Our Blog

India is the world's biggest outsourcing destination in terms of financial attractiveness and business environment, according to a study published today by a London-based global management consulting firm.

 

A T Kearney's 2016 Global Services Location Index (GSLI) rated India as number one out of the total 55 countries analysed.

 

China, Malaysia, Brazil, Indonesia, Thailand, The Philippines, Mexico, Chile and Poland respectively made up the top 10 list.

 

Offshoring to India remains a high attractive proposition for many companies, said the study which also takes a deeper dive into optimal cities for offshoring within the ranked countries.

 

"While India and the Philippines are still top of mind when it comes to offshoring, the hunt for new talent is now taking companies beyond these countries' capitals and major cites to tier 3 locations such as Surat, Nagpur, and Lucknow in India and Bacolod and Iloilo City in the Philippines," said Nikolai Dobberstien, partner with A T Kearney's Communications, Media and Technology practice.

 

One advantage of tier 3 cities is the relative affordability of real estate as facilities in Nagpur and Ahmedabad are 25 per cent to 30 per cent cheaper than Kolkata and Delhi, the report said.

 

Another advantage is the relative availability of labour, its lower cost and lower attrition rates.

 

Many of these cities have highly developed educational infrastructure, ensuring fresh crops of qualified graduates for the foreseeable future, GSLI said.

 

"Even though the top six or seven countries are landing in the same order this year as 2014, looking forward, this could all change radically because the very nature of what's being outsourced is changing," said Arjun Sethi, global leader of A T Kearney's strategic IT practice.

 

"For the first time, we have a trend - automation - that could displace the leadership of the likes of India and China in outsourcing. Technology's relentless progress continues to transform in unanticipated and fundamentally different ways not only where work is moving to, but how and by whom - or by what - it is being done," Sethi said.

 

He said the new business model associated with this automation threatens established concepts of offshoring, while expanding the market.

 

India's undisputed industry leadership is facing a challenge from China which has become attractive with its recent devaluation of Renminbi and gains in educational skills and cultural adaptability.

 

"The implications on accessibility of services and employment in these countries are massive. On the client or receiver end, Business Process as a Service (BPaaS) dramatically lowers the entry barriers to business data management, opening the floodgates to smaller and newer companies," said Sethi, principal author of the study.

 

The GSLI, launched in 2004, helps companies make key location decisions for offshoring and industry development projects with objective guidance.

 

Source: Business Standard

In order to ensure the industry participation in Skill India Mission in a big way, the Centre has planned a major outreach programme for industry leaders to bring them on a common platform for the greater interaction.

 

To this end, the Union Government is organising a "National Industry Conclave on Skills" on January 12 in Mumbai. The conclave will be an annual event and will see participation from across ministries and corporates. This inaugural conclave is being held on the occasion of the 153rd birth anniversary of Swami Vivekananda.

 

Union Urban Development and Parliamentary Affairs Minister Venkaiah Naidu will be steering the conclave along with Minister of State for Skill Development and Entrepreneurship Rajiv Pratap Rudy.

 

"It is a meeting of industry leaders who are the stakeholders in the skill ecosystem, to conceive and partner towards realising the vision of Skill India," an official statement said today. Outlining the theme of the conclave, Mr Rudy said that the conclave would be an annual feature to review the work done across sectors and regions. "This will be a good platform to bring about synergies and convergence across all and contribute collectively to the success of Skill India. Public Private Partnership in Skill Development, Skill imperative for industrial growth and Improving Livelihood of Rural India through Skill India are some of the topics that will be discussed during the day long conclave," he said.

 

From the Maharashtra Government, Chief Minister Devendra Fadnavis will be sharing his views on skill development. Several Union Ministers, including Defence Minister Manohar Parrikar, Union Minister of Road Transport and Highways and Shipping Nitin Gadkari, Union Minister of Rural Development Birender Singh and Petroleum and Natural Gas Minister Dharmendra Pradhan are likely to address the conclave. The conclave will bring together industry captains and professionals from across industries onto one platform to deliberate on important issues related to skill development in India. Industry leaders from corporates like Tata, TCS, Reliance Communication, Bharti Airtel, JSW Steel, Reliance Industries, GVK, GMR, Essar and others will also take part at the conference.

