Biotechnology

Biotechnology Industry in India Currently holding two per cent share of global market, the biotechnology industry in India has immense potential to emerge as a global key player. Going by a forecast in 'Bio Reality in India: Report 2008', by international real estate consultants Cushman & Wakefield, the industry is expected to cross the US$ 5 billion mark, through its products as well as services by 2010. By this time, it is estimated to occupy 140 million square feet of industrial area. An Ernst and Young survey projects India as one of the emerging biotech leaders, ranked third in the Asia-Pacific region, based on the number of biotech companies in the country. Market Size and the Key Opportunity Segments According to an industry survey, carried out by Association of Biotech Led Enterprises (ABLE), biotechnology industry in India notched up a growth of 20 per cent during 2007-08 and the revenues earned were worth US$ 2.56 billion as against US$ 2.1 billion during the last fiscal. Research services touched US$ 500 million and bio IT (bioinformatics) was US$ 250 million. Out of the five broad categories-Biopharma, Agri-biotech, Bioinformatics, Bioindustrial and Bioservices-that the biotech industry in India can be divided into, according to the product offerings, the first three are the most important segments according to their revenue contribution. While the bio-pharma segment accounts for two-thirds of the total sector revenue, the agri-biotech sector in India is growing at 30 per cent for the last five years, being the fastest growing industry among all the biotech industries in the country. The Indian bioinformatics market, which deals with creation and maintenance of extensive electronic databases on various biological systems, is set to double by 2010, from US$ 32 million to US$ 62 million by 2010, according to a report by research firm ValueNotes Outsourcing Practice. The segment derives 90 per cent of its revenue from outsourcing. Since the global bioinformatics market is expected to grow at a CAGR of 16 per cent over 2007-10, it would actually be conducive to its growth in India at a rate of 25 per cent. Biotech Hubs Being home to 200 diverse companies, the biotech cluster in Bangalore alone leads the pack, whereas other cities like Hyderabad, Chennai, Pune and Mumbai also have come up as preferred destinations to set up a biotech facility. According to the Cushman & Wakefield analysis, Bangalore is estimated to witness approximately 6.5 million square feet demand from this sector alone between 2007 and 2010. Hyderabad has witnessed infrastructural development in the biotech domain wherein the Knowledge Park, the Biotech Park, Genome Valley and other projects have come up giving the city an advantage over others. Over 53 international biotech companies have established their operations in the Genome Valley over the last one year. Additionally, this city will witness development of two biotech SEZs and three biotech parks in the next couple of years. A genomics centre is being set up at Tidel Park in Chennai, to explore the Indian genetic pool, leverage on the pool of Indian bioinformatics scientists and low cost software skills, facilitate research and enable entrepreneurs to commercialise their findings. The city will witness development of three more biotech parks and a biotech SEZ in the coming years. In addition to the above, tier II and tier III cities like Vadodara, Coimbatore, Goa, Mysore, Madurai, Kolkata, Gurgaon, Thrissur, Nagpur and Thiruchirapalli have significant potential to emerge as biotech corridors, attracting investments from various stakeholders of the industry.

Telecommunications

The Indian telecommunications industry is abundant with exciting possibilities. The industry is growing at the fastest pace in the world and India is expected to become the second largest telecom market globally by 2010. Forthcoming services such as 3G and WiMax will further augment the growth rate. The world's leading telecom handsets manufacturers, such as Nokia, Samsung, Motorola and LG have their presence in India, along with leading global service companies and infrastructure majors, such as Vodafone, AT&T, Ericsson, Alcatel, Singapore Telecom and Siemens. On June 18, 2008, India reached the target of having 300 million telephone subscribers, becoming the second largest telecommunications network in the world after China. India is adding around 8.5 million to 10 million new mobile subscribers to the network each month, emerging as one of the fastest growing telecom markets in the world. According to the report titled 'Mobile BRIC: Extreme Growth Ahead', BRIC (Brazil, Russia India and China) India is expected to be the second largest mobile market in the BRIC nations, with 560 million mobile users, by 2012 (after China with 800 million users). In July 2008, the cumulative revenues of cellular, fixed line, national long distance, international long distance, broadband, radio trunking and VSAT services, had risen to a humongous US$ 30,888 billion registering a growth of 21.3 per cent, as revealed in a Voice & Data survey. The Indian telecom market had generated revenues around US$ 20 billion in 2006-07. The market saw a growth rate of 33 per cent over previous year and recorded a compounded annual growth rate (CAGR) of 22 per cent for the period from 2002-03 to 2006-07. This growth has resulted in the revenues of the segment growing two-fold, in the past three years. It is projected that the industry will generate revenues worth US$ 43 billion in 2009-10. India's overall tele-density stood at 26.89 per cent in June 2008, and the government has plans to raise the tele-density to 40-45 per cent by 2010, thereby offering greater growth opportunities for service providers to exploit the large untapped potential. Growth in Segments Indian mobile operators are adding over 8 million subscribers a month, with a majority of the new users being from rural areas. The share of mobile phones had increased from 71.69 per cent at the end of March 2006 to 87.68 per cent at the end of May 2008. While the total mobile subscriber base was 277.92 million, wire-line subscriber base was 39.05 million. The number of mobile subscribers in India, (India is the world's second-largest wireless market after China) has gone up to around 280 million. According to a report by Gartner Inc., India's mobile subscriber base is projected to exceed 737 million connections by 2012 growing at a CAGR of 21 per cent and India is likely to remain the world's second largest wireless market after China in terms of mobile connections. The overall cellular services revenue in India is projected to grow at a CAGR of 18 per cent from 2008-2012 to exceed US$ 37 billion. Cellular market penetration will rise to 60.7 per cent from 19.8 per cent in 2007. GSM companies added over 6.3 million new customers in June 2008, (excluding the GSM subscriber base of Reliance Telecom) crossing the 212 million mark, with a growth of 3.07 per cent over May 2008, according to the Cellular Operators' Association of India (COAI). According to an analyst firm Springboard Research, India will become the leading market for WiMAX in the Asia pacific region and is expected to have 15.8 million WiMAX subscribers by 2012, accounting for 46.7 per cent of total subscribers in Asia-Pacific and 35.7 per cent of revenues from the region. However, India had only 3.4 million broadband subscribers in January 2008, which was much lesser than the government's target of 9 million. Global consumer electronics and mobile phone vendors are going green in India. Bigwigs like Nokia, LG, Samsung and Haier, among others, are planning to introduce products that will be positioned on an environment-friendly platform, starting the trend of environment as a brand strategy in the Indian consumer electronics industry.

