Archive for ‘India alert’

30/10/2014

Understanding India’s economic geography | McKinsey & Company

India’s rapid growth in the decade to 2012 saw it emerge as one of Asia’s most promising markets. But the recent slowdown made growth and profitability increasingly elusive, forcing companies to think harder about the way they allocate resources. As growth picks up, and rapid shifts in India’s urban and rural economic landscapes occur, marketers will need to make strategic market choices to maximize returns. Understanding the growth drivers and identifying high-potential markets at a granular level are critical priorities for businesses looking to benefit significantly from this returning tide of growth.

Taking into account their existing footprints, product mixes and extensions, and long-term aspirations, companies could consider three approaches to dissect the Indian market and decipher its heterogeneity: states, clusters, and cities. The research underpinning McKinsey’s latest report—India’s economic geography in 2025: States, clusters, and cities—combines a robust understanding of macroeconomic issues at a national level with microlevel insights on the economic and income potential of states, districts, and cities.1 By building a granular view, based on several different economic scenarios, of where growth and market opportunities will emerge, the report shows that businesses can tailor investment decisions to capture a disproportionate share of the pie in India’s ever-changing economic geography.2

Our research focuses on distinct geographic slivers of opportunity at each level of granularity.

States

India’s 29 states and seven union territories are at different stages of demographic and economic evolution. The per capita gross domestic product of states, a marker of their inhabitants’ affluence or deprivation, reasonably depicts the variation in living standards and market potential across India. We have classified states into four broad groups based on their relative 2012 per capita GDP: very high performing, high performing, performing, and low performing. This approach helps companies understand which states will probably contribute most to India’s growth and the potential size of households in different income segments in each state. That in turn makes it possible to estimate future market demand for specific categories of goods and services.3

We find that eight high-performing states will account for some 52 percent of India’s incremental GDP growth from 2012 to 2025. Along with four very high-performing city-states, these eight will have 57 percent of India’s consuming-class households in 2025.4 Rapid urbanization and the associated income growth will propel the high-performing states to per capita income levels similar to those of today’s middle-income nations. In 2025, for instance, Maharashtra’s 128 million residents will have a purchasing-power parity similar to Brazil’s today. Goa’s and Chandigarh’s 2025 purchasing-power parity will mirror that of Spain today (Exhibit 1).

Exhibit 1

By 2025, the standard of living in ‘very high’ and ‘high-performing’ states will mirror that of high- and middle-income nations today.

Metropolitan clusters

Companies considering a granular pan-India play could target metropolitan clusters. We expect that just 49 of them (some 183 districts) will account for about 77 percent of India’s incremental GDP, 72 percent of its consuming-class households, and 73 percent of its income pool from 2012 to 2025.5 Top-ranked metropolitan districts constitute the nucleus of these clusters, and the surrounding high-potential districts make them serviceable markets with similar psychographics (Exhibit 2).6 The clusters are also at least at par with India as a whole on core development parameters, such as access within the household to basic urban services like water supply, sanitation, and electricity. They are therefore appropriate for companies looking to expand into areas where access to basic infrastructure does not pose a binding constraint.

Exhibit 2

Forty-nine high-potential metropolitan clusters will account for about 77 percent of India’s incremental GDP from 2012 to 2025.

Cities

Within the urban areas, the report focuses on the top 100 cities, distinguishing between metropolitan areas and others in this group. For example, in 2012 India had 54 metropolitan cities, which together with their hinterlands (65 districts) accounted for 40 percent of GDP and 45 percent of consuming-class households. We estimate that in 2025, India will have 69 metropolitan cities, which, together with their hinterlands (79 districts), will account for 54 percent of the country’s incremental GDP from 2012 to 2025 and for 50 percent of its total income in the terminal year. In short, focusing on these 79 districts would provide companies with access to a market potential similar to that offered by the eight high-performing states (Exhibit 3).

Exhibit 3

Seventy-nine metropolitan clusters in India provide the same market size as eight high-performing states.

