Industry Report Merged

E-COMMERCE
For updated information, please visit www.ibef.org July 2019

Table of Content
Executive Summary……………….….…….3
Advantage India…………………..….……..4
Market Overview …………………….……..6
Strategies Adopted………….……..…..…..14
Growth Drivers and Opportunities…….…..17
Industry Associations……………...…….....25
Useful Information……….......……….……..27
EXECUTIVE SUMMARY
 The Indian E-commerce industry has been on an upward growth

trajectory and is expected to surpass the US to become the second Indian E-commerce Market (US$ billion)
largest E-commerce market in the world by 2034. The E-commerce
200.00
market is expected to reach US$ 200 billion by 2026 from US$ 38.5 200
150.00
billion in 2017. 150
100 63.70
 India's e-commerce market has the potential to grow than four folds 38.50 50.00
50
to US$ 150 billion by 2022 supported by rising incomes and surge in 0
internet users 2017 2018F 2020F 2022F 2026F
 With growing internet penetration, internet users in India are
expected to increase from 445.96 million in 2017 to 829 million by Internet Users in India (million)
2021. As of December 2018, internet subscribers in India stood at
604.21 million people.
1,000
636.73 700.00
 The total internet subscriber base in India stood at 636.73 million 604.21
829.00
445.96
subscribers in In FY19. 500
 Each month, India is adding approximately 10 million daily active

0
internet users to the internet community supporting the ecommerce 2017 2018 2019 2020 2021
industry which is the highest rate in the world.
 Online shoppers in India are expected to reach 220 million by 2025. India’s Internet Economy (US$ billion)
 India’s internet economy is expected to double from US$125 billion
300
as of April 2017 to US$ 250 billion by 2020, majorly backed by E-
commerce. 200 250.00
 Digital transactions are expected to reach US$ 100 billion by 2020. 100
125.00
 Through its ‘Digital India’ campaign the Government of India is 0
aiming to create a trillion dollar online economy by 2025. FY17 2020
Source: Media sources, BCG – The $250 billion Digital Volcano, BCG – Digital Consumer Spending in India, Kalaari Capital - Imagining Trillion Dollar Digital India
3 E-commerce For updated information, please visit www.ibef.org

E-commerce
ADVANTAGE INDIA
ADVANTAGE INDIA
 India is the fastest growing market for the E-commerce sector  The recent rise in digital literacy has led to an
with the e-commerce market expected to grow approximately influx of investment in E-commerce firms,
1,200 per cent by 2026. levelling the market for new players to set up
their base, while churn out innovative patterns
 Being driven by a young demographic profile, increasing
to disrupt old functioning.
internet penetration and relative better economic
performance, India’s E-commerce revenue is  E-commerce industry in India witnessed 21
private equity and venture capital deals worth
expected to jump from US$ 39 billion in 2017 to
US$ 2.1 billion in 2017. E-commerce and
US$ 120 billion in 2020, growing at an consumer internet companies in India received
annual rate of 51 per cent, the highest more than US$ 7 billion in private equity and
in the world. venture capital in 2018.
ADVANTAGE
INDIA  In India 100 per cent FDI is permitted in
B2B E-commerce,
 A lot of India’s blue-chip PE firms had  As per the new Foreign Direct Investment
previously avoided investing in E-commerce (FDI) policy, online entities through
but are now looking for opportunities in the foreign investments can not offer the
sector. products which are sold by retailers in
 India’s start-up ecosystem is growing which they hold equity stake.
supported by favourable FDI policies,  As per new guidelines on FDI in E-
Government initiatives like Start-up India and commerce, 100 per cent FDI under
Digital India, as well as rising internet automatic route is permitted in
penetration driven by market players like marketplace model of E-commerce.
Reliance Jio.  The heavy investment of Government of
India in rolling out the fiber network for
5G will help boost ecommerce in India.
Note: FDI – Foreign Direct Investment
Source: Media sources, Aranca Research, Grant Thornton, EY

E-commerce
MARKET OVERVIEW
GROWTH OF E-COMMERCE IN INDIA
 Propelled by rising smartphone penetration, the launch of 4G E-commerce Industry in India (US$ billion)
networks and increasing consumer wealth, the Indian E-commerce
market is expected to grow to US$ 200 billion by 2027 from US$
38.5 billion in 2017. 250
 E-commerce is increasingly attracting customers from Tier 2 and 3

cities, where people have limited access to brands but have high
aspirations. 200
200
 Average online retail spending in India was US$ 224 per user in
188
2017.
 The Government e-marketplace (GeM), three years after its 150

inauguration saw a cumulative procurement by the central and state
governments of Rs 24,183 crore (US$ 3.46 billion) in FY19 and has
a target of Rs 50,000 (US$ 7.15 billion) crore in FY20.
100
 By 2022, smartphone users are expected to reach 476 million and E-
commerce sector expected to grow 1,200 per cent by 2026. 84
64
50
50
39
20
14
0
2014 2015 2017 2018 F 2020 F 2021 F 2025 F 2027 F
Notes: *Estimated, F – Forecasted

Source: Media sources, BCG – The $250 billion Digital Volcano, BCG – Digital Consumer Spending in India, Bain & Company – Unlocking Digital for Bharat, Morgan Stanley

RISING INTERNET PENETRATION IN INDIA
 Internet penetration in India grew from just 4 per cent in 2007 to Internet Penetration in India (%)
34.42 per cent in 2017, registering a CAGR of 24 per cent between
2007 and 2017. As of December 2018 overall internet penetration in 60.0
India was 46.13 per cent.
48.48
 Urban India with an estimated population of 444 million as per 2011
census, already had 390.91 million people using the internet as of 50.0
December 2018.
38.02
 Rural India, with an estimated population of 906 million as per 2011
40.0
census, has 213.30 million internet users as of December 2018.
There is therefore a great opportunity for increasing penetration in
the rural areas. Internet penetration in rural India is expected to grow
34.80
34.42
as high as 45 per cent by 2021 compared to the current rate of 30.0
21.76 per cent .
27.00
 Rural internet subscriber base stood at 227.01 million and rural India
20.0
penetration was 25.36 per cent in FY19.
18.00
 Urban internet subscriber base stood at 409.72 million and its
15.10
penetration was 97.94 per cent in FY19.
10.0
12.60
10.10
 Number of active internet users in the country is the second highest
7.50
globally and data usage of 8 GB/subscriber/month is comparable to
4.00
4.40
5.10
developed countries. 0.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: Internet penetration - number of internet subscribers per 100 population

Source: Economic Times, Live Mint, Department of Telecommunications, Bain & Company – Unlocking Digital for Bharat

ONLINE RETAIL MARKET
Shares of Various Segments in E-commerce Retail by Value

Visakhapatnam
Online Shoppers
port traffic
in India
(million
(million)
tonnes)
(2018)
250 3% Electronics
3%
8%
200 95 Apparels
9%
150 Home and
48% Furnishing
100 Baby, Beauty and
Personal Care
55 Books
50 125 29%
25
0 Others
2017 2025
Tier-II and below Metro & Tier-I
 The online retail market in India is estimated to be worth US$ 17.8 billion in terms of gross merchandise value (GMV) as of 2017.
 India has secured the highest CAGR among major economies in online sales at 70 per cent in the online retail market over the years 2012-17. Online
retail sales in India are expected to grow by 31 per cent to touch US$ 32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.
 E-retail market is expected to continue its strong growth, by registering a CAGR of over 35 per cent and to reach Rs. 1.8 trillion (US$ 25.75 billion) by
FY20.
 Electronics is currently the biggest contributor to online retail sales in India with a share of 48 per cent, followed closely by apparel at 29 per cent. By
2025, non-electronics categories are expected to take 80 per cent share in online retail in India.
 As of July 2018, the number of transactions in E-commerce retailing are 1-1.2 million per day and on E-commerce platforms are 55-60 million per
month.
 With cost of servicing tier-II and other smaller cities going down, most of e-retail’s growth in the country is going to come from there. Overall, online
shoppers in India are expected to cross 120 million in 2018 and eventually 220 million by 2025.
Source: Report by eMarketer, Kalaari Capital – Imagining Trillion Dollar India

ONLINE RETAIL VS TOTAL RETAIL IN INDIA
Online retail out of total retail in India (2018E) Online retail out of total retail in India (2020)
2.9% 5%
97.1% 95%
Offline Retail Online Retail Offline Retail Online Retail
 There are a lot of opportunities for e-retailers in India to capitalize upon with the gradually growing internet penetration in India.
 As of 2016-17, online retail made up 1.5 per cent of overall retail market in India and is expected to contribute 2.9 per cent in 2018. 20 per cent of
organized retail market.
 The online retail market in India increased from US$ 14.5 billion in 2016 to US$ 17.8 billion in 2017 and is expected to grow to US$ 73 billion by
2022 at a CAGR of 29.2 per cent.
Note: E-Expected
Source: Redseer, Crisil, Report by eMarketer

E-COMMERCE RETAIL LOGISTICS MARKET IN INDIA
E-commerce Retail Logistics Landscape in India (2018) E-commerce Retail Logistics: City-Wise Shipments
50% 40%
Captive
Logistics Arms Metros
23%
E-commerce 50%
49% retail focused Tier 2 and
38%
below cities
LSPs
28%
Traditional Tier 1 cities
LSPs
12% 10%
2017 2022
 The E-commerce retail logistics market in India is estimated at US$ 1.35 billion in 2018 and is expected to grow at a 36 per cent CAGR over the
next five years.
 Around 1.9 million shipments are currently being handled every day with metro cities contributing around 50 per cent of this demand
 Logistics is a major driver of the E-commerce retail industry and is an important point of differentiation between market players aiming at better
customer satisfaction and service.
 Currently in-house (captive) logistics arms of large retailers execute the most shipments, followed by E-commerce focused logistics service provides
(LSPs) and traditional LSPs.
 India Post introduced its E-commerce portal leveraging its parcel business network. As of December 2018, full fledged operations have been
launched.
Source: KPMG Report – E-commerce Retail Logistics India Notes: CAGR – Compound Annual Growth Rate

E-TAILING MARKET BY BUSINESS MODEL
E-commerce
Marketplace Model Inventory-led Model
 Marketplace model adheres to the standards and directions of a  Inventory led models are those shopping websites where online
zero inventory model. For example, Naaptol, eBay and Shopclues. buyers choose from among products owned by the online
shopping company or shopping website take care of the whole
 The E-commerce marketplace becomes a digital platform for
process end-to-end, starting with product purchase, warehousing
consumers and merchants without warehousing the products.
and ending with product dispatch.
Marketplaces do offer shipment, delivery and payment help to
merchants by tying up with some selected logistics companies and  A few examples of such are Jabong, Yepme and LatestOne.com.
financial institutions.
 The new FDI policy rules and regulations in the E-commerce

market have permitted 100 percent FDI in the E-commerce
marketplace model under the automatic route.
Source: PWC

KEY PLAYERS

E-commerce
STRATEGIES
ADOPTED
STRATEGIES ADOPTED…(1/2)
 Paytm Mall, E-commerce platform of Paytm, is planning to expand its groceries segment and is targeting a
Gross Merchandise Value (GMV) of US$ 3 billion from this segment by the end of 2018.
 Flipkart and Amazon have also entered the second hands good market in India which is estimated to be
around US$ 17 billion.
 Reliance retail is going to launch online retail this year. It has already launched its food and grocery app for
beta testing among its employees.
 In the festive month beginning October 10, 2018, Gross Merchandise Value (GMV) expanded year-on-year
Expansion for Flipkart at about 90 per cent and for Amazon at about 70 per cent.
 As of December 2018, Amazon is planning to buy stakes in Future Retail to enter into physical retail sector in
India.
 Flipkart, India’s largest e-commerce entity announced the launch of data centre in Hyderabad besides
investments in the state to strengthen its technology infrastructure.
 Amazon is rapidly expanding in its video streaming (Prime video), Voice assistants (Alexa), and food retail
(Prime now) services in India.
 Guaranteed one day deliveries, exclusive deals and video streaming for a subscription fee, as in the case of
Amazon Prime. India is currently the fastest growing market for Amazon Prime.
 Flipkart introduced its own payment gateway Payzippy and also, its own logistics and supply chain firm Ekart.
 E-commerce websites are also introducing e-Wallet services; for example - Amazon’s Pay Balance .It has
also got capital infusion of Rs 2,771 crores from its launch.
 Paytm has launched its bank - Paytm Payment Bank. Paytm bank is India's first bank with zero charges on
Ancillary services online transactions, no minimum balance requirement and free virtual debit card
 GMV of sales financed through no-cost EMIs has increased to 20 per cent from 4-5 per cent share two years
ago.
 As on January 2019, PhonePe, a payment services company of Flipkart is set to enter the financial services
market by providing mutual funds through its app.
 As of March 2019, Flipkart launched its internal fund of about US$ 60-100 million to invest from early stage to
seed innovations related to e-commerce industry.
Source: Media sources, Company websites, Kalaari capital – India Trends 2018

STRATEGIES ADOPTED…(2/2)
 To expand their reach, brands are tying up with assisted E-commerce organisations which provide local
merchants with a platform to place their orders.
 Under this, the consumers do not place online orders on their own. Instead, the order is placed on the
Assisted Commerce merchant shops with their help and the product is either delivered to the shop or customer’s address.
 This model can become an enabler for online retailers to expand their outreach in areas where internet
penetration is low.
 E-commerce companies are increasingly adopting subscription model to provide extra benefits and tailored
services to customers to suit their needs.
 Amazon introduced Amazon Prime, a subscription based service for Amazon customers, in 2016. members of
Subscription for E- Amazon Prime could avail early access to selected deals, free one day delivery and other benefits. Amazon
Prime subscribers in India stood at around 5-6 million as of December 2016
commerce
 In 2014, Flipkart introduced Flipkart First, a premium subscription based services wherein a customer gets
free delivery, discounted same day delivery, priority customer service etc.
 In 2018 even Swiggy , Zomato and Myntra came up with subscription models to attract consumers.
 Site visitors demand one-of-a-kind experiences that cater to their needs and interests. Technology is
available, even to smaller players, to capture individual shoppers’ interests and preferences and generate a
product selection and shopping experience led by individualised promotions tailored to them.
 Many E-commerce websites provide personalised experience to customers to cater to their needs and
interests depending upon their location, choices, products they like or buy, websites they visit etc.
Personalised Experience  This strategy has helped companies to know customers’ demands better and serve them accordingly.
 To give more personalised experience e-commerce sites have adopted voice search technology. Myntra has
been the first one to adopt it.
 Phonepe introduced a stores tab and launched a merchant app to give more holistic experience to customers
and ease for merchants as well.

E-commerce
GROWTH DRIVERS
AND OPPORTUNITIES
GROWTH DRIVERS FOR E-COMMERCE
 As the awareness of using internet is increasing, more and more

people are being drawn to E-commerce.
 Whether it be sellers, buyers, users or investors, people have

started getting used to online mode or commerce.
Increasing
awareness
 Government initiatives like Digital

India are constantly introducing
people to online modes of
commerce.
 Favourable FDI policy is attracting

Growth
key players. drivers
 Increasing FDI inflows,
 Government proposed the
domestic investment, support
“National E-commerce Policy”, set
Government from key industrial players is
up the lawful agenda on cross- Investment
initiatives helping in the growth of E-
border data flow, no data will be
commerce.
shared with foreign government
without any prior authorization of
Indian government.
Source: Aranca Research

DEMOGRAPHIC FACTORS
 Over 120 million people are expected to shop online in 2018 and this number is expected to go up to 175
million by 2020.
Online Shoppers  Mobile-savvy shoppers are the backbone of India’s online shopping industry.
 Men in India are more avid shoppers than women in part because of demographic and cultural differences.
 Metro cities like Bengaluru, Mumbai, and Delhi, with population greater than 100,000, accounted for most
online shopping in absolute numbers.
 E-commerce business of several companies like ShopClues, Craftsvilla, etc., has observed crisis in tier II
Tier II and Tier III cities cities, after racking up around US$ 400 million in investor capital.
provide major sales  Less densely populated regions generated a larger proportion of online sales. Nearly 60 per cent of
Snapdeal’s purchases came from cities classified as tier II and III.
 Flipkart also noted that “sales of branded products across categories saw a sharp increase, as more of tier 2
and tier 3 Indian towns took to shopping online.
 Although shoppers between 25 and 34 years of age were most active on E-commerce portals, a surprising
Millennials are the most number of older people also shopped online in 2016.
active  However, the age group of 15-34 years are the major consumers of E-commerce.
 The popularity of web series among millenials is growing immensely.
 Discounts and EMIs added with a comfort of sitting at home and purchasing has become an effective driving
factor of E-commerce. Availability of various websites gives customers a lot of options to choose from.
Convenience of E-  Chatbots and personal assistance apps have made transactions seamless.
commerce  One can get several brands and products from different sellers at one place. Also, one can get in on the latest
international trends without spending money on travel; you can shop from retailers in other parts of the
country or even the world without being limited by geographic area.
Source: Economic Times, Media sources, Aranca Research

FACTORS DRIVING E-COMMERCE GROWTH… (1/2)
 Online retailers see this emergent segment as a new growth driver as the incremental growth in mobile
subscribers can be credited mainly to people who are comfortable with languages other than English.
 Indian language users on the internet are expected to reach 540 million by 2021.
Internet content in local
 In August 2018, Flipkart acquired an artificial intelligence company Liv.ai, which converts speech to text in 10
languages
Indian languages.
 Reverie Language Technologies is expected to raise US$ 20 million to achieve its vision to create language
equality on the internet.
 Consumer demand can be seen increasing even in small towns and cities.
Growth in non-metro cities  Less densely populated regions generated a larger proportion of online sales. Nearly 60 per cent of
Snapdeal’s purchases came from cities classified as tier II and III.
 Online retailers’ growing reach in town and cities beyond metros is driven by an increasing in usage of mobile
internet in the country. Increased ownership of smartphones is helping more Indians access shopping
websites easily.
 Rise in smartphone usage is expected to reach 50 per cent penetration by 2020.
Mobile Commerce
 In FY2019, Out of total internet subscribers, 93.39 per cent of subscribers used internet service through
mobiles
 The number of mobile internet users is expected to reach 478 million by June 2018 and 37.36 per cent of the
total population by 2021 which will further boost the mobile commerce sector in India.
 Online retailers now deliver to “12,500-15,000 pin codes” out of nearly 100,000 pin codes in the country.
 With logistics and warehouses attracting an estimated investment of nearly US$2 billion by 2020, the reach of
Growth of logistics and online retailers to remote locations is set to increase.
warehouses  Indian warehousing sector is expected to grow by at least 100 per cent by 2021.
 In April 2018, Amazon announced its plans to add five new fulfilment centres in India and retain its position as
the largest warehousing space provider in the country.
Source: Media sources, Kalaari capital – India Trends 2018

