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accounts for about two thirds of the total Indian retail market. Further, according to consultancy firm McKinsey & Co, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for a large chunk of the world food industry, which would grow to US$ 400 billion from US$ 175 billion by 2025. Exports of agricultural products from India are expected to more than double to top US$ 20.6 billion in the next five years, according to the commerce ministry.According to estimates by the Agricultural and Processed Food Products Export Development Authority (APEDA), the share of India's farm product exports in the global trade will grow from 2 per cent now to over 5 per cent.Exports of fresh and processed vegetables, fruits, livestock and cereals rose 10 per cent to US$ 8.67 billion in 2008-09. Spices Despite a global slowdown, Indian spice exports are growing. India exported 470,520 tonnes of spices valued at US$ 11.68 billion—an all-time high—in 200809.During the previous financial year, 444,250 tonnes valued at US$ 11.01 billion were exported.Compared with last year, the export had shown an increase of 19 per cent in rupee value and six per cent in dollar terms. Food ProcessingThe food processing industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-04. The industry received foreign direct investments (FDI) totalling US$ 143.80 million in 2007-08 against US$ 5.70 million in the previous fiscal. The cumulative FDI received by the industry from April 2000August 2009 stood at US$ 878.32 million.However, India’s share in exports of processed food in global trade is only 1.5 per cent; whereas the size of the global processed-food market is estimated at US$ 3.2 trillion and nearly 80 per cent of agricultural products in the developed countries get processed and packaged.In order to further grow the food processing industry, the government has formulated a Vision-2015 action plan under which specific targets have been set. This includes tripling the size of the food processing industry from around US$ 70 billion to about US$ 210 billion, raising the level of processing of perishables from 6 per cent to 20 per cent, increasing value addition from 20 per cent to 35 per cent, and enhancing India’s share in global food trade from 1.5 per cent to 3 per cent. This would require an investment of US$ 20.6 billion.According to an Ernst and Young (E&Y) presentation, the food processing industry in India will grow 30-40 per cent as against the present 15 per cent in the next 10-years.Prime Minister Dr Manmohan Singh on October 6, 2009 laid out a blueprint for rapid growth in the country’s food processing sector. The Prime Minister said that this can be achieved by simplifying the tax structure, formulating a National Food Processing Policy and improving rural infrastructure.
Snacks and ConfectioneryThe Indian market holds enormous growth potential for snack food, which is estimated to be worth US$ 3 billion, with the branded snack market estimated to be around US$ 1.34 billion, growing at 15-20 per cent a year. While the growth rate of the US$ 1.56 billion unorganised sector is 7-8 per cent. To pump up volumes in the US$ 1.89 billion branded biscuits market, the three largest food companies—ITC, Parle Foods and Britannia—plan to spend big on launches, re-launches and retail activities. Health Food Recognising the growth potential of the branded health food sector in India, fast moving consumer goods (FMCG) majors are foraying into this sector in a big way. As Hindustan Lever Ltd (HUL) is test marketing its health food brand, Kissan Amaze, in three southern states in India, Godrej Hershey Foods & Beverages Ltd (GHFBL), a joint venture between Godrej Beverages & Foods Ltd and Hershey Company, is planning to introduce select brands from its international portfolio in the domestic market. ITC Foods is also planning to extend the product portfolio of its health food brand in the next few months. Dairy According to Dairy India 2007 estimates, the current size of the Indian dairy sector is US$ 62.67 billion and has been growing at a rate of 5 per cent a year. The dairy exports in 2007–08 rose to US$ 210.5 million against US$ 113.57 last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011. Beverages According to industry experts, the market for carbonated drinks in India is worth US$ 1.5 billion while the juice and juice-based drinks market accounts for US$ 0.25 billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of the fastest growing in the beverages market. Sports and energy drinks, which currently have a low penetration in the Indian market, have sufficient potential to grow.The market for alcoholic beverages has been growing consistently. 'The Future of Wine', a report on the state of the wine industry over 50 years, suggests that the market for wine in India was growing at over 25 per cent per year. Retail Landscape: Food Chains and Restaurants The food and grocery market in India is the sixth largest in the world. Food and grocery retail contributes to 70 per cent of the total retail sales. According to industry estimates, the segment is growing at a rate of 104 per cent and is expected to grow to US$ 482 billion by 2020.According to a BMI forecast, India is likely to see a huge 443 per cent increase in mass grocery retail (MGR) sales during the 2007-2012 period. Major investments Private investment has been one of the key drivers for growth of the Indian food industry. The 'India Food Report 2008', reveals that the total amount of investments in the food processing sector in the pipeline for the next three years is about US$ 23 billion.