Steel

Riding high on the resurgent economy and rising demand, the Indian steel industry has entered into a new development stage from 2005-06, with an average growth rate of 12 per cent per annum in steel output, for the last two years.

Production

The rapid rise in production has resulted in India becoming the world’s 5th largest producer of steel, up by two places, on the back of 50.71 million tons (MT) production of crude steel and 51.9 MT of finished steel. India is set to achieve 124 million tonnes of steel capacity by 2011-12, far exceeding the requirement that would be to the tune of about 110 million tonnes. In March 2008, finished steel led the pack by registering 21.8 per cent growth compared to 16.6 per cent in March 2007. For the whole year though, finished steel production, with a weightage of 5.13 per cent in the IIP, grew by 5.1 per cent.

While the demand for steel will continue to grow in traditional sectors such as infrastructure, construction, housing automotive, steel tubes and pipes, consumer durables, packaging, and ground transportation, specialized steel will be increasingly used in hi-tech engineering industries such as power generation, petrochemicals, fertilizers, etc.

During April-February 2007-08, production of finished carbon steel was estimated at 49.67 MT - against 46.75 MT in the same period of the previous year - recording a growth rate of 6.2 per cent. Similarly, production of pig iron amounted to 4.39 mt during April-January 2007-08.

Presently, the government plans to increase production from the present 53 MT to 124 MT by 2011 and 200 MT by 2020, so as to narrow the gap between supply and demand. However, access to coking coal will be the key to the success of this strategy.

According to a report by the World Steel Dynamics (WSD), a leading global steel information service, the Indian steel industry has entered a period of massive growth not only in steel demand but also in steel making capacities.

Consumption

Driven a booming economy and concomitant demand levels, consumption of steel has grown by 12.5 per cent during the last three years, well above the 6.9 per cent envisaged in the National Steel Policy. For 2008 it has been forecast that the apparent steel use point in India will increase by 11.8 per cent in 2008.

Steel consumption amounted to 46.14 MT in 2006-07, against 41.43 MT in 2005-06, recording 11.36 per cent growth – higher than the world average. During the first half of 2007, steel consumption has grown by 13 per cent. For the period of April-September 2007-08, the total consumption (excluding double counting) of steel is 21.998 MT as compared to the 19.819 MT in the same period last year (as per data from the joint parliamentary committee).

Semiconductors

India has today become a player to reckon within the international semiconductor market. It is already a preferred destination for chip designing and embedded software and is now taking up manufacturing of semiconductors for the domestic as well as the global markets. According to the India Semiconductor Association (ISA)—the premier body of semiconductor companies and chip design firms in the country— the semiconductor market in India will touch US$ 36 billion in sales by 2015, growing 29.9 per cent every year as design, development and consumption of electronic devices grow. In 2009, the Indian semiconductor market is expected to be US$ 5.5 billion, up from US$ 2.7 billion in 2007.

The ISA-Ernst and Young in their benchmarking study, 'India in the Global Semiconductor Design Ecosystem', rates India as the best on availability and scalability of talent among different destinations, including Silicon Valley, Taiwan, UK, Israel, Canada and the Czech Republic.

