INDIAN VS WORLD

DEMAND
FIVE PRODUCT ANALYSIS

3/25/2009

Bivas Pathak – Roll Number (09)

Mini Pasricha - Roll Number (21)
Nitin Verma – Roll Number (25)
Soumya Mishra – Roll Number (41)
Gold

Demand in India VS Global Demand

Total demand for gold in India, the world’s largest market for the metal, stood at was up 84
per cent in tonnage terms in the fourth quarter of calendar 2008, led by a strong 107 per cent
rise in jewellery demand, according to the World Gold Council (WGC) in its report, `Gold
Demand Trends’.Internationally, total demand was up 26 per cent at 1,036 tonnes or $26.5
billion in value terms

India is the world’s largest market for Gold. India's annual consumption of the yellow metal
is put at 800-850 tonnes, of which close to 150-200 tonnes is accounted for by recycled gold,
classed as "scrap" in the global data collected for the World Gold Council. In February 2009,
External bullion imports were virtually zero thanks to the sky-high prices, and a growing
scrap supply. The important point to note is that India has virtually no domestic Gold Mining
industry.

Scenario Analysis: If India becomes the World

In order to analyse this point of view, we need to take a look at the global gold prices over the last
century:
 The prices of gold, in both the British Pound and U.S. Dollar, were fairly flat till the late
1970’s, post which they witnessed a huge surge in prices and have witnessed huge spikes in
the 21st century. Based on global demand for Gold, the prices have shown a steady growth
in the last decade as shown in the chart below:

Implications

• In case the Demand for Gold in India, were to mirror that of the world demand,
this will translate to an increase in demand by 223%
• A huge spike in the prices of gold globally from the present levels of Rs. 48, 138
per ounce.

Assuming that the huge surge in demand for Gold globally will not be dampened by the
increase in prices, the following implications can be foreseen-

• Indian market is the world’s largest market for the metal. A surge in global
demand will lead to a boom in the Gold industry. Also, India’s Gold industry
 inturn is linked to the many tertiary industries, which will also be impacted, as
discussed below:
o India's gems and jewellery industry, which is one of the most competitive
in the world thanks to its low cost of production and the wide availability
of skilled labour. Worldwide, the gems and jewellery industry had been
growing at a good pace and is currently estimated at $150 billion or more
per year. In India, it accounts for nearly 20% of total national exports and
employs nearly a million people directly and indirectly, according to an
Associated Chambers of Commerce & Industry report. A surge in
demand for gold by 223% will trickle down to this sector as well and
further the employment prospects for this industry.
o India's polishing industry has a worldwide distribution network, which
has been established over a period of time. A surge in demand for Gold
will translate to enhanced demand for this sector as well.
o India has the world's largest cutting and polishing industry, employing
around 800,000 people (some 94% of the industry's global workforce)
with more than 500 hi-tech laser machines. As a result of the enhanced
global demand, this workforce will also see double digit surge in
employment and revenue generation.

World Becomes India: This will lead to a huge reduction in demand and inturn impact the above
stated factors negatively.

Beer

Demand in India VS Global Demand

.
The present Indian beer market has reached
about 1392 million litres in the financial year,
2007-08 i.e per capita consumption of 1.2
litres .compared to this , the global average of
beer consumption is 22 litres and the highest
consumption rate of 159 litres ( The Chez
Republic). India is the World’s No.1 consumer
of Strong Beer in contrast to Mild beer.
Between 15 and 20 per cent of Indian people
consume alcohol and, over the past twenty years,
the number of drinkers has increased from one in
300 to one in 20.

(I n Litres If India Present

per became If world world
Beer capita) world became India Mkt.size
( in million ( in million
litres) litres)
India average consumption 1.2 1392
Global average consumption 22 25520 8160 149600
Percentage Change 1733.33
Highest consumption 159 184440
Assumptions:
Present population of India: 1160 millions
Present population of World: 6800 millions

Right now, India accounts for approximately 10% of global beverage consumption. That
makes beverage consumption in India the third largest in the world, after the United States
and China.
• Beer sales in India are forecast to grow at a compound annual growth rate of 17-
20% to 2020.
• Consumption of beer in BRIC countries (Brazil, Russia, India and China)
increased by almost 50 per cent during 2002-2007.
• Per capita consumption is directly related to the taxation, according to an industry
observer. For instance, in Maharashtra there is a direct 100% excise duty on Beer.
An equivalent 650 ml bottle is available for approximately Rs 8 in China. Which
is why the per capita consumption in China is a high 16 litres per annum.