 

Source: webindia123

A number of factors at work can mean better days ahead for the India investment story. For one, long-term foreign investments are impressive

 

Despite some ongoing economic recovery in India, getting the investment cycle back on track is turning out to be a rather slow process. The contribution of capital formation to the economy has been declining steadily over the past few years: In 2011-12, the numbers stood at 36% and are now down to 31.5% up to the first half of 2015-16. 

 

This loss of share, is also corroborated by the pace of credit creation in the economy, which has averaged a growth of an anaemic sub-10% rate for much of the past year. Industry, which forms the largest component of credit, has shown the slowest growth of 5% in November 2015 among all sectors. Foreign borrowings by corporate India have been weak in the past year, too. 

 

Disappointing as this is, it is however, only half the picture. 

 

A number of factors at work can mean better days ahead for the India investment story. For one, long-term foreign investments are impressive. For the period up to September 2015, India's FDI inflows are north of $24 billion, a trend, which continued for the year will result in the highest ever FDI inflows into the economy in a single year. 

 

The government at the centre has also front loaded its capital spends, possibly in a bid to improve overall investments in the economy. And the central bank on its part, has cut policy repo rate by 1.25 percentage points the past year, which could boost domestic credit creation.

 

Further, growth production of capital goods as per the monthly index has picked up as per numbers from the monthly Index of Industrial Production (IIP) to 9.4% in the April-October 2015 period, compared to 5.3% in the same period in 2014.

 

Also, even though the contribution of capital formation to gross value added has slowed down over the years, the latest growth number gives room for hope. Capital formation in the second quarter of 2015-16 grew at its fastest pace in three quarters at 6.8%, a rate faster than consumption spending. If this growth rate pickup continues continues, then the share of investments in the economy could start rising in the coming quarters.

 

Not everyone buys this, though. According to Madan Sabnavis, Chief Economist, Care Ratings, capital formation as a ratio of the GDP in current prices is still a better indicator to look at, which is slowing down. Also, industrial capacity utilisation needs to pick up before companies can start further capacity creation. Banking sector NPAs can also make banks extra cautious while lending now.

 

All in all, though, chances of some return in investment growth is quite likely in the next quarters, even if it is cautious and even uneven across sectors and over time.

 

Source: Business World

India’s book market is the sixth largest in the world and second among the English language ones.

 

This explains some of the interest from publishers for the ongoing annual ‘World Book Fair’ here, inaugurated on Saturday. It will be on for 10 days. China is the official ‘guest of honour country’.

 

The statistics cited earlier came from an India Book Market Report, by Nielsen, with the Association of Publishers in India and the Federation of Indian Publishers. It values the print book market in India, including imports, at $3.9 billion (Rs 26,000 crore). Its compounded annual growth was 20.4 per cent between 2011–12 and 2014–15.

 

Some noteworthy mergers and acquisitions have taken place in recent years. Among these were  Penguin with Random House and HarperCollins’ acquisition of Harlequin, all companies with substantial presence in this country. Also in educational publishing, such as S Chand’s acquisition of Madhuban, Vikas and Saraswati Book House, and Laxmi Publications’ acquisition of Macmillan Higher Education.

 

Jonathan Stolper, global managing director of Nielsen Book, said after their report was issued: “Some of the facts that came to light are very impressive – there are 9,000 publishers, over 21,000 retailers and 22 official languages, and if you include regional dialects, the total is 1,600. Literacy in India is rising rapidly, from 65 per cent in 2001 to 74 per cent in 2011, and it is predicted to reach 90 per cent in 2020.”

 

However, the Indian book publishing sector gets no direct investment from government, "a serious roadblock", the report says. Other challenges include the fragmented nature of publishing and bookselling, a tortuous distribution system, long credit cycles that make it difficult to manage cash flows, and increases in direct costs. Piracy is widespread, with every other street in the country being  home to stalls selling pirated texts.

 

The Indian e-book market has also seen a major overhauling, with internet expansion and spread of mobile phones, specially smartphones. Many gaps are present and a look at India’s neighbours is interesting. According to a 2014 survey from the Chinese Academy of Press and Publication, 58.1 per cent of China's reading population read digitally, an eight per cent increase from 2013, and higher than the paper reading population for the first time.

