Indo - US Economic Summit 2007

Building Strong
Partnerships

*connectedthinking
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Table of contents

Education Management 2
Farm to Retail - Overview of India’s retail sector 10
India: A manufacturing destination 25
Infrastructure:
a) Roads 32
b) Civil Aviation & Aerospace 36
c) Port Sector 40
d) Real Estate 45
Healthcare in India 50
Education Management

2 • PricewaterhouseCoopers Pvt Ltd.

Issues in Higher Education & Vocational Education
India is one of the world’s fastest growing economies.
Its population has a median age of 25, which means
that over 550 million people are 25 years or younger.
While this gives India a huge demographic edge, it
also puts considerable pressure on its policy makers
to ensure that the young population is given quality
education that will empower the future generations
to contribute to and participate in the growth of the
country. Is India’s education system geared up for this
massive task? Is it ready to meet the current and future
challenges?
In India, the formal education system consists of 1 to 3
years of preschool, 10 years of school; 2 years of higher
secondary school; 3 to 4 years for under-graduate
degree followed by Masters, M.Phil and Ph.D degrees.
The focus of this paper is on higher education and
vocational education in India.
India has one of the largest higher education
infrastructures in the world with 388 universities /
institutions affiliating some 17,000 colleges. Over
450,000 teachers teach 10 million students; third
largest after the US and China. This number is growing
rapidly. Programmes are offered in all major disciplines.
Professional education is imparted with English as
the medium of instruction. Prestigious institutions
get to pick the very best students. Only 1 out of 200
applicants gets admission into the famed Indian
Institutes of Technology. The figure of acceptance is
about 1 out of 10 at MIT(USA). Stories of students not
making it to IITs, but securing admission in Ivy League
colleges in the U.S. are commonplace.
India’s higher education system has been a great asset
– it has not only catered to the manpower needs of
the economy and helped India become self reliant in
several areas but its doctors, engineers and scientists
have been spectacularly successful in the global arena.
Clearly the higher education system has done a good
job. But is it good enough for the very rapidly changing
present and a very demanding future? Perhaps not and
that is the key issue.
While there has been a 113% increase in enrolment
in higher education (from 4.95 million in 1990-91 to
10.58 million in 2001-02), the net enrollment ratio in
2005-06 is still a mere 9.7% While we spend a meagre
0.37% of our GDP on education, developed countries
like Canada spend 1.88% of GDP on higher education
alone.
Turning our focus to primary education, India presents
a dismal picture. Article 8 of the Indian Constitution
mandates universal primary education. Yet, 41 per
cent of children do not reach class 5 in India. In this
respect, India fares worse than Gambia (20%), Mali
(18%), Senegal (15%), Tanzania (17%) and Burkina
Faso (25%). Further, the literacy rate in India is lower
than that of many other developing countries. Many
argue that the development of higher education in
India has been at the cost of primary education. Higher
education is highly subsidized by the Government
– fees at universities have not been revised for several
years. At present only 5% of the total cost of operating
a university is generated through fees.
Yet there is a woeful lack of quality higher education
institutions, giving rise to severe competition for
entry. Admission to reputed colleges is extremely
difficult; one such college in Delhi rejected students
who scored less than 95% in their school leaving
examination for its bachelors course in economics.
This level of competition has resulted in increasing
numbers of students seeking higher education overseas
– US, Australia and UK being the chief destinations.
It has been estimated that Indian students spend
approximately USD 4 billion on education overseas
every year. In 2004-05, about 80,000 Indian students
were studying at US universities comprising roughly
14% of the international students there. A considerable
percentage of this student group ultimately settles
down overseas – a migration of talent and resources
that India can do without.
India needs to expand its educational infrastructure
at all levels. Towards this end the Indian Government
needs to seek out partners both within and abroad.
I. Regulation of higher education
India is a federal setup with powers to legislate on
certain matters with the Central Government, on others
with the State Governments and on some matters on
the concurrent list which come within the purview of
both. Education is on the concurrent list. Exclusive
legislative power has been assigned to the Central
Govt for co-ordination and determination of standards
in institutions of higher education as well as research
and scientific and technical institutions while the
State Governments are responsible for maintenance
of standards of higher education. The coordination
and cooperation between the Union and the States
is brought about in the field of education through the
PricewaterhouseCoopers Pvt Ltd. • 3
Central Advisory Board of Education (CABE).
The cornerstone behind all legislations on education is
that education must be a “not for profit” activity. Various
Supreme Court judgements have reiterated this.
The Central Government has established authorities
for overseeing and ensuring high standards of higher
education in India which include:
1. The University Grants Commission (UGC)
2. All India Council for Technical Education (AICTE)
3. Specialised Professional Councils, like Medical
Council of India (MCI), Bar Council of India (BCI) etc.
A. UGC
The UGC was established by the Central Government
through an Act passed by the Parliament in 1956. UGC
has been vested with two responsibilities:
(i) providing funds to institutions of higher education;
and
(ii) coordination, determination and maintenance of
standards in such institutions.
In carrying out its responsibilities, the UGC serves as
