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Short report assessing the outlook for the Indian economy over the next 12 months.
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Focus on: IndiaGrant Thornton International Business Report 2013
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
400interviewsbusiness
1.1.2 billion inhabi2 billion inhabitanttants and growings and growing
gross domegross domestic producic product$1$1.8trtrn
Focus on: India 2
Introduction
Focus on: India
India is an emerging economy of more than 1.2 billion people. In 2012, its GDP was US$1.8trn, making it the 10th largest in the world.
Drawing on data sources such as the Economist Intelligence Unit (EIU), the International Monetary Fund (IMF) and the Grant Thornton International Business Report (IBR), this short report considers the outlook for the economy, including the expectations of 400 businesses interviewed in India, and more than 12,500 globally, over the past 12 months.
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
63.8%
13.9%
13.1%
4.7%
4.5%
67.7%
11.9%
8.4%
6.9%
5.2%2%
Economyexpanded by
in 20123.3%
Focus on: India 3
The Indian economy grew by just 3.3% in 2012, the slowest pace in a decade and well below the previous norm of 9% in the years leading up to the global fi nancial crisis.
Focus on: India
The rupee has fallen by approximately 25% against the US dollar since May this year, fuelling close to double-digit infl ation and swelling the current account defi cit.
The USA and UAE buy 27% of India’s exports. The economy continues to run a huge trade deficit with China which accounts for 11.9% of imports but just 4.7% of exports, of which refined petroleum oil (16%) and diamonds (11%) are the major contributors.
• economic growth moderated to 4.4% in April-June, down from 4.8% in the previous three-month period and below consensus expectations
• agriculture sector expansion of 2.7% due to a better monsoon and a sharp pickup in government spending (10.5% year on year) were the major growth drivers
• however, output in both the mining and manufacturing sectors contracted year on year
• the consumer price measure of inflation ticked back up to 9.8% in September from 9.5% in August as retail prices for food and fuel continue to climb
• the budget deficit in April-July widened to Rs 3.4trn (US$60.1bn), or 62.8% of the full fiscal year target, and is now forecast to widen to 5.1% of GDP across the year, up from 4.9% in 2012.
Key indicators
EconomyExport destinations (2012)
USUAESingaporeChinaOthers
USUAESaudi ArabiaChinaOthers
Source: Indian Ministry of Commerce & Industry (2012)
Import originations (2012)
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,00
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stment
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.7%
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%
5.2
%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
in 2014forecast growth6.1%
forecast growthin 2013
5.8%
Focus on: India 4
Focus on: India
The outlook for the Indian economy remains diffi cult. When working for the IMF in 2005, the new head of the Reserve Bank of India, Raghuram Rajun, warned of the looming danger of the global fi nancial crisis. His fears were dismissed, but the hope is that he will prove as shrewd in the months to come as he battles the twin dangers of a sliding rupee and slower growth.
High infl ation will continue to dampen consumer spending and business investment, but the economy is expected to gather pace this year, with expansion of 5.8% forecast, picking up to 6.1% in 2014 and 6.7% in 2015. Whilst an improvement on 2012, growth is forecast to remain well below pre-crisis levels threatening job creation prospects for the millions of young Indians entering the labour market.
Reforms have been made to free up key sectors such as aviation and retail to foreign investment and the new Companies Bill should increase transparency. However, more could be done to liberalise the economy, from deregulation of protected sectors and reforming labour laws, to breaking up state monopolies and investing in key transport, ICT and energy infrastructure.
The global economy is adjusting to the end of easy money and has entered a new phase of slower growth in both mature and emerging economies. Despite this, Indian exporters are recovering their zeal, helped by improving business and consumer sentiment in the United States. Exports are forecast to expand by 12.3% this year, rising to 12.9% in 2014 although a further slowing of global growth is a signifi cant downside risk.
Economic outlook
Growth and infl ation forecasts
2012
10
8
6
4
2013 2014 2015 2016 2017
Source: Economist Intelligence Unit (2013)
Real GDP growth
Consumer price infl ation
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
Over
63.8% 67.7%
13.9%
11.9%
8.4%
13.1%
4.7%
6.9%
4.5%
5.2%
120+
15,000
10.4% growth
countries where ourAudit, Tax and
forecast growthin 2013
in 2014
5.8%
forecast growth6.1%
Auditorsworldwide
Economy
Ranked in
Combined global
in financial services2012
revenues of$300m
in major marketsthe top 6
expanded by
in 20123.3%
professional work togetherand Advisory
$4.2bn
More than
Providing services for asset managers,fund administrators,
special purpose vehiclesand mutual funds
hedge funds,
revenues2012
globally in 2012We are the fastest growingaccounting network
One of the
Australiaremains a keytrade partner
global accountancyorganisations
gross domestic product
as recognisedby Wall Street
‘large six’
60% $1.8trn400interviewsbusiness
BRIC average38%
43%
Above the
million jobs
needs to create
100India
shortagehampersgrowth
Talent
optimisticof businessesexpect toincreaseinvestment
for economic
outlook
70%
1.2 billion inhabitants and growing
top clientsof our member firms’
operate in financial services
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Net percentage of businesses expecting an increase in profi ts (next 12 months) 43%
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Net percentage of businesses expecting an increase in profi ts (next 12 months)
Focus on: India 5
Business growth and investmentThe tough economic outlook has undoubtedly dampened Indian business optimism over recent quarters and this has clear knock-on effects for growth: the more confi dent executives are in the economy, the more likely they are to invest in the growth of their operations. Indian business optimism has averaged net 70% over the past four quarters, well below pre-crisis levels (97% in 2007) and down even on the 2009 fi gure (83%). However, it remains well above the BRIC average (33%).
