India Services Sector A Multi-trillion Dollar Opportunity for Global Symbiotic Growth April 2017 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Contents
Message from Confederation of Indian Industry 04 Message from Deloitte 05 Executive Summary 06 Trade Facilitation in Services 45
Focus Sectors 48 1. Skills 49 2. Education 52 3. Banking & Financial Services 56 4. Healthcare Services 60 5. Information Technology 63 6. Next Gen Cities 69 7. Start-ups / SME in Services 73 8. Media & Entertainment 78 9. Sports Services 83 10. Telecom 88 11. Logistics 93 12. Retail & E-commerce 101 13. Environmental Services 104 14. Energy Services 109 15. Space 115 16. Railway Services 120 17. Professional Services 123 18. Tourism & Hospitality 131 19. Wellness 136 20. Facility Management 140 21. Exhibition and Event Services 143
Emerging Opportunities 146 1. Cyber Security 147 2. Northeast India 151 3. Research & Development 157 About Confederation of Indian Industry 160 About Deloitte 161 Acknowledgements 163 Contacts 164 References 166
03 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Message from Confederation Message from of Indian Industry Deloitte
Services sector contributes mora than 60% to CII is proud to collaborate with Deloitte India to In order to showcase India’s potential in the Deloitte India is honored to work with the Ministry India's economy and 28% to the total release a report on Services sector in India and we services sector and the numerous opportunities it of Commerce and Industry and CII for this grand employment. Attracting highest FDI inflows, hope this would be useful for future businesses. presents, the Ministry of Commerce and Industry event. We have prepared a publication services sector is on a growth trajectory driven by We are happy to release this important report at in association with the Confederation of Indian highlighting and introducing the opportunities in digital efforts of the government and highly skilled the prominent event of Global Exhibition on Industry (CII) and SEPC have organised the third various services sectors in India. This publication and low cost manpower. Services 2017 organized jointly by the Ministry of edition of the Global Exhibition on Services (GES), provides the industry profile of key services Commerce and Industry, Government of India, to be held in Greater Noida. This year, 70 countries sectors, such as IT, telecom, media and We have witnessed good revenue generation with Services Export and Promotion Council (SEPC) and are expected to attend this mega event, which is entertainment, healthcare, banking & financial growing sectoral activities across tourism, Confederation of Industry (CII). The goal of GES is focussing on 20 sectors. services, retail, railways, environment, energy, healthcare, telecom, information technology, to provide a strong fillip to the global services logistics, exhibition & event, facility, education, banking, finance, education and space. The new sector becoming a forum for trade, knowledge India has the fastest growing (9.2% in 2015-16) space, skills, start-ups and sports. The publication sectors, which have gained significant momentum exchange, and fresh partnerships between service sector in the world and contribute about in particular highlights the focus of each sector on from government and private players, include countries, governments, and businesses. 66% to Indian GDP. The services sector, which various government initiatives – Skill India, Digital sports, railways and retail including e-commerce stands at about $1.48 trillion, has a potential for India, Start-up India and Make in India. We have and hence, these are included as focus areas in exponential growth riding on various government emphasized on the key drivers of growth in the Global Exhibition on Services 2017. These initiatives like Make in India, Skill India, Start-up various services sectors in India and the potential sectors are increasingly gaining global visibility India and Digital India. Unique innovations of for global expansion of services. The publication and attracting global players to invest and partner IndiaStack namely Aadhaar, DigiLocker, e-Sign, also focusses and delves into special areas such as with domestic players. UPI, BHIM, and AEPS riding on JAM Trinity has cyber security, trade facilitation, and start-ups/ created presence less, paperless, cashless and SMEs in services sectors. In addition to this, the Various government initiatives – Smart Cities, consent platform will enable exponential growth. publication also focusses on emerging Clean India, Digital India, etc. are creating enabling India’s distinctive competencies and competitive opportunities in space technology, R&D, cyber environment giving further push to the services advantage formed by the knowledge-based security and the northeast region. sectors such as communication, healthcare, services makes it unique emerging market in the environment, technology, energy, banking to world. Wide range of service sectors have seen We hope the publication will enable various name a few. With the right regulatory and policy Chandrajit Banerjee double digit growth in the last few years backed stakeholders such as the services industry, the framework and creating a climate that will ease Director General, by digital technologies and institutional public as well as the private sector to identify the the way of doing business in India, the services Confederation of Industry mechanisms facilitated by the government. With future prospects for each of the service sectors sector can achieve new height and hold an significant progression in cultural and government covered in the publication and help in their enlarged share of global services trade pie. These outlook, the ease of doing business in India has strategic thinking and planning. conscious efforts of the government to engage substantially improved for both, domestic and with global companies and governments have led international players. Today, India is home to to increased investments and participation in some of the best companies of the world as a India’s strategic initiatives. However, simplified result of the continuing reforms in terms of regulations and standards, and the establishment reducing trade barriers, relaxing FDI restrictions of global rules on services such e-commerce, etc. and deregulation. to facilitate cross-border trade will be critical for future growth.
04 05 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth Executive Summary Information Technology
Potential for Global Expansion Strengths
•• Advisory services for the world in digital •• Large pool of STEM talent transformation •• Cost advantage •• Asia Pacific Countries (Japan, China, •• Expertise in technology enabled business transformation Australia and ASEAN countries)
•• Emerging African countries •• Vibrant start-up ecosystem •• South America Opportunities •• Digital transformation of industries across the world
•• Growing domestic market in India, due to digital economy initiatives
Linkages Growth Enablers
Make in India Digital India •• To transform India into a knowledge empowered economy
Sector Overview •• Engineering R&D •• Digital delivery of •• Rising domestic demand services – major governance and •• Digital India ($1 trillion dollar opportunity) Global Industry player in telecom citizen services •• The worldwide IT services market will reach $938 billion in 2017 & semiconductors •• India Stack: Technology for 1.2 billion (Aadhaar, UPI, e-KYC, eSign, DigiLocker) •• Technology •• The global IT spending is expected to reach $3.5 trillion in 2017 •• Leveraging infrastructure for •• Rising popularity of ICT enabled services domestic digital economy •• 26 billion internet connected devices and over 4 billion internet users by 2020 •• Tech savvy young demography manufacturing •• National •• In 2016, IP traffic 1.1 Zeta Bytes (over 1 trillion GB), by 2020 IP traffic is expected to touch 2.3 ZB industry for next •• Upgradation of talent with new and emerging skills e-Governance gen services Indian Industry plan 2.0 •• Moving to full transparency in online procurement by Government e-market place •• Indian IT-BPM sector size is $143 billion and is expected to reach $155 billion by 2017 Skill India Start-up India •• Programming of chatbots and robotic process automation along with applications of •• Exports market: $108 billion in 2016 machine learning •• Creating Skillful •• Fueling the •• Domestic market: $52 billion employment with technology •• GDP contribution: 9.5% online vocational startups in India courses. Making •• Providing a Key Events young students platform to • World Conference on Information Technology, China employable and • technology savvy providing working •• Consumer Electronic Show (CES), Las Vegas entrepreneur population with culture in India •• Mobile World Congress, Barcelona new skills
Demand Drivers Case Study
•• Digital transformation across industries •• Smart India Hackathon 2017: World’s largest hackathon involving over 3 million technology students, 6400+ technology institutions in •• Growing Internet penetration and smart devices ($4.3 trillion connected life opportunity) India, 36 hours nonstop digital product development competition over 25 centers across the nation solving 600 problem statements by 25 ministries. •• Mainstream adoption of frontier technologies such as artificial intelligence, machine learning, robotics, automation, virtual reality •• Digital India •• The cost of key technologies such as 3D printing, DNA, solar power, sensors, drones, etc. is falling rapidly •• India Stack: Technology for 1.2 billion for paperless, presenceless, cashless and consent •• Rising demand of cost effective IT services in the emerging economies (Africa, ASEAN countries) •• World class digital payment infrastructure through JAM (Jan dhan, Aadhaar, Mobile), IMPS, UPI, AEPS
•• Unparalleled innovation for creating digital identity for 1.3 billion Indians using two biometrics (retina scan, fingerprint)
For details, see page 63
06 07 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Healthcare
Potential for Global Expansion Strengths
•• Currently patients from East Africa, •• Presence of world-class hospitals and skilled medical professionals Middle East, neighboring countries come •• Treatment for major surgeries in India costs approximately 10% of the cost in most of to India the developed countries •• India’s cost advantage will significantly Opportunities open doors for the developed countries including US, Europe, South East Asia, •• Increasing penetration of health insurance Japan, Middle East, Africa •• Use of technology for healthcare delivery in remote corners
Linkages Growth Enablers
Make in India Digital India •• National Health Policy 2017 ––Comprehensive primary healthcare package Promoting Fueling innovative ––Health Card for access to primary healthcare facility services anytime , anywhere manufacturing work in space ––Free drugs and diagnostics Sector Overview of medical of m-health, ––Free healthcare to victims of gender violence equipment, devices, telemedicine, ––Digital Intervention – tele consultation, National Knowledge Network, National Digital Global Industry consumables and electronic medical Health Authority and introduction of electronic health records •• The global healthcare market had a turnover of $7 trillion in 2015 drugs in India. records, e-ICU, diagnostics through •• AYUSH Ministry is working with various agencies, institutions, Ayurveda researchers and Indian Industry Reduce the cost of health apps, etc. practitioners across the globe to turn India into a global hub for knowledge, research, •• In 2016, the Indian healthcare market had a turnover of $110 billion and is expected to touch $280 billion by 2020. Healthcare delivery these devices, which practice and developmental projects on traditional medicines constitutes 65% of the overall Indian healthcare market. were so far imported •• FDI in hospital and diagnostic centers: $4 billion (April 2000 and September 2016) (with the associated import duties) •• Medical tourism in India ––Current: $3.9 billion (2016) Skill India Start-up India ––Projected: $8 billion (2020) Healthcare Sector Start-ups are ––Tourist arrivals: ~230,000 (2016) Skill Council (HSSC) rapidly increasing Key Events has been set up in number, to aid skilling and covering aspects •• World Congress on Healthcare and Medical Tourism, Dubai UAE vocational training like diagnostics, Demand Drivers for healthcare aggregation of •• Large ageing population industry health providers, electronic •• Increasing healthcare costs in the western world medical records, •• Increase in chronic and communicable diseases video/remote consultations •• Increase in disposable income aiding affordability of healthcare services second opinion consultations, etc.
Case Study
•• A leading eye care hospital in India provides cataract surgery for $16 including 2 night stay at hospital, and medication and cost of lens. Only 30% of their patients pay for treatment and rest go free of charge and yet the hospital makes 35% operating profit.
•• Indian Scientist developed credit card sized ECG machine costing INR 4000 compared to imported machines which are heavier, bigger and 10 times more expensive.
•• Healthcare innovation by an Indian: A origami-based, use and throw microscope costing 50 cents for on-field diagnosis of diseases like malaria, in remote areas of the world like Africa, Thailand.
•• A knee replacement surgery could cost $40,000 in the US, $10,000 in Thailand, and $8500 in India. Similarly, for bone marrow transplant costs $400,000 in the US, $150,000 in the UK, and $30,000 in India.
•• Pradhan Mantri Suraksha Bima Yojana at a cost of INR 12 per annum with a coverage of INR 2,00,000
For details, see page 60 08 09 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Skills
Potential for Global Expansion Strengths
•• According to OECD, all countries which •• Low cost skill development capabilities are likely to face shortage of skills •• English proficiency in Indian skill development sector can attract global students including Japan, Australia, Germany, US, China, UK, etc. •• National Skill Development Corporation offers free and paid skill development courses to Indian students and gives skill certifications •• Other geographies including Africa, Nepal, Sri Lanka, Myanmar, Bangladesh and •• Intermediate skill development programs like ITIs, Diploma programs in PPP mode other Middle East countries Opportunities
•• Focus on imparting skills through online and onsite medium.
•• Business models like National Skill Development to provide affordable skill development courses to global students
•• Revenue sharing franchisee model Sector Overview Linkages Growth Enablers
India Industry Skill India Digital India •• Skill India Initiative was launched by the Prime Minister in 2015 to train 400 million people by 2022. •• To benefit economically from the demographic dividend, Planning Commission has identified 20 sectors to prepare students for Aim to skill 402 Aim to provide employment. The sectors are: Construction, Chemicals, M&E, Electronics, Furniture, Tourism, BFSI, Gems & Jewellery, Leather, IT and million workers training to the •• Government of India has launched Skill Acquisition and Knowledge Awareness for ITeS, Education and Skills, Food Processing, Healthcare, Retail, Transportation, Textiles, Automobile, Real Estate. by 2022 through youth in the skills Livelihood Promotion Programme (SANKALP) to provide vocational training to 35 million •• In 2020, the average Indian will be only 29 years old, compared to 37 in China and the US, 45 in Western Europe and 48 in Japan. Pradhan Mantri required for availing youth. Kaushal Vikas employment •• Government has launched next phase of Skill Strengthening for Industrial Value •• Over 9.2 million people trained in NSDC, and 3.6 million placed in a short span Yojana, National opportunities in the Enhancement (STRIVE), to focus on improving the quality and market relevance of Skill Development IT/ITES sector. •• Vocational training introduced in 10 States, covering 2400+ schools, 2 Boards, benefitting over 250,000 students. vocational training provided in ITIs and strengthen the apprenticeship programmes Mission, and loans through industry-cluster approach. •• Net enrolment in vocational courses in India is about 5.5 million; US: 11.3 million; China: 90 million up to INR 150,000 Demand Drivers Case Study •• Top countries in the world including Japan, India, Australia, Germany, US, China etc. are facing great skill shortage, creating demand for skilling programs 1. National Skill Development Corporation: The objective of NSDL is to contribute significantly (40%) to the overall target of skilling / up-skilling 400 million people in India by 2022, mainly by fostering private sector initiatives in skill development programmes and to •• Alleviation of poverty as more than one billion people in the world live on less than $1 a day. In total, 2.7 billion struggle to survive on provide funding. NSDC has 290 training partners, 4526 training centers and has created a world-class scalable platform using digital 1 less than $2 a day . technologies2. •• Youth make up 25% of the global working-age population; yet their share in total unemployment is 40%. Young people are almost 2. deAsra: deAsra's vision is to support entrepreneurship through a scalable business modelling strategy. deAsra's target is to generate three times more likely to be unemployed as adults. 1,00,000 jobs in the next five years, (2015 to 2020) by facilitating the creation of 25000 enterprises3. •• Government initiatives For details, see page 49 •• Online channel gaining momentum •• Corporate partnerships •• Private participation •• Digital trends
10 11 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Education
Potential for Global Expansion Strengths
•• Opportunity to provide world class cost •• Low cost education effective education to people who cannot •• Low cost of living attractive for International students afford the high cost of education in the developed world. •• World-renowned educational institutions, including IITs, IIMs, IISc, and AIIMS
•• Support developing world both through •• Government's push towards higher education online and onsite education. •• India and China do better in global rankings and have greater opportunities for ––South Asia (Nepal, Afghanistan, and international collaboration Bhutan) ––Middle East Opportunities ––Africa (Nigeria and Sudan) •• Technological advancements driving innovation in teaching methodologies.
•• Tutoring in the schooling segment is expected to grow from $8 billion in 2011 to $26 billion in 2020. Similarly, pre-school segment is at nascent stage, and growing. Sector Overview •• In the next 35-40 years, about 700 million to 1.3 billion youth could potentially go Global Industry through India’s higher education system. •• The global education market, in terms of revenue, stood at $4.4 trillion in 2013. Linkages Growth Enablers Indian Industry Start-up India Digital India •• Government of India allows 100% FDI in the primary education sector under the automatic route. The government has also permitted 100% FDI in construction projects, •• The Indian education market, in terms of revenue, stood at $97.8 billion in 2016. Many start-ups •• All schools to be related to educational institutions. •• FDI in education sector in India: $1.4 billion (April 2000-Dec 2016) are entering to connected with support education broadband and •• Alignment of academic year, course-curriculum and credit system with the leading •• One of the world's largest higher education systems with enrollments of ~33.3 million students in colleges, institutions, across 50,000+ programmes Wi-Fi educational hubs including the US. higher education institutes and 750+ universities. in remote rural •• Pilot MOOCs •• Government's target to increase digital literacy to at least 50% in the next three years Key Events locations. About (Massive Online from the current 15%. 591 education •• The Global Education Conference - A week-long virtual conference using Blackboard Collaborate platform involving 25000+ students, Open Courses) technology startups •• Rules and policies by UGC to facilitate the creation of world-class institutes in India educators, and organizations at all levels from 180+ countries launched through were present in 2015 which can admit up to 30% foreign students. SWAYAM portal Demand Drivers with a funding of which has 93 •• National Education Policy (NEP) 2016 proposed the introduction of a new system of about $135 million. •• ICT and technological developments – Telecom driving geographical and financial inclusion under graduates measuring annual learning outcomes in schools, wherein emphasis will be given on •• Demand for skilled resources and 83 graduate science education to promote creativity through innovative content. programs •• Increasing affluence in society •• The FY2017-18 budgetary allocation stood at $11.9 billion. •• Participation of female labor force and demand for pre-school facilities Case Study •• Demand for vocational education • MHRD has launched Study Webs of Active Learning for Young Aspiring Minds (SWAYAM), a web portal where Massive Open On-line •• Growing significance of MOOCs • Courses (MOOCs) are offered. It provides affordable and flexible way to learn new skills, pursue lifelong interests and deliver quality educational experience at scale.
•• A learning app, launched in 2015 for students, with focus on K-12 classes, and competitive exams (CBSE, CAT, IAS, GMAT, GRE, JEE, NEET, and Bank Exam). It caters to 200,000 school and college students, and attracts 30,000 new users every month.
For details, see page 52
12 13 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Banking & Financial Services
Potential for Global Expansion Strengths
•• Advisory for creating digital identity digital •• Government focus on digital payments through UPI, IMPS, AEPS, BHIM •• Large customer base – eSign. •• High mobile penetration •• Inward Investments - Mauritius, Singapore, US, UK, Netherlands •• Increasing last-mile connect via technology - lowering cost for customer
•• Outward Investments - Emerging •• Preferred destination of cost, strategic & talent arbitrage economies in Asia, Africa Opportunities
•• Refinancing capital: Real estate, infra and bad loans
•• Innovation capital: Fintech, RPA, cognitive, blockchain
•• Investment capital: New banks
Sector Overview •• Re-engineering capital: GIC/shared services
Global Industry Linkages Growth Enablers •• The global banking industry is expected to be $163 trillion in 2017. Make in India Digital India •• Digital India vision to transform India into a digitally empowered society and knowledge economy. Digital payment being key driver of this. Indian Industry •• Easy loans and •• New Bank Licenses benefits to SMEs •• Strong government and regulator push – GOI has raised FDI cap in Insurance and •• The Indian Banking and Insurance sector accounted for ~5.8% of GDP (at factor cost, current price) in FY 134. Indian GDP in 2015 stood •• Digital pension from 26% to 49% and in ARC to 100%; RBI is considering allowing 100% FDI in at a whopping $2.095 trillion5, valuing the industry’s contribution in GDP at > $121 billion in 2015. Based on MOSPI's advanced first •• Push for usage of infrastructure private sector banks; New Banking licenses; Universal banking license available on tap; estimates of National Income for FY 17, the share of the Financial and insurance sector* in GVA stood at INR 7,106.13 billion in FY17. local resources for (JAM Trinity) – UPI, Demonetization; NPA management; Aadhaar; and other digital initiatives: currency printing USSD, IMPS, BHIM Key Events ––Paperless (Digilocker) app, QR code •• World Economic Forum Annual Meeting •• Focus on ––Presence less (Finger Prints, Retina Scans) infrastructure •• Demonetization ––Cashless (Aadhaar Enabled Payments Systems - AEPS) •• The Future of Banking (The Economist) financing ––Consent Layer (E-Signatures) •• Central KYC •• FT banking summit •• Increased competition Skill India Start-up India Demand Drivers •• Strategic arbitrage of GICs •• Penetration of financial services has significant growth potential •• Talent arbitrage for •• Fintech global support opportunity •• Foreign banks allowed to operate via WOS •• Growing income levels •• Technology •• Agile and •• Evolving consumer behavior learning digital focussed institutions -Challenging traditional models
Case Study
•• IndiaStack: Technology for 1.2 billion with paperless, cashless, presence less and consent.
•• A leading Indian wallet provider started operations in Canada via initial partnerships with 1,000 merchants. The app allows Canadians to pay bills (mobile, electricity, water, internet, cable, etc.), insurance and property tax and is available on Android and iOS platforms in the market.
Note: *Financial and Insurance sector is valued at 29% of the Financial, Insurance, real estate and professional services as per press note on First Advanced estimates of National Income, MOSPI, 2016-17. For details, see page 56
14 15 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Start-ups / SME in Services
Potential for Global Expansion Strengths
•• Major market: Domestic •• Strong IT/ITeS presence
•• Analytics and Technology startups export •• High adoption of Internet Services services to US , UK, Mid East and ASEAN •• Tech savvy and entrepreneur driven demographics Countries •• Huge mobile Penetration
•• Large investments
•• Strong presence of Angel Investors and incubators
Opportunities
•• Skilled manpower
•• Evolving consumer demand
Sector Overview: SMEs and Startup Services •• JAM trinity – means to address large scale opportunities in rural markets
Global Industry •• Demand for online service •• US and UK are the major startup ecosystems Linkages Growth Enablers •• US: 52,000 startups, UK: 4,900 Make in India Digital India •• Start-up India initiative by Government of India
•• Israel and China: Growing ecosystem •• Platform for •• NOFN, Cloud, •• Digital India initiative new product Pradhan Mantri Indian Industry •• Commoditization of consumer technology and engineering Jan-Dhan Yojana, •• 3rd largest start-up ecosystem in the world; 10,000+ start-ups by 2020; 4750 tech-based start-ups companies Aadhaar, Mobile •• Smartphone and internet penetration •• $4 billion funding in 2016;46.5% CAGR (2010-2016) (JAM) provides a •• Availability of risk capital great platform for •• Average age of start-up founders: 28 years start-ups •• Global venture capital’s interest in Indian start-ups •• Around 800 investors in the market •• Boost to Fintech, •• MSME sector contributes 38% to the GDP; MSME services sector: 30% of the GDP HealthCare, Key Events Education, Ecommerce •• Global Startup Weekend Skill India Start-up India Demand Drivers •• Entrepreneur •• Liberal policies •• Growing interest of global investors and silicon valley entrepreneurs driven skills to encourage •• Easy exit route for Indian start-ups due to rising M&A activity, offering opportunity for global players business •• Partnership from •• Increasing demand for cost effective and high quality services globally institutes like IIMs •• Start-up centers, •• Growing investments in R&D and Engineering in India and IITs incubators and policy support
Case Study: Start-up India program
Start-up India program provides a platform for new technology players for self-certification, patent application, tax benefits, funding up to INR 100 billion through alternate investment funds, and INR 20 billion through credit, etc.
For details, see page 73
16 17 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Media & Entertainment
Potential for Global Expansion Strengths
•• Captive NRIs across the world •• Liberalization of FDI policy (e.g. in broadcast sector)
•• Increasing interest from US, UK, China, •• Government initiatives to promote India as a filming destination Middle East, Africa and South East Asia in •• Talented crews to assist in filmmaking at comparatively low cost India cinema
•• Online platforms and dubbing in local •• Growing internet penetration due to proliferation of broadband through public Wi-Fi language networks
•• Shooting in India at historical monuments Opportunities and scenic places •• Digital adoption across value chain
•• Co-production treaties
•• Increasing penetration of multiplexes
•• Growth potential in animation, VFX, gaming sectors Sector Overview •• Edutainment channels that provide educational content to young minds Global Industry •• Investments from major film studios in regional cinema •• Global Media & Entertainment (M&E) industry is expected to touch a market size of $2.14 trillion by 2020 •• Distribution of channels by Indian broadcasters in overseas countries Indian Industry Linkages Growth Enablers •• India M&E industry market size estimated to be $20.5 billion in 2016 •• Television, print and films are 3 largest sectors Make in India Digital India •• Ministry of Information and Broadcasting has set up the Film Facilitation Office (FFO) to facilitate efficient approvals and improving ease of shooting in India •• Indian film industry: Largest in the world in terms of number of films produced in more than 20 languages, 2nd highest footfall in the FFO offers a single Digital India world window mechanism campaign to •• Setting up of ‘Centres of Excellence’ with state-of-the-art facilities by state governments for facilitating strengthen the to promote gaming, animation, media & entertainment sector •• 2nd largest television market with 181 million television households in 2016; ~892 television channels in India shooting to promote sectors such as •• Increase of FDI limit to 49% in television news channels and FM radio and 100% FDI •• Largest newspaper market with 110,851 registered publications (March 2016) foreign films video streaming, allowed in digital cable, DTH services shooting in India online music •• FDI inflows: $6.3 billion (April 2000-Dec 2016) consumption and Key Events gaming by increasing •• NAB Show, Las Vegas, Nevada internet penetration •• Broadcast Asia, Singapore Skill India Start-up India •• Cannes Film Festival, France Government Tax exemption initiatives focusing to encourage •• Emmy Awards, USA on generation of animation and •• The Oscars (Academy Awards), California, USA adequately skilled gaming start-up Demand Drivers workforce which is companies industry-ready and • Evolving lifestyles and affluence • employable •• Upcoming use of visual effects (VFX) in movies Case Study •• Deployment of emerging technologies such as virtual reality, augmented reality, drone shootings, etc. "India as an international filming destination": After the success of India-based movies such as Slumdog Millionaire, many international •• Demand for over-the-top (OTT) services that offer advertising, free content studios are increasingly considering shooting large portions of their films in India. Life of Pi, The Second Best Exotic Marigold Hotel, Million Dollar Arm, and Mission Impossible IV were some of the movies recently shot in India
For details, see page 78
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Sports Services
Potential for Global Expansion Strengths
•• Australia, France, Hungary, Kazakhstan, •• Increase in the number of academies and training centers by Indian corporates and Kuwait, Maldives, Mauritius, Netherland, renowned sportspersons New Zealand, Seychelles, Turkey and •• Unexplored rural market and demographic profile in India Turkmenistan (MOUs in sports with India) Opportunities •• South Asia Association for Regional Cooperation (SAARC) nations •• NITI Aayog has advised the government to bid for and host 100 major international sports events till 2026 by creating a separate arm under the Sports Authority of India
•• Demand for sports infrastructure, favorable government policies
•• Sports tourism and sports medicine have high potential
Linkages Growth Enablers
Make in India Digital India •• Inclusion of sports in the harmonized master list of infrastructure sub-sectors by Union Finance Ministry Sector Overview Develop sports To strengthen Global Industry infrastructure in the sectors •• Ministry of Youth Affairs and Sports (MYAS) gained the approval of Ministry of Corporate both rural and urban such as video Affairs (MCA) for inclusion of sports infrastructure, construction and maintenance as •• Global sports market: $480-620 billion (2015) areas streaming, online part of CSR activities Indian Industry sports content •• Government initiatives like Khelo India and Mahatma Gandhi National Rural Employment consumption by •• Indian sports sponsorship market grew 19.3% to $0.95 billion (INR 64 billion) in 2016 Guarantee Act (MGNREGA) to promote sports increasing internet •• 1.33 million youngsters are likely to take up sports professionally by 2017 penetration
•• Of total sponsorships, media spends accounted for 54.8% share followed by on-ground advertising/sponsorship (18.2%), team Skill India sponsorships (10.9%), franchise fees (8.5%), and endorsements (7.4%) GOI-initiated Rashtriya Yuva Sashaktikaran • Cricket continues to account for highest sports sponsorships • Karyakram (RYSK) — New umbrella scheme Key Events to enable youth to realise their potential
•• Olympic Games Case Study
•• Tennis Grand Slam •• War of leagues: With IPL & ISL, is India emerging as a sporting nation? •• Federation Internationale de Football Association (FIFA) World Cup Inspired by the success of IPL, India witnessed the emergence of new non-cricket sports leagues – Indian Super League (ISL), Hockey India League, Pro Kabaddi League (PKL) and Indian Premiere Tennis League. This has helped in improving skills of Indian players, •• Formula 1 Races infrastructure and developing sporting venues
Demand Drivers •• Emergence of virtual reality based sports experiences •• Favorable demographic profile •• Setting up of sports convention centers for training and conducting events •• Increase in female viewership worldwide For details, see page 83 •• Demand for data analytics services for enhancing performance of players •• Growing online viewership of sports fueled by mobile and internet connection
20 21 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Telecom
Potential for Global Expansion Strengths
•• Emerging African countries •• High adoption of mobile devices
•• South America •• Lowest tariffs in the world
•• ASEAN nations •• Large skilled workforce
•• Neighboring nations i.e. Bangladesh, Sri- •• Strong optical fiber backhaul to connect every citizen in the country Lanka Opportunities •• UK and US as inward investment for Digital India •• Internet economy expected to touch INR 10 trillion ($146.72 billion) by 2018, contributing 5% to the GDP
•• Untapped potential in rural areas
•• Demand of data services, digitization
•• Popularity of non-traditional services Sector Overview Linkages Growth Enablers Global Industry Make in India Digital India •• Rising demand for internet services in the under penetrated rural market •• The global telecom services market size, in terms of revenue was $1.13 trillion in 2016. •• 38 new mobile •• Digital payments •• Popularity of non-traditional telecom services (i.e. OTT, digital content, digital banking, Indian Industry manufacturing e-health, social networks, e-commerce) •• BharatNet •• Mobile services market is expected to reach $37 billion in 2017 and $103.9 billion by 2020 at a CAGR of 10.3%. units established •• Cashless economy and other reforms in the payment sector of India •• 2nd largest telecom market in terms of subscriber base (1.05 billion subscribers) since September •• eKranti 2015 •• Pay-tv business models •• 4th largest app economy •• Data analytics for •• New platform social change •• Personalized experience Key Events for Telecom •• Mobile World Congress, Barcelona equipment manufacturers •• Wireless Infrastructure Show, Florida Demand Drivers •• Rising popularity of Indian telecom consultancy services in Africa and South America Skill India Start-up India •• Indian telecom companies setting up global footprint Online and offsite Policy framework platform for to encourage more •• Global presence of telecom infrastructure providers vocational skill tech start-ups to •• Rising FDI and entry of global players in Indian MVNO business development, establish business in certification and India and provides •• Leading ICT service providers supporting Digital India and investing in public Wi-Fi and smart cities employability. an attractive platform for foreign 249 training investment partners and 3,222 training centers
Case Study: Reverse Innovation Success in the Telecom Sector
•• One of the leading telecom operators in India adopted “Minute Factory” model and chose to strategically outsource its core functions which resulted in a paradigm shift in the Indian telecom services market. The outsourcing of core activities allowed the operator to be more customer centric, improved profitability and provided the space to innovate in terms of service offering by adding value added services. The success was then replicated in African operations and other parts of the world.
•• Active and passive infrastructure sharing such as towers, etc. for optimizing capex and opex.
For details, see page 88
22 23 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Logistics
Potential for Global Expansion Strengths
•• Latin America (Brazil, Mexico and •• Strong demand from end-user industries Argentina), Africa (Nigeria), Asia •• Development of new IT-enabled systems (Indonesia, China, Hong Kong and Singapore) •• Government focus on expansion of road, rail, port and airport infrastructure in India
Opportunities
•• Increasing focus on third party (3PL), 4PL and 5PL logistics
•• Increase in e-commerce in India
•• Focus on specialised services such as liquid logistics, temperature-controlled logistics or cold chain logistics
Linkages Growth Enablers
Make in India Digital India •• Taxation and regulatory structure for making the sector competitive Sector Overview Growth of Logistics companies •• Investments in infrastructure for higher efficiencies Global Industry manufacturing are focusing on •• Development of multi-modal hubs including road, railway, ports, aviation and inland •• Global logistics industry: $3.34 trillion in 2016 sector in India increased asset waterways will drive logistics utilization and Indian Industry infrastructure; improvement •• Logistics costs in India is 16-18% compared to China which is 8-10%, and Europe which is •• India spends around 14.4% of its GDP on logistics and transportation sector manufacturing in customer 10-12% - scope for significant reduction in cost sector spends nearly satisfaction level •• Indian logistics sector is expected to grow from $115 billion to $360 billion by 2032. •• Increase in national highway to 200,000 km will lead to 80% of country’s traffic moving 2.2% of its revenue by deploying smart faster Key Events on logistics IT solutions in the •• Hamburg International Conference of Logistics, Hamburg, Germany sector •• Investment of over $250 billion in the road sector by 2019 (of which $80 billion has been invested) Demand Drivers •• Promotion of inland waterways and construction of 2000 water ports and linkages with •• Growing demand in rural and semi-urban areas railways and highways •• Increased focus on third-party (3PL), 4PL and 5PL logistics •• Implementation of Goods and Service Tax (GST) to improve efficiencies Skill India •• Development of dedicated freight corridors, logistics parks, free trade warehousing (FTWZ), multimodal logistics parks (MMLP) and multi-modal transport services CII and National Skill Development Corporation have set up a Logistics Sector Skill Council to meet the increased demand for skills in this sector
Case Study
•• The government of India has laid strong emphasis on developing India as a regional maritime hub and formulated the Sagarmala Program focusing on development along 4 thematic areas viz. port modernization and new port development, port connectivity, port led industrialization and coastal community development.
•• Innovative models in construction and financing through PPP models by NHAI
For details, see page 93
24 25 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Retail & E-commerce
Potential for Global Expansion Strengths
•• FDI investments in multi-brand products •• Strong distribution and delivery network by global companies •• Constant marketing innovation
•• Omni-channel retailing
Opportunities
•• Changing demographics and increasing per capita income
•• Government initiatives
•• Use of technology and digitization
Linkages Growth Enablers
Make in India Digital India •• Implementation of GST is expected to enable easier movement of goods across the country, thereby improving retail operations for pan-India retailers. Sector Overview Manufacturing hub A trillion dollar opportunity •• With the allowance of 100% FDI in single brand retail, investor sentiment will get further •• Initiatives to Global Industry push. promote local •• Digital drive, •• The aggregate revenue of the top 250 global retail players was $4.31 trillion in 2015. production – cashless economy •• Increasing smartphone penetration along with high speed networks. •• The turnover of e-Commerce market was $1.4 trillion in 2016. government leading to higher •• Increase in income levels policies and adoption of online Indian Industry incentives. retail. •• Improvements in logistics and supply chain •• Retail market is expected to reach $1 trillion by 2020 from $600 billion in 2015 •• A platform for •• Proliferation of digital payment ecosystem •• E-commerce sales to reach $120 billion (2020) from $30 billion (2016) more online •• Retail and e-commerce contribute ~10% to GDP and 8% in the employment services in the country. •• FDI inflows in retail were INR30.2 billion in India (Jan-2016 to Sep-2016) Skill India Start-up India Sector leading countries •• China, United States, United Kingdom, Japan and Germany are the leading countries in the sector. •• Human capital •• Catalyst for growth plays a very among the start- Demand Drivers important role up enterprises. •• Retail market demand is driven by income growth, urbanization and attitudinal shifts of the consumers. in retail and e-commerce •• E-commerce market is driven by robust investment in the sector and rapid increase in the number of internet and smartphone users sectors.
•• The influence of the young generation is a key driver to success.
Case Study
•• The government has launched E-Marketplace GeM to bring greater transparency and efficiency in public procurement. It will also help in minimizing prices, and enhance the processes in ways such as demand aggregation, real-time price discovery and prompt automated payments.
•• Agrimarket App developed by the government to keep farmers updated with the crop prices.
•• Increasing the rural e-commerce footprint through over 140,000 post offices of India Post in the rural India providing the last mile reach.
For details, see page 101
26 27 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Environmental Services
Potential for Global Expansion Strengths
•• South-East Asia, Africa •• Increased acceptance of PPP structures
•• Upsurge in technology adoption for better waste management
•• A number of angel investors backing waste management startups in India
Opportunities
•• Government supporting waste management through Swachh Bharat Mission, Smart Cities Mission, and AMRUT
•• Municipal solid waste generation expected to reach 114 million by 2041
•• Government offering subsidies for converting waste to energy (WtE)
Linkages Growth Enablers
Make in India Smart cities •• The government allows 100% FDI under the automatic route for urban infrastructure Sector Overview areas including waste management subject to relevant rules and regulations Foreign players Smart cities to Global Industry (through PPP model have hi-tech solid •• Target to construct 6.6 million toilets in urban India, and over 100 million toilets in rural •• $600 billion global market in 2016 or in collaboration waste management India by 2019 with Indian players) system Indian Industry •• Swachh Bharat Cess (SBC) levied at a rate of 0.5% on the value of taxable services can manufacture •• 3rd largest environmental technologies market globally equipment •• Investment in Swachh Bharat mission components such as public and household toilets, •• The Indian environmental technology market, including goods and services, was worth $16.3 billion in 2016 related to waste solid waste management, capacity building etc. management •• 5th largest e-waste producer in the world •• 1.8 million tons of e-waste generated every year, which is expected to rise to 5.2 million tons by 2030 •• 62 million tons of solid waste generated every year Start-up India Digital India
•• 164,000 MT of waste converted to compost in 2016 Start-ups are Swachh Bharat App •• 88.4 MW energy produced from waste in 2016 showing enthusiasm which captures in the field of images using Key Events recycling and WtE location-based data •• Environmental Pollution and Sustainable Energy Conference, Melbourne, Australia and analytics at the back-end to pin- •• 5th World Convention on Recycling and Waste Management, Singapore City point responsibilities Demand Drivers and actions
•• Rapid globalisation Case Study
•• Population growth and growing middle class •• Indian Government has launched the Swachh Paryatan App which lists 25 monuments protected and maintained by Archaeological •• Increased international trade Survey of India. These 25 monuments have been identified as Adarsh Smaraks. Citizens can share images of garbage at these sites and the government will take immediate action.
•• ISRO brings together world’s biggest collation of space agencies to fight pollution and global warming.