* The government has received around 40 expressions of interest (EoI) for the setting up of 10 MFPs with an investment of US$ 514.37 million. * Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project. * PepsiCo is doubling its investment in its Indian beverage business for calendar 2009. The company will invest over US$ 220 million to increase the capacity of the business. * Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and markets Amul brand, has come up with a long term plan, which envisages increasing the turnover of all its member dairy co-operatives to US$ 5.72 billion by 2020 from current level of US$ 2.12 billion. GCMMF plans to pump in around US$ 550.6 million to achieve its mission. * Direct selling company Modicare Ltd has entered the food & beverage market with the launch of a tea brand called ‘Fruit of the Earth. * Geneva-based food service chain Global Franchise Architects (GFA) aims to open 250 stores around the world by March 2010, of which 100 will be in India. Government Initiatives The new trade policy places increased focus on agro-based industries. * Food processing industries have been put in the list of priority sectors for bank lending. * The government has also started work on 10 Mega Food Parks, and is planning to increase the number to 30 by 2015. * Fruit and vegetable processing units have been completely exempted from paying excise duty. * Automatic approval for foreign equity up to 100 per cent is permitted for most of the processed food items. * Items like fruits and vegetables products, condensed milk, ice cream, meat production have been completely exempted from Central Excise Duty. * Excise duty on ready to eat packaged foods and instant food mixes has been brought down to 8 per cent from 16 per cent. * Excise duty on aerated drinks has been reduced to 16 per cent from 24 per cent. * The Ministry of Food Processing Industry would assist in the setting up of more food processing units so that the industry could create 10 million jobs by 2015, according to Mr Subodh Kant Sahai, Union Minister for Food Processing.
Looking ahead According to the India Food and Drink Report Q3 2008 by research analysis firm Research and Markets, by 2012, India’s processed food output is likely to grow by 44.2 per cent to touch US$ 90.1 billion, while packaged food sales will increase by 67.5 per cent to reach US$ 21.7 billion. On a per capita basis, per capita packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 by 2012.
Moreover, according to a FICCI-E&Y study on the Indian food industry, investment opportunities in the Indian food industry are set to shoot up by a huge 42.5 per cent to US$ 181 billion in 2015 and to US$ 318 billion by 2020.
Gems and Jewellery
Sector structure/Market size The Indian gems and jewellery industry is one of the fastest growing segments in the Indian economy with an annual growth rate of approximately 15 per cent.The domestic market is estimated to be around US$ 16.1 billion and the All India Gems and Jewellery Trade Federation, a nodal agency representing 300,000 jewellers across the country, expects it to grow to US$ 25.2 billion in two to three years. The country is also the largest consumer of gold in the world. It consumes nearly 800 tonnes of gold that accounts for 20 per cent of world gold consumption, of which nearly 600 tonnes go into making jewellery. India is also emerging as the world's largest trading centre for gold targeting US$ 16 billion by 2010. The industry has the best skilled manpower for designing and producing high volumes of exquisite jewellery at low labour costs. Diamonds India is the largest diamond cutting and polishing centre in the world— the industry enjoys 60 per cent value share, 82 per cent carat share and 95 per cent share of the world market in terms of number of pieces. In other words, nearly 9 out of 10 diamonds sold worldwide are cut and polished in India. India exported cut and polished diamonds worth US$ 14.18 billion in 2007-08. Due to the Indian consumers’ attraction for diamond for its high aspirational store value, Rio Tinto has launched pink diamond for the first time in India on the occasion of its 20th anniversary in the country. Retail Sector The Indian gems and jewellery market continues to be dominated by the unorganised sector. However, with the Indian consumer becoming more aware and quality conscious, branded jewellery is becoming very popular and the market for branded jewellery is likely to be worth US$ 2.2 billion by 2010, according to a McKinsey report. The All India Gem and Jewellery Trade Federation is targeting for 2013 a 50 per cent growth in the retail turnover of the domestic jewellery industry, which is currently worth US$ 23.24 billion.Moreover, the government allows 51 per cent FDI in single brand retail outlets, attracting both global and domestic players to