To get the most from this granular approach, companies need to develop customized strategies for each geographic sliver. To do so, they must map priority geographic segments to product categories and extensions. Doing so will help them reallocate their resources significantly and provide the bedrock to develop a tangible implementation road map, including the development of new competencies required for the full business (marketing, sales, and operations) to target these markets effectively. By focusing on tomorrow’s high-potential markets and tailoring strategies and allocating resources accordingly, companies can gain a significant competitive advantage.

via Understanding India’s economic geography | McKinsey & Company.

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30/10/2014

Burger King Brings Beef-Free Whoppers to India – India Real Time – WSJ

When Burger King BKW +0.41% brings its crown to India next month, diners will be the first in the world to bite into a new version of its signature Whopper sandwich: a beef-free one.

The world’s second-largest burger chain, behind McDonald’s MCD +0.14%,  has dropped beef and pork from its menu in India, keeping in mind religious practices of Hindus and Muslims who make for most of the country’s population.

“GREAT NEWS — The WHOPPER IS COMING SOON TO INDIA!” Burger King India’s official Facebook page announced late Wednesday. Minutes later, though, another post followed. “We do not have beef on our menu but our options will certainly delight you.”

So what’s being served on Burger King’s Indian menu? A Chicken Whopper. A Mutton Whopper. And a Vegetable Whopper.

The news didn’t go down too well with at least a few of India’s younger fast-food lovers, whose changing tastes have whipped up a market for restaurants serving beef and bacon.

“Whopper as chicken is unacceptable,” one Facebook user wrote. “That sir is not a Whopper. It looks more like a chicken sandwich trying to be cool,” another posted below a picture of Burger King’s beef-free inventions. “No beef in the menu. Seems like another sad imitation of a global franchise,” a third user posted.

Miami-based Burger King seemed unfazed by the criticism and instead sought to teach its newest customers how to correctly pronounce its flagship hamburger. (“Whaw-per” in case you’re wondering.)

It is unclear when, or how many outlets, the U.S. fast-food chain plans to open in India. Burger King declined to comment ahead of the launch.

Local media reports say the company plans to open at least 12 outlets over next three months in cities including Bangalore, Pune and Chennai. A first outlet is due in New Delhi, according to Burger King’s Indian partner, Everstone Capital Advisors. But an Everstone spokeswoman chose to remain tight-lipped about the exact location.

A photo of a neon-lit Burger King restaurant circulated online late Wednesday, along with rumors that a first store would appear in the capital city’s Select City Walk Mall. Another rumored location doing the rounds online is Connaught Place, a colonial-era marketplace in the heart of New Delhi, where Dunkin Brands Inc. and Starbucks Corp.SBUX -0.66% opened stores in 2012.

Burger King comes to India a few months after Fatburger Inc. and nearly two decades after its arch-rival McDonalds, which offers the McAloo Tikki burger (a potato-burger, basically), as well as the Maharaja Mac, its beef-free take on the Big Mac. Last year, McDonalds opened a vegetarian-only outlet in northern India — a world-wide first — in an attempt to cater to the country’s vast vegetarian population. Fast-food chains like Dominos and Subway have also tailored their menu to serve spicier, and plenty of vegetarian, options.

India’s burgeoning fast-food market — home to 299 KFCs, more than 300 Pizza Hut outlets and four Taco Bells — is expected to grow to $78 billion by 2018, according to Technopak Advisors. The Gurgaon-based market-research firm values the current market at $48 billion.

The Asia Pacific region is Burger King’s smallest market, with approximately 1,100 restaurants. The U.S. and Canada continue to remain its largest, with more than 7,400 restaurants out its 13,667 globally.

via Burger King Brings Beef-Free Whoppers to India – India Real Time – WSJ.

29/10/2014

Pollution in Delhi Prompts U.S. Embassy Warning – India Real Time – WSJ

If you have children in New Delhi, you might not want to let them play outside today. The U.S. Embassy in the Indian capital said air quality – as measured at a monitoring station in the embassy compound – had reached “very unhealthy” levels on Wednesday morning.

