Our comprehensive assessment of India's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect India, as well as the latest industry developments that could impact India's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in India before your competitors.

Country Risk

India Country Risk

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Core Views

  • The strength of the electoral win by the opposition Bharatiya Janata Party (BJP) at the lower house (Lok Sabha) elections in India surprised many - the party swept 282 seats of the 543-seat parliament, 10 more seats than it needs for a majority. Prime Minister Narendra Modi led his party to victory with a presidential-style campaign never seen before and overcame questions about his Hindu nationalist background. While we, like many others, hold high expectations for Modi's team to deliver on its promises to clear the road blocks obstructing infrastructure projects, we hold a more downbeat outlook on the prospects for the quick liberalisation of sectors such as mining, oil and gas, and insurance.

  • We maintain our above consensus outlook for India's real GDP growth, expecting the return of investor and business confidence to support an economic growth revival in...

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India Operational Risk Coverage (9)

India Operational Risk

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BMI View: India's well-educated and sizeable labour force, developed financial sector and expanding market size make the country an attractive location for foreign direct investment. However, a number of key risks limit the market's overall appeal. A high threat of terrorism drives up the cost of employing foreign workers in India , low unemployment rates increase the cost of employment since there are few people available to work , and high levels of corruption and red tape make India an unattractive location to do business. Furthermore, the vast size of India makes transporting goods a logistical challenge since although the transport network is generally good, it is not able to support the country's rapidly expanding trade volumes. Overall, we score India 44.2 out of 100 for its Operational Risk ,...

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India Crime & Security

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Despite boasting Asia's third largest economy and second biggest military, India suffers from high levels of crime and security risk and the country poses moderate security risks for foreign business travellers, expatriates, and tourists. The country faces persistent terrorist risks and experiences elevated levels of petty crime and female sexual assault. Furthermore, foreign governments advise their citizens to avoid certain areas due to instability. India is a regional underperformer in the BMI Crime And Security Index, in 24th place out of 29 Asian countries with a score of 25.8 out of 100. Neighbouring states rank as follows: China (17th), Sri Lanka (19th), Nepal (21st) and Pakistan (29th).

India is a relatively safe place for business assets in terms of property crime, with only a small number of investors citing crime and theft as a major impediment to doing business. Pick-pocketing is one of the most commonly...

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India Labour Market

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India is the second biggest country in the world in terms of population and so has access to one of the most sizeable labour forces. The talent and skills-level depends on jurisdiction and subject matter. Overall literacy rates are high among the younger generation and 63% among the total workforce. However, major socio-economic inequality hinders employment prospects for those on the lowest end of the scale. Taking these factors into consideration, India scores 49.1 out of 100, placing 15 th out of 29 Asian states, and 82 nd out of 170 countries worldwide, in between Vietnam and Macedonia.

The labour force presents a number of significant advantages for private sector development, notably a large population (1.2bn people) with good growth prospects (1.8% p.a.) and good literacy rates in certain areas. There have also been major gains in basic skills attainment in recent years, in line with economic growth and...

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India Logistics

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India, despite its considerable size and population, remains something of a sleeping giant in terms of its international trade potential and the overall value of its supply chain. While India's l economy has become increasingly liberalised over the past few years, the country's trade and logistics sectors remain hamstrung by a combination of mediocre transport infrastructure and high levels of bureaucracy and red tape. A poor utilities framework, both in terms of power generation and the availability and fuel and water are further impediments to an effective supply chain. Despite ongoing challenges, in the past few years there have been signs that the Indian government is beginning to address these inefficiencies and is channelling increased resources into modernising the country's transport and utilities framework. This improvement explains India's position in the top half of BMI's Asia Logistics Risk Index. The country places 14 th...

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India Trade & Investment

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Trade and investment risks are high in India, owing to the country's significant fiscal and trade barriers and the extent of red tape plaguing its bureaucracy. Furthermore, investors are likely to confront weak government policies and widespread corruption, significantly increasing the legal risks and costs involved in operating a business in the country. That said, the country's developed banking system provides good access to international financial markets. For these reasons, the country receives an overall score of 42.0 out of 100 for Trade And Investment risks, putting it in 19th position out of 29 countries in Asia.

The last decade is seen as a something of a golden era for foreign direct investment (FDI) in India. However, significant barriers to foreign investment remain which continue to deter investors. Most notably, the country's limited banking infrastructure and access to banks are a significant risk for investors. Another major...