FACTORS DRIVING E-COMMERCE GROWTH… (2/2)
 A net addition of nearly 140 million debit cards has been recorded in the country in the past few years. Usage
of debit cards at points of sale terminal has increased by 86 per cent during the same period. This clearly
reflects that people are getting comfortable with using debit cards for activities other than withdrawals at ATM.
 Value of Unified Payments Interface (UPI) transactions grew to more than Rs 1.33 trillion (US$ 19.10 billion)
Cashless Transactions in March 2019.
 Paytm has launched India's first bank “Paytm Payment Bank” with zero charges on online transactions.
 PhonePe, a digital payments firm has crossed 2 billion transactions with an annual run rate of transactions
worth US$ 70 billion from its platform.
 Paytm logs 400 million plus transactions in a month .
 Amazon has launched an online Business-to-Business (B2B) market place in India where small and medium
enterprises (SMEs) can buy products.
 Power2SME, one of the largest B2B online marketplaces in India that provides raw materials to small and
medium enterprises (SMEs), has raised US$ 36 million from Inventus Capital, Accel Partners and others in
September 2017, which will be used towards technology, sales, marketing and geographic expansion.
B2B E-commerce  DesiClik a US based company has entered into strategic partnership with Indian Gifts Portal (IGP) which will
offer range of B2B solutions.
 In January 2019, government increased the limit of Foreign Direct Investment (FDI) up to 100 per cent in E-
commerce market model.
 As of June 2018, Walmart India has activated Unified Payments Interface (UPI) transaction on its online B2B
e-commerce site.
 Chinese phone manufacturer, Xiaomi Corporation, is planning to invest about US$ 1 billion in 100 Indian start-
ups over the coming five years, with an aim to make an ecosystem of apps surrounding its smartphone brand.
 In December 2018, Flipkart’s parent company invested Rs 1,431 crore (US$ 201 million) in its wholesale
Increasing Investments entity in India.
 US$ 6.25 billion have been invested in logistics sector in 2019.
 In March 2019, Paytm is about to raise US$ 1.5-2 billion from its existing investors SoftBank Vision Fund and
Alibaba’s financial affiliate Ant Financial.
Source: Media sources, Aranca Research Note: B2B – Business to Business

INCREASE IN SMARTPHONES DRIVING E-COMMERCE
GROWTH
Smartphone User Base in India (million) India’s Smartphone Shipments (million)
160
500 140
142.3
450 120
442
124.0
400
100
402
108.0
350
102.0
80
340
32.1
300
42.5
79.5
60
250
17.5
40
14.5
200
20
150
0
100 2011 2012 2013 2014 2015 2016 2017 2018 2019(
50 up tp
Mar)
0
2018 2020 2022
 The proliferation of mobile devices combined with internet access via affordable broadband solutions and mobile data is a key factor driving the
tremendous growth in India’s E-commerce sector.
 Smartphone shipments in India increased 14.50 per cent year-on-year to reach 142.30 million units in 2018, thereby making it the fastest growing
market of the top 20 smartphone markets in the world.
 During September-December quarter 2018, smartphone shipment in India grew 19.5 per cent year-on-year to 36.3 million shipments. It is
expected to reach 160 million in 2019.
 Smartphone users in India are expected to reach 442 million by 2022.
 Currently, mobile phones account for about 40 per cent of Gross Merchandise Value (GMV).
Source: IMF, World Bank, International Data Corporation (IDC), Counterpoint Research, Media Sources

GOVERNMENT AND PRIVATE INITIATIVES
INFLUENCING E-COMMERCE
 In the Union Budget of 2018-19, government has allocated Rs 8,000 crore (US$ 1.24 billion) to BharatNet
Project, to provide broadband services to 150,000-gram panchayats.
Bharat Net and Digital  The project has a target to connect 250,000-gram panchayats by March 2019. The government has also planned
India to set up 500,000 Wi-Fi hotspots for providing broadband service to 50 million rural citizens.
 The government has also allocated Rs 3,073 crore for the Digital India Mission in 2018-19. Under the Digital
India movement, government launched various initiatives like Udaan, Umang, Start-up India Portal etc.
 In February 2019, the Government of India released the Draft National e-Commerce Policy which encourages
FDI in the marketplace model of e-commerce. Further, it states that the FDI policy for e-commerce sector has
E-commerce draft policy been developed to ensure a level playing field for all participants. According to the draft, a registered entity is
needed for the e-commerce sites and apps to operate in India.
 The telecom provider offered free high-speed internet access to users for first seven months.
 Under this project Google and Tata Trust have collaborated to improve internet penetration among rural women
Internet Saathi in India.
 The project has influenced over 16 million women in India and reached 166,000 villages
 It has also allowed users to access all online services through a family of apps, creating a whole ecosystem for
them.
 Reliance to invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to expand its broadband and E-
commerce presence and to offer 5G services.
Reliance Jio
 As of January 2019, Reliance Retail along with Reliance Jio plans to launch a new e-commerce platform in India
with Gujarat to be the first state to get it. The debut will be made in Diwali when most of the sales are made.
 Reliance to launch its GigaFiber FTTH services in 1,600 cities after testing its broadband connection in selected
cities.
 Udaan is a B2B online trade platform to connect small and medium size manufacturers and wholesalers with
Udaan online retailers and also provide them logistics, payments and technology support.
 The platform has sellers in over 80 cities of India and delivers to over 500 cities.
Source: Bain & Company – Unlocking Digital for India, Union Budget 2018-19, Media Sources

PRIVATE INVESTMENTS IN E-COMMERCE
 E-commerce industry in India witnessed 21 private equity and venture capital deals worth US$ 2.1 billion in 2017 and 40 deals worth US$ 1,129
million in the first half of 2018.
 E-commerce and consumer internet companies in India received more than US$ 7 billion in private equity and venture capital in 2018.
Funding Activities
Company Investor Funding (US$ million)
Flipkart SoftBank 2,500
Alibaba Group Holding Ltd, Sands Capital, International Finance Corp,

BigBasket 300
Abraaj Capital
PayTm Berkshire Hathaway 356
CarDekho Sequoia India, Hillhouse Capital, Capital G and Axis Bank 110
Udaan Lightspeed Venture Partners US and other 50
Capital Float Ribbit Capital, SAIF Partners, Sequoia India 45
Bank Bazaar Experian Plc 30
Droom Asset Management (Asia) Ltd, Digital Garage Inc 20
HBM Healthcare Investments, Maverick Capital Ventures, Sequoia India,

1 mg 15
Omidyar Network and Kae Capital
Gozefo Sequoia Capital India, Helion Venture Partners and Beenext Pte Ltd 9
Jumbotail Kalaari Capital, Nexus India Capital Advisors 8.5
Blackbuck InnoVen Capital 7.7
KartRocket.com Bertelsmann India Investments, Nirvana Digital India Fund 4.1
The Label
Source: MediaLife
sources, Aranca Research, Inc42,Kalpavriksh,
EY Centrum group’s maiden private equity (PE) fund 3.1

E-commerce
INDUSTRY
ASSOCIATIONS
KEY INDUSTRY ASSOCIATIONS
E-commerce Association of India Retailers Association of India (RAI)
Address: 122, 1st Floor, Devika Tower Address: 111/112, Ascot Centre, Near Hotel ITC Maratha,
Corporate Business District, Nehru Place Sahar Road, Sahar, Andheri (E)
New Delhi –110 019 Mumbai – 400099
Phone: +91 011 41582722 Phone: +91 22 28269527 - 29
Fax : +91 011 41582722 Fax: +91 22 28269536
Email: info@ecai.co.in E-mail: info@rai.net.in

E-commerce
USEFUL
INFORMATION
GLOSSARY
 CAGR: Compound Annual Growth Rate
 GMV – Gross Merchandise Value
 FDI: Foreign Direct Investment
 FY: Indian Financial Year (April to March)
 GOI: Government of India
 INR: Indian Rupee
 US$: US Dollar
 Wherever applicable, numbers have been rounded off to the nearest whole number

EXCHANGE RATES
Exchange Rates (Fiscal Year) Exchange Rates (Calendar Year)
Year INR INR Equivalent of one US$ Year INR Equivalent of one US$
2005–06 44.28 2005 44.11
2006–07 45.29 2006 45.33
2007–08 40.24 2007 41.29
2008–09 45.91 2008 43.42
2009–10 47.42 2009 48.35
2010–11 45.58 2010 45.74
2011–12 47.95 2011 46.67
2012–13 54.45 2012 53.49
2013–14 60.50 2013 58.63
2014-15 61.15 2014 61.03
2015-16 65.46 2015 64.15
2016-17 67.09 2016 67.21
2017-18 64.45 2017 65.12
2018-19 69.89 2018 68.36
Source: Reserve Bank of India, Average for the year

DISCLAIMER
India Brand Equity Foundation (IBEF) engaged Aranca to prepare this presentation and the same has been prepared by Aranca in consultation
with IBEF.
All rights reserved. All copyright in this presentation and related works is solely and exclusively owned by IBEF. The same may not be reproduced,
wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or
incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval
of IBEF.
This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the
information is accurate to the best of Aranca and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a
substitute for professional advice.
Aranca and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation and nor do
they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.
Neither Aranca nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any
reliance placed or guidance taken from any portion of this presentation.

FAST MOVING
CONSUMER GOODS
(FMCG)

Table of Content
Market Overview …………….………..…....6
Strategies Adopted……………....………..13
Growth Drivers…….………………............16
Opportunities.....…………………………...24
Key Industry Organisations……….….......26
Useful Information……….……….......…...28
EXECUTIVE SUMMARY
 Favourable demographics and rise in income level to boost FMCG FMCG market in India (US$ billion)
market.
150 CAGR 23.15%
 FMCG market in India is expected to grow at a CAGR of 23.15 per
cent and is expected to reach US$ 103.70 billion by 2020 from US$ 100
68.38 billion in FY18.
50 68.38 103.70
 FMCG sector is the 4th largest sector in the Indian economy.
0
 The FMCG sector is expected to grow at 12-13 per cent during April- 2018(FY) 2020F
June 2019
Final consumption expenditure (US$ trillion)
4 CAGR 25.44%
 Final consumption expenditure is set to increase at a CAGR of 25.44
per cent from 2017-2021. 3 3.60
2
 Final consumption expenditure is expected to reach nearly US$ 3.6
1 1.82
trillion by 2020 from US$ 1.82 trillion in 2017.
0
2017 2020F
 Rise in rural consumption to drive the FMCG market. Rural FMCG market in India (US$ billion)
 In FY18, Rural consumption rose by 9.7 per cent.
250
 The rural FMCG market in India is expected to grow to US$ 220.00 200
billion by 2025 from US$ 23.63 billion in FY18. 150
100 220.00
50 23.63 100.00
0
2018(FY) 2020F 2025F
Notes: F- Forecast
Source: World Bank, Emami Reports, Dabur Reports, AC Nielsen, CRISIL, Nielsen Report, 2018
3 FMCG For updated information, please visit www.ibef.org

FMCG
ADVANTAGE INDIA
ADVANTAGE INDIA
 Rising incomes and growing youth  Low penetration levels in rural market offers
population have been key growth drivers room for growth.
of the sector. Brand consciousness has  Disposable income in rural India has
also aided demand. increased due to the direct cash transfer
 India’s contribution to global consumption scheme.
is expected to more than double to 5.8 per  Exports is another growing segment.
cent by 2020.
 E-commerce segment is forecasted to
 Rural India is witnessing increased contribute 11 per cent of the overall FMCG
demand for quality goods and services sales by 2030.
driven by upgraded distribution channels
of FMCG companies.
ADVANTAGE
INDIA
 RP-Sanjiv Goenka Group to invest capital
fund of US$ 14.74 mn in FMCG startups.  Investment approval of up to 100 per cent
 Supa Star Foods Pvt Ltd, a packaged food foreign equity in single brand retail and 51
per cent in multi-brand retail.
and beverage maker, has received its
second investment from Roots Ventures  Initiatives like Food Security Bill and direct
which will help the company grow its cash transfer subsidies reach about 40 per
cent of households in India.
distribution network and add more products.
 Dabur is planning to invest Rs 250-300 crore  The minimum capitalisation for foreign
FMCG companies to invest in India is
(US$ 38.79-46.55 million) in FY19 for
US$100 million.
capacity expansion and is also planning to
make acquisitions in the domestic market.
Source: Emami, BCG and CII report, Nielsen

FMCG
MARKET
OVERVIEW
EVOLUTION OF FMCG IN INDIA
 FMCG is the fourth largest sector in the Indian economy.

Current Forecast
 India’s household and personal care is the leading segment,
accounting for 50 per cent of the overall market, healthcare (31 per
cent) and food and beverages (19 per cent) comes next in terms of
market share.
 FMCG market is expected
 Growing awareness, easier access and changing lifestyles have  FMCG market reached US$
been the key growth drivers for the sector. reach US$ 103.70 billion by
52.75 billion in FY18.
2020.
 The number of online users in India is likely to cross 850 million by
2025.
 The rural FMCG market  The rural FMCG market is
 FMCG industry expected to grow 12-13 per cent in fourth quarter reached US$ 23.63 billion in expected to grow to US$ 220
FY19.
FY18. billion by 2025.
 Retail market in India is estimated to reach US$ 1.1 trillion by 2020,
with modern trade expected to grow at 20 per cent - 25 per cent  FMCG sales at India's
organised retail stores rose  The online FMCG market is
per annum, which is likely to boost revenues of FMCG companies.
22 per cent year-on-year in forecasted to reach US$ 45
 In 2018, e-commerce segment contribution is projected to be 2018. billion in 2020.
around 1.3 per cent of the overall branded packaged FMCG sales.
 People are gracefully embracing Ayurveda products, which has

resulted in Patanjali being ranked as the most trusted FMCG brand
in India.
Source: Dabur Annual Report, Economic Times, Emami Annual Report, McKinsey Global Institute, CII, Boston Consulting Group Report, TRA's Brand Trust Report 2018

THREE MAIN SEGMENTS OF FMCG
FMCG
Household and Personal

Food and Beverages Healthcare
Care
 It accounts for 19 per cent  It accounts for 31 per

 It accounts for 50 per cent
of the sector. cent of the sector.
of the sector.
 This segment includes  This segment includes
 This segment includes oral
health beverages, OTC products and
care, hair care, skin care,
staples/cereals, bakery ethicals.
cosmetics/deodorants,
products, snacks,
perfumes, feminine
chocolates, ice cream,
hygiene and paper
tea/coffee/soft drinks,
products, Fabric wash,
processed fruits and
household cleaners.
vegetables, dairy
products, and branded
flour.
Note: OTC is over the counter products; ethicals are a range of pharma products, Share per cent as of FY18
Source: Economic Times

STRONG GROWTH IN INDIAN FMCG SECTOR
 Revenues of FMCG sector reached Rs 3.4 lakh crore (US$ 52.8

Trends in FMCG revenues over the years (US$ billion)
billion) in FY18 and are estimated to reach US$ 103.7 billion in
2020F. The sector is projected to grow 11-12 per cent in 2019. 120
 The sector witnessed growth of 16.5 per cent in value terms between
July-September 2018; supported by moderate inflation, increase in
private consumption and rural income. It is forecasted to grow at 12- 100
103.7
13 per cent between September-December 2018.
 The Union Budget 2019-20 initiatives to increase consumer spending

among middle class are expected to boost consumer confidence and 80
83.3
improve demand generation for branded consumer products.
 FMCG sector to gain support for growth from Inland Waterways
68.4
Authority of India (IWAI) multi-modal transportation project of freight 60
village at Varanasi which will bring together retailers, warehouse
52.8
operators and logistics service providers, investment worth Rs 1.7
49.0
billion (US$ 25.35 million). 40
43.1
38.8
 Nielsen India estimates the FMCG industry to grow at 11-12 per cent
35.7
33.3
31.6
in 2019 as against 13.8 percent in 2018.
20
0
2011 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F
Note: F – Forecast, * - FY18

Source: Dabur, AC Nielsen, Euromonitor International, ICICI securities, Nielsen India

URBAN MARKET ACCOUNTS FOR MAJOR CHUNK OF
REVENUES
 Accounting for a revenue share of around 55 per cent, urban

Urban – Rural industry Breakup (FY2017-18)
segment is the largest contributor to the overall revenue generated
by the FMCG sector in India.
 Rural segment is growing at a rapid pace and accounted for a

revenue share of 45 per cent in the overall revenues recorded by
FMCG sector in India. FMCG products account for 50 per cent of
total rural spending.
 In the last few years, the FMCG market has grown at a faster pace in
rural India compared with urban India. In 2018-19, revenues from the
rural segment are expected to grow 15-16 per cent outpacing.
45%
 Demand for quality goods and services has been going up in rural
US$ 52.75 billion
areas of India, on the back of improved distribution channels of 55%
manufacturing and FMCG companies.
 FMCG urban segment is expected to have a steady revenue growth

at 8 per cent in FY19.
Urban Rural
Source: BCG , KPMG- indiaretailing.com, Deloitte Report, Winning in India’s Retail Sector, CRISIL, State Bank of India, CRISIL report