Scenario Analysis

If India becomes the world

• In case the Demand for beer in India, were to mirror that of the world demand,
this will translate to an increase in demand by 1733%.
• This will lead to huge investment in this sectors from multinationals like UB,
SAB-Miller Anheuser-Busch, Carlsberg, Löwenbräu, Heineken, Inbev, Anheuser-
Busch.
• Creation of Job opportunity for additional 1, 28,000 peoples ( in the areas of brewing,
sales & marketing and hospitality)
• As a thumb rule, the FDI inflow will be to the tune of USD 18 billion.

In India the future of beer industry is very much optimistic because:

• India has predominantly a warm/hot climate

• The beer-drinkers in the country are much younger than the average beer-
drinker elsewhere in the world. This makes them more likely to carry the
brand with them for a lifetime.
• Increasing exposure to beer and wine drinking, mainly due to media and
consumer mobility.

All these factors combined make the scenario very promising for beer industry and are
'in sync' with the strategies of these multinationals for India.
If world become India

The present world beer market size is 149600 million litres. If the world average beer
consumption will match the India average consumption rate of 1.2 litre per person per year,
there will be a huge loss of employment and investment opportunities . This will impact the
society in a big way.

Steel

Demand in India VS Global Demand

The per capita steel consumption is generally 5

to 50 kg in under-developed, 50- 250 kg in
developing and over 250 kg in developed
nations. Today, a per capita steel consumption of
around 500- 600 kg is considered close to the
saturation point except for high population
density small countries. While the world average
is around 197 kg, the per capita consumption
data on a few countries is: Singapore 1200 kg,
South Korea & Taiwan 860 to 900 kg, Germany
540 kg, USA 410 kg, Malaysia 350 kg, Thailand
160 kg, China 220 kg and Vietnam 50kg And
India is at 46 kg only - which is just above the
average level in most of Africa.

If world Present
(in Kilograms If India became world Mkt.
Steel per capita) became world India size
( in million ( in million
tonnes) tonnes)
India average consumption 46 53
Global average
consumption 197 229 312 1400
Percentage Change 332.08
Highest consumption 1200 1392

Assumptions:
Present population of India: 1160 million
Present population of World: 6800 million

Scenario Analysis

If India become world

The current per capita steel consumption in India, at a dismal 46 kg, is only at the level of
an under-developed country, let alone a developing one. It indicates that no meaningful
infrastructural development has occurred in the country as a whole. Second, the current
proportion of flat to long product consumption in India, at about 55% to 45% (ideally, the
reverse is desired today), is alarmingly tilted towards the flat products for the present level
of development and is a consumption pattern found in near developed countries.

• If the per capita consumption of steel in India matches the world average of 197
Kg , the steel production will go up from the present level of 53 million tonnes to
229 million tonnes i.e. an increase of 332 % .
• India will become world leader ( No. 2 position) in steel sector.
• To produce this quantity of steel India will require an investments to the tune of
about Rs 300,000 crores .
• International players like Arcelor-Mittal, POSCO, MMK, Severstal, Evraz etc
will bring huge FDI in steel sector.
• As a thumb rule , this will generate additional employment opportunities for
7,20,000 peoples.
• Huge investments will come in the infrastructure sectors.

If world becomes India

The present total steel production of world is approximately 1400 million tonnes . If the
world average steel consumption will became India’s average per capita steel consumption
of 46 Kg , the total steel market size will sink to 312 million tonnes. The use of steel will
decrease and it will affect the infrastructural development of the world.

Cars

Demand in India VS Global Demand :

India is projected to have the largest number

of cars in the world -- 611 million to be
precise -- by 2050. This means every sixth
car produced in the world will be sold in
India. In terms of vehicle ownership per
thousand population, developed countries
would have vehicle ownership propensity of
well over 600 vehicles per thousand. India
and China, which are at believed to be at 12
and 24 respectively, will see substantial
increases in their ownership rates. Within the
next quarter century, China is projected to
reach an ownership rate of close to 380 and
India around 140 per thousand.