For details, see page 104
28 29 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Energy Services
Potential for Global Expansion Strengths
•• Russia, Iran, Qatar, UAE, Nepal, •• Government initiatives such as HELP, UDAY schemes in oil and gas and power sector Bangladesh, US, Australia •• India to merge its existing state-owned oil companies to set up a global integrated oil and gas company
Opportunities
•• Government to allow oil and gas companies to select areas where they want to drill through Open Acreage Licensing Policy (OALP)
•• India has targeted generating 175 GW of power from renewables by 2022
Linkages Growth Enablers
Make in India •• New Hydrocarbon Exploration and Licensing Policy (HELP) to provide for a uniform licensing system for oil, gas, CBM etc., under a single licensing framework Oil PSUs have formulated INDEG Sector Overview (Indigenisation Group) to increase the •• The Discovered Small Fields Policy offers 67 Discovered Small Fields in 46 contract areas domestic component in all kinds of oil through new revenue sharing model Global Industry procurements •• The Ethanol Blended Petrol (EBP) Programme will enable oil companies to sell ethanol •• Global primary energy consumption increased by 1.0% in 2015, well below its 10-year average of 1.9%. Oil remains the world’s leading Skill India Start-up India blended petrol with ethanol percentage of up to 10% fuel, accounting for 32.9% of global energy consumption •• Government focus Oil India and ONGC •• India and France launched a $1 trillion programme to help member countries of the Indian Industry on generation of have announced International Solar Alliance (ISA) harness their solar resources •• 3rd largest energy consumer in the world. It imports over 81% of its crude oil requirements, and meets 45.7% of its gas requirements adequately skilled INR 500 million and through imports workforce. One INR 1 billion start-up •• 5th largest solar energy producer of such initiatives funds, respectively by MoPNG is to foster and •• 4th largest wind energy producer with over 32000 MW installation to set up 6 Skill incubate new ideas •• 11th largest in the total renewable energy producer in the world Development related to oil and gas Institutes (SDIs) in sector Key Events the country •• 22nd World Petroleum Congress, Istanbul, Turkey Case Study Demand Drivers •• In February 2017, India’s solar power sector recorded low-winning bids of INR 2.97 per kilowatt-hour (kWh) to build a 750 MW plant •• Government aims to reduce oil import dependency to 10% from current level by 2022 at Rewa in Madhya Pradesh, called by Rewa Ultra Mega Power Ltd, a JV of Solar Energy Corp. of India Ltd (SECI) and MPUVNL. The low •• Oil and gas companies plan significant investments to increase oil and gas output tariff — primarily due to low cost of financing the project — has made solar energy a competitive source of energy vis-à-vis the coal- fueled conventional source of electricity. •• India to increase the share of natural gas in its energy mix from 6.5% to 15% by 2020-21 by more than doubling its LNG import capacity to 50 MT in the next few years •• The Kamulthi Solar plant, largest solar power plant located in India with a capacity of 646 MW (cumulative over 10,000 MW through solar) and cleaned by robotic systems that is charged by solar panels. •• India has made a huge commitment as a part of COP-21 to reduce energy intensity in the economy by 33-35%, compared to 2005 level, by 2035 For details, see page 109 •• Government accorded CGD network the status of public utility to increase its reach
30 31 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Space
Potential for Global Expansion Strengths
•• US, UK, Germany, France, Japan, Russia •• Capability to launch small payload satellites at low cost and South Kore •• Expertise in multiple launch technologies
Opportunities
•• Major opportunity for low-cost satellite manufacturing for private players and SMEs
•• Industry consortiums to participate in production of PSLVs and regional navigation satellites
•• Large satellite order book of around INR 2,800 million ($42.8 million) for third parties
Linkages Growth Enablers
Make in India •• Government has increased space budget estimate for FY2017-18 by more than 20%, to INR 90.94 billion ($1.35 billion) to provide initial funding for two new space missions to •• Enhance capacities in the private sector Mars and Venus Sector Overview to foster B2B collaborations •• Government approval for building its own space station. Global Industry •• Increase in low-cost manufacturing •• In 2015, the global space industry had a turnover of $335 billion, of which the satellite industry accounted for 62% ($208 billion) facilities to encourage private •• Government to set up ‘Space Parks’ for private players to set up facilities to make participation in manufacturing subsystems and components for satellites Indian Industry subsystems and components for •• Indian satellite industry includes satellite services, satellite launch services, satellite manufacturing and ground equipment satellites
Key Events Start-up India
•• World Space Week ‘Exploring New Worlds in Space’ •• Start-ups in satellite manufacturing are Demand Drivers leveraging technologies, infrastructure and manpower to build space-based •• Strength of Indian organizations such as ISRO in launching satellites at low cost services •• Production of satellites parts and satellites with small payloads at low cost Case Study
In February 2017, India’s ISRO launched a record 104 satellites, taking its tally of foreign satellites launched till date to 180. The latest launch comprised three of ISRO’s own satellites, while the remaining 101 were from six countries. ISRO expects to recover almost 50% of the mission’s cost from payments for foreign launches
For details, see page 115
32 33 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Railway Services
Potential for Global Expansion Strengths
•• South-East Asia, Africa •• The 108,706-km network facilitates movement of 12,617 passenger trains. It has 6,853 stations, 240,000 wagons, 63,045 coaches, and 10,773 locomotives
Opportunities
•• Expected investment of $137 billion in metro rails by 2020
•• Significant potential in O&M services as government focusses on upgradation of facilities, and station re-development
•• 17 sectors in railway operations allow 100% foreign/private investment
Linkages Growth Enablers
Make in India Digital India •• The government has cleared the setting up of a new Railway Development Authority (RDA) which, apart from recommending passenger fares and freight charges, will also •• Open Wi-Fi to be •• Stations to be regulate the sector, which will be opened to private players Sector Overview provided at 400 equipped with stations Cloud-based Global Industry railway display •• Plan for •• The size of the global rail market reached $170 billion in 2015, and is expected to reach $195 billion by 2021 networks construction of Indian Industry six dedicated •• Plan for selling freight corridors unreserved tickets •• 4th largest rail network in the world along the Golden through e-wallets •• Largest employer in the country with 1.4 million employees Quadrilateral
•• The turnover of Indian railways was $25.2 billion in 2016 and is expected to reach $44.5 billion by 2020 Case Study • Facilitated movement of 8.2 billion passengers and 1.1 billion tons of freight in 2015-16 • •• Centre for Railway Information Services has recently upgraded the e-ticketing system. The new system is based on an in-memory Key Events database capable of handling big data. Three million users have migrated; it provides dynamic load balancing to be able to seamlessly manage high demand during peak hours. •• International Railway Summit, Kuala Lumpur • ISRO helps railways with remote sensing at unmanned railway crossings using IRNSS and GPS. Demand Drivers • •• Urbanization and digitalization will sustain growth For details, see page 120 •• Growing middle class population •• Setting up of infrastructure for high-speed trains
34 35 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Professional Services
Potential for Global Expansion Strengths
•• Audit and Accounting: US and UK •• Strong technology presence and local demand
•• Management Consulting: US, Europe and •• Growing Export market for Audit and Management Consulting APAC and ASEAN countries •• Large pool of skilled and unskilled labor •• Architecture and Engineering Services : Mid-east and Asian countries •• Proficiency in English helps in outsourcing demand Opportunities
•• R&D centers in India
•• Growing Demand for Audit and Management Consulting
•• Shared Service centers in India (Multi National)
•• Growing domestic market
Sector Overview •• Preference to low cost high quality products
Global Industry •• Architectural outsourcing •• Global professional services market size : $3.75 trillion in 2015 Linkages Growth Enablers •• Global Management Consulting market: $321 billion in 2016 Make in India •• Large presence of shared services centers in India
•• US accounts for 40% of professional services market with $1500 billion in 2015 •• Start-ups in professional service space •• IndAS converged with IFRS has been a catalyst for expansion
Indian Industry •• New investments due to liberal rules •• Developing talent pool in India which is accredited for the global accounting and auditing standards •• Indian Management consulting market: $ 5.4 billion (INR 348 billion) by 2018 •• Huge boost to Domestic market and •• $28.4 billion Management consulting exports market Employment •• Promotion of trade agreements for easy promotion of professional services •• 10,330 management institutes and 700,000 faculties. Skill India Start-up India •• Liberal FDI in some sectors
•• 2 million enrolments in management courses •• Talent pool to •• Start-ups in provide different Demand Drivers professional professional service space •• Diverse accounting proficiency services •• New investments •• Skilled talent pool •• Language due to liberal rules •• Proficiency in English language proficiency and •• Huge boost to vocational skills •• Technology in Professional Services domestic market to promote and employment •• Popularity of R&D hubs in India outsourcing
Audit Professionals in India Case Study
•• ICAI members: 253,369 ICAI Cloud Campus – Online mentoring to enable students interact with Faculty Members and clear their doubts/ questions •• American Institute of CPAs: 664,532 For details, see page 123 •• Institute of Chartered accountants in England and Wales: 147,000
36 37 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Tourism & Hospitality
Potential for Global Expansion Strengths
•• USA, Bangladesh, UK, Australia, Russia, •• Growth of ‘e-Tourist Visa’, ‘e–Business Visa’ and ‘e–Medical Visa’ Canada, Malaysia, Germany, China, •• Multilingual proficiency of guides Sri Lanka, Singapore, France, Japan, Afghanistan and Nepal •• Set up of Hospitality Development and Promotion Board (HDPB), to monitor and facilitate hotel project clearances and approvals
Opportunities
•• Increase in medical tourism with world class hospitals and skilled medical professionals
•• India to host the Under-17 football World Cup in October 2017, aimed at boosting sports tourism
•• India’s 7,500 km coastline can be used to tap potential for cruise tourism
•• Untapped potential in East and South India (4% tourists visit East India and 18% visit Sector Overview South India)
Indian Industry Linkages Growth Enablers •• Tourism sector’s direct contribution to India’s GDP: $47 billion in 2016 Make in India Digital India •• Provision to offer pre-loaded sim cards to foreign tourists arriving India on e-Visa •• In 2016, Foreign Tourist Arrivals (FTAs) were 8.9 million as compared to 8.3 million in 2015 •• 100% FDI allowed •• E-Visa system •• Increased government initiatives such as Swadesh Darshan, Pilgrimage Rejuvenation in tourism extended to 161 and Spiritual Augmentation Drive (PRASAD) •• Foreign Exchange Earnings (FEEs) from tourism was INR 1,556.50 billion ($24.4 billion) in 2016 construction countries •• Incentives offered by state governments include subsidised land costs, relaxation in •• Tourism and hospitality sector generated FDI inflows of INR 73.5 billion ($1.1 billion) in 2016 projects, including •• Launch of stamp duty, and exemption on sale/lease of land, power tariff incentives, concessional the development •• Improvement in Tourism rankings from 52nd in 2015 to 40th in 2016 due to liberalised visa regime Incredible India rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies of hotels, resorts Key Events app, DigiLocker and special incentive packages for mega projects (for storage •• World Tourism Forum, May 2017, Lucerne, Switzerland of physical Demand Drivers documents)
•• India offers new and relatively cheaper tourism destination with vast geographical diversity, large coastline with attractive beaches, 30 •• Connecting all World Heritage Sites and 25 biogeographic zone gram panchayats •• Diverse portfolio of niche tourism products – cruises, adventure, medical, wellness, sports, eco-tourism, film and religious tourism under Bharat Net initiative •• Dependable and low-cost medical tourism industry in India is expected to touch $8 billion by 2020 Skill India •• The Visa on Arrival scheme extended to 180 countries in 2016. A five-year tax holiday offered for 2, 3, and 4 star category hotels located around UNESCO World Heritage sites (except Delhi and Mumbai) •• Set up of Tourism and Hospitality Skill council
•• Set up of National Skill Development Agency (NSDA), National Skill Development Corporation (NSDC)
Case Study
The government of India launched an international marketing campaign, Incredible India to promote tourism in India to the global audience. It promotes India as a desirable destination among international travellers from the US, Europe and Asia-Pacific and reaches out to travellers in a cost-effective way. Rollout of liberalised visa regime covering 161 countries in 24 airports and 3 ports for e-visa increases
For details, see page 131
38 39 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Wellness
Potential for Global Expansion Strengths
•• Online and onsite training by leading yoga •• Increasing demand for ethnic products institutes for global audience •• Great potential of India with the presence of several Yoga centers, naturopathy centers •• Global demand arising from USA, •• Advantage of having young population with the willingness to adopt to new fitness Bangladesh, UK, Sri Lanka, Canada mantras •• Certification for yoga teachers and Opportunities Ayurveda practitioners from leading Indian institutes •• Significant tourist movement to India for Ayurveda and Yoga
Linkages Growth Enablers
Make in India Digital India •• Growing consumer interest in health, travel, and new experiences
•• 100% FDI is Initiatives such as •• Growing urbanization and changing lifestyle permitted in the National Health •• Easy access to beauty and wellness products through online shopping Sector Overview AYUSH sector Portal to provide general information •• Separate ministry named AYUSH to promote wellness sector •• India is the second Global Industry on health and largest exporter •• Strong support by the Government by recognizing “Wellness” as one of the priority •• Globally, wellness industry represents a $3.7 trillion economy, with a growth of 10.6% from 2013-2015. diseases and of Ayurvedic sectors in its Make in India campaign multiple mobile •• Global yoga market is estimated at $80 billion and alternative apps, like the •• Ancient knowledge of yoga, meditation, spa and ayurveda for preventive health, medicine in Indian Industry Swasthya Bharat wellness and wellbeing. the world and App •• The wellness market in India had a turnover of $13 billion in 2015, it is expected to grow at a CAGR of nearly 12% to reach $23 billion has developed by 2020. vast AYUSH Key Events infrastructure comprising of •• Global Wellness Summit, Florida 736,538 registered •• International Yoga Day practitioners
Demand Drivers Skill India Start-up India
•• Emerging global middle class with rising disposable income Beauty and Wellness Setting up of •• Increasing awareness and availability of herbal and Ayurveda products Skill Development specialized Council (BWSSC) treatment centers •• Focus on preventive healthcare established •• Rising cost of healthcare in the world to ensure the generation of skilled manpower in the sector
Case Study
The Ministry of AYUSH observes the International Day of Yoga on 21st June every year. In 2016, an estimated 5 million people participated in yoga training programmes in India over a period of one month.
For details, see page 136
40 41 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Next Gen Cities Facility Management
Sector Overview Sector Overview
•• Envisaged investment of $40 billion in developing 100 cities during the Smart City Mission period of 5 years Global Industry •• 30% of proposed investment in the ICT sector towards developing smart solutions for urban residents •• Market was estimated at $1.12 trillion in 2016. •• Facilitate requisite infrastructure and services for 40% of Indian residents in the urban areas by 2035 Indian Industry •• India market is expected to grow at 17% year-on-year and reach $19 billion by 2020. Potential for Global Expansion Strengths Demand Drivers •• The Smart Cities Mission has attracted •• Top-down strategy for solutions development •• Increasing urban development and modernization of office spaces are driving the growth in the sector. funding from multilateral donor agencies •• Convergence with other Government schemes like DFID, World Bank in developing key Potential for Global Expansion Strengths Indian cities as Next Gen Cities •• Inclusive governance through citizen participation at all levels •• Global companies are investing in India in •• iCloud based systems used by companies to provide top quality service. •• The Smart Solutions proposed as part of Opportunities setting up their operations. Some of the the Smart City plans are likely to facilitate •• Diversification into IT/Healthcare/Services and financial sector. •• Large untapped market leading US players are already operating large investments from global SI firms in India. •• Digitization of human capital and resource management. •• Growing demand of ICT enabled smart urban services Opportunities •• Digitization efforts of the government irrespective of the sector •• Increased use of technology – ATM machines Linkages Growth Enablers •• Increased security awareness Make in India Digital India •• 30% of proposed investment of $40 billion in the ICT sector towards developing smart solutions for urban residents •• Growth of urban infrastructure •• Enhancing •• Convergence capacity of large to support Growth Enablers OEMs for catering development of •• Robust infrastructure development roadmap of the government. to smart solutions smart & innovative envisaged under solutions •• Policy initiatives like RERA, GST, and infrastructure status for affordable housing are making India an attractive destination for the Smart City corporates to expand operations. •• Digital Mission empowerment of Case Study citizens •• One of India’s leading facility management firm is working with government, semi-government and private sector for development of gardens and landscapes, roads, rural electrification projects, factory construction and relocation.
Case Study •• One of the leading multi-national companies has set up operations in India and provides asset services and manages Corporate Offices, Information Technology Parks, Retail Malls, BPOs, Call Centres, Banks, Financial Institutions and Residential Complexes. In April, 2015 the Government of India approved the Smart City Mission to develop 100 smart cities across the country with an outlay of INR 480 billion over a period of five years. Subsequently, the Prime Minister of India launched the Smart City Mission on 25th June, 2015 •• Bus terminal in Vadodara has been built under a public-private partnership with world class facilities and Airport like design. The realty with the Ministry of Urban Development (MoUD), GoI as the nodal agency for creating these Next Gen Cities. firm involved in the construction has been given a 31 year contract for the maintenance and cleanliness of the facilities.
For details, see page 69 For details, see page 140
42 43 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Exhibition and Event Service Trade Facilitation in Services The services sector has perhaps become Gains in services leading to export almost double than that of its share in the most important part of most growth global merchandise exports. India’s share economies across the globe and assumes Indian export story has also benefited from of global exports of commercial services special importance for the Indian economy, its strength in the services sector. This is increased to 3.2% in 2013 from 1.2% in especially its role in driving the economy evident from the trade data. Rapid growth 2000. In fact, during the period from forward to greater heights. in services has meant big strides in exports 2001-2013, CAGR of world commercial of services too. This has been possible in services exports was 10% with India being The Indian economy has grown in its the last decade due to information and at the top amongst the 15 top economies own unique way as reforms of the 1990s communication technology revolution registering growth at 20.1%, followed by paved the way for growth of the services of mid-1990s and a boost to growth in China at 16.5%. India stands as the eighth sector before any significant leap in the technology, transportability, and tradability largest services exporter in the world. manufacturing sector. The progress that have in turn changed the nature and The services sector is also more open, as of the service sector meant a gain in tradability of services6 7. calculated by total trade including services sophistication of services along with the as a percentage of GDP, as compared to the sector accounting for a major share of the India’s service exports grew almost ten-fold merchandise trade sector8. economy. in the past 15 years, its share in global Sector Overview services exports (such as IT services) being
Global Industry Figure 1: Indian exports of commercial services ($ billion) •• Global exhibition market had a turnover of $55 billion and attracts nearly 260 million visitors annually. Indian Industry 148.2 155.7 155.3 137.9 145.03 •• Indian event industry is projected to be worth nearly INR 960 billion (~$14.5 billion) 116.6 105.6 92.4 •• Growth rate expected to be ~ 5.2% year-on-year 86.2 Growth drivers 69.1 •• Market is largely driven by an increase in the need for specialized, effective, and high-quality exhibition events. •• Social media and search engine marketing. •• Increasing demand for sophistication. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Strengths Source: World Trade Organization •• Use of technology in organizing exhibitions •• Achieving efficiency by use of analytics and other tools •• Availability of niche specialists Furthermore, exports in services have kept The success of these services can be These advancements have also had a pace with the changing global dynamics assessed by looking at the proportion of qualitative impact on services exports Opportunities and shift towards more technology ICT related service exports, which have as rapid growth of such services that do •• Growth of India’s industrial engineering, garment, transport equipment and IT/telecoms sectors are helping to create more demand adoption in all areas. The technology and grown manifold since 2000 and are above not require face-to-face interaction, have business services are some of the most 67% as of today. It is no surprise then that the potential of being stored and traded •• Ministry of Tourism is emphasizing on the potential of MICE Tourism and the new tourism policy has identified it as an important product to increase tourism revenue. dynamic in the world. India’s major services Indian service exports are even more digitally. exports are computer services followed by sophisticated than the average level of high Growth Enablers business services and then technical and income countries9. •• Supportive government policies and regulations trade related services. •• Outstanding infrastructure for meetings and events •• Connectivity with other major destinations worldwide
Case Study
Vibrant Gujarat: The 8th edition attracted 33000+ global participants, 100+ countries and 12 partner countries (Australia, Denmark, Canada, Japan, US, UK, etc.) to connect the global investor with India and the state, showcase innovation and best practices, and discuss their application to the state and the nation, empower India to compete with the best global economies and provide a platform for global business networking. MoUs touched INR 20 trillion in defence, aerospace, mining, mineral, chemicals, steel, automotive, IT, etc.
For details, see page 143
44 45 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Figure 2: ICT services exports as % of total services exports access but to ensure that already existing Given India’s fast growing global services market access gained from current and footprint, it was imperative that the country future liberalization commitments are take the initiative in moving for a TFS 69 68 68 68 69 68 68 effective and meaningful. Agreement. An agreement, in conjunction 67 67 66 with enhanced liberalization commitments, 65 The scope of the TFS agreement would would help realize the fuller potential 61 61 include measures by members affecting for trade in services for the domestic 59 trade in services across all modes of economy. supply. In case of services supplied through 55 “mode 3” (a foreign company setting Conclusion up subsidiaries/branches to provide The World Bank in its latest global outlook14 services in another country), it suggests pointed out that protectionism had been streamlining via a “single window” clearance rising and research cited in the outlook 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 system. For cross-border movement of showed that in 2016, the G20 group of Source: World Bank services suppliers, also known as “mode countries had taken more trade restrictive 4”, it suggests simplifying work permit and measures than trade facilitating ones. It visa procedures while ensuring that policies was seen that the policy announcements relating to taxation, fees and social security were made keeping in view the short term Foreign investment plays its part10 Before delving deeper into how trade in These definitions are significantly broader contributions do not unfairly disadvantage dynamics and did not actually address It is important to note the role that foreign services can be increased, it is important than the concept of services in Balance foreign suppliers.12 the structural issues facing the economy. direct investment has played in the to understand how are services measured of payments and essential to further Such protectionist trade policies create evolution of the Indian services sector. The and classified. Unlike trade in goods which understand how trade in services can The TFS includes as a crucial element, uncertainties as they are meant to provide past two decades have seen significant can easily be tracked as being bought and evolve. ‘facilitating movement of natural persons’ immediate stimulus and therefore tend to growth in FDI inflows in India, with services sold, the nature of services is such that it to address Mode 4 delivery of services as be more variable and less consistent. being the major beneficiary. The combined needs further clarification. Trade Facilitation in Services (TFS) defined in the General Agreement on Trade On the other hand, services have become FDI share of the top 10 service sectors is Agreement in Services (GATS). Mode 4 covers natural a major part of trade flows. Given the 53.3% of the cumulative FDI equity inflows Classification of services Given the importance of services and persons who are service suppliers or work potential for growth in services exports, during the period April 2000-October The World Trade Organization (WTO) has our inherent strength in providing high for service suppliers and are present in services-sector negotiations both at 2015. While total FDI inflows grew by come up with a four pronged definition quality services at competitive costs another WTO member country to supply multilateral and bilateral/regional levels 27.3% in FY15, FDI inflows to the services under a General Agreement on Trade the Indian policymakers have rightly a service. This has become important in have great significance for India. In sector, including the top 10 services, in Services (GATS) dependent on the been pushing for a TFS agreement. In the current global scenario, as there is this respect, India has gone ahead and grew by 70.4%. A further expansion can territorial presence of the supplier and the fact, India has already tabled a paper growing discontent surrounding migration made significant progress by signing be seen in FDI inflows in core services, consumer at the time of the transaction11. ‘Concept Note for an Initiative on Trade that negatively impacts services trade. comprehensive bilateral trade agreements which have touched $5.3 billion in FY17 Facilitation in Services’, which was followed Restrictions on entry and exit have a direct with the governments of South Korea, (Apr-Sep), which is close to $6.9 billion 01. Mode 1 — Cross border trade: from by submission of an “elements paper” impact on the ease of conducting business. Japan, Malaysia and Singapore. India also that was achieved for the last full financial the territory of one member into the in November 2016. The objective was to has a free trade agreement (FTA) with year of FY16. Services contributed 17.2% territory of any other member outline the broad contours of a Trade The TFS paper also suggests facilitative ASEAN that came into effect from mid-2015 to total FDI inflows in FY16, and this figure 02. Mode 2 — Consumption abroad: in Facilitation in Services (TFS) Agreement. provisions ‘for the meaningful supply of while also being a part of the mega regional has grown to almost a quarter of total the territory of one Member to the This assumes special importance in today’s Mode 4 services as well as clarification and FTA Regional Economic Comprehensive FDI inflows, or 24.5%, in the first two service consumer of any other Member world when countries seem to be moving publication requirement that allows for Partnership. quarters of FY17. Thus, as a World Bank 03. Mode 3 — Commercial presence: towards protectionism rather than further providing and making publicly available, study of 2004, also underscored, there is by a service supplier of one Member, globalization. The TFS would essentially explanatory material on all relevant Given these initiatives and the need to a definitive positive correlation between through commercial presence, in the try and ease global services trade with immigration formalities.’ Facilitative grow trade in services, hurdles to growth the level of liberalization and growth in territory of any other Member the aim of reducing barriers that service provisions could include multiple must be addressed. Trade facilitation in service subsectors in India. Hence as 04. Mode 4 — Presence of natural providers face. Some of the barriers that entry permits as well as ‘exemption of services is a positive move and can go global integration increases and as global persons: by a service supplier of one the proposal aims to reduce are high fees, committed categories of natural persons a long way in alleviating these concerns capital seeks more profitable sectors for Member, through the presence of opaque and cumbersome procedures and from payment of additional costs and by helping increase the ease of ease of investment, trade in services is bound to natural persons of a Member in the complex requirements for licensing and charges, including social security payment’. doing business while providing some more increase and may be faster than trade in territory of any other Member movement of persons. The intention of Facilitating cross-border investment as certainty to service providers. merchandise. the agreement is not to get more market well as consumption abroad besides more transparent administration were also included as specific requirements. Labor market and economic needs tests are also provided for13.
46 47 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
1. Skill Industry profile
According to Central Intelligence Agency growth engine for the global economy India’s proportion of trained workforce Focus (CIA), the working age population (15-54 in the next decade. In order to sustain is among the lowest in the world with years) accounted for 58.9% of 1.26 billion the growth momentum, interventions only 10% workforce trained in vocational population in 2016 and is expected to in skill development ecosystem namely trades through formal/ informal modes.17 increase to 65.9% of population in 2022 infrastructure, pedagogy and trainers are The current skills and vocational set-up in (891 million).15 India has been one of key priorities. The provision of skills training India include Industrial Training Institutes Sectors the fastest growing large economies in India is quintessential to sustain growth, (ITIs), Polytechnics (both Public & Private), in recent years and is expected to be a development and business opportunity.16 and Private Vocational Training Providers
Figure 3: Skill development ecosystem in India Skill Development Eco-System in India
Key Bodies Enablers Implementing Bodies Beneficiaries
•• Ministry of Skill •• State Skill Development •• Industrial Training Institute •• Marginalized societies Development & Missions (SSDM) (ITIs) •• Unemployed youth Entrepreneurship •• National Skill Development •• Polytechnics •• Low income group •• Ministry of Human Corporation (NSDC) •• Vocational Training Resource Development •• School & college students •• National Skill Development Providers (VTP) •• Ministry of Rural Agency (NSDA) •• Workers in informal sector •• Captive training by Development (MoRD) •• Sector Skill Councils (SSCs) employers •• Corporate •• Other Central Ministries •• National Council for •• Schools Vocational Training (NCVT) •• Universities •• State Council of Vocational •• Assessment and Training (SCVT) certification agencies •• Financial Institutions
Source: Konrad Adenauer Stiftung – Skill Development in India, 2015
48 49 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
(PVTP). The various schemes by National Growth drivers for the industry Government initiatives ––Training Service Delivery Agents- offer Skill Development Corporation (NSDC) and Government tie-ups Government has launched various training to 300,000 service delivery •• Government Initiatives: The government other Central Ministries in coordination programs to enhance the skill development agents as part of skill development has undertaken several initiatives to with Ministry of Skill Development and to enhance skills in India. Some of these include: to run viable businesses delivering IT improve skill development and vocational Entrepreneurship (MoSDE) caters to services. training in India, including setting up •• Skill India: The government launched around 3.5 million people, falling short of •• National Skill Development ––Training Rural Workforce on Telecom of Indian Skill Development Services Skill India campaign in 2015 aiming to skill the of 13 million who are expected to join Corporation of India (NSDC) and Telecom related services- teaching (ISDS), and provision of entrepreneurship 400 million workers by 2022. Under the the workforce every year by 2022.18 signed a MoU with Center for 500,000 rural youth in the Telecom education and training in ITIs and program following initiatives are taken: Research & Industrial Staff Service Providers (TSPs) domain26. Vocational Training Centres. ––Pradhan Mantri Kaushal Vikas Yojana In order to give thrust to the vocational Performance (CRISP) to explore (PMKVY): PMKVY is the flagship •• Ministry of Skill Development and skilling ecosystem, the government has •• Online channel gaining momentum: national and international program under the Skill India Initiative Entrepreneurship: Launched in June taken multiple initiatives such as the With rising internet penetration in opportunities for strengthening and it includes incentivizing skill 2014, it is entrusted to make broad formation of Ministry of Skill Development India, vocational training companies are skills development in India28. training by providing financial rewards policies for all other ministries’ skill and Entrepreneurship (MoSDE) in 2014 choosing the online platforms to offer •• India and Germany have signed on completion of training to the development initiatives and National Skill and launch of National Policy on Skill courses and expand their outreach. an agreement on vocational participants. It aims to impart skills to Development Corporation (NSDC). Development and Entrepreneurship •• Corporate partnerships: Vocational education and skill development 10 million youth of the country during ––National Skill Development Corporation 2015. Additionally, Skill India Initiative training companies have entered into with a budget of $3.37 million, 2016 to 202023. (NSDC): NSDC is a public private was launched by Prime Minister in 2015 agreements with corporate houses to which will help create and ––National Skill Development Mission partnership organization incorporated to train 400 million people by 2022. The train employees with the required skill improve cooperative workplace- has created an elaborate skilling eco- in 2009 under the National Skill State governments have also set up State sets. based vocational training in India’s system and imparted training to 7.6 Policy (now under the Ministry of Skill Skill Development Mission and new skill industrial clusters29. million youth24. Development and Entrepreneurship). development departments. Various models •• Private participation: Private players are ––National Policy for Skill Development Its main aim is to provide viability gap with Private sector involvement have also showing interest in developing skills •• Ministry of Skill Development and Entrepreneurship, 2015: funding to private sector in order to been piloted and are being encouraged. in their respective sectors20. & Entrepreneurship (MoSDE) Government has identified a skills gap scale up training capacity27. Thus, skill development landscape is set and the Wadhwani Operating •• Foreign languages: Multinational for 110 million workers in 20 key sectors to provide ample opportunities for private Foundation have announced a companies in India and Indian by year 2022, of which 55 million are Conclusion and recommendations sector involvement. tie-up to empower Government conglomerates have growing demand from rural India. The policy aims to train The Indian Government has laid a special of India’s Pradhan Mantri Yuva for candidates with foreign language these workers and provide them with focus on expanding and improving The government has also focused on skill Udyamita Vikas Abhiyaan on skills. The sectors such as IT, Publishing, job. It currently has over 690 projects the skill education and training in the development in the Union Budget 2017-18. entrepreneurship30. Advertising, Entertainment, Mass being implemented by 300 partners, in country. The Policy on Skill Development This budget aims to: Communications, Aviation, Hospitality •• India and Switzerland have signed more than 330 trades from 82 industry and Entrepreneurship contains several •• Set-up 100 India International Skill & Tourism, Education & Training and an agreement to establish formal sectors. Over 27,00,000 candidates initiatives which, if implemented earnestly, Centres across the country. Public Relations have greater demand cooperation in the fields of skills have been trained and over 1,34,000 will go a long way in minimizing the for such professionals. The popular development and vocational candidates have been placed in jobs in demand-supply gap and challenges •• Extend Pradhan Mantri Kaushal Kendras foreign languages in demand are French, and professional education and FY 2016. related to skill mismatch with industry (skill centres) to 600 districts in FY18 Arabic, Mandarin, Korean, Japanese, training31. ––Skill Loan scheme: It aims to provide requirements. (currently spread across 60 districts). German and Spanish. Various universities loans of INR 5,000 to INR 150,000 to •• Launch Skill Acquisition and Knowledge and institutes in India offer courses in over 3.4 million youth to develop their With increased thrust on manufacturing Awareness for Livelihood Promotion these languages from certificates to skills in the next five years25. under the ‘Make in India’ program, the need programme (SANKALP) to provide doctorates21. for improving India’s skill development •• Digital India: Government of India vocational training to 35 million youth. mechanism is quintessential. It has been has initiated a program, i.e., IT for Jobs Potential for global expansion globally recognized that an efficient •• Launch next phase of Skill Strengthening through Digital India in which they According to the World Economic Forum’s vocational education and training, will play for Industrial Value Enhancement provide training to the youth in the Human Capital Report 2015, India ranks a critical role in the industrial development (STRIVE) to focus on improving the quality skills required for availing employment 100 out of 124 countries in terms of and manufacturing success. There is a and market relevance of vocational opportunities in the IT/ITES sector. There learning and employment of its human scope for international collaboration and training provided in ITIs and strengthen are eight components with specific scope capital, while Finland, Norway and assistance in India’s skill development the apprenticeship programmes through of activities under this initiative: Switzerland hold the top three positions in initiatives at all levels, including creating industry-cluster approach. ––IT Trainings to people in smaller towns this index. In terms of expanding globally awareness, capacity building, setting and villages– provide training to 10 •• Impart mason training to 500,000 youth to impart skills, Indian players can focus on standards, improving quality, as well as million students from remote areas for in rural areas by 202219. countries with the lowest rankings on the providing placement opportunities32. IT sector jobs over the next five years. human capital index. Some of these include Nigeria, Myanmar, Pakistan, Nepal, Chad, and Yemen22.
50 51 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
2. Education
Industry profile Population Pyramid- 2016
80+ 80+ 75-79 75-79 Females Males 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4
For the purpose of this report, Education students enrolled in its schools. It has also 25- the world’s largest- leading to growing 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Services includes K-12, Higher Education, one of the world's largest higher education demand for education. International Source: Census India, Population Projections Report 2006 Technical Education, and allied services. systems with enrollments of ~33.3 million Labour Organization (ILO) states that by students in colleges, institutions, across 2020, India will have one of the world’s India has the second largest education 50,000+ higher education institutes and youngest population, with an average age According to Central Intelligence Agency According to Department of Industrial 33 system globally, with a network of more 750+ universities. Approximately 50% of of 29 years. (CIA), Literacy rate in India is 71.2%, with Policy and Promotion (DIPP), the total FDI Provisions for than 1.52 million schools and 259 million the country’s population is under the age of male literacy ratio standing at 81.3% and amount of FDI inflow in to the education that of females at 60.6% (2015) 34 which sector in India stood at $1.3 billion from Education Sector is less than the world average of 86.1% April 2000 to December 2016.37 (2015). Government of India (GoI) is also Population Pyramid- 2011 •• The government allows 100% FDI set to boost the education sector by Growth drivers for the industry in the primary education sector enhancing government spending as well as A number of enablers are facilitating the under the automatic route. encouraging private sector initiatives in the growth of the education sector. 80+ 80+ sector. The government’s initiatives such •• A “not-for-profit” company 75-79 75-79 •• Demographic dividend: With over 500 Females as its ambitious target to increase digital incorporated under section 8 Males 70-74 70-74 million people in the age group of 5 to literacy to at least 50% in the next three of the Companies Act 2013 can 24 years, India’s advantage lies in the 65-69 65-69 years from the current 15%, is also opening receive FDI if it acquires approval huge market for education. Additionally, 60-64 60-64 up several opportunities for private sector under FCRA (Foreign Contribution India has a population of over 1.3 billion, 55-59 55-59 to innovate and collaborate.35 Regulation Act). wherein 20 million additional students 50-54 50-54 enroll every year. With the expected •• Several foreign educational 45-49 45-49 The Indian education sector is estimated growth in the population to 1.7 billion institutions have also opted for 40-44 40-44 to reach $144 billion by 2020, from $97.8 in 2050, the demand for education and academic collaborations and 35-39 35-39 billion in 2016, with a large market share of related services is also bound to rise. partnerships without involvement the K-12 segment (kindergarten through 30-34 30-34 of FDI through investment in 12th grade). The past few years has seen •• ICT and technological developments: 25-29 25-29 “for profit” service/ management significant growth in investments in the The pace of technological growth 20-24 20-24 companies. sector. Technology-enabled education provides ample opportunities to deploy 15-19 15-19 infrastructure, and informal education, them in the sector, as also generating •• The government has now also 10-14 10-14 including, vocational training, pre-school, demands to develop, refresh and permitted 100% FDI in the 5-9 5-9 test prep, child-skill enhancement are upgrade skill levels to keep pace with this construction development 0-4 0-4 key areas wherein investment has been market dynamics. projects, related to educational 36 13% 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% incurred. institutions, subject to fulfillment of certain conditions.38
52 53 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
•• Demand for skilled resources: With followed by Afghanistan (10%), Bhutan Future prospects for the industry •• Participation in ’World-Class •• Training and facility construction: increasing sophistication in technologies, (6%), Nigeria (5%) and Sudan (5%). Several institutions’ initiative: India has had a Foreign players can also invest in the Partnerships and •• Education SEZ: Education SEZs will help companies demand employees who can Indian universities have set up campuses noteworthy history in higher education, sector through course development in addressing the shortage of quality deliver outcomes in services like big data, abroad to either attract global talent to its Joint Ventures with with ancient universities like Takshashila, training for educators, and providing higher-education institutions in India cloud, analytics, and other specialized university, or offer expanded exposure to Nalanda, and Vikramshila, attracting infrastructure services including private companies and also draw students from other Asian domains, leading to higher demand for its students in its home campus (through foreign scholars. In the Union Budget construction/development. nations and reduce the need for local skilled workers. twinning programs). The government is 2016-17, the government announced students to spend large sums of money •• Tapping the informal market: Significant also pushing for a ‘Study in India’ initiative, In 2016, the Ministry of Human its intention of providing an enabling •• Rise in awareness: Collective initiatives to study abroad. In FY16, Indian students demand is gaining momentum in the pre- which focusses on attracting foreign Resource Development (MHRD) architecture to 10 public and 10 private of governments, NGOs, and private spent $1.98 billion in education-related school market driven by demographics students to India. The AICTE is also working collaborated with DTH operator institutions to emerge as world-class enterprises have helped spread overseas expenditure and $2.47 billion and rising incomes and offers substantial on preparing a management entrance test Dish TV to broadcast 32 educational teaching and research institutions. These awareness regarding the benefits of in FY15. Despite the presence of large opportunities. Other informal market modelled on the US SAT exam, for Asian channels on its platform. The universities will aim to bring India at the education, leading to increase in gross universities in India, Indian students are segments such as coaching (online/ class and African countries, and then launching channels would also enable live forefront of global higher education, with enrollments for higher education from spending large amount of money on room) is also a large market offering it globally.40 telecast of classroom lectures focus on achieving global standards of 17.2 million in FY10 to 30.1 million in FY15. foreign education. Presence of education significant opportunities. For example, from premium institutions, quality and excellence. SEZs will act as an added attraction to tutoring in the schooling segment is •• Female labor force participation and Government initiatives including IITs42. foreign education institutions to set up •• Content development for digital expected to grow from $8 billion in 2011 demand for pre-school facilities: Average government spend on education campuses in India.45 learning: India’s digital learning market is to $26 billion in 2020.47 Growing number and proportion of has hovered around 3.4% of GDP ($63 In 2015, the MHRD entered into growing at a fast pace. Use of Information working women is resulting in need billion) which is less than the average spend a partnership with Tata Motors •• International universities: At present and Communication Technologies (ICT) Conclusion and recommendations for childcare and pre-school facilities. of 6% of GDP by developed and developing Ltd, Tata Consultancy Services Ltd in India, there is no legal and regulatory in education has led to the growth of India offers significant opportunities Demand for organized pre-school countries. However, the government’s and real-estate firm Hubtown Ltd, framework to allow foreign universities to digital platforms including smart classes, and advantages in the Education sector services is also growing in smaller cities thrust on education ensures several to open three Indian Institutes set up campus in India.46 e-learning courses, blended learning, both from the point of view of attracting and towns. reforms and increase in government of Information Technology (IIITs), ––In 2016, NITI Aayog had suggested and app-based learning. Recent industry private and foreign players in education, spending for this sector, as reflected in through Public-Private Partnership three routes to permit entry of foreign •• Demand for informal education: reports have projected the market to as also for expansion of Indian start- several of its initiatives. The Union Budget (PPP) mode at Nagpur, Ranchi, and education providers Informal education, coaching institutes more than double - from $2 billion in ups and education providers abroad. 2017-18, allocated $11.9 billion to the Pune 43. ––A new law to regulate the operation of and vocational training has been gaining 2016 to $5.7 billion in 2020, as per a As government continues to spend education sector. such universities in the country. momentum as individuals seek to Technopak report. This is also reflected huge amounts on education, it is also ––Amendment to the UGC Act of 1956 or learn in smaller groups for better •• MHRD has launched Study Webs of in market trends. For example, Byju’s encouraging collaboration with private and deemed university regulations to student-teacher ratio, or develop new Active Learning for Young Aspiring Minds will be given on science education, and Learning App caters to 200,000 school sector players to both provide basic let them in as deemed universities. skill sets through focused training (SWAYAM), a web portal where Massive flexibility in curriculum to promote and college students, and attracts 30,000 infrastructure and education in under- ––Facilitating their entry by tweaking programs. Open On-line Courses (MOOCs) are creativity through innovative content new users every month. served rural areas, as also in the emerging UGC and AICTE regulations on offered. MOOCs is expected to disrupt areas of technology, digital, and quality •• Policy initiatives: The government has •• The government is introducing a scheme twinning arrangements between •• Twinning programs: Foreign investors the existing distance learning model. enhancement. Growing demand for quality undertaken several policy initiatives to promote 20 world class universities Indian and foreign institutions to can also invest in twinning or pathway It provides affordable and flexible way education at affordable prices acts as the to improve access to education. A new in India – 10 in the public sector which permit joint ventures. programs, wherein a student can to learn new skills, pursue lifelong foundation stone to recognize MOOCs in National Education Policy (NEP) 2016 is will receive funding support from the ––Benefits for foreign universities in India undertake one part of the course with interests and deliver quality educational India. Keeping this in view, the government being drafted. Government is also putting government, and 10 in the private ––Foreign universities with high the one institute and spend equivalent experience at scale. has made provisions in FY17 budget. thrust on the sector through its initiatives sector.41 standards will increase competition duration in another partner institute. such as, Rashtriya Ucchatar Shiksha •• FY17 Union Budget aims to provide and result in the improvement of Such programs can be implemented •• Digital India: Digital India is a flagship Through the Right to Education Act and Abhiyan and the World-Class University entrepreneurship, education and training higher educational standards in India. through collaboration or a partnership programme of the Government of several related initiatives (SSA, RMSA, initiatives.39 via MOOCs. The focus is on getting as ––There would also be gains in terms agreement. India with a vision to transform India RUSA), the policymakers are looking to many as 2,200 colleges, 500 government of availability of resources both into a digitally empowered society and •• Collaboration for technical education: universalize access to education. The New Potential for global expansion industrial training institutes, 300 schools human and financial, state-of-the-art knowledge economy. Under the program Subject to the AICTE Regulations, foreign Education Policy, which is expected to According to UNESCO 2015 data, the and 50 vocational training centres on teaching methodology, research and following initiatives are taken: institutions/universities can award focus on addressing gender discrimination, number of Indian students in foreign board for this initiative. innovation. ––All schools connected with broadband. degree, diploma, post graduate diploma creation of educational tribunals, and universities stood at 234,000, while India ––Capital expenditure for setting up •• Additionally, as part of the Right to Free Wi-Fi will be provided in all and post diploma in technical education, strengthening education in the rural hosted merely 39,000 foreign students an institution is high. Entry of foreign Education Act, it has mandated the secondary and higher secondary by partnering with Indian institutions or areas, is also on the anvil. Digital learning, in its universities and colleges. According universities and ease of FDI norms appointment of a special educator for schools (coverage would be around on their own. supported by the government’s Make in to All India Survey on Higher Education will offset some of these costs. children with learning disabilities so 250,000 schools). India and Skill India campaigns will provide (AISHE) 2015-16, foreign students in that they can be assimilated with other ––Pilot MOOCs (Massive Online Open further impetus to this sector. India come from 165 countries, but the students. Courses) launched through SWAYAM top 10 countries constitute 62% of the portal.44 total foreign students enrolled in higher •• Proposal for introduction of a new education institutes. The highest share system of measuring annual learning •• Start-up India: Many start-ups are of students come from Nepal (21%), outcomes in schools, wherein emphasis entering to support education programs in remote rural locations.