RURAL SEGMENT IS QUICKLY CATCHING UP
 In FY18, rural India accounted for 45 per cent of the total FMCG Rural FMCG Market (US$ billion)
market.
250
 Total rural income, which is currently at around US$ 572 billion, is
projected to reach US$ 1.8 trillion by FY21. India’s rural per capita
disposable income is estimated to increase at a CAGR of 4.4 per
220.00
cent to US$ 631 by 2020. 200
 As income levels are rising, there is also a clear uptrend in the

share of non-food expenditure in rural India.
 The Fast Moving Consumer Goods (FMCG) sector in rural and 150
semi-urban India is estimated to cross US$ 220 billion by 2025.
 The revenue of FMCG’s rural segment is forecasted to grow to 15-

16 per cent in FY19 from estimated 10 per cent in FY18. 100
50
23.63
18.92
14.80
12.30
12.10
10.40
9.00
0
2009 2010 2011 2012 2013 2015 2018* 2025F
Note: F-Forecast, 2018* - Data relates to the financial year FY18

Source: AC Nielsen, Dabur Reports, Goderej Group, McKinsey Global Institute, CRISIL

INCREASING ONLINE USERS BOOST ONLINE FMCG
SALES
 India’s increasing internet penetration, rising digital maturity along Growth in Online Users to drive Online FMCG Market
with developing infrastructure has helped boost online transactions.
 The online FMCG market is forecasted to reach US$ 45 billion in

2020 from US$ 20 billion in 2017, backed by growth in online users US$ 45 billion
from 90 million in 2017 to 200 million in 2020E.
 By 2020, about 40 per cent of FMCG consumption is estimated to be

digitally influenced.
 Around 72 per cent Indian consumers are most likely to shop online
locally for premium products.
2020E 200 million
a
2017 90 million
US$ 20 billion
Online Users Online FMCG Market
Note: E - Estimated
Source: Google and BCG report – September 2017 and February 2018

FMCG
STRATEGIES
ADOPTED
STRATEGIES
 FMCG companies are trying to influence consumers with intelligent deals.
 Firms like ITC offers combo deals to the consumers. For example, in the case of soaps and cosmetics; 4 soap cases are
offered at the price of 3, selling the range of deodorants for men and women at a discounted price.
Promotions and
offers  Amazon India is planning to invest significantly over the coming months for expanding its grocery and food business,
launching more products and categories and forming new partnerships with huge grocery and supermarket chains.
 In May 2018, Amazon India targets to capture 100 million customers in the next 5 years by providing more features in Prime
and Alexa.
 The internet enables consumers to make their own research on the kind of products or commodities they want to purchase.
Research online
1 in 3 FMCG shoppers goes online 1st and then to the stores.
Purchase offline
 About 43 per cent of new car-buyers in cities select the model online and purchase it from dealer.
 Keeping in mind the changing tastes of the Indian consumer, FMCG companies are introducing new products to gain market
share.
 In FY19, ITC made more than 60 launches in the Fast-Moving Consumer Goods (FMCG) segment in India.
New product
launches  In June 2019, ITC launches dairy beverage range “Sunfeast Wonderz Milk” in four variants
 In May 2019, Naturell (India) Pvt Ltd, innovator of power snacking launched RiteBite Max protein chips
 In February 2018, industry major Britannia announced that it will introduce 50 new products by the end of 2018-19.
 Godrej Consumer Products Limited (GCPL) is also planning to launch various new products in FY19.
 In February 2019 India’s leading FMCG Contract Manufacturer Hindustan Foods Limited received an investment of US$ 22
million from Convergent Finance LLP for its expansion.
Expansion  Dabur to invest Rs 250-300 crore (US$ 37.29-44.75 million) in FY19 for capacity expansion and is also looking for
acquisitions in the domestic market.
 Tata’s plan to expand their business in home and personal care products to gain advantage of FMCG segment.
Source: AC Nielsen, News Article

STRATEGIES
 Product Flanking: Introduction of different combinations of products at different prices, to cover as many market
segments as possible.
Customisation  Emami, has decided to rework on its overseas strategy by planning manufacturing and acquisitions in overseas markets.
The company plans to re-work on its product portfolio by getting into new categories with higher buying preference and
revamp its distribution networks.
Green  FMCG companies are looking to invest in energy efficient plants to benefit the society and lower costs in the long term.
initiatives
to lower  HUL fulfils 80 per cent of its power requirement for its Sumerpur plant from solar energy. The company has been able to
reduce the carbon footprint of its manufacturing plants by 13 per cent in FY17.
costs
 In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which will produce a range of consumer
Joint Venture
and foodservice dairy products.
 Hindustan Unilever Ltd (HUL) implemented a transformational programme called Connected 4 Growth (C4G) to help
drive business growth by increased speed to market, faster decision making, localised and swifter innovation.
Analytics  Patanjali uses Oracle and SAP for Enterprise Resource Planning (ERP), they will further standardise the application on
SAP. It plans to use machine learning for quality control and product enhancement. They are also in talks with Net App
for big data solution.
Product/ Category  Nestle India is planning to expand aggressively in the Indian market by launching two to three dozen new products in
Expansion existing and new product categories over the next few years,.
Source: News Articles

FMCG
GROWTH DRIVERS
GROWTH DRIVERS FOR INDIA’S FMCG SECTOR
 Organised sector growth is expected to  Low penetration levels of branded products

grow as the share of unorganised market in categories like instant foods indicating a
in the FMCG sector fall with increased scope for volume growth
level of brand consciousness.
 Investment in this sector attracts investors
 Growth in modern retail will augment the as the FMCG products have demand
growth of organised FMCG sector. throughout the year.
 Post GST and demonetisation, modern  Increase in food parks to 13,food processing
trade share grew to 10 per cent of the capacity to 1.41million and food labs to 42.
overall FMCG revenue, as of August 2018.
GROWTH DRIVERS
 Availability of products has become way  Rural consumption has increased, led by a
easier as internet and different channels of combination of increasing incomes and
higher aspiration levels, there is an
sales has made the accessibility of desired
increased demand for branded products in
product to customers more convenient at
rural India
required time and place.
 Huge untapped rural market
 Online grocery stores and online retail
stores like Grofers, Flipkart, Amazon  Nielsen India estimates the FMCG
making the FMCG product s more readily industry to grow at 11-12 per cent in 2019
as against 13.8 percent in 2018.
available.
Note: GST: Goods and Services Tax

Source: Dabur, Nielsen

HIGHER INCOMES AID GROWTH IN URBAN AND
RURAL MARKETS
 Incomes have risen at a brisk pace in India and will continue rising GDP per capita at current prices* (US$)
given the country’s strong economic growth prospects. According to
IMF, nominal per capita income is estimated to grow at a CAGR of 3,500
4.94 per cent during 2010-19F.
3,277.28
 India’s GDP per capita at current prices is expected to increase from
3,000
US$ 1,481.56 in 2012 to US$ 3,277.28 in 2024.
3,023.39
 An important consequence of rising incomes is growing appetite for
2,791.31
2,500
premium products, primarily in the urban segment.
2,578.11
2,378.67
 As the proportion of ‘working age population’ in total population
2,198.59
increases, per capita income and GDP are expected to surge. 2,000
2,036.20
2,014.01
1,761.63
1,500
1,639.69
1,610.36
1,485.60
1,481.56
1,000
500
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Note: *Estimates after 2013
Source: IMF World Economic Outlook Database April 2019

POLICY AND REGULATORY FRAMEWORK
Union Budget  The Government of India has provided a full tax rebate for an income up to Rs 5 lakh (US$ 6,930), which is
2019-20 expected to boost disposable income in the hands of the common people.
 The rate of GST on services lies between 0-18 per cent and on goods lies between 0-28 per cent.
 Major consumer product manufacturing companies like PepsiCo, Dabur, Hindustan Unilever etc. are aligning their
supply chains, IT infrastructure and warehousing systems ahead of unified GST regime, to facilitate seamless
interstate movement of goods.
 Prices of commodities in the FMCG sector, like soaps, shampoo, detergents, biscuits, savory snacks etc.
decreased after the implementation of GST, leading to a 3-8 per cent decrease in prices of goods at modern retail
stores. The GST is expected to transform logistics in the FMCG sector into a modern and efficient model as all
Goods and Service Tax
major corporations are remodeling their operations into larger logistics and warehousing.
(GST)
 Warehousing cost for FMCG companies is estimated to fall by 25-30 per cent backed by the implementation of the
GST. The number of warehouses will decrease from 45-50 to 25-30 and the size of warehouses will become
larger.
 The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as
Soap, Toothpaste and Hair oil now come under 18 per cent tax bracket against the previous 23-24 per cent rate .
Also rates on food products and hygiene products have been reduced to 0-5 per cent and 12-18 per cent,
respectively.
 FSB would reduce prices of food grains for Below Poverty Line (BPL) households, allowing them to spend
resources on other goods and services, including FMCG products.
Food Security Bill (FSB)
 This is expected to trigger higher consumption spends, particularly in rural India, which is an important market for
most FMCG companies.

POLICY AND REGULATORY FRAMEWORK
 The government approved 51 per cent FDI in multi-brand retail in 2006, which will boost the nascent organised
FDI in organised retail retail market in the country.
 It also allowed 100 per cent FDI in the cash and carry segment and in single-brand retail.
 Government has initiated Self Employment and Talent Utilisation (SETU) scheme to boost young entrepreneurs.
SETU Scheme
Government has invested US$ 163.73 million for this scheme.
 Industrial license is not required for almost all food and agro-processing industries, barring certain items such as
Relaxation of license
beer, potable alcohol and wines, cane sugar and hydrogenated animal fats and oils as well as items reserved for
rules
exclusive manufacture in the small-scale sector.
Source: SBI

NEW GOODS AND SERVICE TAX (GST) WOULD
SIMPLIFY TAX STRUCTURE
 Introduction of GST as a unified tax  Elimination of tax cascading is expected

regime will lead to a re-evaluation of to lower input costs and improve
procurement and distribution profitability.
arrangements.
 Application of tax at all points of supply
 Removal of excise duty on products chain is likely to require adjustments to
would result in cash flow improvements. profit margins, especially for distributors
 The rate of GST on services lies and retailers.
between 0-18 per cent and on goods
lies between 0-28 per cent.
Goods and
Service Tax
(GST)
 Tax refunds on goods purchased for  Changes need to be made to
resale implies a significant reduction in accounting and IT systems in order to
the inventory cost of distribution. record transactions in line with GST
requirements and appropriate measures
 Distributors are also expected to
need to be taken to ensure smooth
experience cash flow from collection of
transition to the GST.
GST in their sales, before remitting it to
the government at the end of the tax-  It is estimated that India will gain US$
filing period. 15 billion a year by implementing the
Goods and Services Tax.
Source: GST India

BOOSTS IN FDI INFLOWS AND INVESTMENTS
 100 per cent FDI is allowed in food processing and single-brand Cumulative FDI inflow share – April 2000 to March 2019 (US$
retail and 51 per cent in multi-brand retail. million)
 This would bolster employment and supply chains, and also provide 144.88
high visibility for FMCG brands in organised retail markets, bolstering
Food processing
consumer spending and encouraging more product launches. 898.85
 The sector witnessed healthy FDI inflows of US$ 14.67 billion during 1,495.03 Retail Trading
April 2000 to March 2019.
 Within FMCG, food processing was the largest recipient; its share Paper Pulp
1,400.61
was 62.03 per cent.
 Investment intentions, related to FMCG sector, arising from paper Soap, Cosmetic &
pulp, sugar, fermentation, food processing, vegetable oils and 9,076.50 Toilet preperations
1,655.17
vanaspati, soaps, cosmetics and toiletries industries, worth Rs
Vegetable Oils
916.13 billion (US$ 15.55 billion) were implemented between April
2000-December 2018.
Tea, Coffee
Source: DPIIT, Media articles

KEY M&A DEALS IN THE INDUSTRY
Merger/
Target name Acquirer Name Year
Acquisition
Splash Corporation, Philippines Wipro Consumer Care & Lighting Acquisition 2019
GlaxoSmithKline Consumer Healthcare (GSKCH India) Hindustan Unilever Limited (HUL) Acquisition 2018
Acquisition (14 per

Bombay Shaving Company Colgate Palmolive 2018
cent stake)
Acquisition (26 per
Brillare Science Emami 2018
cent stake)
Acquisition (45 per
Beardo Marico 2018
cent)
Future Consumer Limited Future Capital Investment Private Limited Acquisition 2017
D&A Cosmetics Proprietary Ltd and Atlanta Body &

Dabur India Acquisition 2017
Health Products Proprietary Ltd
Acquisition
Helios Lifestyle Pvt Ltd Emami Ltd 2017
(30 per cent stake)
Godfrey Phillips India (GPI) (packed tea brands) Goodricke Group Ltd Acquisition 2017
HyperCity Future Retail (Future Group) Acquisition 2017

Godrej Industries Godrej Agrovet Ltd. Increase in stake 2017
Godrej Consumer Products Ltd (Home and personal
Argencos, Argentina (Hair care products) Acquisition 2016
care)
Issue Group, Argentina (Hair products) GCPL (Home and personal care) Acquisition 2016
Tura, Nigeria (Soap and cleaning products ) GCPL (Home and personal care) Acquisition 2015
Godrej Consumer Products Ltd (Home and personal
Frika Hair (Pty) Ltd, Africa Acquisition 2015
care)
Source: Bloomberg, Economic Times, Business Standard, News Article

FMCG
OPPORTUNITIES
GROWTH OPPORTUNITIES IN THE INDIAN FMCG
INDUSTRY
 Leading players of consumer products have a strong distribution network in rural India; they also stand to gain from the
Rural Market contribution of technological advances like internet and e-commerce to better logistics.
 Rural FMCG market size is expected to touch US$ 220 billion by 2025.
 Indian consumers are highly adaptable to new and innovative products. For instance there has been an easy
Innovative
acceptance of men’s fairness creams, flavoured yoghurt, cuppa mania noodles, gel based facial bleach, drinking yogurt,
products sugar free Chyawanprash.
 With the rise in disposable incomes, mid and high-income consumers in urban areas have shifted their purchase trend
from essential to premium products.
 Premium brands are manufacturing smaller packs of premium products. Example: Dove soap is available in 50g
Premium products
packaging.
 Nestle is looking to expand its portfolio in premium durables cereals, pet care, coffee, and skin health accessing the
potential in India.
 Indian and multinational FMCG players can leverage India as a strategic sourcing hub for cost-competitive product
Sourcing base
development and manufacturing to cater to international markets.
 Low penetration levels offer room for growth across consumption categories.
Penetration
 Major players are focusing on rural markets to increase their penetration in those areas.
 It is estimated that 40 per cent of all FMCG purchases in India will be online by 2020, thereby making it a US$ 5-6 billion
Online FMCG
business opportunity.
 In May 2018, RP-Sanjiv Goenka Group created a Rs 1 billion (US$ 14.92 million) venture capital fund to invest in FMCG
Start-up Ventures
start-ups.
Source: Assorted articles and reports, AC Nielsen, Boston Consulting Group (BCG) and Google report September 2017

FMCG
KEY INDUSTRY
ORGANISATIONS
INDUSTRY ORGANISATIONS
Visakhapatnam
Indian Dairy port traffic (million tonnes)
Association All India Bread Manufacturers’ Association
Secretary (Establishment) PHD House, 4/2, Siri Institutional Area, August Kranti
Indian Dairy Association, Sector-IV, New Delhi –110022 Marg, New Delhi –110016
Phone: 91-11-26170781, 26165355, 26179780 Phone: 91-11-26515137; Fax: 91-11-26855450
Fax: 91 11 26174719 E-mail: aibma@rediffmail.com; mallika@phdcci.in
E-mail: ida@nde.vsnl.net.in Website: www.aibma.com
Website: www.indairyasso.org
All India Food Preservers’ Association Indian Soap and Toiletries Manufacturers’ Association
206, Aurobindo Place Market Complex Raheja Centre, 6th Floor, Room No 614, Backbay
Hauz Khas, New Delhi –110016 Reclamation, Mumbai – 400021
Phone: 91-11-26510860, 26518848; Fax: 91-11- Phone: 91-22-2824115; Fax: 91-22-22853649
26510860 E-mail: istma@bom3.vsnl.net.in
Website: www.aifpa.net

FMCG
USEFUL
INFORMATION
GLOSSARY
 MSP: Minimum Selling Price
 NREGA: National Rural Employment Guarantee Act
- So FY09 implies April 2008 to March 2009
 SEZ: Special Economic Zone
 MoU: Memorandum of Understanding

EXCHANGE RATES
2004–05 44.95 2005 44.11
2005–06 44.28 2006 45.33
2006–07 45.29 2007 41.29

2007–08 40.24 2008 43.42
2008–09 45.91
2009 48.35
2009–10 47.42
2010 45.74
2010–11 45.58
2011 46.67
2011–12 47.95
2012 53.49
2012–13 54.45
2013 58.63
2013–14 60.50
2014 61.03
2014-15 61.15
2015 64.15
2015-16 65.46
2016-17 67.09 2016 67.21
2017-18 64.45 2017 65.12
2018-19 69.89 2018 68.36

DISCLAIMER
India Brand Equity Foundation (IBEF) engaged TechSci Research to prepare this presentation and the same has been prepared by TechSci
Research in consultation with IBEF.
of IBEF.
information is accurate to the best of TechSci Research and IBEF’s knowledge and belief, the content is not to be construed in any manner
whatsoever as a substitute for professional advice.
TechSci Research and IBEF neither recommend nor endorse any specific products or services that may have been mentioned in this presentation
and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed on this presentation.
Neither TechSci Research nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user
due to any reliance placed or guidance taken from any portion of this presentation.