On Wednesday at 10 a.m., the embassy said its air-quality index was 255 – a measure based on the amount of fine particulate, or PM 2.5, in the air. Such small particulates can enter the lungs and blood stream. They have been linked to severe health problems such as lung cancer.

The U.S. Embassy’s website said that an air-quality index reading between 201 and 300 can cause “significant aggravation of heart or lung disease” and a “significant increase in respiratory effects in general population.”

“Older adults and children should avoid all physical activity outdoors,” it said. “Everyone else should avoid prolonged or heavy exertion.”

The message though hadn’t got through to the American Embassy School in Delhi on Wednesday morning. Kailash Sharma, a staff member at the school, which is located across the road from the embassy, said by telephone that “kids were playing outside.”

The U.S. embassy in Beijing, China, also monitors air pollution.

Delhi’s air quality often deteriorates in winter, particularly in the days after the festival of Diwali when residue from fireworks displays adds to pollution levels.

India’s Ministry of Earth Sciences on Wednesday said its air-quality index was 121, a level described as “poor.”

via Pollution in Delhi Prompts U.S. Embassy Warning – India Real Time – WSJ.

28/10/2014

Banyan: The enablers | The Economist

NOT since Indira Gandhi has a prime minister of India been as dominant as Narendra Modi. His clout comes from the big electoral victory in May of his Bharatiya Janata Party (BJP) after a remarkably personalised campaign; from a hyperactive prime minister’s office that makes Mr Modi look presidential; and from an opposition Congress party in tatters. But even the mightiest cannot rule alone, and Mr Modi relies on two old allies, both crucial. One, Amit Shah, engineers the electoral victories that give Mr Modi his authority. The other, Arun Jaitley, must take that authority and out of it craft policies and decisions that will launch the economic recovery which Mr Modi has promised and by which he will be judged. These two men are Mr Modi’s enablers.

Now the BJP’s president, Mr Shah is a master of the dark political arts—indeed, his hooded eyes give him the air of a pantomime villain. He has served Mr Modi for nearly three decades. The pair collaborated in the state of Gujarat, where Mr Modi won three elections and ruled for a dozen years. Mr Shah had charge of ten state ministries, including home affairs.

Long an outsider in the urbane circles of Delhi’s national-level politics, Mr Shah is uncomfortable in English and rarely gives interviews. When he makes an exception, as he did after state-assembly elections this month in which the BJP seized control of Maharashtra and Haryana, he mostly uses the time to extol his boss. Of himself, he says merely: “Sometimes you get more credit than you deserve.” Mr Shah is too modest. He ran both state campaigns, just as he crafted the BJP general-election success in India’s most populous state, Uttar Pradesh (UP). That victory was at the heart of Mr Modi’s national triumph in May.

Mr Modi stirs voters, but the alchemy of Mr Shah, who turned 50 this week, is to convert popularity into power. In UP the BJP’s share of the vote was 42%, compared with Congress’s 7.5%. That translated into 71 out of 80 of the national seats from the vast state, a golden return. Imbalances between vote share and seats are normal in first-past-the-post electoral systems, but achieving victory in India takes more skill and stamina than elsewhere. Mr Shah makes minute analyses of millions-strong constituencies, imposing candidates and recruiting volunteers early, often from the Hindu-nationalist RSS organisation, where he and Mr Modi were once leaders. He tailors messages according to the audience. He has, variously, presented Mr Modi as a bringer of good economic times, a Hindu strongman and a figure of humble caste. Mr Shah has turned Hindus against Muslims (notoriously, he told Hindu Jats in UP to take electoral “revenge” following communal riots in late 2013). But he has also taken advantage of Shia Muslim antipathy towards Sunnis (in Lucknow, UP’s capital). Mr Modi’s campaigning certainly helps. He led 38 rallies in the recent state elections. Congress’s Rahul Gandhi showed up for only ten.

via Banyan: The enablers | The Economist.

28/10/2014

Softbank invests $840M in India tech companies – Businessweek

Japanese telecommunications company Softbank Corp. is investing nearly $840 million in two technology companies in India, eyeing what it sees as a lucrative market for growth.

