Data: August, 2019 https://medium.com/@MarketBuzz

1. INDIAN ECONOMY
By Ravi Tripathi August | 2019 @RaviTripathi4

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TABLE OF CONTENTS
Sr. No Title Page No.
1. Introduction 1.1-1.2 2
2. India: A Snapshot 2.1-2.3 10
3. Types of Economies 13
4. Industry 4.1-4.31 15
5. Economy Data & Analysis 5.1-5.4 90
6. India’s Consumption Story 92
7. Indian Economy: Issues and Challenges 94
8. Conclusion 98
9. Glossary 99
10. Bibliography 100

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CHAPTER-1
INTRODUCTION
India has emerged as the fastest growing major economy in the world and is expected to be one of
the top three economic powers of the world over the next 10-15 years, backed by its strong
democracy and partnerships.
India is in a period of unprecedented opportunity, challenge and ambition in its development.
Already the world’s third largest economy in purchasing parity terms, India aspires to better the
lives of all its citizens and become a high-middle income country by 2030, well before the
centenary of its independence.
The Indian economy will grow at its fastest pace in three years in the current financial year, as it
recovers from the twin shocks of demonetisation and the implementation of the Goods and
Services Tax.
GDP growth is expected at 7.2 percent in 2018-19 compared to 6.7 percent last year, according to
the first advance estimates released by the Central Statistics Office on 7th
January 2019. Gross
Value Added, which strips out indirect tax and subsidies, is expected to grow at 7 percent compared
to 6.5 percent last year.
India’s economy is picking up and growth prospects look bright—partly thanks to the
implementation of recent policies, such as the nationwide goods and services tax. As one of the
world’s fastest-growing economies—accounting for about 15 percent of global growth—India’s
economy has helped to lift millions out of poverty.
In recent years, the country has made a significant dent in poverty levels, with extreme poverty
dropping from 46 percent to an estimated 13.4 percent over the two decades before 2015. While
India is still home to 176 million poor people, it is seeking to achieve better growth, as well as to
promote inclusion and sustainability by reshaping policy approaches to human development, social
protection, financial inclusion, rural transformation, and infrastructure development.
While the country’s development trajectory is strong, challenges remain. Economic performance
has been strong, but development has been uneven, with the gains of economic progress and access
to opportunities differing between population groups and geographic areas. Despite regulatory
improvements to spur competitiveness, levels of private investment and exports continue to be
relatively low, undermining prospects for longer term growth. The country’s human development
indicators – ranging from education outcomes to a low and declining rate of female labor force
participation - underscore its substantial development needs.
The economy of India is a developing mixed economy. After the 1991 economic liberalisation,
India achieved 6-7% average GDP growth annually. Since 2014 with the exception of 2017, India's
economy has been the world's fastest growing major economy, surpassing China.

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The long-term growth prospective of the Indian economy is positive due to its young population,
corresponding low dependency ratio, healthy savings and investment rates, and increasing
integration into the global economy.
1.1 MARKET SIZE
India’s GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3
per cent in 2018-19. During the first half of 2018-19, GDP (at constant 2011-12 prices) grew by
7.6 per cent.
India has retained its position as the third largest startup base in the world with over 4,750
technology startups, with about 1,400 new start-ups being founded in 2016, according to a report
by NASSCOM.
India's labour force is expected to touch 160-170 million by 2020, based on rate of population
growth, increased labour force participation, and higher education enrolment, among other factors,
according to a study by ASSOCHAM and Thought Arbitrage Research Institute.
India's foreign exchange reserves were US$ 393.29 billion in the week up to December 21, 2018,
according to data from the RBI.
1.2 BRIEF HISTORY OF INDIAN ECONOMY
The combination of protectionist, import-substitution, Fabian socialism, and social democratic-
inspired policies governed India for sometime after the end of British rule. The economy was then
characterised by extensive regulation, protectionism, public ownership of large monopolies,
pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved
the country towards a market-based economy. By 2008, India had established itself as one of the
world's faster-growing economies.
Ancient and medieval eras
Indus Valley Civilisation
The citizens of the Indus Valley Civilisation, a permanent settlement that flourished between 2800
BC and 1800 BC, practised agriculture, domesticated animals, used uniform weights and
measures, made tools and weapons, and traded with other cities. Evidence of well-planned streets,
a drainage system and water supply reveals their knowledge of urban planning, which included
the first-known urban sanitation systems and the existence of a form of municipal government.
For a continuous duration of nearly 1700 years from the year 1 AD, India is the top most economy
constituting 35 to 40% of world GDP.

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West Coast
Maritime trade was carried out extensively between South India and Southeast and West Asia from
early times until around the fourteenth century AD. Both the Malabar and Coromandel Coasts
were the sites of important trading centres from as early as the first century BC, used for import
and export as well as transit points between the Mediterranean region and southeast Asia. Over
time, traders organised themselves into associations which received state patronage. Historians
Tapan Raychaudhuri and Irfan Habib claim this state patronage for overseas trade came to an end
by the thirteenth century AD, when it was largely taken over by the local Parsi, Jewish, Syrian
Christian and Muslim communities, initially on the Malabar and subsequently on the Coromandel
coast.
Silk Route
Other scholars suggest trading from India to West Asia and Eastern Europe was active between
the 14th and 18th centuries. During this period, Indian traders settled in Surakhani, a suburb of
greater Baku, Azerbaijan. These traders built a Hindu temple, which suggests commerce was
active and prosperous for Indians by the 17th century.
Further north, the Saurashtra and Bengal coasts played an important role in maritime trade, and
the Gangetic plains and the Indus valley housed several centres of river-borne commerce. Most
overland trade was carried out via the Khyber Pass connecting the Punjab region with Afghanistan
and onward to the Middle East and Central Asia. Although many kingdoms and rulers issued coins,
barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rulers,
while their craftsmen received a part of the crops at harvest time for their services.
Mughal era (1526–1793)
The Indian economy was large and prosperous under the Mughal Empire, up until the 18th century.
Sean Harkin estimates China and India may have accounted for 60 to 70 percent of world GDP in
the 17th century. The Mughal economy functioned on an elaborate system of coined currency,
land revenue and trade. Gold, silver and copper coins were issued by the royal mints which
functioned on the basis of free coinage. The political stability and uniform revenue policy resulting
from a centralised administration under the Mughals, coupled with a well-developed internal trade
network, ensured that India–before the arrival of the British–was to a large extent economically
unified, despite having a traditional agrarian economy characterised by a predominance of
subsistence agriculture, with 64% of the workforce in the primary sector (including agriculture),
but with 36% of the workforce also in the secondary and tertiary sectors, higher than in Europe,
where 65–90% of its workforce were in agriculture in 1700 and 65–75% were in agriculture in
1750. Agricultural production increased under Mughal agrarian reforms, with Indian agriculture
being advanced compared to Europe at the time, such as the widespread use of the seed drill among

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Indian peasants before its adoption in European agriculture, and higher per-capita agricultural
output and standards of consumption.
The Mughal Empire had a thriving industrial manufacturing economy, with India producing about
25% of the world's industrial output up until 1750, making it the most important manufacturing
center in international trade. Manufactured goods and cash crops from the Mughal Empire were
sold throughout the world. Key industries included textiles, shipbuilding, and steel, and processed
exports included cotton textiles, yarns, thread, silk, jute products, metalware, and foods such as
sugar, oils and butter. Cities and towns boomed under the Mughal Empire, which had a relatively
high degree of urbanization for its time, with 15% of its population living in urban centres, higher
than the percentage of the urban population in contemporary Europe at the time and higher than
that of British India in the 19th century.
In early modern Europe, there was significant demand for products from Mughal India, particularly
cotton textiles, as well as goods such as spices, peppers, indigo, silks, and saltpeter (for use in
munitions). European fashion, for example, became increasingly dependent on Mughal Indian
textiles and silks. From the late 17th century to the early 18th century, Mughal India accounted for
95% of British imports from Asia, and the Bengal Subah province alone accounted for 40% of
Dutch imports from Asia. In contrast, there was very little demand for European goods in Mughal
India, which was largely self-sufficient. Indian goods, especially those from Bengal, were also
exported in large quantities to other Asian markets, such as Indonesia and Japan. At the time,
Mughal Bengal was the most important center of cotton textile production and shipbuilding.
In the early 18th century, the Mughal Empire declined, as it lost western, central and parts of south
and north India to the Maratha Empire, which integrated and continued to administer those
regions.[85] The decline of the Mughal Empire led to decreased agricultural productivity, which
in turn negatively affected the textile industry. The subcontinent's dominant economic power in
the post-Mughal era was the Bengal Subah in the east., which continued to maintain thriving textile
industries and relatively high real wages. However, the former was devastated by the Maratha
invasions of Bengal and then British colonization in the mid-18th century. After the loss at the
Third Battle of Panipat, the Maratha Empire disintegrated into several confederate states, and the
resulting political instability and armed conflict severely affected economic life in several parts of
the country – although this was mitigated by localised prosperity in the new provincial kingdoms.
By the late eighteenth century, the British East India Company had entered the Indian political
theatre and established its dominance over other European powers. This marked a determinative
shift in India's trade, and a less-powerful impact on the rest of the economy.
British era (1793–1947)
From the beginning of the 19th century, the British East India Company's gradual expansion and
consolidation of power brought a major change in taxation and agricultural policies, which tended
to promote commercialisation of agriculture with a focus on trade, resulting in decreased
production of food crops, mass impoverishment and destitution of farmers, and in the short term,