this sector. According to a report released by Technopak Advisors on the Changing Retail Landscape in India, the jewellery and watches market is pegged at about US$ 13.70 billion. It is expected to register a 12 per cent growth by 2012, touching US$ 23.60 billion. The World Gold Council recently estimated the size of India's gold coin market at about US$ 2.11 billion.In order to increase the demand during recession, jewelers are concentrating on newer designs in light weight jewellery. Jewellery major Joyalukkas has targeted a US$ 2 billion business volume by March 2012. Significantly, 60 per cent of that volume is expected to come from Joyalukkas’ operations in the Gulf, headquartered in Dubai. Joyalukkas had business volumes of US$ 302.3 million from its India operations in 2008-09, which is projected to touch US$ 834 million in 2011-12, at which time the Gulf operations are expected to gross US$ 1.25 billion. The government has cleared Damas LLC’s plans to establish a joint venture company with Gitanjali Lifestyle Ltd for retail trading of jewellery and related accessories. The joint venture where Damas would hold 51 per cent stake entails a foreign direct investment (FDI) inflow of US$ 38 million. Jewellery retailer Tanishq plans to expand majority of its 117 outlets in 75 cities as the company sees growth in gold and diamond jewellery market in India despite slowdown. While Tanishq will have four new outlets ready in some time, it will increase its annual average sales per outlet to more than US$ 17 million against the present figure of more than US$ 12.3 million. Exports According to the figures released by the Gem & Jewellery Export Promotion Council (GJEPC), India's gem and jewellery exports posted a modest growth of 1.45 per cent during 2008-09 at US$ 21.1 billion, primarily driven by gold jewellery exports, including medallions and ornaments. The country exported US$ 20.8 billion of gem and jewellery in 2007-08. The United Arab Emirates (UAE) was the largest importer of gems and jewellery from India in 2008-09, with a share of 31 per cent. This was followed by Hong Kong with 25 per cent and the US with 20 per cent. The gem and jewellery sector accounted for 13 per cent of India’s total merchandise exports. The export industry mainly comprises of small-to-large units based in various special economic zones (SEZs) supplying primarily diamond-studded jewellery. Gems and jewellery exports in July 2009 aggregated to US$ 1.9 billion as compared to US$ 1.7 billion in June 2009, according to figures released by GJEPC. There has been a growth of 9 per cent in the export of gold jewellery in July this year. The total export of gold jewellery stood at US$ 627 million as compared to US$ 576 million in the corresponding month last year. Also, there has been a 24 percent rise in the export of coloured gemstones. Last July, around US$ 20 million were exported as compared to US$ 25 million this year. The total export of cut and polished diamonds for the month of July 2009 stood at US$ 1239 million. Government Initiatives The Indian government has provided an impetus to the booming gems and jewellery industry with favourable foreign trade policies:
* 100 per cent foreign direct investment (FDI) in gems and jewellery through the automatic route is allowed. * The government has lowered import duty on platinum and has exempted rough coloured precious gems stones from customs duty. * Rough, semi-precious stones are also exempt from import duty. * Duty-free import of consumables for metals other than gold and platinum up to 2 per cent of freight on board (f.o.b) value of exports. * Duty-free import entitlement for rejected jewellery up to 2 per cent of f.o.b value of exports. * Import of gold of 18 carat and above under the replenishment scheme. * Setting up of SEZs and gems and jewellery parks to promote investment in the sector. * In May 2007, the government abolished import duty on polished diamonds. * The government has raised the limit value of jewellery parcels for export through foreign post office (including via speed post) from US$ 50,000 to US$ 75,000 and the time period for re-import of branded jewellery remaining unsold has been extended from 180 days to 365 days. * The export of coloured gemstones on a consignment basis has been allowed. The government has announced a series of measures to help gems and jewellery exports in the Foreign Trade Policy 2009-14.
* It has been decided to neutralise duty incidence on gold jewellery exports, to allow Duty Drawback on such exports. * In an endeavour to make India a diamond international trading hub, it has been planned to establish "Diamond Bourses". * A new facility to allow import on consignment basis of cut and polished diamonds for the purpose of grading/certification purposes has been introduced. * To promote export of gems and jewellery products, the value limits of personal carriage have been increased from US$ 2 million to US$ 5 million in case of participation in overseas exhibitions. The limit in case of personal carriage, as samples, for export promotion tours, has been increased from US$ 0.1 million to US$ 1 million.