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India Industry Coverage (24)

Agribusiness

India Agribusiness

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BMI View:   We hold a positive view on India 's   agribusiness sector , as the country will remain an agricultural powerhouse and is likely to maintain high levels of self-sufficiency for major food crops. Production growth of various commodities will be driven by strong government support and robust demand for manufactured foodstuff s . We see significant growth opportunities in sub-sectors such as dairy, coffee and livestock. However, India will be increasingly vulnerable to exceptional weather phenomen a owing to climate change effects and serious water shortages . Moreover...

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Autos

India Autos

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Over H114, passenger car sales fell by 0.5%, to 1,280,699 units, according to information on the Focus2Move website. This marks something of a recovery for a new vehicle market which declined by 9.8% across FY13/14 (April-March), to 3,134,204 units, according to figures from the Society of Indian Automobile Manufacturers (SIAM).

Breaking down the sales figures for the April-June period (the first quarter of FY14/15), passenger car sales were up by 1.3% year-on-year (y-o-y), whereas commercial vehicle sales were down by 16.1% y-o-y. Three-wheeler sales were up by 11.64% y-o-y and two-wheeler sales were up by 13.7%, boding well for a strong performance from this sector over the full year.

Looking forward, BMI believes the stage is set for a continued recovery in new vehicle sales over the remainder of FY14/15, targeting 3.3% growth, to reach 3.24mn sales. First, our Country Risk team believes that...

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Commercial Banking

India Commercial Banking

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Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

India Consumer Electronics

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BMI View : India's status as a large emerging market that is making progress on the policy environment for a range of sectors, combined with its late developer status in terms of consumer electronics device adoption rates, means we expect it to be a regional outperformer over the medium term. We expect the market to remain on a strong growth trajectory 2015-20 1 8 , with particularly robust demand growth for computer hardware and handsets expected . We forecast the total consumer electronics spend in India will increase by 8.1 % in US dollar terms in...

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Defence & Security

India Defence & Security

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BMI View: W e believe that India's defence ambitions will continue to face challenges over 2015 . That said, the increase of the foreign inves tment cap to 49% from 26% s hould boost the defence industrial base.   India's security risk is   medium given India's issues with transborder and domestic terrorist groups and particularly in light of the growing prevalence of international terrorism .  BMI highlights the corruption probe into the VVIP helicopter deal has the potential...

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Food & Drink

India Food & Drink

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BMI View:   Over the long term, the Indian economy presents one of the best growth stories globally. The Indian population is the second largest in the world and i s forecast to continue to grow for decades. Real GDP will also grow at an average of around 6% to 2023 , with per capita incomes rising at a similar rate . We forecast that inflation will average around 4% over the longer term, which should be a sustainable level for the economy. W e maintain a bullish long-term outlook on food consumption within the country, especially as multinationals penetrate the market with greater force...

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Freight Transport

India Freight Transport

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India's state-run major ports continue to be the underperformers in the BRIC country's freight transport infrastructure, with volumes at many facilities struggling to grow in recent years. Ports have also been harmed by a ban on iron ore mining, and a fall in exports to Europe.

A case in point is the Jawaharlal Nehru Port, India's largest in terms of containers handled, which has seen a decrease in its box throughput as it continues to chase the elusive fourth terminal. We see strong growth potential in the air freight sector, however, as air freight and logistics companies look to capitalise on India's growing pharmaceuticals export market, though national carrier Air India will struggle to take on this mantle given its financial constraints. The opening up of the air sector to foreign players could provide a boost to the market.

Headline Industry Data

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Information Technology

India Information Technology

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BMI View: W ith the exception of its role as an outsourcing hub India's IT market development trails far behind fellow Asian giant China on virtually all metrics . As a regional laggard, but one with an improving business environment, India's relatively undeveloped status translates into great growth potential over the medium term, which should see it become a regional outperformer . W e raised our outlook for Indian IT spending growth after the election and first policy announcements of Modi's government...

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Infrastructure

India Infrastructure

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BMI View:   We remain conservative towards the near-term growth outlook for India's construction and infrastructure sectors despite the improvement in growth in Q1 2014/15. Even though the results of the 2014 Lok Sabha elections have increased the likelihood for policy formation and execution as well as greater coordination between ministries, other factors dampening construction and infrastructure activity are unlikely to be resolved anytime soon.

Key Trends And Developments

  • In July 2014, the government of Prime Minister Narendra Modi plans to develop 200 low-cost airports in Tier-II and Tier-III towns across India in the next few years. The government has already identified 50 such cities across the country under the first phase of this development. The Airports Authority of India formulated a cost-effective...

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Insurance

India Insurance

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BMI View : As of mid-2014, the latest developments in India's insurance sector confirm our view that the strengths (and opportunities) are considerably greater than the limitations and threats. Overall premiums should grow slowly, but the downside risks are very limited. Non-life insurers are clearly benefiting from past reforms in the motor vehicle insurance market. There are early signs that new business premiums in the life segment are stabilising, after several years in which they have been under downwards pressure. Structural change continues to be driven by the regulator rather than the insurance companies, and focuses on stakeholders and social objectives as much as the insurers' customers and shareholders. Nevertheless, most trends remain positive.