54 55 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
3. Banking & Financial Service
Growth drivers for the industry Services and Insurance, and have a Focus on Aadhaar and other digital Industry profile Demand side need for cost effective infrastructure, payment initiatives technology and talent to serve their •• Level of financial services penetration •• Aadhaar, the single largest digital identity global parents. Indian GICs today are remains low, albeit with significant growth solution in the country is now covering setting the stage in the development of potential: While India is the fastest ~95% of the Indian population. Aadhaar India as a source of strategic benefits, growing economy in the world, significant numbers have been used to open bank cost benefits and talent arbitrage. Large potential for financial services’ growth accounts and mobile phone accounts. scale technology development in India, exists, given penetration of financial have enabled a paradigm shift toward •• Paperless (Digilocker) – Digital records services (bank loans/GDP, bank assets/ Fintech. Growth in the Fintech space are available in the cloud, eliminating GDP and mortgages/GDP) as compared as a result, is positioning India on the dependence on paper and storage. India to global peers shows significant room global stage as an attractive investment Stack is a revolutionary example. A series for improvement. destination. Parent organizations that are of secure and connected systems allow •• Growing Income levels: Average seeking value out of GICs, are increasing data sharing. It creates an e-KYC (creation household income in India grew by a investments in talent, processes and of a central KYC where any customer’s CAGR of 4.83% between 2005 and 2014. innovative technologies. KYC details available to all banks). It will lean on the subsequent three initiatives •• Consumer behavior is evolving: Government and RBI initiatives to make the digital economy work Consumers becoming more connected, India is undergoing changes with a series seamlessly. digitally influenced, more informed and of initiatives propelling the economy to a more demanding. •• Presence less (Finger Prints, Retina Scans) higher growth rate. – allow participation in any service from India is a preferred destination for Financial India has 24 life, 29 non-life insurers In the recent past, Foreign Investment Supply side anywhere. Services. The Indian financial services including 5 pure play health insurers. Other Promotion Board (FIPB) has cleared 15 New Bank Licenses market consists of banks, GICs, insurers, •• Disruptive innovations: Digitization is an •• Cashless (Aadhaar Enabled Payments stakeholders in Indian Insurance market FDI proposals including large investments •• Liberalization through the financial opportunity for banks that respond to Systems - AEPS) – Aadhaar Pay, a mutual funds, NBFCs, MFIs and Fintechs, include agents (individual and corporate), in the insurance sector, leading to a inclusion initiatives of the RBI in the the changing environment. For instance, merchant version of AEPS, was launched etc. Two new banks were launched in 2015 brokers, surveyors and third party cumulative investment of $1.09 billion. form of the issuance of banking licenses, FinTech is emerging as strong contenders to enable those who do not have debit and a host of new small finance banks and administrators servicing health insurance Insurance Regulatory and Development allowing several new players – 2 to banks, globally, and in India. “Omni- cards, mobile wallets and mobile phones payment banks have started operations claims. Authority of India (IRDAI) has given initial Universal Banks, 8 Payments Banks (of Channel Banking” allows banks to to make digital payments. recently/will start operations. Non- approval to Swiss, French, and German the 11 licenses granted by RBI, 3 have performing assets (NPA) issue has plagued use technology to manage consumer India’s life insurance sector is the biggest reinsurers to open branches in India. surrendered it) and 10 Small Finance •• Consent (E-Signatures) – give secured interactions across multiple channels. public sector banks in recent times and in the world with about 360 million Both banking and insurance in India has Banks - to enter the banking space access to documents. Transacting via smartphones, allows government has taken corrective measures policies which are expected to increase seen good growth in the past, and this in India and challenge the existing consumers a fair degree of mobility. •• One million biometric PoS machines to address it. at a CAGR of 12%-15% over the next five trend is expected to continue because of paradigms. (Micro-ATMs) were expected to years. The insurance industry plans to hike various supply and demand side factors. •• Strong government and regulator •• Universal banking license is now available be installed by March, 2017 and penetration levels to 5% by 2020. push: Government and regulator push on tap. subsequently scaled to two million by on digital, increased FDI limits, NPA September 2017 as per Union Budget management are expected to aid the Demonetization 2017. By bringing banking to people’s Figure 4: Banking Assets, Loans and Advances (INR 000’ billion) growth of the financial services sector. 120 doorsteps, these Micro-ATMs have •• Removal of existing currency notes of 110 •• Increased competition: Entry of new revolutionized digital payments by saving INR 500 and INR 1,000 from system in Loans and Advances: 19.23% 96 96 banks expected to put pressure on customers time and costs. November, 2016 in order to flush out Deposits: 17.8% traditional players who will be forced black money. •• Unified Payments Interface (UPI) is Banking Assets: 17.13% 69 94 to innovate in order to survive. The 85 changing the face of digital payments 60 traditionally preferred “branch banking” •• Resulted in huge deposits at banks and 52 72 74 74 in India by bringing everyone to the 67 channel, has experienced a significant corresponding decline in interest rates 43 59 35 56 53 digital net. By using smartphones, it is 29 48 shift. In the payments market, cash and 41 43 •• Fillip to demonetization in the budget: No facilitating instant transfer of funds under 35 credit cards are being replaced by digital 33 30 transaction above INR 200,000 permitted INR 100,000 to Aadhaar number/mobile 22 20 27 25 options. 15 in cash subject to certain exceptions49 . number/virtual address (without IFSC •• Strategic arbitrage of GICs: India with code) across multiple banks. •• Expected to encourage use of digital 1000+ GICs, accounts for roughly 50% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 payment platforms and bring India’s •• Launch of the Bharat Interface for Money of all GICs worldwide. Indian GICs cash to GDP ratio down to single digits (BHIM) app, allows UPI account to non contribute ~25% of the Global offshore (It has reduced to 8.17%50 from the UPI account transfers via QR code. This Loans and Advances Deposits Banking Assets market. Their revenues in India in pre-demonetization figure of 10.6%51 ). is expected to bring digital solutions to 2016 stood at $22 billion48. ~40% of Source: RBI Financial services players are likely to masses in cost effective ways. Payments these GICs are in Banking, Financial fast-track their digital plans. can be made without using mobiles,
56 57 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
simply via fingerprints and Aadhaar •• The Parliamentary Standing Committee •• Expected to allow timely resolution of Focus countries/Funds for outward Institutions in February 2016. One number. Compatibility with a 2G platform on Finance (SCF), released a report on stressed assets, and allow refinancing of investments pertinent recommendation was the Revival extends access of digital payments to a better tackle NPAs with suggestions on assets. By cleaning the existing balance of Development Financial Institutions for •• Capabilities built in India are very relevant wide user base and allows the BHIM app merging banks having higher NPAs with sheets of Banks, room will be created for financing of long term projects including across Middle East, South East Asia, and to achieve its potential by invigorating our other banks, RBI to play a larger role fresh credit, which is an imperative for a infrastructure projects.59 These measures Africa and players from these countries population. in managing NPAs via follow through bank-dependent, growing economy such are expected to rationalize credit risk and can learn from India’s experience. with Banks and improve credit approval as India. reduce NPAs. •• Emergence of fintech in challenging process of Banks, Facilitating recovery of •• The RBI has allowed Indian alternative traditional models such as alternate NPAs including restructuring of loans in a Potential for global expansion investment funds (AIFs), to invest abroad, GICs will need to align to new expectations lending, mobile wallets, etc. manner so as to preserve the economic India is among the top ten investment in order to increase the investment on their operating model. GIC industry value of assets, Making names of willful destinations globally and the Services opportunities for these funds. is witnessing fundamental shifts in the Focus on NPA Management defaulters public. sector, the most attractive for these operating structure, driven by higher •• Indian banks are also looking to tap the •• Recent Asset Quality Review exercise, investments. FDI equity inflow has been expectations from onshore. •• New Insolvency and Bankruptcy Code, global diaspora in other countries. conducted by the RBI increasing within the BFSI subsector (of 2016 (the Code) for faster resolution of the services sector) over the years, and Conclusion and recommendations •• INDRADANUSH for revamping of public insolvency cases including strengthening Future prospects of the industry improved relations with the top investing Indian Financial services market is growing sector banks of debt tribunals. According to IMF World Economic Outlook countries can strengthen domestic capital at a rapid pace, fueled by both demand Update (January 2016), the Indian economy •• Consolidation of public sector banks •• Affordable Housing has been reclassified in this sub-sector. side as well as supply side factors. As is expected to grow around 7%-7.5% during as infrastructure. So far, Banks have the entire ecosystem is growing to serve •• Legal framework has been strengthened FY 2016-17, despite the uncertainties in the been the primary source of funding Recent deals also suggest increased the diverse financial needs of a large and INR 100,000 million has been set global market. for the infrastructure sector. With the interest from new geographies such as population, which so far did not have aside to re-capitalize banks to deal with Infrastructure status, developers can Canada and Japan. In addition, inward access to basic financial services, it is stressed assets52 The launch of new banks is expected to access foreign funds at a cheaper cost by investments from Multi-lateral institutions/ throwing opportunities for all stakeholders integrate social media, mobility, analytics, •• Government has enhanced/liberalized way of debt and will be a priority lending Sovereign Wealth Funds (SWFs) in the BFSI to participate in this growth. Players across cloud and IoT. Digital Wallets, NFC, FDI in asset reconstruction companies for banks as well. space are bringing financial services to the the entire value chain are experiencing Blockchain, Social data and analytics, (ARCs) to 100% under-served. Some distress funds are also these tailwinds, and this has attracted Aadhaar and UID integration in the financial showing interest in the bad-loan portfolios foreign investors, established business services space. Mobile based Micro- of banks. groups, Fintechs and alike to financial payments are expected to be a growth services. Increasing and strengthening area in the times to come. domestic capital in the BFSI sub-sector, Table 1: Top 5 countries for inward investments is leading to banking sector stability and Use of technology to reach bottom of economic growth in the country. Country 2014-15 2015-16 2016-17 Cumulative Current 2000-15 2000-15 For improved pyramid is expected to result in an even larger impact on the financial landscape (April- (April- (April 16- inflows from State (% of (Jan-Dec), (Jan-Dec), relations As governments, regulatory bodies, of the country, from the last round of March), March), December all sectors cumulative Service BFSI Sub technology providers, banks, and 53 54 55 * ** the licenses in 1994 and 2002, and may $ Mn $ Mn 16), $ Mn (April 00- 16 year FDI Sector , Sector , insurers join hands to serve the needs 58 prove to be a game changer for the entire December inflow from $ Mn $ Mn of the population, India is expected 56 57 ecosystem, benefitting customers, players 16), $ Mn all sectors) to see an exponential growth in this and the regulator. Mauritius 9,030 8,355 12,819 108,729 34% 18,921 10,418 Further space, overcoming the hurdles of access, availability and affordability. liberalization A host of innovative partnerships are of FDI policy expected to emerge between these new Singapore 6,742 13,692 7,115 52,994 16% 9,141 5,033 is under players and traditional financial services/ consideration non-financial services players across US 1,824 4,192 1,940 19,884 6% 3,258 1,794 – Will result in channels of delivery, third party products, ease of doing customer facing capabilities, etc. business in UK 1,447 898 1,266 24,374 8% 2,979 1,640 India Regulatory initiatives towards rationalizing NPAs, in the last year included, standard Netherlands 3,436 2,643 2,500 19,814 6% 2,667 1,468 asset categorization, joint lending forums, strategic debt restructuring, forensic reviews, and early warning systems. In an
Notes: effort to reduce NPAs, the Parliamentary *Services sector includes Financial, Banking, Insurance, Non-Financial/Business, Outsourcing, R&D, Courier, Tech. Testing and Analysis Standing Committee on Finance (SCF), ** Country specific BFSI nos. are calculated based on the assumption that 55% is the share of BFSI across all countries per 2000-2015 figures submitted its report on NPAs of Financial
58 59 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
4. Healthcare Service
Figure 6: Per-capita healthcare expenditure ($) the initiatives around a common ground Industry profile where their mutual social and economic 68.6 61.0 61.0 61.9 aspirations can be met. 54.0 58.0
Potential for global expansion India is however rapidly becoming an important hub for medical treatment 2010 2011 2012 2013 2014 2015 among the under-developed and developing markets with its growing share Source: IBEF of best in class corporate hospitals, and sees a large number of foreign nationals •• Medical Value Travel – Increase in jobs for many in the life sciences and availing of health services in India. The foreign citizens traveling to India to medical technology space, it will reduce medical tourism in India is currently avail medical services. Presence of the cost of these devices, which were so $3.9 billion in 2016, and is expected to world-class hospitals and skilled medical far imported (with the associated import touch $8 billion by 2020, having grown at 66 professionals has strengthened India’s duties). This cost reduction will play its a CAGR of 27% over 2013-16 . Majority position as a preferred destination for way down the chain and reduce the of the patients coming to India for medical tourism. Treatment for major healthcare costs for the end consumers, treatment are from the Middle East, surgeries in India costs only a fraction– strengthening the lever of affordability. Africa, Bangladesh, Afghanistan, Maldives, as low as 10% in some cases–of that in Pakistan, Bhutan and Sri Lanka. India’s cost •• Digital India – a push for use of digital developed countries65. advantage will significantly open doors to technologies has also positively impacted The overall healthcare landscape spans employment with total direct employment Growth drivers for the industry US and Europe over future, due to lower healthcare sector. Digital money (cards, across products–namely pharmaceuticals, of 4.7 million people in 201561. Healthcare There are several factors, on both demand Supply side cost than the US and almost half that of e-wallets, UPI, etc.) has opened up medical consumables, medical equipment delivery constitutes 65% of the overall as well as supply side that are acting as Europe. There is also a growing demand •• Availability of capital: Keen interest various payment options for patients to and devices, and services–namely delivery Indian healthcare market. catalysts for this industry. for Indian medical talent and know-how in among investors (Indian and foreign) in pay for healthcare services. of healthcare through diagnostics and geographies that are lacking in advanced Indian healthcare market, leading to entry treatment. India’s healthcare delivery landscape has Demand side •• Start-up India – With tax incentives to medical infrastructure, and several players of more and more players. historically been dominated by government startups and incubation support under in African countries are approaching •• Large, ageing population- Increasing life Healthcare delivery essentially covers hospitals, one-off hospitals or nursing •• Different business models being tried this initiative, the wave of healthcare- Indian players to help them set up and run expectancy is causing an ever-increasing the services provided to consumers homes (owned and run either by charitable – e.g., the rising popularity of single- based startups remains strong, covering hospitals, both as advisors as well as O&M population of aged people. Elderly (patients in this case) through the entire trusts, or self-owned by doctor-promoters). specialty clinics, day-care centers, etc. aspects such as diagnostics, fitness and partners. This is adding to the ‘exports’ population, currently classified as those lifecycle–preventive (also referred to as It is only in the last two decades that wellness, aggregation of health providers, bucket. aged 80 and over are set to rise from the •• Rising interest of corporate houses to ‘wellness’), curative (diagnostics, primary India has seen a surge of large healthcare electronic medical records, video/ current 98.9 million to about 168 million enter the healthcare space, which was care, secondary care, and tertiary care players, often corporate houses, enter remote consultations, second opinion Future prospects for the industry by 202663. hitherto considered a social service, and provided at hospitals or health centers, for the healthcare delivery space and setup consultations, etc. Going forward, healthcare in India will hence many of the corporate houses both chronic and acute health issues, and large, tertiary/quaternary care hospitals •• High incidence of non-communicable witness further strengthening of the have entered the healthcare arena. •• Public-Private Partnership (PPP) – recuperative (home healthcare including which compare with world class hospitals diseases, such as obesity, diabetes, growth drivers. Government has initiated partnerships nutrition, physiotherapy, post-op care). in other parts of the globe. Overall, the cardiovascular, chronic obstructive •• Innovations in medical technology with private players to deliver healthcare •• Talent healthcare delivery market still remains pulmonary disease (COPD), etc. on the making it possible for more and more services in a few specific areas. For ––There is a surge in the number of The healthcare revenue globally was very fragmented, with the 5 largest hospital back of people/conditions to be treated. example, O&M of a few hospitals, running medical education institutes. Private $7 trillion in 201560, and it is $110 billion players together covering around 35,000 ––Sedentary lifestyle (lack of physical medical ambulance services, running institutes are coming up all over the in India in 2016, and is expected to grow beds, which is 1% of the total hospital beds exercise), increased stress Government initiatives healthcare-related helplines, etc. While country, which are expected to supply to $280 billion by 2020. Indian healthcare in India62. Over 85% of the hospital beds in ––Poor dietary habits (junk food) Many government initiatives are directly the government can act as the payer, the skilled workforce that will power the sector became the fifth largest employer, India are present in facilities with less than ––Pollution benefitting the healthcare sector. the execution and delivery of services healthcare institutions of the future. both in terms of direct as well as indirect 25 beds. •• Increase in disposable income, aiding •• Skill India – The Healthcare Sector may be provided by private players ––Task shifting will multiply the resources affordability of healthcare services. Skill Council (HSSC) has been set up to who are experts in the field. In turn, the available for each task – the industry During 2015-19, per capita income aid skilling and vocational training for government would need to hold the is expected to figure out the right education/skill level for performing Figure 5: Trends in Healthcare sector ($ billion) 280.0 is expected to increase at a CAGR of healthcare industry and its growing need players accountable by measuring them 8.09%64. for human resources. This is expected to against pre-decided and pre-agreed each task. provide a new talent pool to the industry service standards (SLAs). But the nation •• Awareness leading to focus on •• Medical insurance penetration 110.0 to fuel its growth. is yet to fully leverage the PPP model 81.3 diagnostics, preventive health checkups. ––As the medical insurance market 45.0 59.5 72.8 to deliver healthcare services to the Led by access to internet, and other •• Make in India – promoting manufacturing matures in India, not only will the population at large. The PPP model will media such as television and radio. of medical equipment, devices, penetration increase, there will be 2008 2010 2012 2014 2016 2020F require both the government and private consumables and drugs in India. Not only innovation in the products too. For players to come forward and structure Source: IBEF will this creates an entire ecosystem and instance, cover for out-patient services,
60 61 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
5. Information Technology
cover for senior citizens. These will •• Medical Value Travel further propel demand for and ––As Indian healthcare industry is Industry profile affordability of healthcare services. able to establish its quality through ––Rise in health insurance penetration clinical outcomes data published in – According to the latest National credible health registries (such as by Sample Survey data, with Centre-run ICHOM – International Consortium Rashtriya Swasthya Bima Yojana (RSBY), for Health Outcomes Measurement), insurance coverage has improved the insurance payers of developed over the years, but still only 12% of the countries will start working with Indian urban and 13% of the rural population health facilities, attracted by the dual had access to insurance cover67. value of low-cost and high-quality. This ––The IRDA has introduced the concept will open up a completely new market of transferring the current insurer to serve. to another without losing out on any •• e-Health benefits. This regulation will also allow ––The government initiative under a consumer to port from one retail e-health aims to provide effective and plan to another retail plan; applicable economical healthcare services to all to both individual and family floater citizens by making use of technology policies. This concept is yet to gain and portals. It will facilitate citizens momentum, once done it has the to maintain health records and book potential to change the landscape of online appointments with various health insurance in India. The Indian information technology departments of different hospitals Figure 7: IT Sector overview industry has progressed over the years, •• Tele-medicine using eKYC and Aadhaar number. Wide Presence from being a provider of cost effective ––The problem of access will be solved The Indian IT sector has its •• Dental tourism technology talent for global enterprises to a large extent through the use of presence in 200 cities of 86 ––Dental tourism accounts for 10% of the to being a strategic partner helping modalities such as telemedicine, tele- countries across the world. medical tourism and the government businesses in technology enabled Share in GDP radiology, e-ICU. As the broadband is keen to promote it. India provides business transformation. The Global FDI inflow quality increases in the interiors of The IT/ITES sector competitive cost advantage at one- Delivery Model approach, pioneered by The software & the country, through the deepening contributes 9.5% tenth of the cost of the US and Europe. the Indian IT services industry wherein hardware sector network of fiber optics across the to the country’s complex technology projects are broken in India attracted length and breadth of the country GDP and more Conclusion and recommendations down into sub systems and modules cumulative FDI (National Fibre Optic Network), this than 45% in total Healthcare services in India are growing at that are delivered by a mix of consultants inflows worth will be a reality, and will give the rural services export in a rapid pace, fueled by both demand side working onsite, closer to customer, and $21.02 billion population access to services that were 2015-16. factors as well as supply side. As the entire in near-shore/offshore locations became between April hitherto limited to only those in urban ecosystem is growing to serve the health one of the most impactful business model 2000 and March centers, such as access to specialists needs of a large, aware and demanding innovations in the past few decades and 2016 and super-specialists. population, it is throwing opportunities set the benchmark for the knowledge •• Technological advancement and for all stakeholders to participate in this industry value chain across the world. innovation growth. Players across the entire value Organizations across industries such as Offshore Largest ––M-Health: This will create new chain are experiencing these tailwinds, and Aerospace, Automotive, Energy, Pharma, Service Private Sector opportunities and business models. this has attracted investors, innovators, Bio tech, Semiconductors, etc. leveraged Leader Employer The use of mobiles for accessing startups and established business groups this phenomenon and established global A preferred The IT and ITeS health-related information or alike to healthcare. research and development (R&D) and destination sector employs consuming health services will be a product development networks to access for IT & ITeS 3.7 million reality, coupled with wearables for As governments, regulatory bodies, local talent and market opportunities, in the world; people and it is tracking health metrics. educational institutions, technology thereby building a network of global continues to be PE/VC investment ––Data Analytics: Electronic medical innovators and core providers join hands the 4th largest knowledge value chain through a mix of in- a leader in the IT & ITeS companies records (EMR) will open up a new trend to serve the needs of the domestic and urban women house centers and partnership networks. global sourcing attracted 45% share of of data analytics for predictive analysis. international population, India will see employer. industry with the total investments an exponential growth in this space, Favorable policies of government to 55% market which is almost $7.5 overcoming the hurdles of access, support the industry like Software share billion (across 396 availability and affordability. Technology Parks of India (STPI), special deals). economic zone (SEZ), The New Telecom Policy (NTP 1999) and IT Act 2000 over the years, and other support infrastructures Source: Deloitte Analysis
62 63 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
helped establish India’s leadership position On the demographic front, the industry a means to enable public governance Figure 9: Domestic and Export IT and ITeS revenue in $billion Figure 10 Major IT exports market in the global technology sourcing market also helped create a generation of and citizen services through technology and in the process, catalyzed the growth of technology savvy population, comfortable enabled interfaces. Investments in creating EU UK services sector in India across education, with using technology enabled tools in such public technology infrastructures such healthcare, tourism, financial services, day to day life. Taken together with the as Digital India, Skill India, Make in India 11% 17% transportation, hospitality, and other contemporaneous advancements in leveraging the industry’s talent ecosystem services. IT services industry ecosystem telecommunication networks, services, along with the industry’s adaptability 108 has played a part in helping India leap frog and the smartphone penetration, this to emerging technologies like machine 98.5 from an agriculture driven economy to a convergence of technology, telecom, and learning, artificial intelligence, automation, Exports market services driven economy. content perfectly set the stage for the next block chain, virtual reality, etc. will broadly 86 $108 billion 76 wave of technology enabled business such define the narrative for this industry in the 69 as e-commerce and consumer internet coming decades. 59 50 industries in India, and also provided
US 48 52 62% 24 29 32 32 32 Market segments FY10 F Y11 F Y12 FY13 FY14 F Y15 FY16 Figure 8: Market segments Domestic Exports IT Services Business Process Software Products Hardware E-Commerce Management & Engineering Source: NASSCOM •• Market size: $75 •• Market size: $13.5 •• Market size: 17 billion •• Market size: $28 •• Market Size: $26 billion billion billion billion Competitive profile delivery presence in these locations Government initiatives •• Export: $61 billion •• Export $0.5 billion •• Major market: Indian vendors face competition from to cater to the near shore market. In Digital India: Indian IT services sector can •• Export: $24 billion •• Export: $22 billion Domestic •• Domestic: $14 •• Domestic: $13 both large global service providers as well the current environment countries like support and have a major role to play in the billion •• Domestic: $4 •• Domestic: $4 billion as niche firms and startups in frontier Philippines, Vietnam, Malaysia, and eGovernance and eKranti pillars of Digital billion billion technologies. Latin America and Eastern Indonesia are also emerging as potential India, drawing on talent and the experience •• Major market: •• Major market: European countries traditionally competed destination for delivering cost effective IT/ in supporting digital transformation Global •• Major market: •• Major market: Domestic with India for near-shore and offshore BPO services. projects in the western markets. Global Global •• Export revenue: delivery infrastructure, and most large 81% •• Export Revenue: •• Export Revenue: vendors from India have established 85% 83%
Figure 11: Digital India IT Initiatives Source: ITSR 2016, NASSCOM and Deloitte Analysis
•• Digitizing business processes of government to improve transactions, simplifying them as well 73 The IT –BPM sector generated revenue of to touch $1 trillion by 2023 driven by growing at a CAGR 13.5% . North America eGovernance as reducing the lengthiness of procedures. $143 billion in 2016 with exports of $108 domestic and global growth70. The GDP is the major destination for IT exports and Reforming billion and the domestic contribution was contribution has changed dramatically in generates 60% of the export revenue. government •• Interface between departments and online application submission and tracking systems. 68 $35 billion . The domestic IT-ITeS market the last two decades and currently the Europe contributes 25% of export revenue through •• Building and using online repository for school certificate, voter ID cards is $52 billion which includes $17 billion sector contributes 9.5% to the Indian GDP out of which almost 50% comes from UK. technology e-Commerce sector along with domestic (FY15) in comparison to 1.2% in FY9871 and Dollar is the invoice currency constituting •• Integrating UIDAI, Payment Gateway, Mobile Platform and EDI to various systems IT sector revenue69. Notwithstanding the also plays a significant role in generating 75% of the exports followed by pound current global headwinds and changing employment for almost 3.7 million people72. and euro74. There is significant growth in geo-political discourse on globalization, The sector comprises of 4 major sub the domestic market since FY14 driven by •• Internet based educational infrastructure across schools. the sector has good prospects in the segments and majority of the revenue government initiatives like Digital India, •• Digitizing health services, consultancy, record, patient information etc. medium-long term, and is expected comes from export. The export market is Smart City etc. eKranti •• Technology for farmers to access real time price information, order inputs and make financial Electronic transaction online. delivery of services •• Promoting mobile based emergency services.
•• Technology and systems for financial inclusions like mobile banking, micro-ATM program and CSCs / post offices.
Source: Digital India
64 65 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Make in India: India’s Engineering R&D global powerhouse in ER&D services. By delivery by providing Aadhaar-based Figure 13: Potential Markets services sector, which is among the fastest leveraging the emerging manufacturing verification, paperless e-KYC, cashless growing sub sectors within the IT/BPM and industrial ecosystem enabled by Make transaction, secure storage of digital Cloud Services IoT Cyber security ecosystem, can benefit from the policies in India initiative, India has the potential to documents, and electronic signature of •• Global cloud market: $208.6 billion •• Global IoT market : $1.7 trillion by •• Enterprise security spending and support infrastructure provided become the global leader in Engineering documents76. 2020 (hardware, software and services) in •• Indian Cloud Market: $ 16 billion by by Make in India initiative to establish R&D. India is around $1.12 billion in 2016, •• Presence less layer: Where a universal India’s leadership position in the global 2020 •• Indian IoT market size: $15 billion by biometric digital identity allows people to up 10.6% from $1.01 billion in 2015 R&D services market. Global market for Skill India: The Skill India initiative has 249 2020 participate in any service from anywhere •• Growth Drivers for IT services: and is expected to reach $1.24 billion ER&D services is traditionally dominated Training Partners, 3,222 Training Centers in the country •• Growth Drivers for IT services in 2017 by service providers from France and across India. People can search for training •• Digitisation •• High IoT security spending ($348 •• As per gartner, India Security Market Germany, who have built their capabilities partner and course, access e-content, •• Paperless layer: Where digital records •• Payment sector by leveraging the local manufacturing provide feedback, and locate the nearest move with an individual's digital identity, million in 2016) is expected to grow 10.6% in 2016 •• Government services and industrial ecosystem in European CSC and post innovative ideas. It provides eliminating the need for massive amount •• Digital India markets. In recent years, service providers vocational training and certifications of paper collection and storage •• Aadhaar, e-KYC from India have emerged as preferred to students to make them eligible for •• Security Services •• Cashless layer: Where a single interface partners for global R&D services sourcing, employment. This initiative is a big boost to all the country's bank accounts and Source: NASSCOM, Gartner, IDC, Deloitte Analysis and a few major service providers from for the IT services sector which requires wallets to democratize payments India are among the Top 10 vendors more skilled human resources. in the global ER&D services market75. •• Consent layer: Allows data to move freely Some of the key trends driving digital Potential for global expansion78 Baidu, and Tencent could herald the Taken together with Global In house Mapping IT services to India Stack: India and securely to democratize the market disruption across industry segments are In addition to the domestic market in next phase of digital adoption among Centers (GICs) of MNCs across industries, stack is the innovation around digital for data below: India, APAC is a large and underpenetrated traditional enterprises thereby driving India is fast emerging as a regional and services in India for efficient service market for Indian IT vendors that could the growth of technology services in this •• Banking and Financial Services – provide the next phase of growth market. increasing investments in digital banking amidst geo political headwinds in the and fin-tech solutions as India moves •• Australia – Software, technology Figure 12: API's for India western markets. Japan and China are towards cash less economy outsourcing, and consulting are among the largest technology spenders Aadhaar eKYC UPI Digilocker eSign expected to be among the major areas •• Telecom – Integration of data and in APAC region, an opportunity that of investments in Australia79 and Indian •• Enabler platform •• Verification portal •• Payment gateway •• Cloud service •• Cloud service content ecosystem, enabled by high could be profitably addressed by Indian vendors are well positioned to capture (APIs) (APIs) speed connectivity through 4G/5G technology vendors leveraging their •• Security •• Storage and •• Platform the emerging opportunities in these technologies decades of expertise in delivering complex •• Interface •• Bank interface security segments, taking advantage of their •• Storage transformational projects for western •• Manufacturing – digital manufacturing, capabilities in consulting and digital •• Database •• Wallet services •• Connectivity markets. automation, Industry 4.0 technologies. •• Security •• Japan – at $248 billion in 2017, Japan •• Retail – E-commerce and consumer •• ASEAN countries – countries like is the largest market for technology internet products from startups Thailand, Indonesia, Malaysia, Philippines, goods and services in APAC region. In Source: IndiaStack Vietnam, and Singapore collectively •• Healthcare – Digitization of health Japan’s mature market for technology account for a sizable market for records, Tele medicine the next phase of growth could come technology goods and services, and from operational technologies like IoT, are among the fastest growing markets Future prospects for the indsutry ER&D services: At $26 billion, ER&D and policies and support infrastructure Domestic and other emerging markets: machine data analytics, and automation for technology in APAC region. Largely India’s structural advantages such as large product development services is among envisioned under Make in India initiative, The domestic market in India has a high as businesses tend to focus on hardware and telecom equipment driven, pool of cost effective STEM talent (science, the fastest growing sub segments within India can emerge as a global leader in potential of growth driven by digital operational improvements to enhance spending on software is expected to technology, engineering, and mathematics), the larger IT-BPM industry, employing R&D and product development services economy initiatives of the government, productivity. –These are the areas where raise by 9% and outsourcing by 12% in high quality research institutions, MNC R&D close to 477,000 people and a 28% market industry. along with digitisation and automation. Indian IT vendors have made significant 201780. These markets are also being centers, rising smartphone and internet share in the global sourcing market. This The digital transformation drive by the investments in the recent years and are explored as alternative destinations for penetration, along with public sector sector is expected to reach $35 billion to Digital transformation: Increasing government such as Digital India, Skill in a better position to address 77 setting up ITeS services like business investments in digital economy initiatives in $40 billion revenue by 2020 supported adoption of digital technologies like cloud, India, e-KYC, JAM Trinity etc., creates huge •• China – The second largest market process management on account of the India, would enable the industry to address by the emerging trends in core engineering mobility, and IoT across industries and demand for IT and ITeS services in the for technology goods and services in availability of cost effective talent. ASEAN domestic and global opportunities in verticals like Industry 4.0, automation, the requirement for robust cyber security country and provides new opportunity for APAC region, after Japan. Traditionally a markets can be explored by Indian IT digital transformation, along with emerging hybrid vehicles, autonomous driving, infrastructure provides an interesting the vendors. opportunities in frontier technologies. robotics, 3D printing, IoT, and machine data growth opportunity for the service major market for telecom and hardware vendors for both talent, as well as market analytics. After Europe, India is the second providers as the demand for traditional equipment, the recent successes of opportunities. largest sourcing location for global ER&D services becomes stagnant. digital native companies like Alibaba, services, and by leveraging the favorable
66 67 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
6. Next Gen Citie
Conclusion and recommendations Investments in frontier technology: Industry profile Increasing investment focus in emerging technologies such as Artificial Intelligence, Machine Learning, Automation, reducing dependence on traditional services, and strategic investments in global markets through a mix of local hiring and M&A would help Indian technology vendors address emerging opportunities.
Incentives for domestic R&D Increasing incentives for creating products and intellectual property in emerging technology areas will help Indian companies provide cost effective solutions for the global B2B technology market, which is currently dominated by the US and European vendors.
Ease of doing business in India: Simplifying technology procurement Rapid urbanization in India has led to In April, 2015 the GoI approved the Smart far been qualified for the implementation processes and program management for increased pressure on existing municipal City Mission to develop 100 smart cities phase of the Mission. These 60 cities are government procurement would provide infrastructure like energy, water supply across the country with an outlay of INR likely to spend INR 1450+ billion ($22 billion) a major boost to the industry and help & distribution, sewerage, transportation, 480 billion over a period of five years. over the next five years for implementing vendors profitably address emerging digital energy consumption and other urban Subsequently, the Prime Minister of India Smart City Plans. The envisaged investment economy opportunities in India. amenities. It is expected that nearly 600 launched the Smart City Mission on 25th from 100 cities is estimated at INR 2500+ million (40%)81 population will be residing June, 2015 with the Ministry of Urban billion ($40 billion). As the technology outsourcing market in Indian urban areas by 2035. This has Development (MoUD), GoI as the nodal steered the Government of India (GOI) agency for creating these Next Gen Cities. Role of ICT Industry as key services matures, Indian IT Services industry is to undertake a number of measures, sector going through a transformation, to IT aiming to transform Indian cities through The Smart Cities Mission is an innovative Based on the Smart City proposals Services 2.0. While phase one was about urban renewal and technology infusion initiative by GoI to drive economic growth received so far, approximately, 30% of the decades of double digit growth at high catapulting them among the global Next and improve the quality of life of people by investments proposed under the smart margins leveraging global delivery model Gen Cities, the most important of which is enabling local development and harnessing city mission is envisaged in ICT, one of the through cost effective platform, phase the flagship Smart Cities Mission (SCM). technology as a means to create smart key service sectors in the country. The key two will see Indian vendors help global outcomes for citizens. Since the launch of sectors of this investment is presented in enterprises in their strategic business Mission in 2015 about 60 cities have so the diagram below82: transformation through digital services using an optimized delivery infrastructure, Figure 14: Key sectors for investment under SCM Transport Sector Level and also profitably address digital economy Others Transport •• Smart Cards (for multi-modal use) Spending initiatives in India helping bring technology 9% 23% •• Smart traffic management system for billion plus people. IT Services 2.0 has Water Social Infra the potential for Indian Industry to redefine 8% •• Telemedicine for urban poor and shape global technology market, •• Smart Classrooms and also catalyze the domestic economic Energy growth across sectors. The policies we Waste •• Smart metering envision today should help the industry Management •• Energy efficient smart street lighting achieve this transformation in a sustainable 8% Security manner. •• CCTV network Security •• Command and control centre 9% Social Infra Waste Management 19% •• Smart bin management •• Real time fleet management Water Housing Energy •• Piping network management system 11% 13% •• Automated remote metering Source: Smart Cities Mission, Ministry of Urban Development, Govt. of India and Deloitte Analysis 68 69 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
The role of ICT in the Smart City Plan services (energy, water, sewerage, solid Transport System for transportation, Some of the major innovative and smart Figure 16: Components of ITS is essentially an amalgamation of hard waste management), transportation, Government to citizen services like online solutions proposed in these sectors have Transit Management infrastructure (Physical infrastructure education and healthcare services, and information related to public grievances, been presented below: and social infrastructure) and Information soft infrastructure like SCADA system death and birth, vaccination and school ••Fleet Management Technology based innovative solutions, for energy, water and sewerage, Global dropouts through citizen information Intelligent Transport System (ITS): ITS (AVL/CAD) i.e., design, development and management Positioning System (GPS) based solid waste management. is a broad range of wireless and wired Arterial ••Passenger Information of hard infrastructure like utilities and management, smart parking and Intelligent communications-based information and Management System Incident electronics technologies, which when ••Advanced Signal Management applied to the current transportation Systems ••Video system, can help improve safety, reduce Figure 15: Key ICT Solutions proposed in Smart City Plans Surveillance & congestion, enhance mobility, minimize ••Transit Signal Priority Detection Next Gen City environmental impacts, save energy, and promote economic productivity. It is a cost- ••Emergency ••Traffic effective strategy that further enhances Vehicle Management the Bus Rapid Transit (BRT) experience. Preemption Centre for ITS is the application of advanced Intelligent Information ••Bicycle & communications and technologies Dissemination Pedestrians Transport to transportation systems providing System E-Governance Safety & Transportation Solid Waste Energy Water advanced monitoring, control and traveler Domains Surveillance Management information capabilities that allow better real-time management of roads and transit Emergency Traveler systems. The major components of ITS is Management Information presented in the figure alongside. ••Emergency E-Service Threat / Smart Waste Power Water ••Variable Traveler Delivery Crime Traffic Collection Transmission Sourcing Message ICT based Energy Efficient Lighting: Information Management Management & Distribution & Quality Signs As a part of Smart Networking Concept System Monitoring for rationalizing maximum usage of LED Electronic Payment lights which would in turn positively & Pricing Disaster Smart impact the energy savings and electricity ••Advanced Fare Management Parking Waste Smart Water consumption bills, the concept of sensor Collection System Handling & Transactions Distribution based monitoring of city lighting system Source: Deloitte Analysis Smart Toll Processing has been introduced. Centralized Control Smart Street & Fare Monitoring System (CCMS) will comprise Sub - domains - Sub Lighting Future prospects for the industry Smart Railway Stations: A smart railway Management of a wide variety of sensors, including IR, Digitization irrespective of the sector will station is essentially a redevelopment ultrasonic, light, illumination, voice, and be the key element for next gen economic project encompassing easy access to Hall sensors, which can be integrated into Smart Public growth for any spatial region. However, stations, improved passenger amenities, Public Grievance a microcontroller unit-based LED lighting Emergency Transport when it comes Smart Cities the key driver integrated public transport hub, waiting Management system helping in detection and processing Management Management is investment in urban infrastructure halls and other amenities for passengers, of various types of signals for energy and working towards introducing smart development of residential & commercial efficient operation of the LED lighting solutions. Some of the key future smart spaces, landscaping etc. Integrated Command & Control Center system. Data Analytics solution prospects with a combination of improved urban infrastructure and ICT are Smart Campuses: A Smart Campus Solid Waste Management through discussed below: solution is a software application Source: Smart Cities Mission, Ministry of Urban Development, Govt. of India and Deloitte Analysis Innovative Technologies: Geo-coded integrated with innovative technologies and sensor tagged waste collection bins Smart Villages: A Smart Village aims like Smart card, Biometrics, Barcode, to relay key information like location of to provide sustainable and inclusive and Interactive Voice Response System containers, time and date of collection, development to all sections of its (IVRS). It comprises of a set of modules status (lifted or not lifted), weight, etc. community, ensuring a high standard which help in application & admission, GPS tracking system will enable real-time of living. It focuses on empowering local administration, student services, staff monitoring of collection fleet, on-time self-governance, providing access to services, examination, library management, waste pick-up and efficient route allocation. assured basic amenities and responsible fee management, student profile and Further, challenges related to improper individual and community behavior to build Management Information System (MIS) waste disposal can be mitigated through a vibrant society with partnership from dashboard. sensor based sorting system for separating individuals, NRIs, elected representatives, waste particles resulting in high recovery & corporates and business houses, NGOs, purity rates. philanthropists, etc. 70 71 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
7. Start-ups / SME in Service
Conclusion and recommendations Once, Smart City based infrastructure is Industry profile developed to a certain level in the 100 cities, the next step would be to explore the potential towards developing intercity networks and creation of smart regions including smaller towns (smart towns/ regions) and rural areas (smart villages), thereby increasing the user base for the provisioned infrastructure, profiting through economies of scale. The crucial factors that will play a pivotal role in the next generation of city reforms will include:
•• Cities/States to develop enabling policies for creating an improved eco-system for implementing smart solutions in city context.
•• Development of innovative financial models/monetization models for funding both Cap-Ex and Opex. Micro, Small and Medium Enterprises IT/ITeS industry. This industry created a • Smartphone and internet •• Innovative ICT based solutions including • (MSMEs) have been the engines of India’s robust ecosystem of Science, Technology, cloud hosted solutions for improving penetration – as of 2016, there are development for several decades, making Engineering and Mathematics (STEM) 85 urban governance and service delivery 367 million internet users and almost significant contributions towards economic talent in India, and also a new demography 86 can be packaged in the form of mobile 300 million smartphone users in India. growth and job creation. There are around of consumers comfortable in using applications and can be made available The Internet subscriber base is expected 51.1 million MSME units across India out of technology enabled interfaces for day to 87 for a cluster of cities with real time to reach 730 million by 2020 while the which about 55.3% are based in semi urban day business transactions. Supported updates ensuring better urban services, total telecom subscriber base will reach and rural areas providing a distributed by contemporaneous advancements in 88 increased economic growth and 1.4 billion in the same period. This development model in a large and diverse mobile phone and internet penetration, improved quality of life. provides a new platform for companies country. The sector represents 38% of the the market was ready for new services to reach their customers through mobile •• Capacity building of the city country’s GDP (out of which 8% comes and innovative business models that first services. administration for ensuring long term from manufacturing while 30% comes from used technology for disrupting traditional sustainability. services83), contributes 40% of the total industries and value chains to provide •• Risk capital - As successful technology exports, 45% of the overall manufacturing superior value to the consumers. The early platforms enjoy a natural monopoly output and employs around 100 million successes of such services in e-commerce status in the markets they operate in, people84. The sector traditionally faced and consumer internet sector generated there is considerable interest from challenges in adequate and timely access interest among global investors on the the investor community to fund such to risk capital, non-availability of skilled larger potential of such services. Taken opportunities that uses technology labor and technology, ineffective marketing together, technology and risk capital enabled platforms and interfaces for and distribution networks, and stringent started a new wave of SMEs in India reaching a larger market. regulations and compliance requirements enabling the development of what is now that made it difficult for SMEs to leapfrog widely known as the start-up ecosystem in Defining a Start-up into the big league. the country. The Start-up India Initiative by government of India has defined start-ups in India. SME to Start-ups – the transition enabled Key enablers: Provided that such entity is not formed by technology and assess to risk capital by splitting up, or reconstruction, of a •• Commoditization of consumer business already in existence. Provided technology – rapid advancements in In the past decade, as information also that an entity shall cease to be a start- digital technologies and large scale technology industry grew at a rapid pace up if its turnover for the previous financial adoption of digital services like social, across the world transforming business years has exceeded INR 250 million or it mobile, and web based services around processes and creating efficient value has completed 5 years from the date of chains through seamless information the world commoditized the building incorporation/registration89. exchange. India also capitalized on this blocks required to build and operate web opportunity through the home grown scale IT systems.
