MDI, Gurgaon

Strategy Management - II
Assessment of the changes in Indian industry environment and their impact in respect of the following sectors: a) Telecom b) Automobile c) Shipping
ARPIT JAIN: 12P189

Indian Industries
The Indian economy has survived the global downturn very well. It has posted one of the highest rates of economic growth in the world despite other major industrial giants lagging behind. At the end of 2009, the Indian economy was growing at 7% a year. The strongest growth was coming from the manufacturing and construction sector and the weakest section was agriculture. The drawback of such a rapid economic expansion is a rise in inflation. The economy of India is the eleventh largest economy in the world by nominal GDP. Post independence the country went into a fast paced economic growth which was further fuelled by the free market principles started in the 1990’s which welcomed foreign investments. It has been predicted by leading Economists around the world that by 2020, India will be among the leading economies of the world.
Four key industrial economic sectors are identified in India. The primary sector, largely extract raw material and they are mining and farming industries. In the secondary sector, refining, construction, and manufacturing are included. The tertiary sector deals with services and distribution of manufactured goods. India's service industry accounts for 57.2% of the country's GDP while the industrial and agricultural sector contribute 28% and 14.6% respectively. Agriculture is the predominant occupation in India, accounting for about 52% of direct and indirect employment. The service sector makes up a further 34% and industrial sector around 14%. The labour force totals around half a billion workers. Industry accounts for 28% of the GDP and employ 14% of the total workforce.
In the revised 2007 figures, based on increased and sustaining growth, more inflows into foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India's GDP per capita in US$ terms will quadruple", and that the Indian economy will surpass the United States (in US$) by 2043. In spite of the high growth rate, the report stated that India would continue to remain a low-income country for decades to come but could be a "motor for the world economy" if it fulfils its growth potential.
According to the official estimates, Indian economy is expected to grow at 7.6% (+/- 0.25%) in the fiscal year 2012–2013. However, leading financial organisations and economic think-tanks expect Indian economy to grow slower than official projections.

Telecom Industry Size of the Industry | 562 million Subscribers, 525.1 million wireless connections per annum | Geographical distribution | Gurgaon, Noida, Bangalore, Hyderabad, Pune, Chennai, New Delhi, Mumbai and other cities. | Output per annum | Rs 136,833 crore per annum & Increasing 20% for every month | Percentage In GDP | 6% to Share |
Latest Developments * FDI of 74% is allowed subject to license granted by Department Of Telecommunication In Basic, Cellular, Paging and Value Added Service and Global Mobile Personal Communications by Satellite. * FDI up to 100% is allowed for dark fibre, electronic and voice mail. The condition set was that these companies would divest 26% of their equity in favour of Indian companies in five years, provided they were listed in other parts of the world. * FDI of 100% was allowed in telecom manufacturing. * The new trend in the Indian Telecom Industry is the 3G or Third Generation technology which is a convergence of various Second Generation telecommunication systems. The technology is intended for Smartphones - multimedia cell phones which consists of Video broadcasting and other e-commerce services such as, stock transactions and e-learning which will now be made possible much faster. It offers 3 Mbps speed for downloading, which is very high as compared to that of the 2G technology. * Mobile Number Portability is the service which allows any subscriber to change his service provider without changing his mobile phone number. The announcement of the guidelines has made telecom service providers to improve the quality of service to avoid losing subscribers. * Value added Services (VASs): Mobile VASs include text or SMS, menu-based services, downloading of music or ring tones, mobile TV, videos, streaming, and sophisticated m-commerce applications. * Manufacturing: The Indian telecom industry today manufactures a vast range of telecom equipment using state-of-the-art technology. Indian has become hub of many renowned telecom companies for even manufacturing bases in India. The production of telecom equipment has increased from US$ 9.09 billion during 2007-08 to US$ 10.75 billion during 2008-09 * In R&D the favourable factors such as facilitative policies, large talent pool and low labour cost can provide an impetus to the telecom manufacturing industry in the country. Exports increased from US$ 88.61 million in 2002-03 to US$ 2.42 billion in 2008-09 accounting for 21 % of the equipment produced in the country. * A consortium of global telecom service providers, including Reliance Jio Infocomm and Vodafone, have signed an agreement to construct and maintain a submarine telecom and data cable system connecting Southeast and South Asia to West Asia, as well as other regions. Alcatel-Lucent has signed an agreement with the consortium to deploy the Bay of Bengal Gateway (BBG) system. The 8,000 km BBG cable, to be operational by end of 2014, would link six countries * Reliance Communication (RCom) and Reliance Jio have signed a Rs 12,000 crore (US$ 2.02 billion) agreement. The latter will use 45,000 of RCom’s 50,000 ground and rooftop-based towers so that the rollout of 4G services can be accelerated, the two companies said in a press statement * OnMobile has entered into a definitive agreement to acquire business assets and liabilities of the US-based firm Livewire Mobile for US$ 17.8 million * Bharti Airtel plans to invest Rs 734.5 crore (US$ 123.86 million) in Gabon, Africa. The company will support social and commercial programmes including deployment of 3G and 4G networks, said Mr Manoj Kohli, Managing Director and CEO (International), Bharti Airtel. In addition, Airtel plans to use environmentally-friendly energy sources to power its telecom towers in Africa in order to reduce the operational costs of running the network * ZTE Corporation has entered into an exclusive agreement with Pune-based Calyx Group to market and distribute its products - smartphones and tablets - across the country * The trend in mobile data growth in India is in line with other high growth mobile data markets around the world. "The fact that data consumption by 3G users has tripled in one year clearly shows the rapid and steady increase in mobile data consumption in India. This translates into the need for high-quality mobile broadband services with improved speed and service quality to satisfy mobile broadband users," said Mr Sandeep Girotra, Head of India region, Nokia Siemens Networks * The pan-India GSM subscriber base stood at 667.56 million in April 2013, a 0.47 per cent rise for the second successive month in terms of net customer additions in May 2013, according to latest subscriber growth numbers unveiled by Cellular Operators Association of India COAI) * Moreover, rural India added 3.8 million subscribers, of which 1.66 million joined Bharti Airtel, making the Indian bellwether the largest rural player again.