Sector structure/Market size Healthcare, which is a US$ 35 billion industry in India, is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017, according to Technopak Advisors in their report – ‘India Healthcare Trends 2008’. The sector offers immense potential to healthcare players as the country witnesses a rise in the incidence of lifestyle-related and other diseases. A growing elderly population and rise in income levels are also pushing for better facilities in the country. To meet this growing demand, the country needs US$ 50 billion annually for the next 20 years, says a Confederation of Indian Industry (CII) study. India needs to add 3.1 million beds by 2018 to the existing 1.1 million, and requires immediate investments of US$ 82 billion, as per the Technopak Advisors report. Adds a FICCI-Ernst and Young report, India needs an investment of US$ 14.4 billion in the healthcare sector by 2025, to increase its bed density to at least two per thousand population. According to a latest report by McKinsey, driven by strong local demand, Indian healthcare market is expected to continue growing close to previously projected rates of 10 to 12 per cent. With average household consumption expected to increase by more than seven per cent per annum, the annual healthcare expenditure is projected to grow at 10 per cent and also the number of insured is likely to jump from 100 million to 220 million. India's healthcare industry registered 42.44 per cent growth in net profit during April-June 2009, according to the Associated Chambers of Commerce and Industry (ASSOCHAM). In the healthcare sector, the leading 10 companies posted a growth of 23.94 per cent in total income and 21.37 per cent in total expenditure during the quarter, the study said. Health Insurance Currently only 10 per cent of the Indian population has health insurance, which means that there is tremendous scope for growth in this area. The Indian health insurance business is growing at 50 per cent. The sector is projected to grow to US$ 5.75 billion by 2010, according to a study by the PHD Chamber of Commerce and Industry. Investments in Healthcare The sector has been attracting huge investments from domestic players as well as financial investors and private equity (PE) firms. Funds such as ICICI Ventures, IFC, Ashmore and Apax Partners invested about US$ 450 million in the first six months of 2008-09 compared with US$ 125 million in the same period a year ago, according to an analysis carried out by Feedback Ventures. Feedback Ventures expects PE funds to invest at least US$ 1 billion in the healthcare sector in the next five years. In February 2009, India Venture invested almost US$ 18 million in Tamil Nadu-based Kavery Medical while in June IFC invested US$ 30 million in Max India. Piramal Life Sciences, the research and development (R&D) arm of Piramal Group is investing US$ 41.17 million in the next two years’ period to discover and develop new chemical entities and novel drug delivery systems. The Hinduja Group will invest up to US$ 72 million in
increasing capacity of its hospital in Mumbai by 350 beds in the next four years through expansion of existing facility and setting up of a new unit. As part of its ‘Healthymagination’ initiative, GE will spend US$ 3 billion over the next six years on research and development, provide US$ 2 billion of financing over the next six years to drive healthcare information technology and health in rural and underserved areas, and invest US$ 1 billion in partnerships, content and services. The government, along with participation from the private sector, is planning to invest US$ 1 billion to US$ 2 billion in an effort to make India one of the top five global pharmaceutical innovation hubs by 2020. The Ajay Piramal Group-owned private equity (PE) firm, India Venture Advisors, will launch its second US$ 150 million healthcare fund next year. Medical Tourism In 2007, India treated 450,000 foreign patients ranking it second in medical tourism. According to a study by McKinsey and the CII, medical tourism in India could become a US$ 2 billion industry by 2012 (from US$ 350 million in 2006). Credit Suisse estimates medical tourism to be growing at between 25-30 per cent annually. The key selling points of the medical tourism industry are its cost effectiveness and its combination with the attractions of tourism. Treatment cost is lowest in India – 20 per cent of the average cost incurred in the US, Singapore, Thailand and South Africa. Besides world class medical facilities, India is also trying to promote its traditional medicine such as ayurveda. Areas of Opportunity The fast growth in the Indian healthcare sector has created various pockets of opportunities for investors. A recent FICCI-Ernst and Young report highlights several such areas within the healthcare sector. * Medical infrastructure forms the largest portion of the healthcare pie. Beds in excess of one million need to be added to reach a ratio of 1.85 per thousand at an investment of US$ 77.9 billion. * The medical equipment industry is around US$ 2.17 billion and is growing at 15 per cent per year. It is estimated to reach US$ 4.97 billion by 2012. * The medical textiles industry is projected to double to reach US$ 753 million by 2012.
