India is the 12th largest economy in the world and has the second largest population at 1.13B. India’s GDP grew 9.1% in 2007 and grew about 8% each of the previous three years. However, while India’s economy is booming, its lack of natural resources, compared to emerging markets like Brazil and Russia, and lack of infrastructure investment present real obstacles to the country's further growth. The Indian government also expects that about $500B in infrastructure investment will be needed to support the ongoing growth of the country. The economy ran into difficulties in 2008 as inflation rose to 11.4%, the highest since 1995, due largely to record prices in oil and other major commodities. The stock market fell 40% in the first half of 2008 and foreign investors withdrew $5.5B from the market after having put $19B into the market in 2007. India also has a fiscal deficit amounting to 6% of GDP, higher than any other major emerging market.
Major Indian Companies
Energy
• Reliance Industries Limited (RELIANCE.EQ-IN) is the largest company in India.
• Oil and Natural Gas Corporation (ONGC.EQ-IN) is a major oil and gas producer.
• Indian Oil Corporation Limited (IOC.EQ-IN) is an oil producer.
• NTPC Limited (NTPC-BY) is a major utilities company.
Banking
• ICICI Bank (ICICIBANK-BY) - ICICI Bank is the largest credit card provider in India.
• HDFC Bank (HDFCBANK.EQ-IN)
• State Bank of India (SBI-BY) is the largest bank in India.
Telecommunications
• Bharti Airtel (BHARTIARTL-BY) is a major telecom services provider.
• Reliance Communications (RCOMSL-BY) is a major telecom services provider.
Industrial
• Steel Authority of India Limited (SAIL-BY) is the largest steel producer in India.
• Tata Steel Limited (TATASTL-BY) is the second largest steel producer.
• Hindustan Zinc Limited (HINDZINC-BY) is a mining company that produces zinc and lead.
• Bharat Heavy Electricals Limited (BHEL-BY) is an industrial manufacturing and engineering company.
Retail
• Pantaloon Retail Limited (PANTALOONR.EQ-IN) is India's largest retailer.
• Shoppers Stop Limited (SHOPERSTOP-BY) is an Indian department store.
Services
• Infosys Technologies (INFY) is the largest IT outsourcing company in India.
• Wipro (WIT) is a major IT outsourcing company.
• Satyam Computer Services (SAY) is a major IT outsourcing company.
• Tata Consultancy Services (TCS-BY)
• Catvision Products Ltd (CATVISIO) is a niche security technology company in India.
Automotive
• Tata Motors (TTM) is the largest automobile manufacturer in India.
• Maruti Suzuki India (MARUTI-BY) is a major automobile manufacturer, especially for small cars.
• Mahindra_&_Mahindra_Ltd_(MNM-BY) is the top tractor maker and also is one of the car-makers.
Foreign Companies Invested in India
• Nokia's second largest market behind China is India. Nokia's Asia-Pacific segment made up 22% of sales in 2007, predominantly coming from China and India. India was Nokia's third largest market in 2006, but passed the US in 2007 putting it in the second place spot.
• Hyundai is the second largest car manufacturer in India and had a 17% share in the automobile market in 2007.
• IBM is the largest multinational company in India and received about $1B in sales from India in 2007.
Trends and Forces
India Pays High Price to Fuel Rapidly Growing Economy
India's GDP grew 9.1% in 2007 and over 8% per year the three years before that, but India does not have the natural resources to cover the majority of the fuel demanded by this growth. India must import 75% of its oil and in 2007/2008 oil prices hit record highs. India paid $68B in oil imports in 2007-2008, a 40% increase from the previous year. In an effort to reduce the pain of high oil prices, India is turning to one of its few major resources: coal. Coal makes up about 55% of India's energy needs, with about 83% of coal coming from the state-run oil company, Coal India Limited. However, domestic coal production is still not sufficient as Coal India's chairman said that he expects coal imports to rise 10% in 2008. Coal India is also investing in operations in Africa, Indonesia, Canada, and Australia to help meet the demand. While India must import a lot of its energy, the domestic energy companies, like Reliance Industries and Indian Oil Corporation, are still in high demand and growing rapidly.
A Booming Retail Market
The retail market has grown 1,440% between 1991 and 2007 and is the 5th largest retail market in the world at $330B in 2007. India has 12M retail outlets, but the market is by no means dominated by organized retail chains. Only 4% of India’s retail market is made up by organized retailers, and, as a result, foreign companies have started to invest in the growing Indian market. McKinsey Global reported that the middle class in India could grow from 50M to 300M and that the average Indian income will grow 300% by 2025. However, already India is the 3rd largest country in the world by purchasing power and has the second largest population in the world – 1.1B people.
Expanding the Infrastructure
The Indian government expects that about $500B in infrastructure investment will be needed to support the ongoing growth of the country. In 2007 only 20% of India’s roads were considered to be in good condition and it takes an average of 3 to 5 days for a port to turnaround a ship (compared to 4 to 6 hours in Hong Kong and Singapore). On top of that, India has not expanded its air infrastructure since 2002, but over that same time the number of air passengers has increased 25%. India's GDP is growing at an average annual rate of 7%, but without an equally impressive investment in India's infrastructure, the growth can not be sustained. Tata Steel and the Steel Authority of India are the two largest steel companies in India.
Growth of Internet and Technology Usage
About 40% of the 1.1B person population is 18 or younger, and this is the generation leading the adoption of the internet and consumer technology products. Between 2000 and 2007, the number of Indian people using the internet grew 700%. The internet population grew to 60M which represents a 5.2% penetration. This, however, is very low compared to penetration in the US, Japan, and South Korea which are all around 68% penetration. Of those 60M users, only about 3M have access to broadband. At the same time, India is the fastest growing mobile phone market in the world. Gartner predicts that India's market will be $37B by 2012 (a compounded annual growth rate of 12%). In 2007, mobile phone penetration was 19.8%, but Gartner expects that to increase to 60.7% by 2012. India has primarily a rural population and a low average income so mobile phone manufacturers are focusing on handsets below $25. Market prices for notebooks tend to be lowered in the Indian market as well in order for companies to gain market share, but the introduction of "netbooks" or mobile internet devices, could provide a cheaper alternative to notebooks for consumers in India.
$31B in Software Exports
Software exports have grown from 500M in 1994 to 31B in March 2007, making up about 22% of India's exports. India is the largest exporter of software beating out both China and Russia. IT business process outsourcing grew 33% in 2007 and Nasscom expects the IT industry in India will grow to $75B by 2010. India’s largest IT outsourcing companies like Infosys and Wipro have also started to set up branches in other possible outsourcing hot spots like China, Latin America, and Morocco.
India's Demographics
For the most part, India remains a rural population. About 77% of the country lives outside the cities and about 60% of the workforce is in agriculture. The average Indian salary has grown 15.2%, the most of any country in the world in 2007, but, at the same time, 30% of the population is in poverty and only about 61% are literate. The educational system has been neglected for many years and while there are finally efforts to revamp India's education, it will take time for measures to take effect. Only 10% of Indian children go to college and, as a result, India is suffering from a shortage of skilled labor.