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led to numerous famines. The economic policies of the British Raj caused a severe decline in the
handicrafts and handloom sectors, due to reduced demand and dipping employment. After the
removal of international restrictions by the Charter of 1813, Indian trade expanded substantially
with steady growth. The result was a significant transfer of capital from India to England, which,
due to the colonial policies of the British, led to a massive drain of revenue rather than any
systematic effort at modernisation of the domestic economy.
Under British rule, India's share of the world economy declined from 24.4% in 1700 down to 4.2%
in 1950. India's GDP (PPP) per capita was stagnant during the Mughal Empire and began to decline
prior to the onset of British rule. India's share of global industrial output declined from 25% in
1750 down to 2% in 1900. At the same time, the United Kingdom's share of the world economy
rose from 2.9% in 1700 up to 9% in 1870. The British East India Company, following their
conquest of Bengal in 1757, had forced open the large Indian market to British goods, which could
be sold in India without tariffs or duties, compared to local Indian producers who were heavily
taxed, while in Britain protectionist policies such as bans and high tariffs were implemented to
restrict Indian textiles from being sold there, whereas raw cotton was imported from India without
tariffs to British factories which manufactured textiles from Indian cotton and sold them back to
the Indian market. British economic policies gave them a monopoly over India's large market and
cotton resources. India served as both a significant supplier of raw goods to British manufacturers
and a large captive market for British manufactured goods.
British territorial expansion in India throughout the 19th century created an institutional
environment that, on paper, guaranteed property rights among the colonisers, encouraged free
trade, and created a single currency with fixed exchange rates, standardised weights and measures
and capital markets within the company-held territories. It also established a system of railways
and telegraphs, a civil service that aimed to be free from political interference, a common-law and
an adversarial legal system. This coincided with major changes in the world economy –
industrialisation, and significant growth in production and trade. However, at the end of colonial
rule, India inherited an economy that was one of the poorest in the developing world, with
industrial development stalled, agriculture unable to feed a rapidly growing population, a largely
illiterate and unskilled labour force, and extremely inadequate infrastructure.
The 1872 census revealed that 91.3% of the population of the region constituting present-day India
resided in villages. This was a decline from the earlier Mughal era, when 85% of the population
resided in villages and 15% in urban centers under Akbar's reign in 1600. Urbanisation generally
remained sluggish in British India until the 1920s, due to the lack of industrialisation and absence
of adequate transportation. Subsequently, the policy of discriminating protection (where certain
important industries were given financial protection by the state), coupled with the Second World
War, saw the development and dispersal of industries, encouraging rural–urban migration, and in
particular the large port cities of Bombay, Calcutta and Madras grew rapidly. Despite this, only
one-sixth of India's population lived in cities by 1951.
The impact of British rule on India's economy is a controversial topic. Leaders of the Indian
independence movement and economic historians have blamed colonial rule for the dismal state

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of India's economy in its aftermath and argued that financial strength required for industrial
development in Britain was derived from the wealth taken from India. At the same time, right-
wing historians have countered that India's low economic performance was due to various sectors
being in a state of growth and decline due to changes brought in by colonialism and a world that
was moving towards industrialisation and economic integration.
Several economic historians have argued that real wage decline occurred in the early 19th century,
or possibly beginning in the very late 18th century, largely as a result of British imperialism.
Economic historian Prasannan Parthasarathi presented earnings data which showed real wages and
living standards in 18th century Bengal and Mysore being higher than in Britain, which in turn had
the highest living standards in Europe. Mysore's average per-capita income was five times higher
than subsistence level, i.e. five times higher than $400 (1990 international dollars), or $2,000 per
capita. In comparison, the highest national per-capita incomes in 1820 were $1,838 for the
Netherlands and $1,706 for Britain. It has also been argued that India went through a period of
deindustrialization in the latter half of the 18th century as an indirect outcome of the collapse of
the Mughal Empire.
Pre-liberalisation period (1947–1991)
Indian economic policy after independence was influenced by the colonial experience, which was
seen as exploitative by Indian leaders exposed to British social democracy and the planned
economy of the Soviet Union. Domestic policy tended towards protectionism, with a strong
emphasis on import substitution industrialisation, economic interventionism, a large government-
run public sector, business regulation, and central planning, while trade and foreign investment
policies were relatively liberal. Five-Year Plans of India resembled central planning in the Soviet
Union. Steel, mining, machine tools, telecommunications, insurance, and power plants, among
other industries, were effectively nationalised in the mid-1950s.
Jawaharlal Nehru, the first prime minister of India, along with the statistician Prasanta Chandra
Mahalanobis, formulated and oversaw economic policy during the initial years of the country's
independence. They expected favourable outcomes from their strategy, involving the rapid
development of heavy industry by both public and private sectors, and based on direct and indirect
state intervention, rather than the more extreme Soviet-style central command system. The policy
of concentrating simultaneously on capital- and technology-intensive heavy industry and
subsidising manual, low-skill cottage industries was criticised by economist Milton Friedman, who
thought it would waste capital and labour, and retard the development of small manufacturers. The
rate of growth of the Indian economy in the first three decades after independence was derisively
referred to as the Hindu rate of growth by economists, because of the unfavourable comparison
with growth rates in other Asian countries.
Since 1965, the use of high-yielding varieties of seeds, increased fertilisers and improved irrigation
facilities collectively contributed to the Green Revolution in India, which improved the condition
of agriculture by increasing crop productivity, improving crop patterns and strengthening forward

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and backward linkages between agriculture and industry. However, it has also been criticised as
an unsustainable effort, resulting in the growth of capitalistic farming, ignoring institutional
reforms and widening income disparities.
Subsequently, the Emergency and Garibi Hatao concept under which income tax levels at one
point rose to a maximum of 97.5% – a world record for non-communist economies – started
diluting the earlier efforts.
In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion
for incumbent companies, removed price controls, reduced corporate taxes and promoted the
creation of small-scale industries in large numbers.
Post-liberalisation period (since 1991)
The collapse of the Soviet Union, which was India's major trading partner, and the Gulf War,
which caused a spike in oil prices, resulted in a major balance-of-payments crisis for India, which
found itself facing the prospect of defaulting on its loans. India asked for a $1.8 billion bailout
loan from the International Monetary Fund (IMF), which in return demanded de-regulation.
In response, the Narasimha Rao government, including Finance Minister Manmohan Singh,
initiated economic reforms in 1991. The reforms did away with the Licence Raj, reduced tariffs
and interest rates and ended many public monopolies, allowing automatic approval of foreign
direct investment in many sectors. Since then, the overall thrust of liberalisation has remained the
same, although no government has tried to take on powerful lobbies such as trade unions and
farmers, on contentious issues such as reforming labour laws and reducing agricultural subsidies.
By the turn of the 21st century, India had progressed towards a free-market economy, with a
substantial reduction in state control of the economy and increased financial liberalisation. This
has been accompanied by increases in life expectancy, literacy rates and food security, although
urban residents have benefited more than rural residents.
While the credit rating of India was hit by its nuclear weapons tests in 1998, it has since been
raised to investment level in 2003 by Standard & Poor's (S&P) and Moody's. India experienced
high growth rates, averaging 9% from 2003 to 2007. Growth then moderated in 2008 due to the
global financial crisis. In 2003, Goldman Sachs predicted that India's GDP in current prices would
overtake France and Italy by 2020, Germany, UK and Russia by 2025 and Japan by 2035, making
it the third-largest economy of the world, behind the US and China. India is often seen by most
economists as a rising economic superpower which will play a major role in the 21st-century global
economy.
Starting in 2012, India entered a period of reduced growth, which slowed to 5.6%. Other economic
problems also became apparent: a plunging Indian rupee, a persistent high current account deficit
and slow industrial growth. Hit by the US Federal Reserve's decision to taper quantitative easing,
foreign investors began rapidly pulling money out of India – though this reversed with the stock
market approaching its all-time high and the current account deficit narrowing substantially.

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India started recovery in 2013–14 when the GDP growth rate accelerated to 6.4% from the previous
year's 5.5%. The acceleration continued through 2014–15 and 2015–16 with growth rates of 7.5%
and 8.0% respectively. For the first time since 1990, India grew faster than China which registered
6.9% growth in 2015. However, the growth rate subsequently decelerated, to 7.1% and 6.6% in
2016–17 and 2017–18 respectively, partly because of the disruptive effects of 2016 Indian
banknote demonetisation and the Goods and Services Tax (India). As of October 2018, India is
the world's fastest growing economy, and is expected to maintain that status for at least three more
years.
India is ranked 77th out of 190 countries in the World Bank's 2018 ease of doing business index,
up 23 points from the last year's 100 and up 53 points in just two years. In terms of dealing with
construction permits and enforcing contracts, it is ranked among the 10 worst in the world, while
it has a relatively favourable ranking when it comes to protecting minority investors or getting
credit. The strong efforts taken by the Department of Industrial Policy and Promotion (DIPP) to
boost ease of doing business rankings at the state level is said to impact the overall rankings of
India.

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CHAPTER-2
INDIA: A SNAPSHOT
India, a South Asian nation, is the seventh-largest country by area, the second-most populous
country with over 1.33 billion people, and the most populous democracy in the world. India boasts
of an immensely rich cultural heritage including numerous languages, traditions and people. The
country holds its uniqueness in its diversity and hence has adapted itself to international changes
with poise and comfort. While the economy has welcomed international companies to invest in it
with open arms since liberalisation in 1990s, Indians have been prudent and pro-active in adopting
global approach and skills. Indian villagers proudly take up farming, advanced agriculture and
unique handicrafts as their profession on one hand while modern industries and professional
services sectors are coming up in a big way on the other.
Thus, the country is attracting many global majors for strategic investments owing to the presence
of vast range of industries, investment avenues and a supportive government. Huge population,
mostly comprising the youth, is a strong driver for demand and an ample source of manpower.
Location: India lies to the north of the equator in Southern Asia
Latitude: 8° 4' to 37° 6' north
Longitude: 68° 7' to 97° 25' east
Neighbouring Countries: Pakistan and Afghanistan share political borders with India on the West
while Bangladesh and Myanmar stand adjacent on the Eastern borders. The northern boundary
comprises the Sinkiang province of China, Tibet, Nepal and Bhutan. Sri Lanka is another
neighbouring country which is separated by a narrow channel of sea formed by the Palk Strait and
the Gulf of Mannar.
Capital: New Delhi
Coastline: 7,517 km, including the mainland, the coastlines of Andaman and Nicobar Islands in
the Bay of Bengal and Lakshadweep Islands in the Arabian Sea.
Climate: Southern India majorly enjoys tropical climate but northern India experiences
temperatures from sub-zero degrees to 50 degrees Celsius. Winters embrace northern India during
December to February while springs blossom in March and April. Monsoons arrive in June and
stay till September, followed by autumn in October and November.
Area: India measures 3,214 km from north to south and 2,933 km from east to west with a total
area of 3,287,263 sq km.
Natural Resources: Coal (fourth-largest reserves in the world), iron ore, manganese, mica,
bauxite, rare earth elements, titanium ore, chromite, natural gas, diamonds, petroleum, limestone,
arable land.