India Advantage

India has certain natural advantages that have attracted many global companies to set up their Indian operations.

• The Indian consumer market is expanding rapidly and is expected to see a ten-fold rise in middle class population and four-fold rise in household income by 2025 from 2005.
• India has one of the largest cost-competitive technical workforces in the world.
• The country has immense manufacturing capability which spans almost all areas of manufacturing activity.
• The Indian information technology industry is burgeoning, throwing up great opportunities.
• The country provides well-developed R&D, infrastructure, and technical and marketing services.
• The Indian banking system is well developed comprising a commercial banking network of over 64,000 branches, supported by a number of national and state level financial institutions.

Broad-based Growth Potential

India has huge potential across different segments of the semiconductor value chain, from board, chip and systems design to finished electronic products. According to a report by ISA Frost and Sullivan, while the total available market (TAM) revenues are estimated to increase at a compound annual growth rate (CAGR) of 35.8 per cent to US$ 3.18 billion in 2009 from US$ 1.26 billion in 2006, total market revenues are estimated to grow at a CAGR of 26.7 per cent from US$ 2.69 billion in 2006 to US$ 5.49 billion in 2009.

The top five end-user products that are expected to drive growth over the period 2007–09 would be: mobile handsets, desktops and notebooks, GSM base stations, set top box and energy meters. Over the long term, the growth is likely to be sustained with robust growth of the electronics industry. India's electronic consumption which was US$ 28 billion in 2005 is estimated to grow at a 29.8 per cent to US$ 363 billion by 2015. Simultaneously, India's share in the world market is likely to grow from 1.8 per cent in 2005 to 11 per cent in 2015.

Significantly, the semiconductor content in the estimated electronic consumption in 2015 is expected to be US$ 36.3 billion accounting for 6.5 per cent of the global semiconductor revenues. Also, the estimated electronics production potential of US$ 155 billion in 2015 is expected to create an opportunity of US$ 15.52 billion for semiconductor companies and also for Electronic Manufacturing Services (EMS) companies.

Chip Design Sector

India has almost 130 chip design companies, with almost all global design semiconductor companies setting up design operations in India. The Indian semiconductor design industry consists of very large scale integration (VLSI) design, board design and embedded software companies. The Indian semiconductor design services industry is estimated to grow at a compounded annual growth rate (CAGR) of 21.7 per cent to US$ 10.96 billion in 2010, from the current level of US$ 6 billion and clock revenues worth US$ 7.3 billion by 2008-end.

Semiconductors

India has today become a player to reckon within the international semiconductor market. It is already a preferred destination for chip designing and embedded software and is now taking up manufacturing of semiconductors for the domestic as well as the global markets. According to the India Semiconductor Association (ISA)—the premier body of semiconductor companies and chip design firms in the country— the semiconductor market in India will touch US$ 36 billion in sales by 2015, growing 29.9 per cent every year as design, development and consumption of electronic devices grow. In 2009, the Indian semiconductor market is expected to be US$ 5.5 billion, up from US$ 2.7 billion in 2007.

The ISA-Ernst and Young in their benchmarking study, 'India in the Global Semiconductor Design Ecosystem', rates India as the best on availability and scalability of talent among different destinations, including Silicon Valley, Taiwan, UK, Israel, Canada and the Czech Republic.

India Advantage

India has certain natural advantages that have attracted many global companies to set up their Indian operations.

• The Indian consumer market is expanding rapidly and is expected to see a ten-fold rise in middle class population and four-fold rise in household income by 2025 from 2005.
• India has one of the largest cost-competitive technical workforces in the world.
• The country has immense manufacturing capability which spans almost all areas of manufacturing activity.
• The Indian information technology industry is burgeoning, throwing up great opportunities.
• The country provides well-developed R&D, infrastructure, and technical and marketing services.
• The Indian banking system is well developed comprising a commercial banking network of over 64,000 branches, supported by a number of national and state level financial institutions.

Broad-based Growth Potential

India has huge potential across different segments of the semiconductor value chain, from board, chip and systems design to finished electronic products. According to a report by ISA Frost and Sullivan, while the total available market (TAM) revenues are estimated to increase at a compound annual growth rate (CAGR) of 35.8 per cent to US$ 3.18 billion in 2009 from US$ 1.26 billion in 2006, total market revenues are estimated to grow at a CAGR of 26.7 per cent from US$ 2.69 billion in 2006 to US$ 5.49 billion in 2009.

The top five end-user products that are expected to drive growth over the period 2007–09 would be: mobile handsets, desktops and notebooks, GSM base stations, set top box and energy meters. Over the long term, the growth is likely to be sustained with robust growth of the electronics industry. India's electronic consumption which was US$ 28 billion in 2005 is estimated to grow at a 29.8 per cent to US$ 363 billion by 2015. Simultaneously, India's share in the world market is likely to grow from 1.8 per cent in 2005 to 11 per cent in 2015.