It is expected that the passenger car density in India will continue to be a third of China's
until 2025. India will overtake its neighbour somewhere in the vicinity of 2050, when the
country will have 382 cars per thousand people compared with China's 363 in that year.

By 2010: Total India Capacity : 3.22 million cars/annum Despite the fact that the number of
cars produced in India are insignificant compared to the US, Japan, China and other European
countries, India is the third largest producer of small cars after Japan and Brazil.
 If world Present
If India became world
Car became world India Mkt.size
(No. of Cars per 1000
of population)
India average 12 13920000
8160000
Global average 350 406000000 0 2380000000
Percentage Change 2816.67
Highest 765 887400000

• The growth will be huge due to innovation in Small Car.

• Also the penetration levels are too low in India & with many companies setting up
production facilities in India to manufacture small affordable cars (Ex: Tata Nano at
Rs. 1 Lac) the demand as well as supply sides are taken care of.
• Even Government of India has ambitious plans for Passenger vehicles (Automotive
Mission Plan – 2016)
• The increase levels in Young population & PCI will boost up the demand for
Passenger cars.

Scenario Analysis

If India becomes the World

The present passenger car density per thousand population in India is 12.

• If the car density of India matches the world figure of average 350 cars , the No.
of cars will go up from present 14 millions to 406 million , an increase of 2816
%.
• To produce this number of cars , India will require an investments to the tune of
about Rs 250,000 crores .
• International players like GM, FORD, Reynolds-Nissan , BMW , Volkswagen
etc will establish production facility in India.
• India will became a global hub for car production .
• This will generate approximately additional employment opportunities for
5,80,000 peoples.
If world become India

If the world car density matches India’s average of 12 cars per thousand , the market size
will be 81 million approximately instead of the present 2380 million . This will create
transportation problem in the world.
Cellular Subscription

The Indian telecom services sector is one of the fastest growing sectors, ranking sixth in the
world. In 2007 alone, the Indian cellular market added more than 80 million cellular
subscriptions. By end of 2008, India had more than 300 million cellular customers. The
market grew at a rate of approximately 57% year-on-year in Q1 2008, with a cellular
penetration rate of more than 20%. In comparison, China’s cellular base grew by
approximately 18% over the same period, but with a market penetration rate of 40%.

Demand in India vs. Global Demand

There were 4 billion mobile subscriptions worldwide at the end of 2008, after an average of
24 percent annual growth since 2000. Saturation rates are above 100 percent in Singapore and
Hong Kong, compared with 30 percent in Nigeria and just over a quarter in India, two of the
fastest expanding mobile markets.

Despite high growth rates for cellular subscriptions, India lags behind in terms of the penetration
rates. India had some 296 million mobile subscribers by end July 2008 but with a relatively low
penetration rate of about 20 per cent. The following chart presents details of the market penetration
along with the number of cellular connections in India.
 Also, India ranks the lowest in terms of the Tele density (number of cellular phone
connections, per 100 inhabitants).The following chart presents a comparison of the Indian
Telecom Industry with the World in terms of Tele density.

Scenario Analysis: India becomes the World

In case the demand for cellular subscription in India were to reach the penetration and
teledensity levels of the world, this would imply an increase of 256% in the levels of
teledensity and an increase of 1200% in terms of the cellular subscriptions . Implications of
the following could be as indicated below:

• Reduced cellular call rates:

Riding on impressive growth, the cellular call rates in India have reduced significantly to
about 2.6 cents per minute. However, this remains high compared with fixed-line rates at 0.9
cents per minute. In order to meet the global demand targets, these call rates will have to
reduce even further in order to enhance penetration to the lucrative rural Indian markets

• Enhanced Penetration in Rural India

Mobile penetration in the rural market is low at 2 percent, but this represents an immense
opportunity for the cellular service providers. Handset manufacturers are therefore
concentrating on launching sub US $25 mobile handsets.

• Enhanced Connectivity
This by far has been and will be the largest contribution of the telecommunications industry
to the economy at large. Enhanced connectivity will facilitate trade and inturn lead to the
growth of the untapped sectors of the economy.

World Becomes India:

This will inturn lead to a sharp fall in penetration and teledensity and inturn will take us back
in time in terms of our connectivity development.