72 73 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Figure 19: Geographical Cluster •• An entity, incorporated in India
•• Should not be more than five years old Delhi NCR (e-commerce Hub) Pune (Health Tech Hub) •• With annual turnover not exceeding INR 250 million in any preceding financial year, and 30% total e-commerce Start-ups 4 out of 10 Health-tech Startups Type: Leading Type: Emerging •• Working towards innovation, development, deployment or commercialization of new products, processes or services driven by No. of Startups: 1175+ No. of Startups: 300+ technology or intellectual property B2B: 25-30%, B2C: 65-75% B2B: 40-50%, B2C:50-60% Funding: $1,050 million Funding: ~$200 million
India: fastest growing start-up around 2,50,000 people by 2020. The no. of cities such as Kochi, Kolkata and Jaipur ecosystem tech start-ups in India is expected to reach are also emerging as important start-up As of 2016, there are more than 10,000 10,500 by 2020. The sector has witnessed destinations due to low operational costs, startups in the country out of which 46.5% CAGR growth between 2010 and cost effective workforce, and efficient local around 4,750 are in the technology sector. 2016 in terms of number of start-ups. infrastructure. Together Kochi, Kolkata and The technology based start-up sector is Average age of start-up founders in India is Jaipur attracted $350 million in 2016. While growing by 10-12% Y-o-Y making India the just 28 years and the sector has 9% female there are more than 110 start-ups present Mumbai (Emerging Fin-Tech) 3rd Largest start-up ecosystem in the founders. in Kochi, Kolkata and Jaipur are the home to 30% Fin-tech Funding world after US and UK. India has added almost 125+ start-ups91. Type: Leading No. of Startups: 800+ more than 1400 tech start-ups in 2016 Emerging geographical clusters: Hyderabad (Infotech) B2B: 30-40%, B2C: 60-70% with a Y-o-Y growth rate of around 8-10% In addition to the traditional start-up Technology MNCs Funding: ~$750 million and employed around 100,000 people hubs such as Bangalore, Delhi-NCR, Type: Emerging 90 in start-ups and is expected to employ Chennai, Mumbai, Hyderabad, and Pune, No. of Startups: 400+ B2B: 35-45%, B2C:55-65% Funding: ~$300 million Figure 17: Top Tech Startup Countries Figure 18: Start-up Growth in India
10,500 Bengaluru (Silicon Valley of India) 40% Overall Funding Chennai (B2B Dominated) Type: Leading 55-60% B2B Startups US No. of Startups: 1300+ Type: Emerging 52,000 B2B : 35-40%, B2C: 60-70% No. of Startups: 275+ Funding: ~1,350 million B2B:55-60%, B2C:40-45% 4,750 Funding: ~$200 million 4,100 3,100 Source: NASSCOM: Indian Start-up Ecosystem Maturing, Report 2016 2,200 Start-up UK ranks 4,900 480
Startup Growth Start-up Lifecycle and Funding a bigger brand or is consolidated with a the start-ups fail within the initial 5 years A start-up goes through multiple stages in larger entity. The Business risk varies in due to the risks associated with products 2010 2013 2014 2015 2016 2020 (e) its life time before it matures and becomes each stage, and an estimated 70-80% of and the market. India 4,750 Source: NASSCOM: Indian Startup Ecosystem Maturing Figure 20: Lifecycle of Start-up Ecosystem
Product Discover Validate Efficiency Growth Mature Source: NASSCOM: Indian Startup Development Ecosystem Maturing
•• Product/Service •• Minimum •• Development •• Monetization •• Product market •• Profitability ideation Viable Product expansion •• Customization •• Wide customer •• Risk: Medium •• Target market •• Risk: Medium base •• Risk: High •• Risk: High •• Risk: Low •• Risk: High
Source: Deloitte Analysis
74 75 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
As start-ups navigate these stages in and the capital for the growth stage and PE deals between January and December of start-ups are increasingly focusing on had difficulties in accessing timely funds for their growth journey, the requirement late stage is typically provided by Private 2016. There is a decrease of around 55% providing domain specific solutions for capex and working capital requirements at for capital and the associated risk-return Equity investors, each having their own in the start-up funding in comparison to the larger market opportunity across competitiive rates. While the government’s expectations also vary across these return expectations commensurate with 2015 which managed $9 billion. Whereas sectors such as agriculture, education, initiatives to improve this situation aimes stages. Early stage risk capital is typically the business risks in the respective stage. the number of deals has increased by 3% in finance, healthcare, and manufacturing. to address the gaps, support from the provided by founders themselves, angel Indian start-ups managed to generate $4 comparison to 201592. The technology infrastructure envisaged larger ecosystem players in terms of timely investors and venture capital investors, billion funding across 1,040 angel and VC/ under digital India program such as JAM payment of invoices would help start-ups trinity, Aadhaar enabled payments, UPI manage their working capital cycles in an interface, etc. along with the private sector efficient manner and thereby increase their Figure 21: Global perspective initiatives such as ‘India stack’ are expected chances of survival in the initial years. to provide the necessary platforms and infrastructure support for these start-ups Ease of doing business early stage to build large scale solutions for the core companies traditionally faced challenges industries. related to complex regulatory and compliance requirements in Inida. While Innovation and R&D: India has always the policy steps envisaged under Startup been a leader in frugal innovation. India initiave such as self certification, •• Startup rank: 1 •• Startup rank: 2 •• Startup rank: 4 •• Startup rank: 5 Our cost structures and purchasing public procurement guidelines, and •• Startups: 52,000 •• Startups: 4900 •• Startups 4600 •• Startups: 4300 power parity helps us build high end tax exemptions provide the necessry technology at globally competitive costs, framework to ease the regulatory and •• Large global talent pool •• Good connectivity •• Young population •• Large workforce as demonstrated in our success in atomic compliance burden of start-ups in their understands leadership •• High spending capacity •• Access to global talent •• Cheap labour and and space research. But compared to initial years, support from the respective pool •• Great technological Infrastructure our global peers, India lags considerably state and municipal administrations is •• Presence of tech giants training in institutionalizing R&D, as shown equally important in reducing the red •• Easy funding and liberal •• Wide presence in in the number of patent applications tapism and encouraging start-ups from tier regulations •• Innovative ideas international market filed. India has 45,568 patents in 2015 2 and tier 3 cities solving local problems. in comparison to China’s 1.1 million Indian SMEs and start-ups have always Source: NASSCOM, Deloitte Analysis patents97. By increasing investments in demonstrated their resilience in surviving R&D and monetizing it through patents and and thriving in challenging business products, Indian start-ups can profitably enviroments. While the policies and Government initiatives million in 201693. With the Government’s institutions. address broader opportunities in the support infrastructure envisioned Digital India: Increasing investments plan to impart skill training to 400 •• Innovation and R&D: A fast-track system global market, at significantly lower costs under Startup India program aims to in digital economy initiatives provides million people by 202294, sectors such as for patent examination at lower costs compared to their global competitors. help start-ups in their initial stages of opportunities for start-ups in India to eLearning, and eMentoring will be the key is being conceptualized by the central growth, the larger cultural implication provide localized solutions for the larger enabers of such large scale transformation government. Industry collaboration India’s large and of such large scale initiative to promote market. and start-ups in this space can take active entrepreneurship ecosystem can entrepreneurship is in inspiring the young advantage of this opportunity to reach a •• Funding Support and Tax exemption: benefit largely from engaging closely with population towards creating jobs and Key enablers include: larger market. Initial corpus of INR 25 billion and a the large and established companies in participating in the economic growth and planned corpous of INR 100 billion •• NOFN: The nationwide broadband their respective sectors and across sectors. nation building. The long term benefits of Start-up India: Start-up India initiative over a period of 4 years95. Start-ups are network which will connect 250,000 While start-ups benefit from the talent such demographic transormation would provides the necessary regulatory exempted from income tax for a period Gram Panchayats will be a big boost for and market access, large enterprises can help secure India’s leadership position in and policy support to promote of 3 years. start-ups to reach rural population. gain in niche technical and subject matter the emerging global order. entrepreneurship and support start-ups in •• Research Parks/Start-up Centers: expertise along with the ability to address •• Aadhaar e-KYC: The Aadhaar based their initial years of existance. Key initiavites Government plans to set up 7 new emerging opportunities faster. Though authentication (e-KYC) provides an easy include Research Parks in institutes with an initial companies in the technology sector are way to do business with authentication of •• Compliance Regime based on Self- investment of INR 1 billion each. It also more proactive in engaging with start- customers. Certification: Objective is to reduce the plans to setup 13 start-up centers and 18 ups, companies in traditional sectors •• Cloud Platforms: accelerating the regulatory burden on start-ups thereby Technology Business Incubators96. should also start exploring such start-up adoption of as-a-service business models allowing them to focus on their core engagements for a mutual success. business and keep compliance cost low. Future prospects of the sector Skill India: The Skill India initiative could Market opportunity: While the first phase Capital though technology start-ups in •• Online portal and mobile application: be a good opportunity for the emerging of start-ups focused on the e-commerce ecommerce, consumer internet, and Single platform start-ups for interacting Edutech sector which has more than 180 and consumer internet sectors targeting enterprise software segements are fairly with Government and other regulatory companies, and managed to attract $170 the urban population, the next phase successful in accessing risk capital, SMEs and start-ups in traditional sectors have
76 77 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
8. Media & Entertainment
India is the world’s second largest television and remaining 34.04% from advertising. Industry profile market with 181 million99 television TV penetration reached 64% of total households in 2016 and 892 television households in 2016. As is evident in the channels100 (as on 30 Nov 2016). Television graph below, there has been an increase industry generated total revenue of $9.6 in the share of digital cable and direct-to- billion (INR 641.8 billion) in 2016 with home (DTH) as a result of digitization. 65.96% share coming from subscription
Figure 23: Split by type of TV Subscribers
22 15 19 44 55 79
37 55 90 65 41 5 2015 2016E 2020F
Analog cable Digital cable Pay DTH Free DTH The Indian Media and Entertainment (M&E) is one of the industries identified by the industry is a sunrise sector with a rapid government under “Make in India” initiative. Source: IBEF growth curve. The market size of M&E The key sectors of M&E industry are E: Estimated, F: Forecasted industry in India is estimated to be $20.5 outlined below: billion98 (INR 1,370.63 billion) in 2016. M&E Figure 24: Television Industry Revenue Share (%) Figure 22: Segmentation of M&E Industry 2016E
Print 34.04 % 33.24 % Films 23.21% 12.07%
66.76 % Digital 65.96 % Advertising Films 6.17%
Animation & VFX 2016E 2020F 6.17% Print Subscription Revenue Advertising Revenue Gaming sectors
2.34% largest3 Television Source: IBEF E: Estimated, F: Forecasted Outdoor Advertising 2.15%
Radio 1.78% Television 46.92% Music 0.92%
Source: IBEF
78 79 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
The Ministry of Information and India is the biggest newspaper market In terms of revenue, the sector has gross Table 2: Information and Broadcasting – FDI inflows (January-September 2016) Broadcasting (MIB) has mandated that with 110,851104 registered publications as box office realizations of $2.06 billion (INR all analog networks be replaced with on 31st March 2016. Print sector is the 138 billion)105 in 2015 which is expected to Sub sectors INR million $ million % of Total inflows Digital Addressable System (DAS) which second largest segment and market size grow at 11% CAGR reaching $3.56 billion Radio Broadcasting Plan 56,459.80 837.09 2.6 is scheduled to be completed in four was estimated at $4.76 billion (INR 318.25 (INR 238 billion) by 2020. Domestic box phases. Viewers can access digital services billion) in 2016. Growth is expected in office contributes majority of the revenue, Print Media 69.17 1.03 0.0 only through a set top box (STB). Phases regional print and local news segments. representing 74% for the sector. Films and Entertainment 15,886.58 236.92 0.74 I and II, which focused on India’s major metro markets (except Chennai) and 38 Film sector is the third largest sector in Another sector that has witnessed Sector total 72,415.54 1,075.04 3.34 Tier I cities, have been completed. The M&E industry. The Indian film industry is tremendous growth over last few years revised timeline for Phase III was January the largest in the world in terms of number is the “Animation Industry.” Key growth Source: FDI Equity Inflows 2016, DIPP 2017 (earlier December 2015), while of films produced between 1,500 to 2,000 factors include increased usage of Phase IV is expected to be completed by films produced every year in more than 20 technologies such as 3D videos, movies, Growth drivers of the Industry Government initiatives 31 March 2017101. languages. games and commercials. This has resulted •• Rising incomes and evolving lifestyles Make in India in creating significant job opportunities for The cable TV market is highly fragmented animators and developers. Cities such as •• Rapidly growing young population •• Promote Foreign Films shooting in India with more than 230102 permanent Multiple Mumbai, Pune, Chennai, Bangalore and coupled with increased usage of 3G, 4G •• Develop technical skills for film production, post production, and VFX System Operators (MSOs) to operate in Trivandrum are emerging as animation and portable devices DAS registered with MIB and more than hubs. To encourage the growth of this •• Explore additional film treaties •• Government initiatives and policies such 50,000103 Local Cable Operators (LCOs). sector, state governments have proposed as ‘Make in India’, ‘Digital India’ animation, visual effects, comics and Digital India gaming (AVCG) parks on SEZ model. •• Implementation of proposed GST will •• Digitization of cable television in 4 phases to attract institutional funding, improve Figure 25: Films: Category-wise break-up of revenue result in transparency in the transactions. profitability and value chain. 100% FDI is allowed in television sector There are many transactions where •• Strengthen the sectors such as video streaming, online music consumption and Cable and including cable TV network, DTH. 49% the input taxes paid are not available gaming by increasing internet penetration. Satellite Rights FDI (under approval route) is allowed for as credit and are regarded as tax cost. 13% up-linking of news and current affairs TV Likewise, many transactions attract dual •• Give consumer better control in terms of subscription choices. It will also lead to channels. tax levies. GST should address this issue increase in ARPU and subsequently increase in broadcasters’ share of subscription of cascading and dual taxation impact revenues. 100% FDI in film sector is allowed under •• Increase in FDI inflows on account of automatic route which has encouraged •• The Budget reinforced India's huge shift towards digitization especially with the liberalization in policy overseas studios to set-up presence in proposed deployment of high optic cables to increase internet penetration in rural Overseas India/co-produce films. •• Animation, visual effects (VFX), gaming India. This is a big positive for content creators as it will boost the digital content Box Office and digital advertising emerging as fast consumption across online and mobile platforms. 7% 26% FDI (under approval route) is allowed growing sectors •• Further impetus on digital payments and transactions will eventually help the for publication of newspaper/periodicals •• International/foreign films gaining box subscription model. and Indian edition of foreign magazines office share Domestic dealing with news and current affairs. Skill India 100% FDI (under approval route) is allowed box office Ancillary Revenue Potential for global expansion •• Increase productivity of the existing workforce in M&E sector 74% Streams for publishing/ printing of scientific and technical magazines/specialty journals/ •• Potential for global expansion of Indian •• Develop technical skills for film production, post production and VFX 5% periodicals and publication of facsimile M&E industry with the US, UK and China. •• Create employment opportunities - 1.2 million skilled workforce by 2022 edition of foreign newspapers. Home •• India to enter into co-production treaty Videos with the US to promote co-production of 1% films.
Source: Deloitte publication on “Indywood: The Indian Film Industry” •• FDI policy liberalized in the information and broadcasting sector. Roadshows Future prospects for the Industry a number of startups, leading production can be conducted in the US and the UK houses and also several international •• Shift towards Internet-based delivery to promote investment in Indian M&E players foraying in the market. platforms: Over-the-top (OTT) platform sector. that uses internet as a medium to •• Visual effects (VFX) and Animation •• Expansion of footprint in terms of distribute content is emerging as a Services: India is considered as the most distributions of channels by Indian business model. Disruptive pricing sought-after destination for animation broadcasters in overseas countries. announcements on unlimited data and and VFX services led by cost efficient, aggressive internet plans have benefitted high quality service, affluent workforce •• Expansion of territories for distribution of the OTT sector. This sector has witnessed and presence of hi-tech animation Indian films. 80 81 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
9. Sports Service
studios. Entertainment conglomerates has also proposed to set up center of •• Promoting India as a filming destination: are increasingly outsourcing animation excellence with state-of-the-art facilities India should consider to adopt a globally Industry profile and special effects to India. Furthermore, along with AVCG parks on SEZ model108. recognized standard to boost film cost of animation production in India is shooting across various locations in •• Under Penetrated Multiplex Screens: one fourth of North America and about India. The government must provide India is still under penetrated in terms 35%106 lower than countries such as quick approvals to help filmmakers get of screens which means there is a huge Korea and Philippines. In addition, several all clearances. The government should scope of growth for the film sector. With Indian studios have been successful ensure ease for obtaining approvals, the proliferation of multiplex screens in establishing a strong footprint in availability of local talent, production coupled with technology to conveniently international markets. resources and adequate infrastructure book tickets, footfalls are expected to facilities for attracting foreign producers •• Promoting India as a filming increase. Many foreign players have to shoot films in India. destination: Ministry of Information expanded their base in India by acquiring and Broadcasting has set up the Film a controlling stake and increasing the •• Grant infrastructure status to Facilitation Office (FFO) to facilitate number of screens across the country. broadcasting sector: Broadcasters efficient approvals and improving the and distribution platforms should be •• Broadcasting channels in overseas ease of shooting in India. Filmmakers can accorded “infrastructure status” so as to countries: On account of huge Indian expect clearance between 6-8 weeks, obtain better and affordable financing population residing overseas, there is depending on the shooting location. India options in the present capital-intensive an opportunity for Indian broadcasters has signed film co-production treaties growth phase. to expand their footprint overseas with 11 countries (UK, Spain, Germany, by broadcasting channels in such •• Enter into more co-production treaties Canada, New Zealand, Brazil, Italy, France, countries. Apart from the above, content for incentivizing co-production of film: Poland, China, and most recently, South Sports sector in India has seen a speedy Figure 26: Diverse Stakeholders syndication now extends to local In order to widen the reach of Indian growth over the past few years with Korea) providing a huge opportunity for audiences as well. cinema, the Government of India must increasing investments from corporate growth. Negotiations are on-going to explore additional film treaties that would houses in sports properties and events, finalize the agreement with Australia. Conclusion and recommendations help in boosting the film industry as well expanding spectator base and rising •• Collaboration with international studios: as developing skills in the local talent number of sports television channels. •• Improving screen density ratio: Franchise Over past few years, international film pool. The global sports market is estimated to (clubs) Screen penetration in India at present Investors studios have collaborated with local film be worth $480-620 billion110 in 2015. The Leagues (team is significantly low at 6 screens per production houses to develop Hindi and sports sector includes different segments owners) million109. Many single screen cinemas 4 regional movies. Local film production such as sports tourism, sporting goods have been shut down due to high 3 5 can leverage the experience of these (in manufacturing and retail), sports operational cost, non-viability of running international studios to expand their medicines, sporting management and on a standalone basis and low occupancy Regulatory Broadcasters international reach and incorporate sponsorship. 6 rate. Government should consider bodies 2 and sponsors enhanced project planning and cost providing financing support through controls. However, the Indian sports market is still tax holidays in respect of conversion of at a nascent stage and accounts for a •• Gaming as a hot spot: With increase single screen to multiscreen, extra floor meagre 2%111 share in the global sports 1 7 in smartphones usage, adoption of space index and access to capital at lower market. The number of stakeholders Sports Government 3G/4G internet network, India is poised interest rates. Conversion of 75% of the involved in the Indian Sporting industry management authorities companies to become one of the world’s leading existing single screens into two screen continues to increase with the advent of Diverse markets in gaming sector. To encourage multiplexes can unlock revenues of INR new leagues. The below diagrams depict Stakeholders the growth of this sector, incentives 40-50 billion for the film industry through the key stakeholders involved in sports are provided by state governments, for higher average ticket price, occupancy management. In India most of the sports Source: Deloitte Publication Source: Deloitte Publication units in SEZ. The State Government of rate and advertising and food and marketing spend comes in the form of Telangana aims to set up a “Center of beverage revenues. sponsorships and advertising during sports Figure 27 : India Sports Sponsorship Market (INR billion) Excellence”107 with state-of-art facilities to events. •• Skill development in M&E: There is a promote gaming, animation, media and scarcity of formal training institutes and entertainment sector. To boost the start- In 2016, the Indian sports sponsorship creative technologies in India. Currently, up ecosystem in the state, Government market grew 19.3% to INR 64 billion112 most of the personnel are trained on of Telangana, in association with Software ($0.95 billion). The money flowing into 64.00 the job or self-trained. There must be a Technology Parks of India (STPI), has sports sponsorship is mainly from five concerted effort by the government and 53.63 created an incubation center dedicated segments - on-ground sponsorship, media industry to develop training institutions for animation, visual effects, comics spends, team sponsorships, franchise fees with proper financial and infrastructure and gaming (AVCG) industry start-ups. and endorsements. 2015 2016 support. In addition the Karnataka Government Source: ESP Properties – Sportz Power report
82 83 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Figure 28: Breakup of Sports Sponsorships in India (INR billion) 2016 Government initiatives117 Sports Tourism 35.11 •• Mega sporting events121 such as "Khelo India" (National Programme for Development of Sports) the Hockey World Cup and the 19th 28.17 •• Develop sports infrastructure in both rural and urban areas Commonwealth Games (both held in New Delhi in 2010), along with the ICC •• Guiding and nurturing of the talent through assistance to SAI Training Centres and Cricket World Cup held in 2011 attracted Academies and State Government training centres/academies a number of tourists and sports •• Setting up of new academies both in public and PPP Mode. enthusiasts. India will also stage the Under-17 football World Cup in October Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) 2017 that will boost sports tourism.
•• Develop sports infrastructure especially playgounds owned by Government schools •• Simultaneously, there has also been a marked rise in the number of tour •• To promote sports in rural areas and providing them with basic materials such as operators and agents specializing in 11.56 volleyball nets, cricket materials, football etc. servicing the requirements of this 10.31 particular tourist segment. Even Rashtriya Yuva Sashaktikaran Karyakram (RYSK) mainstream tour operators have set up 7.0 •• Flagship program of MYAS to enable youth to realise their potential separate divisions to tap the potential of 5.48 5.41 5.58 sports tourism. 4.76 •• New umbrella scheme which consolidates Nehru Yuva Kendra Sangathan 4.16 NYKS), National Youth Corps (NYC), National Programme for Youth & Adolescent •• Sports medicine is another area that is Development (NPYAD) and National Discipline Scheme (NDS), National Young highly underpenetrated. By providing Leaders Programme (NYLP) treatment at a very competitive rate equipped with latest in-house laboratory Endorsement Franchise Team Sponsorship Ground Sponsorship Media Spends services and professional staff, this segment offers a huge opportunity for Future prospects for the industry Sports Education and Skill 2016 2015 growth in sports tourism. Sports Facilities and Infrastructure Development Service Source: ESP Properties- Sportz Power Report •• It is estimated that about 1.33 million120 Sports Marketing and Management •• The emergence of new leagues and young people are likely to take up sports Services teams have driven the need for as their full time profession by 2017 in Of the total sponsorships, media spends The Ministry of Youth Affairs and Sports Potential for global expansion •• The growth and development of the infrastructure development sporting India. MYAS is implementing various accounted for 54.8% share followed by on- (MYAS), under the Government of India is MYAS has MOUs/agreement116 pertaining Indian sports industry is creating venues. Recently, MYAS gained the projects through the Sports Authority of ground advertising/sponsorship (18.2%), implementing various projects through the to sports with Australia, France, opportunities for management approval of Ministry of Corporate India (SAI) to find new talents. team sponsorships (10.9%), franchise fees Sports Authority of India (SAI). At present, Hungary, Kazakhstan, Kuwait, Maldives, professionals in a wide variety of 113 Affairs (MCA) for inclusion of sports (8.5%), and endorsements (7.4%). there are 70 STC (SAI Training Center) Mauritius, Netherland, New Zealand, •• Accordingly, there is a huge demand of settings. New sports initiatives require infrastructure, construction and Cricket continues to dominate sports with a total strength of 1183 trainees (775 Seychelles, Turkey and Turkmenistan. coaches and trainers for different sports. professional human capital to speed maintenance as part of CSR activities118. sponsorships in India. The growth in boys & 408 girls). These agreements have strengthened Several Indian corporates and renowned up its growth. But in India, availability of sponsorships was also due to emergence cooperation and have contributed •• Several Indian corporates like JSW, Indian sportspersons have already professional sports managers are less or of new non-cricket sports leagues – Indian In Union Budget 2017-18, the Sports to enhancement of sports and social Reliance Foundation and Tata Group opened state-of-the-art academies with minimal. Super League (ISL), Pro Kabaddi League Ministry was allocated a total of INR 19.43 development. have opened modern facilities to train modern facilities and services to train raw (PKL), World Kabaddi League, Champions billion114 ($288 million), compared to INR students through various programs119. talents. Some are listed below: Creation of Digital Assets and Content Tennis League and Indian Premiere Tennis 15.92 billion ($237.6 million) last year given Another potential area of expansion is ––Gopichand Badminton Academy (OTT Platforms) •• Several MNCs like Business Club League. Kabaddi was the growth driver in that Indian athletes are preparing for that of South Asia Association for Regional ––Prakash Padukone Badminton Academy Australia, Hockey Australia are also •• Over-the-top (OTT) platform that uses 2016 on back of a two-season Pro Kabaddi Commonwealth Games and Asian Games Cooperation (SAARC) nations that has been ––Bhaichung Bhutia Football Schools investing in infrastructure development. internet as a medium to distribute League and India hosting the Kabaddi in 2018. a part of PM Narendra Modi’s vision. South ––Mary Kom Boxing Academy Well-known clubs like FC Bayern content is emerging as a business model. World Cup in Ahmedabad. Asian Games (SAG) is a biennial multi-sport ––Bhiwani Boxing Club Munich (Germany), Barcelona (Spain) Disruptive pricing announcements on Recently in Oct 2016, the Union Finance event held among the athletes from SAARC ––Netaji Subhash National Institute of and Manchester United (UK) have also unlimited data and aggressive internet Further, there has been a significant Ministry has approved inclusion of countries viz. India, Sri Lanka, Bangladesh, Sports collaborated with local clubs. plans have enabled Indians to increasingly increase in female audience that now forms sports in the harmonized master list of Afghanistan, Nepal, etc. The 12th South ––Mahesh Bhupathi Tennis Academy watch sports content online. India’s active a large segment of the growth story. The infrastructure sub-sectors115 to be eligible Asian Games was held in Guwahati and (MBTA) OTT video subscribers are expected to online sports audience has expanded for obtaining long term financial support Shillong in 2016 wherein India secured 308 ––Gun For Glory Shooting Academy grow to 105 million122 by 2020. starsports. too, fueled by better mobile and internet from banks and other financial institutions. medals including 188 gold medals. ––Sehwag International School com, Liv Sports, starsports.com, Neo connections and affordable data plans. Sports already have OTT platforms123 dedicated only for sports.
84 85 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Sports Data Analytics124 new experiences. India having a diverse sports promotion among the specially geography provides extreme adventure abled. More initiatives must be taken for •• The popularity of data driven decision- activities like sky diving, mountaineering, identifying and nurturing their sports making in sports is increasing. Every trekking, bungee jumping, mountain talent. The Government must also provide major professional sports team either biking, river rafting, rock climbing and various incentives in form of sports quota has an analytics department or an deep sea diving. With rising demand, in jobs, financial assistance, pension and analytics expert on staff. Teams often the number of tour operators offering cash rewards to give an impetus to them. have to scan scout notes from clipboards, specialized packages in this category convert those PDF’s to Excel, and then have also increased. Structured sports education with hand those files over to data developers. special emphasis on sports medicine: There are now entire websites dedicated •• Another category that will witness growth Priority should be guiding and nurturing to the research and analysis of sports is that of fantasy sports. In India, fantasy talent through existing sport academies statistics and how they relate to a sports is called ‘game of skill’ which is and new set up either by Government prediction in performance. outside the purview of gambling. With or State Government in PPP model. The rising number of sports enthusiasts, Government must emphasize more on Fan Engagement internet penetration and usage of opening of sports universities in different smartphones, India would be an obvious •• Sports franchises in India are taking states likewise the proposed National destination and business choice for several initiatives to increase fan Sports University in Manipur. It should fantasy sports operators. Nagaland126 is engagement. While it was traditionally also incentivize sports medicine segment the only state in India that has issued just in-stadium and TV but at present by setting integrated diagnostic, pre- online gaming licenses for skill games fans are touched digitally through web, habilitation, treatment, rehabilitation including fantasy sports. mobile, content sites (own and third- services for sports injuries. party) and numerous social channels. Conclusion and recommendations Other touch-points include merchandise Increase bids to host events: The Grant industry status to sports sector: sales, F&B POS, online sales channels, Government must encourage bidding to The Government should grant industry third-party operators for tickets, tours, host mega sport events in India in order to status to sports sector which will increase etc. Other initiatives include starting a boost tourism and increase exposure to the participation of private sector, fan page on official website, extensively sports facilities. In its road map, NITI Aayog generate more revenue streams and help using social media to connect with fans, has advised the government to bid for and sport-centric employment generation. arranging for fans to meet team players host 100 major international sports events Government should consider providing and even organizing training camps and till 2026 by creating a separate arm under financing support through tax exemptions talent hunt programs. the Sports Authority of India127. for earnings from sports or reduction
in import duties on expensive sports Virtual Reality Gaming Experience Development of a common platform: equipment. A system for registration, rating and •• Virtual Reality (VR) is one of the publishing information about all sports unexplored areas and is the most sought Augment sports infrastructure and facilities should be established in the form after technologies in sports. VR, an ensure its proper utilization: With of web portal. The portal should also have upcoming technology uses computer International tournaments like FIFA U-17 information like rating of existing sports technologies that use virtual reality World Cup scheduled to be held in October facilities, inclusion of private facilities in the headsets to generate the realistic images, 2017, the Government should carve a region, information on coaches available at sounds. This technology has been separate fund. In addition, Government these venues, transportation facilities like explored to create gaming lounges. These must propose more of sport cities in nearest bus or metro station, membership gaming destinations provide unmatched various states to develop integrated sports fees, timings and details of available sports range of games that offers a superlative complex that will encourage different facilities. A sports (event) calendar for using virtual-reality experience for sports sports and promote healthy lifestyle. Also, the existing infrastructure through the enthusiasts. Recently, a cricket legend has the Government should ensure ease of year in various sports by various teams been roped in as the brand ambassador access for grounds maintained by schools should be drawn. This will allow organized of one of such gaming lounges. and colleges to boost asset utilization. and increased participation from budding as well as existing sportspersons, and also Rise of Adventure and Fantasy Sports Incentivize and promote sports among give opportunity to boost sports tourism. specially abled: With a successful spell in •• Adventure sports125 in India has shown an Rio Paralympics 2016 after securing four impressive growth with rising disposable medals, the Government must focus more income and willingness among Indians on encouraging and allocating funds for to look beyond the usual holidays for
86 87 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
10. Telecom
non-traditional services such as banking, Market segments cumulative foreign direct investment (FDI) Industry profile education, payment, infrastructure, etc. are Telecom services: The fastest growing of $18.38 billion since April 2000132. The gaining momentum. telecom services market is expected to mostly voice-centric market has seen high reach $103.9 billion128 by 2020 at a CAGR growth in the internet subscribers and Indian telecom sector has established of 10.3%. The total mobile services market data usage with the increasing adoption of itself as a unique market over the years by is expected to touch $37 billion in 2017. 3G and 4G services in the last few years. setting new parameters in efficient service The global telecom services market size, in The average minutes of usage (MoU) has offerings as shown in the figure. While the terms of revenue is $1.2 trillion in 2016129. come down to 319 minutes in 2016 from global telcos are nearing saturation in their The market is highly competitive with 12 446 minutes in 2006133. The revenue from markets, Indian telecom sector continues active operators fighting for their share voice services, which used to be the major to find innovative ideas for a sustainable of the consumers’ wallet. Though India source of revenue with a share of 80%, has business. has the lowest Average Revenue per User been going down. The sector is expected to (ARPU) i.e. $2130 in comparison to global generate 700,000 jobs in the next 5 years average of $10/month131, the sector is still driven by high investments and growth134. attractive for domestic and global players The top five players in the market are owing to its large untapped potential in responsible for almost 78% of the market terms of mobile and internet services in share in terms of subscriber base. the rural areas. The sector has attracted
Figure 30: Telecom subscriber base growth
Telecom industry, in particular, high speed Figure 29: Unique features of Indian telecom market 1,400 internet connectivity has significant 996 1058 importance in a country’s overall growth. 898 904 730 As per a study by World Bank, 10% 302 363 increase in broadband penetration helps 165 252 the economic growth by almost 1.3% for Supply Chain Outsourced supply developing economies. Since 1990—the Prepaid Market 2013 2014 2015 2016 2020F era of liberalization of Indian telecom 85% prepaid chain to small retail sector, there has been accelerated growth subscribers are a businesses saves in the sector and it is now the second major revenue source. cost and improves Telecom subscriber base (million) Internet subscriber base (million) largest telecom market in the world in Flexibility to low reachability. terms of subscriber base. Today, the income Consumers Source: GSMA dynamics of telecom sector has Network Sharing changed as the Active network infrastructure sharing Infrastructure services: The telecom Figure 31: Telecom tower growth Spectrum Management and Spectrum trading infrastructure sector in India is an Average spectrum per operators and sharing helps to important part of the telecom sector. 6 in India is just 40MHz against curb the limited backhaul 2000 With continuous growth in the telecom 5 global average of 50MHz. challenge in India 1,359 1,487 sector, the tower sector also grew by 320% 1500 1,237 Operators manage QoS to 970 1,115 4 from 100,000 in 2006 to reach 420,000 billion subscribers with non- 775 3 by 2016. The Indian telecom operators, 1000 contiguous spectrum 2 both own and manage the towers as well 2.3 2.5 500 2.1 2.2 1 as outsource the service to independent 1.8 1.9 Low ARPU tower operators. The tenancy ratio has 0 0 2015 2016 2017 2018F 2019F 2020F The ARPU per month in India is increased to almost 2 per tower135. Due to just $2 in comparison to the world emerging technologies and high adoption Cost Management Total Sites (Thousands) Tenancy Ratio for wireless network, the BTS sites have Telecom operators managed average of $10. Large subscriber also grown exponentially and had reached to cut costs by centralized base provides volume to survive in 1.1 million BTS sites by 2016. There is a operation, Outsourcing non- low ARPU market. Source: Deloitte's Telecom Tower report 2015 huge demand for telecom towers and BTS core activities like Network sites to provide high Quality of Service management, HR etc. (QoS) and manage better coverage. As Improves core business per a Deloitte study, the tenancy ratio is efficiency. forecasted to reach around 2.5 by 2020136. Source: Deloitte Analysis 88 89 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Growth drivers for the industry areas. Urban population looking for more enter the industry, normally by partnering Non-traditional services: Telecom advanced services and penetrating the with local service providers. Recently, major companies are slowly transforming the Figure 32: Growth drivers for the industry untapped rural areas. Indian software companies expanded traditional business models to adapt to their operations and delivery centers in the new generation of services. Operators High Demand Liberal Policy High Investment Skilled Workforce The telecom products and services export Africa, implementing low-cost models in are diversifying their business to different is expected to reach $10 billion (INR 620 strategically situated delivery centers to sectors like Machine-to-Machine (M2M), •• Affordable & innovative •• Relaxed FDI norms and •• Increasing FDI •• 2.8 million direct billion) by 2020. India's telecom services serve outsourcing customers in Europe Internet of Things (IoT), virtual reality, services reduced license fees employment •• Government initiatives exports currently stands around INR 12 and West Asia. Major ICT demand in Africa augmented reality, machine learning, 142 •• Young population and more •• Increasing number of govt •• 400,000 expected billion. South-East Asia, Latin America, emanates from South Africa, Ghana, and connected world, smart healthcare, •• Increasing M&A activity spending power initiative employment Africa, Middle East as well as North America Nigeria, Kenya, and Egypt. Many Indian education, infrastructure and ecommerce, •• INR 1.3 trillion Digital India have shown growing interest to choose ICT companies are expanding to countries etc. The presence of M2M and IoT can •• Smartphone adoption/ •• Spectrum sharing and •• Training platforms like initiative India as a source of telecom products and like Ethiopia, Uganda, and Malawi. The be seen almost everywhere from coffee Increasing online service trading TSSC, Skill India services. accelerated ICT requirements for emerging machines and smart wearables to large economies like Africa, rising urbanization organizations and cities due to the Source: Deloitte Analysis Consulting Services in emerging and spending power, and increase in the digitization drive. Indian IoT market is economies: western as well as Asian multinational expected to grow to $15 billion by 2020 Government initiatives •• eKranti: National e-Governance Plan 2.0 Potential for global expansion The African ICT sector is expected to corporations into different sectors like from $5.6 billion in 2016144 and the global The government initiatives such as Digital through its 44 Mission Mode Projects Africa and Latin America: The sector triple by 2025, to reach $80-95 billion143. manufacturing, telecom and natural market is expected to reach around $3 India, Skill India, Make in India and Start-up is underway to ensure ICT enablement has many opportunities for cooperation Indian telecom sector has been a resources, which demand IT support trillion by 2020.145 Similarly, the Indian M2M India are transforming socio-economic and electronic delivery of services. It with African countries as well as some case study in the global peers due to systems and infrastructure, provides market is expected to reach $35.16 billion development of India. The massive push spans sectors such as e-education, developing Latin American countries to ICT developments, new innovations, new opportunities for Indian telecom by 2020.146 According to Cisco figures, from government and huge investments e-healthcare, e-courts, police, insurance, share the ICT expertise, solution and experienced professionals and consulting service providers as well as ICT players in Internet of Everything is estimated to make India an attractive market for global income tax, property registration, application development, skill development services, etc. There is a strong presence the country. Overall, Indian companies’ create business value of up to $511 billion as well as local players. passports, pension, land records, road and innovation. of Indian telecom services in Africa and low-cost innovative business models have over the next decade in India.147 Many transport, municipalities, banking & Indian ICT companies enjoy a first mover been particularly successful in attracting innovative technology start-ups from India Digital India: Digital India provides a financial inclusion137. UK and US: The government initiatives like advantage in the continent. Though there is business from enterprises focused on and other parts of the world have started platform for telcos to invest in different Digital India, Smart Cities Mission and Make large presence, of Indian companies, there mobile technologies, e-governance, skill big investments in M2M and IoT platforms. •• Big data analytics for social change: areas such as communication, payment, in India has provided an attractive platform is still scope for mid-sized enterprises to development and social media. Big data analytics is a growing market in governance and digitization, etc. The for European and US companies to invest India and is expected to reach $16 billion saturating global telecom services sector in India. Other countries like Sweden, by 2025138. Telecom service providers is starting to leverage the INR 1.3 trillion France and Germany are starting to invest can leverage on the huge amount of Figure 33: Sector potential at 2020: Encouraging investments Digital India opportunity. This initiative as well. Handset manufacturers from the data like call drop records, etc. by storing has created high interest in global peers US and China are investing in India for and analyzing it to provide insights on and top communication and IT service manufacturing quality handsets at a low different government initiatives under providers. cost. Digital India. •• Digital payments: With a focus on 75%: 1.9 billion GDP: 48% Mobile MVNO: $34 billion •• Skill India: The Skill India initiative has South East Asian Nations: The developing New rural connected INR 1.4 trillion Broadband $4 billion operator moving towards less cash economy, the 249 training partners and 3,222 training nations can leverage on the experience internet devices sector revenue digital payment sector has initiated new centers to provide online and classroom of India in taking telecom services to the interfaces such as Aadhaar Pay, BHIM education platform for students. There remote corners of the country using cost •• 75%: Local •• Huge untapped •• 6.5%: GDP •• 688 million: •• Complete new •• Heavy investment app, UPI, etc. to enable mobile-based is massive growth in online education effective solutions and innovative business content demand market for foreign contribution Smartphone market for in infrastructure payments. Telecom sector can leverage for new users funding in public adoption MVNOs services in India and huge number of models. •• More direct •• More FDI these solutions by connecting the masses Wi-Fi, IoT and foreign universities are investing to •• More rural & indirect •• FDI in mobile •• Highly attractive expected and providing banking interfaces, security M2M provide vocational courses, certifications, Future prospects of the Industry and storage. investment employment technology & for foreign etc. Telecom services sector can facilitate Rising demand: The sector serves around •• Backed by Govt R&D investment •• Rise in FDI •• Socio-economic •• BharatNet: The massive infrastructure in providing online platform and robust 1.15 billion subscribers of which the lion’s initiatives push to connect 250,000 gram connectivity to Skill India initiative. share belongs to the urban India with tele- growth panchayats has been underway and density of 165 while rural tele-density is Source: The Mobile Economy: India 2016, GSMA there is huge telco involvement for Start-up India: The new Start-up India just 52.8.139 The Internet subscriber base infrastructure building, and providing policies encourage more tech start-ups to is expected to reach 730 million by 2020140 Common Services Centers (CSCs) in establish business in India and provides an while the total telecom subscriber base will villages. This is expected to generate attractive platform for foreign investment reach 1.4 billion during the same period141. massive direct and indirect employment and funding. India ranks third after the US Comparing the vast population of India opportunity in India. and the UK in terms of highest number of and the ratio of urban-rural population technology start-ups. which is 30:70, the potential is huge in both
90 91 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
11. Logistic
Conclusion and recommendations Ease of Doing Business Index 2016148. investment. However, there is still an urgent Ease of doing business: India ranks at The gradual removal of red tape policies need for regulatory reforms to attract more Industry profile 130 out of 189 countries in World Bank’s is making India an attractive market for foreign funds into the sector.
Subject Present Status Recommendations
TAX Retrospective taxation •• Simplification and Rationalization of tax regime will provide financial stability to the Indian telecom.
Spectrum Usage 3% •• Spectrum usage charges should be reduced as operators pay for spectrum at market Charges driven price
License fee Circle A – 10% AGR •• License fee should be nominal rates
Circle B - 8% AGR •• 13-14 % License and Spectrum fee discourages investors
Circle C – 6% AGR
USOF 5% •• Current USOF rate is too high. USOF funds should be utilized properly.