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Land: 2,973,190 sq km
Water: 314,070 sq km
2.1 Political Profile
Political System and Government:
The world's largest democracy implemented its Constitution in 1950 that provided for a
parliamentary system of Government with a bicameral parliament and three independent branches:
the executive, the legislature and the judiciary. The country has a federal structure with elected
governments in States.
Administrative Divisions: 29 States and 7 Union Territories
Constitution: The Constitution of India came into force on January 26, 1950
Executive Branch: The President of India is the Head of State, while the Prime Minister is the
Head of the government and runs office with the support of the Council of Ministers who forms
the Cabinet.
Legislative Branch: The Federal Legislature comprises of the Lok Sabha (House of the People)
and the Rajya Sabha (Council of States) forming both the Houses of the Parliament.
Judicial Branch: The Supreme Court of India is the apex body of the Indian legal system,
followed by other High Courts and subordinate Courts.
Chief of State: President, Mr Ram Nath Kovind (since July 25, 2017)
Head of Government: Prime Minister, Mr Narendra Modi (since May 26, 2014)
2.2 Demographic profile
Population: 1,326,801,000
Population Growth Rate: 1.2 per cent (2015)
Religions: Hinduism, Islam, Christianity, Sikhism, Buddhism, Jainism
Languages: Hindi, English and at least 16 other official languages
Literacy: Total population: 74.04 per cent (provisional data-2011 census)
Male: 82.14 per cent
Female: 65.46 per cent
Suffrage: 18 years of age; universal
Life expectancy: 66.9 years (men), 69.9 years (women) (2015 – WHO 2016 Report)

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2.3 Economic Profile
India’s GDP is estimated to have increased 6.6 per cent in 2017-18 and is expected to grow 7.3
per cent in 2018-19. Between April-September 2018-19, the GDP (at constant 2011-12 prices)
grew 7.6 per cent year-on-year.
▪ Gross Value Added (GVA) Composition by Sector (2017-18 2nd Advance Estimate)
o Services: 53.9 per cent
o Industry: 29.1 per cent
o Agriculture: 17.1 per cent
Forex Reserves: US$ 393.29 billion in the week up to December 21, 2018.
Gross Fixed Capital Formation (GFCF) at current prices: Gross Fixed Capital Formation (GFCF)
at current prices is expected to be Rs 26.03 trillion (US$ 373.04 billion) during the first half of
2018-19.
Value of Exports: India's exports stood at US$ 351.99 billion in April-November 2018.
Export Partners: US, Germany, UAE, China, Japan, Thailand, Indonesia and European Union.
India is also tapping newer markets in Africa and Latin America.
Currency (code): Indian rupee (INR)
Exchange Rates: Indian rupees per US dollar - 1 USD = 69.7923 INR (December 31, 2018)
Fiscal Year: April 01 – March 31
Transportation in India:
▪ Airports: Airports Authority of India (AAI) manages 129 airports in the country, which
includes 23 international airports and 20 civil enclaves at defence airfields.
▪ International Airports: Ahmedabad, Amritsar, Bengaluru, Chennai, Goa, Guwahati,
Hyderabad, Kochi, Kolkata, Mumbai, New Delhi, Thiruvananthapuram, Port Blair,
Srinagar, Jaipur, Nagpur, Calicut.
▪ Railways: The Indian Railways network is spread over 108,706 km, with 12,617 passenger
and 7,421 freight trains each day from 7,172 stations plying 23 million travellers and 3
million tonnes (MT) of freight daily.
▪ Roadways: India’s road network of 4.87 million km is the second largest in the world.
With the number of vehicles growing at an average annual pace of 10.16 per cent, Indian
roads carry about 65 per cent of freight and 85 per cent of passenger traffic.
▪ Waterways: 14,500 km

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CHAPTER-3
TYPES OF ECONOMIES
Depending upon the shares of the particular sectors in the total production of an economy and the
ratio of the dependent population on them for their livelihood, economies are categorised as:
Agrarian Economy
An Economy is called an Agrarian if the share of its primary sector is 50 percent or more in the
total output of the of the economy. At the time of Independence, India was an Agrarian Economy.
Agrarian societies are especially noted for their extremes of social classes and rigid social mobility.
As land is the major source of wealth, a social hierarchy develops based on land ownership and
not labour. The system of stratification is characterized by three coinciding contrasts: governing
class versus the masses, urban minority versus peasant majority, and literate minority versus
illiterate majority. This results in two distinct subcultures the urban elite versus the peasant masses.
Moreover, this means that cultural differences within agrarian societies greater the differences
between them.
Industrial Economy
In a country, if the secondary sector contributes more than 50% to the total production value of an
economy, it is an industrial economy. The industrial organization adds real-world complications
to the perfectly competitive model, complications such as transaction costs, limited information,
and barriers to entry of new firms that may be associated with imperfect competition. It analyzes
determinants of firm and market organization and behaviour as between competition and
monopoly, including from government actions.
There are different approaches to the subject. One approach is descriptive in providing an overview
of the industrial organization, such as measures of competition and the size-concentration of firms
in an industry. A second approach uses microeconomic models to explain the internal firm
organization and market strategy, which includes internal research and development along with
issues of internal reorganization and renewal. A third aspect is oriented to public policy as to
economic regulation, antitrust law, and, more generally, the economic governance of law in
defining property rights, enforcing contracts, and providing organizational infrastructure.
Service Economy
If the contribution of the tertiary sector is more than 50% in an economy, it can be referred to as a
Service Economy.
Service economy can refer to one or both of two recent economic developments:

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▪ The increased importance of the service sector in industrialized economies. The current list
of Fortune 500 companies contains more service companies and fewer manufacturers than
in previous decades.
▪ The relative importance of service in a product offering. The service economy in
developing countries is mostly concentrated in financial services, hospitality, retail, health,
human services, information technology and education. Products today have a higher
service component than in previous decades. In the management literature, this is referred
to as the servitization of products or a product-service system. Virtually every product
today has a service component to it.

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CHAPTER-4
INDUSTRY
4.1 Agriculture and Allied Industries
Agriculture is the primary source of livelihood for about 58 per cent of India’s population. Gross
Value Added by agriculture, forestry and fishing is estimated at Rs 17.67 trillion (US$ 274.23
billion) in FY18.
The Indian food industry is poised for huge growth, increasing its contribution to world food trade
every year due to its immense potential for value addition, particularly within the food processing
industry. The Indian food and grocery market is the world’s sixth largest, with retail contributing
70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the
country’s total food market, one of the largest industries in India and is ranked fifth in terms of
production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent
of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of
India’s exports and six per cent of total industrial investment.
Market Size
During 2017-18 crop year, food grain production is estimated at record 284.83 million tonnes. In
2018-19, Government of India is targeting foodgrain production of 285.2 million tonnes. Milk
production was estimated at 165.4 million tonnes during FY17, while meat production was 7.4
million tonnes. As of September 2018, total area sown with kharif crops in India reached 105.78
million hectares.
India is the second largest fruit producer in the world. Production of horticulture crops is estimated
at record 306.82 million tonnes (mt) in 2017-18 as per third advance estimates.

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Total agricultural exports from India grew at a CAGR of 16.45 per cent over FY10-18 to reach
US$ 38.21 billion in FY18. Between Apr-Oct 2018 agriculture exports were US$ 21.61 billion.
India is also the largest producer, consumer and exporter of spices and spice products. Spice
exports from India reached US$ 3.1 billion in 2017-18. Tea exports from India reached a 36 year
high of 240.68 million kgs in CY 2017 while coffee exports reached record 395,000 tonnes in
2017-18.
Food & Grocery retail market in India was worth US$ 380 billion in 2017.
Investments
According to the Department of Industrial Policy and Promotion (DIPP), the Indian food
processing industry has cumulatively attracted Foreign Direct Investment (FDI) equity inflow of
about US$ 8.57 billion between April 2000 and June 2018.
Some major investments and developments in agriculture are as follows:
▪ By early 2019, India will start exporting sugar to China.
▪ The first mega food park in Rajasthan was inaugurated in March 2018.
▪ Agrifood start-ups in India received funding of US$ 1,66 billion between 2013-17 in 558
deals.
▪ In 2017, agriculture sector in India witnessed 18 M&A deals worth US$ 251 million.
Government Initiatives
Some of the recent major government initiatives in the sector are as follows:
▪ The Agriculture Export Policy, 2018 was approved by Government of India in December
2018. The new policy aims to increase India’s agricultural exports to US$ 60 billion by
2022 and US$ 100 billion in the next few years with a stable trade policy regime.
▪ In September 2018, the Government of India announced Rs 15,053 crore (US$ 2.25 billion)
procurement policy named ‘Pradhan Mantri Annadata Aay SanraksHan Abhiyan' (PM-
AASHA), under which states can decide the compensation scheme and can also partner
with private agencies to ensure fair prices for farmers in the country.
▪ In September 2018, the Cabinet Committee on Economic Affairs (CCEA) approved a Rs
5,500 crore (US$ 820.41 million) assistance package for the sugar industry in India.
▪ The Government of India is going to provide Rs 2,000 crore (US$ 306.29 million) for
computerisation of Primary Agricultural Credit Society (PACS) to ensure cooperatives are
benefitted through digital technology.
▪ With an aim to boost innovation and entrepreneurship in agriculture, the Government of
India is introducing a new AGRI-UDAAN programme to mentor start-ups and to enable
them to connect with potential investors.