MANUFACTURING

Table of Content
Executive Summary……………….………..3
Advantage India…………………..…...……4
Market Overview …………….………….….6
Recent Trends and Strategies…….……..17
Growth Drivers and Opportunities…….....20
Industry Organisations …….......…………29
Useful Information……….……….......…...31
EXECUTIVE SUMMARY
 Organised manufacturing is the biggest private sector employer in India. Overall, more than 30 million people
are employed by the sector (organised and unorganised) and will become the engine of growth as it tries to
Pillar For Economic incorporate the huge available workforce in India most of which is semi-skilled.
Growth  The sector will push growth in the rural areas where more than 5 million manufacturing establishments are
already running. This will be the alternative available to the new generation of farmers.
 Government aims to achieve 25 per cent GDP share and 100 million new jobs in the sector by 2022.
 India’s manufacturing industry is already moving in the direction of industry 4.0 where everything will be
connected and every data point will be analysed. Indian companies are at the forefront of R&D and have
already become global leaders in areas such as pharmaceuticals and textiles. Areas such as automation and
Potential To Become A robotics also receiving the required attention from the industry.
Global Hub  Large international industrial producers such as Cummins and Abbott already have manufacturing bases in
the country.
 Improvement in port infrastructure has also been a focus point of the government for the same reason.
 India has all the necessary ingredients for its major industrial push – a huge semi-skilled labour force,
multiple government initiatives like Make in India, high investments and a big domestic market.
Competitiveness  Necessary support infrastructure is being developed with areas such as power being the prime focus.
 Government incentives like free land to set up base and 24*7 power supply are making India competitive on
a global scale
Source: Central Statistics Office, FICCI, PwC, Economic Survey of India
3 Manufacturing For updated information, please visit www.ibef.org

Manufacturing
ADVANTAGE INDIA
ADVANTAGE INDIA
 Investments in the Indian manufacturing

 Huge domestic market with a rapidly sector have been on the rise, both
increasing middle class and overall domestic and foreign. Gross Fixed Capital
population. Formation, which represents net
investments in fixed assets, has grown
 By 2030, Indian middle class is expected
10.44 per cent annually between FY16
to have the second largest share in global
and FY18PE.
consumption at 17 per cent.
 Most sectors are open to 100 per cent FDI
under automatic route.
ADVANTAGE
INDIA
 National Investment and Manufacturing
 Increasing share of young working Zones developed to create an ecosystem
population in the total population. India for industries in India.
can achieve its full manufacturing potential  Initiatives like ‘Make in India’ and sector
as it looks to benefit from its demographic specific incentives to various
dividend and a large workforce over the manufacturing companies, aiming to make
next two to three decades. India a global manufacturing hub.
 A resource-rich country with fifth largest  Skill India, a multi skill development
reserves of coal in the world and immense programme has been started to equip the
potential for renewable energy like solar workforce with the necessary skills
and hydro, ready to meet the needs of required by the sector.
growing industry.
Note: PE – Provisional Estimate

Source: Brookings Institute, DPIIT, Economic Times, Make in India,

Manufacturing
MARKET
OVERVIEW
EVOLUTION OF THE INDIAN MANUFACTURING
SECTOR
Pre Independence 1948-1991 Post 1991 reforms Present
 Most of the products were  Focus of Indian government  Indian markets were opened  Make in India campaign was
handicrafts and were exported on basic and heavy industries to global competition with the launched to attract
in large numbers before the with the start of five year LPG reforms and gave way to manufacturers and FDI.
British era started plans. private sector entrepreneurs  Government is aiming to
 The first charcoal fired iron  A comprehensive Industrial as license raj came to an end. establish India as global
making was attempted in Policy resolution announced  Services became the engines manufacturing hub through
Tamil Nadu in 1830. in 1956. Iron and steel, heavy of growth while the industrial various policy measures and
 India’s present day largest engineering, lignite projects, production saw volatility in incentives to specific
conglomerate Tata Group and fertilizers formed the growth rates during this manufacturing sectors.
started by Jamsetji Tata in basis of industrial planning. period.  70 per cent of manufacturing
1868.  Focus shifted to agro-  MSMEs in the country were units under the private sector.
 Slow growth of Indian industry industries as a result of many given a push through  GVA at basic prices from
due to regressive policies of factors while license raj grew government’s policy manufacturing grew at a
the time. in the country and public measures. CAGR of 4.46 per cent to
sector enterprises grew more FY19AE at current prices.
 Indian industry grew during
inefficient. The industries lost
the two world war periods in
their competitiveness.
an effort to support the British
in the wars.
Note: MSME – Micro, small and Medium Enterprises, FDI – Foreign Direct Investments
Source: data.gov.in, Central Statistics Office, Indian Express

SUB-SECTORS UNDER MANUFACTURING
As per National Industrial Classification, following 24 activities make up the manufacturing sector in India:
Manufacturing
Fabricated metal products, except

Food products Paper and paper products
machinery and equipment
Printing and reproduction of Computer, electronic and optical

Beverages
recorded media products
Coke and refined petroleum Electrical equipment

Tobacco products
products
Machinery and equipment n.e.c.
Chemicals and chemical
Textiles Motor vehicles, trailers and semi-
products
trailers
Pharmaceuticals, medicinal
Wearing apparel
chemical and botanical products Other transport equipment
Repair and Installation of

Leather and related products Rubber and plastics products
machinery and equipment
Wood and products of wood and cork, Other non-metallic mineral Other manufacturing which
except furniture; manufacture of articles of products includes jewellery, bijouterie and
straw and plaiting materials related articles, musical
instruments, sports goods, games
Furniture Basic metals and toys, medical and dental
instruments and supplies
Source: udyogaadhaar.gov.in

GROSS VALUE ADDED BY MANUFACTURING
 India’s manufacturing sector has witnessed strong growth over the

GVA of Visakhapatnam
Manufacturing atport traffic
basic (million
current tonnes)
prices (US$ billion)
past few years.
 The sector’s Gross Value Added (GVA) at basic prices based at

CAGR 4.29%
current prices is estimated at US$ 403.47 billion in FY19#. 450
 GVA of the sector has recorded a CAGR of 4.29 per cent FY12-19#.
400
403.47
390.84
350
347.18
327.86
300
307.63
300.76
289.60
284.25
250
200
150
100
50
0
FY12 FY13 FY14 FY15 FY16* FY17** FY18*** FY19PE
Note: FY – Indian Financial Year (April -March), PE – Provisional Estimate, Exchange rate used is average for the Financial Year, *Third revised estimates, **Second revised estimates,
***First Revised Estimates, #First Advance Estimate.
Source: Ministry of Statistics and Programme Implementation

MANUFACTURING SECTOR – PERFORMANCE IN
COMPARISON WITH OTHER SECTORS
 Gross Capital Formation simply means capital accumulation over a Gross Capital Formation of Manufacturing Sector at current
time period through additions in physical assets such as equipment, prices (in US$ billion)^
transportation assets and electricity. This serves as an indicator of
the investment activity in a sector. 160.00
 At current prices, Gross Capital Formation of the sector increased to

Rs 8.73 trillion (US$ 135.49 billion) in 2017-18*** from Rs 6.15 trillion 140.00
(US$ 128.26 billion) in 2011-12.
135.49
120.00
128.26
119.19
117.90
117.51
113.41
100.00
104.42
80.00
60.00
40.00
20.00
0.00
FY12 FY13 FY14 FY15 FY16* FY17** FY18***
Note: Êxchange rates used are average of each year – provided on page 33, *Third revised estimates, **Second revised estimates, ***First Revised Estimates, Update for FY19 is
expected to be available in January 2020
Source: Central Statistics Office, World Bank

INDUSTRIAL PRODUCTION
 The Index of Industrial Production (IIP) is prepared by the Central Annual Growth Rates of IIP (%) at Sectoral level
Statistics Office to measure the activity happening in three industrial
sectors namely Mining, Manufacturing, and Electricity.
 It is the benchmark index and serves as a proxy to gauge the growth 20.00
of manufacturing sector of India since manufacturing alone has a
weight of 77.63 per cent in the index.
 The manufacturing component of the IIP grew 4.50 per cent year-on- 15.00
14.8
year in FY18.
 During FY 2019, the manufacturing component of the index grew

10.00
3.50 per cent. Strong growth was recorded in production of
construction goods (6.4 per cent), tobacco products (13.5 per cent)
and computer , electronic and optical products (10.6 per cent).
5.00
6.1
5.8
5.7
5.4
5.3
5.2
2.3
4.9
4.8
4.5
4.3
4.0
3.9
3.6
3.5
3.0
2.9
0.00
FY13
FY14
FY15
FY16
FY17
FY18
FY19
-0.1
-1.4
-5.3
-5.00
-10.00
Mining Manufacturing Electricity
Source: Central Statistics Office

PERFORMANCE OF EIGHT CORE INDUSTRIES
 The Index of Eight Core Industries (ICI) is an index reflecting the production performance of eight core industries viz. Coal Production, Crude Oil
Production, Natural Gas Production, Petroleum Refinery Processing, Steel Production, Cement Production and Electricity Generation.
 The overall index advanced by 4.3 per cent year-on-year during FY 2019. Growth in the index in December 2018 was supported by robust growth
in steel, cement, natural gas and electricity.
Production Performance of Eight Core Industries
1600.0
1400.0
1,374.89
1,306.60
1200.0
1,242.11
1,173.60
1,110.46
1000.0
967.24
912.06
800.0
876.95
739.40
600.0
688.41
671.53
337.32
650.79
297.56
620.78
283.46
279.98
270.94
262.36
255.83
254.38
246.61
574.54
243.26
569.13
231.92
229.50
551.55
221.14
220.76
217.74
203.20
400.0
111.32
106.36
100.75
92.16
90.98
87.67
81.69
75.70
46.48
39.78
38.09
37.86
37.79
37.46
36.94
36.01
35.68
34.64
32.79
32.06
31.83
31.24
30.92
200.0
34.20
38.78
37.49
38.05
38.54
41.24
41.33
41.34
41.49
0.0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Natural Gas Production (in BCM) Crude Oil Production (in MT) Fertilizer Production (in MT)
Steel Production (in MT) Petroleum Refinery Products (in MT) Cement Production (in MT)
Coal Production (in MT) Electricity Generation (in Million MWH)
Note: MT – Million Tonnes, BCM – Billion Cubic Metres, MWH – Mega Watt Hour
Source: Office of the Economic Adviser

MANUFACTURING SECTOR PMI
 The Nikkei India Manufacturing Purchasing Manufacturers Index Nikkei India Manufacturing PMI (Monthly)
(PMI) is an index which indicates the sentiments relating to
manufacturing activity in the economy. 55
 A value above 50 reflects positive sentiments and potential

expansion of the sector.
54.30
54
 India’s manufacturing PMI stood at 52.1 in June 2019.Also
54.00
53.90
companies start to spend more on hiring and anticipate good growth
in future prospects .
52.70
53
53.20
53.10
53.10
52.60
52.40
52.30
52
52.20
52.10
52.10
51.80
51.70
51.60
51
51.20
51.00
50
49
Jan-18
Jun-18
Jul-18
Jan-19
Jun-19
Feb-18
Mar-18
Feb-19
Mar-19
Nov-18
Dec-18
Aug-18
Sep-18
May-18
Oct-18
May-19
Apr-18
Apr-19
Source: IHS Markit

CAPACITY UTILISATION IN MANUFACTURING
SECTOR
 Capacity Utilisation in the manufacturing sector is measured by

Capacity Utilisation in Manufacturing Sector (in percentage)
Reserve Bank of India in its quarterly Order Books, Inventories and
Capacity Utilisation Survey.
 It indicates not only the production levels of companies, but also 77

indicates the potential for future investments.
76
 As per the latest survey, capacity utilisation in India’s manufacturing
75.9
75
sector stood at 75.9 per cent in the third quarter of 2018-19.
75.2
74.8
74.6
74
 During the same period, average new order book of manufacturing
74.1
73.8
entities reached Rs 1.46 billion (US$ 20.88 million). 73
72
72.0
71.8
71.7
71
71.2
71.0
70
69
68
Q1 2016-17
Q2 2016-17
Q3 2016-17
Q4 2016-17
Q1 2017-18
Q2 2017-18
Q3 2017-18
Q4 2017-18
Q1 2018-19
Q2 2018-19
Q3 2018-19
Source: Reserve Bank of India Order Books, Inventories and Capacity Utilisation Survey

EXPORTS OF MANUFACTURED GOODS
 Manufacturing is a key component of India’s merchandise exports.
 India’s merchandise exports grew 9.78 per cent year-on-year to US$ 302.84 billion in 2017-18. Merchandise exports recorded 9.06 per cent year-
on-year growth to reach US$ 331.02 billion in FY19.
Export performance of select industries (US$ million)
90,000.00
80,000.00
81,017.29
76,204.40
70,000.00
70,769.99
65,239.20
60,000.00
61,626.38
60,664.42
59,318.92
58,848.41
58,635.46
58,597.44
56,819.87
50,000.00
47,276.60
46,849.00
40,000.00
43,630.00
43,199.45
21,854.07
41,020.70
19,091.12
40,237.00
40,027.98
39,286.50
38,235.00
17,250.00
15,914.60
16,912.00
16,840.00
15,433.00
14,935.00
14,663.00
30,000.00
34,939.78
12,664.21
12,561.80
13,268.00
12,062.28
11,931.76
11,742.82
11,684.64
29,049.37
28,600.00
6,082.00
4,990.12
27,059.35
20,000.00
3,446.75
3,605.23
10,000.00
-
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20P
Engineering Exports Petroleum Products Exports Gems and Jewellery Exports Pharmaceutical Exports Chemical Exports
Source: EEPC, DGCIS, GJEPC, CHEMEXCIL, PHARMEXCIL, News Articles

ROLE IN EMPLOYMENT
 Manufacturing constitutes a significant part of employment in India. New Subscribers under Employees’ Provident Funds Scheme*
 Around 24 per cent of India’s total employed population was working
in the industrial sector in 2018.#
1600000
 As per MOSPI’s report on Payroll Reporting in India, number of new
subscribers* under Employees’ Provident Fund Scheme reached
1400000
1,444,321
8,25,371 in February 2019.
1,405,455
1,402,243
1,348,249
1,286,066
1200000
1,242,614
1,236,069
1,203,231
1,161,461
1,114,264
1,109,219
1000000
1,011,436
1,002,819
994,144
800000
878,197
859,553
825,371
600000
400000
200000
Jan-18
Jun-18
Jul-18
Jan-19
Feb-18
Mar-18
Feb-19
Mar-19
Dec-17
Nov-18
Dec-18
Aug-18
Sep-18
May-18
Oct-18
Apr-18
Apr-19
Note: #As per the World Bank, *Provisional Estimates, Updating of employee records is a continuous process, thus data gets updated in subsequent months
Source: MOSPI, World Bank

Manufacturing
RECENT TRENDS
AND STRATEGIES
NOTABLE TRENDS IN INDIA’S MANUFACTURING
SECTOR
 As per India Manufacturing Barometer 2019*, 85 per cent of respondents are confident of increase in turnover driven by
Exports-driven global demand.
expansion  Going forward, business leaders expect global demand to play a major role in expansion of India’s manufacturing
industry.
 Popularly knows as 3D printing, this new manufacturing technology uses digital models to create products by printing
Additive layers of materials. This has huge potential in India with the rise of mega projects coming up.
Manufacturing  As of August 2018, IISC’s Society of Innovation and Development (SID) and WIPRO 3D are collaborating to produce
India’s first industrial scale 3D printing machine.
 With the rise of IoT in consumer tech, manufacturing sector has also started implementing this new network of sensors
and actuators for data collection, monitoring, decision making and process optimisation over internet infrastructure .
Industrial Internet
Data is a huge component of this whole setup and Indian companies have a lot of potential in this area with many large
of Things (IIOT)
companies already betting on big data and analytics. As an example, Indian Railways will be rolling out locomotives with
and Industry 4.0
solutions like remote diagnostics and proactive predictive maintenance and these trains will be part of a wider
ecosystem connected to industrial internet.
Advanced  While standalone robotic workstations are already common place even in Indian companies, advanced robotics use
Robotics enhanced senses, dexterity, and intelligence to automate tasks or work alongside humans.
Note: ISRO – Indian Space Research Organisation, * - by PWC, IISC – Indian Institute of Science
Source: PWC India Manufacturing Barometer, FICCI, Bloomberg Quint

STRATEGIES ADOPTED
 With the advent of the digital age, Indian manufacturing companies have started adopting digital technologies in their
production processes which will help in increasing efficiency. It is estimated that 65 per cent of manufacturing
Digital companies will have high levels of digitalisation by 2020.
Technologies
 For its Commercial Vehicles, Ashok Leyland is utilising machine learning algorithms and its newly created telematics
unit to improve the performance of the vehicle, driver and so on.
 Backward integration helps manufacturers to increase efficiency and overall cost of products without sacrificing on
Focus on quality. Various organisations are looking at backward integration as a means to reduce costs.
backward
 As of August 2018, Britannia Industries has started with backward integration with procurement of milk as it is coming
integration
out with dairy based products.
 Forward integration strategies also help organisations to realise cost benefits.