Effect of the developments on Telecom Sector in 2012-13 * It is now the second largest telephone network in the world, after China. * Tele-density, which shows the number of telephones per 100 persons, was 76.75 per cent at the end of October 2012. * However with the growth of mobile telephony the number of landline telephones has declined from 32.17 million as on end March 2012 to 30.95 million as on 31 October 2012. * Wireless telephones now account for 96.7 per cent of all telephones. * After the Broadband Policy came into force in 2004, several measures have been taken to promote broadband penetration in the country. As a result, there were 22.86 million internet subscribers including 13.79 million broadband subscribers at the end of March 2012. * Broadband subscribers increased to 14.81 million by the end of this financial year. * India is expected to have around 130.6 million mobile internet users by March 2014, according to a joint study by the Internet and Mobile Association of India (IAMAI) and Indian Market Research Bureau (IMRB). The number of users accessing internet through mobile devices was 87.1 million in December 2012. * India's internet industry can contribute up to US$ 100 billion to India's gross domestic product (GDP) and generate about 22 million jobs by 2015. * The Indian telecom industry's contribution is likely to increase upto 3.3 per cent of the country's GDP by 2015. * The telecommunications industry in India attracted foreign direct investments (FDI) worth US$ 12,623 million between April 2000 to December 2012, an increase of 7 per cent to the total FDI inflows in terms of US$, according to the latest data published by Department of Industrial Policy and Promotion (DIPP).
Automobile Industry Size of the Industry | 2.6 Million Units | Geographical distribution | Jamshedpur, Pune, Lucknow, Gurgoan, Delhi, Mumbai, Bangalore, etc | Output per annum | Rs 2,000 crore per annum | Percentage in world market | 6-8% | Market Capitalization | 5% of the share |
Latest Developments * Yamaha Motor Co (YMC) has announced to set up its fifth global research and development (R&D) centre at its Greater Noida facility. * Honda Cars India Ltd (HCIL) plans to invest Rs 2,500 crore (US$ 462.11 million) at its Tapukara plant in Rajasthan. The company plans to set up a new assembly line for car with an installed annual capacity of 120,000 units. * Isuzu Motors plans to set up its greenfield manufacturing facility in Andhra Pradesh (AP), for pickup trucks or LCV and SUV, with an investment of Rs 1,500 crore (US$ 277.26 million) over 5-7 years. * Volvo plans to expand car operations in India. The company looks to drive in new models in the market apart from increasing its sales network. * Global ultra-luxury car maker, Rolls-Royce Motor Cars, plans to launch exclusive 'India Edition' cars in 2013. The car maker would come up with a customised edition of its Phantom and Ghost models for Indian buyers. * Escorts Ltd has inked a partnership with Italy-based BCS SpA to distribute and sell the speciality Ferrari brand of tractors in India. * TVS Motor and BMW AG's motorcycle division have announced a deal to jointly develop bikes that would give the Indian automaker access to BMW technology. TVS Motor and BMW will develop motorcycles in the sub 500 cc segment. * Bajaj Auto and Kawasaki Heavy Industries plan to take their partnership to Indonesia, under which select Bajaj products will be assembled at the Kawasaki facility and distributed through its network. * Bajaj Auto also plans to become the first Indian automobile company to manufacture a street bike, with a made in India motorcycle tag, in the US. The Indian company will manufacture this product for its partner KTM AG.