18. INDIAN ECONOMY
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▪ The Government of India has launched the Pradhan Mantri Krishi Sinchai Yojana
(PMKSY) with an investment of Rs 50,000 crore (US$ 7.7 billion) aimed at development
of irrigation sources for providing a permanent solution from drought.
▪ The Government of India plans to triple the capacity of food processing sector in India
from the current 10 per cent of agriculture produce and has also committed Rs 6,000 crore
(US$ 936.38 billion) as investments for mega food parks in the country, as a part of the
Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters
(SAMPADA).
▪ The Government of India has allowed 100 per cent FDI in marketing of food products and
in food product e-commerce under the automatic route.
Achievements in the sector
▪ The Electronic National Agriculture Market (eNAM) was launched in April 2016 to create
a unified national market for agricultural commodities by networking existing APMCs. Up
to May 2018, 9.87 million farmers, 109,725 traders were registered on the e-NAM
platform. 585 mandis in India have been linked while 415 additional mandis will be linked
in 2018-19 and 2019-20.
▪ Agriculture storage capacity in India increased at 4 per cent CAGR between 2014-17 to
reach 131.8 million metric tonnes.
▪ Coffee exports reached record 395,000 tonnes in 2017-18.
▪ Between 2014-18, 10,000 clusters were approved under the Paramparagat Krishi Vikas
Yojana (PKVY).
▪ Between 2014-15 and 2017-18 (up to December 2017), capacity of 2.3 million metric
tonnes was added in godowns while steel silos with a capacity of 625,000 were also created
during the same period.
▪ Around 100 million Soil Health Cards (SHCs) have been distributed in the country during
2015-17 and a soil health mobile app has been launched to help Indian farmers.
Road Ahead
India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture
sector in India is expected to generate better momentum in the next few years due to increased
investments in agricultural infrastructure such as irrigation facilities, warehousing and cold
storage. Furthermore, the growing use of genetically modified crops will likely improve the yield
for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to
concerted efforts of scientists to get early-maturing varieties of pulses and the increase in minimum
support price.
The government of India targets to increase the average income of a farmer household at current
prices to Rs 219,724 (US$ 3,420.21) by 2022-23 from Rs 96,703 (US$ 1,505.27) in 2015-16.

19. INDIAN ECONOMY
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Going forward, the adoption of food safety and quality assurance mechanisms such as Total
Quality Management (TQM) including ISO 9000, ISO 22000, Hazard Analysis and Critical
Control Points (HACCP), Good Manufacturing Practices (GMP) and Good Hygienic Practices
(GHP) by the food processing industry will offer several benefits.
References: Agricultural and Processed Food Products Export Development Authority (APEDA),
Department of Commerce and Industry, Union Budget 2018–19, Press Information Bureau,
Ministry of Statistics and Programme Implementation, Press Releases, Media Reports, Ministry
of Agriculture and Farmers Welfare, Crisil
4.2 Automobile
The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per cent
year-on-year to 4.02 million units (excluding two wheelers) in 2017. It was the 7th largest
manufacturer of commercial vehicles in 2017.
The Two Wheelers segment dominates the market in terms of volume owing to a growing middle
class and a young population. Moreover, the growing interest of the companies in exploring the
rural markets further aided the growth of the sector.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Automobile exports grew 20.78 per cent during April-November 2018. It is expected to
grow at a CAGR of 3.05 per cent during 2016-2026. In addition, several initiatives by the
Government of India and the major automobile players in the Indian market are expected to make
India a leader in the two-wheeler and four-wheeler market in the world by 2020.
Market Size

20. INDIAN ECONOMY
19
Domestic automobile production increased at 7.08 per cent CAGR between FY13-18 with 29.07
million vehicles manufactured in the country in FY18. During April-November 2018, automobile
production increased 12.53 per cent year-on-year to reach 21.95 million vehicle units.
Overall domestic automobiles sales increased at 7.01 per cent CAGR between FY13-18 with 24.97
million vehicles getting sold in FY18. During April-November 2018, highest year-on-year growth
in domestic sales among all the categories was recorded in commercial vehicles at 31.49 per cent
followed by 25.16 per cent year-on-year growth in the sales of three-wheelers.
Premium motorbike sales in India crossed one million units in FY18. . During January-September
2018, BMW registered a growth of 11 per cent year-on-year in its sales in India at 7,915 units.
Mercedes Benz ranked first in sales satisfaction in the luxury vehicles segment according to J D
Power 2018 India sales satisfaction index (luxury).
Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.
Investments
In order to keep up with the growing demand, several auto makers have started investing heavily
in various segments of the industry during the last few months. The industry has attracted Foreign
Direct Investment (FDI) worth US$ 19.29 billion during the period April 2000 to June 2018,
according to data released by Department of Industrial Policy and Promotion (DIPP).
Some of the recent/planned investments and developments in the automobile sector in India are as
follows:
▪ Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20 million)
to launch 20-25 new models across various commercial vehicle categories in 2018-19.
▪ Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC Motor has also
announced to invest US$ 310 million in India.
▪ Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000
units per year, highest for any luxury car manufacturing in India.
▪ As of October 2018, Honda Motors Company is planning to set up its third factory in India
for launching hybrid and electric vehicles with the cost of Rs 9,200 crore (US$ 1.31
billion), its largest investment in India so far.
Government Initiatives
The Government of India encourages foreign investment in the automobile sector and allows 100
per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are –
▪ The government aims to develop India as a global manufacturing centre and an R&D hub.
▪ Under NATRiP, the Government of India is planning to set up R&D centres at a total cost
of US$ 388.5 million to enable the industry to be on par with global standards

21. INDIAN ECONOMY
20
▪ The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the
country for introduction of electric vehicles (EVs) in their public transport systems under
the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India)
scheme. The government will also set up incubation centre for start-ups working in electric
vehicles space.
Achievements
Following are the achievements of the government in the past four years:
▪ Number of vehicles supported under FAME scheme increased from 5,197 in June 2015 to
192,451 in March 2018. During 2017-18, 47,912 two-wheelers, 2,202 three-wheelers, 185
four-wheelers and 10 light commercial vehicles were supported under FAME scheme.
▪ Under National Automotive Testing And R&D Infrastructure Project (NATRIP), following
testing and research centres have been established in the country since 2015
o International Centre for Automotive Technology (ICAT), Manesar
o National Institute for Automotive Inspection, Maintenance & Training (NIAIMT),
Silchar
o National Automotive Testing Tracks (NATRAX), Indore
o Automotive Research Association of India (ARAI), Pune
o Global Automotive Research Centre (GARC), Chennai
▪ SAMARTH Udyog – Industry 4.0 centres: ‘Demo cum experience’ centres are being set
up in the country for promoting smart and advanced manufacturing helping SMEs to
implement Industry 4.0 (automation and data exchange in manufacturing technology).
Road Ahead
The automobile industry is supported by various factors such as availability of skilled labour at
low cost, robust R&D centres and low cost steel production. The industry also provides great
opportunities for investment and direct and indirect employment to skilled and unskilled labour.
Indian automotive industry (including component manufacturing) is expected to reach Rs 16.16-
18.18 trillion (US$ 251.4-282.8 billion) by 2026. Two-wheelers are expected to grow 9 per cent
in 2018.
References: Media Reports, Press Releases, Department of Industrial Policy and Promotion
(DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian
Automobile Manufacturers (SIAM), Union Budget 2015-16, Union Budget 2017-18
4.3 Indian Aviation Industry
The civil aviation industry in India has emerged as one of the fastest growing industries in the
country during the last three years. India is currently considered the third largest domestic civil
aviation market in the world. India is expected to become the world’s largest domestic civil

22. INDIAN ECONOMY
21
aviation market in the next 10 to 15 years. India is also expected to displace the UK to become the
third largest air passenger* market by 2025.
Market Size
India’s passenger* traffic grew at 16.52 per cent year on year to reach 308.75 million. It grew at a
CAGR of 12.72 per cent during FY06-FY18.
Domestic passenger traffic grew YoY by 18.28 per cent to reach 243 million in FY18 and is
expected to become 293.28 million in FY20E. International passenger grew YoY by 10.43 per
cent to reach 65.48 million in FY18 and traffic is expected to become 76 million in FY20E.
In FY18, domestic freight traffic stood at 1,213.06 million tonnes, while international freight
traffic was at 2,143.97 million tonnes.
India’s domestic and international aircraft movements grew 14.40 per cent YoY and 9.40 per cent
YoY to 1,886.63 thousand and 437.93 thousand during 2017-18, respectively.
During Apr-Aug 2018, passenger* traffic in India stood at 141.77 million. Out of which domestic
passenger traffic stood at 113.44 million while international traffic stood at 28.32 million. Total
freight traffic handled in India stood at 1.49 million tonnes during the same time.
During Apr-Aug 2018, domestic aircraft movement stood at 0.89 million while international
aircraft movement stood at 0.19 million.
As of May 2018, there are nearly 558 commercial aircraft in operation in India.
Investment

23. INDIAN ECONOMY
22
According to data released by the Department of Industrial Policy and Promotion (DIPP), FDI
inflows in India’s air transport sector (including air freight) reached US$ 1,658.23 million between
April 2000 and June 2018. The government has 100 per cent FDI under automatic route in
scheduled air transport service, regional air transport service and domestic scheduled passenger
airline. However, FDI over 49 per cent would require government approval.
India’s aviation industry is expected to witness Rs 1 lakh crore (US$ 15.52 billion) worth of
investments in the next five years.
The Indian government is planning to invest US$ 1.83 billion for development of airport
infrastructure along with aviation navigation services by 2026.
Key investments and developments in India’s aviation industry include:
▪ AAI is going to invest Rs 15,000 crore (US$ 2.32 billion) in 2018-19 for expanding existing
terminals and constructing 15 new ones.
▪ In June 2018, India has signed an open sky agreement with Australia allowing airlines on
either side to offer unlimited seats to six Indian metro cities and various Australian cities.
▪ The AAI plans to develop Guwahati as an inter-regional hub and Agartala, Imphal and
Dibrugarh as intra-regional hubs.
▪ Indian aircraft Manufacture, Repair and Overhaul (MRO) service providers are exempted
completely from customs and countervailing duties
Government Initiatives
Some major initiatives undertaken by the government are:
▪ Allocation to Civil Aviation Ministry has been tripled to Rs 6,602.86 crore (US$ 1,019.9
million) under Union Budget 2018-19.
▪ In February 2018, the Prime Minister of India launched the construction of Navi Mumbai
airport which is expected to be built at a cost of US$ 2.58 billion. The first phase of the
airport will be completed by end of 2019.
▪ The Government of Andhra Pradesh is to develop Greenfield airports in six cities-
Nizamabad, Nellore, Kurnool, Ramagundam, Tadepalligudem and Kothagudem under the
PPP model.
▪ Regional Connectivity Scheme (RCS) has been launched under the policy
▪ In September 2018, Jharsuguda Airport in Odisha and Pakyong Airport in Sikkim were
inaugurated. Pakyong airport is Sikkim’s first ever airport and AAI’s first greenfield airport
construction.
Road Ahead
India’s aviation industry is largely untapped with huge growth opportunities, considering that air
transport is still expensive for majority of the country’s population, of which nearly 40 per cent is
the upwardly mobile middle class.