Significantly, the semiconductor content in the estimated electronic consumption in 2015 is expected to be US$ 36.3 billion accounting for 6.5 per cent of the global semiconductor revenues. Also, the estimated electronics production potential of US$ 155 billion in 2015 is expected to create an opportunity of US$ 15.52 billion for semiconductor companies and also for Electronic Manufacturing Services (EMS) companies.

Chip Design Sector

India has almost 130 chip design companies, with almost all global design semiconductor companies setting up design operations in India. The Indian semiconductor design industry consists of very large scale integration (VLSI) design, board design and embedded software companies. The Indian semiconductor design services industry is estimated to grow at a compounded annual growth rate (CAGR) of 21.7 per cent to US$ 10.96 billion in 2010, from the current level of US$ 6 billion and clock revenues worth US$ 7.3 billion by 2008-end.

Retail

The Indian retail market is literally on the go. The share of retail trade in the country's gross domestic product was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010.

The Indian retail market, which is the fifth largest retail destination globally, was ranked 2nd after Vietnam as the most attractive emerging market destination for investment in the retail sector, by AT Kearney's seventh annual Global Retail Development Index (GRDI), in 2008.

According to a study by ASSOCHAM, Indian retail will touch US$ 365 billion in 2008, against US$ 300 billion in 2007. With a year-on-year growth of 30–35 per cent, the sector is likely to touch US$ 440 billion by 2010. By 2015, the retail sector is projected to overtake the US$ 650 billion mark, and organised retail will cross the US$ 130 billion mark. The study also estimated that the organised retail segment would see an investment of US$ 25 billion–28 billion in 2008, which would touch US$ 70 billion by 2010. The organised segment will account for 25 per cent of the total sales by 2011.

Commercial real estate services company CB Richard Ellis' findings state that India's retail market, is currently valued at US$ 511 billion, and is poised to grow to US$ 833 billion by 2013. The report further stated that organised retail that currently accounts for less than 5 per cent of the total retail market is expected to register a compound annual growth rate (CAGR) of 40 per cent and swell to US$ 107 billion by 2013.

A report by global consultancy AT Kearney said "The consumer spending in India has increased by an impressive 75 per cent in the last four years and will quadruple in the next 20 years."

Continuing the robust growth of the organised retail in India, according to the Credit Rating and Information Services of India, the industry raked in US$ 25.44 billion turnover in 2007–08, as against US$ 16.99 billion in 2006–07— a whopping growth rate of 49.73 per cent.

India has one of the largest number of retail outlets in the world. Of the 12 million retail outlets present in the country, nearly five million sell food and related products. Thought the market has been dominated by unorganised players, the entry of domestic and international organised players is set to change the scenario.

Mall space, from a meagre one million square feet in 2002, is expected to touch an estimated 60 million square feet by end 2008, says Jones Lang LaSalle's third annual Retailer Sentiment Survey-Asia. A report by Images Retail estimates the number of operational malls to grow more than two-fold, to cross 412, with 205 million square feet by 2010, and a further 715 malls to be added by 2015, with major retail developments even in tier-II and tier-III cities in India.

Even as the organised retail market is starting to take off, there is an associated surge in branded discount outlets in India. Top realtors and local retail chains are developing malls in regional boroughs, specifically to sell premium branded goods.

Rural retail

Led by the rising purchasing power, changing consumption patterns, increased access to information and communication technology and improving infrastructure, rural retail market is estimated to cross US$ 45.32 billion mark by 2010 and US$ 60.43 billion by 2015, according to a study by Confederation of Indian Industry (CII) and YES Bank.

The rural retail market in 2008 has grown at 25 per cent compared to the 7–10 per cent growth rate of the urban consumer retail market. With 87 per cent of rural markets not having access to any sort of organised marketing and distribution, this segment has tremendous potential for growth.

After ITC's ' Chaupal Sagar' (India's first rural mall), the DCM Shriram Group's Hariyali Bazaar', and Tata Chemicals' Tata Kisan Sansar, retail giants like Reliance, Spencer's and Subhiksha are also expanding in semi-urban and rural areas.

Real Estate

The Indian real estate sector is witnessing a quiet revolution, owing to a flourishing economy and a positive government attitude, which includes a liberalised foreign direct investment regime. The realty sector, which is growing at an amazing 35 per cent, is estimated to be worth US$ 15 billion. It is also expected to grow at 30 per cent annually over the next decade, attracting foreign investments worth US$ 30 billion. This double-digit growth is mainly attributed to the off-shoring business, including high-end technology consulting, call centres and software businesses. The IT and ITES sector is estimated to require 150 million sq ft of office space across urban India by 2010. This will have a domino effect since for every sq ft of developed office area around 10 sq ft of residential space needs to be developed for accommodation of the employees.