Focus on forward
integration  As of October 2018, Filatex India, a polymer manufacturer, is planning to undertake forward integration by setting up a
fabric manufacturing and processing unit.
 The Government of India has been pushing for greater technology transfers and collaborations along with more FDI and
Collaboration
domestic production.
Source: Annual Reports and Company Presentations, TechSci Research

Manufacturing
GROWTH DRIVERS
AND OPPORTUNITIES
GROWTH DRIVERS FOR MANUFACTURING IN INDIA
Government Public Private

Initiatives Partnerships
Growth Drivers
Domestic International
Consumption Investments
Huge Labour Pool

MAKE IN INDIA INITIATIVE
 Make in India initiative was launched in 2014 to encourage Indian as well as multi-national companies to manufacture in India. After the launch of the programme,
India became the top destination globally for Foreign Direct Investment (FDI) in 2015.
 The programme initially focused on 25 sectors of the economy, however, its scope has been increased to 27 sectors. Various new sectors including Financial
Services, Education Services, Environmental Services, Communication Services, Legal Services, Audio Visual Services, Accounting and Finance Services,
Transport and Logistics Services, Medical Value Travel are now covered under the programme. Also, various existing sectors covered have been modified –
‘Automobiles’ and ‘automobile components’ have been combined, ‘Defence Manufacturing’ has been modified to ‘Aerospace and Defence’, ‘Chemicals’ sector
has been modified to ‘Chemicals and Petrochemicals’, ‘Pharmaceuticals’ sector has been altered to include ‘Medical Devices’ and ‘Leather’ sector has been
changed to ‘Leather and Footwear’.
 Special cells called ‘Japan Plus’ and ‘Korea Plus’ have been made under the initiative to facilitate investments and fast track proposals from Japan and Korea
respectively.
 Make in India and other initiatives have helped India to improve its Ease of Doing Business rank by 65 positions from 142 in 2014^ to 77 in 2018^, in World
Bank’s Ease of Doing Business Report.
 Moreover, the Make in India initiative led to a rise in India’s total FDI inflows to US$ 60.97 billion in 2017-18 from US$ 34.9 billion in 2014-15. In 2018-19(up to
December 2018)
 FDI inflow stood at US$ 46.62 billion
 In August 2017, the government announced a new Consolidated FDI Policy. The policy allows start-ups to raise money from Foreign Venture Capital Investors
(FVCI’s) by issuing instruments such as convertible notes.
 In Union Budget 2018-19, the Government of India reduced the income tax rate to 25 per cent for all companies having a turnover of up to Rs 250 crore (US$
38.75 million).
 In 2018, India was ranked at 30th position on a global manufacturing index*, ahead of BRICS peers, Brazil, South Africa and Russia.
 As of December 2018, premium smartphone maker OnePlus is anticipating that India will become its largest Research and Development (R&D) base within the
next three years.
 In July 2018, Samsung inaugurated the world’s biggest mobile phone factory in Uttar Pradesh. The factory will double the company’s mobile phone production
capacity to 120 million units by 2020.
Note: * By World Economic Forum (WEF), ^Release year of the report
Source: Bloomberg, Economic Times

SKILL INDIA INITIATIVE
 Skill India Campaign was launched in 2015 and aims to train over 400 million people in various skills. It involves various schemes such as
National Skill Development Mission, Pradhan Mantri Kaushal Vikas Yojana and National Policy for Scheme Development and Entrepreneurship.
 Budget 2017-18 aims to extend Pradhan Mantri Kaushal Kendras from 60 to 600 districts of the country and also establish 100 India International
Skills Centres. These centres would offer advanced training and courses in foreign languages.
 As of December 2018, there are 15,053 Industrial Training Institutes (ITI) present in India.( Accessed on December 26, 2018)
 As of November 30, 2018, approximately 3.39 million candidates have been trained under the Pradhan Mantri Kaushal Vikas Yojana (PMKVY).
 The government has introduced two new World Bank assisted projects viz. SANKALP scheme and STRIVE scheme for skill development in the
country. Both Skill Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP) and Skills Strengthening for Industrial Value
Enhancement (STRIVE) scheme aim to improve quality of skill development and reforms institutions for skill development in India. World Bank is
going to provide a loan worth US$ 250 million and Rs 1,100 crore (US$ 169.91 million) for the implementation of the scheme.
Source: Budget, Economic Times, Media sources, Ministry of Skill Development and Entrepreneurship

STARTUP INDIA
 Startup India campaign was launched in 2015 to encourage startups in India and provide policy support to startups.
 Under the Startup India action plan a startup is an entity which is headquartered in India, has been opened less than five years ago and has
revenue less than US$ 3.88 million.
 There are various benefits offered to registered startups under the scheme:
• As per the scheme no inspection regarding labor laws would be carried out for three years. Also, only self certification is required for
environmental law compliance.
• Startups can claim an 80 per cent rebate on their patent costs and get protection for Intellectual Property Rights (IPR’s).
• Income Tax exemption is available for first three years after obtaining certificate from Inter-Ministerial Board. Capital Gains Tax exemption is
also available if the funds are invested in a fund of funds recognised by the government.
• Startups in manufacturing sector are exempted from the criteria of prior turnover/experience without relaxation in quality standards or technical
parameters in public procurement.
 As of August 2018, Global entrepreneurial network Techstars is going to invest US$ 120,000 each in 10 start-ups in India working in fields like
Artificial Intelligence (AI), Blockchain, AR/VR, Robotics, Internet of Things (IoT) and Big Data Analytics.
 Japanese firm Softbank pledged total investments of US$ 10 billion in startups. It has already invested US$ 2 billion in India.
 As of March 2018, Xiaomi is planning to invest around Rs 7,000 crore (US$ 1.09 billion) in around 100 start-ups in India over the next five years.
 Budget 2017-18 reduced the Income tax from 30 per cent to 25 per cent for companies with annual turnover of up to US$ 7.76 million.
 In February 2018, India launched its States Start-up Ranking. The ranking framework will evaluate states on various parameters and is expected
to support in creation of a robust start-up ecosystem in the country. In December 2018, the Government of India came out with the first ever
states’ Start-up Ranking.
 The Government of India has prepared the 'Startup India Vision 2024' document with tax incentives and other measures to promote new ventures.
Source: Media sources, TechSci Research

NATIONAL MANUFACTURING POLICY
 National Manufacturing Policy was introduced in 2011. It aims to increase the share of Manufacturing sector in India’s GDP to 25 per cent and
create 100 million jobs by 2021.
 The policy was introduced to create an enabling policy framework and provide incentives for infrastructure development on Public Private
Partnership (PPP) basis.
 Under the policy, National Investment and Manufacturing Zones(NIMZ’s) have been conceived as large industrial townships managed by a
Special Purpose Vehicle (SPV). These SPV’s would ensure planning of the zones, pre-clearances for setting up industrial units and undertaking
other specific functions.
 Fourteen NIMZ’s have already been granted ‘in principle’ approval while four of them have been given final approval.
 Central and State governments will provide exemptions, subject to fulfillment of conditions by the SPV, from compliance burdens for industries
located in these zones.
 Exemption from Capital Gains Tax on sale of plant and machinery will be granted in case of re-investment of the capital gain amount for purchase
of plant and machinery within the same or different NIMZ within three years of sale.
 A Technology Acquisition and Development Fund(TADF) has been launched for acquisition of appropriate technologies, creation of a patent pool
and development of domestic manufacturing of equipment's for reducing energy consumption.
 In 2016, eight NMIZ’s were announced to be developed along the Delhi-Mumbai Industrial Corridor. Other than these, as of April 2017, fourteen
NIMZ’s have been granted ‘in-principle approval’, while three of them have been granted final approval by the government.
 An amount of US$ 1.4 million has been allocated for Scheme for implementation of National Manufacturing Policy in Budget 2017-18.
 Government of India is in the process of coming up with a new industrial policy which envisions development of a globally competitive Indian
industry. Consultations are being held with various stakeholders such as state governments, industry bodies, etc for formulation of the policy. As
of December 2018, the policy has been sent to the Union Cabinet for approval.

FOREIGN INVESTMENTS FLOWING INTO THE
SECTOR
 100 per cent FDI is approved in the sector through the automatic Total FDI Equity Inflows in the manufacturing sub-sectors
Visakhapatnam port traffic (million tonnes)
route under the current FDI Policy. during April 2000 – March 2019 (US$ billion)
 In August 2017, Department for Promotion of Industry and Internal Automobile Industry
Trade released the consolidated FDI Policy.
 For the period between April 2000 – March 2019 2.37 Drugs &
• Automobile sub-sector received FDI inflows of US$ 21.39 billion Pharmaceuticals
3.12
5.28
• Drug and pharmaceutical manufacturing has received US$ 15.98 21.39 Chemicals (other than
billion fertilizers)
8.03
• Chemical manufacturing sector (excluding fertilizers) received Food Processing
inflows totalling to US$ 16.58 billion.
9.08
Electrical Equipments
15.98
Cement
16.58
Textiles (including
dyed and printed)
Electronics
Note: data is expected to be updated from FDI Statistics quarterly report by DPIIT
Source: DPIIT

IMPACT OF GST ON MANUFACTURING SECTOR
 Goods and Services Tax (GST) is expected to provide a major boost to the manufacturing sector. It has subsumed various taxes that were earlier
imposed on manufacturers. Some of the ways in which GST will help manufacturers are:
• Before GST, excise duty had to be paid as a specified percentage of Maximum Retail Price(MRP). However, under GST the excise duty will
have to be paid on the ex-factory transaction value leading to lower tax burden.
• Pre-GST Central taxes could not be offset against State wise taxes and there were cascading layers of taxation. With the introduction of GST,
such issues get addressed as set-offs are allowed across the production and value chain.
• Subsuming of entry taxes for inter state transfers will reduce the cost of goods and services, thereby boosting demand.
• GST will provide a simple single point registration unlike the old regime in which each production facility had to be registered separately.
• Under the new tax law, manufacturers can claim input tax credit on input goods which will have positive impacts on cash flows.
• Another benefit would be the provision of a single Goods and Services Tax Identification Number (GSTIN) instead of the multiple registrations
required for service tax, VAT, CST.
• Manufacturers will also be able to optimise their supply chain for business efficiency. Warehousing and location decisions will be taken on the
basis of economic efficiency such as costs and locational advantages instead of tax efficiency.
• Assessment of income of manufacturer by many separate authorities for VAT, Service Tax, Central Excise, etc. has been replaced by only
three authorities – Central, State and Interstate.

OPPORTUNITIES IN MANUFACTURING
 For creating an eco-system to make India a global hub for electronics manufacturing a provision of
Government Initiatives US$115.62 million in 2017-18 in incentive schemes like M-SIPS and EDF.
 100% FDI is allowed under the Electronic System Design and Manufacturing Sector(ESDM).
 In Budget 2019-20, US$ 59.74 billion was allocated to Defence.

 31 per cent of India’s Defence Budget is spent on capital acquisitions.
Defence Manufacturing  It is estimated that India will spend over US$ 250 billion on defence in the next decade.
 Defence production by OFBs and DPSUs increased to Rs 58,759 crore (US$ 9.12 billion) in 2017-18.
 The FDI limit in the defence sector has been raised to 100 per cent
 In February 2019, the Union Cabinet passed the National Policy on Electronics (NPE) which has envisaged
creation of a US$ 400 billion electronics manufacturing industry in the country by 2025. 32 per cent growth
rate has been targeted globally in next five years.
 In September 2018, the Government of India exempted 35 machine parts from basic custom duty in order to
boost mobile handset production in the country.
 The electronic goods industry is one of the fastest growing industries. Demand for electronic goods is
Electronic Goods increasing at a CAGR of 22 per cent and is expected to reach US$ 400 billion by 2020. Production of India’s
Manufacturing electronics sector is estimated to have increased to Rs 3,87,525 crore (US$ 60.13 billion) in 2017-18 from Rs
3,17,331 crore (US$ 47.30 billion) in the preceding fiscal.
 The government has launched various schemes to boost Electronics System Design and Manufacturing
(ESDM) sector in India. Modified Special Incentive Package Scheme (M-SIPS) is one scheme which aims to
achieve ‘Net Zero Imports’ in the industry by 2020. Under the scheme, subsidy for investment in capital
expenditure is provided to the extent of 20 per cent of investment in SEZs and 25 per cent of investment in
non-SEZs.
Note: OFB – Ordinance Factory Board, DPSU – Defence Public Sector Undertaking

Manufacturing
KEY INDUSTRY
ORGANISATIONS
The TextileVisakhapatnam port (TAI)

Association (India) traffic (million tonnes) All India Food Processors’ Association (AIFPA)
Address: 72-A, Santosh, Dr M B Raut Road, Shivaji Park, Dadar (W), Address: 206, Aurbindo Place Market, Hauz Khas - 110016, New
Mumbai- 400 028 Delhi
Telefax: 91 22 24461145 Phone: 011-26510860, 41550860
Website: www.textileassociationindia.org E-mail: aifpa@vsnl.net
Website: www.aifpa.net
Automotive Component Manufacturers Association of India

Cement Manufacturers’ Association (CMA)
(ACMA)
Address: CMA Tower Address: The Capital Court
A-2E, Sector 24, Noida - 201301, Uttar Pradesh 6th Floor, Olof Palme Marg,
Phone: 0120-2411955, 2411957, 2411958 Munirka - 110067, New Delhi
E-mail: cmand@cmaindia.org Phone: +91-11-26160315
Website: www.cmaindia.org E-mail: acma@acma.in
Website: www.acma.in

Manufacturing
USEFUL
INFORMATION
GLOSSARY
 BTRA: Bombay Textile Research Association
 US$: US Dollar
 ACMA: Automotive Component Manufacturers Association

of India
 Wherever applicable, numbers have been rounded off to

the nearest whole number

EXCHANGE RATES
2004–05 44.95 2005 44.11

2005–06 44.28 2006 45.33
2006–07 45.29 2007 41.29
2007–08 40.24 2008 43.42
2008–09 45.91
2009 48.35
2009–10 47.42
2010 45.74
2010–11 45.58
2011 46.67
2011–12 47.95
2012 53.49
2012–13 54.45
2013 58.63
2013–14 60.50
2014 61.03
2014-15 61.15
2015 64.15
2015-16 65.46
2016-17 67.09 2016 67.21
2017-18 64.45 2017 65.12
2018-19 69.89 2018 68.38

DISCLAIMER
of IBEF.

RETAIL
For updated information, please visit www.ibef.org June 2019

Table of Content
Executive Summary…………………..……..3
Advantage India…………………..….…….. 5
Market Overview and Trends………...…….7
Strategies adopted……………....…………15
Growth Drivers……………………......…....18
Opportunities.....…………………………...26
Key Industry Organisations……….……....29
Useful Information……….……….......…....31
EXECUTIVE SUMMARY
 Rising income and demand for quality products to boost consumer Consumer expenditure in India (US$ billion)
expenditure.
4,000
 Total consumption expenditure is expected to reach nearly US$
3,000 3,600
3,600 billion by 2020 from US$ 1,824 billion in 2017.
2,000
1,824
1,000
0
2017 2020F
 Indian retail one of the fastest growing markets in the world due to Retail market in India (US$ billion)
economic growth.
1,500
 Retail industry reached to US$ 950 billion in 2018 at CAGR of 13 per
950
cent and expected to reach US$ 1.1 trillion by 2020. 1,000 1,200
 India is the world’s fifth largest global destination in the retail space. 500 672
 Retail market in India is projected to grow from an estimated US$ 0
672 billion in 2017 to US$ 1,200 billion in 2021F. 2017 2018 2021F
Modern retail market in India (US$ billion)

 India’s modern retail to double in size over the next three years.
30
 The modern retail market in India is expected to grow from US$
26.67
13.51 billion in 2016 to US$ 26.67 billion in 2019. 20
10 13.51
0
2016 2019F
Notes: CAGR - Compound Annual Growth Rate, F- Forecast, E – Estimated, Consumer expenditure data is expected to be updated by July 2019 from World Bank data
Source: Ernst and Young, Price Waterhouse Cooper, Economic Times, MRRSIndia.com and Assocham - The Associated Chambers of Commerce and Industry of India, Consumer Leads
report by FICCI and Deloitte - October 2018
3 Retail For updated information, please visit www.ibef.org

EXECUTIVE SUMMARY
 Robust consumption, rural markets to augment FMCG market. FMCG market in India (US$ billion)
 FMCG market expected to increase to US$ 103.7 billion by 2020 120

from Rs 3.4 lakh crore (US$ 52.75 billion) in FY18. The sector is 100
103.70
projected to grow 11-12 per cent in 2019. 80
52.75
60
40 49.00
20
0
2016 FY18 2020 F
 Increasing participation from foreign and private players to boost Revenue from online retail in India (US$ billion)
retail infrastructure.
70
 India's online retail sector grows 23 per cent to US$ 17.8 billion in 60
50 60.00
2017.
40
 Online retail sales is forecasted to grow at the rate of 31 per cent 30
14.50 32.70
year-on-year to reach US$ 32.70 billion in 2018. 20 13.00
10 17.80
 Revenue generated from online retail is projected to grow to US$ 60
0
billion by 2020. 2015 2016 2017 2018F 2020 E
Notes: CAGR - Compound Annual Growth Rate, F – forecast,, All the years denote calendar year, ^ - FY18
Source: indiaretailing.com, eMarketer, Nielsen India

Retail
ADVANTAGE INDIA
ADVANTAGE INDIA
 Healthy economic growth, changing  Collective efforts of financial houses and

demographic profile, increasing banks with retailers are enabling
disposable incomes, changing consumer consumers to go for durable products with
tastes and preferences are driving growth easy credit.
in the organised retail market in India.
 Rapid urbanisation with increasing
purchasing power has led to growing
demand.
 Retail space demand is expected to
increase at the rate of 81 per cent to 7.8
million sq ft in 2018.
ADVANTAGE
INDIA
 Foreign retailers are continuously entering  About 51 per cent FDI in multi-brand retail.
the Indian market.  100 per cent FDI in single-brand retail
 Cumulative FDI inflow in retail between under the automatic route.
April 2000 to March 2019 stood at US$  Goods and Service Tax (GST) was
1.66 billion. introduced as a form of single unified tax
system.
 India’s retail sector investments doubled to
reach Rs 1,300 crore (US$ 180.18 million)  To provide a level-playing field to
in 2018. stakeholders, the government is planning
to synchronise policies of retail, FMCG
and e-commerce within a single policy
framework.
Note: FY – Indian Financial Year (April–March), NMDP – National Maritime Development Programme, FDI – Foreign Direct Investment, MMT – Million Metric Tonnes,
Source: Report of the Task force on Financing Plan for Ports, Government of India, JLL report, Anarock Retail

