17 December 2012.

96. The Times of India. “No time-frame for real estate bill”, December 13, 2012.

97. www.moneycontrol.com. “India real estate forecast for 2013.” 12 December 2012.

98. Hindu Business Line. “Dangers posed by FDI in retail.” 9 December 2012.

99. Economic Times. “No roaming charges within India from 2013, says Telecom minister Kapil Sibal.” 25 September 2012.

100. Press Information Bureau. “National Telecom Policy-2012 and Unified Licensing Regime.” 31 May 2012.

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This Report has been published for information and illustrative purposes only and is not intended to serve as advice of any nature whatsoever. The information contained and the references made in this Report are in good faith, neither Accenture nor any its directors, agents or employees give any warranty of accuracy (whether expressed or implied), nor accepts any liability as a result of reliance upon the content. This Report also contains certain information available in public domain, created and maintained by private and public organizations. Accenture does not control or guarantee the accuracy, relevance, timelines or completeness of such information.

Project team

Raghav Narsalay, Mamta Kapur, Ryan T. Coffey, Aarohi Sen, Smriti Mathur

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with 259,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

About the Accenture Institue for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accenture’s extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high performance businesses.