Almost 80 per cent of real estate developed in India is residential space, the rest comprising of offices, shopping malls, hotels and hospitals. According to the Tenth Five Year Plan, there is a shortage of 22.4 million dwelling units. Thus, over the next 10 to 15 years, 80 to 90 million housing dwelling units will have to be constructed with a majority of them catering to middle and lower income groups.

After agriculture, the real estate sector is the second largest employment generator in India and contributes heavily towards gross domestic product (GDP). Five per cent of the country's GDP is contributed to by the housing sector. In the next five years, this contribution to the GDP is expected to rise to 6 per cent.

The real estate sector is also responsible for the development of over 250 other ancillary industries such as cement, steel, paints etc. A study by rating agency ICRA shows that the construction industry ranks 3rd among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. A unit increase in expenditure in this sector has a multiplier effect and the capacity to generate income as high as five times. If the economy grows at the rate of 10 per cent, the housing sector has the capacity to grow at 14 per cent and generate 3.2 million new jobs over a decade.

All-round Development

Rising income levels of a growing middle class along with increase in nuclear families, changing demographics of home buyers (the average age of a new homeowner in 2006 was 32 years compared with 45 years a decade ago), and easy housing finance has led to a boom in the housing sector.

According to 'Housing Skyline of India 2007-08', a study by research firm, Indicus Analytics, there will be a demand for over 24.3 million new dwellings for self-living in urban India alone by 2015. Consequently, this segment is likely to throw huge investment opportunities. In fact, an estimated US$ 25 billion investment will be required over the next five years in urban housing, says a Merrill Lynch report.

Furthermore, a booming Indian economy has had a cascading effect on demand for commercial property to help meet the needs of business, such as modern offices, warehouses, hotels and retail shopping centres.

Growth in commercial office space requirement is led by the burgeoning outsourcing and information technology (IT) industry and organised retail. For example, the organised retail industry is likely to require an additional 220 million sq ft by 2010. Moreover, growth is not restricted to a few towns and cities but is pan-India, covering nearly all tier I and tier II cities.

Moreover, market analysis pegs returns from realty in India at an average of 14 per cent annually with a tremendous upsurge in commercial real estate on account of the Indian BPO boom. A significant demand is also expected as the outsourcing boom moves into the manufacturing sector. Further, the housing sector has been growing at an average of 34 per cent annually, while the hospitality industry has been growing at around 10 per cent over the last couple of years.

Apart from the huge demand, India also scores on the construction front. McKinsey report reveals that the average profit from construction in India is 18 per cent, which is double the profitability for a construction project undertaken in the US.

Pharmaceuticals

As one of the fastest growing sectors in India, the pharmaceutical industry is witnessing tremendous growth. According to a report by Visiongain, the market for pharmaceuticals in India is expected to witness strong growth during 2008–2023. The report reveals that healthcare provision in both public and private is improving vastly, resulting in a growing market for healthcare products, particularly modern pharmaceuticals.

The report further states that globally, India is emerging as a competitive player in manufacturing Active Pharmaceutical Ingredients (APIs), generic drugs, intermediates for drug makers, and also new formulations; apart from becoming a major outsourcing hub. Moreover, in addition to marketing pharmaceuticals, Indian firms are also manufacturing for foreign clients as outsourcing to India saves costs and precious developmental time. Furthermore, with the upgradation of their manufacturing plants, many Indian manufacturers have received certifications by the US Food and Drug Administration (FDA), European Directorate for the Quality of Medicines (EDQM), and other regulatory agencies.

Indian biotechnology firms are now providing research and development (R&D) services for global pharma companies for drug discovery and manufacture. Previously, Indian biotech companies merely offered low-level R&D services in drug discovery.

According to a study titled 'The globalization of innovation: Pharmaceuticals, Can India and China cure the Global Pharmaceutical Market' by US-based Ewing Marion Kauffman Foundation, increasing research and development (R&D) initiatives in the pharmaceutical sector has made India a more mature place for drug discovery activities than China. The report stated that Indian companies are playing an important role in early drug discovery processes due to their substantial experience in the field of generic drugs. The study also holds India as a more established venue for chemistry and drug discovery developments than China.

Indian companies like Aurigene, Advinus, Nicholas Piramal and Jubilant have settled long-term deals with foreign pharma companies for developing new chemical entities. "Many drugs from these partnerships are now going into clinical testing", states the study. As a result, R&D would increasingly move to these two countries.

Exports

According to a research report (released in August 2008), "Booming Pharma Sector in India", by RNCOS, (an industry research firm) India is now one of the world's most potential destinations for pharmaceutical exports. The country exported drugs worth US$ 7.2 billion in 2007-08 and the US and Europe was the biggest export destinations for Indian generic manufacturers, followed by emerging markets like Central and Eastern Europe, Latin America and Africa.

The report forecasts that Indian pharmaceutical exports will grow at a compound annual growth rate (CAGR) of 18.5 per cent between 2007-08 and 2011-12. This growth will be in fuelled by multi-billion dollar patent expirations and growth in the global generics market.