24. INDIAN ECONOMY
23
The industry stakeholders should engage and collaborate with policy makers to implement
efficient and rational decisions that would boost India’s civil aviation industry. With the right
policies and relentless focus on quality, cost and passenger interest, India would be well placed to
achieve its vision of becoming the third-largest aviation market by 2025.
Exchange Rate Used: INR 1 = US$ 0.0149 as of Q1 FY19.
Note: * - International and Domestic
References: Media Reports, Press Releases, Press Information Bureau, Directorate General of
Civil Aviation (DGCA), Airports Authority of India (AAI), Union Budget 2018-19, Boeing
4.4 Banking Sector in India
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and well-
regulated. The financial and economic conditions in the country are far superior to any other
country in the world. Credit, market and liquidity risk studies suggest that Indian banks are
generally resilient and have withstood the global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. RBI’s new measures may go a long way in helping the
restructuring of the domestic banking industry.
The digital payments system in India has evolved the most among 25 countries with India’s
Immediate Payment Service (IMPS) being the only system at level 5 in the Faster Payments
Innovation Index (FPII).*
Market Size
The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign
banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks,

25. INDIAN ECONOMY
24
in addition to cooperative credit institutions.^^ In FY07-18, total lending increased at a CAGR of
10.94 per cent and total deposits increased at a CAGR of 11.66 per cent. India’s retail credit market
is the fourth largest in the emerging countries. It increased to US$ 281 billion on December 2017
from US$ 181 billion on December 2014.
Investments/developments
Key investments and developments in India’s banking industry include:
▪ As of September 2018, the Government of India launched India Post Payments Bank
(IPPB) and has opened branches across 650 districts to achieve the objective of financial
inclusion.
▪ The total value of mergers and acquisition during 2017 in NBFC diversified financial
services and banking was US$ 2,564 billion, US$ 103 million and US$ 79 million
respectively @.
▪ The biggest merger deal of FY17 was in the microfinance segment of IndusInd Bank
Limited and Bharat Financial Inclusion Limited of US$ 2.4 billion @.
▪ In May 2018, total equity funding's of microfinance sector grew at the rate of 39.88 to Rs
96.31 billion (Rs 4.49 billion) in 2017-18 from Rs 68.85 billion (US$ 1.03 billion) #.
Government Initiatives
▪ As of September 2018, the Government of India has made the Pradhan Mantri Jan Dhan
Yojana (PMJDY) scheme an open ended scheme and has also added more incentives.
▪ The Government of India is planning to inject Rs 42,000 crore (US$ 5.99 billion) in the
public sector banks by March 2019 and will infuse the next tranche of recapitalisation by
mid-December 2018.
Achievements
Following are the achievements of the government in the year 2017-18:
▪ To improve infrastructure in villages, 204,000 Point of Sale (PoS) terminals have been
sanctioned from the Financial Inclusion Fund by National Bank for Agriculture & Rural
Development (NABARD).
▪ Between December 2016 and March 2017, a major drive was undertaken to boost use of
debit cards, resulting in an increase in the number of Point of Sale (PoS) terminals by an
additional 1.25 million by 2017 end from 1.52 million as on November 30, 2016.
▪ The number of total bank accounts opened under Pradhan Mantri Jan Dhan Yojana
(PMJDY) reached 333.8 million as on November 28, 2018.
Road Ahead

26. INDIAN ECONOMY
25
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth. All these factors suggest that India’s
banking sector is also poised for robust growth as the rapidly growing business would turn to banks
for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services to
the fore. The banking sector is laying greater emphasis on providing improved services to their
clients and also upgrading their technology infrastructure, in order to enhance the customer’s
overall experience as well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion by
FY2023 driven by the five-fold increase in the digital disbursements.
Exchange Rate Used: INR 1 = US$ 0.0142 as on Q2 FY19.
References: Media Reports, Press releases, Reserve Bank of India, Press Information Bureau,
www.pmjdy.gov.in
Notes: * - according to an FIS report, # - Microfinances Institution Network, @ - EY Annual
Report, ^^ - Indicates data for FY17
4.5 Cement industry in India
India is the second largest producer of cement in the world. No wonder, India's cement industry is
a vital part of its economy, providing employment to more than a million people, directly or
indirectly. Ever since it was deregulated in 1982, the Indian cement industry has attracted huge
investments, both from Indian as well as foreign investors.
India has a lot of potential for development in the infrastructure and construction sector and the
cement sector is expected to largely benefit from it. Some of the recent major initiatives such as
development of 98 smart cities are expected to provide a major boost to the sector.
Expecting such developments in the country and aided by suitable government foreign policies,
several foreign players such as Lafarge-Holcim, Heidelberg Cement, and Vicat have invested in
the country in the recent past. A significant factor which aids the growth of this sector is the ready
availability of the raw materials for making cement, such as limestone and coal.

27. INDIAN ECONOMY
26
Market Size
The housing and real estate sector is the biggest demand driver of cement, accounting for about 65
per cent of the total consumption in India. The other major consumers of cement include public
infrastructure at 20 per cent and industrial development at 15 per cent.
Cement production capacity stood at 502 million tonnes per year (mtpy) in 2018. Cement
consumption is expected to grow by 4.5 per cent in FY19 supported by pick-up in the housing
segment and higher infrastructure spending. The industry is currently producing 280 MT for
meetings its domestic demand and 5 MT for exports requirement.
The Indian cement industry is dominated by a few companies. The top 20 cement companies
account for almost 70 per cent of the total cement production of the country. A total of 210 large
cement plants account for a cumulative installed capacity of over 350 million tonnes, with 350
small plants accounting for the rest. Of these 210 large cement plants, 77 are located in the states
of Andhra Pradesh, Rajasthan and Tamil Nadu.
Investments
On the back of growing demand, due to increased construction and infrastructural activities, the
cement sector in India has seen many investments and developments in recent times.
According to data released by the Department of Industrial Policy and Promotion (DIPP), cement
and gypsum products attracted Foreign Direct Investment (FDI) worth US$ 5.26 billion between
April 2000 and June 2018.
Some of the major investments in Indian cement industry are as follows:
▪ As of December 2018, Raysut Cement Company is planning to invest US$ 700 million in
India by 2022.

28. INDIAN ECONOMY
27
▪ During 2017-18, Ultratech commissioned a greenfield clinker plant with a capacity of 2.5
MTPA and a cement grinding facility with 1.75 MTPA capacity in Dhar, Madhya Pradesh.
The company is expecting to complete a 1.75 MTPA cement grinding facility and a 13
MW waste heat recovery system by September 2018 at the same location.
▪ In May 2018, Ultratech Cement decided to acquire the 13.4 MTPA capacity cement
business of Century Textiles and Industries.
▪ JK Cement is planning to invest Rs 1,500 crore (US$ 231.7 million) over the next 3 to 4
years to increase its production capacity at its Mangrol plant from 10.5 MTPA to 14 MTPA.
Government Initiatives
In order to help the private sector companies thrive in the industry, the government has been
approving their investment schemes. Some such initiatives by the government in the recent past
are as follows:
In Budget 2018-19, Government of India announced setting up of an Affordable Housing Fund of
Rs 25,000 crore (US$ 3.86 billion) under the National Housing Bank (NHB) which will be utilised
for easing credit to homebuyers. The move is expected to boost the demand of cement from the
housing segment.
Road Ahead
The eastern states of India are likely to be the newer and virgin markets for cement companies and
could contribute to their bottom line in future. In the next 10 years, India could become the main
exporter of clinker and gray cement to the Middle East, Africa, and other developing nations of
the world. Cement plants near the ports, for instance the plants in Gujarat and Visakhapatnam, will
have an added advantage for exports and will logistically be well armed to face stiff competition
from cement plants in the interior of the country.
Due to the increasing demand in various sectors such as housing, commercial construction and
industrial construction, cement industry is expected to reach 550-600 Million Tonnes Per Annum
(MTPA) by the year 2025.
A large number of foreign players are also expected to enter the cement sector, owing to the profit
margins and steady demand. In future, domestic cement companies could go for global listings
either through the FCCB route or the GDR route.
With help from the government in terms of friendlier laws, lower taxation, and increased
infrastructure spending, the sector will grow and take India’s economy forward along with it.
Exchange Rate Used: INR 1 = US$ 0.0142 as of Q2 FY19.
References: Media Reports, Press releases, Union Budget 2018-19, Edelweiss Securities Ltd.

29. INDIAN ECONOMY
28
4.6 Indian Consumer Market
Indian consumer durables market is broadly segregated into urban and rural markets, and is
attracting marketers from across the world. The sector comprises of a huge middle class,
relatively large affluent class and a small economically disadvantaged class. Global corporations
view India as one of the key markets from where future growth is likely to emerge. The growth
in India’s consumer market would be primarily driven by a favourable population composition
and increasing disposable incomes.
Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in 2012. The
maximum consumer spending is likely to occur in food, housing, consumer durables, and
transport and communication sectors.
Market Size
▪ The growing purchasing power and rising influence of the social media have enabled
Indian consumers to splurge on good things. Import of electronic goods reached US$ 53
billion in FY18.
▪ Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$
31.48 billion) in 2017. India is one of the largest growing electronics market in the world.
Indian electronics market is expected to grow at 41 per cent CAGR between 2017-20 to
reach US$ 400 billion.
▪ As of FY18, washing machine, refrigerator and air conditioner market in India were
estimated around Rs 7,000 crore (US$ 1.09 billion), Rs 19,500 crore (US$ 3.03 billion)
and Rs 20,000 crore (US$ 3.1 billion), respectively.
▪ India became world's second largest smartphone market with 40.1 million units shipped
between July-September 2018. India is expected to have 829 million smartphone users by
2022.