Retail
MARKET
OVERVIEW AND
TRENDS
EVOLUTION OF RETAIL IN INDIA
Pre 1990s 1990-2005 2005-2010 2010 onwards
 Pure-play retailers realised the  Substantial investment  Cumulative FDI inflow from
 Manufacturers opened their
potential of the market. commitments by large Indian April 2000 to March 2019, in
own outlets.
corporate. the retail sector, reached US$
 Most of them in apparel
1.66 billion.
segment.  Entry in food and general
merchandise category.  Retail 2020: Retrospect,
Reinvent, Rewrite.
 Pan-India expansion to top
 Movement to smaller cities and
100 cities.
rural areas.
 Repositioning by existing  More than 5–6 players with
players. revenues over US$ 1 trillion by
2020.
 Large-scale entry of
international brands.
 Approval of FDI limit in multi-
brand retail up to 51 per cent.
 Rise in private label brands by
retail players.
 Sourcing and investment rules
for supermarkets were relaxed.
 E commerce has emerged as
one of the major segments.
 100 per cent FDI in single
brand retail under the automatic
route.
Source: Technopak Advisors Pvt Ltd, BCG

RETAIL FORMATS IN INDIA
Mono/exclusive  Exclusive showrooms owned or franchised  Complete range available for a given
branded retail shops out by a manufacturer. brand, certified product quality.
Multi-branded retail  Focus on particular product categories and  Customers have more choices as many
shops carry most of the brands available. brands are on display.
 Display most of convergence as well as

Convergence retail  One-stop shop for customers; many
consumer/electronic products, including
outlets product lines of different brands on display.
communication and IT group.
 It is an online shopping facility for buying

 Highly convenient as it provides 24X7
and selling products and services; the
E-retailers access, saves time and ensures secure
facility is widely used for electronics, health
transaction.
and wellness.
Note: IT - Information Technology

Source: TechSci Research

COMPETITIVE LANDSCAPE IN INDIAN RETAIL
SECTOR
Retail
Supermarkets/ Cash and carry

Departmental stores Hypermarkets Specialty stores
convenience stores stores
 Pantaloon has 209  Pantaloon Retail is  Aditya Birla Retail-  Titan Industries is a  Metro started the
stores. the leader in this More Supermarket large player, with cash and carry
 Westside operates format, with 259 Big (523 stores). 496 World of Titan, model in India; the
145 stores as of Bazaar stores and 262 Tanishq and company operates
 Spencer’s Daily
March 2019. online franchisees. 509 Titan Eye+ 24 stores across
(120 stores).
shops. Mumbai, Kolkata,
 Shoppers Stop has  Aditya Birla Retail
 Reliance Fresh (539 Delhi, Punjab,
83 stores in India, (More  Vijay Sales, Croma
stores). Hyderabad and
as of 2018. Hypermarket)- 20 and E-Zone are into
 REI 6Ten (350 Bengaluru.
stores. consumer
 As of FY18, stores). electronics.  As of FY18,
Reliance Retail  HyperCITY (19
 Big Bazaar (239 Reliance Retail
launched ‘Trends’ in stores), Trent,  Landmark and
stores). operates 43 cash
this format and Spencer’s (Spencer Crossword focus on
and carry stores
currently has more Hyper), and books and gifts.
called ‘Reliance
than 3,300 stores Reliance are other
Market’.
across India. players.
Source: Company websites, Press Release

STRONG GROWTH IN THE INDIAN RETAIL INDUSTRY
 The retail sector in India is emerging as one of the largest sectors in Market
Visakhapatnam
size over the
port
past
traffic
few years
(million
(US$
tonnes)
billion)
the economy. It contributes 10 per cent of GDP and 8 per cent of
employment. 2,000
*CAGR 10.97%
 The total market size of Indian retail industry reached US$ 672 billion
1,800
in 2017. It is forecasted to increase to US$ 1,200 billion by 2021 and
1,750
1,750 billion by 2026.
1,600
 India will become a favourable market for fashion retailers on the
back of a large young adult consumer base, increasing disposable 1,400
incomes and relaxed FDI norms.
1,200
 Revenue of India’s offline retailers, also known as brick and mortar
1,200
(B&M) retailers, is expected to increase by Rs 10,000-12,000 crore 1,000
(US$ 1.39-2.77 billion)^ in FY20.
800
 Experiential retail draws the concentration to a customer driven
approach where the client can interact with product or brand rather 600
672
641
than being a passive participant.
600
534
518
400
490
424
368
321
200
278
238
204
0
2021F
2026F
2000
2002
2004
2006
2008
2010
2012
2013
2014
2015
2016
2017
Note: *CAGR for 2000-2016, F – Forecast, E – Estimated , âs per CRISIL
Source: indiaretailing.com, BMI Research, Consumer Leads report by FICCI and Deloitte - October 2018

ORGANISED RETAIL IN NASCENT STAGE
Significant scope for expansion
3% 7%
9%
18%
2017E 2021F
75%
88%
Traditional retail Organised retail E-commerce*
 As of 2017E, the traditional retail, organised retail and e-commerce segments account for an estimated 88 per cent, nine per cent and three per
cent of the market, respectively.
 The organised retail market in India is growing at a CAGR of 20-25 per cent per year.
 It is projected that by 2021 traditional retail will hold a major share of 75 per cent, organised retail share will reach 18 per cent and e-commerce
retail share will reach seven per cent of the total retail market.
 The unorganised retail sector in India has huge untapped potential for adopting digital mode of payments, as 63 per cent of the retailers are
interested in using digital payments like mobile and card payments.
Note: E – estimate, F – Forecast, * - e-commerce market here refers to sale of products and services through electronic transactions, home shopping is considered a part of e-commerce
Source: BCG , KPMG- indiaretailing.com, Deloitte Report, Winning in India’s Retail Sector, Centre for Digital Financial Inclusion (CDFI) report, Crisil, Consumer Leads report by FICCI and
Deloitte - October 2018

SECTOR’S HIGH GROWTH POTENTIAL IS
ATTRACTING INVESTORS
 India has occupied a remarkable position in global retail

rankings; the country has high market potential, low economic
FDI Confidence Index 2018
risk and moderate political risk.
 India’s high growth potential compared to global peers has 2.5
made it more favourable. India is expected to become the
world's third-largest consumer economy, reaching US$ 400
billion in consumption by 2025, according to a study by Boston 2
2.1
Consulting Group.
1.9
1.87
1.85
1.79
 In FDI Confidence Index, India ranks 11th (after U.S., Canada,
1.78
1.72
1.67
1.67
1.65
Germany, United Kingdom, China, Japan, France, Australia, 1.5
1.62
1.61
1.59
1.58
1.55
1.54
1.54
Switzerland and Italy).
 India is ranked first in the Global Retail Development Index
2017, backed by rising middle class and rapidly growing 1
consumer spending.
0.5
Belgium
Japan
United States
France
Denmark
Germany
Netherlands
Canada
Switzerland
India
Australia
Italy
Spain
UK
China
Singapore
Sweden
Note: FDI - Foreign Direct Investment
Source: AT Kearney 2017 FDI Confidence Index

RISING PROMINENCE OF ONLINE RETAIL
Online retail in India (US$ billion) Indian E-Commerce Market (US$ billion)
80 200
180 200
70
73.00 160
60 140
60.00
50 120
40 100
80 100
30
32.70 60
20
40 50
10 17.80 39
13.00 14.50 20
0 0
2015 2016 2017 2018F 2020F 2022F 2017 2018F 2020F 2026F
 Online retail business is the next generation format which has high potential for growth. Currently, it is estimated to be a US$ 50 billion
opportunity. After conquering physical stores, retailers are now foraying into the domain of e-retailing. It had a market size of US$ 18 billion in
2017 and is forecasted to reach US$ 32.70 billion by 2018.
 Online retail market is estimated to reach US$ 60 billion by 2020. The online retail market sales is forecasted to grow at the rate of 31 per cent
year-on-year to reach US$ 32.70 billion in 2018. It is projected to reach US$ 73.00 billion by 2022F.
 India's ecommerce industry's sales rose 40 per cent year-on-year to reach Rs 9,000 crore (US$ 1.5 billion) during the five-day sale period ending
September 24, 2017, backed by huge deals and discounts offered by the major ecommerce companies. It is forecasted to reach US$ 53 billion by
2018.
 The government plans to allow 100 per cent FDI in e-commerce, under the arrangement that the products sold must be manufactured in India to
gain from the liberalised regime.
Notes: APMEA - Asia/ Pacific, Middle East and Africa, F- Forecast
Source: MasterCard Worldwide Insights 4Q 2010, ANAROCK, ASSOCHAM, UN Report 'The power of 1.8 billion‘, Nasscom annual guidance 2018, RedSeer Consulting, eMarketer

Retail
STRATEGIES
ADOPTED
STRATEGIES ADOPTED
Strong distribution  It is imperative for a retailer to have a strong distribution and

 It is imperative for a retailer to have a strong distribution and
logistic network to succeed in this sector. Players follow a
logistic network to succeed in this sector. Players follow a
and logistic distribution network that suits them the best. For example, Shoppers Stop follows a “hub and spoke” model for its
distribution network that suits them the best. For example, Shoppers Stop follows a “hub and spoke” model for its
network distribution network to increase efficiency and productivity.
distribution network to increase efficiency and productivity.
 In February 2019, Future Consumer partnered with T Choithram & Sons to start offering products in the Middle East.
 As of February 2019, Marks & Spencer (M&S) aims to expand aggressively by opening six more stores in next two
months.
Expansion  As of October 2018, Xiaomi opened 500 Mi stores in rural region of India. It aims to open 5,000 such retail stores all over
the country by the end of 2019.
 On August 09, 2018 IKEA world's largest furniture retailer opened its first retail store in Hyderabad and it plans to open
24 more stores by 2025.
 Retailers are opting for many channel to maximise sales, Omni-channel retailing is being adopted by many retailers in
India. For example, Shoppers Stop is making efforts to be an omni-channel retailer. Ezone has launched an online
Omni-channel platform, which has led to increase in sales.
retailing
 As of January 2019, Medlife aims to expand its retail pharmacy segment with integration of omnichannel strategy by
opening 750 pharmacies across India by 2020.
Collaborative  As of October 2018, Procter & Gamble India (P&G India) launched Innovation Sourcing Fund, a multimillion-dollar fund to
growth invest in Indian start-ups.
 Certain retailers adopt ‘first price right’ approach. Retailers do not offer discounts under this strategy: they directly
Lowering prices
compete on the selling price by offering a best price without any markdowns.
 Most retailers have advanced off-season sales from 15 days to a month with discounts of 20-70 per cent on certain
Offering discounts
products. Also higher discounts and other value-added services for members.
Source: Company website, News Articles

STRATEGIES ADOPTED
Offering value-  Companies offer innovative value-added services, like customer loyalty programmes and happy hours on shopping
added services deals. Offers for senior citizens, contests for students and lottery gains are now very common.
Leveraging  To keep customers on shop floors for a longer time and increase conversions, retailers are now pitching to partner with
partnerships manufacturers, service providers, financial companies, etc. to create a buzz around certain product categories.
 Critical components of supply chain planning applications help retailers to maintain profit margins. Innovative solutions
Strong supply
like performance management, frequent sales operation management, demand planning, inventory planning, production
chain
planning and lean systems can help retailers to get advantage over competitors.
 To diversify the product offerings and tab the growing luxury retail segment, retailers are forming joint ventures with
Joint Ventures foreign luxury brands. Reliance Brands Ltd. formed a joint venture with Bally, a Swiss luxury brand, to exclusively market
its products in India.
 To create perception that their store brands to have consistent and comparable quality and availability in relation to
Changing the branded products. Retailers are providing more assortments for private level brands to compete with supplier's brand.
perception New product development, aggressive retail mix and everyday low pricing strategy help to get edge over supplier's
brand.
Hyper-  Indian retailers use hyper-personalisation models based on behavioral data, brands performance, demographic
Personalisation preference and pin codes as marketing strategy which boosts sales.
 Online retail segment offers cash-on-delivery and manufacturers’ warranty to boost e-retailing in consumer durable
Cash-on-Delivery sector.
 Cash-on-delivery is the most preferred payment option with over 30 per cent of buyers opting for it in India.
Source: International

Retail
GROWTH DRIVERS
GROWTH DRIVERS FOR RETAIL IN INDIA
Easy consumer Favourable

credit and increase in demographics
quality products
Growth Drivers
Brand Rise in income
consciousness and purchasing
power
Change in
consumer mindset

GROWTH DRIVERS FOR RETAIL IN INDIA
Consumer  India’s per capita GDP increased to Rs 143,048 (US$ 1,982.65) in FY19 from Rs 129,901 (US$ 1,800.43) FY18.
preferences  Indian consumers are now shifting more towards premium brands by paying more for value and service.
Brand  Factors like young demographic composition, increasing personal disposable income, more preference towards
Consciousness affordable luxury and rising middle class population are developing preferences for specific brands.
Consumer  Consumers have become more comfortable using online services due to demonetisation.
Finance  Online retail segment provides various credit and payment options driven by increasing internet penetration, speed, 24-
Opportunities hour accessibility and convenient and secured transactions.
 Department for Promotion of Industry and Internal Trade (DPIIT) approved three foreign direct investments (FDI),
FDI Approvals Mountain Trail Food, Kohler India Corporation, and Merlin Entertainments India in the single brand retail sector.
 The DPIIT has approved two FDI proposals worth more than Rs 400 crore (US$ 62.45 million) within the retail sector.
 India’s retail sector investments doubled to reach Rs 1,300 crore (US$ 180.18 million) in 2018.
 As of January 2019, Future Supply Chain Solutions will invest Rs 1,000 crore (US$ 138.60 million) to set up India Food
Investments Grid with a network of 38 food distribution centers.
 Beccos, a South Korean designer brand is set to enter the Indian market with an investment of about Rs 1.00 billion
(US$ 14.25 million) and open 50 stores by June 2019.
Source: News Articles, Ministry of Statistics and Programme Implementation, Anarock Retail

INCOME GROWTH TO DRIVE DEMAND FOR
ORGANISED RETAIL
Visakhapatnam
GDP at current
portprices
traffic(US$
(million
billion)
tonnes) Visakhapatnam
GDP per capita
port
at current
traffic (million
prices (US$)
tonnes)
3,000 2,200
2,000
1,982.65
2,500 1,800
2,640.88
2,602.51
1,800.43
1,750.30
1,600
2,273.62
2,000 1,400
2,039.36
1,403.04
1,200
1,854.99
1,288.63
1,500
1,674.40
1,179.28
1,000
1,482.19
1,058.03
1,302.18
800
945.92
1,000
600
500 400
200
- 0
FY12 FY13 FY14 FY15 FY16 FY17 FY18** FY19* FY12 FY13 FY14 FY15 FY16 FY17 FY18** FY19*
 Multiple drivers are leading to strong growth in Indian retail through a consumption boom.
 Significant growth in discretionary income and changing lifestyles are among the major growth drivers of Indian retail.
 Easy availability of credit and use of ‘plastic money’ have contributed to a strong and growing consumer culture in India.
 Acceptance and usage of e-retailers by consumers are increasing due to convenience and secured financial transactions.
 Expansion in the size of the upper middle class and advertisement has led to greater spending on luxury products and high brand consciousness.
 In FY19*, GDP at current prices was US$ 2,640.88 billion and GDP per capita at current prices was US$ 1,982.65.
Source: IMF, * - 2nd Advance Estimates, ** - Provisional Estimates

FDI POLICY DETAILS ON SINGLE AND MULTI-BRAND
RETAIL IN INDIA
 Minimum investment cap is US$ 100 million.

 30 per cent procurement of manufactured or processed products must be from SMEs.
 Minimum 50 per cent of total FDI must be invested in backend infrastructure (logistics, cold storage, soil testing
labs, seed farming and agro-processing units).
 Removes middlemen and provides better price to farmers.
51 per cent FDI in  Development in retail supply chain system.
multi -brand retail  50 per cent of jobs in retail outlet could be reserved for rural youth and a certain amount of farm produce could
Status: Policy passed be required to be procured from poor farmers.
 To ensure the Public Distribution System (PDS) and Food Security System (FSS), the government reserves the
right to procure a certain amount of food grains.
 It will keep food and commodity prices under control. It will also cut agricultural waste as mega retailers would
develop backend infrastructure. Consumers will receive higher quality products at lower prices and with better
service.
 Products to be sold under the same brand internationally. Sale of multi-brand goods is not allowed, even if
produced by the same manufacturer.
 100 per cent FDI allowed in single-brand retail under the automatic route.
100 per cent FDI in
 Single brand retail entities have been allowed to set off their incremental sourcing of goods from India for global
single brand retail operations during the initial five years starting from the 1st April of the year of the opening of first store, as
Status: Policy passed against the compulsory sourcing requirement of 30 per cent of purchases from India.
 100 per cent FDI in retail trading of food products manufactured or produced in India.
 Liberalisation of FDI is expected to give a boost to ease of doing business and Make in India.

