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High Growing Economic Sectors “Opportunity For entrepreneurs ” in India for 2010

India will have a demand for 85-90 million people across various sectors, and the majority of the demand will come from high-growth industries like IT, outsourcing, banking,

retail, telecommunication and healthcare.18 Jan, 2009 -BCG

Facts• Sustained high growth of GDP since 1991 of about 6% per year has led to

a fundamental transformation of Indian economy. Some dimensions include:

– 12th largest in the world in 2008 (GDP of ~US$1.1 trillion) and poised to become the 4th largest in absolute $$$ terms sometime by 2030

– About 300 million Indians pulled out of poverty line in last 20 years, though over 300 million still await their turn

– At about US$ 400 Billion in private consumer consumption (retail spending), capable of supporting many multi-billion $$ in revenue size consumer product and services businesses

Facts• Many growth drivers including:

– Favorable demographics, dropping dependency ratio, and rapidly rising education levels

– Steady urbanization

– Very promising broad-basing of components of overall gross domestic output, encouraging broad-basing of geographic spread of economic activity, and well-founded optimism on broad-basing of the nature of jobs that match the current skill sets of the population

Facts• However, adequate reason to be very optimistic about India’s near and

long term future on account of:

– The arrival of a voting majority of youth (better educated, more socially enlightened) when 2014 general elections are held (impact seen even in 2009)

– The resurgence of entrepreneurship in India – as the current business leadership faces challenges, a new generation of Indian entrepreneurs have poised to come into the place (but in much larger numbers)

– The rapidly improving access for India to global intellectual and financial capital

6

THE INDUSTRY CAN TRANSFORM INDIA BY HARNESSING TECHNOLOGY TO ENABLE INCLUSIVE GROWTH

50% of Indians do not have access to primary healthcare – technology can provide it at half the cost

80% of Indian households are unbanked – technology can enable access for 200 million families

India faces a 3-fold shortage in teachers – technology can address this through remote solutions

Healthcare

Financial services

Education

Public services

India suffers from a leakage of 40-50% in public food distribution - technology can ensure transparency

Potential of ICT solutionsAreas

Source: Expert interviews; McKinsey analysis

Shortage of skill in Target Sectors• The projected growth rates in industry and services sectors are expected

to generate 60 millions job opportunities during 2006-12 and 156 million during 2006-16

• Media and Entertainment: The demand for animation production services from India is growing. This has opened up innumerable opportunities for students of Design, Fine Arts and Mass Communication.

• Biotechnology sector: 80 % shortfall of doctorate and post doctorate scientists.

• IT and BPO sector could employ 9 million persons directly and indirectly by 2010

• Raising the rate of growth of manufacturing to 12 % could create 1.6 to 2.9 million direct jobs annually, and another 2-3 times that number indirectly

• Retail Sector - demand of 3-5 lakh trained people in the northern region alone by 2010. This sector would throw up 2 million employment by 2010.

Shortage of skill in Target Sectors• Health sector: Shortage of 5 lakh doctors and 10 lakh Nurses.• IT sector : Shortage of 5 lakhs (half a million) engineers. • Education sector: Faculty shortage of 25-40 percent. • Banking and Finance sector: 50-80 percent personnel shortage. • Pharmacy sector: Severe shortage of top pharmacy scientists as research

expenditure by pharmacy companies has quadrupled in the last 5 years. Thus there is a shortage of middle-level and junior scientists too. This has made salaries of top pharmacy scientists rise to US levels.

• Project Management Services-this labor intensive sector will grow with growth in corporate structure, infrastructure & retail industry

Source: Data compiled from (FICCI report, New Delhi); (NASSCOM); (NASSCOM McKinsey Report 2006); (Press Release, Ministry of Com. & Ind. April 7, 2006); (Presentation made by NMCC to National Advisory Council, February 18, 2006) (IL&FS, 2008)

India’s tremendous potential-Demographic Dividend

• Working age population to comprise over 63 % of the aggregate by 2016.• India only large economy with declining age dependency ratios till 2030. • India’s total population in year 2004: 1,080 million, (672 million people in

the age-group 15 to 64 years "working age population”). • A third of India’s population below 15 years of age and 20 % of the

population in the 15-24 age groups. • Projections indicate the emergence of a young Indian will 800 million in

the productive age group by 2015; the comparable no. of China is 600m • In 2020, the average Indian will be only 29 years old, compared with the

average age of 37 years in China and the US, 45 in west Europe and 48 in Japan.

Source: (National Population Policy 2000 ); (BRICS report of Goldman Sachs ), NSSO report

• The challenges are immense and in order to achieve the goals there has to be substantial expansion of quality technical/ vocational education and training for raising employability and productivity.