 

Rohit Kumar, co-chair of the publishing committee at the Federation of Indian Chambers of Commerce and Industry says despite India’s surge in internet users, this is still the lowest in leading economies at 19 per cent. China’s is 46 per cent. Digital revenue is between three and four per cent of the total, at considerable seeming variance with the Nielsen survey numbers. Consumer data survey shows, on average, people read books 2.1 times a week, while nearly two-thirds read a book occasionally. Interestingly, 56 per cent of the respondents bought at least one e-book a year and nearly half of these bought at least three or four, indicating a growing demand here.

 

Fifty-five per cent of trade sales are of books in English. Books in Hindi are 35 per cent of Indian language sales but the largest share of these is taken by ‘Others’, despite what the report identifies as a "highly disorganised" local publishing sector.

 

Foreseeing a rosy outlook for the publishing sector, Kumar states, "2016-2018 will see a dramatic change in the way it is going to function. But, India should learn from China because not only are they four-five years ahead of us in terms of the internet revolution but also because their publishing sector has seen a steep growth as compared to others."

 

Source: Business Standard

For FMCG sector, which is the fourth largest in economy with market size of US$13.1 billion year 2015 has been a mixed bag. It was a roller coaster ride right from Union Budget to impending implementation of GST Bill for consumer goods sector.

 

Summit Chairman and CEO, PepsiCo India of “Re-Imagining FMCG in India” ,D Shivakumar  aptly summarised the present scenario of FMCG sector in India saying,“The FMCG industry has always been bedrock of talent to all other industries. It is one of the largest sectors in India and is a largely a Make-in-India industry. FMCG has to be re-imagined for a future world, owing to the varied changes and opportunities seen in this sector. " 

 

For FMCG sector, which is the fourth largest in economy with market size of US$13.1 billion year 2015 has been a mixed bag. It was a roller coaster ride right from Union Budget to impending implementation of GST Bill for consumer goods sector. There were cloudy days involving the Maggi ban, increase on tax of tobacco and heavy rains affecting rural market. However, the sector is estimated to be among the key factors in reviving India. Despite of lackadaisical economic growth and weak performance in the past two years, outlook remains positive for India’s consumer goods industry in the new year.

 

Nielsen, a leading global information and measurement company, predicts India’s FMCG industry to grow from $37 billion in 2013 to $49 billion in 2016. Digital communication, e-commerce and premium products are foreseen as key drivers for growth. Its future depends on how they evolve around this sections. By 2020, around 150 million consumers are expected to be digitally influenced in FMCG and these digital consumers alone would spend ~ 40 USD Bn on FMCG categories, elucidated a report by Boston Consulting Group.

 

Budget woes

 

Right from the time the Union Budget 2015 was presented in the Parliament, FMCG sector had a fair share of its peak and crests. .25% hike on excise duty of cigarettes for length not exceeding 65mm and by 15% for cigarettes of other lengths was announced. Similar increases were proposed on cigars, cheroots and cigarillos. Also, changes were made in the compounded levy scheme applicable to pan masala, gutkha and certain other tobacco products. This did not augur well for major tobacco producers like VST Industries, Godfrey Phillips, and ITC. In a glimmer of hope however, FM Arun Jaitley, vowed to implement Goods and Service Tax bill (GST bill) by April 2016, which would provide a respite to the industry plaguing from several taxation structures.

 

Nestle Tragedy!

 

Perhaps the biggest controversy for the year came from major food maker Nestle, which reported its first quaterly losses in India due to Maggi ban. India is among the largest consumer of Maggi noodles across all Nestle operations in the world, with a topline at 8-9%. The ban was enforced on the accusation that Maggi contained excess levels of lead and mono-sodium glutamate (MSG). After much hue and cry and dozens of law cases the company had to eventually withdraw Maggi noodles of worth Rs. 210 crore from the market.

 

Distress compounded for Nestle, as during April-June quarter, the company reported loss of Rs 64.4 crore, while recalling Maggi worth Rs. 320 crore. Later, apex court of consumer issued a notice to  Nestle to cough up Rs. 640 crore, for unfair trade practices, false labeling and misleading advertisements of Maggi noodles.

 

Though the Swiss-based food manufacturer remain convinced on Maggi being safe, authorities in India sent samples of it to several food test labs. After facing tough objections from Food Safety and Standards Authority of India (FSSAI), apex court has finally allowed it to be brought back on shelves. Now that everyone’s favourite snack is back, Nestle seeks double digit growth for their brand by increasing its consumption capacity, and new marketing stragies like partnership with Snapdeal

 

GST merriment or dismay!