the link between the Central and the State Governments
and institutions of higher learning.
Under the provisions of the UGC Act, the right of
conferring or granting degrees is exercisable only by
a university established under an Act passed by the
Centre or a State or by an institution which is declared
by the Central Government to be a deemed university
by issuing a notification. The Act also confers powers
on the UGC to make rules to provide for, among others:
• defining the qualifications required of the teaching
staff;
• defining the minimum standards of instruction for
grant of degree
• regulating the maintenance of standards and the
coordination of work or facilities in universities;
4 • PricewaterhouseCoopers Pvt Ltd.
• specifying matters in respect of which fees may be
charged and scales of fees
The UGC has, accordingly, notified rules and
regulations governing these issues. Before issuing any
regulation, the UGC must seek the approval of the
Central Government.
B. AICTE
All India Council for Technical Education (AICTE) was
established in 1988 also through an Act of Parliament.
AICTE is vested with the statutory authority for
planning, formulation and maintenance of norms and
standards, quality assurance through accreditation,
funding in priority areas, monitoring and evaluation,
maintaining parity of certification and awards and
ensuring coordinated and integrated development and
management of technical education in the country.
AICTE’s purview covers programmes in Engineering,
Technology, Architecture, Town Planning, Management,
Pharmacy, Applied Arts and Crafts, Hotel Management
and Catering Technology etc.
For the purpose of facilitating collaboration and
partnerships between Indian and Foreign Universities /
Institutions, the AICTE has, in 2005, issued Regulations
for Entry and Operation of Foreign Universities in India
imparting technical education.
C. Specialised professional councils
The Central Government has also set up specialized
professional councils such as the Bar Council of India,
Medical Council of India, Dental Council of India etc.
with a view to regulating professional education in
law, medicine, dentistry etc. The degrees awarded to
students admitted by colleges without obtaining the
required approval from such bodies are not recognised
for registration to practice the respective professions in
India.
D. State Governments
State Governments are responsible for establishment of
State Universities and colleges and provide grants for
their development and maintenance.
II. Foreign investment in education sector
A. FDI policy
The Foreign Direct Investment Policy of India allows
100% FDI in the education sector under the automatic
route as per Press Note 2 of 2000 issued by the
Department of Industrial Policy & Promotion, Ministry of
Commerce & Industry.
B. Regulatory framework
The UGC has so far not notified any regulatory
framework in respect of participation in higher
education by foreign universities. Regulations are under
preparation and are likely to provide for the following:-
• the prospective foreign education providers be
recognized in their home country;
• the fees charged by them be controlled by the UGC;
• no commercialization of education be allowed;
• reservations for backward classes.
On March 1, 2007, the Cabinet approved the Regulation
of Foreign University Entry and Operation (Maintenance
of Quality and Prevention of Commercialisation) Bill,
2007. Due to political opposition to the entry of foreign
universities, the Bill’s introduction in the Parliament has
been deferred. Media reports indicate that the proposed
legislation gives universities of international repute
the freedom to not observe domestic norms such as
reservations for socially and educationally backward
sections and the dispensation from requirement of
adhering to admission and fee norms. However, their
entry into India may only be with conditions which may
cover minimum investment, usage of surplus for further
development of their educational institutions in India
etc.
Unlike the UGC, the AICTE in 2005 has issued
regulations for the entry and operations of foreign
universities/ institutions imparting technical education
in India leading to award of diplomas and degrees
including post graduate and doctoral programmes.
These regulations and the procedures are so complex
that it almost appears that they are designed to block
rather than facilitate entry of foreign universities.
Some provisions are even contradictory in nature. For
example, one of the conditions for entry and operation
reads:
“The educational programmes to be conducted in India
by Foreign Universities / Institutions leading to award of
degrees, diplomas, shall have the same nomenclature
as it exists in their parent Country. There shall not be
any distinction in the academic curriculum, mode of
delivery, pattern of examination etc. and such degrees
and diplomas must be fully recognized in their parent
Country.”
Another one however reads:
“The Foreign University / Institution shall be bound by
the advice of AICTE with regard to admissions, entry
qualifications and the conduct of courses / programmes
in technical education, as may be communicated to
them from time to time.”
Clearly, these two stipulations are contradictory. The
equivalence in the curricula that is mandated in the first
could be lost by the binding “advice” of AICTE given in
the second stipulation.
III. Issues in higher education
In a report sent to the Prime Minister in end-November,
2006, the National Knowledge Commission (NKC) notes
that there is a “quiet crisis in higher education in India
that runs deep”. It calls for “a systematic overhaul” of
the nation’s universities so that much larger numbers
of people can be educated without diluting academic
standards.
India needs to increase its number of universities to
1,500 by 2015, from 350 now. Such an increase is
necessary to raise the proportion of 18 to 24-year-olds
entering higher-education institutions to at least 15
percent, up from 7 percent now, which is only half the
average for Asia, says the NKC report. The report goes
on to add that various universities vary considerably in
terms of quality and there is little knowledge creation,