Growth

The industry's growth rate is likely to touch 19 per cent from the current 13 per cent, according to a projection released by the Confederation of Indian Industries (CII), on September 1, 2008. The incremental growth of 6.6 per cent will be bolstered by factors like a growing middle class (contributing 2 per cent of the incremental growth), pricing of the pharma products (1 per cent), untapped rural markets (2 per cent), and marketing efficiencies (1 per cent).

According to a McKinsey study, the Indian pharmaceutical industry is projected to grow to US$ 25 billion by 2010 whereas the domestic market is likely to more than triple to US$ 20 billion by 2015 from the current US$ 6 billion to become one of the leading pharmaceutical markets in the next decade.

Oil & Gas

The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. The petroleum and natural gas sector which includes transportation, refining and marketing of petroleum products and gas constitutes over 15 per cent of the country's gross domestic product (GDP).

As per an Investment Commission report, petroleum exports have also emerged as the single largest foreign exchange earner, accounting for 11.5 per cent and 15 per cent of the total exports in 2005-06 and 2006-07. The growth continues in the new fiscal with the export of petroleum products touching US$ 20.03 billion during April-December 2007.

However, India's domestic demand for oil and gas is also on the rise. As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 176.40 million tonnes of oil equivalent (mmtoe) in 2007-08 to 233.58 mmtoe in 2011-12.

As per the BP Statistical Review of World Energy, 2006, India's primary commercial energy consumption (including coal, oil and gas) was 423 mmtoe in 2006, making it the fourth largest consumer in the world with a four per cent share of the global primary commercial energy consumption. The primary commercial energy consumption in India grew at a compound annual growth rate (CAGR) of 4.5 per cent during 1996-2006, which is more than double the global CAGR during the same period. Of the total primary commercial energy consumption in India, oil constitutes 28 per cent and natural gas 8 per cent. Coal continues to be the dominant fuel accounting for 57 per cent of total energy consumption.

Domestic production of crude oil has been increasing steadily. While production grew by 5.6 per cent in 2006-07 to 33.98 million tonne (MT) from 32.19 MT in 2005-06, it has increased to 34.11 MT during 2007-08.

Global Refining Hub

India is emerging as the global hub for oil refining as it enjoys competitive cost advantage, with capital costs lower by as much as 25 to 50 per cent over other Asian countries.

Already, the fifth largest country in the world in terms of refining capacity (up from 19th in 1995), with a share of 3 per cent of the global capacity, India is likely to boost its refining capacity by 45 per cent or 65.3 mtpa (million tonne per annum) over the next five years, according to a Deutsche Bank report. According to the report, Indian companies plan to increase their refining capacity to 242 mtpa by 2011-12 from about 149 mtpa in 2007.

• Indian Oil Corp (IOC) plans to increase its refining capacity from 60.2 mtpa to 80 mtpa.
• The two public sector undertakings, GAIL (India) Ltd and Indian Oil Corporation Ltd (IOCL), are looking at setting up a US$ 2.09 billion petrochemical plant at Barauni, which would be of a minimum 3 lakh tonnes capacity.
• ONGC plans to scale up its refining capacity up to 45.5 million tonnes by 2009-10 from about 13 mtpa in 2006.
• Reliance Industries Ltd is constructing a new refinery in the Jamnagar SEZ with a capacity of 29 mtpa, which will be operational shortly.
• Nagarjuna Oil Corp is planning a new refinery at Cuddalore with a capacity of 6 mtpa to be operational by 2011 at an investment of US$ 1.05 billion.
• Essar Oil plans to more than triple the capacity at its refinery at Vadinar to 34 mtpa from the current 10.5 mtpa at an investment of US$ 6 billion.
• Hindustan Petroleum Corporation plans to invest US$ 2.5 billion in expanding its Visakhapatnam refinery capacity to 16 million tonnes.

In fact, Reliance's new refinery (which will be the world's only full-export-oriented refinery) will be the world's sixth-largest. And with the existing refinery of RIL, the combined capacity (RPL along with RIL) will turn the Jamnagar complex into the world's largest single-location refinery.

Media & Entertainment

The Indian Media and Entertainment (M&E) industry is poised to enter a golden era. One of the largest markets in the world, the industry is seeing strong growth and has the potential to garner US$ 200 billion by 2015.

In 2007 the Indian media and entertainment industry grew 17 per cent over the previous year, touching the US$ 11.92 billion mark, according to a joint report by industry body the Federation of Indian Chambers of Commerce and Industry (Ficci) and audit firm PricewaterhouseCoopers.

"The Global Entertainment and Media Outlook 2008-2012 report by PriceWaterHouseCoopers (PWC) projects India as the fastest-growing territory in Asia during the next five years with a potential to grow at a CAGR of 18.5 per cent against 6.6 per cent globally. By then it is expected to be worth around US$ 36.331 million in volume."

