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

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 : We made a positive revision to the outlook for Indian consumer electronics spending this quarter to reflect strong growth in notebook, tablet and smartphone sales, as well as improving economic sentiment following the election of Modi's government in H114. We expect the market to remain on a strong growth trajectory over the medium term, with robust demand growth for computer hardware and handsets driving spending higher. We expect the total consumer electronics spend in India will increase by 11.7 % in US dollar terms in 2014 to USD 71.2 bn , and then reach USD92.5bn in 2018 . We expect medium term growth will be driven by rising...

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Defence & Security

India Defence & Security

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BMI View: BMI believes that India's defence ambitions will continue to face challenges for the fiscal year 2014-15. That said, the increase of the foreign investment cap to 49% should boost the defence industrial base. Using BMI ' s Risk Reward Rating BMI calculates that India's security risk is medium given the growing prevalence of international terrorist groups and the ongoing territorial disputes in India's northern regions. In our view, the corruption probe into VVIP helicopter deal has the potential to complicate further other procurement deals in India.

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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:   India's IT market development trails far behind fellow Asian giant China, with the notable exception of its export oriented IT services industry. One positive from India's relatively undeveloped status is that it has great potential over the medium term, with a PC penetration rate around half the level in China. Following the election of Modi's government we have raised our outlook for Indian IT spending , and now forecast the market will grow   at a CAGR of 12.7% 2014-2018. H ardware sales will be key as incomes rise and government initiatives extend PC ownership to lower income segments, while we also expect robust enterprise and public sector hardware demand. While the outlook is bullish ,...

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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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Espicom 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....

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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 pertinent efforts to improve the level of 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 such as 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 become a major...

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Mining

India Mining

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BMI View: A greater number of state-owned miners will be keen to expand production along with India's growing economy. However , the country'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 production 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...

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Oil & Gas

India Oil & Gas

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BMI View:   While India's downstream grows from strength to strength, upstream developments continue to waiver. India has significant gas production potential in the KG Basin and unconventional onshore resources, but has failed to sufficiently incentivise investment. Both the upstream and downstream are heavily influenced by the state.

Headline Forecasts (India 2012-2018)
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Petrochemicals

India Petrochemicals

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BMI View: The uneven development of the Indian economy is being mirrored in the development of the petrochemicals industry with capacity continuing to surge in the west and north, while the east has seen a major failure of operations at Haldia Petrochemicals Ltd (HPL) that is causing major concerns for downstream producers, states BMI's latest India Petrochemicals Report.

HPL is one of the largest manufacturers of high density polyethylene (HDPE) in the country, supplying different grades of polymers mainly in the Eastern region. As a result, manufactures were forced into importing polymers to maintain output and capacity utilisation in the conversion sector fell to under 50%. If the situation continues, many downstream units could close. The gap in the market left by HPL is not easily filled by other players due to logistics and lack of capacity in the region. Imports...

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Pharmaceuticals & Healthcare

India Pharmaceuticals & Healthcare

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BMI View:   While the newly elected government is keen to improv e the population's health, BMI highlights that this may come at the pharmaceutical industry's expense , as drug price cuts are increasingly being using to limit health expenditure. We maintain that the government needs to increase spending on healthcare rather than pushing cost s   on to the pharmaceutical industry.

Headline Expenditure Projections

Pharmaceuticals:...

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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: The considerable potential of India's commercial real estate sector is being undermined by a weak macroeconomic climate with manufacturing activity and consumer spending growth at multi-year lows. This uncertain backdrop has led demand to stagnate in some areas of the country, leading to oversupply and fluctuation in rental rates. India has nevertheless maintained its a ppeal as an affordable (and hence attractive) market for international real estate investment.

The election of Narendra Modi's Bharatiya Janata Party comes at a time of considerable flux for the Indian economy, which grew at its slowest rate for more than a decade in 2013 as both businesses and consumers cut back on spending and investment in the run-up to the May election. This sluggish growth trend has continued into 2014...

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Renewables

India Renewables

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BMI View: We are maintaining our 2014 forecasts for non-hydropower renewable generation and capacity in India this quarter, and expect generation to grow by 11.2% this year. We are also maintaining our positive long-term outlook for the sector as thermal generation continues to face numerous difficulties and government support for the sector remains strong. However, the victory of Narendra Modi in the 2014 general elections poses an upside risk to our short- and long-term forecasts as Modi is a strong support of renewable energy.

Non-hydropower renewable generation growth will be driven primarily by the country's mature wind sector as well as the smaller, but booming solar sector. We are also maintaining our positive long-term outlook for the Indian non-hydropower renewables sector and forecast capacity to grow at an average rate of 10.7% a year between 2014 and 2023.

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Retail

India Retail

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BMI View:   An emerging middle class and a highly urbanised youth population which aspires to new products and brands should result in a strong rise in household spending across all retail subsectors over the next few years. We are particularly positive about the future growth prospects for communications, clothing & footwear and furnishing & home, with personal care & insurance spending also set to grow strongly. However, we expect food & and drink expenditure to remain the highest throughout our forecast period.

The India Retail Report provides an extensive forecast of various retail indicators, including household spending and headline total spending across each retail subsector, household income and employment forecasts, demographic forecasts, and a detailed breakdown of household and per capita spending across a large number of retail areas...

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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 in the ports, but investment is now starting to be made. However, this may be a case of too little, too late. Further, 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 return to growth in the currency bloc in 2014 will result in throughput growth returning to the major Indian ports.

Headline Industry Data

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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: With a population of over 1.2bn, India offers an enormous potential outbound and internal tourism market. The country has a fast growing middle class, and thanks to GDP growth we are seeing an expansion of private financial consumption which is a key indicator of tourism spending. The outbound travel market in 2013 reached 13.7 mn, and thanks to robust growth during the forecast period we expect outbound travel to reach 24.4mn by 2018.

India already has a well established tourism market, and has long been a popular holiday destination for travellers from a range of source markets across the world, including the UK and the USA. Moving forward, we expect India to build upon this healthy base market and thanks to growth of around 5% per year we are forecasting that annual arrivals will reach 8.8mn per year by 2018. As the world's seventh...

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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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