Challenges include an idiosyncratic regulatory regime, competitive landscapes (in both major...

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Medical Devices

India Medical Devices

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BMI Industry View : The Indian medical device market ranks among the world's top 20 but, despite strong growth rates, it remains disproportionately small with per capita spending of less than US$3.0 . After registering strong growth between 2010 and 2012, the sharp depreciation of the rupee that took hold from May 2013 has dampened growth in US dollar terms, although the market is still set to remain one of the world's fastest growing over the next five years. Much of future increased demand will come from the private sector which is expanding to meet the healthcare needs of India's growing middle-class. T he...

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Metals

India Metals

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BMI View: India is set to become a major consumer of metals over the coming years as the government makes substantial efforts to improve infrastructure in the country . That said, major roadblocks concerning the availability of raw materials and institutional weaknesses will continue to hinder growth in the metals industry.

In contrast to the dimming outlook in major steel-producing countries, we believe India's steel sector is on track to experience healthy growth over our forecast period to 2018. While steelmakers in countries including China, Japan and South Korea are struggling with overcapacity and sluggish steel demand, the fortunes for Indian steelmakers are much more positive.

We expect India to...

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Mining

India Mining

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BMI View:   India's poor operating environment will continue to impede growth in the mining sector. A domestic shortfall in coal production is unlikely to fade a way anytime soon, while growth in iron ore output will be restricted by the government's clampdown on illegal mining.

While growing domestic demand for commodities will encourage state-owned miners to expand production, we believe India's poor operating environment will continue to restrict growth in the mining sector. A spate of bureaucratic and regulatory hurdles will remain major challenges for miners to grapple with over the coming quarters. For instance, the difficulties in securing environmental clearances and land acquisition have led to a series of mining projects being delayed over the past year....

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Oil & Gas

India Oil & Gas

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BMI View: Incremental reforms to India's regulatory regime under the Modi-led government offer upside risk to upstream exploration and production. However, with the country's most prospective resource base in the deepwater offshore and unconventional sectors, wider improvements to the fiscal and licensing terms may be needed to support more substantial increases in investment. The outlook on the refining sector remains heavily bullish, supported by domestic fuel price liberalisation , rising consumption and the sharp fall in the cost of imported crudes.

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Headline Forecasts (India 2012-2018)
2012

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Petrochemicals

India Petrochemicals

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BMI View: Growth in investment and output has been undermined in part by the indefinite closure of th e Haldia petrochemicals complex. However, we expect improvements to the country's outlook in the years ahead under the new Modi administration.

Haldia Petrochemicals Ltd (HPL)'s temporary but indefinite closure in July 2014 prompted BMI to remove the complex's capacities from medium-term forecasts, including 670,000 tonnes per annum (tpa) ethylene, 700,000tpa of polyethylene (PE) and 340,000tpa polypropylene (PP). Having a 12.8% share of the domestic polymers market, HPL's failure has also affected downstream plastics converters and around 150 plastic processor firms have shut down as a result.

In 2015, attention will focus on the ONGC's new complexes in...

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Pharmaceuticals & Healthcare

India Pharmaceuticals & Healthcare

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BMI View:   The new government under Prime Minister Modi bodes well for the overall pharmaceutical sector. The proposed introduction of universal healthcare in 2015 coupled with small regulatory reform will help unlock the potential of the large Indian market.

Headline Expenditure Projections

Pharmaceuticals: INR904.0bn (USD15.4bn) in 2013 to INR1,021.8bn (USD17.0bn) in 2014; +13.0% in local currency terms and +10.36% in US dollar terms. 

Healthcare: INR4,640bn (USD79.2bn) in 2013 to INR5,179.9bn (USD86.3bn) in 2014; +11.6% in local currency terms and 9.0% in US dollar terms

Risk/Reward Index

India's Pharmaceutical Risk/Reward Index(RRI) score for Q414 is 53.0 out of the maximum...

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Power

India Power

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BMI View:   We have revised up our forecasts for India's power sector this quarter on the back of positive economic and political momentum. In particular, the victory of Narendra Modi in the 2014 general elections is likely to be a catalyst for more rapid growth in the sector over the coming decade.

We have revised up our 2014 forecasts for electricity generation and consumption in India this quarter on the back of positive economic and political factors. We now see electricity generation growing by 5.2% in 2014, up from 5.0% previously. We have also revised up our long-term forecasts for the Indian power sector, and are now forecasting electricity generation to grow an average of 5.7% per annum between 2014 and 2023, up from 5.5% previously. The acceleration of economic growth and the positive operating environment for solar energy are factors attributing to the...