Spectrum Fragmented spectrum •• Policies on efficient utilization of spectrum
•• Road-map to provide contiguous spectrum in future
•• Utilize the unutilized spectrum India’s logistics industry is highly Right of Way Unclear •• Need of clear Right of Way framework for Infrastructure set-up. Uniform RoW Figure 34: Road, Rail, Shipping and Air FDI in India ($ million) fragmented. While there is a growing regulations across all states 538.3 presence of large pan-India players, the 474.2 458.7 industry is still dependent on multiple small 407.4 regional players. Even as manufacturing 352.2 R&D spending: India ranks at 51 in The telecom sector in India is destined come at the right time increasing the companies in India resort more to logistics University research ranking and at 36 for high growth and the aggressive attractiveness for higher investments. service outsourcing, it will take time to in government spending on R&D out of digital movement by the government With innovative business models, volume catch up with other economies such as 25.8 43.8 149 11.1 4.6 56 countries. India performs poorly in has accelerated the growth. The market market and high growth potential, India the US and China which have a reasonably patent application and filed just 45,568 provides exciting opportunities for is poised to be the global powerhouse of mature third-party logistics (3PL) market 2014 2015 2016 patents in 2015 in comparison to China’s both, the domestic and international telecom services and a hot destination for with large service providers managing 1.1 million patents. Innovation, and stakeholders. The growing demand investors. the entire supply chain across multiple Shiping Airports and Air Freight Roads & highways and Warehouses Engineering research and development of mobile technologies, data services, geographies through enhanced use of Source: DIPP (ER&D) need more investment from the mobility, smart technologies and appropriate technology, thereby reducing government and skill building should be governments’ push towards liberalized cost. Figure 35: Share of Logistics Sector in Gross Value Added (GVA) 2015-16 considered an area of priority. services for ease of doing business have India spends around 14.4% of its GDP on Storage logistics and transportation sector150 as 0.10 compared to 8.5% in the US, 18% in China and 20% in Singapore. Water Transport 0.10
Air Transport 0.20
Services Road Transport incidental to 3.20 transport 0.80
Railways 0.80
Source: MOSPI 92 93 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
According to the World Bank’s biennial Services (rail and road terminals, airports, In absolute terms, the annual investment in Railways commodities carried by Indian Railways measure of international supply chain ports, inland water terminals), Storage and railways, roads and other transport, would India is the fourth largest rail freight carrier are coal, iron ore, food grains, iron & steel, efficiency, called Logistics Performance Warehousing (cargo and containers) and increase to INR 3,800 billion ($70 billion) in the world and the largest passenger fertilizer, cement and Petroleum products. Index (LPI)151, India’s ranking has jumped Value-adding activity. during the 12th Plan, INR 6,300 billion ($110 carrier. Freight traffic has seen a consistent from 54 in 2014 to 35 in 2016, ahead billion) in the 13th Plan and rising to about increase during FY2009-10 to FY2015-16, of some advanced economies such as Transportation INR 14,000 billion ($250 billion) in the 15th Indian Railways earns nearly 70% of its growing at a CAGR 1.2%.160 Portugal and New Zealand152 153. Recent The transport system in India comprises Plan. revenue from the freight segment. Major FDI trends show that Indian logistics distinct modes such as road, rail transport, sector is gaining traction and is expected shipping and inland water transport, and Road to attract more FDI due to government air. The National Transport Development The road network of India comprises of Figure 37: Traffic on Indian Railways (million) policy initiatives in this sector.154 155 The Policy Committee (NTDPC) had estimated National Highways (NH), State Highways government has laid much emphasis on the modal share of rail and road in the total (SH), Other Public Works Departments 1,140,412 1,147,190 1,143,039 1,046,522 1,098,103 infrastructure development, with hefty freight traffic to be 35:65 in the 12th Five (OPWD) Roads, Rural Roads and Urban 978,508 903,465 investments on building new interstate Year Plan, 39:61 in the 13th, 45:55 in the Roads. It has reached 5.47 million km 682,612 highways and national waterways, 14th and 50:50 in the 15th Five Year Plan. in FY2015156 with National Highways 601,290 626,473 668,618 650,625 666,728 655,605 attracting FDI in railways, privatization of Total investment in transport was projected constituting nearly 1.8% of the total national ports, labour reforms and use of to increase from about 2.6% of GDP in the network in FY2015.157 158 The market size PPP model in infrastructure development. 11th Plan to 3.3% in the 12th Five Year Plan, of the road logistics industry, on basis of and stabilising at 3.7% in the 13th, 14th and freight rate and freight traffic growth–as Market segments 15th Plans. provided by the Ministry of Road Transport 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 The logistics industry is broadly divided in and Highways–is estimated to be $40,503 the following components: Transportation million in FY16, growing at CAGR of 9.2% Passenger kms. Net Tonne - kms (different modes of transport), Terminal over the past four years.159 Source: Indian Railways
Figure 36: Road Network in India (million km) Shipping (Coastal shipping, deep sea) December 2014. 873 vessels (70.1%) with 6.00 .15 India had a fleet strength of 1,246 vessels 1.50 million GRT are engaged in coastal with gross registered tonnage (GRT) of trade and the remaining 373 vessels 0.10 0.10 161 4.00 0.09 .10 10.51 million as on December 2015 , as (29.9%) with 9.01 million GRT are deployed 0.07 compared with fleet strength of 1,204 for overseas trade. .06 vessels with 10.31 million GRT as on 2.00 .05 3.37 4.68 5.40 5.47 5.23 0.00 .00 2000-01 2010-11 2013-14 2014-15 2015-16* Figure 38: Growth of Indian Shipping Fleet
846 873 Total National Highways 804 835 700 750
340 372 350 364 358 373 Source: MORTH
2010 2011 2012 2013 2014 2015 2015-16
Costal Overseas
Source: Indian Shipping
94 95 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Air During FY2016162, domestic freight traffic Airports April-December FY2016-17.166 The Air cargo supply chain includes airlines, increased at 6.08% while international India is the ninth largest civil aviation international passenger traffic increased customs, ground services, air cargo freight traffic increased at 7.55% as market in the world. In FY2017, civil aviation by 8.7% and domestic passenger traffic forwarders, domestic transportation, air compared with FY 2015.163 Rise in import sector of India witnessed a growth rate increased by 22.6% respectively, during cargo terminals, distribution centres and and exports is the key driver for growth in of around 20-25%. Total international April- December FY2016-17167 as compared integrated international express services freight traffic in India. and domestic aircraft movements have to the same period last year. centres. witnessed an increase of 14.7% during
Figure 39: Growth of Air Cargo Traffic in India (million tons) Figure 41: International and Domestic Passenger Traffic (million)
1.66 168.9 1.54 1.50 1.47 151.8 1.41 1.44 1.36 139.3 1.27 121.5 116.4 122.4 105.5 0.99 1.05 0.85 0.81 0.78 0.84 0.84 50.8 54.7 0.69 37.9 40.8 43.0 46.6 43.8
2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17*
2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17* International Domestic
Source: AAI Domestic International
Source: AAI
Inland Container Depots/Container Figure 42: ICD/CFS by States (2016) Freight Stations/ Private Freight Terminals (ICD/CFS/PFTs) Terminal logistics Telangana Others ICDs/CFSs act as hubs in the logistics Ports minor and intermediate ports. Cargo The Ministry of Shipping has set a target 2% 5% chain. The government and the private According to the Ministry of Shipping, traffic at major ports stood at 606.37 MMT capacity of over 3,130 MMT by 2020, driven Tamil Nadu sector have set up ICDs/CFSs for handling Madhya Pradesh around 95% of India's trading by volume in FY2016, increasing at a CAGR of 0.9% by participation from the private sector. 22% and temporary storage of containerized 3% and 70% by value is handled via maritime during FY11–17. Cargo traffic at non-major cargo.168 They are largely concentrated in transport. India has 12 major and 200 ports stood at 466.1 MT in FY15-16.164 165 Punjab the NCR region, Tamil Nadu, Maharashtra 3% and Gujarat and cater to maximum demand in the northern hinterland and the Figure 40: Cargo Traffic at Major and Non-major Ports (million tons) Rajasthan coastline running through the other parts Maharashtra 4% of India169 170. 19% 581.3 606.4 Karnataka 570.1 560.2 545.8 555.5 470.9 466.1 A large number of Private Freight Terminals 3% 417.0 387.9 are also being built on the rail network 353.7 315.4 West Bengal 315.4 in response to the Indian Railways (IR) 234.3 4% initiative. These are third party terminals Gujarat meant to handle rail traffic efficiently and Haryana 14% support the last mile connection through 5% 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17* improved warehousing, handling, and Uttar Pradesh transportation. Andhra Pradesh Kerala 6% Major Ports Non-major Ports 5% 5%
Source: Shipping.nic Source: NCFS
96 97 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Inland Water Terminals India has five declared National Terminal’s Gaighat & Kalughat on National The Inland Waterways Authority of India Waterways (NW I to V), out of which, three Waterways -1 under the Public-Private Industry/retail Liquid storage Agri-warehousing Cold stores (IWAI) is responsible for the development are operational with an annual cargo Partnership (PPP) model.172 warehousing and regulation of inland waterways in movement of ~7 MMT. Key industries Automotive, electronics Oil and gas, petroleum Agriculture and FMCG Dairy, meat and 171 India. India has five declared National & electrical, textiles, refineries, chemicals, poultry, sea-food, Waterways (NW I to V), out of which, three The IWAI has identified development pharmaceuticals, edible oil units fruits & vegetables, are operational with an annual cargo and operation of Kolkata Terminal’s GR machine and engineering, pharmaceuticals, movement of ~7 MMT. Jetty -I, GR Jetty-II & BISN and Patna fertilizers agriculture
Size/ Infrastructure Estimated to be worth As of 2014, India had 7,000 National Waterway Location Stretch (Kms) INR 80-85 billion (2013) cold stores, with a total capacity of 32 MT176. NW 1 Ganga-Bhagirathi-Hooghly river system from Allahabad to Haldia 1,620
NW 2 Brahmaputra river from Sadiya to Dhubri 891
NW 3 West Coast Canal from Kottappuram to Kollam along with Champakara 205 Growth drivers for the Industry trade warehousing (FTWZ), multimodal •• The Sagarmala Program focuses on logistics parks (MMLP) and container development along 4 thematic areas and Udyogmandal canals •• Agriculture based demand: India is one freight stations, multi-modal transport viz. port modernization & new port of the largest producer of vegetables and NW 4 Godavari & Krishna rivers & Canals between Kakinada and Puducherry 1,095 services, development, port connectivity, port led fruits in the world. It represents a vast Brahmani river & Mahanadi delta system along with East Coast Canal 623 industrialization and coastal community NW 5 opportunity for logistics and cold chain •• Specialised services: Emergence of development. players to capture the untapped potential specialised services, such as liquid in the market. logistics, temperature controlled logistics •• The Coastal Economic Zones (CEZ) or cold chain and reverse logistics. will lead port-led development through •• Increasing focus on third party logistics Trans-shipment Hubs Storage and Warehousing The total capacity of organised warehouses coastal economic zones (CEZs) in (3PL): The concept of 3P Logistics is still India’s first trans-shipment hub, Storage and Warehousing infrastructure in India is 126.96 million tons. About 80 to Government initiatives eight coastal states with balanced at a nascent stage in India, but provides International Container Transhipment is created to deal with both cargo and 85% of organised warehousing sector is ecosystem, large contiguous land, growth opportunities for organised •• Make in India: Government’s Make Terminal (ICTT) built at Vallarpadam, containers: Industry/Retail, Liquid cargo controlled by Government and PSUs. The access to urbanisation and supporting players. Indian firms are looking at new in India scheme to enhance the Cochin handles mother container ships (Crude oil, Petroleum products, Chemicals, private sector has only 18.97 million tons. infrastructure.180 logistics capabilities and more complex manufacturing sector in India will drive of 8,000+ Twenty Feet Equivalent Units Edible Oils etc.), Agricultural commodities About 30% of the warehousing capacity is solutions from their 3PL partners in order logistics infrastructure as manufacturing •• Multimodal Logistics Parks (MMLP) (TEUs) capacities. It has substantially and, Cold Storage for perishable cargo held by unorganised small godown players to focus back on their core business. sector spends about 2.2% of its revenue has been proposed to set up at 15 reduced the need for transshipment of and stack areas for storage of loaded and who lack scale and quality.174 175 3PL provides the ability to bring down on logistics. locations in Maharashtra, Punjab, Gujarat, Indian containers through ports of other empty containers. conventional logistics costs and handle Rajasthan, Tamil Nadu, Karnataka and countries, thereby resulting in reduced •• Bharatmala and SetuBharatam have more complicated tasks. Telangana.181 182 183 transportation cost and time.173 been announced to build stronger •• Rise of e-commerce market in India: network of National Highways. •• Union Budget 2017: The total allocation Robust growth in e-commerce market is National Highways Interconnectivity for National Highways has been likely to drive growth of logistic business Improvement Project ensures safe, fast increased from INR 579.76 billion ($8.8 Figure 43: Warehousing Capacity in India 2016 in India. Major e-commerce retailers and all weather movement of traffic on billion) in 2016-17 to INR 649 billion ($9.9 have moved towards a marketplace National Highways. Logistics Efficiency billion) in 2017-18. The outlay for Indian 45.28 35.92 model where a third-party logistics (3PL) Enhancement Programme (LEEP) Railways is INR 1,310 billion ($20.06 company is assigned with the task of aims to enhance freight transportation billion) vis-à-vis INR 1,210 billion ($18.5 18.97 15.07 picking the product directly from the by improving cost, time, tracking and billion) in 2016-17. 11.72 vendor and delivering it to the customer. transferability. •• The government envisions airport •• Goods and Service Tax (GST): •• In Railways, the Eastern Dedicated infrastructure investment of INR 744.42 Food Corporation Central Warehousing State Warehousing Cooperative Private Sector Implementation of GST is expected to Freight Corridor (1,856 km) and Western billion ($11,400 million) under the 12th of India (FCI) Corporation (CWC) Corporation (SWCs) Sector lead to consolidation of warehouses, Dedicated Freight Corridor (1,504 km) Five Year Plan (2012-17). It plans to invest and State Agencies improved efficiencies due to reduction of projects are under implementation. INR 119.5 billion ($1,830 million) for trade barriers, revaluation, sourcing and It will strengthen India’s present rail development of airport infrastructure Source: WDRA manufacturing decisions.177 infrastructure to carry very high levels of along with aviation navigation services by freight leading to a reduction in cost of 2026. •• Infrastructure: Development of transportation and inventory.178 179 infrastructure such as dedicated freight
corridors, logistics parks, growth in free-
98 99 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
12. Retail & E-commerce
Future prospects for the industry Potential for global expansion The logistics industry is expected to grow Industry profile •• Major logistics players are expanding at 8.6% annually during 2015-2020 and be their global presence across Latin worth $307 billion by 2020. America (Brazil, Mexico and Argentina), •• Consolidation of warehouses: Logistics Africa (Nigeria), and Asia (Indonesia, players are looking at consolidation China, Hong Kong and Singapore) via joint of their warehouses to set up larger ventures and global mergers. Several integrated facilities, increasing supply‐ large players have also set up import chain efficiencies. export trading divisions to focus on international trade. •• Emergence of Multimodal Logistics Parks (MMLP): Logistics companies •• Expanding presence across the critical are setting up MMLP connected with value chain in logistics, Indian players are rail network, container yards and expected to become major beneficiaries warehousing (with value-added services of global trade. such as cross docking, inventory management, packaging and labelling). Conclusion and recommendations
•• Development of coastal shipping: •• Expansion of road infrastructure and Coastal shipping or use of water as a focus on last-mile roads connecting all mode of transportation is much safer, roads and port terminals to warehouses economical, and a less polluting mode and distribution centres. of transport. It will provide increased The Indian retail industry has emerged as e-commerce markets. Indian e-commerce to major improvements in the telecom •• The development of multimodal logistic one of the most dynamic and fast-paced sales are expected to reach $100 billion by infrastructure. With 3G and 4G services opportunities in container-feeder parks will improve the entire logistics industries due to the entry of several 2020 from $30 billion in FY2016. making way into India along with declining services. Coastal shipping can carry large network in India and lead to efficient new players. It accounts for over 10% of data tariffs, spend on internet data parcel sizes and provides opportunity operations. the country’s GDP and around 8% of the E-Commerce has transformed the way is growing significantly. Government for consolidation of loads and over- employment. India is the world’s 5th largest business is done in India. The dynamic schemes such as Optical Fibre Network can dimensional cargo. •• Development of new IT-enabled global destination in the retail space. pace of the Digital age in India has forced all significantly increase internet penetration technological systems will lead to •• Increase in containerisation of major companies to take steps to cater to in the rural communities as well as provide improved operations, enable high-level cargo: Private and government ports The aggregate revenue of the top 250 the consumer expectations. A prerequisite a means to e-Commerce companies to tap tracking as well as help in removing are focusing on container cargo. retail players globally was $4.31 trillion in to success in the e-commerce industry is to the huge market potential there. inefficiencies. Containerisation of cargo has brought a 2015. The global e-Commerce market was create innovative, sustainable, consistent significant change in the organisation of •• Focus should also be laid on introducing estimated at $1.4 trillion in 2016. and seamless shopping experience within Smartphones are demonstrating ways and port terminal services, resulting in higher green logistics to help improve the all facets of consumers. means to exhibit massive growth in the demand for sophisticated handling environmental footprint. India’s retail market is expected to nearly coming years. The widespread adoption equipment, inland logistics capabilities, double to $1 trillion by 2020 from $600 The growth of the e-Commerce industry of smartphones is being propelled by •• India faces increased requirement and service efficiencies.184 billion in 2015, driven by income growth, has been triggered by increasing internet several factors such as high competition for logistical skills, with demand urbanisation and attitudinal shifts. While and smartphone penetration in not leading to low prices, prevalence of internet •• IT-enabled logistics: Indian companies for warehouse managers, logistics the overall retail market is expected to only metro cities but also in tier two and enabled services and ease of accessibility are focusing on IT-enabled logistics, such managers, coastal seafarers and IT grow at 12% per annum, modern trade tier three cities of India. Mobile devices to content. as the development of logistics planning services expected to rise in future. would expand twice as fast at 20% per are further expected to drive sales via and co-ordination systems to contribute CII and National Skill Development annum and traditional trade at 10%. e-Commerce platforms in future. The leading e-Commerce companies state towards development of 3PL services.185 Corporation, has set up a Logistics Sector that almost 70-75% of their online traffic Skill Council to address these issues India’s Business to Business (B2B) Emerging trends comes from mobile phones and thus •• Intelligent transport systems: India through a structured skill development e-commerce market is expected to reach Ongoing innovation: All the existing higher revenues are coming from mobile represents a huge scope for intelligent program. $700 billion by 2020 whereas the Business e-Commerce companies aim to effuse applications. transport systems (ITS) that would to Consumer (B2C) e-commerce market a strong vision to build Exponential provide real time monitoring of trucks •• Digitising warehousing operations would is expected to reach $102 billion by 2020. Organisations whose impact is huge. New payment solutions: Cash-on-Delivery and trains through GPS and integrate the lead to strengthening of supply chain Online retail is expected to be at par with Exponential Organizations are led by (CoD) remains a popular mode of payment same into one system. operations, it will also considerably lower the physical stores in the next five years. innovative imperatives and enablers such for Indian e-Commerce transactions. Cash the costs of logistics operations. as digitisation, technology enablement, transactions result in high administration India is expected to become the world’s analytics, cloud-based solutions and costs even for the e-Commerce companies fastest growing e-commerce market, mobilisation of services. which reduces their margins. Hence, new driven by robust investment in the sector digital payment solutions are evolving to and rapid increase in the number of Internet penetration: The e-Commerce address these challenges. internet users. Various agencies have industry in India has been propelled high expectations about growth of Indian by the rise in internet penetration due 100 101 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Demonetisation has played a key role in India Post with its extensive reach of •• The Government has approved a Earlier this year, the government began Online retailers continue promotional Conclusions and recommendations enhancing new payment solutions. Further, people and post offices across the country proposal to scrap the distinctions among to pay increased salaries and benefits prices in the market, offering a significant As the consumers journey to purchase the Indian government’s initiative to extend has set-up dedicated processing centres different types of overseas investments to central-government employees and boost to e-retailing in consumer durable becomes increasingly facilitated by banking facilities to its previously unbanked to handle last-mile deliveries of the by shifting to a single composite limit, pensioners, back dated to January. sector. Options like cash-on-delivery enabling technologies, companies need to citizens through the ‘Jan Dhan Yojna’ e-Commerce companies. which means portfolio investment up to and manufacturers’ warranty add fuel to engage and influence consumers at every scheme has added significant number 49% will not require government approval On 8 November 2016, India demonetized this rage. Cash-on-delivery is the most stage of the process, from research to the of debit cards thereby providing these Even in the B2B e-Commerce space, nor will it have to comply with sectoral its high-value currency notes to curb “black preferred payment option with over 30% of final purchase decision. It’s imperative to customers access to electronic payments. logistics companies are beginning to conditions as long as it does not result in money” (undeclared income). This has buyers opting for it in India. The computer target the right consumer with the right There has been launch of electronic wallets partner with online truck aggregators a transfer of ownership and/or control of caused a definite shift to formal banking peripherals, cameras and mobiles, and message in the right moment through and also digital payment products from and freight marketplaces such as Freight Indian entities to foreigners. As a result, and electronic modes of payment. lifestyle segments account for a majority of whatever device they are using. Retail traditional banks for faster check-in and Tiger to build trust and accelerate intercity foreign investments are expected to total purchases and ecommerce companies should check-out of e-Commerce transactions to freight transactions. Such aggregators are increase, especially in the attractive retail India expects to replace its indirect tax develop solutions to support the latest ease the payment process in e-Commerce. increasingly poised to become leading B2B sector. structure with an efficient goods and It is imperative for a retailer to have a trends in brand personalization. This has marketplaces for the logistics industry in services tax. Items such as consumer strong distribution and logistics network implications for the supply chain and the •• Just recently the announcement of The launch of Unified Payments Interface India. electronics, white goods and beauty to succeed in this sector. Players follow a talent needed to manage the process in abolishment of Foreign Investment (UPI) by Reserve Bank of India is aimed products could become cheaper, while distribution network that suits them the a more complex environment. For larger Promotion Board (FIPB) is a bold step to transform the mobile banking. UPI is Government initiatives others, like textiles, edible oil and cheap best. enterprises that tend to be structured taken by the Government to boost expected to benefit the e-Commerce The Government of India has taken various footwear, could become more expensive. around traditional lines of business, this will foreign investments into India. industry as well by reducing the number initiatives to improve the retail industry in An additional tax will apply on demerit and Companies are now adopting innovative likely mean a learning curve. of failed e-Commerce transactions India. luxury goods such as cigarettes, aerated marketing strategies for their business. Future prospects of the Industry due to complicated transaction flows drinks and high-end cars, though effective Certain players in this sector are focused Companies should modify their traditional •• Government of India has allowed E-commerce is expanding steadily in in the current payment systems. The rates will probably not rise. on a particular segment. Some of the large marketing strategies and tactics, 100% FDI in online retail of goods and the country. Customers have the ever implementation of UPI will enable the retailers exclusively operates hypermarkets developing contemporary messages services through the automatic route, increasing choice of products at the lowest e-Commerce delivery staff to collect money India’s youthful population is becoming and home retailing businesses. They focus delivered through cutting-edge, digital thereby providing clarity on the existing rates. E-commerce is probably creating the electronically for even CoD transactions. brand- and fashion-conscious, especially on maintaining its competitive advantage platforms in light of the evolving drivers businesses of e-commerce companies biggest revolution in the retail industry, For early adaptability, several e-Commerce in the big cities, where increasingly affluent and gaining benefits of scale through of consumer purchase and consumers’ operating in India. The government has and this trend would continue in the companies have already started building households are acquiring a taste for luxury focusing on efficiency and productivity continued immersion in the digital world. years to come. Retailers should leverage applications that will facilitate mobile also signed pacts worth INR 15 billion items. Many global brands are targeting the digital retail channels (e-commerce), payments on UPI. However, the challenge ($222.36 million) in a wide range of this segment. Retailers are opting for many channel to Due to the shifting composition of the which would enable them to spend less will be to balance safety, integration and sectors including retail and steel and maximise sales, provide convenience and consumer population and the growing money on real estate while reaching out to mass-adoption. gas. FDI equity inflows in retail trading E-commerce is expected to be the next for enhanced productivity. Omni-channel influence of the young consumers, retail more customers in tier-2 and tier-3 cities. were $936 million (April 2000–December major area supporting retail growth in retailing is being adopted by many retailers and ecommerce companies will need to Both organised and unorganised retail Ancillary sectors: Customers are getting 2016). India. With growth in the e-commerce in India. develop strategies to both understand companies have to work together to ensure accustomed to next-day delivery of industry, online retail is estimated to reach and optimize innovation and marketing •• The Ministry of Urban Development has better prospects for the overall retail products. Due to challenges in terms of $70 billion by 2020 from $3 billion in 2014. Retailers benefit if consumers perceive communications that address these trends. come out with a Smart National Common industry, while generating new benefits for handling huge volumes of delivery, return The value of online retail purchases made their store brands to have consistent Mobility Card (NCMC) model to enable their customers. orders and higher standards of customer by consumers in India is projected to cross and comparable quality and availability seamless travel by metros and other service, the industry has seen rise of $100 million by 2017. in relation to branded products. For this, transport systems across the country, as Nevertheless, the long-term outlook for several third-party logistics companies retailers are providing more assortments well as retail purchases. the industry is positive, supported by (3PLs) who handle last-mile deliveries and The key drivers of online retail are a young for private level brands to compete rising incomes, favourable demographics, reach the hinterlands of the country mainly •• Implementation of GST is expected to population aided by easier access to with supplier's brand. New product entry of foreign players, and increasing in tier 2 and 3 cities. enable easier movement of goods across credit and payment options, increasing development, aggressive retail mix and urbanisation. the country, thereby improving retail internet penetration and speed, 24-hour everyday low pricing strategy help to get Logistics lies at the heart of e-Commerce operations for pan-India retailers. accessibility, and convenient and secured edge over supplier's brand. It is expected that India will retain its and a large number of third-party logistics transactions. •• With the allowance of 100% FDI in single current position as the third-largest retail service providers have entered this space brand retail, investor sentiment will market in Asia and the fourth-largest in to provide customised last-mile deliveries. the world (after the US, China and Japan) However, the increasing logistics costs get further push. Rapid emergence of until 2018, after which it is likely to overtake associated especially with return orders organised retail outlets, such as mega Japan. Retail sales grew by 6.5% in volume requires innovative and analytical driven malls and hypermarkets, are augmenting terms in 2015, and growth is forecast models that will increase operational the growth of organised retail in the to accelerate in 2016 given improved efficiencies in Reverse logistics. This will country. Retailers have made dynamic economic growth and rural demand. The help e-Commerce companies to drive changes in supply chain and logistics Economist Intelligence Unit expects retail towards profitability. for competitive advantage and meeting sales to accelerate sharply during 2017-20, consumer demands. rising to $1.70 trillion by 2021.
102 103 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
13. Environmental Service
respective sectors. A few known players in backing waste management startups which 40% will come from the Government Industry profile the segment include Attero Recycling, E.coli in India, among them are Saahas Waste of India (GoI), 21% from state governments Waste Management (e-waste segment), Management, Karma Recycling, and and 39% from the private sector).194 Ramky Enviro, Jindal Group (MSW sector), MobiTrash. Further, the government has allocated ~$3 Synergy Waste Management, and Earth billion for the Namami Gange Programme, Sense Recycle Work (bio-medical waste), According to India’s Planning Commission, towards cleaning and rejuvenation of the etc. Some other known players operating the total capital investment required to Ganga river. in Indian market include BASIX Municipal upgrade India’s water infrastructure will Waste Venture, Concept Biotech, Eco Birdd require an investment of $126 billion There are various initiatives taken by Recycling, EcoCentric Management, UL over the next 20 years. The Planning private companies offering solutions for Trust Solutions, UPL Environmental and Commission has also estimated that India’s waste management: Vulcan Waste Management. A growing municipal solid waste management will number of angel investors are also require an investment of $3.4 billion (of
•• SPML Enviro, an integrated environment solution provider arm of Subhash Projects and Marketing Limited (SPML) provides solution in relation to collection, transportation & disposal of municipal / hazardous waste, segregation and recycling of municipal waste, construction & management of sanitary landfill, construction & operation of compost plant and waste to energy plant at the Delhi airport and Hyderabad Airport. The company has partnered with US-based PEAT International, a waste-to-resources company for the treatment and recycling of a range of waste feedstocks, including industrial, universal, and medical waste.
According to the Global Water Market The following statistics provide a snapshot These challenges present a large market •• HCL Info System has created the online process of e-waste recycling request registration, where customers (individual or corporate) 2014, India is one of the top four markets of the critical environmental challenge that for companies in the environment can register their requests for disposal of their e-waste. in global water treatment, along with India is facing at present: technologies space. As per the US •• ITC Ltd. has chosen environmental & waste management as one of the areas for their CSR efforts, including recovery of dry Brazil, China and United States. Population Department of Commerce and •• According to the Central Pollution Control recyclable waste going to landfills, creating sustainable livelihoods for waste collectors, and participation in Swachh Bharat Mission. explosion, coupled with rapid urbanization International Trade Administration Board (CPCB) of India, of the 62 million and industrialization, has resulted in (ITA) Environmental Technologies Top •• Recently, a Pune-based waste-to-energy solutions providing company Aspirify Energy acquired G.E.T. Water Solutions, a tons of solid municipal waste generated increased generation of solid wastes in Markets Report, India’s environmental water-treatment-solutions firm to expand its capabilities in the liquid waste management segment, with the aim of leveraging each year, only 70% is collected and a urban as well as rural areas of the country. technologies market, including goods and opportunities created by Swachh Bharat Mission. mere 23% is processed or treated186. Further, with increasing political thrust and services, was valued at $16.3 billion in Seven states in the country (Maharashtra, public awareness, solid waste management 2016188. Municipal solid waste (MSW) is a Uttar Pradesh, Tamil Nadu, Andhra is starting to receive due attention. promising sub-sector, expected to grow Pradesh, Gujarat, Karnataka, and Delhi) at 8-10% p.a., during 2015-2020, owing produce close to 45% of MSW187. Regulatory landscape paper, metal, wood, etc.) and domestic and water supply for urban transformation. The waste management market comprises to the government’s plans for setting up Municipal solid waste: The MSW Rules hazardous (diapers, napkins, mosquito Further, clean water supply, sanitation, of various sub-segments across solid waste •• India generates about 4.2 million tons of 500 engineered sanitary landfills facilities, were formulated in 2000, which defined repellents, etc.) and hand it over to and efficient waste management are (urban, industrial, agricultural, electronic, industrial waste per annum (CPCB). provision for mechanized sweeping, and the roles of municipal corporations, state authorized rag-pickers/waste collectors/ the important components of the bio-medical and radioactive), and liquid new emission standards for incineration. •• Of the three million small-scale governments, and the pollution control local bodies. government’s Smart Cities Mission. waste (waste generated from washing, Tremendous opportunities also exist in the enterprises, most are not using any boards in management of solid waste. flushing or manufacturing processes of industrial water & wastewater systems, as pollution control equipment (CPCB).188 These rules were revised in 2016 wherein Sanitation and environmental cleanliness: Electronic waste: In 2012, E-waste industries, sewerage). In addition, gaseous companies in power, food & beverages, rules will be applicable beyond municipal The government’s Swachh Bharat Mission (management and handling) Rules 2011 waste (released in the form of gases from •• A 2015 WHO study revealed that in India, pharmaceutical, textile industries demand areas, to include urban agglomerations, focuses on eliminating open defecation, made it mandatory for all electronic goods automobiles, factories or burning of fossil the number of rivers defined as ‘polluted’ advanced treatment technologies such notified industrial townships, areas under collection and scientific disposal/reuse/ manufacturers to ensure that producers fuels) also adds on to the air pollution load doubled in the last five years. as reverse osmosis membranes, ion the control of Indian Railways, airports, recycling of municipal solid waste, and collect their ‘end-of-life’ products from opening up air quality monitoring and exchange, and electro dialysis. As per the •• According to CPCB, India has an airbase, port and harbour, defence strengthening of urban local bodies to consumers (industrial and individuals) purification market. The nature of waste ITA report, the industrial water & waste installed capacity to treat only 30% of its establishments, special economic zones, design, execute and operate systems. and recycle them in environmentally safe such as hazardous and non-hazardous water systems sub-sector is anticipated to household waste, the remaining is either and State and Central government manner. These rules were made more wastes, add another important dimension grow 13-15% p.a. during 2015-2020.190 released into the open drains or dumped organizations. The new rules also place Urban waste management: As part of stringent in 2016, setting targets for of treatment and technology. These various on the ground, leading to water pollution emphasis on integration of informal sector Atal Mission for Rejuvenation and Urban producers for collection of such waste, types of waste (Municipal, industrial, Owing to the varied nature of each and related health issues. with the formal sector, and extend the Transformation (AMRUT), the government making them responsible for handing over e-waste, bio-medical waste) are governed category of waste (MSW, bio-medical, responsibility of generators to segregate focusses on establishing infrastructure that e-waste to recyclers. by different laws and policies under various e-waste, etc.), requiring different waste as wet (biodegradable), dry (plastic, could ensure adequate sewerage networks departments. technologies and disposal methods, companies have developed expertise in
104 105 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Table 3: Applicable rules pertaining to various waste segments, including hazardous and bio-medical waste are mentioned consumers frequently buy new phones •• International collaborations: Global collection systems like specific bins in the table below, along with various government initiatives. to get access to the latest technology.191 players can partner with both Indian which would eventually lead to BMW Telecom equipment accounts for 12% private players as well as the government treatment systems. Some of the emerging Year Policy/Initiatives of e-waste, the majority (70%) being in PPP to create integrated solutions in opportunities in the sector are: accounted by computer equipment. various waste management areas like 1989 The Hazardous Waste (Management & Handling) Rules •• Participation in Waste-to-Energy (WtE) Since a meagre 1.5% of total e-waste feasibility study, design and planning, projects: According to the Ministry of 1998 Bio-medical Waste Handling Rules, 1998 gets recycled in India due to inadequate technical consultations, waste treatment New and Renewable Energy (MNRE), if the infrastructure, tremendous opportunities technologies, restructuring of existing 2000 MSW (Management & Handling) Rules, 2000 current 62 million tons of MSW produced exist for manufacturers and other players waste collection systems, etc. in India is dumped without treatment, 2006 Strategy and action plan-use of compost in cities to participate in this space. •• International investors: Various fiscal the country would need 340,000 cubic 2008 National Urban Sanitation Policy •• Stricter norms for industries: The incentives offered by the Government, meters of landfill space every day. 2009 Draft document on E-waste handling Rules governments is placing emphasis can make the sector more attractive Considering that this figure could go up on better waste management and for the foreign investors. These include to 114 million tons by 2041, there is an 2010 National Mission on Sustainable Habitat stringent requirements on industries 100% tax deductions on gains and urgent need to look for alternative ways 2011 Plastic Waste Rules, 2011 for compliance with environmental laws. profits to companies that handle waste to utilize this waste. One of the solutions For instance, in 2016, GoI notified new management projects; electricity taxes to this issue is converting this waste 2012 E-waste Rules, 2011 hazardous waste management rules and excise duty with exemptions and into energy. As per MNRE, there exists 2013 Draft Municipal Solid Waste Rules 2013 wherein it banned the import of solid concessions and waiver of customs duty a potential to generate about 1700 MW plastic waste including PET bottles to on certain material imports meant for of power from urban waste (1500 from 2014 Draft Manual on Municipal Solid Waste Management and Handling ensure that existing plastic waste in the generating renewable energy. MSW and 225 MW from sewage) and Swachh Bharat Mission country is used efficiently, for industrial about 1300 MW from industrial waste. 2014 •• Opportunities at collection of waste: purposes.192 Per IREDA (Indian Renewable Energy Atal Mission for Rejuvenation and Urban Transformation (AMRUT) Collection of waste has significant 2015 Development Agency) estimates, so employment generation potential. Rough 2016 Solid Waste Management Rules (SWM) 2016, Plastic Waste Management Rules 2016, e-waste (Management) Rules Role of Environmental Services as key far India has realized only 2% of its WtE estimates peg the number of informal 2016, Bio-Medical Waste Management Rules 2016, Construction and Demolition Waste Management Rules 2016, services sector potential. To promote uptake, the MNRE waste scavengers at around 39 million.192 Hazardous and Other Wastes (Management and Transboundary Movement) Rules 2016 The government allows 100% foreign direct is also providing subsidies and incentives investment under the automatic route for WtE projects. As per the Ministry of Future prospects for the industry Source: Industrial and Urban waste management in India, The Energy and Resources Institute, 2015 for urban infrastructure areas including Urban Development (MoUD), about 21 Some of the international good practices waste management subject to relevant WtE plants are under tendering stage have a replication potential in India’s waste rules and regulations. This opens various across various states. Several Indian management landscape. For instance, opportunities for foreign players and players have also entered this space, Growth drivers for the industry •• Rate of industrialization: The policy push Bharat Mission (Clean India Mission) and in the Netherlands, Austria and UK, the investors to collaborate with Indian players and are offering services to international Growing urbanization and industrialization for industrialization through liberalization Atal Mission for Rejuvenation and Urban bio-degradable waste management and explore the nascent Indian waste clients as well. are two major reasons that are increasing of FDI norms, and campaigns such as Transformation (AMRUT) place emphasis (BMW) systems focus on building separate pressure on environment, and will form the Make in India have resulted in various on better management of industrial and management industry. growth drivers for the waste management companies entering India to set up household waste. Swachh Bharat Mission industry in India. their manufacturing bases. The present has put emphasis on 100% collection treatment capacity for industrial and scientific processing/disposal/reuse/ Company Operating regions •• Population growth and urbanization: wastewater is 1/6th (142 MLD) of total recycling of municipal solid waste. The The 2011 census reported that of the 1.2 VA Tech Wabag Europe, Africa, Asia, Middle East, Latin America generation.192 government is focusing on providing all billion population in India, 377.1 million support to municipal bodies to come up UPL Environmental Engineers Pvt Ltd Germany, UK, Japan reside in urban areas. This figure is •• Impact on health: Increasing awareness with design, execution and operation expected to rise to 600 million by 2031.189 of adverse health impacts such as Ramky Enviro Engineers Ltd Singapore, Indonesia, Vietnam, Thailand, Middle East and North Africa plans for waste disposal systems. The rapid growth of urban dwellers respiratory concerns, and cardiovascular There is also an emphasis on private- Mailhem Engineers Pvt Ltd Pakistan, Nepal, Bangladesh is anticipated to further burden the diseases, among others, because of Air sector participation and public-private country’s waste management resources. pollution and water pollution (caused by Attero Recycling Plans to expand overseas partnership (PPP) in capital expenditure, As per The Energy and Resources unsanitary disposal of waste) has further operation and maintenance of solid Institute (TERI)’s 2015 report, by 2041, 114 highlighted the need to manage waste. waste. The Sustainable Habitat Mission million tons of municipal solid waste will •• Thrust on urban waste management also has an important component on be generated in India every year, resulting through recent initiatives: The solid waste management. in per capita waste generation of 0.53 government is driving better urban kg/day (rising from 0.36 kg/day in 2011), •• Upsurge in technology adoption: A waste management practices through necessitating better waste management study by ASSOCHAM revealed that of 1 awareness generation, policy thrust and technologies.190 billion phones in circulation in India, close programmatic interventions. Swachh to 25% end up in e-waste annually as
106 107 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
14. Energy Service
•• Opportunities under Smart Cities Mission: Efficient waste management Industry profile is one of the important areas identified under the Smart Cities Mission as well. For instance, under the smart city development project, the Agra Municipal Corporation has formulated a plan wherein it will install 293,000 hi-tech dustbins which will be RFID-tagged.193 These bins will be tracked through GPS-enabled garbage collection vehicles to ensure timely unloading of waste material. Such innovative models can be replicated in other cities as well.
•• Opportunities under Swachh Bharat Mission: The government targets to construct 6.6 million toilets in urban India, and over 100 million toilets in rural India by 2019, with an outlay of INR 620 billion (~$ 9.3 billion) and INR 1340 billion (~$20 billion), respectively. This will result India is the third largest energy consumer in opportunities for health and hygiene Renewables in the world. companies, ceramic companies, and Hydro-electric 2.2% construction companies. 4.0% Its primary energy consumption rose by Nuclear •• Participation in e-waste management: 5.2% as compared to global growth of 1.2% India is the fifth largest e-waste producer 1% in 2015. Coal remains the dominant Natural gas in the world, generating 1.8 million tons fuel, accounting for 58% of India’s primary 6.5% of e-waste each year, which is expected energy consumption. India’s energy to rise to 5.2 million tons by 2030. Over intensity (the amount of energy required 95% of e-waste is collected by the per unit of GDP) declined by 2% in 2015, unorganized sector, leaving ample space faster than the 10-year average of -1.4%.194 for private players to enter the market. Oil and gas sector Conclusion and recommendations Oil Coal Waste management presents enormous •• India has 26 sedimentary basins covering 27.9% 58.1% opportunities in India as it brings a unique an area of 3.14 million sq. km. (44% on situation wherein issues of service quality land and 56% offshore). and waste quantity need to be handled •• India imports over 81% of its crude oil together. The government has made waste requirements195 , and meets 45.7% of its management a priority under several of gas requirements through imports. its initiatives including Swachh Bharat
Mission, Smart Cities Mission, AMRUT, and Source: BP Statistical Review 2015 National Mission for Sustainable Habitat. The on-ground implementation of these plans will require a vast number of players in the market. India certainly requires newer delivery models, more sophisticated technology, newer designs, and better implementation practices to manage its waste, which can result in tremendous opportunities for investors and private firms.
108 109 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Table 4: Exploration and Production
Reserves (FY2015) Production Remarks Sector Current Status
Crude Oil Proved oil reserves of 0.8 41.2 MMT (FY2015) India has proved oil reserves-to-production (R/P) of 18, as Refining •• India has 23 refineries, 18 in the PSU Sector, 3 in the private sector and 2 in joint venture. Thousand million tonnes (TMT) compared to world R/P ratio of 50.7 •• Domestic installed refinery capacity: 230.1 MMTPA (FY2016) Natural Gas Proved gas reserves of 29.2 BCM (FY2015) India has proved gas reserves-to-production (R/P) of 50.9, •• Total refinery crude throughput: 232.86 MMT 52.6 Trillion Cubic Feet (TCF) as compared to world R/P ratio of 52.8 •• Refinery capacity utilization: 108.2% Coal Bed Methane Prognosticated CBM resources 367.5 MMSCM (Nov Great Eastern Energy Corporation and Essar Oil have (CBM) of about 92 TCF (2,600 BCM) in 2016) CBM-gas producing blocks in Raniganj, West Bengal. Petroleum Products •• Production: 231.9 MMT (FY2016) 12 states of India196 •• Consumption: 184.67 MMT (FY2016) Shale Gas & Oil Recoverable shale gas resources Oil and Natural Gas Corporation Limited (ONGC) has identified 17 potential shale •• High Speed Diesel (HSD) accounted for the largest share of production (47%) in the Indian refineries, followed of about 96 TCF oil and gas sites along the eastern and western coasts of India.197 by MS (Motor Spirit) at 17%. Gas Hydrates 933 TCF (Hydrate Energy Launched National Gas Hydrate Program (NGHP), along with the Ministry of Retail Outlets •• As of October 2016, total of 57,393 retail outlets, 323 oil terminals/depots, 188 LPG Bottling plants, 18,214 International)198 Petroleum and Natural Gas (MoPNG), government institutes and Public Sector LPG distributorships and 6,544 SKO/LDO Agencies. Undertaking (PSU) companies199 200 •• Indian Oil owns the maximum number of retail outlets in the country (about 44.7%), followed by HPCL (24.4%) and BPCL (24%); private firms own the remaining.