* Clinical trials have the potential to become a US$ 1 billion industry by 2010 and the health services outsourcing sector has the potential to grow to US$ 7.4 billion by 2012, from US$ 3.7 billion in 2006. Notwithstanding the current economic slowdown, the US$ 2.26 billion Indian wellness services market is expected to grow at about 30-35 per cent for the next five years on the back of rising consumerism, globalisation and changing lifestyles, according to a FICCI-Ernst and Young study. The report classified wellness industry into seven core segments of allopathy, alternative therapies, beauty, counselling, fitness/slimming, nutrition and rejuvenation. While rejuvenation services such as spas, alternative therapies, ayurveda treatments and beauty services are expected to grow by as much as 30 per cent, fitness comprising gyms and slimming centres are expected to grow by more than 25 per cent. Government Initiative The Government launched the National Rural Health Mission (NRHM) in 2005. It aims to provide quality healthcare for all and increase the expenditure on healthcare from 0.9 per cent of GDP to 2-3 per cent of GDP by 2012. During the 2009 interim budget, the government allocated US$ 2.42 billion for NRHM. The Tamil Nadu government has allocated US$ 698.16 million for health and family care for the year 2009-10, up from US$ 564.34 million a year ago. The increased budget includes creating a mega blood bank—Asia’s largest—in Chennai and upgrading several hospitals, besides launching a new insurance scheme. The government has announced a US$ 63.2 million initiative to promote domestic manufacture of medical devices such as stents, catheters, heart valves and orthopaedic implants that will lead to lower prices of these critical equipment.
The Indian information technology industry has played a key role in putting India on the global map. Thanks to the success of the IT industry, India is now a power to reckon with. According to the National Association of Software and Service Companies (NASSCOM), the apex body for software services in India, the revenue of the information technology sector has risen from 1.2 per cent of the gross domestic product (GDP) in FY 1997-98 to an estimated 5.8 per cent in FY 2008-09. India's IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System
Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services.
As per NASSCOM's latest findings: * Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach US$ 71.7 billion in aggregate revenue (including hardware). Of this, the software and services segment accounted for US$ 59.6 billion. * IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40.9 billion in FY 2007-08 to US$ 47.3 billion in FY 2008-09. Moreover, according to a study by Springboard Research, the Indian IT services market is estimated to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent. Despite the uncertainty in the global economy, the top three IT majors— Infosys, TCS and Wipro—have seen revenue growth from all important sources of income: from the North American and European regions, in the financial services vertical and from application maintenance and development (ADM) offerings between fiscal years 2008 and 2009. At present, there are 60 million Internet users in the country. According to Manufacturer’s Association of IT (MAIT), the number of active Internet entities rose to 8.6 million by March 2009 from 7.2 million units in March 2008. MAIT has outlined 'Goal 511', an ambitious target that talks about 500 million Internet users, 100 million broadband connections, and 100 million connected devices by 2012. A latest study by MAIT estimated that the total PC sale in India is likely to grow by 7 per cent in 2009-10, with total sales expected to cross 7.3 million units. Outsourcing A research by Gartner forecasts India as the undisputed leader in the outsourcing space in the year 2008. India's most prized resource is its readily available technical work force. India has the second largest English-speaking scientific professionals in the world, second only to the US. It is estimated that India has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which train more than 67,785 computer software professionals every year. The enormous base of skilled manpower is a major draw for global customers. According to NASSCOM, software and services exports (including exports of IT services, BPO, engineering services and R&D and software products) reached US$ 47 billion in FY 2008-09, contributing nearly 78 per cent to the total software and services revenue of US$ 59.6 billion. India continues to be the most preferred destination for companies looking to offshore their IT and back-office functions. It also retains its low-cost advantage and is among the most financially attractive locations when viewed in combination with