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Real Estate

India Real Estate

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BMI View: There is huge long-term potential in India's commercial real estate market as the country builds on its status as a global IT and outsourcing hub and becomes open to more foreign investment, and as the spending power of the expanding middle class continues to grow. The economy is also beginning to rebound, and although in the short term we see no rise in rental rates, risks are to the upside. 

Growth in India's commercial real estate market will be supported by an uptick in economic growth. Data from the first quarter (April-June) of the 2014/2015 financial year indicate that the economy grew by 5.7% year-on-year (y-o-y) in real terms, and we forecast growth of 5.6% in 2014/2015 (April-March), supported by regulatory improvements and an increase in investment as well as strong growth in exports, industrial output and services output....

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Renewables

India Renewables

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BMI View: We forecast non-hydropower renewable generation in Ind ia to grow by an impressive 11.2 % in 2015, with growth supported by strong support from the public sector. Over the longer term, we expect this strong level of government involvement as well as difficulties in the thermal generation sector to underpin our positive long-term outlook for the renewables sector.

We forecast that non-hydropower renewable capacity in India will grow by 3.4GW in 2015, marking an 11.7% year-on-year (y-o-y) increase in capacity. Growth will primarily come from wind and solar capacity, with most of the projects scheduled to come online in 2015 already underway.

We are maintaining our positive long-term outlook for the Indian non-hydropower renewables sector, and forecast capacity to grow at an average rate of 9.8% a year between 2015 and...

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Retail

India Retail

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BMI View:   Greater policy certainty and positive regulatory improvements are benefiting the Indian retail sector, and we believe the economy will sustain robust growth momentum over the coming quarters. The Indian retail market is entering a period of unprecedented change as online activity escalates, while bricks-and-mortar retailers are increasingly shifting gear to tier 2 and 3 cities , such as Pune , as disposable income gr ows among countryside dwellers.

The India Retail Report focuses on household spending on various segments within the retail sector, forecasting future spending patterns, assessing key drivers behind this, and determining future trends. We also look at the outlook for the sector as a whole, individual segments within it, and the...

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Shipping

India Shipping

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BMI View: The primary issue in Indian shipping continues to be the state of the nation's ports. Investment in the 12 major state-run facilities has not kept up with the demand engendered by rapid economic growth experienced in India over the past decade. This is leading to repeated issues of congestion at the port s. I nvestment is now starting to be made, but this may be a case of too little, too late. Further more , Indian ports' troubles have been compounded by a fall in demand in the eurozone, which has contributed to a fall in container throughput at many facilities in recent years . It is hoped that the projected...

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Telecommunications

India Telecommunications

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BMI View:   Despite the huge investment opportunities posed by the lack of adequate broadband infrastructure in metropolitan markets and basic services in rural areas, the Indian telecoms market is challenging for new and established players alike. The fluid regulatory regime is open to highly variable interpretation by the government, the regulators and the most influential businesses while the fragmented nature of the mobile and wireline markets - caused by the imposition of a regional licensing scheme - means that investment has largely targeted the most affluent areas of the country and bypassed large numbers of rural consumers. In an effort to justify investment in mobile and broadband infrastructures, operators have resorted to intense price competition to win and retain consumers. This is not sustainable over the long term.

Key Data

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Tourism

India Tourism

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BMI View : The India t ourism report examines a range of key indicators in this enormous market, including expected growth in the number of inbound and outbound travellers and th e forecast increases in tourism- related expenditure and industry value. With g rowth expected across the board as India benefits from improving domestic economic conditions and expands its regional and international travel connections, the future is looking very bright for the burgeoning tourism industry.

The outbound tourism market is currently more substantial than inbound tourism, with some 17.6mn tourism departures expected in 2015. With a population of more than 1.2bn, India offers an enormous potential outbound tourism market, as well as a...

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Water

India Water

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BMI View: The persistent conflict between agricultural, domestic and industrial water demands is going to become increasingly tense over the coming years in our view, was consumption rises and puts ever more pressure on existing water supplies. We believe events such as the recent protest by farmers in Tamil Nadu State against withdrawals from the Cauvery River will become more common. This will put additional pressure on the government to invest in better water infrastructure and develop a more coherent national water management plan. 

Urban areas are better supplied with 96% of the urban population having access to an improved water source and 54% to improved sanitation. Inadequate access to clean water impacts investors involved water-intensive industries or those with a large labour force. Furthermore, the level of sanitation in India affects the facilities that...

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