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Appendix - Independent market
research report
By CBRE South Asia Pvt. Ltd
The Central Government in its Union Budget 2012-13 has indicated a balancing act between implementing reforms
in the economy and also promoting populist measures. The Government has indicated a GDP growth of 7.6% for
2012-13, besides lowering the fscal defcit to 5.1%. Besides a modest disinvestment target of INR 300 bn, the
Government has indicated that it will pursue crucial reforms like implementation of the Direct Tax Code (DTC), Goods
and Services Tax (GST) and foreign investment in multi-brand retail, but only after due consultations and political
consensus. While enlisting an investment target of almost INR 50 tn (USD 1 tn) for the 12th fve year plan (2012-2017),
the Government has enhanced funding for specifc schemes and modal organizations to promote infrastructure growth
and enable funding for affordable housing projects across the country. These are positive steps for the economy and
the Government should now focus upon the implementation of these reforms to stimulate the economy to a higher
growth trajectory.
While the Government has been struggling to implement key economic reforms and attract foreign investment in core
sectors, another key challenge has been to revive investments by limiting further rate hikes by the central bank. The
regular rate hikes by the Reserve Bank of India (RBI), in a bid to rein in infation, have exerted enormous pressure on the
cost of funds for banks, besides infating input costs for real estate projects. However, the Central Bank indicated
towards a halt in the rate hikes in its policy review in December and has reduced the Cash Reserve Ratio (CRR) by
almost 125 bps in the last three months. This is expected to ease liquidity in the economy and pave way for reduction
in interest rates in the coming few months.
In spite of the current turbulent conditions, within the spectrum of emerging markets, India is considered to be amongst
one of the most promising economies in the world due to a large, fast-growing and resilient market. The urban population
in India is expected to grow at a compounded annual growth rate (CAGR) of 2.4% from 2000 to 2015, representing
an increase from 28% to 32% of the total population. As a consequence of urbanization, more and more households
are emerging with increased purchasing power and a heightened desire towards consumerism. Consequently, the
per capita income at current prices during 2011-12 is estimated to be INR 60,972 compared to INR 53,331 during 2010-
11, displaying an increment of 14.3%.
While India’s economy has been largely focused upon domestic consumption as a force to drive its growth, the last few
years have witnessed expansion in its export potential. India has emerged amongst the largest trading nations in the
world and is expected to attain trade worth more than USD 700 bn (INR 35,000 bn) in 2011-12. India is also a founding
member of General Agreement on Tariffs and Trade (GATT), as well as the World Trade Organization (WTO). It has
enhanced its trade engagement by fnalizing trade promotion agreements with various countries. India has fnalized
Free trade Pacts with South Korea, Malaysia and Japan besides negotiating pacts with the Association of South East
Asian Nations (ASEAN) and EU. India’s cumulative exports during the period April-December 2011 stood at USD 242.8
bn (INR 11,537 bn), while imports during the same period stood at USD 391.5 bn (INR 18,591 bn), with a trade defcit
of USD 148.6 bn (INR 7,054 bn). Exports have witnessed a healthy growth of approximately 23% on a y-o-y basis, while
imports have surged by approximately 29% y-o-y. Export fgures for January 2012 were valued at USD 25.35 bn (INR
1,301 bn) compared to almost USD 23.02 bn (INR 1,045 bn) during the same period last year; registering a growth
of almost 10.1% y-o-y. India’s major trading partners are the European Union (EU), China, USA and the United Arab
Emirates (UAE), even as the Government is shifting focus on African and Latin American markets.
2 India Investment Market Overview
The global economy has been witnessing a downturn in growth due to the ongoing crisis in the Eurozone and the United
States. As a result, global investment fows have decreased from a peak of USD 2 tn in 2007 to almost USD 1.2 tn in
2010. It is anticipated that the global foreign direct investment fows will recover as the economic crisis eases and
investors become more confdent regarding profts and market effciencies; expected to be between USD 1.4 tn – 1.6 tn
5Exchange rate: USD 1 = INR 50
6Ministry of Commerce, Government of India
7 AT Kearney Report: Global FDI Confdence Index 2012
8 Department of Industrial Policy and Promotion, Government of India
182 POSITIONED FOR GROWTH