little interaction with the economy, society and other
academic / research institutions.
PricewaterhouseCoopers Pvt Ltd. • 5
The regulatory environment for education in India
is complex and is often criticized as an hindrance
to the growth of the sector. The Economist (2005)
noted ‘whereas most nations in the world are working
towards loosening of statutory control over higher
education, India is moving in the reverse direction’.
Over-centralisation, lack of institutional autonomy
and accountability and slow responses to change
have become the distinguishing features of the higher
education system in India.
Conclusion
There are two key issues on higher education in India.
1. The need to expand the infrastructure to provide
quality education to much larger numbers and
2. The need to recognize that the Government alone will
not be able to do so and it must seek out partners
from within and outside India and that partners will
come only when they are made to feel welcome.
These two issues are well debated and well understood.
India’s policy makers now need to muster the will to do
what is necessary to effect changes.
IV. Vocational and technical education
While India’s population growth rate has declined over
the years, the labour force is still projected to grow by
close to 2 per cent every year. The National Sample
Survey Organisation (NSSO) reports that 12.8 million
people enter the labour force every year. Over half of
the labour force is still engaged in rural activities. Over
90 percent of the labour force still works in the informal
sector, much of it at low levels of productivity.
As per the Constitution, “Vocational and Technical
Training of Labour” is a concurrent subject which
means that both the Central and State Governments
share the responsibility. The Central Government lays
down the policies, standards, norms for affiliation,
guidelines and conducts trade test and certification.
Implementation of vocational training programme rests
with the respective State Governments.
Under the Allocation of Business Rules, “Vocational
training of craftsmen and apprentices” is allocated to
6 • PricewaterhouseCoopers Pvt Ltd.
the Ministry of Labour & Employment. The Directorate
General of Employment & Training (DGE&T), under the
Ministry of Labour & Employment, is responsible for
providing skilled workforce to the industry for shop floor
level and foreman at supervisory level, both in India and
abroad. The DGE&T’s functions include:
• policy formulation on Vocational Training;
• laying down standards;
• revision of course curricula;
• granting affiliation;
• trade testing & certification.
In India, the vocational education programme at
secondary school level was introduced in 1976-77
as a state scheme. Due to financial constraints, the
programme was introduced initially only in a few States.
However, these States have felt the need for central
assistance to run the programme. Subsequently, a
Centrally Sponsored Scheme of Vocationalisation of
Secondary Education was introduced during 1987-
88 and since then around 6,800 institutions have
introduced the programme at Grade XI and XII level of
education.
The Technical/Vocational Education and Training is
multi-sectoral in nature. Each ministry/department in
Central as well as State Governments is responsible for
manpower development in that sector. While some offer
regular formal or non-formal courses, others draw from
the general pool of educated and trained manpower.
Around 150 vocational courses are offered in these
schools with an intake capacity of around 1 million
students per year.
The programme covers all major areas like Agriculture,
Engineering and Technology, Business and Commerce,
Home Science, Health and Paramedical, and
Humanities, Science and Education. Almost all these
schools are in the public sector, enrolling close to
400,000 students in the vocational education scheme
– utilizing just 40 per cent of the available student
capacity in these institutions. These schools offer a
total of over 100 courses in various areas - agriculture,
business and commerce, humanities, engineering and
technology, home science and health and para medical
skills.
The Vocational Training Programmes (VTP) conducted
are aimed at imparting skills to school leavers at VIII, X
and XII standards. The two major VTP schemes are :
1) Craftsmen Training Scheme (CTS) that are conducted
through the Industrial Training Institutes (ITIs).
2) Apprenticeship Training Scheme (ATS) which
provides on the job training in real life industry
environment.
There are 5,114 ITIs in the country having a cdapacity
of 742,000. The number of Government ITIs is 1,896
while there are 3,218 private Industrial Training Centres.
All India Trade Tests are conducted for Craftsmen
Training Scheme under the aegis of National Council
of Technical Training (NCVT) which trainees appear
in after completion of the course. Successful trainees
are awarded the National Trade Certificates, which are
recognised for employment within the country as well
as overseas.
Performance of ITIs
India’s vocational education infrastructure is woefully
inadequate- catering to the training needs of only 2.5
million – 1 million by the DGE&T and 1.5 million by 11
other ministries and departments. It is estimated that an
overwhelming 93 per cent of the workforce, which is in
the unorganised sector, does not have access to formal
vocational training.
A survey conducted by the Federation of Indian
Chamber of Commerce & Industry (FICCI) on the ITIs in
the country makes the following conclusions:
• The quality of the Industrial Training Institutes (ITIs)
in the country has been deteriorating in the last
few years, with the industry increasingly reporting
disconnect between the skills imparted in these
institutions and the skills demanded in the market.
More than half of the ITIs reported underutilisation
of seats, indicating that the basic industrial trades
offered by these institutes are becoming increasingly
unattractive for their limited scope in terms of
creating job opportunities.
• As against 107 trades that have been notified by the
government, the maximum trades that any ITI offered
were just 38. This reflects the inability of the ITIs