Cinema

The Indian film industry, with over 3 billion admissions per annum, is the largest in the world, in terms of number of films produced per year. This industry, which was worth US$ 2.12 billion in 2006, is estimated to grow at a CAGR of 16 per cent to US$ 4.42 billion by 2011.

The opening of the film industry to foreign investment coupled with the granting of industry status to this segment has had a favourable impact, leading to many global production units entering the country. For example, Walt Disney has partnered with Yash Raj Films to make animated movies, the Warner Group is funding the Sippys' film projects, Viacom has joint-ventured with the TV 18 group to form Viacom-18, and Sony Pictures Entertainment has co-produced Saawariya with SLB Films (Sanjay Leela Bansali FIlms).

Simultaneously, advancements in technology along with a rise in consumer income and change in consumption patterns has led a massive shift in all spheres of the film industry -- production, exhibition, distribution and marketing.

One perceptible change has been the rapid growth of multiplexes, which meets consumer demand for quality entertainment and has also helped boost production of niche films targeted at niche audiences.

Multiplexes

The nation's multiplex industry is all set for an unprecedented boom buoyed by positive regulatory changes and booming consumerism. Multiplexes /megaplexes have been instrumental in contributing 28 percent of the total theatrical sales for the film industry according to a report by Systematix Institutional Research. Industry experts estimate that top six multiplex chains have plans of 300-500 screens each by FY-10.

• DLF, a leading real estate player in the country, plans to invest US$ 298.12 million for the expansion of its multiplex business. The company has planned to add at least 500 screens in the next four to five years across the country.
• Entertainment conglomerate Adlabs Cinemas has drawn up a plan to build 12 megaplexes in India where you can not only see movies but also cricket and soccer matches on screen.
• Multiplex chain PVR Cinemas, which currently has 92 screens, is also planning to add over 150 screens across India, staggered over a period of three years from 2008-2010, with a total investment outlay of around US$ 71.55 million.
• Cinemax India, the multiplex chain which currently has 55 screens over 17 properties across the country is planning to scale up its presence to 299 screens across about 100 properties by fiscal 2010

IT enabled Services

The Information Technology enabled Services (ITeS) sector has not only changed the way the world looks at India but has also made significant contributions to the Indian economy. According to the National Association of Software and Service Companies (NASSCOM), the IT/ITeS industry's contribution to the country's gross domestic product (GDP) has grown from 1.2 per cent in FY 1998 to an estimated 5.5 per cent in FY 2008. The net value-added by this sector, to the economy, is estimated at 3.3-3.9 per cent for FY 2008.

The Indian IT-ITeS sector (including hardware) grew by 33 per cent in FY 2008 to reach US$ 64 billion in aggregate revenue. Of this, the ITeS/BPO sector contributed US$ 12.5 billion as against US$ 9.5 billion in FY 2007, an increase of 31 per cent.

The Indian ITeS-BPO exports grew significantly from US$ 8.4 billion in FY 2007 to US$ 10.9 billion in FY 2008 while the revenues of domestic BPO grew to US$ 1.6 billion in FY 2008 from US$ 1.1 billion in FY 2007. The sector provided direct employment to 700,000 in FY 2008 up from 553,000 in FY 2007.

ITeS, which started with basic data entry tasks over a decade ago, is witnessing an expansion in its scope of services to include increasingly complex processes involving rule-based decision making and even research services requiring informed individual judgment. It now offers services such as knowledge process outsourcing (KPO), legal process outsourcing (LPO), games process outsourcing (GPO) and design outsourcing among others.

Realising its potential, after IT Parks and IT SEZs, the government has cleared a proposal for creating much larger Information Technology Investment Regions (ITIRs) to give a fillip to the country's growing IT and ITeS sector.

Moving up the Value-chain

The number of patent filings from Indian R&D centres has been growing over the years. More and more cutting-edge products are being developed in India. While outsourcing lower level technical jobs to India has been a practice of multinational technology firms, the increasing reliance on Indian R&D operations is a growing trend.

• Aviation majors like Boeing and Lockheed Martin are looking at setting up captive IT-related technological R&D centres in India.
• India has emerged as the largest developer location for companies such as Sun Microsystems and Nokia. Sun Microsystems has 760,000 developers in India – the largest such community in the world for the firm. The world's largest handset maker Nokia works with over 140,000 independent developers in India, again the largest.

India with its natural competitive advantage is likely to play a huge role in various segments of the ITeS industry.

