December , 2019
Indian industries: an overview
15:13 pm

Aritra Mitra

India has emerged as the fastest growing major economy in the world. Backed by its strong democracy and diplomatic relations, it is expected to be one of the top three economic powers of the world over the next 10-15 years. According to the recently released data, the Indian economy expanded by 4.5% year-on-year (y-o-y) basis in the third quarter of 2019, below the 5% growth in the previous period and lower than the market expectations of 4.7%.

However, according to industry insiders, India’s Gross Domestic Product (GDP) is expected to reach $6 trillion by FY27 and achieve upper-middle income status backed by digitisation, globalisation, favourable demographics and reforms.The Indian industries are also going to play an impor-tant role in contributing to the GDP of the country’s economy.

According to the Index of Industrial Production (IIP), India’s industrial output grew at 3.4% on a y-o-y basis in April 2019. The estimated contribution of various sectors to the GDP is agriculture 16%, industry 30% and services 54% respectively. As far as industries are concerned, 12 out of 23 groups in the manufacturing sector have performed very well during May 2019. The major industries of India include steel, banking, cement, petrochemical, automotive, Information Technology (IT), healthcare and textile.

Iron and steel industry

From January to October, 2019, the world crude steel production reached 1541.77 million tonnes (mt) and showed a growth of 3.2% over January-Oct 2018. India is the second-largest producer of crude steel (93.31 mt), only next to China (829.21 mt). According to a projection by World Steel Association, Indian steel demand grew by 5% in 2019. According to the Joint Plant Committee, per capita finished steel consumption for India in 2018 was 74.1 kg.

According to World Steel Association report, the country is also the largest producer of Sponge Iron or DRI in the world. The coal based route accounted for 79% of total Sponge Iron production (34.71 mt) in the country in 2018-19. It is also the third largest finished steel consumer in the world after China and the US.

In 2018-19, production of total finished steel was 101.287 mt. The government has released the National Steel Policy 2017 which has envisaged 300 million tonnes of production capacity by 2030-31. In 2018, steel consumption of the country is expected to grow by 5.7% year-on-year to 92.1 mt. Further, according to market insiders, India is expected to surpass the US to become the world’s second largest steel consumer in 2019. JSW Steel has planned a $ 4.14 billion capital expenditure programme to increase its overall steel output capacity from 18 million tonnes to 23 million tonnes by 2020.

The steel sector in India contributes nearly 2% of the country’s Gross Domestic Product (GDP) and employs over 6,00,000 people. The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to India’s manufacturing output.

Banking industry

According to the official data, there were 13.80 lakh bank employees and officers at the end of March 2018. Of the total manpower in the banking sector, 8.59 lakh were bank officers while the number of clerks was 3.6 lakh and banks also had 1.61 lakh subordinates.

In FY 17-18, total lending of the Indian banking sector increased at a CAGR of 10.94% and total deposits increased at a CAGR of 11.66%. India’s retail credit market is the fourth largest in the emerging countries. It increased to $281 billion on December 2017 from $181 billion on December 2014. The biggest merger deal of FY17 was in the microfinance segment of IndusInd Bank Limited and Bharat Financial Inclusion Limited worth $ 2.4 billion.

As of September 2018, the government had launched India Post Payments Bank (IPPB) and has opened branches across 650 districts to achieve the objective of financial inclusion. The total value of mergers and acquisition during 2017 in NBFC diversified financial services and banking was $ 2,564 billion, $ 103 million and $ 79 million respectively.

The government is planning to inject `42,000 crore ($ 5.99 billion) in the public sector banks by March 2019 and will infuse the next tranche of recapitalisation by mid-December 2018. India’s digital lending stood at $ 75 billion in FY18 and is estimated to reach $ 1 trillion by FY2023 driven by the five-fold increase in digital disbursements.

Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth. All these factors suggest that India’s banking sector is also poised for robust growth as rapidly growing businesses would turn to banks for their credit needs.