30. INDIAN ECONOMY
29
Investments
According to the data released by the Department of Industrial Policy and Promotion (DIPP), the
electronics sector attracted foreign direct investment (FDI) worth US$ 1.97 billion between April
2000 and June 2018. The S&P BSE Consumer Durables Index has grown at 20 per cent CAGR
between 2010-17.
Following are some recent investments and developments in the Indian consumer market sector.
▪ India is now the world’s second largest mobile phone manufacturer with presence of 120
factories as of July 2018.
▪ In July 2018, Samsung announced an investment of Rs 5,000 crore (US$ 745.82 million)
for expansion of manufacturing capacity to 120 million from 68 million devices at its Noida
plant in India.
▪ Intex Technologies will invest around Rs 60 crore (US$ 9.27 million) in 2018 in technology
software and Internet of Things (IoT) startups in India in order to create an ecosystem for
its consumer appliances and mobile devices.
▪ Micromax plans to invest US$ 89.25 million by 2020 for transforming itself into a
consumer electronics company.
Government Initiatives
▪ A draft National Policy on Electronics Policy was released by the Ministry of Electronics
& Information Technology in October 2018.
▪ A new Consumer Protection Bill has been approved by the Union Cabinet, Government of
India that will make the existing laws more effective with a broader scope.
▪ The mobile phone industry in India expects that the Government of India's boost to
production of battery chargers will result in setting up of 365 factories, thereby generating
800,000 jobs by 2025.
▪ The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for
investors by amending the M-SIPS scheme, in order to further incentivise investments in
electronics sector, create employment opportunities and reduce dependence on imports by
2020.
▪ The Government of India has allowed 100 per cent Foreign Direct Investment (FDI) under
the automatic route in Electronics Systems Design & Manufacturing sector. FDI into single
brand retail has been increased from 51 per cent to 100 per cent; the government is planning
to hike FDI limit in multi-brand retail to 51 per cent.
Road Ahead
Indian appliance and consumer electronics (ACE) market is expected to increase at a 9 per cent
CAGR to reach Rs 3.15 trillion (US$ 48.37 billion) in 2022. Demand growth is likely to accelerate

31. INDIAN ECONOMY
30
with rising disposable incomes and easy access to credit. Increasing electrification of rural areas
and wide usability of online sales would also aid growth in demand.
Exchange Rate Used: INR 1 = US$ 0.0149 as of Q1 FY19
References: Media reports, press releases, Press Information Bureau (PIB), Union Budget 2017-
18, Boston Consulting Group, International Data Corporation.
4.7 E-commerce Industry in India
The e-commerce has transformed the way business is done in India. The Indian e-commerce
market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much
growth of the industry has been triggered by increasing internet and smartphone penetration. The
ongoing digital transformation in the country is expected to increase India’s total internet user base
to 829 million by 2021 from 445.96 million in2017. India’s internet economy is expected to double
from US$125 billion as of April 2017 to US$ 250 billion by 2020, majorly backed by ecommerce.
India’s E-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion
in 2020, growing at an annual rate of 51 per cent, the highest in the world.
Market Size
Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer
wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$
38.5 billion in 2017 Online retail sales in India are expected to grow by 31 per cent to touch US$
32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.
During 2018, electronics is currently the biggest contributor to online retail sales in India with a
share of 48 per cent, followed closely by apparel at 29 per cent.

32. INDIAN ECONOMY
31
Investments/ Developments
Some of the major developments in the Indian e-commerce sector are as follows:
▪ Flipkart, after getting acquired by Walmart for US$ 16 billion, is expected to launch more
offline retail stores in India to promote private labels in segments such as fashion and
electronics. In September 2018, Flipkart acquired Israel based analytics start-up Upstream
Commerce that will help the firm to price and position its products in an efficient way.
▪ Paytm has launched its bank - Paytm Payment Bank. Paytm bank is India's first bank with
zero charges on online transactions, no minimum balance requirement and free virtual debit
card
▪ As of June 2018, Google is also planning to enter into the E-commerce space by November
2018. India is expected to be its first market.
▪ E-commerce industry in India witnessed 21 private equity and venture capital deals worth
US$ 2.1 billion in 2017 and 40 deals worth US$ 1,129 million in the first half of 2018.
▪ Google and Tata Trust have collaborated for the project ‘Internet Saathi’ to improve
internet penetration among rural women in India
Government initiatives
Since 2014, the Government of India has announced various initiatives namely, Digital India,
Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective
implementation of such programs will likely support the e-commerce growth in the country. Some
of the major initiatives taken by the government to promote the e-commerce sector in India are as
follows:
▪ In order to increase the participation of foreign players in the e-commerce field, the Indian
Government hiked the limit of foreign direct investment (FDI) in the E-commerce
marketplace model for up to 100 per cent (in B2B models).
▪ In the Union Budget of 2018-19, government has allocated Rs 8,000 crore (US$ 1.24
billion) to BharatNet Project, to provide broadband services to 150,000 gram panchayats
▪ As of August 2018, the government is working on the second draft of e-commerce policy,
incorporating inputs from various industry stakeholders.
Road Ahead
The e-commerce industry been directly impacting the micro, small & medium enterprises (MSME)
in India by providing means of financing, technology and training and has a favourable cascading
effect on other industries as well. The Indian e-commerce industry has been on an upward growth
trajectory and is expected to surpass the US to become the second largest e-commerce market in
the world by 2034. Technology enabled innovations like digital payments, hyper-local logistics,
analytics driven customer engagement and digital advertisements will likely support the growth in
the sector. The growth in e-commerce sector will also boost employment, increase revenues from

33. INDIAN ECONOMY
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export, increase tax collection by ex-chequers, and provide better products and services to
customers in the long-term.
4.8 Education & Training Industry in India
India holds an important place in the global education industry. India has one of the largest
networks of higher education institutions in the world. However, there is still a lot of potential for
further development in the education system.
Moreover, the aim of the government to raise its current gross enrolment ratio to 30 per cent by
2020 will also boost the growth of the distance education in India.
Market Size
India has the world’s largest population of about 500 million in the age bracket of 5-24 years and
this provides a great opportunity for the education sector. The education sector in India is estimated
at US$ 91.7 billion in FY18 and is expected to reach US$ 101.1 billion in FY19.
Number of colleges and universities in India reached 39,050 and 903, respectively in 2017-18.
India had 36.64 million students enrolled in higher education in 2017-18. Gross Enrolment Ratio
in higher education reached 25.8 per cent in 2017-18.
The country has become the second largest market for e-learning after the US. The sector is
expected to reach US$ 1.96 billion by 2021 with around 9.5 million users.
Investments/ Recent developments.
The total amount of Foreign Direct Investments (FDI) inflow into the education sector in India
stood at US$ 1.75 billion from April 2000 to June 2018, according to data released by Department
of Industrial Policy and Promotion (DIPP).

34. INDIAN ECONOMY
33
The education and training sector in India has witnessed some major investments and
developments in the recent past. Some of them are:
▪ Indian education sector witnessed 18 merger and acquisition deals worth US$ 49 million
in 2017.
▪ The Ministry of Human Resource Development, Government of India is also planning to
raise around Rs 1 lakh crore (US$ 15.52 billion) from private companies and high net worth
individuals to finance improvement of education infrastructure in the country.
▪ India has signed a loan agreement with World Bank under 'Skills Acquisition and
Knowledge Awareness for Livelihood Promotion' (SANKALP) Project to enhance
institutional mechanisms for skills development.
▪ Singapore is going to open its first skill development centre in Assam, which will provide
vocational training to youth in the region.
Government Initiatives
Some of the other major initiatives taken by the Government of India are:
▪ In August 2018, Innovation Cell and Atal Ranking of Institutions on Innovation
Achievements (ARIIA) were launched to assess innovation efforts and encourage a healthy
competition among higher educational institutions in the country.
▪ In August 2018, Government of India launched the second phase of ‘Unnat Bharat
Abhiyan’ which aims to link higher educational institutions in the country with at least five
villages. The scheme covers 750 such institutions.
▪ The allocation for school education under the Union Budget 2018-19 is expected to
increase by 14 per cent, to focus on accelerating existing schemes and quality
improvement.
▪ In order to boost the Skill India Mission, two new schemes, Skills Acquisition and
Knowledge Awareness for Livelihood Promotion (SANKALP) and Skill Strengthening for
Industrial Value Enhancement (STRIVE), have been approved by the Cabinet Committee
on Economic Affairs (CCEA), Government of India, with an outlay of Rs 6,655 crore (US$
1.02 billion) and will be supported by the World Bank.
▪ The Ek Bharat Shreshtha Bharat (EBSB) campaign is undertaken by Ministry of Human
Resource Development to increase engagement between states, union territories, central
ministries, educational institutions and general public.
▪ Prime Minister Mr Narendra Modi launched the Skill India initiative – ‘Kaushal Bharat,
Kushal Bharat’. Under this initiative, the government has set itself a target of training 400
million citizens by 2022 that would enable them to find jobs. The initiatives launched
include various programmes like: Pradhan Mantri Kaushal Vikas Yojana (PMKVY),
National Policy for Skill Development and Entrepreneurship 2015, Skill Loan scheme, and
the National Skill Development Mission.

35. INDIAN ECONOMY
34
Government Achievements
Following are the achievements of the government in the past four years:
▪ Under the mid-day meal scheme initiated by the Government of India, about 95 million
students of around 1.14 million schools enjoy fresh meal every day.
▪ The Government has laid foundation of 141 universities and 7 IITs in the past four years.
▪ With an aim of promoting innovation and entreprenuership among secondary school
students in the country NITI Aayog, Government of India has launched the Atal Innovation
Mission (AIM)In June 2018, 3,000 additional Atal Tinkering Labs were approved, taking
the total number of labs to 5,441.
Road Ahead
In 2030, it is estimated that India’s higher education will:
▪ Adopt transformative and innovative approaches in Higher education.
▪ Have an augmented Gross Enrolment Ratio (GER) of 50 per cent
▪ Reduce state-wise, gender based and social disparity in GER to 5 per cent.
▪ Emerge as a single largest provider of global talent, with one in four graduates in the world
being a product of the Indian higher education system.
▪ Be among the top five countries in the world in terms of research output with an annual
R&D spent of US$ 140 billion.
▪ Have more than 20 universities among the global top 200.
Various government initiatives are being adopted to boost the growth of distance education market,
besides focusing on new education techniques, such as E-learning and M-learning.
Education sector has seen a host of reforms and improved financial outlays in recent years that
could possibly transform the country into a knowledge haven. With human resource increasingly
gaining significance in the overall development of the country, development of education
infrastructure is expected to remain the key focus in the current decade. In this scenario,
infrastructure investment in the education sector is likely to see a considerable increase in the
current decade
Moreover, availability of English speaking tech-educated talent, democratic governance and a
strong legal and intellectual property protection framework are enablers for world class product
development, as per Mr Amit Phadnis, President-Engineering and Site Leader for Cisco (India).
The Government of India has taken several steps including opening of IIT’s and IIM’s in new
locations as well as allocating educational grants for research scholars in most government
institutions. Furthermore, with online modes of education being used by several educational
organisations, the higher education sector in India is set for some major changes and developments
in the years to come.