INDIAN RETAIL IS SET TO BENEFIT FROM FDI POLICY
Benefits of FDI
in Indian retail
Technological Infrastructure
Increase in employment Removing middlemen
advancement investment
Benefiting Indian
Sector Entry route FDI limit
manufacturers
Wholesale cash
Automatic 100%
and carry trading
Single brand
Automatic 100%
product retailing
Multi-brand, Foreign Investment and

51%
front-end retail Promotion Board

NEW GOODS AND SERVICE TAX (GST) WOULD
SIMPLIFY TAX STRUCTURE
 Elimination of tax cascading is expected

 Goods and Service Tax (GST) as a to lower input costs and improve
unified tax regime is expected to lead to profitability.
a re-evaluation of procurement and  Application of tax at all points of supply
distribution arrangements. chain is likely to require adjustments to
profit margins, especially for distributors
 Removal of excise duty on products
and retailers.
would result in cash flow improvements.
 The CII survey 2018, a survey of over
200 businesses about one year of GST
indicated moderate retail inflation due to
GST.
Goods and
Service Tax
(GST)
 Tax refunds on goods purchased for  Changes need to be made to
resale implies a significant reduction in accounting and IT systems in order to
the inventory cost of distribution. record transactions in line with GST
requirements.
 Distributors are also expected to
experience cash flow from collection of  Appropriate measures need to be taken
GST in their sales, before remitting it to to ensure smooth transition to the GST
the government at the end of the tax- regime through employee training,
filing period. compliance under GST, customer
education and inventory credit tracking.
Note: CII: Confederation of Indian Industry

Source: TechSci Research

RECENT M&A DEALS IN THE INDIAN RETAIL SECTOR
Acquirer name Target name Year Deal type

Aditya Birla Fashion and Retail Ltd Jaypore and TG Apparel & Decor
June 2019 Acquisition
(ABFRL) Pvt Ltd
Reliance Industries Ltd (RIL) Hamleys May 2019 Acquisition
Future Enterprises Ltd LivQuik Technology (India) Pvt. October 2018 Acquisition (55 per cent)
Ltd
Amazon and Samara Capital More September 2018 Acquisition
Genesis Colors Ltd (GCL), GLF
Lifestyle Brands, Genesis La
Reliance Retail Ventures Ltd
Mode, Genesis Luxury Fashion September 2018 Acquisition
(RRVL)
Pvt Ltd, GML India Fashion and
GLB Body Care
Walmart Flipkart May 2018 Acquisition
Future Group HyperCity October 2017 Acquisition
Berger Paints Chugoku Marine Paints April 2017 Collaboration
Myntra InLogg April 2017 Acquisition
Flipkart owned Myntra HRX August 2016 Acquisition
Myntra MotoGP August 2016 Collaboration
Aditya Birla Fashion and Retail Forever 21 (India Business) May 2016 Acquisition
Idein Ventures Infurnia Jan 2016 Joint Venture
Paytm Near.in Dec 2015 Acquisition
Morgan Stanley Flipkart June 2015 Private Equity
InnoVen
Source: Capitaland Thomson ONE Banker, News Articles
Bloomberg Sportsbiz Private Limited July 2015 Private Equity

Retail
OPPORTUNITIES
GROWTH VALUE PROPOSITION
Higher brand consciousness. Rising incomes and purchasing power.

Demand Factors
Growing aspiration levels and

Credit availability.
appetite to experiment.
Growing young population Changing consumer preferences

and working women. and growing urbanisation.
Indian retail opportunity
Rapid real estate and

Easy availability of credit.
infrastructure development.
Supply Factors
Emergence of new categories. Expansion plans of existing players.
Development of supply chain R&D, innovation and

improving efficiency. new product development.
Source: KPMG International 2011

AMPLE GROWTH OPPORTUNITIES IN INDIAN RETAIL
INDUSTRY
 India is the fifth largest preferred retail destination globally.

Large number of
retail outlets  The sector is experiencing exponential growth, with retail development taking place not just in major cities and metros,
but also in Tier-II and Tier-III cities.
Rural markets  In FY18, rural consumption rose by 9.7 per cent while the urban spending grew at 8.6 per cent.
offer significant
 The Union Budget 2019-20 is expected to give boost to the rural consumption in India.
growth potential
 The organised Indian retail industry has begun experiencing an increased level of activity in the private label space.
 The organised retail sector is forecasted to witness strong growth in the coming years.
Private label
opportunities  The share of private label strategy in the US and the UK markets is 19 per cent and 39 per cent, respectively, while its
share in India is just 6 per cent. Stores like Shopper Stop, Lifestyle generates 15 to 25 per cent revenues from private
label brands.
 India‘s price competitiveness attracts large retail players to use it as a sourcing base.
Sourcing base  Global retailers such as Walmart, GAP, Tesco and JC Penney are increasing their sourcing from India and are moving
from third-party buying offices to establishing their own wholly-owned/wholly-managed sourcing and buying offices.
 Luxury retailing is gaining importance in India. This includes fragrances, gourmet retailing, accessories and jewellery
among many others.
Luxury retailing  Luxury market of India is expected to grow to US$ 30 billion by the end of 2018 from US$ 23.8 billion in 2017 supported
by growing exposure of international brands amongst Indian youth and higher purchasing power of the upper class in tier
2 and 3 cities, according to Assocham.
Notes: FMCG - Fast Moving Consumer Goods

Source: TechSci Research , Nielsen, Jefferies report

Retail
KEY INDUSTRY
ORGANISATIONS
Retailers Visakhapatnam
Association ofport traffic (million tonnes)
India The Franchising Association of India
Address: 111/112, Ascot Centre, Address: A-13, Kailash Colony

Next to Hotel Le Royal Meridien, Sahar Road, Sahar, New Delhi – 110048
Andheri (E), Tel: 91- 11- 2923 5332
Mumbai – 400099. Fax: 91- 11- 2923 3145
Tel: 91- 22 - 28269527 - 28 Website: www.fai.co.in
Fax: 91- 22- 28269536
E-mail: info@rai.net.in
Website: www.rai.net.in

Retail
USEFUL
INFORMATION
GLOSSARY
 FMCG: Fast Moving Consumer Goods
 So FY10 implies April 2009 to June2010
 IT: Information Technology
 MoU: Memorandum of Understanding
 MT: Million Tonnes
 MTPA: Million Tonnes Per Annum
 SEZ: Special Economic Zone
 US$: US Dollar

EXCHANGE RATES
2004–05 44.95 2005 44.11
2005–06 44.28 2006 45.33

2006–07 45.29 2007 41.29
2007–08 40.24 2008 43.42
2008–09 45.91
2009 48.35
2009–10 47.42
2010 45.74
2010–11 45.58
2011 46.67
2011–12 47.95
2012 53.49
2012–13 54.45
2013 58.63
2013–14 60.50
2014 61.03
2014-15 61.15
2015 64.15
2015-16 65.46
2016-17 67.09 2016 67.21
2017-18 64.45 2017 65.12
2018-19 69.89 2018 68.36

DISCLAIMER
incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of
IBEF.

SERVICES

Table of Content
Market Overview and Trends……….……..6
Strategies Adopted………….……..………13
Growth Drivers and Opportunities…..……15
Industry Associations……….......…………26
Useful Information……….......……………..28
EXECUTIVE SUMMARY
 The services sector of India remains the engine of growth for India’s economy and contributed 54.17 per cent
of India’s Gross Value Added at current prices in 2018-19*.
Key Driver of Economic  At current prices, the sector grew 12.75 per cent year-on-year (in Rs terms) in 2018-19*.
Growth
 As of 2018, 34.49 per cent of India’s employed population was working in the services sector.
 Net export estimate from April to June 2019 in services is US$ 56.18 billion and import is US$ 37.46 billion.
 A large pool of skilled IT manpower has made India into a global outsourcing hub. It now commands a 55 per
Global Technology Hub cent share in the global sourcing market.
 Further, India is the digital capabilities hub of the world with presence of 75 per cent of global digital talent.
 The government’s move to launch ‘Startup India’ aims to create an inclusive ecosystem for entrepreneurs
and push for innovation. Services are a big part of this system. The technology infrastructure required for
such an ecosystem has increased the potential for the sector in India.
Attractive Ecosystem  Low setup costs make this sector an attractive investment destination
 India also has reasonably well-developed financial markets.
 All these factors make Indian services sector an attractive ecosystem for both the entrepreneurs and the
investors.
Note: , Updated data on services exports is expected by the end of August 2019 from RBI, *As per second advance estimates
Source: Economic Survey of India, DIPP, MOSPI, RBI, International Labour Organisation
3 Services For updated information, please visit www.ibef.org

Services
ADVANTAGE INDIA
ADVANTAGE INDIA
 India is the export hub for software services. It

 Services sector is the largest recipient of
has a 55 per cent share in the US$ 185-190
FDI in India with inflows of US$ 74.14
billion global sourcing market in 2017.
billion between April 2000 and March
 India is also becoming a destination for 2019.
medical tourism as a result of cheaper but
 100 per cent FDI for any regulated
quality healthcare services.
financial sector activity under the
 India has immense potential in tourism automatic route.
services and earned Rs 1,84,971 crore (US$
28.70 billion) from tourism in 2017-18.
ADVANTAGE
INDIA
 Government of India is working to remove
 An already established technology base many trade barriers to services and tabled a
and infrastructure that will help in the draft legal text on Trade Facilitation in
creation of an ecosystem for other Services to the WTO in 2017.
services.  Government is promoting necessary
 Large pool of skilled manpower, especially services and will charge zero tax for
in the areas of IT & ITeS available at a education and health services under the
GST regime.
relatively low cost and and a rapidly
increasing youth population looking to  The government has identified 12 sectors
under the Champion Services Sectors
migrate from agriculture to other sectors.
Initiative which is aimed at formulating
cross-cutting action plans to promote their
growth.
Source: WTO- World Trade Organisation

Source: Economic Survey of India 2016-17, DIPP, NASSCOM

Services
MARKET OVERVIEW
AND TRENDS
SERVICES SECTOR CLASSIFICATION
Services sector
Transport,
Storage, Real Estate,
Public
Trade, Repair, Communication ownership of
Financial Administration
Hotels and and dwelling and
Services and Defence
restaurants Services Professional
and Others
related to Services
Broadcasting
Railways Road Transport Air Transport
Trade and Repair Hotels and

Services Restaurants
Source: Indiabudget

SHARE OF SERVICES SECTOR GROWS AT THE
FASTEST CAGR
 In terms of overall GDP India ranks 7th in 2018 and was the among Services Sector GVA at basic prices at current prices (in US$
the leaders in services GVA growth in 2017, achieving 7.92^ per cent billion)
growth.
1,600 CAGR 6.96% 60%
 India’s services sector GVA grew at a CAGR of 6.96 per cent to US$
1,356.49 billion in FY19* from US$ 846.84 billion in FY12.
1,400 54.30%
53.50% 55%
 Growth rate of financial, real estate and professional services was 52.33%52.72%
51.83%
1,356.49
estimated at 12.71 per cent (in Rs terms) in FY19*. Trade, hotels, 1,200
50.03%50.62%
1,285.14
transport, communication and services related to broadcasting are 48.97%
50%
estimated to have recorded 11.63 per cent growth (in Rs terms) in 1,000
1,095.05
1,005.30
FY19*.
976.49
800 45%
870.26
847.76
846.84
600
40%
400
35%
200
0 30%
FY12
FY13
FY14
FY15
FY17***
FY16****
FY19*
FY18**
Growth of India's Services Sector (GVA at basic price)
Services sector GVA as a percentage of total GVA (in Rs terms)
Note: CAGR - Compound Annual Growth Rate, Exchange Rate used is average for the year, ****Third Revised Estimates, ***Second Revised Estimates, **First Revised Estimates, *
Provisional, Âs per World Bank’s World Development Indicators
Source: IMF, World Bank, MOSPI

SERVICE SECTOR PMI
 The services sector is a key driver of India’s economic growth Nikkei India Services PMI (Monthly)
 Nikkei India Services Purchasing Managers' Index (PMI) stood at
60
50.2 in May 2019, indicating an expansion but fall in June 2019 to
49.6.
54.2
53.7
50
53.2
 Strong overseas demand and new export business opportunities
52.6
52.5
52.2
52.2
52.0
51.5
51.0
50.9
50.2
49.6
49.6
helps to boost total sale in country .
40
30
20
10
Jun-18
Jul-18
Jan-19
Jun-19
Feb-19
Mar-19
Nov-18
Dec-18
Aug-18
Sep-18
May-18
Oct-18
May-19
Apr-19
Source: IHS Markit

PERFORMANCE OF INDIA’S SERVICES SECTOR:
SOME INDICATORS
Period
Sector Indicators Unit
2009-10 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
IT- BPM service revenues US$ billion 64 106 119 143 154 167 181
IT- BPM Exports US$ billion 50 87 98 108 116 126 137
Domestic US$ billion 14 19 21 35 38 41 44
Airline Passengers (Total) Million 77.4 103.8 115.8 135.0 158.4 308.8 344.70
Aviation Domestic Million 45.3 60.7 70.1 85.2 103.7 243.3 275.22
International Million 32.1 43.1 45.7 49.8 54.7 65.5 69.48
Telecom Connections
Telecom Million 621.3 933.0 996.1 1,058.9 1,194.6 1,206.2 1,183.51
(wireline and wireless)
Foreign Tourist Arrivals Million 5.2 7.0 7.7 8.0 8.8 10.5 9.65#
Tourism
Foreign Exchange earnings
US$ billion 11.1 18.4 20.2 21.1 22.9 28.8 19.68#
from tourism
Gross tonnage of Indian
Million GT 9.7 10.5 10.5 10.5 12.0 12.6 12.68**
shipping
Shipping
No. of ships Numbers 998 1,209 1,210 1,251 1,338 1,384 1,403**
Ports Port Traffic Million tonnes 850.0 972.46 1,052.23 1,071.76 1,133.69 1208.94 699.05***
Note: NA - Not Available, ** - As of December 2018, , ***between April 2018 - March 2019
Source: AAI, TRAI, Economic Survey 2017-18, Ministry of Shipping, Ministry of Tourism, NASSCOM, Directorate General of Shipping

INDIA’S SERVICES TRADE
 Services exports are a key driver of India’s growth and India ranked Net Exports of Major Services from India (US$ billion)
as the eighth largest exporter of commercial services in the world in
2017. 2016-17 2017-18P 2018-19*P
80
 India’s services exports grew 19.60 per cent year-on-year to US$
195.09 billion during 2017-18P. Services imports rose 22.85 per cent 70
72.19
70.06
year-on-year to US$ 117.53 billion during the same period.
60
 Net Services exports from India grew 14.98 per cent year-on-year to
57.55
US$ 77.6 billion in 2017-18P. India had net service exports of US$ 50
60.25 billion in April-December 2018 (P).
 Exports of travel services witnessed the highest growth, growing 40

13.59 per cent year-on-year to US$ 20,858.33 million in April-
30
December 2018(P).
20
8.84
6.82
4.28
10
1.46
1.14
1.01
0.88
0.81
0.75
0.71
0.72
0.69
1.72
0
-0.37
-0.01
Business -0.13
Transportation -0.17
-0.38
-0.46
-0.75
-0.78
-10
Financial
Insurance
Travel
Software
G.n.i.e
Communication
Note: G.n.i.e – Government not included elsewhere, P – Provisional, * - Up to December 2018.
Source: RBI

KEY PLAYERS
Banking and Financial

Services
Tourism and
Hospitality Services
Telecommunication
Services
Healthcare Services
IT and ITeS Services
Aviation Services
Source: Company websites, TechSci Research

Services
STRATEGIES
ADOPTED
STRATEGIES ADOPTED
Banking and Financial  Acquisition - On January 01, 2019, Bandhan Bank Ltd acquired Gruh Finance Ltd through a share swap
Services ratio deal of 3:5.
 Players are trying to ensure convenience for their customers by providing all services available on a single
portal. For example, makemytrip.com and a host of other websites provide a comprehensive basket of
offerings which include outbound and inbound travel for leisure and business trips, hotels and car booking,
holiday packages within India or abroad, etc
 Players are opting for many channels to maximise sales and ensure convenience for their customers. For
Tourism and Hospitality
example, Thomas Cook and Kuoni India launched their online portals to compete with others. On the other
Services hand, makemytrip.com is planning to go for the offline channel to complement its existing portal and has
already launched mobile apps for maximising sales.
 Indian LCC’S are looking forward to increase their ancillary services, without tampering their business
models. This includes services like lounge access, priority boarding, customer loyalty memberships and
customer meals
 Acquisition - General Atlantic Partners and TPG voiced intentions to bid jointly for acquiring the healthcare
Healthcare Services assets of Fortis for US$ 1.80 billion
 As the Indian education industry opens to new innovative ways of learning, Educomp has decided to explore
Education and Training
this opportunity by offering its various online and supplemental solutions to help institutions to leverage the
Services most of technology
 Merger - In August 2018, Vodafone India and Idea Cellular merged into Vodafone Idea. As of May 2019,
Telecommunication Vodafone Idea is India’s largest telecom service provider.
Source: Company websites, Media sources, TechSci Research

Services
GROWTH DRIVERS
AND OPPORTUNITIES
GROWTH DRIVERS OF SERVICES SECTOR
 Growth in per capita income has resulted in higher domestic demand for various services such as travel and
Rise in Per Capita tourism, healthcare and telecommunications.
Income  India’s per capita income has increased rapidly from US$ 1,323.50 in 2011-12 to US$ 1,982.65 in 2018-19* and. It
is expected to reach around US$ 6,000 by 2025.
 Services Exports have acted as a major growth driver of India’s services sector.
Services Exports  Growth in global exports of commercial services has acted as a catalyst for expansion of India’s services sector
 World commercial services exports have increased from US$ 4.15 trillion in 2011 to US$ 5.25 trillion in 2017.
 Government of India’s push to financial inclusion has led to increased access to the banking system.
Growth in Banking
 Strong growth in savings in the country have also acted as tailwinds for the banking sector.
 Low-Cost Carriers have contributed to growth of the sector

Growth in Aviation
 Rising traffic from smaller towns and cities is a major growth driver
 Growing tourism infrastructure has led to expansion of the tourism and hospitality sector.
Growth in Tourism
 Schemes introduced by Government of India such as Swadesh Darshan Scheme have also contributed to
and Hospitality expansion.
Growth in  Rise in affordability of telecommunication services has been a major factor in driving the growth of the sector
Telecommunication  Shift of Indian residents from low income to high income groups has also been a contributor.
Note: Exchange Rates used are average of each year, provided on slide 30, *As per second advance estimate
Source: Ministry of Statistics and Programme Implementation, World Trade Organisation