Softbank said Tuesday it is investing $627 million and becoming the biggest shareholder in Snapdeal, the largest digital marketplace in India with 25 million users and 50,000 businesses. It brings together products from thousands of big and small brands.

The Tokyo-based company, which recently acquired Sprint in the U.S., is also investing $210 million in Ola Cabs, which runs the technology to connect consumers with cab drivers in India.

Softbank executives said they were banking on India because it has a large number of Internet users, the online market is not yet saturated and connection speeds are likely to get faster.

via Softbank invests $840M in India tech companies – Businessweek.

28/10/2014

Britain’s PM David Cameron Unveils Encyclopedia of Hinduism – India Real Time – WSJ

British Prime Minister David Cameron held a Diwali party in London to launch the new Encyclopedia of Hinduism, as his Conservative Party attempts to strengthen relations with the country’s large Indian community ahead of national elections next year.

The encyclopedia, which took 25 years to compile, contains 11 volumes and is published by the India Heritage Research Foundation, a nonprofit founded by Pujya Swami Chidanand Saraswati, head of the largest ashram in Rishikesh, a town in northern India.

More than 1,000 guests attended the unveiling of book in Westminster, near the Houses of Parliament. The event was organized by the United Kingdom’s ruling Conservative Party and the Conservative Party Friends of India among others.

Mr. Cameron and his wife Samantha lit a diya, or lamp, at the Diwali party that coincided with the book launch.

Andrew Feldman, chairman of the Conservative Party, said that the book, a product of research by 1,000 scholars, was a “phenomenal achievement.”

“The party wants to deepen and broaden our links with the British Indian community and with India and this event is one important step on our journey,” Lord Feldman said, according to a statement released after the event.

via Britain’s PM David Cameron Unveils Encyclopedia of Hinduism – India Real Time – WSJ.

28/10/2014

Talks gather pace on sale of Indian patrol vessels to Vietnam | Reuters

Talks are gathering pace on the sale of Indian naval patrol vessels to Vietnam, an Indian official said, the first significant military transfer to Hanoi as it improves its defences in the South China Sea where it is embroiled in a territorial dispute with China.

Vietnam's Prime Minister Nguyen Tan Dung (C) shakes hands with his Indian counterpart Narendra Modi (R) as Dung's wife Tran Thanh Kien looks on during Dung's ceremonial reception at the forecourt of Rashtrapati Bhavan in New Delhi October 28, 2014.  REUTERS/Adnan Abidi

The four patrol ships will be provided to Vietnam under a $100 million defence credit line and represent a push by the nationalist government in New Delhi to counter Beijing’s influence in South Asia by deepening ties with old ally Vietnam.

Vietnamese Prime Minister Nguyen Tan Dung held talks with counterpart Narendra Modi on Tuesday, the first meeting since the Indian leader took office in May, promising to turn the country into an economic and military power.

An Indian government official said negotiations for the patrol craft had gathered pace since the credit line was announced last month during the visit of India’s president to Vietnam.

“We expect to see progress on this fairly early as negotiations are continuing between the Vietnamese and our defence suppliers,” the government official involved in discussions said.

Vietnam wants the craft for surveillance off its coast and around its military bases in the Spratly island chain in the South China Sea where it is building a credible naval deterrent to China with Kilo-class submarines from Russia.

Claims by an increasingly assertive China over most of the energy-rich sea have set it directly against U.S. allies Vietnam and the Philippines. Brunei, Taiwan and Malaysia also claim parts of the waters.

Beijing’s placement of an oil rig in disputed waters earlier this year infuriated Vietnam but the coastguard vessels it dispatched to the platform were each time chased off by larger Chinese boats.

Since then, the two sides have sought to repair ties and on Monday, top officials agreed to use an existing border dispute mechanism to find a solution to the territorial dispute.

Dung said Vietnamese defence cooperation with India was the pillar of their strategic partnership.

via Talks gather pace on sale of Indian patrol vessels to Vietnam | Reuters.

