India has a very large domestic market, and resilient private consumption is a major driver of economic growth. A vast supply of inexpensive but skilled labour has turned India into the back office of the world. Despite numerous problems, India has generally managed to avoid hard authoritarian rule or military coups, which have happened in many other developing countries, including India’s neighbours, Bangladesh, Myanmar and Pakistan.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 24 of India’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you one step ahead, so you can do business with ease in India.

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, India's vast size makes transporting goods a logistical challenge as although the transport network is generally good, it is not able to support the country's rapidly expanding trade volum...

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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 51.1 out of 100, ranking 16 th out of 30 Asian states, between Indonesia and Cambodia.

BMI underlines the boom in the education sector as a key benefit to investors. Enrolment and graduation rates are growing which boosts the quality of the talent pool, especially in strategic subjects such as maths and engineering. However, we warn that education attainment rates are constrained by poverty, as although attendance is free under law, budgetary...

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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 41.9 out of 100 for Trade And Investment risks, putting it in 18th 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 foodstuffs. We see significant growth opportunities in sub-sectors such as dairy, coffee and livestock. However, India will be increasingly vulnerable to exceptional weather phenomena owing to climate change effects and serious water shortages. Moreover, the country will remain prone to erratic government intervention, which seriously hampers its reputation as an...

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Autos

India Autos

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According to figures from the Society of Indian Automobile Manufacturers (SIAM), domestic auto sales (sum total of passenger vehicle and commercial vehicle sales) rose 11.7% year-on-year (y-o-y) in December 2014 to 260,025 units, in line with the broad recovery in the sector since the arrival of India's new Prime Minister Narendra Modi.

However, this quarter BMI has become slightly more cautious on the near-term outlook for Indian auto sales. This reflects two factors: first, the fact that sales growth has become increasingly volatile over recent months and secondly, the government's decision to rollback excise duty cuts introduced in 2013/14, when the local auto industry was struggling. As such, we have tempered our sales forecasts for FY2014/15 (April-March), now targeting 2.2% growth for the fiscal year.

With economic growth gathering pace on the back of Modi's ongoing...

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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 2015-2018, 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: We believe that India's defence ambitions will continue to face challenges over 2015. That said, the increase of the foreign investment cap to 49% from 26% should 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 is 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. We 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: With 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. We 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. Reforms in energy and transport sector show encouraging signs for the industry, however, and it is possible that BMI will upgrade its outlook in the future.

Key Trends And Developments

  • The new administration has made significant progress in introducing reforms and encouraging growth in the power...

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Insurance

India Insurance

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BMI View : The Indian insurance sector returned to growth in 2014, with single digit premium growth reported across most lines, bolstered by the increasing strength of the Indian rupee. Moving forward a more positive domestic economic outlook underlines our forecasts for high single digit growth in the dominant life insurance sector as well as even more positive double digit growth in India's rapidly expanding non-life sector.

We are forecasting healthy GDP growth in India of 5.6% in FY2014/15 (April-March) which will provide a boost to household consumption and underpins our forecasts for growth across a range of insurance lines. After a difficult period in 2011-2013, the life insurance sector returned to growth in 2014 and we expect to see further growth of around 7% throughout the remainder of the forecast period meaning...

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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. The...

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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 away anytime soon. India's new ordinance will help bolster iron ore production growth, however, an environment of low ore prices coupled with higher royalties will dampen the rebound in iron ore production.

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...

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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 the 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 expect growth in the Indian power sector to accelerate in 2015, on the back of positive economic and political momentum. Our long-term outlook for the sector is similarly positive as we believe that several fundamental drivers of growth for the sector are beginning to align in India's favour.

We forecast that electricity generation in India will grow by 5.6% in 2015, faster than 5.2% growth that we estimate the sector will experience in 2014. Our 2015 forecast can be attributed to the strengthening economic outlook and the reforms that Modi has started to initiate in the sector.

We have maintained our long-term forecasts for the Indian power sector, and forecast electricity generation to grow at an average of 5.7% per annum between 2015 and 2023. The outlook for the sector is extremely positive, and we believe that several fundamental drivers of growth are...

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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 India 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: A large and young population has set the foundations for growth in India's retail sector. Furthermore, the country's economy has proven to be resilient and the new government is slowly improving the regulatory environment. These factors all bode well for both domestic and international retailers who are increasingly seizing opportunities in the country's second and third tier cities where disposable income has slowly increased. Despite this optimism, India remains underdeveloped, the country's retail formats remain outdated and retail space is limited. This has made it difficult for a number of international retailers to enter the market.

India's retail market is undergoing a rapid...

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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 ports. Investment is now starting to be made, but this may be a case of too little too late. Furthermore, plans to push ahead with the privatisation of the state-run facilities will likely see mass strikes in the sector in 2015. Although we believe the move is necessary in order to...

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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 : India's tourism market is expected to show healthy growth across key indicators over the medium term (2015-2019). A relaxation of visa requirements and increase in international flight connections will help to improve accessibility for major inbound source markets while domestic economic growth is supporting robust growth in the larger outbound travel market. As a result of increased travel, we expect to see healthy gains in tourism related expenditure and industry value.

The outbound tourism market from India is substantial and has enormous potential for future growth considering the size of the population. Solid annual GDP growth and increasing wages will boost the spending power of Indian tourists, and many...

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Water

India Water

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BMI View: In order to realise the country's economic growth potential and meet demand from an ever-expanding demand base, a reliable water supply is crucial. Massive water investment is required to achieve targeted economic expansion and the Indian government has set ambitious targets for water and sanitation availability.

A survey by the central government of household water usage shows that water shortages remain prevalent across much of the country. 14% of all rural households suffered water shortages or drought over 2012, and 10.5% of urban households saw similar issues. Moreover, the risks to urban-based businesses are higher, with worse water sufficiency in built up areas than rural regions. This is, we believe, largely due to the absence of proper water infrastructure, particularly mains distribution networks. However, this is a major growth area, as India is keen to develop its...

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