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Independent market review
By CBRE South Asia Pvt. Ltd
Economic overview
•GDP growth for FY2011/12 was estimated at 6.9%.30 The debt crisis in the Eurozone, persistently high infation in the country
and increase in lending rates led to a slowdown in GDP growth during FY2011/12 compared to last year’s 8.4% growth.
•The slowdown witnessed in the industrial sector (which registered a growth of 3.9% during FY2011/12) further impeded
the GDP growth. However, the services sector grew at a robust rate of 9.4%during the same period. According to International
Monetary Fund, India is the third largest economy in the world in terms of Purchasing Power Parity.
•Increase in urbanisation witnessed during FY2011/12 is driving the purchasing power of households and hence consumer
spending. The per capita income at current prices for FY2011/12 is estimated to be INR 60,972, an increment of 14.3%31 over
the previous year.
•Exports have witnessed a healthy growth of approximately 23% on a year-on-year basis, while imports have surged by
approximately 29% year-on-year. India’s major trading partners are the European Union, China, USA and the United Arab
Emirates, with increasing Government focus on South East Asian, African and Latin American markets.32
•The Central Government in its Union Budget FY2012/13 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 FY2012/13,
besides lowering the fscal defcit to 5.1%. The Government is planning to achieve that through disinvestments,
implementation of the Direct Tax Code, reforms in Goods and Services Tax and foreign investment in multi-brand retail.
•The regular rate hikes by the Reserve Bank of India, in a bid to rein in infation, had exerted enormous pressure on the
cost of funds for banks, besides infating input costs for real estate projects. The Central Bank has indicated a halt in the rate
hikes and a reduction in the Cash Reserve Ratio, which is expected to ease liquidity in the economy. The above measures
are expected to lower interest rates going forward, beneftting investments and consumption.
•The consumption-led growth witnessed in India has helped to mitigate the effects of the global slowdown over the last 3 to
4 years.
Investment scenario in India
•India is expected to continue to be a strategic hub for foreign companies’ operations and investments due to its high
potential for growth.
•FDI infows into India stood at approximately USD 24.18 bn (INR 1,120 bn) in FY2011/12 (April-December) compared to
USD 16.04 bn (INR 732 bn) during the same period in FY2010/11, registering a growth of almost 51% year-on-year.33 This
signifes confdence in the economic credentials of the country as the global economic downturn, the Eurozone crisis and
stagnating domestic growth did not deter global investors from participating in the country’s growth trajectory.
•Singapore, Japan, USA and UK are the leading investors in India, accounting for approximately 60%-70% of the overall
cumulative foreign equity infows in the country till date.
•Government’s active role in removing regulatory barriers for international investors coupled with implementation of proposed
policy reforms are expected to fuel the growth in foreign investments.
Overview of IT/IT-enabled Services (“ITeS”) Industry in India
•The Indian IT sector continues to be one of the sunshine sectors of the Indian economy. New initiatives such as vendor
consolidations, gaining traction in emerging services/verticals and geographical diversifcation are expected to drive the next
phase of growth for the sector.
•According to NASSCOM, overall Indian IT/ITeS revenues have grown to USD 88.1 billion in FY2010/11 and an estimated
USD 100 billion in FY2011/12, translating into a compounded annual growth rate of 24% from FY2004/05 to FY2011/12.
The outlook for the Indian IT/ITeS industry remains positive.
30Reserve Bank of India.
31Ministry of Statistics and Programme Implementation, Government of India.
32Ministry of Commerce, Government of India.
33Department of Industrial Policy and Promotion, Government of India.
A-ITRUST ANNUAL REPORT 2011/2012 37