36. INDIAN ECONOMY
35
Exchange Rate Used: INR 1 = US$ 0.015 as of March 30, 2018.
References: Media Reports, Press Releases, Press Information Bureau, RNCOS Report,
Department of Industrial Policy and Promotion (DIPP), Union Budget 2018-19
4.9 Financial Services in India
India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth
of existing financial services firms and new entities entering the market. The sector comprises
commercial banks, insurance companies, non-banking financial companies, co-operatives, pension
funds, mutual funds and other smaller financial entities. The banking regulator has allowed new
entities such as payments banks to be created recently thereby adding to the types of entities
operating in the sector. However, the financial sector in India is predominantly a banking sector
with commercial banks accounting for more than 64 per cent of the total assets held by the financial
system.
The Government of India has introduced several reforms to liberalise, regulate and enhance this
industry. The Government and Reserve Bank of India (RBI) have taken various measures to
facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs). These
measures include launching Credit Guarantee Fund Scheme for Micro and Small Enterprises,
issuing guideline to banks regarding collateral requirements and setting up a Micro Units
Development and Refinance Agency (MUDRA). With a combined push by both government and
private sector, India is undoubtedly one of the world's most vibrant capital markets. In 2017, a new
portal named 'Udyami Mitra' has been launched by the Small Industries Development Bank of
India (SIDBI) with the aim of improving credit availability to Micro, Small and Medium
Enterprises' (MSMEs) in the country. India has scored a perfect 10 in protecting shareholders'
rights on the back of reforms implemented by Securities and Exchange Board of India (SEBI).
Market Size

37. INDIAN ECONOMY
36
The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under Management
(AUM). Total AUM of the industry stood at Rs 24.03 trillion (US$ 342.01 billion) between April-
November 2018. At the same time the number of Mutual fund (MF) equity portfolios reached a
high of 74.6 million as of June 2018.
Another crucial component of India’s financial industry is the insurance industry. The insurance
industry has been expanding at a fast pace. The total first year premium of life insurance companies
reached Rs 193,866.23 crore (US$ 30.10 billion) during FY18.
Along with the secondary market, the market for Initial Public Offers (IPOs) has also witnessed
rapid expansion. The total amount of Initial Public Offerings (IPO) increased to US$ 1.2 billion
raised from 37 between April – June 2018.
Over the past few years India has witnessed a huge increase in Mergers and Acquisition (M&A)
activity. In H12018, 74 deals of acquisition took place in financial sector. The total value of such
transactions was US$ 4.166 billion. *
Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint venture
with Ebix Inc to build a robust insurance distribution network in the country through a new
distribution exchange platform.
Investments/Developments
▪ Investments by Foreign Portfolio Investors (FPIs) in Indian capital markets have reached
Rs 6,310 crore (US$ 899.12 million) up to November 22, 2018.
▪ As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with an
investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion
Initiative (BII) along with JP Morgan, Michael and Susan Dell Foundation, and the Bill
and Melinda Gates Foundation.
▪ The private equity and venture capital (PE/VC) investments reached US$ 25.20 billion
between January to October 2018.*
Government Initiatives
▪ In December, 2018, Securities and Exchange Board of India (SEBI) proposed direct
overseas listing of Indian companies and other regulatory changes.
▪ Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on Sensex
50 index from October 26, 2018.
▪ In September 2018, SEBI asked for recommendations to strengthen rules which will
enhance the overall governance standards for issuers, intermediaries or infrastructure
providers in the financial market.
▪ The Government of India launched India Post Payments Bank (IPPB), to provide every
district with one branch which will help increase rural penetration. As of August 2018, two
branches out of 650 branches are already operational.

38. INDIAN ECONOMY
37
Road Ahead
▪ India is today one of the most vibrant global economies, on the back of robust banking and
insurance sectors. The relaxation of foreign investment rules has received a positive
response from the insurance sector, with many companies announcing plans to increase
their stakes in joint ventures with Indian companies. Over the coming quarters there could
be a series of joint venture deals between global insurance giants and local players.
▪ The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in
assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than
three times growth in investor accounts to 130 million by 2025.
▪ India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate
(CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions
to touch Rs 32 trillion (USD $ 492.6 billion) by 2022.
Exchange Rate Used: INR 1 = US$ 0.0142 as of Q2 FY19
Notes - * - Private Equity Deal Tracker report by EY
References: Media Reports, Press Releases, IRDAI, General Insurance Council, Reserve Bank of
India, Union Budget 2017-18
4.10 FMCG Industry in India
Fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with
Household and Personal Care accounting for 50 per cent of FMCG sales in India. Growing
awareness, easier access and changing lifestyles have been the key growth drivers for the sector.
The urban segment (accounts for a revenue share of around 55 per cent) is the largest contributor
to the overall revenue generated by the FMCG sector in India However, in the last few years, the
FMCG market has grown at a faster pace in rural India compared with urban India. Semi-urban
and rural segments are growing at a rapid pace and FMCG products account for 50 per cent of
total rural spending.

39. INDIAN ECONOMY
38
Market Size
The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in
2017, with modern trade expected to grow at 20 per cent - 25 per cent per annum, which is likely
to boost revenues of FMCG companies. Revenues of FMCG sector reached Rs 3.4 lakh crore (US$
52.75 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020. The sector witnessed
growth of 16.5 per cent in value terms between July-September 2018; supported by moderate
inflation, increase in private consumption and rural income.@
Investments/ Developments
The government has allowed 100 per cent Foreign Direct Investment (FDI) in food processing and
single-brand retail and 51 per cent in multi-brand retail. This would bolster employment and supply
chains, and also provide high visibility for FMCG brands in organised retail markets, bolstering
consumer spending and encouraging more product launches. The sector witnessed healthy FDI
inflows of US$ 13.63 billion, during April 2000 to June 2018. Some of the recent developments
in the FMCG sector are as follows:
▪ Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya
Pradesh, Assam, Andhra Pradesh and Uttar Pradesh.
▪ Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for
capacity expansion and is also planning to make acquisitions in the domestic market.
▪ In May 2018, RP-Sanjiv Goenka Group created an Rs 1 billion (US$ 14.92 million) venture
capital fund to invest in FMCG start-ups.
▪ In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which will
produce a range of consumer and foodservice dairy products.
Government Initiatives

40. INDIAN ECONOMY
39
Some of the major initiatives taken by the government to promote the FMCG sector in India are
as follows:
▪ The Government of India has approved 100 per cent Foreign Direct Investment (FDI) in
the cash and carry segment and in single-brand retail along with 51 per cent FDI in multi-
brand retail.
▪ The Government of India has drafted a new Consumer Protection Bill with special
emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible,
affordable and timely delivery of justice to consumers.
▪ The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the
FMCG products such as Soap, Toothpaste and Hair oil now come under 18 per cent tax
bracket against the previous 23-24 per cent rate.
▪ The GST is expected to transform logistics in the FMCG sector into a modern and efficient
model as all major corporations are remodeling their operations into larger logistics and
warehousing.
Achievements
Following are the achievements of the government in the past four years:
▪ Number of mega food parks ready increased from 2 between 2008-14 to 13 between 2014-
18.
▪ Preservation and processing capacity increased from 308,000 during 2008-14 to 1.41
million during 2014-18.
▪ The number of food labs increased from 31 during 2008-14 to 42 during 2014-18.
Road Ahead
Rural consumption has increased, led by a combination of increasing incomes and higher
aspiration levels; there is an increased demand for branded products in rural India. The rural FMCG
market in India is expected to grow to US$ 220 billion by 2025 from US$ 23.6 billion in FY18. In
FY18, FMCG’s rural segment contributed an estimated 10 per cent of the total income and it is
forecasted to contribute 15-16 per cent in FY 19. ^ FMCG sector is forecasted to grow at 12-13
per cent between September–December 2018. @
On the other hand, with the share of unorganised market in the FMCG sector falling, the organised
sector growth is expected to rise with increased level of brand consciousness, also augmented by
the growth in modern retail.
Another major factor propelling the demand for food services in India is the growing youth
population, primarily in the country’s urban regions. India has a large base of young consumers
who form the majority of the workforce and, due to time constraints, barely get time for cooking.

41. INDIAN ECONOMY
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Online portals are expected to play a key role for companies trying to enter the hinterlands. The
Internet has contributed in a big way, facilitating a cheaper and more convenient means to increase
a company’s reach. It is estimated that 40 per cent of all FMCG consumption in India will be
online by 2020. The online FMCG market is forecasted to reach US$ 45 billion in 2020 from US$
20 billion in 2017.
It is estimated that India will gain US$ 15 billion a year by implementing the Goods and Services
Tax. GST and demonetisation are expected to drive demand, both in the rural and urban areas, and
economic growth in a structured manner in the long term and improve performance of companies
within the sector.
Exchange Rate Used: INR 1 = US$ 0.0142 as on Q2 FY18
Note - ^ - According to CRISIL report, @ - according to Nielsen
References: Media Reports, Press Information Bureau (PIB), Union Budget 2018-19, Firstpost
4.11 Healthcare Industry in India
Healthcare has become one of India’s largest sectors - both in terms of revenue and employment.
Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical
tourism, health insurance and medical equipment. The Indian healthcare sector is growing at a
brisk pace due to its strengthening coverage, services and increasing expenditure by public as well
private players.
Indian healthcare delivery system is categorised into two major components - public and private.
The Government, i.e. public healthcare system comprises limited secondary and tertiary care
institutions in key cities and focuses on providing basic healthcare facilities in the form of primary
healthcare centres (PHCs) in rural areas. The private sector provides majority of secondary, tertiary
and quaternary care institutions with a major concentration in metros, tier I and tier II cities.
India's competitive advantage lies in its large pool of well-trained medical professionals. India is
also cost competitive compared to its peers in Asia and Western countries. The cost of surgery in
India is about one-tenth of that in the US or Western Europe.