Effect of the developments on Automobile Sector in 2012-13 * The automobile industry in India reported a robust growth rate of 26 percent in the last two years (2010-2012). * The BSE AUTO Index outperformed the benchmark Nifty by 79%, 12% and 19% in FY10, FY11 and FY12, respectively. However, the sector has shown a sluggish growth of 12 percent in 2012. The trend is likely to stay with a 10 percent growth outlined for 2013 due to rising fuel costs and slow income growth. A cautious growth is expected over the next few years. * However, from a long-term perspective, rising incomes, improved affordability and untapped markets present promising opportunities for the automobile industry in India. According to a research report, sale of passenger vehicles is expected to double in the next four years and growth anticipated is higher than the 16 percent achieved in the past 10 years. * Two-wheeler vehicle segment is expected to show slow growth of 10 percent CAGR over the period of 2012-2016 according to the report. * The Automotive Mission Plan 2016 launched by the Indian Government seeks to grow the industry to a size of US $145bn by 2016 and make it contribute 10 percent to the nation’s GDP. * India is emerging as a strong automotive R&D hub with foreign players like Hyundai, Suzuki, and General Motors setting up base in India. This move is further enhanced by the Indian Government’s support towards setting up centres for development and innovation. Also there are opportunities of growth available in alternative segments like electric cars, vehicles run on natural gas, etc.
Shipping Industry Size of the Industry | 515 vessels with a grt of 7.06 million | Geographical distribution | The major ports are located at Calcutta/ Haldia, Chennai, Cochin, Ennore, Jawaharlal Nehru Port at Nhava Sheva, Kandla, Mormugao, Mumbai, New Mangalore, Paradip, Tuticorin and Vishakhapatnam. | Output per annum | 42% of total Indian tonnage | Percentage in world market | 8% of entire world trade |
Latest Developments * The Indian government has decided to invest US$ 737,939.5 million for the development of different projects in port sector. * It is also declared that the existing capacity of major ports will be raised from 689.83 million tonnes per annum to 1229.24 million tonnes per annum during the end of March 2017. * As per “Navy vision 2012”, 160 new vessels will be required by the year 2020. * The total Coast Guard vessel fleet is anticipated to increase to 250 vessels by end of 2020, from the present fleet of 95. * India and Austria has inked a pact for technological co-operation in the shipping and ports infrastructure sector. * The Shipping Ministry is working on developing a new land policy for major ports that is aimed at ensuring level playing field for all shareholders. * The government has decided to award projects worth US$ 2610 million in the ongoing financial year in order to boost major ports' capacity to nearly 934 million tonnes (MT) per annum. * India is aiming to develop port capacity of over 3 billion metric tonnes with the aim to meet the predicted traffic need of almost 2.5 billion metric tonnes, according to the provisions made in the Maritime Agenda, 2010-2020. * The government is considering setting up two new major ports, one each in Andhra Pradesh and West Bengal. The move is to meet the expected higher demand for energy leading to increased import of coal and oil and container volumes in the upcoming years. * Private equity firm NYLIM Jacob Ballas India has announced the investment of Rs 200 crore in Marg Karaikal Port, a unit of MARG Ltd. The proceedings will be used by the port to expand capacity to 28 million metric tonnes per annum. MARG Karaikal Port is an all-weather port on the south east coast of India. * L&T Shipbuilding has received US$ 86.63 million orders for four-specialized commercial vessels during April-May of FY13. It received orders from the Qatar-based Halul Offshore Services for the design, construction, trials and commissioning of two supply vessels and two anchor handling, towing, supply and support vessels. * Adani Kandla Bulk Terminal Pvt Ltd, a Adani Ports and Special Economic Zone arm, has inked a concession pact with the Kandla Port Trust to establish a dry bulk terminal at the Kandla port on build, operate, transfer basis. The project is projected to be worth US$ 217 million. * Gujarat Pipavav Port Ltd (GPPL) plans to invest on expansion of Pipavav Port in Gujarat. * The Government of Maharashtra is planning to set up an international cruise terminal at Mumbai port to attract international cruise tourists from Europe and the US. * Dempo Shipbuilding & Engineering has acquired a majority stake of 74 per cent in Modest Infrastructure Ltd, shipbuilding and ship repairs space in Bhavnagar, Gujarat.
Effect of the developments on Shipping Sector in 2012-13 * India was ranked 8th among the developing countries in terms of container ship operations with 9.95 million twenty foot equivalent units of container (TEUs), with a world share of 1.74 per cent. India is one of the major ship-breaking destinations as well. * Iron ore traffic at major Indian ports increased by over 100 per cent in December 2012. A total of 1.89 MT iron ore was shipped out of 11 major Indian ports in December 2012, up from 907,000 tonne in November, as per the Indian Port Association data. * Cargo traffic at major Indian ports is expected to grow by 4 per cent in 2013-14, according to a study by the Centre for Monitoring Indian Economy (CMIE). Cargo traffic handled by major ports is anticipated to increase to 568.5 MT in 2013-14 from the 546.4 MT estimated for 2012-13. * The Indian shipbuilding and ship repair industry is likely to reach US$ 92 billion from the current level of just over US$ 1316 million, according to a study done by the industry body ASSOCHAM (The Associated Chambers of Commerce and Industry of India).