the business environment it offers and the availability of skilled people, according to global management consultancy AT Kearney. India has retained its numero uno position even as some other well-established outsourcing hubs dropped in their attractiveness to be replaced by new emerging destinations in AT Kearney’s latest ranking of the top outsourcing destinations across the globe. The top three countries in the 2009 Global Services Location Index (GSLI) remain the same — India, China and Malaysia. Domestic Markets India's domestic market has also become a force to reckon with, as the existing IT infrastructure evolves both in terms of technology and depth of penetration According to NASSCOM, domestic IT market (including hardware) reached US$ 24.3 billion in FY 2008-09 as against US$ 23.1 billion in FY 2007-08, a growth of 5.3 per cent. India Inc's demand for IT services and products has bolstered growth in the domestic sector with deal sizes going up remarkably and contracts worth US$ 50 million-US$ 100 million up for grabs. The market for enterprise networking equipment in India is estimated to grow from US$ 1 billion in 2008 to US$ 1.7 billion by 2012, recording a compounded annual growth rate (CAGR) of 15 per cent during this period, according to a study by Springboard Research. Investments * Infosys Technologies Ltd, will invest US$ 70 million over the next three quarters of the current financial year towards increasing its sales and marketing staff overseas, building new capabilities and hiring local resources for its international centres. * The Andhra Pradesh Government expects the IT-related SEZs and Software Technology Parks of India (STPI) in the State to receive about US$ 3.27 billion investments in the next five years. * HCL Technologies has entered into a strategic partnership with South Africa’s UCS Group. As part of the all-cash deal, HCL will acquire UCS’s enterprise solutions SAP practice focused on the retail sector for US$ 7.7 million. Rural Penetration According to a report of the Internet and Mobile Association of India (IAMAI), rural India has 3.3 million active internet users. Since rural India was mapped for the first time, the year-on-year growth of internet users in rural India could not be estimated.
The research also notes there are 5.5 million people who claim to have used Internet at some point in time. Government Initiatives * The government set up the National Taskforce on Information Technology and Software Development with the objective of framing a long term National IT Policy for the country. * Enactment of the Information Technology Act, which provides a legal framework to facilitate electronic commerce and electronic transactions. * The government-led National e-Governance Programme, has played an important role in increasing internet penetration in rural India. Road Ahead The Indian information technology sector continues to be one of the sunshine sectors of the Indian economy showing rapid growth and promise. According to a report prepared by McKinsey for NASSCOM, the exports component of the Indian industry is expected to reach US$ 175 billion in revenue by 2020. The domestic component will contribute US$ 50 billion in revenue by 2020. Together, the export and domestic markets are likely to bring in US$ 225 billion in revenue, as new opportunities emerge in areas such as public sector and healthcare, and as geographies including BRIC and Japan opt for greater outsourcing.
Insurance The US$ 41-billion Indian insurance industry is the fifth largest life
insurance market in the emerging insurance economies globally, growing at 32-34 per cent annually. Life insurance in India has the First Year Premium (inclusive of Single Premium) segment accounting for US$ 24 billion and Non-Life Insurance— US$ 5.6-billion industry—with motor and health segments accounting for 56 per cent of total business. Currently, there are 22 life insurance firms operating in India and as per industry estimates, the life category constitutes about 4 per cent of the total GDP in the country. The foreign direct investment (FDI) limit in the insurance space for foreign players is capped at 26 per cent—permissible under the automatic route subject to obtain a licence from the official regulator, Insurance Regulatory and Development Authority (IRDA)—but the government is planning to raise it to 49 per cent and a bill to give effect to the proposal is pending in the Rajya Sabha. The life insurance industry has contributed more than four per cent to the country’s gross domestic product (GDP) since liberalisation and non-life’s contribution has been at 0.6 per cent for the last nine years. SBI Life Insurance has been ranked the no. 1 life insurer across the globe, by the Million Dollar Round Table (MDRT) members. MDRT is an association of the world’s best life insurance sales professionals.