Focus on: India
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2008 2009 2010 2011 2012 20132007
60%
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IndiaBRIC
Source: Grant Thornton IBR 2013
Business leaders expect to increase investment in plant and machinery over the next 12 months which should add to the long-term potential of the Indian economy. 2013 average investment expectations stand at net 43%, above the BRIC average (38%) but still below pre-crisis levels (56%). Indian businesses are also bullish about the growth of their own operations. Over the past four quarters, net 73% of business leaders have indicated that they expect profi ts to rise. This is up from 72% in 2012 is and well above the BRIC average (58%).
Net percentage of business leaders indicating optimism for their economy (next 12 months)
IndiaBRIC
Source: Grant Thornton IBR 2013
2007 2008 2009 2010 2011 2012 2013
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Focus on: India 6
Focus on: India
Employment and the demographic transitionPopulation projections for India
* The Economist - ‘Wasting time’; 11 May 2013
Dependents (0-15 and 65+)Working age (16-65)
52
41.4
58.6
35.2
64.8
31.9
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Source: UN Population Division (2012)
2050
2030
2010
1990India is expected to become the most populous country in the world by 2030, adding some 230m people of working age to the population. Rising rates of higher education mean not all of these people will need a job straight away but this may be mitigated partially by higher rates of women entering the workforce.
Either way, the economy will probably need to create 100m jobs over the next decade alone to satisfy these additional hands*.
Leaving aside potential social unrest, the danger if these jobs are not created, is that India will lose the benefi ts of its demographic transition – a one-off boost to growth as the proportion of people of working age rises (and peaks) relative to the proportion of dependents (those too young or old to work). The UN estimates that India’s dependency ratio will bottom out in 2040, from which point the proportion of people of working age (15-64) will begin shrinking relative to the proportion of the population (0-14 and 65+) they have to provide for. Creating enough jobs for India’s new workers over this period will therefore decide the trajectory of India’s growth path.
The hiring plans of Indian businesses are encouraging. Expectations fell sharply during the fi nancial crisis, slipping to just 28% in 2009, but have since recovered. Across 2013, net 68% of companies have indicated that they expect to add to their workforces, up from 64% in 2012 and well above the BRIC average (31%). However, Indian businesses are generally unimpressed by the standard of applicants: 58% say a lack of skilled workers is hindering their expansion plans, quite some way above the BRIC average (40%).
64
5357
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3740
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58
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Focus on: India 7
Focus on: India
Net percentage of business leaders expecting an increase (next 12 months)
Net percentage of businesses citing issue as a constraint on growth (next 12 months)
Source: Grant Thornton IBR 2013
IndiaBRIC
IndiaBRIC
Infl ation remains a major concern. It not only eats into disposable income and so dampens consumer spending but it also dissuades saving meaning gold imports have soared, further widening the current account defi cit. Compounding this, a sinking rupee increases import prices. Consumer prices rose by 9.8% in September, up from 9.5% in August and the Reserve Bank of India has raised interest rates to 7.75%.
For businesses which import, higher infl ation means higher input prices; selling prices must be raised to keep turning over a profi t; and wages must be raised to keep workers happy and productive. If wages do not keep pace with prices, then demand is likely to fall, acting as a further brake on growth. In India, net 64% of business leaders indicated an intention to raise prices in 2013, well above the BRIC average (39%). And 30% expect to raise worker salaries above the prevailing rate of infl ation, double the BRIC average. This suggests a real danger of a ‘wage-price spiral’ taking hold: a vicious cycle where salaries rise to meet price increases forcing businesses to raise prices further to maintain real profi ts and so on.
Infl ation and other growth constraints
Selling prices Staff real salaries Exports
64
3930
15
37
Cost of fi nance
Bureaucracy
Transport infrastructure
Lack of demand
Lack of skilled workers
ICT infrastructure
24
The more positive news from the fall in the rupee is that exports become relatively cheaper. And Indian businesses appear prepared to take advantage: 37% expect to increase exports over the next 12 months, well above the BRIC average (24%).
Aside from infl ation, Indian businesses are also having to contend with a range of other growth impediments, from a shortage of fi nance (64%), a lack of skilled workers (58% - see previous page), regulations and red tape (57%), a lack of demand (53%) and poor quality infrastructure (47%). In all these areas, business leaders in India feel more constrained than BRIC peers.
© 2013 Grant Thornton International Ltd.
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CA1309-01
IBR 2013 methodologyThe Grant Thornton International Business Report (IBR) is a quarterly survey of approximately 3,300 senior executives in listed and privately-held businesses all over the world. Launched in 1992 in nine European countries, the report now interviews more than 12,500 business leaders in 45 economies on an annual basis, providing insights on the economic and commercial issues affecting companies globally.
The data in this report are drawn from interviews with chief executive officers, managing directors, chairmen and other senior decision-makers from all industry sectors. Q3 data is drawn from 3,300 interviews (100 in India; 375 in the BRICs) conducted in September 2013. 2013 data is drawn from over 12,500 interviews (400 in India; 1,500 in the BRICs) conducted between November 2012 and September 2013.
To find out more about IBR, please visit: www.internationalbusinessreport.com.
Dominic KingGrant Thornton International LtdGlobal research managerT +44 (0)207 391 9537E [email protected]
Vidya MohanGrant Thornton India LLPVice president, Markets T +91 22 6626 2600 E [email protected]