INDIAN BANKING SECTOR DRIVING GROWTH IN THE
SERVICES SECTOR
 During FY06–18, deposits grew at a CAGR of 11.66 per cent from Growth in deposits over the past few years (US$ billion) (as of
US$ 474.18 billion in FY06 to US$ 1,781.12 billion in FY18. As of Dec 2019)
September 2018, deposits in the country stood at Rs 120,818.92
2,000 CAGR* 11.66%
billion (US$ 1,674.55 billion).
 Access to banking system has also improved over the years due to 1,800
1,781.12
persistent government efforts to promote banking-technology and
1,600
1,674.55
promote expansion in unbanked and non-metropolitan regions.
1,602.54
 At the same time India’s banking sector has remained stable despite 1,400
1,475.71
1,456.11
global upheavals, thereby retaining public confidence over the years.
1,331.82
1,317.01
1,200
1,298.35
 Strong growth in savings amid rising disposable income levels are
1,189.50
the major factors influencing deposit growth. 1,000
970.46
 Opportunity: 800
853.35
801.79
• Significant growth possible in private sector lending as credit
600
disbursal by private sector banks is expected to increase.
575.72
• Market share of private banks in advances is expected to 400
474.18
increase from 27.7 per cent in 2017-18 to nearly 35 per cent in
200
2019-20.^
0
FY19
FY 06
FY 07
FY 08
FY 09
FY 10
FY 11
FY 12
FY 13
FY 14
FY 15
FY 16
FY 17
FY 18
Note: CAGR - Compounded Annual Growth Rate, Exchange Rate used is average for the year, Âs per Motilal Oswal, * - CAGR upto FY18
Source: Reserve Bank of India (RBI), TechSci Research ;

AVIATION DRIVING GROWTH IN SERVICES WITH
INCREASING PASSENGER AND FREIGHT TRAFFIC
Freight traffic in India (million tonnes) Passenger traffic

Visakhapatnam in in India
port traffic (million)
(million tonnes)
4.00
400
3.50
350
3.56
3.00
3.36
300
344.70
2.50
308.75
250
2.70
2.68
2.53
264.97
2.00
2.35
2.28 200
2.28
2.19
223.96
1.50
0.56
1.96
73.35
150
55.60
190.10
1.72
1.70
169.03
1.55
162.31
1.00
159.40
1.40
100
FY11 143.43
FY10 123.76
FY08 116.87
FY09 108.88
FY07 96.49
0.50 50
0.00 0
FY2…
FY20…
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY06
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
 Witnessing a growth of 12.64 per cent over the previous year, total passenger traffic stood at a 308.75 million in FY18, which was recorded at
264.97 million in FY17 in India. Passenger and freight traffic during Apr 2018 - Mar 2019 reached 344.70 million and 3.56 million tonnes,
respectively.
 Growth in passenger traffic has been strong since the new millennium, especially with rising incomes and low-cost aviation.
 Freight traffic on airports in India is expected to cross 11.4 million tonnes by 2032.
 Opportunity:
• Passenger traffic arising from small cities and towns is expected to witness rapid growth.
• Total passenger traffic in the country is expected to surpass 855 million by 2030-31.
• Rise in passenger traffic is being complemented by the Regional Connectivity Scheme (RCS) and expansion of airport handling capacity of
India.
Notes: CAGR – Compound Annual Growth Rate, FY – Indian Financial Year (April – March)
Source: Association of Private Airport Operator, Airports Authority of India

INCREASING EXPENDITURE ON TRAVEL AND
TOURISM IS A MAJOR DRIVER FOR THE SECTOR
 The travel and tourism sector forms a major part of the services Visakhapatnam
Travel and tourism
portspending
traffic (million
(US$ tonnes)
billion)
industry; thereby increasing expenditure for obtaining this service is
expected to drive growth in the overall services sector.
250.0
 The share of travel and tourism in India’s GDP was 10.4 per cent in
234.4
2018 and is expected to grow to 9.9 per cent in 2028.
 Leisure and business travel and tourism spending are expected to 200.0
201.7
increase to US$ 234.4 billion and US$ 12.9 billion in 2018,
180.0
respectively.
150.0
 Opportunity:
• Presence of world-class hospitals and skilled medical

professionals makes India a preferred destination for medical 100.0
tourism.
92.7
90.2
• India’s earnings from medical tourism could exceed US$ 9 billion
77.9
69.3
68.7
by 2020. 50.0
60.9
26.4
25.5
24.4
22.3
22.1
20.8
18.8
18.7
17.8
48.7
46.2
12.9
11.6
10.3
42.1
0.0
2018E
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Business Travel and Tourism Spending (in US$ bn)
Leisure Travel & Tourism Spending (in US$ bn)
Notes: IT – Information Technology, E – Estimated, Updated data is expected from World Travel and Tourism Council by the end of August 2019
Source: World Travel and Tourism Council, Make in India, Global Business Travel Association

STRONG GROWTH IN HEALTHCARE SERVICE
SECTOR
 Healthcare has become one of India's largest sectors both in terms Healthcare
Visakhapatnam
Sectorport
Growth
traffic
Trend
(million
(US$tonnes)
Billion)
of revenue and employment. The industry is growing at a
tremendous pace owing to its strengthening coverage, services and
300
increasing expenditure by public as well private players CAGR: 16.5%
 During 2008-20, the market is expected to record a CAGR of 16.5
280.0
per cent 250
 The total industry size is expected to touch US$ 160 billion by 2017
and US$ 280 billion by 2020
200
 Indian companies are entering into merger and acquisitions with
domestic and foreign companies to drive growth and gain new
markets.
150
160.0
 Opportunity:
• India’s median age of population is expected to increase from

100
110.0
26.7 years in 2015 to 31.4 years in 2030.^
104.0
• This increase in median age coupled with rising income levels is
81.3
72.8
expected to lead to significant growth in demand of healthcare
68.4
50
59.5
services.
51.7
45
0
2008 2009 2010 2011 2012 2014 2015 2016 2017F 2020F
Note: F – Forecast, Âs per UN data

Source: Frost and Sullivan, LSI Financial Services, Deloitte, TechSci Research

EXPANDING TELECOM SUBSCRIBER BASE
 India is currently the second largest telecommunication market and Visakhapatnam

Growth in
port
total
traffic
subscribers
(million tonnes)
has the 2nd highest number of internet users in the world
 India’s telephone subscriber base expanded at a CAGR of 15.69 per 1,400 92.84 100
92.98
cent during FY07-19, reaching 1,183.51 million in FY19. 90.11
83.36 90
 Tele-density (defined as the number of telephone connections for 1,200
78.7 77.5879.38
1,206.22
1,194.58
every 100 individuals) in India, increased from 18.3 in FY07 to 90.11 80
1,183.51
74.02
70.9
in FY19. 1,000
1,058.86
70
996.00
 Total telephone subscriber base and tele-density reached 1,183.77
951.34
60
898.02
million and 90.05 per cent, respectively, at the end of April 2019. 800 52.7
846.32
846.32
 Opportunity: 50
600 37
• Internet penetration in India has displayed strong growth over the 40
621.28
past few years, yet India is far behind other economies in terms of
26.2 30
internet penetration. 400
429.72
18.3
• Consequently, internet subscriber base of India is expected to 20
300.49
grow from 445.96 million in 2017 to 829 million in 2021. 200
205.86
10
0 0
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
Telephone Subscribers (in million) Teledensity (in percentage)
Note: CAGR - Compound Annual Growth Rate.

Source: Telecom Regulatory Authority of India, TechSci Research

GROWING IT AND IT-ENABLED SERVICES SECTOR
 IT and ITeS sector is the major driver of India’s service sector. Market
Visakhapatnam
size of IT industry
port traffic
in India
(million
(US$
tonnes)
billion)
 IT BPM industry revenues grew 8.38 per cent year-on-year to US$
181 billion in FY19E from US$ 167 billion in FY18. 200
 The domestic revenue of the IT industry is estimated at US$ 44 180
billion and export revenue is estimated at US$ 137 billion in FY19E. 137
160 126
 Opportunity:
116
140
• India has emerged as the digital capability hub if the world, 108
accounting for nearly 75 per cent of the global digital talent pool. 120 98.5
86
• As global digital spending increases from US$ 180 billion in 2017 100 76
to US$ 310 billion in 2020, Indian IT/ITeS industry will be well 69
positioned to expand significantly 80 59
50
• The rollout of 5G wireless technology in India is expected to bring 60
US$10 billion global business to Indian information technology
40
(IT) services firms during 2019-25. 41 44
34 35 38
20 29 32 32 32
• India’s digital economy is estimated to reach US$ 1 trillion by 24
2025. 0
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY18
FY19E
FY17
Domestic Export
Note: E – estimate, IT – Information Technology, E – Estimate

Source: NASSCOM, TechSci Research

GOVERNMENT POLICIES AND INITIATIVES
 SEIS is aimed at promoting export of services from India by providing duty scrip credit for eligible exports.
Services Exports from  Under this scheme, a reward of 3 to 5 per cent of net foreign exchange earned is given for Mode 1 and Mode
India Scheme (SEIS) 2 services.
 In the Mid term review of FTP 2015-20, SEIS incentives to notified services were increased by 2 per cent.
 The National Digital Communications Policy 2018 envisages three missions:

National Digital • Connect India: Creating Robust Digital Communications Infrastructure
Communications Policy • Propel India: Enabling Next Generation Technologies and Services through Investments, Innovation and
2018 IPR generation
• Secure India: Ensuring Sovereignty, Safety and Security of Digital Communications
National Tourism Policy  Formulation of National Tourism Policy 2015 that would encourage the citizens of India to explore their own
2015 country as well as position the country as a ‘Must See’ destination for global travellers.
 The Union Cabinet, Government of India, has approved the National Health Policy 2017, which will provide
National Health Policy the policy framework for achieving universal health coverage and delivering quality health care services to all
2017 at an affordable cost.
 The new 2016 National Education Policy (NEP) considers education as an utmost important parameter in the
National Education country. The 2016 NEP majorly focuses on quality of education as well as innovation and research in the
Policy, 2016 sector.
Note : FTP - Foreign Trade Policy

Source : Economic Survey 2017, Media sources

GOVERNMENT POLICIES AND INITIATIVES
 100 per cent FDI is allowed under automatic route in scheduled air transport service, regional air transport
service and domestic scheduled passenger airline.
 Approval of 100 per cent FDI in aviation for foreign carriers.
 100 per cent FDI is allowed under the automatic route in tourism and hospitality, subject to applicable
regulations and laws.
 The Government of India allowed 100 per cent FDI in the education sector through the automatic route since
2002.
FDI Policy
 For the healthcare sector, 100 per cent FDI is allowed under the automatic route for greenfield projects and for
brownfield project investments, up to 100 per cent FDI is permitted under the government route.
 FDI cap in the telecom sector has been increased to 100 per cent from 74 per cent; out of 100 per cent, 49 per
cent will be done through automatic route and the rest will be done through the FIPB approval route.
 Government has allowed 100 per cent FDI in the railway sector for approved list of projects.
 FDI limit for insurance companies has been raised from 26 per cent to 49 per cent and 100 per cent for
insurance intermediates..
 The GST rates are nil for education and healthcare services; 5 per cent for air transport of passengers in
economy class, transport of goods by rail and vessel, supply of tour operator services (without ITC); 12 per cent
for food and drinks at restaurants without air conditioner, heating system or license to serve liquor, while it is 18
Goods and Services
per cent for those having them; 12 per cent for accommodation in hotels, inns, etc for rooms with tariff between
Tax (GST)
Rs 1000-2500, while it is 18 per cent for those between Rs 2500-7500; 12 per cent for air transport of passengers
in other thane economy class; 28 per cent for entertainment events, cinematograph films, etc, hotels and inns
with room tariff above Rs 7,500.
Source : Economic Survey 2017, Media sources

HIGH FDI INFLOWS INTO THE SECTOR
 To ensure that India remains an attractive investment, the Total FDI Equity Inflows in the top 10 services sectors during
Government has brought about a number of reforms such as the April 2000 – March 2019 (US$ billion)
abolition of the Foreign Investment Promotion Board (FIPB) and the
introduction of composite caps in the FDI policy which permits 100 Services Sector
per cent FDI under automatic route for any financial sector activity
which is regulated by any financial sector regulator. Computer Software &
Hardware
 The services category is the highest recipient of FDI Inflows in India
with total inflow of US$ 74.15 billion during April 2000-March 2019. Telecommunications
Top ten service sectors received US$ 227.94 billion FDI during April
2000-December 2018. Construction
74.15
development
Trading
25.05 Hotel and Tourism
37.24 Information &

32.83 Broadcasting
Hospital & Diagnostic

Centres
Consulatncy Services
Sea Transport
Source: Department of Industrial Policy and Promotion

Services
INDUSTRY
ASSOCIATIONS
KEY INDUSTRY ASSOCIATIONS
Indian Banks' Association Directorate General of Civil Aviation (DGCA)
World Trade Centre, 6th Floor Address: Aurobindo Marg, Opp. Safdarjung Airport,
Centre 1 Building, New Delhi –110 003
World Trade Centre Complex,
Phone: 91 11 24622495
Cuff Parade, Mumbai - 400 005, India
Fax: 91 11 24629221
E-mail: webmaster@iba.org.in
E-mail: dri@dgca.nic.in, dfa@dgca.nic.in
Association of Unified Telecom Service Providers of India

Hotel Association of India (HAI)
(AUSPI)
Address: B 212–214 Address: B-601, Gauri Sadan 5, Hailey Road, New Delhi – 110 001,
Som Dutt Chamber-I, India
Tel: 91 11 23358585
Bhikaji Cama Place,
Fax: 91 11 23327397
New Delhi – 110 066
Website: http://www.auspi.in/
Phone: 91-11-2617 1110/14
Fax: 91-11-2617 1115
National Association of Software and Services Companies

Services Export Promotion Council (SEPC)
(NASSCOM)
Address: International Youth Centre Teen Murti Marg, Chanakyapuri, Address: 3rd Floor, 6A/6, NCHF Building, Siri Fort Institutional Area,
New Delhi – 110 021 August Kranti Marg
Phone: 91 11 2301 0199 New Delhi-110049
Fax: 91 11 2301 5452 Phone: +91 11-41046327-28-29, +91 11-41734632
E-mail: info@nasscom.in. E-mail: services.epc@gmail.com
Website: www.servicesepc.org

Services
USEFUL
INFORMATION
GLOSSARY
 US$: US Dollar

EXCHANGE RATES
2004–05 44.95 2005 44.11

2005–06 44.28 2006 45.33
2006–07 45.29 2007 41.29
2007–08 40.24 2008 43.42
2008–09 45.91
2009 48.35
2009–10 47.42
2010 45.74
2010–11 45.58
2011 46.67
2011–12 47.95
2012 53.49
2012–13 54.45
2013 58.63
2013–14 60.50
2014 61.03
2014-15 61.15
2015 64.15
2015-16 65.46
2016-17 67.09 2016 67.21
2017-18 64.45 2017 65.12
2018-19 69.89 2018 68.36

DISCLAIMER
of IBEF.

Industry Report Merged

Caricato da

Informazioni sul documento

Titolo originale

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Industry Report Merged

Caricato da

Copyright:

Formati disponibili

E-COMMERCE

For updated information, please visit www.ibef.org July 2019

Market Overview …………………….……..6

Growth Drivers and Opportunities…….…..17

 The Indian E-commerce industry has been on an upward growth

 Each month, India is adding approximately 10 million daily active

3 E-commerce For updated information, please visit www.ibef.org

5 E-commerce For updated information, please visit www.ibef.org

 E-commerce is increasingly attracting customers from Tier 2 and 3

 The Government e-marketplace (GeM), three years after its 150

Notes: *Estimated, F – Forecasted

7 E-commerce For updated information, please visit www.ibef.org

Note: Internet penetration - number of internet subscribers per 100 population

8 E-commerce For updated information, please visit www.ibef.org

Shares of Various Segments in E-commerce Retail by Value

9 E-commerce For updated information, please visit www.ibef.org

Offline Retail Online Retail Offline Retail Online Retail

10 E-commerce For updated information, please visit www.ibef.org

11 E-commerce For updated information, please visit www.ibef.org

Marketplace Model Inventory-led Model

 The new FDI policy rules and regulations in the E-commerce

12 E-commerce For updated information, please visit www.ibef.org

13 E-commerce For updated information, please visit www.ibef.org

15 E-commerce For updated information, please visit www.ibef.org

16 E-commerce For updated information, please visit www.ibef.org

 As the awareness of using internet is increasing, more and more

 Whether it be sellers, buyers, users or investors, people have

 Government initiatives like Digital

 Favourable FDI policy is attracting

Source: Aranca Research

18 E-commerce For updated information, please visit www.ibef.org

Source: Economic Times, Media sources, Aranca Research

19 E-commerce For updated information, please visit www.ibef.org

20 E-commerce For updated information, please visit www.ibef.org

21 E-commerce For updated information, please visit www.ibef.org

Smartphone User Base in India (million) India’s Smartphone Shipments (million)

 Smartphone users in India are expected to reach 442 million by 2022.

22 E-commerce For updated information, please visit www.ibef.org

23 E-commerce For updated information, please visit www.ibef.org

Flipkart SoftBank 2,500

Alibaba Group Holding Ltd, Sands Capital, International Finance Corp,

PayTm Berkshire Hathaway 356

Udaan Lightspeed Venture Partners US and other 50

Capital Float Ribbit Capital, SAIF Partners, Sequoia India 45

Bank Bazaar Experian Plc 30

Droom Asset Management (Asia) Ltd, Digital Garage Inc 20

HBM Healthcare Investments, Maverick Capital Ventures, Sequoia India,

Jumbotail Kalaari Capital, Nexus India Capital Advisors 8.5

Blackbuck InnoVen Capital 7.7

KartRocket.com Bertelsmann India Investments, Nirvana Digital India Fund 4.1

24 E-commerce For updated information, please visit www.ibef.org

E-commerce Association of India Retailers Association of India (RAI)

New Delhi –110 019 Mumbai – 400099

Phone: +91 011 41582722 Phone: +91 22 28269527 - 29

Fax : +91 011 41582722 Fax: +91 22 28269536

Email: info@ecai.co.in E-mail: info@rai.net.in

26 E-commerce For updated information, please visit www.ibef.org

 CAGR: Compound Annual Growth Rate

 GMV – Gross Merchandise Value

 FDI: Foreign Direct Investment

 FY: Indian Financial Year (April to March)

 GOI: Government of India

 INR: Indian Rupee