The country's largest life insurance player, Life Insurance Corporation of India (LIC), is celebrating its 53rd anniversary week starting September 1, 2009 and has grown to 35.8 million policies and a sum assured of US$ 80.3 billion in 2008-09. It has collected US$ 325.27 million through alternate channels in the first four months of the current fiscal. MetLife India Insurance became the first private sector life insurer to provide guaranteed monthly income along with other regular benefits like tax incentives and bonuses with the launch of 'Met Monthly Income Plan' in August 2009. MetLife has been among the top three fastest growing life insurance companies consecutively for the last 30 months. Currently, there are at least 18 third party agents (TPAs) empanelled with the four PSU insurers. Insurers have also begun mulling setting up their own TPA mechanism to rectify the current weaknesses. According a report by rating agency Care, public sector companies continue to dominate the general insurance market accounting for more than 58 per cent of market share. The four public sector general insurers—United India Insurance Company, National Insurance Company, New India Assurance and Oriental Insurance Company— were able to marginally increase their market share to 59.74 per cent from their combined market share of 59.4 per cent during April 2008February 2009. In June 2009, the general insurance industry grew at 7.4 per cent. Gross underwritten premiums (GWP) of the public sector insurers stood at US$ 319 million, up by eight per cent. The growth in GWP of private sector players was to the tune of 6.5 per cent at US$ 214.72 million. United India Insurance was the best performer, among public sector players, growing its business by around 17 per cent. New India Assurance grew at 8.5 per cent. Overall growth in the life insurance industry remained moderate, with private insurers reporting a decline of 20 per cent in the category. They clocked US$ 1.12 billion during the first three months of the fiscal, while public sector player LIC posted a 20 per cent growth in first year premiums. Among the larger, Reliance Life is the only private player that has recorded a positive growth at 20 per cent in its first year premium collections. According to the data compiled by the insurance regulator, in June 2009, LIC’s new business premiums were up 10 per cent. Cumulative assets managed by the private insurance players stood at US$ 31.7 billion as on June 30, 2009, while LIC managed over US$ 167.37 billion (March 2009). Rural business According to IRDA guidelines, a certain portion of the life insurance company’s business must come from rural markets. LIC has a much wider rural foothold, with rural business accounting for nearly 40 per cent of the total, while the private life insurance companies have significantly increased their focus on rural business in the past two years. Health Insurance
Both life and non-life insurers provide health insurance schemes. There are currently over 30 health insurance products offered by as many insurance companies across India. Sale of health insurance products in India registered around 30 per cent growth and garnered US$ 1.36 billion in terms of new premium collection for the year ended March 2009 owing to growing awareness and rising healthcare costs, as per IRDA. However, there is still huge potential for growth in the segment as currently the penetration of health insurance is at around 2 per cent of India’s 1.1 billionpopulation. Tata AIG has launched a health product called ‘Hospicashback’ in early 2009. The product offers a guaranteed return of premium, irrespective of the claims of the customers besides paying customers fixed benefits for expenses such as hospital and ambulance charges. In August 2009, Metlife entered the health insurance business with the launch of a new scheme ‘Met Health Care’, offering daily cash benefits in the case of hospitalisation. Customers can avail of the health insurance without undergoing any medical tests.Bancassurance Bancassurance simply means selling of insurance products by banks. In India, the bank branch network encompasses nearly 75,000 branches inclusive of PSU and private banks. Close to 100,000 branches of cooperative, district co-operative and regional rural banks also exist. Normally, commercial banks act as a corporate agent and tie-up with one insurance company. Both Axis bank and HDFC bank are tying up with insurance companies vying for better share of the commissions. Policy Initiatives To improve returns under the unit-linked insurance plans (ULIPS), the regulator has capped the amount insurance companies can charge the fund. Insurance regulator, IRDA, also tightened the guidelines by asking the insurance companies to ensure that no policies are issued to persons with fictitious names. From June 2009, non-life insurance companies can neither reject the renewal of existing health insurance policies on the premise that claims had been made in the previous years, nor arbitrarily increase the premium while renewing cover. The grounds for such rejection have been made rare and exceptional, according to an IRDA circular. Investment Scenario * Magma Fincorp is foraying into insurance business. The company has tied up with German insurance major, HDI-Gerling International Holding, to enter the general insurance sector in India, and will have an initial paid-up equity capital of US$ 22.65 million.
* Life Insurance Corporation of India (LIC) is looking at 25 per cent growth in new premium income in FY 2009-10, after it registered a growth of 69.33 per cent in the first premium collection in April 2009. It is also planning to invest US$ 8.23 billion in equities in 2009-10. The Road Ahead According to the Investment Commission of India, the Indian insurance market is expected to be around US$ 52 billion by 2010. The compound annual growth rate (CAGR) is expected to be over 30 per cent per annum. The total investment opportunity is estimated to be US$ 14 billion-US$ 15 billion. Further, according to a report 'Booming Insurance Market in India (2008-2011)’ by Research and Markets, total life insurance premium in India is projected to grow US$ 253.2 billion by 2010-11. Total non-life insurance premium is expected to increase at a CAGR of 25 per cent for the period spanning from 2008-09 to 2010-11.