 

India Inc is waiting with bated breath for GST to be implemented. However, things might not turn out to be As per a Religare Capital Market report, at a GST rate of 18% on food items, edible oils, biscuits, chocolate, cocoa and baked items, FMCG companies will take a hit as indirect tax incidence will go up. Carbonated drinks may take a larger hit at 40% proposed GST.

 

However, clarity on GST bill is yet unclear. The panel is suggesting taxation in three categories where some essential goods will be taxed at a lower rate of 12%, demerit goods such as luxury cars, aerated beverages, pan masala and tobacco products at a higher rate of 40%; and all remaining goods at a standard rate of 17-18%. If these changes are brought into practice, it could be downside for tobacco players in India, as cigarettes sales account for 17% of the top 100 FMCG sales, and just below the personal care category. ITC alone holds 60% volume market share and 70% by value of all filter cigarettes in India. So, unlike other sector, GST is not playing Santa to the FMCG.

 

Weak Monsoon, Low rural consumption:

 

Major FMCG players are stressed on rural consumption for the next two-three quarters. For the two successive year, there has been shortfall in rains which has impacted incomes and adversely affecting sales across product categories. In the past four quarters, rural growth of household items right from toothpastes to detergent and biscuits to beverages has been contracting to single digit growth of 5-6% compared to 11-12% of last year.

 

Dabur, the world’s largest Ayurvedic medicine & related products manufacturer in a report stated, there has been a decline in net disposable income of rural households specially in drought-affected areas. The fall is led by poor monsoons, unchanged NREGA scheme and low lower-than-normal increase in minimum support price. For the September 2015 quarter, Coca-Cola reported 4% growth in its volume, which the beverage maker attributed to lower farm income.

 

All the sun shines here!

 

Year 2015, belonged to debt free companies in FMCG market.

 

HUL has stunned the market with its volume growth, with its soap segment among the top 10 list. Despite of new entries of various products, the company maintained to dominate competitors with its four brands Lifeboy, LUX, Dove and Pears in the personal care category. The domestic major also acquired Indulekha and Vayodha from Mosons Group for Rs 330 crore so as to strengthen its ayurvedic section and also tapping its personal care segments.

 

Companies like Dabur, HUL, Marico and Britannia has started targeting weaker states to strengthen their market value. In a year, Dabur Red, the ayurvedic toothpaste brand of Dabur has overtaken Colgate-Dental cream in states like Odisha and Bihar, doubling its shares. In September ended quarter 2015, Dabur witnessed 8% yoy increase in its revenue, led by its consumer care business which was up by 10% yoy.

 

Britannia Industries consolidated profit from operations witnessed 56% increase in Q2 and 70% rise for the six months at Rs. 298 crores & Rs. 559 crores respectively. The industry has lined up capex of around Rs. 500 crore and plans significant investment for the next two-three years.

 

Marico’s key products Coconut Parachute have continued to perform, with growth of 10% maintaining its fundamentals strong. During September ended quarter, the company witnessed consolidated net profit of Rs. 150.72 crore, up by 27% against Rs. 118.26 crore for the same period in the previous year.

 

Government Initiatives:

 

To pacify the consumer sentiment, Government has allowed 100 percent Foreign Direct Investment (FDI) in the electronics hardware-manufacturing sector through the automatic route. It has also permitted 51% FDI in multi-brand retail and 100 per cent in single-brand retail in order to attract foreign investment for the sector. Policies such as National Electronics Mission and digitisation of television and setting up of Electronic Hardware Technology Parks (EHTPs) is expected to boost the growth of this sector.

 

What Future Holds?

 

The consumer electronic segment is forecast to rise to US$ 400 billion by 2020. By 2016, the production is expected to reach around US$ 104 billion. In India, urban market consists of 65 percent share of total revenues in the sector. Demand for non-essential products such as LED TVs, laptops, split ACs and, beauty and wellness products are expected to be driven in urban markets. In the coming years, rural market will see increase in demand of durables like refrigerators as well as consumer electronic goods as the government plans to invest significantly in rural electrification. By 2025, India is expected to become fifth largest consumer durables market in the world. It remains to be seen how India will cope to that challenge, starting 2016.