• The skills provided have to be attuned to:

– New business requirements;

– Improving quality of education and trainings at all levels; and

– Make technical/ vocational education system more flexible and inclusive for sustainable growth.

n BFSI n Hi-tech/Telecom n Manufacturing

n Retail n Media, Publishing and Entertainment

n Construction and Utilitiesn Other

IT services: Anchor segment for the sector

• Banking, Financial Services and Insurance (BFSI) vertical continues to account for the largest share of exports at 31 per cent

• Telecom vertical accounts for second-largest share of the pie at 19 per cent

• Other verticals such as manufacturing, retail, media and healthcare are rapidly gaining pace

35%

19%

33%

1%4%

3%2%

ICT sector opportunities and threatsOpportunities Threats

Short- medium-term

Restructuring and efficienciesICT budgets hard to compressRestructuring in other sectors - more use of ICTs / outsourcingPublic sector and emerging economies continue to invest Economic stimulus packages

Declines in R&D and innovationDecreasing access to capital / VCIT budgets plunge all sectors / regionsConsumer ICT spending plummetsFall in demand from emerging economies

Longer-term

R&D and innovation priorities Growth in digital content Green IT, health & aging driversConsolidation / globalisation of back-office / information managementSpending on ICT security upLong term stimulus packages

Dropping R&D / innovation prioritiesProlonged financing problemsSlow development new business models Slow supply of ICT professionals skillsBusiness / consumer spending fallsProlonged infrastructure underinvestmentEffects on low-cost locations

Scalability• India’s young demographic profile and academic

infrastructure have potential to cater to the growing demand for IT-ITeS

• An estimated additional demand for 0.8 million IT and 1.4

million ITeS professionals by 2009-10

• India possesses an abundant talent pool, producing 6,75,000 technical graduates per annum, of which 4,00,000 are engineers

HealthCare

• India is mostly rural than urban

• healthcare in India at an average of a dismal 4 points on a scale of 1-10

• pharmaceutical sector as a manufacturing hub has resulted in a significant

increase in foreign investment

• Healthcare is one of India’s largest sectors in terms of revenue and employment

• Revenues from the healthcare sector account for 5.2 per cent of the GDP,

making it the third largest growth segment in India.

• By 2012, India’s healthcare sector is projected to grow to nearly $40 billion. The

private sector accounts for more than 80% of total healthcare spending in India

Retail• Retail is one of the largest industries in India, accounting for over 10% of

the Indian GDP, and more than 8 % employment

• High growth trajectory with a projected $453 billion potential by 2011

• Retailers are realizing that IT systems can enhance their business with

benefits like operations integration, real-time data, inventory and

merchandising management, and reductions in processing and

warehousing costs

• IT market opportunities in the Indian retail segment are expected to grow

at a CAGR of 44% from 2006 to 2010.

Retail

• The Indian retail market is expected to be about US $ 535 Billion by 2013. With an

anticipated US$ 30 Billion in fresh investments over next 5 years, modern retail will

show impressive CAGR >40%

Telecom

• The infusion of Product IT into the telecom revolution puts us at the

threshold of transition

• telecom players have proposed for deployment of mobile broadband

financed by private players, which would create 25 million jobs

• In emerging economies, a 10 percent increase in mobile penetration

boosts annual GDP growth by 1.2 percent

• India Telecom sector will create 150,000 jobs in 2009

IT Education• The Indian IT education market has grown by 13% to reach Rs 3,827 crore in FY

09, up from Rs 3,393 crore in the previous fiscal.• The corporate training market also grew 11%, the reason could be that

demand for on-site deployment of certified training resources far outweighs the number of layoffs.

• Nasscom predicts that by 2010, the Indian software industry alone would require 2.3 mn professionals, and based on the current supply there is likely to be a shortfall of half a million.

• IT training came in FY 09 from the governments increasing emphasis on training.

• Infrastructure management appeared to be the next growth frontier for most training majors

• India is strongly positioned to capture up to $15 bn of the global remote infrastructure management market over the next four years

• As per Nasscom estimates, out of 5 lakh plus engineering passouts a year, only 25% are considered employable owing to the outdated curriculum.

Banking, Financial Services and Insurance (BFSI)

• Banking is the most dominant sector of the financial system in India. • Banking, financial services and insurance (BFSI) comprise 38 per cent of

the outsourcing industry in India (worth $47.8 billion in 2007). • Outsourced services from the BFSI domain include customer support,

software and solutions required for core banking, various banking processes like mortgage loan processing, application processing, verifications, market analysis, financial statement analysis etc.

• Size: Indian banking sector will grow at a healthy compound annual growth rate (CAGR) of around 23.3 per cent till 2011.

• Outsourcing by the BFSI segment in India is expected to grow at an annual rate of 30–35 per cent.

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