26/10/2014

Wal-Mart Struggles to Crack Retail Market in India – Businessweek

As Indians celebrate the Hindu festival of Diwali, executives at Wal-Mart India don’t have much reason to cheer. The company is still waiting for its big breakthrough in India, a market it has been trying to crack at least since 2007. That’s when the American retailer teamed up with one of the top businessmen in the country, Sunil Mittal, to open wholesale stores in India. If all had gone well, that partnership with Bharti Enterprises was supposed to have led to consumer-facing stores, too.

A Wal-Mart store on the outskirts of Chandigarh, Punjab, India, on June 10

When then-Prime Minister Manmohan Singh in 2012 eased restrictions on foreign ownership in retail, Wal-Mart Stores (WMT) executives saw an opportunity in the world’s second-largest country. In September 2012, a Wal-Mart executive told Bloomberg News the two sides were in talks and retail stores were less than two years away.

Those discussions didn’t end well. Wal-Mart and Bharti Enterprises went their separate ways last year, dissolving the joint venture in October 2013. Wal-Mart bought out Bharti and took full control of the 20 members-only, cash-and-carry stores in India. After that, the company largely kept its India plans on hold: It’s been two years since Wal-Mart added new wholesale stores in India.

via Wal-Mart Struggles to Crack Retail Market in India – Businessweek.

22/10/2014

Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek

With the Indian smartphone market booming, Xiaomi has made a splash with its weekly flash sales on Flipkart, an Indian rival to Amazon.com (AMZN). When the Chinese smartphone brand conducted another of its sales on Tuesday, over 300,000 people registered to buy some 90,000 of its Redmi 1S phones priced at 5,999 rupees (or $98). In last week’s sale, the Xiaomi phones sold out in four seconds.

The Spice Android One Dream Uno smartphone

Xiaomi isn’t the only foreign company looking to take advantage of consumer demand for inexpensive alternatives to the iPhone (AAPL). The company with perhaps the most ambitious plan is Google (GOOG), which last month made India the first market for its new Android One smartphone operating system. Google teamed up with local brands Micromax, Karbonn, and Spice, all of which have recently introduced smartphones priced around 6,000 rupees.

India particularly needs better low-cost phones, argues Caesar Sengupta, Google’s vice president of product development in Singapore and head of the Android One project. India’s mobile operators don’t offer the sort of generous subsidies that consumers in the U.S. and other markets take for granted. ”In the U.S., when you buy an iPhone, it costs $600 to $700 but you get a subsidy, so to a consumer it feels you are buying a $200 phone,” Sengupta says. In India, the cost to the consumer is much closer to the actual cost of the hardware.

via Google’s Big Plans for Low-Cost Android One Phones in India – Businessweek.

22/10/2014

India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek

Narendra Modi has proven once again how important it is to be lucky in politics. In the spring, he was India’s opposition leader, running for prime minister by focusing on the government’s mismanagement of the economy. He had plenty of ammunition: The coalition led by the Congress Party had presided over years of corruption scandals and stalled reforms—and also had to contend with a growing budget deficit fueled by soaring prices for oil and other imported commodities.

In India, Falling Oil Prices Make Modi's Job Much Easier

During the campaign, Modi said he wanted to cut back on the costly subsidies the government offered millions of Indians to cushion the blow of those soaring prices. Petroleum subsidies account for one-quarter of India’s 2.6 trillion rupee ($42.4 billion) subsidies bill. But after he won in a landslide, Modi’s first budget (which his finance minister announced in July), was a modest plan that left the subsidies untouched.

That left observers unsure as to whether Modi was backing away from the politically difficult task of making the cuts. “We can either trust that the government will deliver price hikes as the year progresses,” Mirza Baig, head of foreign exchange and interest rate strategy at BNP Paribas in Singapore, wrote in a report after the budget announcement in July. “Or we can be more cynical and suggest that the Modi administration intends to continue the practice of rolling forward subsidy expenditure to next year.”

via India’s Modi Ends Fuel Subsidies, Showing He Is a Reformer – Businessweek.

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