Growth drivers for the sector •• Focus on manufacturing through “Make Fields Policy, 67 Discovered Small Fields City Gas Distribution •• CGD sector comprises of Compressed Natural Gas (CNG) and Piped Natural Gas (PNG). As part of International Energy Outlook in India” initiative – The government have been offered in 46 Contract areas (CGD) •• As of Sep 2016, India had 20 CNG companies operating about 1,167 CNG stations across 12 states. As of April 2016, EIA projects that India and China will aims to increase manufacturing sector through the new Revenue Sharing 2016, the total number of PNG connections stood at 31,63,588. account for about half of global energy contribution from around 17% of GDP to Model.204 205 206 demand growth through 2040, with India's 25% by 2022.203 •• In November 2016, the MoPNG announced eighth round of CGD bidding covering 8 geographical areas in •• Increase in E&P spend - Oil & Gas players energy demand growing at 3.2% per year. Haryana, Goa, Puducherry, UP and Maharashtra.207 •• Reduce import dependency - The Hon’ble including national oil companies have As per BP Energy Outlook 2016, India's Prime Minister of India had outlined the planned significant investments to Strategic Reserves •• The government will set up two strategic oil storages at Chandikhol (Orissa), Bikaner (Rajasthan) with a energy consumption is projected to grow at vision to reduce import dependency to increase oil and gas output from existing combined storage capacity of 10 MMT to enhance oil security and protect supply disruptions. India has 4.2% per annum up to 2035, faster than all the extent of 10% from current level by fields and also to develop new fields. signed a deal with Abu Dhabi National Oil Co (ADNOC) to fill half of an underground crude oil storage facility major economies in the world201. The key 2022. The government had approved new at Mangalore, Karnataka.208 209 210 growth drivers are: Hydrocarbon Exploration and Licensing •• Robust GDP Growth - India's economy Policy (HELP), which will provide for a has been growing consistently. The uniform licensing system for oil, gas, CBM Growth drivers for the sector •• In November 2016, the MoPNG •• India is looking to merge its existing GDP growth rate has averaged at 6.9% etc., under a single licensing framework. India aims to increase the share of natural announced eighth round of CGD covering state-owned oil and gas companies 202 annually in the past 5 years. Further, under the Discovered Small gas in its energy mix from 6.5% to 15% by eight geographical areas.215 As of March to create a new company with a large 2020-21. To achieve this, India plans more 2017, India had 21 CNG companies balance sheet which will look for than double its LNG import capacity to 50 operating about 1,197 CNG stations acquiring strategic assets globally Refining, Transportation & Marketing MT in the next few years by setting up new across 13 states in India.216 particularly in the upstream segment.219 Table 5: Refining, Transportation & Marketing LNG Terminals in the country.211 212 213 •• Focus on clean fuels – India has made Refining •• Gas transmission pipelines using huge commitment as a part of COP-21 to Sector Network (FY2016) Capacity (FY2016) Viability Gap Funding (VGF) - The Cabinet reduce energy intensity in the economy. •• The government plans to roll out BS-IV Pipeline network •• Total pipeline network: 42,486 Kms •• Crude oil pipeline: 140.5 MMT Committee on Economic Affairs had auto-fuels by 1 April 2017 and leapfrog •• Assisting implementation - The approved the VGF of $1.93 billion for into BS-VI auto-fuels w.e.f. 1 April 2020, •• Crude oil pipeline: 9,853 kms (9,365 kms onshore and •• Natural gas pipeline: 464.12 MMSCMD government has accorded CGD network natural gas pipeline from Jagdishpur to which would facilitate major investment 488 kms offshore) the status of public utility. This will allow •• Petroleum product pipeline: 97.7 MMT Haldia and Bokaro to Dhamra (JHBDPL). in refinery upgradation, auto industry, the CGD system to increase its reach and •• Natural gas pipeline: 17,658 kms This will develop gas network in the related manufacturing and services make it comparatively easier to secure eastern region of India, which has limited sector. •• Petroleum product pipeline: 14,975 kms government licences and clearances.217 gas pipeline network currently. •• The government has implemented LNG •• Four operational LNG regasification terminals at Hazira and 30 MMTPA (Sep 2016) •• The government has in-principle •• Growing CGD network - PNGRB has Ethanol Blended Petrol (EBP) Programme Dahej (Gujarat); Kochi (Kerala); Dhabhol (Maharashtra) approved the decks for use of LNG as authorised total 75 geographical areas as under which, oil companies will sell an auto fuel. The draft norms for LNG of FY17.214 ethanol blended petrol with ethanol application in road vehicles will be ready percentage of up to 10%. Further, the in FY2018.218 Bio-diesel Programme, permits the sale
110 111 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
of Bio-diesel (B100) by private players & certification services; petroleum •• Total installed capacity has grown at 9% Figure 46: India – Total Transmission Line Length •• India has set an ambitious target of to bulk consumers such as Railways and testing, refining and distribution per annum from 132 GW in FY2007 to generating 175 GW of power from 220 State Transport Corporations. services; engineering software 315 GW in FY2017 (up to Jan). Capacity 15,000,000 renewables by 2022, which will include solutions, compliance services (with addition has been driven by private 100 GW of Solar power, 60 GW from wind •• MoPNG constituted a Steering Engineering standards) etc. sector investing heavily in coal and Committee to implement the 'Make in 10,000,000 power, 10 GW from biomass power and 5 renewables based generation capacity. GW from small hydro power.224
India' campaign in oil and gas sector. ckm 03. Global Delivery Centers (GDC) of Private sector is responsible for 64% of Oil PSUs have formulated INDEG 5,000,000 EPCM companies, Oilfield Services the total capacity addition of 182 GW •• The government has approved the Ujwal (Indigenisation Group) to increase the Companies and International Oil since FY2007. As a result, the share of the DISCOM Assurance Yojna or UDAY, which domestic component in all kinds of oil 0 provides for the financial turnaround and Companies in India private sector has increased from 13% of FY 07 FY 15 procurements.221 (GDCs providing EPCM services, R&D installed capacity to 43%. revival of Power Distribution companies (DISCOM).225 As of date, 22 states have •• Under the Start-up India Mission, Oil India services, information technology Below 66kV Above 66 kV •• Transmission & distribution remain and ONGC have announced INR 500 services, finance/business support come under UDAY and power tariff largely in the public sector, with a few million and INR 1 billion start-up fund to services). orders for 2016-17 have been issued in notable exceptions. Capacity addition 226 foster and incubate new ideas related to 18 states. has been seen in transmission and oil and gas sector.222 Electricity Services Figure 47: India – State Sector Capex • The Government has set target to distribution as well, with PowerGrid • achieve 100 GW of Solar power by 2022. •• Under the Skill Development Initiative, •• Power sector has witnessed significant alone capitalizing approximately 320,000 To promote investments in this sector, oil & gas PSUs are setting up 6 Skill private sector participation, skewed million ($4,740.7 million) of projects in 100,000 87,025 86,946 83,239 the key initiatives include exemption Development Institutes (SDIs) in the heavily towards generation sector. FY2016. from excise duties and concession country. MoPNG, through Oil Industry 80,000 Development Board (OIDB), has set up on import duties on components and 60,000 Hydrogen Sector Skill Council (HSSC) for equipment and 10-year tax holiday for oil & gas sector.223 Figure 44: India – Generation Capacity by type 40,000 solar power projects. It is also providing INR Million special incentives for exports from India 20,000 in renewable energy technology under Opportunities in the oil and gas sector 227 01. Exploration & Production 350 315 0 renewable energy sector specific SEZ. FY 13 FY 14 FY 15 Oilfield service providers have the 250 •• In February 2017, India’s solar power opportunity to provide services in Source: Deloitte Analysis sector recorded low-winning bids of INR
GW 132 the areas of drilling & oilfield services. 150 2.97 per kilowatt-hour (kWh) to build 750 Companies provide seismic services MW plant at Rewa in Madhya Pradesh. 50 such as surveying, interpreting and Growth drivers and future prospects •• Poor financial health of the distribution The low tariff–primarily due to low cost ascertaining the reservoir geology and -50 FY 07 FY 17 sector, especially in a few key states, of financing the project–has made solar other drilling-related services such as •• With the significant capacity additions, is a significant hurdle to continued energy a competitive source of energy. directional drilling and mud logging; enhanced fuel availability and moderated Coal Gas Diesel Nuclear Hydro RE development of the sector and proactive onsite engineering, operational & demand profile, India is expected to •• India and France launched a $1 trillion measures like UDAY, IPDS and DDUGJY maintenance services, manpower have a demand and energy surplus programme to help members of the have been rolled out to address the supply services; and those providing during FY2017. However, as access is International Solar Alliance (ISA) countries challenges. 228 drilling mud, transporting oil/gas progressively enhanced and economic harness their solar resources.
from the reservoirs to the refinery, Figure 45: India – Generation Capacity by entity activity picks up pace, continued •• The total hydro power generation compliance services (with Engineering enhancement of capacity across capacity above 25 MW capacity in India standards) etc. generation, transmission and distribution (as on February 2017) was at 44,413.42 315 350 will be required to meet expected MW. The government is taking initiatives 02. Refining, LNG and Pipeline demand. to restart the 20 stalled hydro power 250 Transportation projects totaling 6,329 MW. It has also Companies have opportunities in the 150 132 sanctioned the proposal regarding basin-
GW Figure 48: India – Power Sector Losses (INR million) areas of EPCM services, technology wise reassessment of hydro potential in solutions, industrial technical 50 the country.229 inspection services; asset integrity 0% -50 FY 07 FY 17 management services; corrosion -150,000 FY13 FY14 FY15 -5% services; technical staffing & training -10% services; hazardous areas testing State Private Central -350,000 -15% -550,000 -20% INR Million -750,000 -25%
Source: Deloitte Analysis 112 113 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
15. Space
Potential for global expansion (IOR) techniques to improve the IT implementation. The demand for average recovery rates. Oil field service operations and maintenance, metering Industry profile •• India and Russia have agreed to explore providers can provide advanced and data management services is building a gas pipeline to transport technologies to help companies to expected to grow. natural gas from Siberia.230 enhance oil and gas production.236 •• Retail supply remains bundled with the •• India and the UAE have signed MoU in •• India has announced an Open Acreage distribution function the field of energy management and Licensing Policy (OALP) for oil and gas –– In this scenario, and when shortages conservation.231 exploration which will allow operators materialize again, the demand for •• In terms of LNG import, India buys 7.5 to select areas where they want to drill. ESCO services to bring in efficiencies MMTPA of LNG from Qatar. It expects to India will conduct auction of hydrocarbon across the consumer base and possibly, commence a 3.5 MMTPA LNG contract blocks under OALP twice a year. The first demand response models is expected with Sabine Pass Liquefaction Terminal in round is likely to occur in July 2017. to materialize. When retail supply is the US in 2017.232 –– OALP will allow pricing and marketing unbundled to bring in competition freedom to operators and shift to a at the consumer interface, it is •• India supplies 500 MW of power to revenue sharing model. It will give expected that there will be a demand Bangladesh since 2013233. Further, India an option for companies to select for consulting services in business is set to invest $11 billion in Bangladesh exploration areas based on the data structuring, legal and financial aspects. power, LNG and port sectors.234 provided by Directorate-General of –– In operations, there is demand for •• India and Nepal have joined hands Hydrocarbons in a National Data customer relationship management, to build new cross-border power Repository. automated meter reading data transmission lines.235 –– It will provide opportunity for oil field management and bill collection Figure 49: Global Space Industry (2015, US$335.3 billion) service companies to analyse seismic services. Global space industry is valued at $335 Conclusion and recommendations and geophysical data and provide billion in 2015 of which the satellite industry •• With increasing grid penetration of 238 more information about prospective accounts for 62% $208 billion and Satellite Satellite Launch •• India’s crude oil production declined by renewable energy generators, grid hydrocarbon blocks.237 includes satellite services, satellite launch Manufacturing 16.6 Industry 5.4 1.36% to 36.95 MMT in FY2016, as against integration of intermittent generation services, satellite manufacturing and 5% 2% 37.46 MMT in FY2014-15, mainly due to •• Power transmission & distribution remain whilst maintaining grid security has ground equipment.239 shortfall of production in Mumbai asset, largely in the public sector, which typically become a challenge. natural decline of mature fields and less houses most of the required capabilities –– The demand for generation forecasting India’s Department of Space (DoS) has than envisaged production from new and and skills within the organization. to ensure adherence to schedules is the primary responsibility of promoting marginal fields. –– Demand for consulting services during expected to grow. Further, analytics for the development of space science, Ground –– Oil and gas companies have increased the development phase is subdued production optimization and applied satellite, technology and applications Equipment 58.9 focus on production optimization but growing. In the operations phase, research in generation technology and for development of national space 17% Satellite in mature fields. Further, they are there is demand for consulting storage is expected to grow. infrastructure while the Indian Space Ser vices 127.4 implementing Enhanced Oil Recovery services in capacity building (non- Research Organisation (ISRO), a 38% (EOR) and Improved Oil Recovery technical), regulatory compliance and government institution under the DoS, has piloted all Indian activities in the space sector since its inception in 1969240. Some Table 6: Services in Power Sector of the initiatives successfully taken up by Generation Transmission Distribution Retail supply Renewable Energy ISRO are:
Capex phase ––Consulting: ––Consulting: ––Consulting: ––Consulting: ––Consulting: •• Launched 87 spacecraft missions engineering, legal, engineering, legal, engineering, legal, engineering, legal, engineering, legal, (including 2 Nano Satellites) Non-Satellite financial, business financial, business financial, business financial, business financial, business •• Exhibited 60 launch missions (including Industry 127.0 opportunities opportunities opportunities opportunities opportunities Scramjet-TD and RLV-TD) and 2 re-entry 38% Operations phase ––O&M of assets ––Consulting: capacity ––Consulting – ––CRM, AMR data ––Generation missions Source: Satellite Industry Report, June 2016v building, regulatory capacity building, management, bill forecasting, analytics •• Launched 8 student satellites compliance, IT regulatory collection, ESCO for production implementation compliance, IT optimization, R&D implementation on generation tech & ––O&M of assets storage ––O&M of assets ––Metering & data ––O&M of assets management ––Metering & data management
114 115 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
their satellites through ISRO owing to Opportunities Figure 50: Global Satellite Market (2015, US$208.3 billion) its excellent track record and low-cost New launches, launch order book and Opportunities satellite launch services. space station Consortiums for production of Satellite Launch –– Cost of satellite launches in India are satellites and launch vehicles Industry 5.4 •• Following the launch of 104 satellites, nearly 30 to 40% lower compared to ISRO has floated industry consortiums Satellite 3% ISRO plans to take two Google Lunar other countries. for the production of PSLVs and Indian Manufacturing 16.6 Xprize contenders to the moon on the –– Low-costs are primarily due to lower Regional Navigation Satellite System 8% same PSLV and drive missions to Mars wages, lesser cost of parts and (INRSS) satellites. ISRO has also outsourced and Venus. production, and small payload sizes. the manufacturing of two navigation –– India has also developed expertise •• Currently, India has satellite order book satellites, Navic to a consortium of private in multiple launch technology using a of around INR 2,800 million ($42.8 million) firms. The consortium will have private single rocket. for third parties, which will take it around sector expertise in each segment such as 2-3 years to exhaust.250 electrical, software and others, required for India is currently working on a Unified building a satellite255 256. •• The country is also in discussions for Ground Launch Vehicle (ULV), which will eventually Equipment 58.9 contract manufacturing of meteorological replace Geo-Synchronous Satellite Launch Private sector opportunities in Satellite satellites with other countries along with 28% Vehicle (GSLV) and Polar Satellite Launch satellite manufacturing Ser vices 127.4 Indian industry. 61% Vehicle (PSLV). ULV will have the capacity to ISRO has invited private sector companies launch 15,000 kg into low earth orbit (LEO). •• ISRO also awaits government approval for to participate in satellite manufacturing. building its own space station.251 252 So far, private companies have only been The Indian satellite industry includes supplying satellite components.257 Further, satellite services such as satellite launch Satellite fabrication services ISRO has announced to develop a 100-acre services, satellite manufacturing & hi-tech Space Park in Bengaluru, where the Source: Satellite Industry Report, June 2016v •• ISRO Satellite Centre (ISAC), Bengaluru, fabrication and ground equipment related private players will set up facilities to make is the lead centre of ISRO for design, to data management and analysis. subsystems and components for satellites. development, fabrication and testing The opening up of the high profile satellite Figure 51: India's space sector budget (INR billion) of all Indian made satellites. ISRO has Satellite launch services manufacturing sector is a part of the "Make standardized design of major satellite 58.5 in India" initiative.258 •• Antrix, the commercial arm of ISRO, is subsystems in telemetry, tele-command, 48.4 45.9 the nodal agency for providing satellite power, control systems, structural Opportunities for large industrial Launch services for customer satellites, systems, spacecraft mechanisms, etc. It manufacturers on-board ISRO’s operational launch has outsourced fabrication and testing ISRO is roping large industrial vehicles namely, PSLV and GSLV.245 In activities to several approved players253 manufacturers to create engines, stages 17.7 14.7 FY2016, Antrix earned a revenue of and envisages to enhance industry 11.1 10.2 8.0 of rockets, propellant tanks, solar panels, 5.2 5.3 5.5 5.5 approximately INR 2,300 million ($35.17 participation towards production of 1.8 1.3 1.9 1.7 2.0 2.2 thermal control systems and electronics million) through commercial launch subsystems, including component packages required for satellites and launch INSAT Satellite Autonomous services, which is about 0.6% of the procurement, fabrication, package Space Technology Space Applications Space Sciences Establishment vehicles. Further, ISRO is currently in the global launch services market. assembly and testing. Systems Expenditure Bodies and Others process of developing a semi-cryogenic •• For launching foreign satellites, a third •• ISRO also has a list of approved vendors engine. This will require indigenous Budget Estimate 2016-17 Revised Estimate 2016-17 Budget Estimate 2017-18 launcher of higher payload capacity, GSLV which provide satellite sub-systems development of 35 materials and 22 Mk – III is being developed and has been fabrication, testing, components and coating processes. Indian industries will Source: India Budget 2017-18 tested successfully. It is expected to take design services such as Transpace help fabricate the hardware for the engine its first flight during Q1 2017246 247. Technologies254, Alpha Design subsystems.259 Technologies Private Ltd., Avasara As a part of the government’s 12th Five Year •• The provisional financial resource two new ambitious Indian space science •• In February 2017, ISRO launched a record Technologies, L&T and Godrej and Plan 2012-2017, ISRO has submitted a plan requirements for the missions as well missions—one to Mars and another to of 104 satellites, taking its tally of foreign Dhruva Space, etc. for 58 space missions to be undertaken, as for advance investments for the Venus242. satellites launched to date to 180. The which includes 33 satellite missions and realisation of missions during the early latest launch comprised three of its •• India has been launching satellites for 25 launch vehicle missions241. phase of 13th Five Year Plan has been set own, while the remaining 101 were from foreign countries for over 15 years. It has –– Between 2012 and 2016, ISRO has at INR 550 billion ($8.4 billion) at (2011-12) six countries: US, Israel, Switzerland, well established itself as a committed been able to launch a total of 52 prices242 243. 248 249 player in the commercial satellite market. Netherlands, UAE, and Kazakhstan . space missions (meeting 90% of its •• The government has increased its Space planned 5-year target), including 26 •• The country has become a preferred Budget estimate FY2017-18 by more satellite missions and 26 launch vehicle destination for foreign satellite launches, than 20%, to INR 90.94 billion ($1.35 missions. given the significant difference in costs. billion). It will provide initial funding for Many countries are keen to launch
116 117 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Satellite data satellite remote sensing, Geographical not only start-ups, but also provides an Conclusion and recommendations •• Further, India needs to focus on setting Information Systems (GIS), Space opportunity for SMEs to leverage cluster- ground rules for international space •• National Remote Sensing Centre (NRSC) •• The government should encourage Management and Data Analysis services based externalities such as technologies, cooperation with respect to other at Hyderabad is responsible for remote private players in the industry to develop to ISRO as well as to foreign space infrastructure and manpower to build countries such as the USA, China and sensing satellite data acquisition and capacity and capability in pursuing stations. space-based services.263 Russia. Unregulated international processing, data dissemination, aerial space activities for future technology cooperation can spur regional and remote sensing and decision support for development. Opportunities National Optical Fibre Network (NOFN) international insecurities. disaster management. Further, Regional BRICS to share data from remote plan •• There is a need to promote and develop a Remote Sensing Centres (RRSCs) •• India can look forward to set up an sensing satellites The Government is pursuing the National model for promotion of SMEs to capture support remote sensing tasks specific independent space activities focused BRICS nations have agreed to share spatial Optical Fibre Network (NOFN) plan of a larger share in the international space to their regions as well as at the national think tank constituting distinguished data on natural resources from their connecting the Gram Panchayats (GP) in market. The government could consider level. experts in the space field. The think remote-sensing satellites for optimum the country through the optical fibre cable instituting a national fund for promotion tank will provide key insights on space •• The Indian Institute of Remote Sensing utilisation of space assets. The initiative (OFC). Recently, OFCs in 76,728 GPs and of entrepreneurship in the space program management, dual-use of (IIRS) provides capacity building in will bring developing nations under the optical fibre in 64,599 GPs have been laid industry. technologies, economic impacts of Remote Sensing and Geo-informatics umbrella of space, opening possibilities which allows significant room for satellites •• India expects development of allied space expenditures, new space laws, through education and training of using excess capacities in the satellites. to contribute to Digital India. technologies such as composites and insights on international cooperative programmes260 261. Going forward, the space agencies of the technology to play a vital role in the space agreements.266 267 BRICS nations will share similar data for Potential for global expansion •• As part of space cooperation between future demand of space tourism and tele-education, tele-medicine, and a host of India and Association of South East Asian •• India holds potential for global expansion space habitat due to its lightweight and societal applications for mutual benefit.262 Nations (ASEAN), ISRO, is also working across several countries such as the US, better performance. Further, electronics towards the establishment of a Satellite UK, Canada Germany, France, Korea, and and data analytics industry will grow Growing NewSpace phenomenon Tracking & Data Reception Station and Middle East. leading to enhanced collaborations in the NewSpace is a worldwide phenomenon Data Processing Facility in Vietnam for space industry.265 of enterprises expanding capacity and •• As of date, ISRO has successfully ASEAN Member countries. This facility capability to develop space products launched 180 foreign satellites for 23 •• India could replicate the built-up of is aims to acquire and process Indian and service using private funding. It is countries.264 The US accounts for the Bangalore as an IT hub for the space Remote Sensing Satellite data pertaining challenging the traditional ways of space largest share of satellite launches, industry as well. Dedicated land should to ASEAN region and disseminate to services which have been otherwise followed by Canada and Germany. be allocated for space ventures and ASEAN Member countries. considered expensive and time-consuming. assistance should be provided to them •• Various Indian companies provide Enabling NewSpace in India will impact in the start-up stage. Additionally, senior ISRO and Antrix officers can mentor the Figure 52: Foreign satellites launched by ISRO start-ups in space industry to ensure 114 they operate within the Indian space policy framework and leverage technical expertise to ISRO.
•• India is enhancing focus on NewSpace companies which are building B2B and B2C models which can scale both nationally and internationally. The B2B, B2C ecosystem in the space industry has the potential of tapping the IT infrastructure and extending it 11 10 8 to core software-based applications 6 4 3 of space-based information such as 2 1 Geographical Information Systems (GIS). USA Canada Germany Singapore UK Algeria Indonesia, The Kazakhstan, The government support in NewSpace is Switzerland, Netherlands, UAE, Korea, required to further catalyse the multiplier Japan Isreal, Belgium, effect while steps are being taken to upgrade the existing capacity of the Denmark, Argentina, space industry. France, Austria Italy, Turkey, Luxembourg Source: ISRO
118 119 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
16. Railway Service Industry profile •• Indian Railway Station Development Corporation, in cooperation with China Railway Construction Engineering Group, will be developing New Bhubaneshwar and Baiyappanahalli stations.
•• Indian Railways will form a joint venture with the Belgium government to develop and modernize the Mumbai Central, Jammu, Jaipur and Varanasi railway stations to make them into commercial hubs.
•• South Korea has come forward to redevelop the New Delhi railway station, one of the busiest terminals in the country, as a world- class facility.
•• French Railways is assisting its Indian counterpart in upgrading the track between Delhi-Chandigarh to facilitate running of trains at a maximum speed of 220 km per hour.
Growth drivers for the industry Figure 54 : Trends in freight traffic (Million tonnes)
•• Growth in passenger traffic: The passenger traffic is expected to grow to 975.2 1058.8 1107.0 804.1 892.2 15.2 billion by 2020, from 8.2 billion in 2016272. Urban population in India as a percentage of total population, grew to 33% of total population in 2015 (from 31% 2008 2010 2012 2014 2016 The Indian Railways is the largest employer Figure 53 : Trends in Passenger volumes (in billion) in 2010), leading to surge in passenger in the country, employing 1.4 million traffic between urban and rural areas. persons (as of December 2016). It is also Additionally, rising income levels have Source: : Ministry of Railways the fourth largest rail network after the 8.2 8.4 8.2 made rail travel affordable to a large 7.2 US, Russia, and China. The 108,706-km 6.5 number of Indian population leading to a personnel to operate bullet trains and •• Construction related services: Indian rise in passenger movement from rail. network facilitates movement of 12,617 other high speed trains being developed Railway Construction Co Ltd (IRCON), Rail passenger trains. It has 6,853 stations, •• Growth in freight traffic: Increasing in the country. Indian Railways is expected India Technical and Economic Services 240,000 wagons, 63,045 coaches, and levels of industrialization across the to generate employment of 140 million (RITES) and Power Grid Corporation of 10,773 locomotives.268 2008 2010 2012 2014 2016 country is expected to increase freight man-days in 2018-19273. According India Ltd (PGCIL) are coming together to traffic, which is estimated to grow to 2.2 to Department of Industrial Policy & reduce carbon footprint by electrifying Railways services is split into passenger Source: : Ministry of Railways billion tons by 2020, from 1.1 billion tons Promotion (DIPP), FDI inflows into railways 24,000 km of railway tracks over the services and freight services. The in 2016272. Freight traffic via Dedicated related components from April 2000 to next five years. Currently, about 2,000 passenger traffic stood at 8.2 billion Freight Corridor (DFC) is also anticipated March 2016 stood at INR 47.6 billion ($710.9 km track is being electrified per year and in 2015-16, while freight traffic stood participation, establishment of a Rashtriya and capacity augmentation, and Foreign to grow at a CAGR of 5.4% to reach 182 million).272 the aim is to reach 4,000 km per year by at 1.1 billion tons during this period.269 Rail Sanraksha Kosh to ensure passenger Rail Technology Cooperation scheme. million tons in 2021–22, from 140 million 2017-18 and 6,000 km in the subsequent Freight remains the major revenue safety, and elimination of unmanned The Railways has identified 17 sectors •• Emerging opportunities: Indian Railways tons in 2016–17. year. Through electrification, trains level crossing on broad gauge lines by in its operations to allow 100% foreign/ is among the biggest suppliers of earning segment for the Indian Railways, will run faster, reducing the energy bill 2020. It focussed on rejuvenation of the private investment including high speed •• Rise in demand for mass transit equipment including locomotives and accounting for more than 67% of total considerably and less emission of carbon. revenues in 2015-16. The gross revenue of railway network through commissioning railway, freight corridors, suburban systems: Metro rail projects are being coaches to smaller nations in Africa, such Indian Railways stood at INR 1,687.7 billion of 3,500 km of railway lines in 2017-18, lines, standalone passenger lines (hill envisaged across many cities over the as Benin, Angola, Tanzania, Mozambique, Potential for global expansion redevelopment of at least 25 stations in railways), passenger terminals, bio-toilets, next ten years, and an investment of $137 and Senegal. The Indian Railways is also ($25.2 billion), and is expected to reach INR Export share of Indian Railways is just 2% 270 2017-18, installation of bio-toilets in all technological solutions for unmanned billion is expected in metro rail networks making plans to sell rail wheels to South 2,981 billion ($44.5 billion) by 2019-20. of the total world market of $175 billion. coaches by 2019, and feeding of about level-crossings, mechanized laundries, by 2020272. Africa, a developed economy with a There is a significant potential in rolling 7,000 stations with solar power in the testing facilities, and construction of well-equipped railway system. RITES (a The government has been investing stock and infrastructure services in the medium-term. bridges. Role of Railway Services as key public sector undertaking under India's heavily to upgrade railway infrastructure. countries of Africa, South America, Middle services sector Railway Ministry) recently exported The Union Budget 2017-18 allocated INR East, South East Asia, and CIS countries, The Railways is also encouraging private Further, the government has partnered Indian Railways is planning to launch an 60 AC coaches to Bangladesh. It had 1.3 trillion ($19.7 billion) for capital and where India can play major role in tapping 271 players to participate in rail projects with foreign governments to aid integrated mobile application for availing also bagged a contract for the supply development expenditure of Railways. this opportunity. Indian railways can through policy initiatives such as, modernization of the Railways: all travel-related services such as hiring of 18 MG diesel electric locomotives The budget envisaged enactment of a new leverage its strength in R&D, services and Participative models for rail connectivity taxis, pre-ordering a meal, requesting to Myanmar Railways. Players such as Metro Rail Act to facilitate greater private IT capabilities to gain entry in the world for porter services, lodging at a retiring Korea’s Hyundai Rotem and Bombardier market by participation in railway oriented room etc. According to railways, there will Inc., are also planning to export from trade fairs and exhibition. be a requirement of nearly 10,000 skilled India.
120 121 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
17. Professional Service
Future prospects for the industry •• Integrated ticketing system: The Conclusion and recommendations Indian Railways has plans to modernize its railways is looking to move towards a The Indian Railways has plans to modernize Industry profile railway infrastructure, and for that it seeks cashless ticketing system by installing its infrastructure to be at par with the best to modernize its railway stations in a way 6,000 point-of-sale machines and 1,000 transit hubs in the world. The government that would place them at par with the best ticket vending machines across its plans to invest INR 8600 billion (~$130 transit hubs in the world. network. An integrated ticketing system billion) for new tracks, faster trains and such as use of multi-purpose card for station redevelopment, of this, INR 1 •• Operation and maintenance services: electronic payment across multiple trillion ($15 billion) is expected to come Several Indian players have been involved modes of transport will simplify the ticket from the private sector. It is also moving in operations and maintenance of railway procurement process for passengers. It away its focus from fares and new trains services. For instance, Larsen & Toubro also has plans to launch an integrated to improving customer experience, for bagged the contract for construction mobile app through which the consumers which it intends to modernize identified of sections of Mukundpur-Lajpat Nagar can access all travel-related services corridors, revamp stations, make disabled- line for Delhi Metro; Kalindee-VNC joint including ticketing, hiring cabs and friendly stations, and double the average venture was awarded the contract porters. speed of freight trains, among others. It for commissioning of sections of is correspondingly looking at non-fare Janakpuri West-Kalindi Kunj and Central •• Opportunities in mass transit: The revenue streams, including advertising Secretariat-Kashmere gate line for Delhi government is encouraging cities with and land leasing. This ensures ample Metro. Indian players can also explore a population of 2 million and above to opportunities for the private players, opportunities for export of train sets and develop mass transit systems, including particularly as it has allowed up to 100% other related equipment in Bangladesh, metro, monorail and light-rail systems. FDI in a number of areas, including, Myanmar, Sri Lanka, Mozambique and Around 50 cities in India are expected operation and maintenance services, other African countries, where RITES is to have a population of over 2 million by Professional services include a range Figure 55 : Accounting and Auditing production turnover (% Share) manufacturing services, and signaling and already an established player. 2050, creating abundant opportunities of different occupations like Audit and infrastructure projects. for players in coach manufacturing, track Accounting, Management consulting, •• Technology and analytics: The Railways maintenance, signaling and electrification, Architectural and Engineering and Legal plans to use drones and geospatial ticketing and other support services. services which provide support to different Financial Auditing satellite technology to remotely review businesses across the world. Professional and Book Keeping the progress of major projects. Union •• Station redevelopment: Focus on station service providers add value through 33% Budget 2016-17 mentioned digital redevelopment projects will open up their advisory services to their clients to analytics as one of the focus areas, with opportunities for private developers as improve productivity, growth by ensuring the government planning to set up a well as for consultancy services. required compliance. This includes Insolvency Special Unit for Transportation Research Services •• Advisory services: The Indian Railways services like but not limited to taxation and Analytics (Sutra) to analyze the data 39% is looking for advisory services in a range advisory, non-attest assurance/accounting collected by the national carrier, to gain of areas, including that in raising finance services, associated compliance services, business insights. Tax Advoisors through public private partnership management consulting in the areas of 28% •• Dedicated freight corridor: Dedicated (PPP), setting up National Rail Transport bringing productivity efficiencies, structural Freight Corridor Corporation of India University, generation of non-fare consulting in terms of engineering and (DFCCIL) – a Special Purpose Vehicle revenue, and optimizing asset base architecture. Professional services support businesses of all sizes and in a wide range under the aegis of Ministry of Railways- is through analytics-based services. Source: Industry Capsule: Euromonitor, Deloitte Analysis constructing Dedicated Freight Corridor of industries. The professional services •• Research unit: To promote in key policy (DFC) along the Eastern (1,856 km market size is $14.43 billion and there is areas, the railways proposed setting up of expertise developed by the profession revenue growth in 2015.275 The slowed route length) and Western (1,504 km a high growth in the export market with SRESTHA (Special Railway Establishment in regard to information technology has down M&A activities in 2015 and 2016 has route length) parts of India, to enhance 9.4% growth recorded in the first half of for Strategic Technology & Holistic 274 resulted in accountancy firms becoming restricted the financial advisory services punctuality of freight trains, for which it 2015-16 . Advancement), a special unit comprising among the world's largest suppliers of such revenue in India. However the anticipated signed contracts worth INR 350 billion of scientists and railway experts to consultancy services. rise of M&A activities in 2017 is expected ($5.2 billion) as of November 2016. It is Audit and Accounting Services accomplish long-term research for to restore the revenue directions. In 2015, also looking at enhancement of the speed The Accounting and Auditing services improving its overall functioning. The accounting and auditing industry in Tax advisor services managed to earn the of all Express trains on the Diamond constitute the core activities of India is driven by double-digit growth in highest share of revenue with approximately Quadrilateral High Speed Rail Network. accountancy firms’, i.e., evaluation of the reliability and credibility of financial the FDI inflows and the rising activity in the INR 49 billion while financial auditing and information as well as a wide range of manufacturing sector due to the ‘Make in book keeping services and Insolvency additional services like assurance services, India’ initiative. The FDI inflow in India grew services revenue was approximately INR merger audits, insolvency services, by 30% making India the fourth largest 43 million and INR 35 million respectively. tax advice, investment services, and receiver of FDI after Hong Kong, China and The major accounting firms generated $128 management consulting. The internal Singapore. The sector recorded a 10% billion revenue globally in 2015276.
122 123 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Domestic and global demand: The global demand of audit and accounting (AICPA) has highest accounting professions Potential for global expansion: The a Memorandum of Understanding (MoU) exponential demand to take care of the economy is changing rapidly due to services. The large availability of talent with 664,532277 professionals, India also rising adoption of technology based audit with Chartered Institute of Australia, potential of supply of services getting globalization and industrialization. Rising pool, low-cost structure and technology has a demographic advantage with The process, talent pool, niche expertise Canada, New Zealand, Ireland and Oman. generated in the country. For example, tension due to increasing financial crisis driven outsourcing services in India makes Institute of Chartered Accountants of on cost, diverse portfolio offering and Presently, around 200000 members and renowned global companies setting up around the world and rising international it the perfect destination for accounting India (ICAI) having 253,369278 members accounting standard makes India a hot 1 million students are pursuing the course there financial and accounting shared trade activities implies to the importance and auditing services. Similarly, from a in comparison to Institute of Chartered destination for countries where Audit from ICAI in India. services centers in India is a big and non- of accounting and auditing services across domestic perspective, rising growth of this Accountants in England and Wales (ICAEW) and Accounting is less developed. Under linear shift in the business model opening the world. As a natural outcome, regulatory market, investments from global players, which has 147,000 members.279 developed countries in Africa and least Future prospects: India’s demographic up many new accounting and auditing policies, laws and accounting and audit new business models in the technology developed countries like Afghanistan, advantage is well known. The syllabus profiles for the talent pool in India. The standards are getting updated to respond space and ease of doing business are the Competitive profile: India has a plethora Myanmar provides opportunity for global of the Chartered Accountancy, Cost growth in the global market is reflected to economic fallout and public outcry. growth drivers The new Indian accounting of accounting firms which are still new in expansion to the Indian firms. Institute Accountancy and Company Secretary in the operations of these shared service Overall there is an increased awareness standards (Ind AS), converged with the market in comparison to large audit of Chartered accountants of India (ICAI) courses are aligned/being aligned to the centers, thereby creating the growth and stakeholders’ expectations in the area International Financial Reporting Standard firms in the US, UK, and some other has signed MoUs with international global standards. Both these factors create prospects for Indian accounting/auditing of public accounting. The geographical (IFRS) has been a catalyst of growing European countries with wide global bodies which will help in CAs practicing a tremendous opportunities for Indian services. expansion and diverse business portfolios demand in the audit service space in India. presence. Global companies in India in different countries and will help in accounting and auditing professionals to across the world has also created a While The American Institute of CPAs leverage experience, reputation, network increasing international trade. It has signed cater to the global markets. Also there is and expertise to gain more clients and revenue than smaller firms. However Recommendations: Figure 56: Accounting and Auditing Market Demand 2010-2015 (~$ million) smaller firms find it difficult to develop industry-specific knowledge, technical Subject Present Status Recommendations expertise due to poor financial health and 160 130 fall behind the bigger firms. FDI in the sector 46% in services •• Relaxation on FDI will attract more foreign funds and help in better exposure of the 106 Indian firms in global market and vice versa 90 There is a constant threat from South 73 Limitation related High •• Developing talent pool in India which is accredited for the global accounting and Korean as well as Chinese markets which 73 to Licensing and auditing standards which will enable working with entities from different geographies 1,950 is a challenge to India’ niche expertise of 1,850 accreditation 1,580 low cost operation. The performance of 1,139 1,339 947 the market is forecast to decelerate, with an anticipated CAGR of 7.8% for the five- 2010 2011 2012 2013 2014 2016 year period 2015-2020, which is expected to drive the market to a value of $14.8 Management Consulting line and exploring new markets. The billion by the end of 2020. Comparatively, Management consulting sector provides management consultancy market size is Locally Produced Products RSP Imports RSP the South Korean and Chinese markets is specialized advisory services to help expected to be around INR 300 billion in expected to grow with CAGRs of 2.7% and in management decision making in a India and is expected to touch INR 348 Source: Industry Capsule: Euromonitor, Accessed via EMIS 9.7% respectively, over the same period, to company. These services helps the billion by 2018281. The market is extremely reach respective values of $8.7 billion and organizations in various ways like fragmented and competitive with and is a $16.2 billion in 2020. Business Optimization and restructuring, combination of selected global and no. of expanding new business, product small players.
Growth Drivers: Figure 57: Sector Contribution to GVA (INR million) Technology Accounting Cost Structure Domestic Market Diverse Portfolio Standard 348 •• Digital Business •• Low Cost High •• Growth of domestic •• Wide range of 300 Process as a key •• New IndAS Quality audit market services other 280 261 differentiator converged with IFRS services than Audit and 236 248 •• New MNCs setting Accounting •• Software and •• Diverse accounting •• Global Exposure of up business in India Cloud services in standard proficiency auditors due large •• IT services •• Infrastructure, Accounting presence of MNCs connectivity and •• Consulting talent •• Back office operations FY 12 FY 13 FY 14 FY 15 FY 16 FY 18 (F)
Source: Deloitte Analysis Contriburion to GVA (INR million)
Source: Dun & Bradstreet Research
124 125 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Market segments: Figure 59: Export/Import market in $million
Management Engineering Socio-economic IT Consulting HR Consulting 30349 28447 28482 28422 Consulting Consulting Consulting 27189 27644 •• IT Strategy •• Workforce 25910 25788 24626 24083 •• Corporate Strategy •• Feasibility Study •• Urban planning Management •• Performance •• Regulatory •• Cost Estimation •• Rural Improvement •• Training & strategy Development Development •• Project •• IT M&A •• M&A and JV Management •• Environment •• Leadership •• IT Project Impact Development •• Restructuring & •• Project Lifecycle Effectiveness Assessment Cost Optimization •• Engineering design •• Renewable Energy FY 12 FY 13 FY 14 FY 15 till Dec 2016 Support
Export Import
Global and domestic demand: economic reform measures and rising The recent reforms in Indian economy Source: RBI The global management and marketing trade activities. The US and Europe who and government initiative to boost consultancy market had total revenues of represent 47% and 29% of the global manufacturing sector in India has also Growth Drivers $321 billion in 2015, representing a CAGR market share are the major players for playing a significant role to generate of 4.5% between 2011 and 2015. There Indian consulting services sector while demand in the domestic market. The Indian Skilled Workforce Low-Cost Service Diverse capabilities Government Initiative has been a constant rise in demand for other countries like Germany, UK, and education sector has 10,330 management • Large Talented human • Low-cost management • Talent with different • New demand from management and consulting services France are also popular in the consulting institutes with almost 700,000 faculties. • • • • resource consulting services domain specific knowledge government initiatives across the world due to Globalization, arena. The total enrolment in management colleges in 2015-16 is around 2 million.282 •• English Proficiency •• Well connected tier-1, tier-i •• Consulting firms offering •• Government push to ease Some of the management institutes are and metro cities diverse solutions of doing business and •• Technology Savvy Figure 58: Consulting market share known globally for the quality of education liberal trade policies generation • Availability of Infrastructure and talent they produce. Talent pool in the • • Start-ups and Larges France management sector has been a strong • domestic market 1% point in India’s arsenal. RoW 8% Export market: Source: Deloitte Analysis United The Management consulting service sector Kingdom in India has changed its stance, from being Future prospects for the industry initiatives to make India an attractive •• Make in India initiative and liberal FDI 5% an import market to becoming a major exporter in the last few years due to rise The Indian economy has witnessed strong market for manufacturing, service policy has attracted many foreign of management consultant firms both in growth in the last few years amidst global outsourcing, research and development, investors to start business in India which economy crisis, political instability and etc. Initiatives like make in India, will create a huge demand for consulting US domestic as well as international market. changing regulatory environment. The liberalization of FDI policy, etc. has opened services. 47% The US and Europe are the major export destinations. government has introduced numerous the market to the global investors.