42. INDIAN ECONOMY
41
Market Size
The healthcare market can increase three-fold to Rs 8.6 trillion (US$ 133.44 billion) by 2022.
India is experiencing 22-25 per cent growth in medical tourism and the industry is expected to
double its size from present (April 2017) US$ 3 billion to US$ 6 billion by 2018.
There is a significant scope for enhancing healthcare services considering that healthcare spending
as a percentage of Gross Domestic Product (GDP) is rising. The government’s expenditure on the
health sector has grown to 1.4 per cent in FY18E from 1.2 per cent in FY14. The Government of
India is planning to increase public health spending to 2.5 per cent of the country's GDP by 2025.
Investment
The hospital and diagnostic centers attracted Foreign Direct Investment (FDI) worth US$ 5.25
billion between April 2000 and June 2018, according to data released by the Department of
Industrial Policy and Promotion (DIPP). Some of the recent investments in the Indian healthcare
industry are as follows:
▪ Healthcare sector in India witnessed 23 deals worth US$ 679 million in H12018.
▪ India and Cuba have signed a Memorandum of Understanding (MoU) to increase
cooperation in the areas of health and medicine, according to Ministry of Health and Family
Welfare, Government of India.
▪ Fortis Healthcare has approved the de-merger of its hospital business with Manipal
Hospital Enterprises. TPG and Dr. Ranjan Pal could invest Rs. 3,900 crore (US$ 602.41
million) in Manipal Hospital Enterprise.
Government Initiatives

43. INDIAN ECONOMY
42
Some of the major initiatives taken by the Government of India to promote Indian healthcare
industry are as follows:
▪ On September 23, 2018, Government of India launched Pradhan Mantri Jan Arogya Yojana
(PMJAY), to provide health insurance worth Rs 500,000 (US$ 7,124.54) to over 100
million families every year.
▪ In August 2018, the Government of India has approved Ayushman Bharat-National Health
Protection Mission as a centrally Sponsored Scheme contributed by both center and state
government at a ratio of 60:40 for all States, 90:10 for hilly North Eastern States and 60:40
for Union Territories with legislature. The center will contribute 100 per cent for Union
Territories without legislature.
▪ The Government of India has launched Mission Indradhanush with the aim of improving
coverage of immunisation in the country. It aims to achieve atleast 90 per cent
immunisation coverage by December 2018 which will cover unvaccinated and partially
vaccinated children in rural and urban areas of India.
Achievements
Following are the achievements of the government in the year 2017:
▪ In 2017, the Government of India approved National Nutrition Mission (NNM), a joint
effort of Ministry of Health and Family Welfare (MoHFW) and the Ministry of Women
and Child development (WCD) towards a life cycle approach for interrupting the
intergenerational cycle of under nutrition.
▪ As of September 23, 2018, the world’s largest government funded healthcare scheme,
Ayushman Bharat was launched.
▪ As of November 15, 2017, 4.45 million patients were benefitted from Affordable
Medicines and Reasonable Implants for Treatment (AMRIT) Pharmacies.
▪ As of December 15, 2017, the Government of India approved the National Medical
Commission Bill 2017, it aims to promote area of medical education reform.
Road Ahead
India is a land full of opportunities for players in the medical devices industry. India’s healthcare
industry is one of the fastest growing sectors and it is expected to reach $280 billion by 2020. The
country has also become one of the leading destinations for high-end diagnostic services with
tremendous capital investment for advanced diagnostic facilities, thus catering to a greater
proportion of population. Besides, Indian medical service consumers have become more conscious
towards their healthcare upkeep.
Indian healthcare sector is much diversified and is full of opportunities in every segment which
includes providers, payers and medical technology. With the increase in the competition,
businesses are looking to explore for the latest dynamics and trends which will have positive

44. INDIAN ECONOMY
43
impact on their business. The hospital industry in India is forecasted to increase to Rs 8.6 trillion
(US$ 132.84 billion) by FY22 from Rs 4 trillion (US$ 61.79 billion) in FY17 at a CAGR of 16-17
per cent.
India's competitive advantage also lies in the increased success rate of Indian companies in getting
Abbreviated New Drug Application (ANDA) approvals. India also offers vast opportunities in
R&D as well as medical tourism. To sum up, there are vast opportunities for investment in
healthcare infrastructure in both urban and rural India.
Exchange Rate Used: INR 1 = US$ 0.0142 as on Q2 FY19
References: Department of Industrial Policy and Promotion (DIPP), RNCOS Reports, Media
Reports, Press Information Bureau (PIB)
4.12 Infrastructure Sector in India
Infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for
propelling India’s overall development and enjoys intense focus from Government for initiating
policies that would ensure time-bound creation of world class infrastructure in the country.
Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development.
In 2018, India ranked 44th out of 167 countries in World Bank's Logistics Performance Index
(LPI) 2018.
Market Size
Foreign Direct Investment (FDI) received in Construction Development sector (townships,
housing, built up infrastructure and construction development projects) from April 2000 to June
2018 stood at US$ 24.87 billion, according to the Department of Industrial Policy and Promotion
(DIPP). The logistics sector in India is growing at a CAGR of 10.5 per cent annually and is
expected to reach US$ 215 billion in 2020.

45. INDIAN ECONOMY
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Investments
India has a requirement of investment worth Rs 50 trillion (US$ 777.73 billion) in infrastructure
by 2022 to have sustainable development in the country. India is witnessing significant interest
from international investors in the infrastructure space. Some key investments in the sector are
listed below.
▪ In June 2018, the Asian Infrastructure Investment Bank (AIIB) has announced US$ 200
million investment into the National Investment & Infrastructure Fund (NIIF).
▪ Private equity and venture capital (PE/VC) investments in the infrastructure sector reached
US$ 1,827 million during January-November 2018
▪ Indian infrastructure sector witnessed 91 M&A deals worth US$ 5.4 billion in 2017
Government Initiatives
The Government of India is expected to invest highly in the infrastructure sector, mainly highways,
renewable energy and urban transport.
The Government of India is taking every possible initiative to boost the infrastructure sector. Some
of the steps taken in the recent past are being discussed hereafter.
Announcements in Union Budget 2018-19:
▪ Massive push to the infrastructure sector by allocating Rs 5.97 lakh crore (US$ 92.22
billion) for the sector.
▪ Railways received the highest ever budgetary allocation of Rs 1.48 trillion (US$ 22.86
billion).
▪ Rs 16,000 crore (US$2.47 billion) towards Sahaj Bijli Har Ghar Yojana (Saubhagya)
scheme. The scheme aims to achieve universal household electrification in the country.
▪ Rs 4,200 crore (US$ 648.75 billion) to increase capacity of Green Energy Corridor Project
along with other wind and solar power projects.
▪ Allocation of Rs 10,000 crore (US$ 1.55 billion) to boost telecom infrastructure.
A new committee to lay down standards for metro rail systems was approved in June 2018. As of
August 2018, 22 metro rail projects are ongoing or are under construction.
Rs 2.05 lakh crore (US$ 31.81 billion) will be invested in the smart cities mission. All 100 cities
have been selected as of June 2018.
The Government of India is working to ensure a good living habitat for the poor in the country and
has launched new flagship urban mission, the Pradhan Mantri Awas Yojana (Urban). In May 2018,
construction of additional 150,000 affordable houses was sanctioned under Pradhan Mantri Awas
Yojana (PMAY), Urban.

46. INDIAN ECONOMY
45
Achievements
Following are the achievements of the government in the past four years:
▪ The total national highways length increased to 122,434 kms in FY18 from 92,851 kms in
FY14.
▪ India’s rank jumped to 24 in 2018 from 137 in 2014 on World Bank’s Ease of doing
business - "Getting Electricity" ranking.
▪ Energy deficit reduced to 0.7 per cent in FY18 from 4.2 per cent in FY14.
▪ Number of airports has increased to 102 in 2018.
Road Ahead
India’s national highway network is expected to cover 50,000 kilometres by 2019. National
highway construction in India has increased by 20 per cent year-on-year in 2017-18.
India and Japan have joined hands for infrastructure development in India's north-eastern states
and are also setting up an India-Japan Coordination Forum for Development of North East to
undertake strategic infrastructure projects in the northeast.
Exchange Rate Used: INR 1 = US$ 0.0155 as of March 30, 2018.
4.13 Indian Insurance Industry Overview & Market Development Analysis
The insurance industry of India consists of 57 insurance companies of which 24 are in life
insurance business and 33 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life insurers
there are six public sector insurers. In addition to these, there is sole national re-insurer, namely,
General Insurance Corporation of India (GIC Re). Other stakeholders in Indian Insurance market
include agents (individual and corporate), brokers, surveyors and third-party administrators
servicing health insurance claims.

47. INDIAN ECONOMY
46
Market Size
Government's policy of insuring the uninsured has gradually pushed insurance penetration in the
country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in FY18, with Rs
4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51 trillion (US$ 23.38 billion) from
non-life insurance. Overall insurance penetration (premiums as % of GDP) in India reached 3.69
per cent in 2017 from 2.71 per cent in 2001.
In FY19 (up to October 2018), premium from new life insurance business increased 3.66 per cent
year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In FY19 (up to October 2018), gross direct
premiums of non-life insurers reached Rs 962.05 billion (US$ 13.71 billion), showing a year-on-
year growth rate of 12.40 per cent.
Investments and Recent Developments
The following are some of the major investments and developments in the Indian insurance sector.
▪ As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo Munich Health
Insurance at a valuation of around Rs 2,600 crore (US$ 370.05 million).
▪ In October 2018, Indian e-commerce major Flipkart entered the insurance space in
partnership with Bajaj Allianz to offer mobile insurance.
▪ In August 2018, a consortium of WestBridge Capital, billionaire investor Mr Rakesh
Jhunjunwala announced that it would acquire India’s largest health insurer Star Health and
Allied Insurance in a deal estimated at around US$ 1 billion.
▪ In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance policy for
individuals.
▪ Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7 billion)
through public issues in 2017.