Healthcare Industry

Healthcare has become one of India’s largest sectors - both in terms of revenue and employment. Healthcare comprises hospitals, medical devices, clinical trials, outsourcing, telemedicine, medical tourism, health insurance and medical equipment.

The Indian healthcare sector is growing at a brisk pace due to its strengthening coverage, services and increasing expen-diture by public as well private players. India is experiencing 22-25% growth in medical tourism and the industry is expected to reach $9 billion by 2020. The government’s expenditure on the health sector has grown to 1.4% in FY18 from 1.2% in FY14.

According to data released by the Department of Industrial Policy and Promotion (DIPP), the hospital and diagnostic centers attracted Foreign Direct Investment (FDI) worth $6.09 billion between April 2000 and March 2019. The healthcare market can increase three fold to `8.6 trillion (US$ 133.44 billion) by 2022.

On September 23, 2018, the Government of India launched the Pradhan Mantri Jan Arogya Yojana (PMJAY), to provide health insurance worth `500,000 ($ 7,124.54) to over 100 million families every year. A government funded health insurance project was launched in 2018 by the Government of India, called Ayushman Bharat.

Cement industry

India is the second largest cement producer in the world. As of 2018, it accounts for over 8% of the global installed capacity with 460 million tonnes per year (mtpa) of cement production. As of July 19, 2019, the cement production stood at 28.08 million tonnes and the production capacity is estimated to touch 550 mt by 2020. India’s exports of cement, clinker and asbestos cement increased at CAGR of 10.54% between FY12-FY20 (April-July 2019) to reach $177.93 million.

Petrochemical industry

India is the third largest producer of chemicals in Asia. According to market insiders, chemical industry generates around 80,000 commercial goods ranging from plastic to toiletries and pesticides to beauty products. In 2016-17, Alkali chemicals had the largest share in the chemical industry in India which is approximately 69% share in the total production. The production of polymers account for about 59% of total production of basic major petrochemicals.

The industry is expected to go up at 10% to touch $100 billion by 2022. Market for crop protection chemicals in India is expected to reach $ 7.5 billion by 2019. Market insiders are of the opinion that the government schemes and high FDI inflows have proved beneficial for the growth of chemical industry.

Automobile industry

India is a prominent auto exporter and has strong export growth expectations for the near future. Automobile exports grew by 14.5% during FY 2019. It is expected to grow at a CAGR of 3.05% during 2016-2026. In addition, several initiatives by the government and the major automobile players in the Indian market are expected to make India a leader in the two-wheeler and four wheeler market in the world by 2020.

In FY19, year-on-year growth in domestic sales among all the categories was recorded in commercial vehicles at 17.55% followed by 10.27% year-on-year growth in the sales of three-wheelers.

In order to keep up with the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. According to data released by Department for Promotion of Industry and Internal Trade (DPIIT), the industry has attracted Foreign Direct Investment (FDI) worth $ 21.38 billion during the period April 2000 to March 2019.

Software industry

Over the last 10 years, the software Industry in India has registered an immense expansion. India’s IT sector growth has reached $ 181 billion in 2018-19. Exports from the IT sector have gone up to $ 137 billion in FY19 while domestic revenues (including hardware) increased to $ 44 billion. The IT industry is expected to maintain growth rate of over 9%.

As per data released by DPIIT, the computer software and hardware sector in India attracted cumulative FDI inflows worth $ 37.23 billion between April 2000 and March 2019 and ranks second in inflow of FDI.

Textile industry

The textiles industry in India is currently estimated at more than $ 100 billion. The Indian textile industry contributes to 7% of industrial output in terms of value, 2% of India’s GDP and to 15% of country’s export earnings. The Indian textiles industry, currently estimated at around $ 150 billion, is expected to reach $ 250 billion by 2019. India’s overall textile exports during FY 2017-18 stood at $ 39.2 billion in FY18 and are expected to increase to $ 82.00 billion by 2021 from $ 31.65 billion in FY19.

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