to ramp up scale and offer new and more market-
oriented courses.
• While the situation with regard to physical
infrastructure and availability of power supply
remains comfortable, factors like non-availability
of computerized numerically controlled machines
(CNCs), inadequate supplies of raw material and lack
of focus on staff training and development are key
impediments in the strengthening of ITIs in India.
The Prime Minister has stated that India faces the
challenge of increasing the skilled work force from 5%
at present, which is the lowest in the world, to about
50% by 2021 which is the norm in developed countries.
This requires that the training capacity be increased
by five times. To make working people employable,
adequate infrastructure for skill training and certification
and for imparting training needs to be created. To
sustain a high level of economic growth, it is essential
to have a reservoir of skilled and trained manpower.
Shortages have already emerged in a number of
sectors. The Government recognises that ITIs must
keep pace with the technological demands of modern
industry and the expanding universe of technical
knowledge. The Prime Minister has noted complaints
about an imminent shortage of skilled employees
and announced the launch of a National Mission on
Vocational Education so that the skills deficit in the
economy is addressed. The Planning Commission has
formed a Task Force on Skill Development which will,
inter alia, develop a blueprint for the National Mission.
The Government in recent years has taken steps to
upgrade ITIs. The Finance Minister, in his Budget
Speech 2004-05, had announced measures for
upgradation of 500 ITIs in the country. Subsequently,
a scheme for upgradation of 100 Government ITIs with
domestic funding was approved in March 2005. These
100 ITIs were distributed in 22 States/Union Territory
Administrations with 75:25 funding pattern to be shared
between Central and State Governments respectively.
PricewaterhouseCoopers Pvt Ltd. • 7
For the remaining 400 Government run ITIs, the Ministry
of Labour and Employment began a dialogue with the
World Bank for providing financial assistance. The
World Bank, in June 2007, approved a credit of US $
280 million (Rs. 1,231 crore) towards the central share
for taking up the ‘Vocational Training Improvement
Project’ for upgradation of these 400 ITIs.
The remaining 1,396 government ITIs have been
proposed to be upgraded into Centers of Excellence
in specific trades and skills under the Public-Private
partnership (PPP). Under the proposed scheme, the
State Government, as the owner of the ITI, continues to
regulate admission and fees while the new management
will be given academic and financial “autonomy” and
the Central Government will provide financial assistance
by way of seed money.
Industry participation in ITIs is a welcome step that
has several advantages. It would ensure increased
involvement of the industry resulting in better skills
delivery & exposure for the candidates. In turn, the
Industry would get skilled & trained manpower. The
industry response has been encouraging. Several
automobile companies have adopted ITIs and
introduced relevant training programmes. Industry
chambers like CII and FICCI have also come forward
and announced their intent to partner ITIs in various
states.
To maintain the growth rate of the economy, which is
essential to bring people out of poverty, it is imperetive
to have a reservoir of technical and skilled manpower.
A properly planned and effectively implemented
vocational education system will enable the
unemployed youth to take up useful employment and
contribute to the country’s growth.
While scarcity of resources for education is an accepted
fact, it is even more true of vocational education in
8 • PricewaterhouseCoopers Pvt Ltd.
India. It is also more expensive to organize courses
in vocational education than in general education.
This is because vocational and technical education
involve heavier capital costs and maintenance
costs for laboratory, workshop, equipment, etc.
Government expenditure on vocational education
has been extremely low, as compared to general
secondary education. The Knowledge Commission
has recommended that given the demand for
skilled manpower in manufacturing and services the
Government should aim to spend at least 10 – 15%,
of its total public expenditure on education, on
vocational education and has suggested 1) enhancing
fees, coupled with student loan schemes, 2) raising
funds through a cess on employers (for instance 2%
of salaries of all employees, as in Singapore) and 3)
making it obligatory for companies to finance public
vocational education and training programmes (as in
Korea).
The Planning Commission estimates that every year
2.2 million students leave school after passing Class X.
Those who drop out after Class VIII number 19 million.
These young people are the ones for look for vocational
training and self-employment avenues. As against this,
available formal training capacity of the country is only
2.5 million students, thus leaving a huge gap. The ITI
system needs to be revamped to fill this gap.
Educationists and experts have consistently
recommended that education at secondary and higher
secondary level should be given a vocational bias to
link it with the world of employment. It has also been
recommended that 80-90 percent students completing
Class X should be diverted to the vocational stream,
reducing the pressure on the universities and also
preparing students for gainful employment.
Conclusion India needs to put much more emphasis on Vocational
Education and Training to bring about a transformation
The advantages of vocational education for a country in its manufacturing sector and build entrepreneurship.
like India cannot be overstated. It is estimated that at A major expansion of the vocational education
any given time, 1.5 percent to 2 per cent of Europe’s programme is the need of the hour.
population is under training with VET. The same
percentage of India’s population amounts to at least
20 to 30 million people. In sharp contrast, the actual
number of people receiving VET is very low, at around
2.5 million.