• The Indian animation industry is rapidly growing as a major outsourcing hub with a growth rate of 30 per cent.
• The Indian KPO sector is estimated to become a US$ 10-billion industry by 2012, from the current size of US$ 4 billion according to a report on the "Future Course of KPO Industry".
• India is fast becoming a hot destination for outsourced e-publishing work. As per a Confederation of Indian Industry (CII) report, the industry is growing at an annual rate of 35 per cent and India's outsourcing opportunities in the value-added and core services such as copy editing, project management, indexing, media services and content deployment will help make the publishing BPO industry worth US$ 1.46 billion by 2010.
• A recent CRISIL research study on the outsourcing industry has concluded that engineering services outsourcing (ESO) is poised to be the next big opportunity in the Indian outsourcing services industry. The ESO sector is likely to grow at a compounded rate of 26 per cent and post revenues aggregating around US$ 7.5 billion by 2012.

Insurance

The insurance sector is one of the most promising sectors in India today. The market size went up to US$ 47.89 billion in 2007, from US$ 21.71 billion in 2000, showing an increase of 120 per cent. Between 2000 and 2007, overall premiums sustained an average growth rate of 11.96 per cent and the compound annual growth rate (CAGR) growth was 11.96 per cent. This was one of the most steady growth patterns witnessed amongst emerging economies in Asian as well as global markets.

With the largest number of life insurance policies in force in the world, the penetration of insurance in India as a percentage of gross domestic product (GDP) stood at 4.8 per cent, as on February 2008, against 1.2 per cent in 1999–2000. Of this, life insurance accounted for 4.1 per cent and non-life insurance for 0.6 per cent.

Growth of private insurance companies

A report - 'Insurance Sector Futuristic Growth'—released in August 2008, by ASSOCHAM revealed that bolstered by intense marketing strategies, private insurance players have rapidly increased their market share. The share of state-owned insurance companies like General Insurance Corporation (GIC), Life Insurance Corporation (LIC) and others have come down to 70 per cent in last 4–5 years from over 97 per cent. It is estimated that its growth rate could even exceed 140 per cent. State-owned insurance companies have been suffering due to the limited number of policies on offer, while private insurance companies have a larger number of policies on offer, with more competitive premium amounts and maturity periods. The private sector insurance players have now also stepped into the rural markets in which, till recently, was dominated by the state-owned companies.

Private insurance companies have innovated with customised policies for different sections. For instance, an increase in the number of working women has led to a demand for life insurance policies, which in turn has helped women through a micro-entrepreneurship initiative (women have flexibility - managing home and being financially independent as distributors of insurance).

Children's products such as ICICI Prudential Life's 'SmartKid', Birla Sun Life's 'Children's Dream Plan', or HDFC Standard 'Life's Young Star Plus', are on a consistent growth path. According to industry estimates, currently, 20–30 per cent of business of many companies comes from children-specific insurance policies alone.

Simultaneously, many Indian companies are venturing abroad to diversify and increase their global presence.

Life Insurance

India is the fifth largest life insurance market in the emerging insurance economies globally and the segment is growing at a healthy 32-34 per cent annually. The Indian life insurance market is growing rapidly and from having a single company a decade ago, there are 18 active players in the market today. According to a report by research firm RNCOS—'Booming Insurance Market in India (2008-2011)'—the total life insurance premium in India is projected to grow to US$ 259.72 billion by 2010–11. The booming market has propelled the Indian life insurance agents into the 'top 10 country list' in terms of membership to the Million Dollar Round Table (MDRT) - a select club for the best performing life insurance agents.

The total life insurance market premiums is likely to more than double from the current US$ 40 billion to US$ 80 billion–US$ 100 billion by 2012, says a study by McKinsey. The study titled 'India Insurance 2012: Fortune Favours the Bold,' expects a rise in premiums between 5.1 and 6.2 per cent of the GDP in 2012 from the current 4.1 per cent driven by greater insurance intensity per capita as the average per capita income increases and rise in penetration in urban and rural areas.

General Insurance

The general insurance sector is likely to grow at a rate of 18 per cent in 2008, compared to 13 per cent in 2007. The general insurance sector's market size is likely to grow from the present US$ 7 billion to US$ 7.7 billion. During 2007–08, the general insurance sector grew at 12.53 per cent.

The 17 major non-life insurers collected a total of US$ 840.27 million as premium in April 2008, as against US$ 734.57 million premium collected in the corresponding period last year, recording a growth rate of 14.39 per cent. Private players continued to grow faster than the public sector players with a growth rate of 23 per cent, thereby increasing their share to 43.91 per cent in total premium collections. With the market players increasing their product lines to meet the growing demand, the growth momentum of the non-life insurance business is likely to continue, as per the credit rating agency ICRA.

The urban market is the major contributor of the general insurance industry. The sector needs to grow by 25 to 30 per cent to increase its low penetration level of 0.65 per cent. However, with the rural market registering a rapid growth rate, the general insurance industry growth is expected to increase to18 per cent this year.

In 2007–2008, the public sector could increase its premiums by just 3.94 per cent, 13 private sector players clocked premium growth of 28.85 per cent. The current fiscal has continued to maintain the growth momentum of the Indian general insurance industry. Private sector players' market share has grown to about 40 per cent in FY 2008 as compared to the public sector's 60 per cent.