Recommendations:
Subject Present Status Recommendations Germany 10% Promotion and Low •• A promotional branding strategy is required to promote Indian firms in the Branding international arena
Funding Need Based •• Homegrown small Indian firms need high financial support Europe 29% Make in India Manufacturing •• Expansion of make in India activities to support export market
Source: Global Management & Marketing Consultancy Report, MarketLine Export promotion Not present in India •• Export promotion councils can help in export growth council
Understanding Low access to global •• Research on global market to gain market knowledge Global Market market data •• Bilateral trade agreement to promote export growth
•• Information through affiliates and subsidiaries to understand the market
126 127 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
•• India is the fastest growing startup Global and domestic potential: high spending in architectural and planning institutes. The Engineering and Growth drivers: India has transforming •• Outsourcing spends: As per some global ecosystem in the world and government Rapid urbanization and industrialization engineering services in European countries technology institutes constitute of 3,364 from a restrictive market to a platform analysts the spending in engineering initiative “startup India” along with of the Indian economy has generated like the UK, France, Germany, Spain and undergraduate colleges, and 2,305 post for huge global investment. Though outsourcing services market is set to technology savvy young population with huge demand for business and residential Italy as well as APAC countries like South graduate colleges while 3,851 diploma architecture and engineering services are increase as the demand for such services entrepreneurial mindset are bringing new premises, especially in urban India, with Korea, Japan and Australia are the leading colleges.286 More investment in the in its nascent stage of development there is keep growing due to huge development ideas into business. These fast growing rising investment in the real estate. export market. Engineering products architecture skill development is the need ample opportunity of growth in the sector initiatives across the world and rising startups are creating a demand for Public and private spending on different exports from India was $62 billion in FY of the hour. According to India Council of due to liberal government policies, growing outsourcing competition from other professional services in the country. infrastructure and real estate projects such 2013-14284. South America, Caribbean, Architecture, there are 40,000 registered domestic market, government initiatives countries. as housing projects, railway projects, roads, Kenya, Iran and developing nations like architectural professionals in India287 and like make in India, smart city projects etc. •• Liberal trade agreements are also helping •• Expectation of shorter project lifecycle: ports and airport, etc. has given significant Cambodia, Peru, and Sri Lanka are the the demand is too high with 1.25 billion In a global environment low cost structure, more and more trade export to the US Consumers today are well-informed and opportunity to the sector. Government leading export market for engineering population in the country and high demand high availability of skilled workforce and and European countries. knowledgeable when it comes to the new spending on smart city projects are services285. for urbanization. The gap in demand language proficiency are the drivers of technologies being used in engineering also providing a platform for innovative means finding international talent. Though growth. Large presence of knowledge Architecture and Engineering Services domain. Clients expect to have very short architecture and engineering services. Talent/Skill requirement there are an ample amount of engineering process outsourcing for both architectural For a developing country like India, project lifecycles and service providers India’s exports in architectural and The country has total 6431 approved institutes, the quality of education is still and engineering services make India a infrastructure development is a key are pressurized to meet these demands engineering services were approximately Engineering and technology institutes a worry as only few top level institutes potential hub for R&D activities. driver of growth. And that signifies and stay ahead of the competition in the $6.9 million in 2014. In a global scenario while 171 architecture and 8 town manage to provide high quality education the importance of architecture and market and grab the market share. and employment opportunity. Future prospects: engineering services in the country. •• Start-up ecosystem: The emerging Architecture and engineering services are •• Talent: There is a need to spend Figure 60: Architecture Enrolment Competitive profile: The US, Western startup ecosystem in India will be helpful the backbone of the construction services more on skilling and talent building. Europe, and China are the major exporters to generate domestic demand as well and covers several related activities, such 7,000 Number of professionals in the service of architectural and engineering services as to create innovative architectural and as advisory and pre-design architectural sector specifically in the architectural and are challenges to Indian architectural engineering service solutions to cater to services, architectural design, contract services are not enough to cater to the and engineering firms. Japan, Germany, the rising domestic and global demand. administration services, urban planning, future demand from urbanization and Spain, and France are other leading Start-ups with innovative architectural etc. Architectural and Engineering services industrialization. 4,251 competitors in terms of architectural and idea can provide new solution to the lack are often combined into projects offered by 3,898 4,001 engineering services market. of infrastructure issue in India. one company. 3,412
The government initiative in India to promote infrastructure development Recommendations: services are creating a large demand for architectural and engineering services in Subject Present Status Recommendations India. There are several policy changes like allowing 100% FDI in the real-estate 2011 2012 2013 2014 2015 Trade Agreement Low activity •• Promote trade agreements for easier promotion of Architectural and Engineering sector has made the market attractive for Services Source: AICTE foreign investors. India’s architectural and Export Body Not Present •• Agencies in different countries to promote architectural and Engineering services by engineering sector is mostly fragmented connecting Indian companies to new clients with more than 50,000 players in the Figure 61: Leading Exporters 17 market. The top players represent only 5% Promoting India’s Low •• Participate and promote in global events of the total market. The Architectural and Expertise Engineering services in India is expected to Mutual Recognition Unknown •• Mutual Agreement with statutory bodies of other countries with potential demand for reach around $1.5 billion by 2018 growing Agreements services at a CAGR of 14.2%283. The sector mostly 12 consists of B2B segment which represents LLPs with private Not Allowed •• Allowing will help in the growth of the sector with higher compensation and around 99% of the total size. Public companies investments administrator, defense and social security are the major areas of investment. With rising demand there is a need for more man power as well as skilled labors in the sector. 3 3 3
Japan Germany Spain UK France
Source: Euromonitor via ISI Emerging Markets
128 129 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
18. Tourism & Hospitality
Legal Growth Drivers Proper implementation of laws and Industry profile regulations requires a well-functioning legal Large Talent Pool Versatile Skills service sector. With increasing globalization and constant policy reforms in India, •• Large talented human resource •• Expertise in legal activities like more and more companies are willing to Merger and Acquistion •• Skilled workforce with English setup their business in India which creates proficiency •• Infrastructure financing a demand for domestic legal services. Increased level of globalization and •• 1200 Law colleges •• Public Private Partnership international trade has helped the Indian •• 70-80 thousand enrolments in law legal services sector to expand as there is colleges every year more requirement of documentation, legal advice on setting up and structuring the business. The sector is one of the most restricted sectors both in India as well as enter the international market (including estimates, the UK accounts for around globally. The market grew by 6% in 2015 tie-ups with global players) which is 10% of the global market for legal services, in comparison to 17% CAGR growth over putting pressure on Indian government for second only to the US. It is also the largest 2010-2015.288 While the revenue growth liberalization of the sector. The US and UK market in Europe, accounting for around is fueled by government initiatives to ease are the largest legal markets and provides a fifth of its legal services fee revenue.291 regulations on foreign investments and export potential for India. The UK is the world’s most international rising demand of domestic market, the market for legal services and it offers decline in the mergers and acquisitions Talent pool: unrestricted access to foreign firms with The value of the restaurant and hotel very important to the economy. There are Direct contribution of the sector is in India’s deal value is a barrier to the revenue India’s legal profession is the world’s over 200 foreign law firms from around 40 industry is expected to continue to grow at around 2,333 number of hotels spread GDP estimated to be $47 billion in 2016. growth. Also Indian companies enhancing second-largest, with more than 600,000 jurisdictions present in the UK. The US is a rate (averaging 8.1% annually throughout across various categories; 1/2/3/4/5 star, The sector’s total contribution to GDP is their footprints globally (subsidiaries, lawyers in more than 500 legal practices another major market in the Legal Service the forecast period), as India seeks to heritage hotels, apartment hotels, etc. in expected to increase to $136.2 billion by associates, etc.), there is an increased level nationwide.289 There are around 1200 law exports. China has started legal exports develop and diversify the types of tourists India, which serves around 79,000 rooms, the end of 2016. The total contribution of compliance requirements. This opens up schools in India with around 70,000-80,000 with major law firms setting up offices in served. Its value will increase from $28.1 in the Country, as on 31 December, 2014. of travel & tourism to Indian GDP is opportunity for Indian law firms to increase enrolments every year.290 China. billion in 2016 to $39.8 billion by 2020.292 forecasted to increase by 4.97% per annum their sphere of operations. While the hotel and restaurant industry India ranks third among 184 countries in to $280.5 billion by 2026. Competitive profile: Countries like the contributes less than 1.5% of GDP–a share terms of total contribution of tourism to Domestic and global demand: US and UK has the advantage of organized that will be maintained in the next five GDP of 7.5% in 2016. In 2015, the total contribution of Travel and Under current regulations, foreign law law firms and are home to most of the big years—this merely attests to the diversity Tourism to employment was 8.7% of the total firms are not allowed to practice in India. players in the sector. The sector’s trade and strength of other industries, such as employment. It is expected to rise by 3.0% in But there is an increasing number of surplus has nearly doubled over the past IT, mining and infrastructure, which remain 2016 and by 1.9% pa to 9% in 2026.293 foreign multinational companies are decade to £3.4 billion in 2015, while the looking to enter India for other business sector’s contribution to the UK economy opportunities in the legal sector. Some of increased to a record £25.7 billion in 2015 Figure 62: Total contribution to GDP (in $ billion) 160.2 the Indian companies are also eager to (1.6% of GDP). According to TheCityUK
Recommendations: 120.3
Subject Present Status Recommendations 105.2 Liberalization Restricted •• Requires FDI allowance for better growth, allowing foreign firms to enter Indian 89.2 86 marketServices 85 77 74 70 Increasing Entry Low entry threshold •• All India Bar Exam need to increase the entry threshold to create raise the quality of 65 86.9 threshold legal professionals in India like ICAI 57 47 40.1 42.8 Legal Infrastructure Poor •• Requires more courtrooms and infrastructure 31 31 36 25 24 26 Right to Advertise Unknown •• Advocates and Legal firms can create greater brands when allowed to advertise. This 18 will help in better quality of service
2006 2007 2008 2009 2010 2011 2012 2013 2015 2016 2026 (E)
Direct Contribution Indirect Coutribution
130 131 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Figure 63: Total contribution to Employment (in %) FDI in tourism and hospitality sector $0.8 billion. Hotel bookings is one of the hotels located around UNESCO World projects sanctioned during FY2016-17 The tourism and hospitality sector least penetrated segment within the Heritage sites (except Delhi and Mumbai). include Belur (West Bengal), Dwarka 7.05 generated FDI inflows of INR 73.5 billion in travel categories in India; online bookings 100% FDI is allowed under the automatic (Gujarat), Hazratbal (Jammu & Kashmir), 6.55 2016, and a cumulative inflow of INR 544.48 account for 16% of the hotel booking route in tourism & hospitality, subject to Kanchipuram and Vellankani (Tamil 6.15 297 5.8 billion during Jan 2000 to Dec 2016. currently. In Europe, 70% of hotel rooms applicable regulations and laws. 100% FDI Nadu). 5.5 5.5 5.31 are booked via online booking portals allowed in tourism construction projects, •• Visa approvals: As on 31 December, 4.94 Currently, 100% FDI is allowed under while it stands at 35%-50% in the US. including the development of hotels, 4.63 2016 the ‘e-visa’ facility is available under 4.37 the automatic route in the tourism & resorts & recreational facilities •• Destination Management 3 sub-categories i.e. ‘e- Tourist Visa’, hospitality sector. 100% FDI is also allowed 3.2 3.2 Organization (DMO): These are •• State incentives: Incentives offered by e – Business Visa’ and ‘e – Medical Visa’. in tourism construction projects, which marketing organisations which initiate state governments include subsidised E –Visa facility has been extended to the include development of hotels, resorts & a standardized procedure to market land cost, relaxation in stamp duty, and nationals of 161 countries.303 E-medical recreational facilities.298 a destination. They are designed to exemption on sale/lease of land, power Visa provides visa for foreign travellers •• Domestic expenditure on tourism: bring visitors in touch with marketers tariff incentives, concessional rate of visiting India for medical treatment under Domestic expenditure on tourism has (providers of tourism products and interest on loans, investment subsidies/ Indian systems of medicine. grown significantly; by the end of 2016, services). They are perceived to manage tax incentives, backward areas subsidies •• Pre-loaded sim cards to foreign tourists: 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 the market is projected to reach $96 a destination evolving into a "total and special incentive packages for mega In February 2017, the Ministry of Tourism billion, representing growth at a CAGR of destination management system". Some projects. Incentives are provided for announced to provide pre-loaded sim Direct Contribution Indirect Coutribution 5.4% during 2008– 16, which is further of the international DMOs are present in setting up projects in special areas – the cards to foreign tourists arriving India on anticipated to increase to $332.4 billion India. North-east, Jammu & Kashmir, Himachal e-Visa. Bharat Sanchar Nigam Ltd. (BSNL) by 2025.299 Pradesh and Uttarakhand. will distribute pre-loaded SIM cards to Growth drivers for the industry In 2016, Foreign Tourist Arrivals (FTAs) During January-December 2016, a total of •• Capital investment in the tourism •• Incentives from the Ministry Of foreign tourists on e-Visa, initially at New in India was 8.9 million as compared to 1.07 million tourists arrived on e-Tourist sector: Capital investment in the tourism •• Robust demand: Foreign tourist arrivals Tourism: These include assistance in Delhi airport and later in the remaining 15 8.3 million in 2015294. This is forecasted Visa as compared to 0.44 during January- and hospitality sector is expected to expected to increase at CAGR of 7.1% large revenue-generating projects, international airports.304 to increase at a CAGR of 7.1% during December 2015, registering a growth of increase at a CAGR of 6.2% during over 2005–25. India recorded 8.9 million Support to PPPs in infrastructure •• Multi-Lingual Tourist Info Line: The 2005–2025. According to the World Tourism 142.5%. The growth was mainly attributed 2009–16. By 2025, investments are foreign tourist arrivals in 2016, listing an development such as viability gap ministry operates a 24x7 Toll Free Organisation, foreign tourist arrivals in to introduction of e-Tourist Visa for 161 expected to increase to $125.9 billion.300 annual growth of 4.5% over the previous funding, Schemes for capacity-building of Multi-Lingual Tourist Info Line in 10 India is expected to reach 15.3 million by countries as against the earlier coverage of International hotel chains are increasing year. By 2020, medical tourism industry service providers. International Languages to provide 2025. 113 countries.296 their presence in the country, as it will of India is expected to touch $8 billion.302 •• Infrastructure: More than half of the information and assistance to domestic account for around 47% share in the A separate board has been formed by Ministry of Tourism’s Plan budget is and international tourists while travelling The share of FTAs in India during December Foreign exchange Earnings (FEEs) from Tourism and Hospitality sector of India by the Ministry of Tourism for this purpose channelized for funding the development in India. 2016 among the top 15 source countries tourism was INR 1,556.50 billion in 2016, 2020 and 50% by 2022, increasing from which is expected to drive the growth in of destinations, circuits, mega projects was highest from US (18.33%) followed by, witnessing growth of 15.1% from 2015. 44% in 2016. coming years. •• Set up of National Medical and as well as rural tourism infrastructure Bangladesh (13.02%), UK (11.71%), Australia Wellness Tourism Board: The ministry •• Collective government spending •• Growing demand: Domestic expenditure projects. (5.43%), Russian Fed (4.18%),Canada has constituted a National Medical & on tourism: Government’s collective on tourism is expected to rise due to the (4.13%), Malaysia (3.38%), Germany (2.80%), Wellness and Tourism Board to provide spending on tourism and hospitality growing income of households. A number Government Initiatives China (2.53%), Sri Lanka (2.25%), Singapore institutional framework and promote sector, in 2016, stood at around $2.2 of niche offerings such as medical (2.12%), France (2.01%), Japan (1.79%), •• Swadesh Darshan: 13 thematic circuits medical tourism, wellness tourism and billion.301 During 2008-2016 (till March tourism & eco-tourism are expected to Afghanistan (1.38%), and Nepal (1.34%).295 have been identified for development: Yoga, Ayurveda Tourism and any other 2016), collective government spending on create more demand. North-East India Circuit, Buddhist Circuit, format of Indian medicine covered by tourism sector is expected to grow at a •• Attractive opportunities: India has Himalayan Circuit, Coastal Circuit, Krishna Ayurveda, Yoga, Unani, Siddha and CAGR of 6.8%. By 2025, the government’s Figure 64: FDI in Tourism (in INR billion) a diverse portfolio of niche tourism Circuit, Desert Circuit, Tribal Circuit, Eco Homeopathy (AYUSH). collective spending is expected to products–cruises, adventure, medical, Circuit, Wildlife Circuit, Rural Circuit, 73.54 increase to $7.0 billion. •• Adventure Tourism: The Ministry has 70.03 wellness, sports, MICE, ecotourism, film, Spiritual Circuit, Ramayana Circuit & 48.65 issued guidelines for the approval 22.32 •• Online travel (OTA): OTAs offer single rural, and religious tourism. Heritage Circuit. During FY2016-17, the of Adventure Tour Operators. It has marketplace for all travel related needs. ministry has sanctioned 31 projects •• Diverse attractions: India offers also formulated a set of guidelines on Online Accommodation Reservation under this scheme, with Central Financial geographical diversity, attractive Safety and Quality Norms on Adventure Services specialize in accommodation Assistance of INR 26 billion and INR 5 beaches, 30 World Heritage Sites and 25 Tourism as basic minimum standards for look-up and bookings. Rate parity is billion. biogeographic zone. adventure tourism activities. the offering of same price for the same •• Pilgrimage Rejuvenation and Spiritual room night regardless of the distribution •• Policy support: The Visa on Arrival •• Trained manpower: As part of Augmentation Drive (PRASAD): 25 channel. Indian online hotel industry to scheme was extended to 180 countries the Ministry’s initiative to generate sites of religious significance have be $1.8 billion by 2016 from the current in 2016. A five-year tax holiday has been professionally trained manpower been identified for development 2013 2014 2015 2016 offered for 2-, 3-, and 4- star category to meet the needs of the tourism & under the PRASAD Scheme. The
132 133 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
hospitality industry, 42 Institutes of Hotel •• Special boards: The Ministry has set up a advantage of its 7,500 km coastline to tap Improving inner capabilities such as Quality •• Aggressive tourism marketing Management (IHMs) (21 Central IHMs Hospitality Development and Promotion growth potential of the cruise tourism of People engaged in Tourism & Hospitality strategies: Tourism ministry should and 21 State IHMs), and 10 Food Craft Board (HDPB), which will monitor and segment through its Sagarmala Project – through better program/trainings for surely pursue aggressive online and Institutes (FCIs), have been set up with facilitate hotel project clearances/ which was established in July 2015. deploying quality people across this other marketing strategies to promote financial assistance from the Ministry of approvals. sector; Infrastructure and Connectivity India as a must-visit location. Whether •• Rural tourism: The potential for the Tourism. of the network spread for tourism, it is broadcasting ‘Incredible India’ •• Project Mausam: Under ‘Project development of rural tourism in India is Professionalism, Hygiene and Safety to campaigns abroad, holding tourism •• International Advertisement Mausam’ the government has proposed high as most of its population resides provide world class facilities for tourism. seminars or offering Indian locations to Campaign: The ministry has launched an to establish cross cultural linkages and in rural areas. This can benefit the local promote foreign film productions in the International Advertisement Campaign to revive historic maritime cultural and community economically and socially, Conclusion and recommendations country. in electronic and digital media for FY economic ties with 39 Indian Ocean and facilitate interaction between tourists To promote multiple tourism (Rural, 2016-17 on leading Television Channels countries. In 2015, Government of India and locals for a mutually enriching •• Sell niche tourism areas separately: Adventure, Medical, Heritage, Luxury, including CNN, BBC, Discovery & TLC linked China Silk Road project with Project experience. India is currently in a position where Eco-tourism and Pilgrimage) tourism, the , Euro News, History, CNBC, Travel Mausam. it can make a cash cow out of selling •• Eco-tourism: India is often termed as following factors need to be considered: Channel, CBS (USA), Tabi (Japan) and RMC customized experiences, luxury spa a hotspot of biodiversity and this rich (France) and Google. Future prospects of the industry •• Allow corporate sponsorship for sessions, rare animal sanctuaries, natural heritage is unparalleled in many heritage buildings: An effective solution religious pilgrimage tours and extreme •• MoUs for developing tourist places in •• Medical tourism: The presence of ways. Such a valuable resource base for this would be to outsource the Himalaya tours. states: As on February 2017, the State world-class hospitals and skilled medical gives impetus for the practice of variety maintenance and exterior lighting of the Governments of Chhattisgarh, Gujarat, professionals makes India a preferred of alternate tourism forms, many of which heritage monument to corporate giants Karnataka, Rajasthan and Uttarakhand destination for medical tourism. India’s are already in existence. in return for some branding opportunity have signed 86 MoUs for developing earnings from medical tourism could at the monument. tourist places in their respective states. exceed $8 billion by 2020.305 Tour Potential for global expansion operators are teaming up with hospitals The rising number of foreign tourist •• Create experiences, not sightseeing •• Allocation for North- Eastern regions: to tap this market. arrivals from different parts of the world spots: The tourism industry which The Ministry provides complimentary suggests that there is huge scope for India includes the government and private space to the North Eastern States, •• Cruise tourism: Cruise shipping is one to attract the foreign tourists. Below is the players, needs to manipulate destinations in the India Pavilions set up at major of the most dynamic and fastest growing comparison of number of arrivals in India as experiences and not sightseeing international travel fairs and exhibitions. segments of the global leisure industry. during 2014 and 2015 with some of the point alone. Be it botanical gardens, It also provides Marketing Development Government of India has estimated that countries/geographies experiencing high architectural monuments, backwaters, Assistance (MDA) to tourism service India would emerge with a market size number of arrivals.306 the Himalayas, the tourism ministry providers to undertake promotional of 1.2 million cruise visitors by 2030 – should see the potential of a place to activities overseas and also in India. 31. Moreover, India is looking to take attract tourists rather than merely banking on the natural beauty of a place.
•• Build great roads and access points: It is Country/Geography 2014 2015 Percentage change 2015/14 critical to build good roads and approach South Asia 1694857 1946207 14.8 points to a certain tourist destination. Packaged train travel, easy bus Western Europe 1860580 1880203 1.1 connections and safe car hire services North America 1387468 1494930 7.7 with knowledgeable personnel combines with great freeways and highways should South East Asia 685805 700298 2.1 be explored. East Asia 546792 555770 1.6
West Asia 413678 417616 1
Eastern Europe 422278 331051 -21.6
Australasia 286294 312101 9
Africa 280754 293569 4.6
Central & South America 69926 70831 1.3
Not Classified 30667 24557 -19.9
134 135 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
19. Wellnes
Around two to three decades back, the healthcare, beauty, hospitality and more, next 5 years.308 The industry can achieve Industry profile wellness industry saw its nascent and participating in it directly or otherwise. The about $23 billion by 2020.309 The rural unstructured, yet promising beginnings. young population; emerging middle class; population too is joining the mainstream The concept of wellness has since become rising disposable incomes; and growing with improvement in linkages with the cities a globally accepted phenomenon. consumer interest in health, travel, and by roads, telecommunication and the firms Indian traditional yoga, interestingly, new experiences are all fueling strong reaching out to the people in villages and has become the favorite flavor and an demand–leading the Indian wellness small towns. integral part of all wellness spas, centers industry on a growth trajectory. India’s and festivals worldwide. There has been wellness market in 2015 was estimated at The wellness market offerings are an unprecedented and steady growth approximately $13 billion and it is expected segmented on the basis of services as in this sector, marked with sectors like to grow at a CAGR of nearly 12% for the follows:
Segments Services
Beauty Care Salons and Beauty Centers, Cosmetic treatments
Alternate Therapy Treatment Centers for Ayurveda, Homeopathy, Unani, Naturopathy, etc.
Spa & Wellness Centers Spas & Rejuvenation Resorts
Nutraceutical Dietary Supplements and Functional Foods
Fitness Products & Centers Fitness Centers, Slimming Centers, Gyms Influenced by modern lifestyles and lead to a state of holistic health, ranging Globally, wellness industry represents a increased awareness, wellness industry from physical, mental, social to emotional, $3.7 trillion economy, with a growth of is growing at a tremendous pace with an spiritual wellbeing. The whole idea of 10.6% from 2013-2015.307 Majorly there are Beauty Care Alternate Therapy generating approximately $0.6 billion. India increasing share of the global economy. wellness is going back to the ancient ten sectors which are part of the wellness Increasing awareness and growing India has an unmatched heritage will continue to be a hot spot for medical Wellness is defined as the active pursuit times—becoming preventive rather than ecosystem, including beauty, tourism, spa, aspirations of consumers to look good represented by its ancient systems of tourists that seek travel services that of activities, choices, and lifestyles that curative. fitness. has opened up the beauty and wellness medicine which are a treasure house of incorporate diverse wellness packages. market. Currently, it is estimated at $6.5 knowledge for both preventive and curative Figure 65: Global wellness economy billion with a focus of moving the sector healthcare. Under its prime focused ‘Make The India's Spa Industry is relatively young towards a more organised space.310 This in India’ campaign, government is giving by global standards, however, it is also sector is expected to grow with a CAGR impetus to meet the rising demand in India the home to key pillars of the ancient and of 24% in next ten years posing huge and abroad for the ancient healthcare modern spa industry, Ayurveda, Yoga, Complementary growth opportunities for FMCG and other systems. The Government of India has Meditation, etc. Such very authentic & Alternative Wellness companies.311 We are also seeing a shift in set up a dedicated Department of Yoga, services related to the country can be Medicine Tourism consumers from modern beauty methods Ayurveda, Naturopathy, Unani, Siddha and incorporated at a level not as easily $199b Thermal $563b to traditional remedies, including herbal, Homoeopathy (AYUSH). The department obtained around the globe. / Mineral Ayurveda etc. A few of the factors driving is entrusted with the responsibility of Springs growth in this industry are as follows: developing and propagating officially Regionally, it is mainly dominated by North Preventive & $51b 01. Demographics of India, approximately recognized systems, namely, Ayurveda, India followed by Mumbai in West. South personalised 60% population are in the age bracket Yoga, Naturopathy Siddha, Unani, and India is more known for its Ayurvedic Spa Beauty & Medical and of 15-54. 312 Interestingly, there is a Homoeopathy. flavor. Thermal bathing, advanced beauty Industry Anti-Aging Public Health rising aspiration among Indian/India's treatments, medi-spa services, and male $99b $999b $534b men towards the beauty care which The AYUSH sector has an annual turnover grooming are becoming increasingly has resulted in a growth of 42% in the of approximately $2 billion.314 The sector popular around the world. However, Workplace last five years in the men’s grooming is dominated by micro, small and medium India has yet to fully explore application Wellness market. enterprises, accounting for more than 80% of these trends within its own spa and $43b 02. Easy access to beauty and wellness of the enterprises, located in identifiable wellness market. Horwath Health and Wellness products through online shopping; geographical clusters. Wellness strongly believes that, in India, Healthy Eating, Fitness & Lifestyle currently around 62% young financial opportunities exist beyond luxury Nutrition & Mind-Body Real Estate consumers buy online in metro cities.313 SPA & Wellness Centers hotel spas. The fact that Ananda in the Weight Loss $542b $119b 03. Increase in the number of beauty Substantial expansion in travel and tourism Himalayas, located in Narendra Nagar, $648b salons and spas in the country. industry as well as a rise in income has Uttarakhand, is India’s only currently 04. Rise in awareness and availability of made Spa as one of the fastest growing operational destination spa of global Herbal and Ayurveda products. industry in India after America and repute clearly demonstrates room for Source: Global Wellness Institute Europe. Annually, Spa industry in India is growth in this market segment.
136 137 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
On the other hand, the large domestic grow in these cities, high real estate costs •• A vast infrastructure with a dedicated forms the core target group for D. Facilitators: Facilitators include Conclusion and recommendations audience also likes to experience ‘western/ will drive players to look at tier 2 and 3 Central Council of Indian Medicine, wellness products and services.318 employers, insurance companies and As more people around the world turn to modern/foreign’ spa and wellness cities for growth. Hence, a higher growth in Central Councils of Homoeopathy •• India's growing middle-class is schools, who are likely to play a key wellness focused activities and lifestyles modalities. So, a clearly identified and the premium and mid-end of the market is (Regulatory Councils) and five Central fueling demand for wellness role in encouraging and inculcating to mitigate their mounting stress and well-structured differentiator for every anticipated. Councils for Research, one for each products. pro-wellness habits among consumers deteriorating health, the wellness economy respective spa needs to be developed. AYUSH system. There are seven National •• Increase in discretionary spends is going forward. Employers, too, is positioned to expand at a healthy pace. Drawbacks are the scarcity of trained team Growth drivers for the industry Institutes (two for Ayurveda and one each positive for the industry. have started providing a supportive Wellness sectors are positioned to grow as members and the missing know how of for other systems), two North-eastern ––Rising incomes are resulting environment to promote wellness as an increasing share of the India economy, •• An emerging global middle class with modern management of spa’s services and institutes to cater to needs of a specific in increasing discretionary part of employee's lifestyle. propelled by demographic and consumer rising disposable income and favorable processes. In addition, Indian developers area, two Pharmacopoeia Laboratories, expenditures. E. Government: The Government wears trends, as well as an evolving collective (young) demographics focused on tend to call in specialists (like us) far one Pharmacopoeia Commission for ––Aspirational products and multiple hats in its roles as a provider, consciousness toward global wellbeing. improving the quality of life and their too late, thus leading to not always well Indian Medicine, a National Medicinal services are finding many takers. facilitator, enabler and regulator in the Given the potential in this sector, a gradual future outlook. conceptualized spas. Plants Board and a public sector •• Growing urbanization is resulting in industry. Recognizing the importance improvement over the below aspects •• An increasing consumer interest in undertaking for manufacture of higher awareness levels. of this industry, the Government has would surely lay a strong foundation to tap Nutraceutical maintaining and improving lifestyle and standardized Ayurveda and Unani ––The urban population constituted already initiated some measures to this uncommon sector, with high potential Riding high on around 20% annual health and moving from curative to medicine. 28% of total population in 2001, stimulate growth. business opportunities: growth in past six year, the nutraceuticals preventive healthcare this is estimated to increase to •• An increasing inbound tourism from the •• Skilled manpower: There is an urgent market in India is expected to double to 37% in 2025. Government initiatives •• A collective, growing awareness and USA, UK, Australia, and UAE for Ayurveda, need to skill the workforce and standards $4.1 billion by 2020.315 Drug Marketing B. Providers: Providers offer wellness education among the consumers around Yoga, etc. •• Make in India: In India, a separate need to be defined which should be and Manufacturing Association (DMMA) services and products to meet the wellness. Ministry named AYUSH has been formed, followed across the industry. Private estimates that the nutraceutical industry •• A strong growth in wellness tourism, hygiene, curative and enhancement which will have a Department for YOGA. players can work with government to is likely to grow by 16% CAGR over the next •• A strong support by the Government faster than global tourism, as more needs of the consumer. Wellness The market has the potential to generate formulate guidelines on education and five years. Rise in lifestyle diseases such by recognizing “Wellness” as one of consumers aspire to higher levels of services bouquet accounts for 40% three million job opportunities. India training institutes. as diabetes, blood pressure, obesity and the priority sectors in its Make in India wellness and incorporate this intention of the total wellness market in India. is also the second largest exporter of cardio vascular problems are driving the campaign. into their travels. India is ranked 12th in the The beauty care market comprises of •• Minimum wage rate: There is need to fix Ayurvedic and alternative medicine in the high demand of nutrition supplements. Global Wellness Tourism ranking in 2015. cosmetic products, salons and cosmetic the minimum salaries for different levels •• An increasing interest in natural world. The country has also developed Currently this market is dominate by treatment centers of training with standard pay scale for remedies and old traditions of Ayurveda, •• Switzerland recognized CAM vast AYUSH infrastructure comprising of multinationals and pharma giants. •• The nutraceutical segment skilled manpower. Yoga, Naturopathy, Unani, Siddha and (complementary and alternative 736,538 registered practitioners. The sector also has issues regarding comprises of Health & Wellness Homoeopathy (AYUSH) and herbal medicines) in its public health system •• Curb malpractices: To create strong quality, consistency and compliance. Food and Beverages, Dietary •• Skill India: A national level initiative with products. A vast reservoir of natural flora in 2009. The recognition of Ayurveda in industry lobby to liaison with government Therefore, there is a strong push by the supplements. the partnership of the government, and fauna and also ancient texts and Swiss public health system exemplifies its for better monitoring and compliance industry association towards encouraging ––Health and wellness food and employers and other important knowledge that have made it an authority efficacy in the public health system and within the industry. Further, a team small players to create sufficient beverage1s includes three sub- stakeholders to create and lead a skill in the field of AYUSH. therefore it could be replicated in other should be setup to conduct surprise infrastructure to meet labelling, global segments; Fortified foods and development initiative for the beauty and countries of the world. checks on a regular basis to check the manufacturing practices and quality •• A global trend of seeking experiences beverages (FFB), Naturally healthy wellness industry has been envisaged. usage of sub-standard, ineffective and control norms so that they are able to that are rooted in authenticity and •• CAM has witnessed an increase in use in (NH) products, Better for you Beauty and Wellness Skill Development harmful products by service providers compete with bigger players. nature therefore leading towards a global recent times not only in North America, (BFY) products Council (BWSSC) established to ensure with a view to regulate costs. recognition of tradition India wellness Europe and Australia but also in Asian •• The spa and wellness centers the generation of skilled manpower Fitness Products & Centers practices. countries including India.317 segment is in the nascent stage but in the sector, create career paths in •• Introduce quality norms: Government The health and fitness industry in India growing rapidly. roles existing within the unorganized should define quality norms to bring •• A rising cost of unwell workers is is poised at an inflection point and is Competitive profile ––The industry is highly fragmented and organized segments of the Beauty standardization and uniformity within the encouraging the employers to spend chiefly driven towards wellness, fitness, Characteristics of the stakeholders and with no clear industry leader and and Wellness industry and ensure industry. more on employee wellness as a presentability, and confidence. Fitness key growth drivers of the wellness market/ there is an opportunity for new active participation of the different means to lower healthcare costs, •• Awareness campaign: Consumer industry in India is worth $1.1 billion and network are as follows: players to create value in this stakeholders, i.e., Industry, Academia and improve morale and recruitment, raise awareness programs in the form of is expected to cross $1.1 billion by 2017.316 A. Consumers: Consumers mainly segment learners to ensure a holistic development productivity, and stay competitive in road shows and media channels to The market penetration rate in India is comprise young population with rising C. Adjacent industries: Adjacent of skilled manpower. the market. As companies increase advertise benefits of accredited and non- as low as 0.5% and is mainly fragmented income levels. Increasing need to look industries such as healthcare, their workplace wellness expenditures, •• Digital India: National Health Portal to accredited center. with majority of the market dominated by good and feel good has led these young hospitality, education, media, retail and it generates many related business provide general information on health unorganized and independent gyms. The consumers to seek wellness solutions gaming are capitalizing on the growth opportunities, including a proliferating and diseases and multiple mobile apps organized fitness market is concentrated to meet lifestyle challenges. of the wellness sector to generate number of third-party providers that such as the Swasthya Bharat App have in top eight cities of India—Delhi NCR, •• Indian youth (in the age group of additional revenue streams, leverage supply services, products, and platforms been initiated.319 Mumbai, Bengaluru, Chennai, Kolkata, 15 to 34 years) is the core target existing competencies and offer a (e.g., screening assessments, diagnostic Pune, Hyderabad and Ahmedabad with group, comprising over 34% of the wider array of services/products to tests, incentive programs, wearable more than 60% of top companies located total population. This is expected customers. devices, counselling services, etc.) here. While the market will continue to to cross over 400mn by 2016 and
138 139 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
20. Facility Management Industry profile Figure 66: Facility Management Services in end user industries IT/ITES/BPO/BFSI •• Electrical services like HVAC and maintaining power stations for office buildings
•• Water management for regulating water usage in canteens and washrooms
•• Housekeeping
•• Security
•• Pantry and cleaning
Manufacturing •• Operation and maintenance of HVAC systems
•• Energy management for utilities
•• Soft services like security, pantry, transportation
Retail •• Electrical and mechanical services
•• Housekeeping
•• Security
Healthcare •• Electrical maintenance of OPD, ICU, Facilities management services revolve facilities management will grow at a CAGR With growth expected in the facility around people. It involves maintaining of 17% and reach $19 billion by 2020.320 The management market, several large •• and other critical areas and managing the building facility and Indian facility management services market multinational corporations are entering •• Housekeeping carrying out several non-core business is largely unorganized in the current state and looking to enter the market. Some activities for the organization. These of things. of the leading US players are already •• Pantry and cleaning include hard services like management and operating in India. maintenance of an entire building facility, Facility management services are primarily Infrastructure •• HVAC soft services or business support services, concentrated in and around metros with Future prospects of the industry and energy management services. Services low penetration in Tier II and Tier III cities. •• Housekeeping •• Businesses are constantly making in this sector can range from a single This is due to the presence of a majority efforts to ensure that their facilities and •• Security service, bundled service, or an entire range of office facilities, building spaces, and workplaces are properly maintained, of business support functions for the client developed infrastructure in these areas. focusing attention on the core business Government •• Housekeeping organizations. Among all Indian cities, the two cities activities. Facility management vendors of Mumbai and Pune contribute the •• Catering provide flexibility of outsourcing The facility management services maximum share of over 20% to the facility their non-core activities like heating, •• Security spans across sectors - infrastructure, management services market followed by ventilation and air conditioning (HVAC), manufacturing, IT, and other services Delhi-NCR and Bangalore.321 maintenance and cleaning, plumbing, and (along with future investments). Among IT/ITES/BPO/BFSI •• Electrical and mechanical services several other support functions. end-users, IT/ ITES/ BFSI contributes more Within the end-user segments, information •• Security than 21% of revenue generated by the technology (IT)/information technology •• The facility management services market facility management services market due enabled services (ITES)/Banking, Financial in India is slowly gaining momentum •• Housekeeping to the recent boom and investment in the Services, and Insurance (BFSI) occupy the owing to the rapid infrastructural •• Catering and cleaning segment. Other sectors like healthcare, maximum share of facility management growth expected in the forecast period. retail, manufacturing, and infrastructure services, followed by manufacturing and The facility management sector will •• Horticulture are also gaining momentum because infrastructure sectors. The demand for strengthen its hold in the services sector •• Transportation growth is stemming from increased facility management services is high with and penetrate into other developing investments and initiatives undertaken by growing emphasis on urban development sectors like manufacturing, healthcare, the Government of India. and modernization of office spaces. The and retail. Indian real estate sector is the major •• The growth in BPO, IT, and ITES sectors Global facility management market was driver for the facility management services has stimulated the demand for facility estimated at $1.12 trillion in 2016. The market. With advances in infrastructure management services in India. The US leads the sector with some of its facilities, any positive activity in the real country is the world's largest IT industry, large multinationals present worldwide. estate sector will benefit the market in accounting for approximately 65% of the It is expected that the Indian market for future.