PricewaterhouseCoopers Pvt Ltd. • 9

Farm to Retail –
Overview of India’s
Retail Sector

10 • PricewaterhouseCoopers Pvt Ltd.

Several global studies rank India as the most attractive retail destination PricewaterhouseCoopers estimates that
in the world. PricewaterhouseCoopers estimates that India’s retail sector the Indian retail sector is worth USD350
is worth an estimated USD350 billion. Over 12 million retail outlets (or billion and is growing at 40 percent per
annum. Organised retail penetration is
kirana stores) comprise India’s unorganised market; more than 80 percent currently three percent. Some of the drivers
of kirana stores are operated by small family businesses using household fueling the growth of the retail industry
labour. Organised retail penetration in India is between three to eight include—
percent. Organised retail is growing at a compounded annual growth rate
of between 30 to 40 percent per annum. • Strong GDP

India’s retail sector will witness increased growth due to the following • Rising incomes
factors: • Increased numbers of working women

• Stable GDP growth rates of nine percent are resulting in increased • Demanding middle class
economic prosperity for the country and for consumers.
• Large young population
• India’s 300 million-strong middle class are demanding increased access
Source: PricewaterhouseCoopers, From Sao Paulo to
to good and services.
Shanghai: New Consumer Dynamics—The Impact on
Modern Retailing*
• Changing lifestyle patterns are witnessed in the increase of lifestyle- and
luxury-oriented purchases and a decrease in essential purchases.