140 141 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
21. Exhibition and Event Service
global IT market. Various hard services •• Among all service lines, facilities •• The Industry is moving towards and soft services are required in most management services are–and will consolidation and ‘Integrated Facility Industry profile of the offices, resulting in a bright future continue to be– the most highly Management Services’ is the emerging for the facility management services integrated industry purchase. trend. Even customers are more market. It is projected that by 2020, an comfortable with a single vendor •• Increasing competition coming from additional 325 million sq. ft. of land in providing multiple services rather than new players in emerging markets will Tier I cities and 300 million sq. ft. of land dealing with multiple vendors. The force companies to search for greater in Tier II and III cities for office space integrated services approach gives major differentiation, and to be innovative in would be created in the IT/ITES industry. cost benefits to the facility management how they adjust their business models The rapidly expanding office spaces in company as well as to the customers, and deliver extra value to clients. IT sector signals positive signs for the making it a win-win situation for both. facility management industry. Facility •• Global warming will be one of the main The growing regulatory and compliance management services in the industry sustainability challenges for the coming requirements have furthered the case of have gradually transformed their role century. To become more energy and integrated services and customers are from an outsourcing service arm to carbon-efficient, societies around the happy to rely on the service providers to a more solution-based channel for world may be forced to restructure take care of these unwanted regulatory business enhancement. With advances their economies and infrastructure. complexities. in technology, it is expected that facility Technological development is squeezing management services will evolve from low-quality labour out of the market The government is also looking towards workplace management to cloud-based and creating new demands for skill sets. professional facility management service solutions and services underlined by People and organizations expect tailored providers rather than relying on in-house Computer Aided Facility Management. products, services and solutions. manpower. The government is becoming Exhibitions are a medium for effective Global exhibition market was estimated MICE destination. India has major MICE more and more stringent with its quality promotion of businesses, products, and at $55 billion and attracts around 260 •• Big and established vendors can cater •• Companies expect their facility centers located in New Delhi, Mumbai, and delivery parameters. This is a welcome to a wide variety of facilities services management and services industry services. They help in lead generation million visitors annually. It is growing at a Agra, Bangalore, Chennai, Cochin, Goa, change for the professional facility compared with small and local vendors. providers to supply individualized and are more effective than advertising significant rate worldwide. The market is Hyderabad, Jaipur and Kolkata. Also major management service providers as it opens Technology will also play a decisive role services that maximize their value campaigns such as online banner poised to witness a huge demand in the 5 star and 7 star hotel chains at these more avenues for them in the government in ensuring delivery capability of facility proposition. Additionally, companies will adverts and newspapers. Companies APAC region and the MEA region. The US, locations have excellent facilities for such sector. Also, with infrastructure management services, encouraging experience increasing employee turnover. that participate in the events, maximize Germany, France, the UK and Spain are activities. development being one of the major focus the need for constant technological Individualization will be prominent as the return from the events by combining top 5 countries in the world in organizing of the government, the facility management upgrades. Facility management has employees and customers increase their it with various marketing techniques meetings. Growth drivers for the industry industry is set to grow with leaps and become a tool that allows businesses demands for individual attention. such as direct mail, public relations, and The Global Exhibition Organizing market bounds as every new infrastructural facility to integrate their noncore activities, e-newsletters. An event is a forum for The Global Exhibition Organizing market is largely driven by an increase in the need •• Corporations are implementing needs a facility manager. focusing attention on core activities. interaction of prospective buyers and generates revenue from the organizations for specialized, effective, and high-quality alternative workplace practices and sellers. of the following exhibitions: One-time exhibition events, which would attract new ways of working to promote Government Initiatives events and permanent facilities. These international buyers to take part in local corporate identity and foster more The various policy initiatives such as Business to consumer (B2C) and exhibitions are not recurring in nature and exhibitions. Social media and search engine efficient collaboration, knowledge RERA (The Real Estate (Regulation Business-to-business (B2B) exhibitions are conducted for a few months or may marketing are also driving the growth in the sharing, flexibility, speed, innovation, and and Development) Act, 2016), GST, held worldwide help provide a platform be prolonged for years. Exhibitions which sector. Ministry of Tourism is emphasizing productivity. Infrastructure Status for Affordable to promote products and services are recurring in nature, are conducted in on the potential of MICE Tourism and the to a wide group of target customers. permanent facilities and have a dedicated Housing, coupled with a strong •• Introduction of foreign players in this new tourism policy has identified it as an infrastructure development plan, is making market is expected to increase in the Vendors organize exhibitions to provide exhibition centre. important product to increase tourism India an attractive destination for foreign coming times. The next wave of urban interaction between the exhibitors revenue. companies to set up operations in the development will occur in areas already and the prospective buyers. Exhibition Indian event industry is projected around country. prone to natural disasters. Facility organizations stage and manage INR 960 billion ($14.5 billion) growing at the The exhibitions provide a platform for management and services industry exhibitions. They select the venue and rate of ~5.2% year-on-year. increased brand awareness, media make provision for facilities and logistics. Conclusions and recommendations managers should prepare contingency exposure, networking, and competitive and continuity plans for a number of MICE (Meetings, Incentives, Conventions monitoring. They enhance direct •• Within the next few years, the facilities challenges. The interactive forum enables sellers and Exhibitions) tourism is growing and interaction between buyers and sellers, management and real estate industries to pitch their products according to the contributing significantly to the global which is essential for doing effective will experience a considerable increase in •• Government regulations including Private preferences of the customers. tourism industry. The entire world business. The exhibitions could generate the demand for outsourcing, integration Security Agencies (Regulation) Act 2005 has witnessed the immense potential ancillary services, new clients, and and globalization of services. and Foreign Direct Investment Policy of MICE Tourism. The government is partnerships. and Goods and Services Tax is building working towards promoting India as a the foundation for a key segment of this sector.
142 143 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Figure 67: Drivers in the Global Exhibition Organising market
Increased demand for business- Effective 1 focused events medium for the promotion 3 of business
Growth in Increased emerging government markets 2 support 4
Source: Deloitte Analysis
'The Exhibition industry is growing at together. The innovations reduce the a robust pace in developing countries probability of disinterested parties such as China, India, Brazil, Russia, and interacting with each other, thereby South America. However, the Exhibition increasing the throughput for the Organizing market in China is larger than exhibiters. Both social media and search other developing countries. This is mainly engine marketing have a strong effect because the country has stable economic on the Exhibition industry and are also growth, and has a higher demand for the expected to drive the market during the Exhibition industry. forecast period.
Conclusion and recommendations Overall, the market will continue growing at Despite these challenges, the Global a high rate during the forecast period due Exhibition Organizing market is growing to an increasing number of organizations significantly because of some emerging establishing themselves in developing trends. Increased innovation in exhibition countries. Supportive government policies formats is one of the trends. These and regulations, outstanding infrastructure innovations allow organizers to offer a for MICE and connectivity with other major customized experience to buyers and destinations worldwide would strengthen sellers by strategically bringing them growth.
144 145 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
1. Cyber Security Industry profile
Emerging Cyber security is related to securing and Market trends •• Rising risks preventing unauthorized access of any There are a number of trends that are ––Social Media Risks: Social media can enterprise asset in which digital data can creating a need for a focused effort to solve be a valuable sales and marketing reside or transcend. The key principles on cybersecurity issues: tool. Inherent in these applications are Opportunities which cyber security operates on are security risks that can put the individual •• Increased sophistication & number of or a company in a compromising •• Secure: securing and reducing the risk to attacks: Despite company efforts, these position or at serious operational, the asset attacks continue. Clients agree they need regulatory as well as reputational risks. to change the way they defend against •• Vigilant: monitoring the enterprise and ––Cloud Infrastructure Risks: Lack and recover from cyber-attacks. the assets continuously to ensure that of best practices on the method there are no threats and •• Rising costs: It used to be that a cyber and content of a cloud services risk breach would cost only the company assessment. Non-transparency of •• Resilient: ensuring the resilience of the remediation but now the costs are service providers presents challenges asset, to self-heal or be able to recover to increasing with the average cost $6.75 to security professionals charged with original state in case of a compromise. million. assessing the risk of cloud services. Poorly defined business requirements The Assets can fall into the area of •• Increased mobility: Companies IT on the part of cloud services buyers information technology, communication infrastructure continues to extend create additional areas of potential risk. Infrastructure, Internet of Things (IoT), beyond the walls of their data center. ––Malware Follows Users to Mobile: physical access and other digital assets With Bring Your Own Device, business With increase in usage of services through which Digital Information can partnerships, mobile and cloud through mobiles and tablets, malware transcend proliferation, data is increasingly exposed pose a threat even to the mobile to higher risks. devices. With these networks growing Defense and military, government, financial •• Underdeveloped cybersecurity more and more common, with increase institutions and corporation etc. collect workforce: With the increase in in complexity, keeping a check on the and store confidential information on sophistication of attacks companies find spread of malware has become an computers and transfer that data across it easier to outsource cyber services to increasingly difficult task. networks. In order to protect this data and firms who can leverage resources for information from being compromised, many clients, thereby decreasing costs cyber security becomes necessary. while retaining expertise. Increasing threats such computer intrusion
(hacking), virus deployment and denial of •• Changing regulations and guidelines:
services are increasing the demand for Governments around the world are cyber security solutions and services. implementing more stringent regulations.
146 147 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Market segments further gets segmented based on Opportunities The market in India has a high potential of Competitive landscape Conclusion and recommendations The Cyber Security market can be broadly customizations and needs of specific The growing concern over geo political growth driven by digital economy initiatives As one analyzes the cyber security Cyber security is no different, we will segmented into three major types into Industry sectors and regions. issues, regulatory matters, organized of the government, along with digitisation competitive landscape, one can draw an face competition from all fronts. We cyber-crime and rising adoption of digital and automation. The digital transformation analogy and learning from the technology as a country need to capitalize on the •• Security Original Equipment Market size technologies like social, mobile cloud, and drive by government creates huge demand and business process outsourcing advantages that we have and rapidly Manufacturer (OEM): The cyber security While it is intuitive to understand the IoT, etc. that further increase the risk of for cyber security services in the country industry, where Indian vendors face accelerate our capabilities and capacity ecosystem comprises cyber security expanding market size of Cyber Security, it compromise, provide new frontiers and and provides new opportunity for the competition from both large global service in the cyber security space by offering a OEM’s such as Intel Security Symantec further gets validated by several research / growth opportunities for Cyber Security. vendors. Further mature markets such as providers as well as niche firms. Further complete portfolio of services to assist Corporation, Hewlett Packard Enterprise, reports: India’s large pool of cost effective English Americas and EMEA where there is a severe in this space Latin America and Eastern enterprises establish their cyber security IBM Corporation, Cisco Systems, Inc., speaking talent (with proven capabilities shortage of cyber security professionals European countries traditionally compete programs, and assist them in the ongoing Rapid7, Inc., EMC RSA, FireEye, Inc., Trend •• The global cyber security market size is in ITES, BPO, KPO types of services), rising and additionally the emerging markets with India for near-shore and offshore management and monitoring of these Micro, Inc., Sophos Ltd., service providers; estimated to grow from $122.45 billion smartphone and internet penetration, like APAC, Middle East & Africa which delivery infrastructure and countries programs, and continue to be trusted system integrators; and enterprises. in 2016 to $202.36 billion by 2021, at a along with public sector investments in face similar challenges, provide new like Philippines, Vietnam, Malaysia, and advisor who partakes in their business CAGR of 10.6%. •• Services: This sub-segment includes digital economy initiatives in India would opportunities for growth for Indian cyber Indonesia are also destinations for transformation and assist in managing consulting – risk and compliance, design •• According to Data Security Council of enable the industry address domestic and security vendors. delivering cost effective IT/BPO services. of cyber risk as the threat environment and integration, training, analytics, India (DSCI), the Indian Cyber Security global opportunities in Cyber Security. constantly evolves. The complete portfolio forensic, etc. Other service providers market is expected to grow nine fold from is described below: include security service providers, $4 billion to $35 billion by 2025. The rise of Uber, AirBnb, etc. which have IT service providers, resellers and disrupted/transformed their respective •• Government spending has increased at technology providers. sectors, has been an awakening call for an average annual rate of 14.5% from several enterprises across the world •• Applications & Solutions: This sub- 2006 – 2017, outpacing investments in and this has caused rapid acceleration segment has solutions categorized any other program, according to Scott of disruptions / adoption of digital in the following broad categories Homa, Senior Vice President for Mid- technologies like social, mobile, cloud, namely risk and compliance, identity Atlantic Research at Jones Lang Lasalle and IoT, etc. as businesses strive to be and access, information leakage and (JLL). Cyber Threat Cyber Analytics & Cyber Strategy and Vulnerability Infrastructure competitive and relevant. rights management, Infrastructure Intelligence Incident Response Governance Management Management •• A 2016 report from BI Intelligence, management (firewall, encryption, estimates that $655 billion will be spent These businesses in their desire to To prepare and combat Anticipate, Plan & Define and implement Providing the enhanced Providing IT PKI, anti-malware and anti-virus, web globally on cyber security initiatives Uberize within and become more Digital against security attacks Prepare. Provide a Cyber strategy and a threat protection to infrastructure filtering, DAC, IDS, etc.), Threat & Incident to protect computer systems, mobile in an accelerated window of time, further prompt response and governance framework critical environments management services management, vulnerability management, resolution to qualified devices, and IOT from 2015-2020. increase the risk of compromise, thus resilience and business continuity and incidents providing new frontiers and growth analytics/correlation. This sub-segment opportunities for cyber security. Description
Provide updates and Providing prompt Support an executive- Providing enhanced Enable companies to feeds on an on-going response and led cyber Governance, threat protection to optimize, secure, Cloud Services loT Cyber Security basis regarding malign resolution assistance to Risk and Compliance critical and fragile manage and support •• Global Cloud Market •• Global loT Market Size: •• Enterprise security happenings across the qualified incidents program customer environments availability and globe to prepare and performance of $208.4 billion $1.7 trillion by 2020 spending(hardware, softwere, combat against security infrastructure services) in India is around 1.12 •• Indian Cloud Market •• Indian loT Market Size: attacks billion in 2016, upto 10.6 percent $ 16 billion by 2020 $15 billion by 2020 from $1.01 billion in 2015 and is Design •• Growth Drivers for IT •• Growth Drivers for IT Services expected to reach $1.24 Billion In Services 2017 Implement •• High loT Security Spending (348 •• Digitisation million in 2016) •• As per Gartner, India Security Market Operate is expected to grow 10.6 Percent in •• Payment Sector •• Security Services 2016 •• Government Services
•• Aadhar, e-KYC
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2. Northeast India
In this journey of race to the top, India •• Cyber Security Incubation, R&D and needs to position itself as the security #MakeInIndia: Create cyber security Industry profile provider to the world, by building an parks or expand the mandate of STPI, ecosystem of cyber security services, SEZ etc. and create special incentives solution and technology providers. This for creating products intellectual segment will need further incentives property, innovation of services in cyber to incubate and grow at a rapid space security areas. This will help Indian to capture market share from the companies innovate and provide cost competition. Thus India should take bold effective security solutions and services steps in the following: (#MakeInIndia) for the global markets, which is currently dominated by the US •• Cyber Skilling India: Revisit the and European vendors. curriculum at school and colleges and revamp it to adapt to the changing needs and establish a strong foundation •• Data Protection, Ownership and in cyber security at a very early Jurisdictional Rights: As India embarks stage. Further incentivize private and on being the security capital of the world, government training institutes to providing managed security services establish and impart re-skilling of cyber from state of art cyber security centres, security training to the vast pool of we should consider provide explicit Data professionals in existing work force. This Protection, Ownership & Jurisdictional will create a vast pool of skilled workforce rights to businesses who may want to that can be used to support domestic have their data reside in India, as a logical Northeast India comprises eight states– and Sikkim. It is one of the most resource Some of the driving factors are discussed and global needs. extension of their own country. This will Arunachal Pradesh, Assam, Manipur, rich regions in the country and is endowed below: further turbo-charge the adoption of Meghalaya, Mizoram, Nagaland, Tripura, with a diverse range of natural resources. •• National talent search: Create the ability remote cyber security centres. to constantly search and identify the best Driving factors for NE talent across the country and provide •• Authentication as a Service: them state of art facilities to further Authentication will continue to be a •• The region has a long international border of almost 4500 km and shares border enhance and develop their cyber security challenge across the world. Leveraging Strategic with – Bangladesh, Bhutan China, Myanmar and Nepal skills and contribute to the nation and the the state of art authentication capabilities Location •• It has potential to be developed for boosting trade with ASEAN countries private industry. and significant scale established by the Government of India for the Aadhaar •• Ease of doing business in India: Simplify environment, we should explore the procurement processes within the •• Most state in North East have an education index above 60 and the level of opportunity of establishing a trusted government, to provide a major boost Affordable education is alleged to be higher than that in other parts of the country environment to provide authentication as to the domestic security industry and Labour a service across the world. •• Presence of a youthful population and labour at affordable rates help security service providers address emerging digital economy opportunities in India. •• Presence of a diverse range of natural resources and crops – tea, bamboo, etc. Natural •• Almost 52% of the region has forest cover and has abundant water resources Resources •• NER supplies 10% of the gas and 12% of the oil requirements of India
•• Each of the eight states offers its distinct culture and heritage
Cultural •• There are 3 UNESCO identified world heritage sites located in this region
•• NE Tourism Circuit being developed under the Swadesh Darshan scheme
•• Plans of investing INR 920 billion for development of roads and railways
•• Under the “Special Accelerated Road Development Programme in North- East Government (SARDP-NE), the Trans-Arunachal highway is being developed Focus •• Each Central Ministry is required to spend 10% of its budget in the North East
•• Government has a INR 1.3 trillion plan to double O&G production in NE
150 151 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
Combining the strengths of the Northeast Tourism in Northeast folk dance and music in the Northeastern •• Five year tax holiday for two, three, and on the northeastern states of the country, NERAMAC (North Eastern Regional region and the focus of the Central Northeast India comprises eight states region together offers an opportunity for four star category hotels located around this virtually unexplored region can be Agricultural Marketing Corporation Limited) Government, certain industries (Tourism, namely Arunachal Pradesh, Assam, development of tourism in the region. UNESCO world heritage sites in India. developed as a tourism hub based on is considering setting up the following Logistics, Food Processing, IT & ITES) with Manipur, Meghalaya, Mizoram, Nagaland, Each state in the region has its own Three such UNESCO sites exists in this different themes such as adventure, three projects–a Central Packaging Centre potential for attracting investment in the Tripura, and Sikkim. The location of the distinct feature and together the region is region–two in Assam and one in Sikkim. wildlife, eco-tourism, wellness tourism, at Guwahati, multi-food processing plant Northeast region have been detailed in this region is strategically important as it shares endowed with diverse tourist attractions. cultural tourism, tea- tourism and at Silchar, Assam, and modernization of •• A six week training program has been document. its border with Bangladesh, Bhutan, China, Of the 35 UNESCO identified World pilgrimage. The region’s proximity to the pineapple concentration plant at Tripura.324 launched for the age group 18-28 years and Myanmar. The natural beauty of the Heritage Sites in India, three are in this South-East Asian Tourism Hub is an added to achieve better tourist satisfaction place, rivers and mountains, Buddhist region–Kaziranga Wildlife Sanctuary and advantage. Future prospects for the industry in terms of availability of skilled tourist monasteries, serene natural environment, Manas Wildlife Sanctuary in Assam; and facilitators in Northeast. •• Northeast, and in particular the state of exotic flora and fauna, unique tribal culture, Khangchendzonga National Park in Sikkim. Food Processing in Northeast Assam, is the largest tea producing state The North Eastern Region holds lot of Future prospects for the industry in India. Development of blending and potential for food processing as the Figure 68: Total number of tourist arrivals in North East India in 2015 (in million)322 mixing services holds good potential in •• Niche tourism sectors like medical weather and adequate availability of water the region provided new infrastructure tourism, eco-tourism, and wellness are conducive to food cultivation and 8.06 3.53 like that of the existing ICD (Inland 5.52 tourism offer good opportunities in suitable for growing large variety of fruits Container Depot) Amingaon, Tea parks, the tourism industry. Northeast has a and vegetables. The Central Government etc. are developed in the region. plethora of attractions to be developed is trying to develop food processing sector for niche tourism. in Northeast through its schemes of •• The demand for organic products is Mega Food Park, Cold Chain, Abattoir, and growing and the North East region •• Development of the tourism sector In MillionIn development of Food Testing Laboratories. has the potential to become the 0.15 has potential to benefit other ancillary 0.76 organic farming hub of India. Sikkim 0.067 0.067 0.4 services providers such as facility 0.74 Government initiatives has already turned completely organic management, banking and financial The Government of India approved a and farmers in other region can be services providers, and entertainment 2015 Arunachal Assam Manipur Meghalya Mizoram Nagaland Tripura Sikkim package of fiscal incentives and other educated and supported to completely service providers. Pradesh concessions for the North- Eastern region reject chemicals. This can create huge •• Northeast India has been largely including Sikkim namely, ‘The North East impetus to the setting up of various food Source: Annual Reports of Ministry of Tourism, Government of India untapped till date and the focus of the Industrial and Investment Promotion processing services and organic value Central Government on this region Policy (NEIIP), 2007’, effective from 1 April, chains in the region. The number of tourist arrivals in Northeast and Promotion Board to monitor and •• Provision of complimentary space to the under the Swadesh Darshan and Prasad 2007, which envisages large number of •• Agricultural extension programs are India has increased from 6.43 million in facilitate hotel project clearances. Some of Northeastern states in India Pavilions schemes will provide the requisite incentives/subsidies namely, Excise Duty conducted in Assam for technology the year 2011 to 8.06 million in 2015 at the key initiatives are mentioned below: set up at International Travel Fairs and impetus to tourism related infrastructure exemption, Income Tax exemption, Capital transfer to the tea growing farmers. a CAGR of almost 5.8%. In the last few Exhibitions. projects in this region. In 2016 alone, four Investment Subsidy, Interest Subsidy, etc.323 •• Introduction of the Swadesh Darshan Similar extension services can be years there has been a steady rise in the projects have already been sanctioned. scheme to promote theme based tourist •• 100% central financial assistance to the •• 3 Mega Food Parks have been sanctioned provided to the food processing setups number of domestic and foreign tourist circuits in the country. The Northeast Northeastern states for organizing fairs •• Skill development initiatives targeted for for this region, one each in Assam (which in order to improve competence of arrivals in the region, however Northeast India Circuit (Paradise Unexplored) has and festivals. tourism will create requisite talent pool has been made operational), Mizoram the farmers and adoption of new India still accounts for less than 1% of been identified as one of the twelve for the tourism industry in Northeast and in Tripura. technologies.325 the total tourist arrivals in India. This •• Ministry of Tourism, as part of its ongoing thematic circuits under this scheme. India and that too at affordable rates. may be attributed to the lack of proper activities undertake several outdoor •• 5 Cold Chain projects have also been Infrastructure projects amounting to Conclusion and recommendations infrastructure, inadequate marketing, and media campaigns in the international •• The development of the Northeast India sanctioned in Assam, Manipur, Mizoram around INR 3.5 billion has already been There is a lot of potential around scarcity of skilled manpower and absence and domestic market to promote various Circuit under the Swadesh Darshan is which have a capacity of 11500 MT of cold sanctioned under this scheme for the developing food processing industry of a broad tourism policy for the region as tourist destinations. It undertakes special expected to generate greater demand storage, 0.75 MT/per Hr. of IQF capacity Northeastern region. in the Northeast, given its proximity to a whole. campaigns on Northeast region to for tourism and accommodation facilities. and 68 Reefer Trucks. South East Asian markets, being home to •• Introduction of the PRASAD scheme promote tourism in this region. The expected increase in demand •• 8 Abattoirs projects have also been diverse variety of fruits and other crops Government initiatives (Pilgrimage Rejuvenation and Spiritual combined with the five year tax holiday •• International Tourism Mart (ITM) is sanctioned which are aimed at and the huge potential of organic farming The Ministry of Tourism has taken a Augmentation Drive) to promote places offered to two, three and four star organized annually with the objective establishing modern Abattoirs and in the region. The continuous focus of the plethora of initiatives to promote tourism with pilgrimages. Kamakhya in Assam is category hotels located around UNESCO of showcasing the largely untapped ensuring hygienic and scientific meat Government of India in setting up modern in the country and specifically in Northeast one such center identified. World Heritage sites by the Government potential of Northeast India in the processing. infrastructure like food parks, export India. From formulation of the National is expected to attract investment in this •• 10% of the plan allocation of the Ministry domestic and international markets. zones and cold chain and efficient policy Tourism Policy 2015 to introduction of region. •• 6 Food Testing Labs for creating of Tourism is earmarked for North East Already four ITMs have been conducted making can make the North East one of the new initiatives like Swadesh Darshan and infrastructure for food safety and quality India. so far. potential food processing zones in India. PRASAD many steps are been taken to Conclusion and recommendations testing. boost the tourism industry. The Ministry Investment in tourism and hospitality has also set up a Hospitality Development has been rising consistently. With the renewed focus of the Central Government
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Logistics in North East •• Growing E-retail segment: Online sales •• The government is also looking at •• Cold Chains: Considering the current Infrastructure snapshot of the north east region in this region has seen considerable developing a viable road network in levels of food wastage and food security traction, especially in categories like this region by increasing the lanes of issues, there is a huge demand for cold Table 7: Key activities / services in logistics music, apparels and books331. The the existing ones and laying out new chains in India. The segment is expected presence of a relatively young population lanes through PPP model to improve to grow at 28% CAGR to reach $13 Transportation Distribution Import/Export has further accelerated this growth. With connectivity. billion by 2017.335 The market is highly the penetration of online retail across all fragmented with organized players Plan Network Design Facility Design Coordination of global freight •• North Eastern Development Finance tier-II cities in India, there has not only contributing only 8-10%. The segment movement Corporation set up by the government Carrier contracting Project Management been a sustained growth of existing has been given infrastructure status and to predominantly cater to the financial courier players but also emergence of FDI is allowed through automatic route Shipment optimization needs of the MSME sector in this region dedicated logistics providers. There is to attract investments in this emerging can resolve the working capital issue for Execute Carrier selection Warehouse management Customs clearance a lot of potential for growth for these sector. businesses venturing in this industry. Shipment tracking Value added services Freight forwarding players as they plan to invest in logistics services and manpower training. •• Regional Connectivity plan in airlines Conclusion and recommendations Freight payment sector may not only revive the dormant Development of transportation and Source: IEEE326 Government initiatives airports (along with development of logistics-related infrastructure such as ancillary services industry) but will reduce dedicated freight corridors, logistics •• Railway Connectivity in North East: commuting time in a cost effective parks, free trade warehousing zones, and Road: The North Eastern region has linkages to international trade). There operates ferry services. The current budget The Northeast Frontier Railway zone manner - existing Guwahati Airport, container freight stations are expected close to 8480 Km of National Highways327 are 11 operational airports (includes two also proposed construction and operation has received a massive push from the Dibrugarh Airport, Silchar Airport, to improve efficiency and transform the running across the eight states (including international airports at Guwahati and of water taxis as one of the key projects in government and is expected to complete Agartala Airport, Shillong Airport, Imphal logistics sector in India. The north east Sikkim). The lion’s share of freight Imphal) in the Northeast and 10 non- the region. connectivity across the states within Airport, and Dimapur Airport to be; and region offers significant opportunities in movement across the region happens operational airports with one green field 2020332. Some of the key tracks in the upcoming new airports at Itanagar, the logistics sector both from the point through roadways and movement across airport coming up in Itanagar.328 Growth drivers for the industry region include: Ceithu (Kohima), Pakyong (Gangtok) to be of view of attracting private and foreign the Chicken’s Neck region (the stretch of –– Jiribam-Imphal, 110.63 km in Manipur •• Emergence of new hubs in tier-II cities: benefitted.334 players as also for expansion of Indian land connecting this region to the rest of Waterways: The Brahmaputra River which –– Badarpur (Assam)-Agartala (Tripura), Locations like Guwahati (Assam), Agartala start-ups and logistics service providers. India through Siliguri in North Bengal) has flows through the region provides Assam 227 km in Tripura (Tripura), and Imphal (Manipur) in north Future prospects for the industry With increasing focus of the current resulted in extreme congestion. with the largest network of navigable –– Katakhal (Assam) to Sairang (Mizoram), east are some of the key emerging government on improving infrastructure waterways in the country. Along with river 135.38 km •• Organized retail: With emergence of hubs330 catering to the increasing across India and efficient policy making the Rail: The railways network across the north Barak, which was recently was declared –– Tetelia (near Guwahati)-Shillong organized players , key trends in the demand across the north eastern states. logistics sector is going to be one of the key eastern states is ~2600 km with broad part of National Waterways (NW16), nine (Meghalaya), 129.9 km industry as seen in the last few years sectors to watch out for. gauge limited majorly to Assam. other rivers the Aai, the Subansiri, the •• International Trade: The region shares –– Dhansiri-Zubza, 91.75 km in Nagaland include: Gangadhar, the Beki, the Dehing, the border with Bangladesh, Myanmar, and –– Harmuti (Assam)-Naharlagun –– Growing acceptance of 3PL (third party IT/ITES in Northeast Air: Civil aviation holds the key of not only Dikhow, the Puthimari, the Kapili and the Nepal (BBIN Corridor) and has huge (Arunachal Pradesh), 21.75 km logistics) players A large chunk of highly educated, computer connecting this region with the rest of India Dhansiri are being developed as a part potential for improving trade with these –– Sivok (Bengal)-Rangpo (Sikkim), –– Government focus on providing literate, English speaking youths from but also boosting trade and commerce of the national waterways329 where the regions and the entire South Asia. 44.96 km support for cold chain and logistics the Northeast are now working in ITES- (both within the region as well as providing state inland water transport department industry •• Development of multi-modal hubs: The BPOs across the country. The fact that –– Emergence of 4PL players which are government is looking at development the Northeastern states have a legacy of Table 8: Snapshot of infrastructure in the North Eastern States of India involved in management of 3PL players of multi-modal hubs including road, missionary schools, where good English is and looks at the entire supply chain of railway, ports and aviation and inland taught is coming in handy for the industry State Roadways Length Rail Network Length Operational Airports Non-operational the organization (Km.) (Km.) Airports waterways which would act as great and offers a huge potential for BPO firms. logistics hubs. Proposals to convert •• High quality warehouses: With the Assam 2836 2434.99 6 1 Inland Waterways Terminal in Jogighopa development of new warehouses Growth drivers for the industry (Assam) into a multi-modal transport in emerging hub locations, most Arunachal Pradesh 1992 1.26 5 •• Availability of skilled resources: The hub for cargo movement and trade organizations are looking at bringing in northeastern region has, as of 2016, 1 IIM, Manipur 959 1.35 1 between Bangladesh and Bhutan is global best practices and high standards 1 IIT and 8 NITs to fulfill the technological currently under consideration by the in these warehouses. Improved Mizoram 927 1.50 1 1 resource required for the IT/ITES industry. government.333 Other locations which warehouse management and tracking Along with a legacy of missionary education Meghalaya 810 1 could be explored on similar lines include systems, automated conveyor systems and exposure to English language from Dhubri and Badarpur in Assam. fire sprinklers, etc. are expected to Nagaland 494 12.85 1 a very early age, the population of the improve the standards of the warehouses region has a distinct advantage for the IT/ Tripura 400 151.4 1 3 as India prepares for post-GST ITES industry. Companies such as NIIT operations. Sikkim 62 Planetworkz, has set up close to 30 Time
Total 8480 2602.35 11 10 Machines, an online recruitment kiosk, at different places in Northeastern states. Source: Ministry of Development of NER website and AAI Presentation on North East Connectivity Summit 2015
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3. Research & Development
•• Thrust on IT Connectivity: There is a a. Capital Support: Up to 50% of Future prospects for the industry focused plan and sustained investment one time expenditure incurred Provision of IT/ITES services to Industry profile from Government of India may result in on admissible items subject to an International Markets: Northeast better tele-services required for setting upper ceiling of INR 100,000/Seat. India is strategically located for foreign up of industries and Smart Cities, with b. Special Incentives: The following and domestic investors to tap the vast Guwahati being selected for the first special incentives will be provided contiguous markets of Bangladesh, batch of Smart Cities to come up in India. within the ceiling oftotal financial Myanmar, China, Malaysia, Thailand, support, i.e., INR 100,000/Seat. Singapore, Philippines, Indonesia and other •• Focus on IT infrastructure: With the c. Training Incentive: Upto 50% of East and South East Asian countries. India exception of Arunachal Pradesh and training expenditure with cap of INR being the eighth largest trading partner Nagaland, all other states have dedicated 6,000/employee for total regular of ASEAN countries (as of June 2016) and Software Technology Parks set up. The IT employees up to the 1.5 times close proximity to SAARC countries, the Park in Manipur and Tripura have been (employment target) the number Northeast region of India is positioned allotted a massive 20,000 sq. ft. and of approved seats of BPO/ITES to cater to the huge demand in the 35,000 sq. ft. respectively. operation. international market.338 •• Lower manpower & Real estate costs: d. Incentive for diversity & inclusion: The Northeast region, being one of the Special incentive (% of eligible Conclusion and recommendations most underdeveloped part of India, capital support) for Units providing •• Improvement in connectivity to be a has relatively lower manpower and real employment to women and focus area and participation of more estate cost of approximately 50% and persons with disability will be private players to be encouraged through 40% respectively when compared to Tier provided as the North East BPO Promotion Scheme 1 cities. –– 5% for 50% women employment (NEBPS). –– 7.5% for 75% women •• Favorable Policies: The government employment •• The North East Development Finance India is the sixth largest in R&D spending Engineering Services sector allocated funds for various R&D projects has undertaken several policy initiatives –– 2% for employment for persons Corporation Limited supports across globe totaling over $66 billion The US, Japan, Germany, France, the UK, such as $72 million for National Automotive to incentivize and uplift the state of IT/ with disability entrepreneurs and startups to set up IT/ in 2015 for both in-house and contract Italy, Netherlands, and Sweden are the Testing and R&D Infrastructure Project ITES industry in the Northeast. The e. Incentive for providing ITES operations through its North East R&D and accounted for 2.7% of global world’s largest spenders of Engineering (NATRIP) program. The IITs across India Northeast BPO Promotion scheme, which employment beyond target: Venture Fund with investment limit up to expenditure. In 2016, government spending Services. plan to nurture start-ups and house was envisaged under the Digital India Special incentive (% of eligible INR 100 million for each project.339 on R&D was 0.85% of the GDP and is the R&D centres for established firms in Program offers capital incentives, and capital support) for units providing expected to reach 2.4% of the GDP by The outsourced engineering services order to forge closer industry-academic other incentives for training, diversity and •• Software Technology Parks of India (STPI) 346 employment beyond employment 2034. The government has declared 2010- market in India would reach $15 billion by collaboration. employment along with incentives for set up in the five Northeast regions may target (1.5 times the number of 2020 as ‘decade of innovation’ giving a push 2020 from $7.8 billion in 2015 at a CAGR of setting up of BPO/ITES operations. expand to all eight states. 343 seats) will be provided as follows: to R&D. Around 30% of the top 1,000 global 14%. Engineering Services sector –– 5% for 2X number of seats •• Availability of skilled manpower, low cost R&D spending organisations are present in opportunities Government initiatives 340 –– 7.5% for 2.5X number of seats of infrastructure and huge potential India. As products become smarter and global Given the natural advantage of India, the There are several Gvernment schemes –– 10% for 3X number of seats for providing IT/ITES services to both companies seek to provide services engineering services market is expected to running to support the development of IT/ f. Incentive for promoting local developed and emerging economies India has the third largest scientific and through internet, they use India’s reach $42 billion at a CAGR of 14% by 2020. ITES industry in NER. entrepreneur: Special Incentive (5% makes Northeast the hot bed for technical talent pool in the world. There traditional technology and the emerging However, CRO market includes trial by 347 •• The North East BPO Promotion of eligible capital support) for units potential investment in the sector. are 162 universities awarding around engineering skills. In this context focus on global companies as well. Scheme (NEBPS) seeks to incentivize setting up BPO/ITES operations as a 4,000 doctorates and around 35,000 IP, end-to-end solutions, higher sales, and establishment of 5,000 seats in respect consortium with local. postgraduate degrees every year. The marketing investments seems to fit into Contract Research Organization (CRO) 344 of BPO/ITES operations in Northeast Council of Scientific and Industrial Research what India has to offer. market •• In addition, North Eastern Development 341 region at an outlay of INR 500 million runs 38 research laboratories. The Indian pharmaceutical industry Finance Corporation Limited (NEDFi) creating employment opportunities Engineering Services sector growth spends about 6-8% of their sales on R&D, in association with Ministry of for about 15,000 persons in BPO/ITES However, as per US Chamber of Commerce drivers compared to 15-20% by companies in the Development of North Eastern Region 348 operations. NEBPS provides the financial report published in February 2017, India Atal Innovation Mission has been created to developed world. (M-DoNER) has launched the first supports with overall ceiling of INR stood at the 43rd position out of 45 nations facilitate the academicians, entrepreneurs dedicated venture capital fund for the 342 100,000/seat in the form of Viability Gap in Global Innovation Index, with Indian and researchers for working on innovative The Indian clinical trials industry stagnated Northeast region namely “North East 345 Funding (VGF) to eligible companies, professionals largely providing engineering ideas. post 2012 after government tightened Venture Fund”. With a corpus of INR 1 to encourage the growth of the IT/ITES services in India for the global companies the regulations and due to attention from billion with the primary objective of North Industry in the North Eastern Region which have set up their R&D centres in According to Union Budget 2017-18, the media and activists. There was a sharp East Venture Fund (NEVF) to invest in (NER) through BPO/ITES operations336: India. India is re-stablishing itself as the government of India is planning to establish drop in the number of trials approved enterprises focused IT & ITES located in most preferred location for Engineering 100 India International Skills centres across (from 262 in 2012 to just 107 in 2013). The the Northeast region.337 Services and Clinical trials globally. the country. Also, the government has industry is re-orienting towards growth
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after new regulatory framework has been CRO sector potential for global Conclusion and recommendations implemented which has made the approval expansion As per the 2015 estimates, the private process quicker and in line with the global The global pharmaceutical companies sector investments in R&D in India was practices.349 and Indian entrepreneurs have set up about half of the public sector which is CROs in India as the cost of conducting a generally around 2:1 in case of developed Joint ventures, alliances and licensing clinical trial is more than 50% cheaper than economies. It indicates that there is an agreements have increased R&D in the United States or the Europe. The enormous potential for private players investment in recent years. However, the reasons for low cost of drug development participation and government could definition of “innovation” under Patents Act is the relatively low cost human resource incentivise collaboration of public and and the issuance of India's first compulsory availability for conducting clinical private R&D. licence in 2012 have slowed down the research.352 efforts of R&D companies in India.350 The ‘Make in India’ initiative which CRO sector regulations encourages global companies to CRO market growth drivers 01. New regulatory changes have made the manufacture in India will lead to increased With large number of volunteers for clinical approval process quicker. R&D investments provided issues such trial, qualified medical professionals, 02. The CDSCO has relaxed the restriction as ease of doing business and complex clinicians and data specialists, and good of not allowing trial investigators to regulations are addressed. regulatory policies, Indian clinical research conduct more than 3 clinical trials market is poised for growth. at any given period in time in the country.353 The global companies are looking to achieve greater efficiency on R&D Government initiatives expenditure resulting in growing demand •• As part of DIGITAL India initiative, online for outsourcing of analytical testing and licensing portal SUGAM has been set up clinical trial services and regulations by the Central Drugs Standard Control requiring companies to conduct clinical trial Organization (CDSCO) in March 2016 before it is approved. for the online application of clinical trial requests by pharma companies.354 CRO market opportunities Clinical trial and research is now a major •• The government is planning a major business in India with over 100 companies multi-billion dollar initiative with 50% currently conducting the clinical trials. public funding through public private India has been increasingly attracting partnership (PPP) model to harness collaborative contract proposals for India’s innovation capability. The vision conducting clinical trials and many is to push India into one of the top-five entrepreneurs have already come Pharma innovation hubs by 2020 with forward to set up their Clinical Research one out of every 5 to 10 drugs discovered Organisations (CROs).351 in India at global scale.355
•• The Department of Pharmaceuticals Prevalence of chronic diseases, relatively has prepared a “Pharma Vision 2020” low cost of talent and a large pool of document, with a focus to establish India volunteers for clinical research makes India as a leading county for end-to-end drug a preferred destination for clinical trials. manufacturing and innovation.356
Clinical trial growth and maturity in India •• $149.11 million venture capital fund has is important as with a large and ageing been planned by the Department of population, India will need to invest in novel Pharmaceuticals to support R&D start- and targeted therapies to treat its own ups in the pharmaceutical and biotech growing population of the diseased. industry.357
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About Confederation About Deloitte of Indian Industry
The Confederation of Indian Industry The CII theme for 2016-17, Building We believe that we’re only as good as the That’s what makes us truly different at (CII) works to create and sustain National Competitiveness, emphasizes good we do. Deloitte. Not how big we are, where we an environment conducive to the Industry's role in partnering Government are, nor what services we offer. What really development of India, partnering industry, to accelerate competitiveness All the facts and figures that talk to our defines us is our drive to make an impact Government, and civil society, through across sectors, with sustained global size and diversity and years of history, as that matters in the world. advisory and consultative processes. competitiveness as the goal. The focus is notable and important as they may be, on six key enablers: Human Development; are secondary to the truest measure of In India, Deloitte member firms are spread CII is a non-government, not-for-profit, Corporate Integrity and Good Citizenship; Deloitte: the impact we make in the world. across 13 locations with more than 40,000 industry-led and industry-managed Ease of Doing Business; Innovation and professionals who take pride in their ability organization, playing a proactive role in Technical Capability; Sustainability; and So, when people ask, “what’s different to deliver to clients the right combination of India's development process. Founded in Integration with the World. about Deloitte?” the answer resides in local insight and international expertise. 1895, India's premier business association the many specific examples of where we has over 8000 members, from the private With 66 offices, including 9 Centres of have helped Deloitte member firm clients, (C) 2017 Deloitte Touche Tohmatsu India as well as public sectors, including SMEs Excellence, in India, and 9 overseas offices our people, and sections of society to LLP and MNCs, and an indirect membership in Australia, Bahrain, China, Egypt, France, achieve remarkable goals, solve complex of over 200,000 enterprises from around Germany, Singapore, UK, and USA, as well problems or make meaningful progress. 240 national and regional sectoral industry as institutional partnerships with 320 Deeper still, it’s in the beliefs, behaviors bodies. counterpart organizations in 106 countries, and fundamental sense of purpose that CII serves as a reference point for Indian underpin all that we do. CII charts change by working closely with industry and the international business Government on policy issues, interfacing community. Our hard work and commitment to making with thought leaders, and enhancing a real difference, our organization has efficiency, competitiveness and business grown in scale and diversity—more than opportunities for industry through a range 245,000 people in 150 countries, providing of specialized services and strategic global multidisciplinary services yet our shared linkages. It also provides a platform for culture remains the same. consensus-building and networking on key issues. For us, good isn’t good enough. We aim to excel at all that we do—to help clients Extending its agenda beyond business, CII realize their ambitions; to make a positive assists industry to identify and execute difference in society; and to maximize the corporate citizenship programmes. success of our people. This drive fuels the Partnerships with civil society organizations commitment and humanity that run deep carry forward corporate initiatives for through our every action. integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversity management, skill development, empowerment of women, and water, to name a few.
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Acknowledgements
We acknowledge the efforts put in by: Strategic direction K Kumar Hemant Joshi
Research team Vedamoorthy Namasivayam Sneha Prithviraj Kalpesh Mehta Saurabh Khosla Amrit Pandurangi Soumyak Biswas Monish Shah Ashish Mehta Anil Talreja Manikanda Prabhu Charu Sehgal Riddhi Lahiri Arindam Guha Rabani Gupta PN Sudarshan Pravin Wani Anis Chakravarty Kiran Vergis Shree Parthasarathy Ranjan Kotian Ashesh Jani Akanksha Sharma Rajat Vig Arpita Garg Peeyush Naidu Deepshikha Jana Debashish Biswas Soumya Dalai Mohammed Shariff Navdeep Verma Prashant Bhojwani Mukesh Verma Rishi Suri Rishi Shah Aanchal Karanth Ankita Chowdhry
Project Management Office
Anu Peisker
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164 165 India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth India Services Sector | A Multi-trillion Dollar Opportunity for Global Symbiotic Growth
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