• The higher numbers of working women are resulting in an increase

in double income families who want to purchase more consumption-
oriented goods. Also, the higher number of urban professional working
women is driving demand in urban centers.

• India has one of the world’s largest youngest populations where half the
population is under the age of 25 years.

• Increased access to credit is enabling consumers to spend more and

save less. (Retail loans have doubled since 2003.) Who Buys More— Rural or Urban India?

• The top 10 cities account for 11 percent

• Residents in rural and Tier II, III cities are demanding that modern of India’s total consumption and the next
trade move into their localities. The population of rural India is the 20 cities account for 20 percent of India’s
combined populations of the US and the EU and represents 51 percent consumption.
of consumption. In addition, the spread of IT and BPO operations to
Tier II and III cities is raising incomes, improving standards of living and • Of the total households in India that earn
resulting in a desire to acquire more goods and services. more than INR300,000 (USD 6,667) per
annum, a third reside in rural India.

PricewaterhouseCoopers Pvt Ltd. • 11

Some retail real estate issues that impact
the growth of the retail industry include:
• High stamp duties on transfer of property,
varying by state.
• Urban Land Ceiling Act and Rent Control
Acts have distorted property markets
in cities, leading to exceptionally high
property prices.
• Presence of strong protenancy laws
makes it difficult to evict tenants. This
problem is compounded by problems of
clear titles to ownership.
• Land use conversion is time consuming
and complex.
• Time consuming legal process for
property disputes.
• City urban planning projects smaller
commercial plots and this, along with rigid
building and zoning laws, make it difficult
to procure retail space.
Source: PricewaterhouseCoopers, From Sao Paulo to
Shanghai: New Consumer Dynamics—The Impact on
Modern Retailing*
12 • PricewaterhouseCoopers Pvt Ltd.
Emerging trends that are observed in the Indian retail sector include:
• Increase in Private Labels—Private labels enhance the profitability
levels of product categories, increase retailers’ negotiation powers and
create consumer loyalty. Retailers are introducing private labels in all
categories, including apparel, accessories, footwear and groceries.
• Foray into Retail Agribusiness—India’s most prestigious business houses
and many global retailers are planning to enter retail agribusiness.
Market entrants plan to invest in the entire value chain, moving goods
“from the farm to the fridge at home.” Viewed as India’s next “sunrise
sector,” retailers use contract farming to access land, manpower and
farming skill without having to purchase land. Multinational companies
also want a share of this food retail market and may enter the market
through cash-and-carry or franchisee models.
• Selling to Tier II and III Cities—Indian retailers are planning to extend
operations into Tier II and Tier III cities. People living in Tier II and III
cities are typically well-educated and are willing to purchase goods and
services. Some of the emerging opportunities in the Indian retail sector
include:
• Low Penetration of Modern Trade—India’s retail market is largely
dominated by unorganized players, representing a major growth
opportunity for modern trade. The share of organized retail, currently
at three percent, is expected to increase to 10 percent by 2010. For
consumers, modern trade will provide increased access to products and
services. Modern trade will also improve the economy through increased
employment, agriculture and sourcing of products and services from
India.
• Young, Upwardly Mobile Consumers—With the IT/BPO boom in India,
a new and younger generation has access to more disposable income
than their parents. India’s population, with a median age of 24, is the
youngest consumer segment in the world and presents an attractive
and lucrative opportunity for retailers. Young Indian consumers have
easier access to credit and as a result, a “buy now and pay later” culture
is emerging. These consumers are increasingly spending on a variety
of luxury products and lifestyle-oriented services and are unapologetic
about their generous spending habits. Lifestyle-oriented activities include
eating out, watching movies, buying branded apparel, more expensive
personal care items and the latest consumer durables electronics.
• India As A Sourcing Hub—India is a sourcing location for textiles
and apparel; companies sourced USD2.5 billion worth of goods from
India in 2005 to 2006. Global retailers like Wal-Mart, GAP, JC Penney
and Target are increasing their sourcing volumes from India. These
companies, which accounted for 50 percent of the apparel outsourced
from India in 2005, are now rationalising their vendor bases and limiting
their sourcing to a fewer countries like India and China. International
retail chains are also setting up captive liaison offices in India instead
of depending on third-party buyers. Some of the main challenges
include:

• Inadequate Availability of Skilled Labour—Developed economies,

which have a high penetration of modern retailing formats, employ
between 10 to 11 percent of their workforce in retailing, as compared
to seven percent employed in India today. With new entrants and
existing domestic retailers planning large-scale expansion, there has
been a surge in demand for skilled resources. However, this demand is
not being met by a readily available supply of talent. There is a growing
concern about the paucity of trained retail personnel both at the store
and managerial levels. While there is no manpower shortfall in India,
given its large working population, the gap lies in finding people with
the right hard and soft skill-sets, like customer orientation and selling,
which are critical.

• Retail Real Estate Issues—Availability of quality retail space is a critical

enabler for the anticipated rapid growth of modern retailing in India.
With most Indian cities undergoing rapid urbanization, spiraling costs
of retail space is a key concern among retailers. With the demand from
the commercial properties remaining strong, the cost of real estate
in most top tier cities has been rising in the past two years, thereby
escalating the lease rentals and the time it takes to break-even.

• Absence of Robust Food Supply Chains—India is a fragmented

country with 70 percent of the population residing in rural areas.
The absence of an infrastructure and logistics system means that
reaching consumers and transporting goods is difficult. With growing
urbanization the necessity of roads, highways and public transport
systems are essential. Due to the presence of large local and
multinational companies, India has a fairly organised and developed
non-food manufacturing supply chain. However, the food supply chain
in India is fragmented and unorganised.

PricewaterhouseCoopers Pvt Ltd. • 13

New Trends in Food
A CII-AC Nielsen Org-Marg report on foods
and beverages indicates that one of the
biggest opportunities in food is likely to be
the quasi-meal. Demand for quasi-meals
is coming from an increased willingness to
experiment with foods and to break rules,
one of the main ones being the importance
of eating a full meal.
In addition the rise in the numbers of
working women is likely to be one of the
most significant factors in altering the food
landscape in India. Ready-to-eat meals
and culinary aids that assist with and ease
the preparation of regional specialties is
emerging.
That said, to be able to move quasi-meals,
ready-to-eat meals and culinary aids to
consumers, retailers need to build strong
farm-to-fork models.
Source: CII, PricewaterhouseCoopers analysis
The Imperative of improving India’s food supply chain
Looking at the figure below, India is at the stage of building supply
chains, improving back-end systems, instituting processes and applying
technologies. These efforts will ensure:
• A smoother transfer of goods from point of origin to point-of-sale
• Increased operational efficiencies
• A reduction in overall costs
• Improved customer service since goods can be moved rapidly and
efficiently between factories, warehouses and outlets
• Better insight into which goods move quickly off shelves and which
remain in stock. Some retailers, in order to address the absence of supply
chain and logistics systems are establishing captive systems comprised
of cargo planes, railway hubs, warehouses, distribution centres, cold
chain storage, etc. Logistical challenges, rapidly changing consumer
tastes, the evolution of retail formats, the high cost and availability of real
estate are characteristics of the Indian retail sector. However, as modern

14 • PricewaterhouseCoopers Pvt Ltd.

trade grows, supply chain efficiency will become essential in offering According to a FICCI report of October
competitively priced products, responding to customers’ changing needs 2004 India is the:
and providing good customer service. Supply chain management involves:
• Second highest fruit and vegetable
supplier management, purchasing, materials management, manufacturing producer in the world (134.5 million tones)
management, warehousing, material handling, transportation, physical with cold storage facilities available only for
distribution and customer service. Establishing an efficient supply chain 10 percent of the produce.
that links farmers and small manufacturers (who have limited infrastructure
or distribution strength) directly with retailers, will maximize value for all • Second highest producer of milk with a
stakeholders. Together with back-end infrastructure, this will minimise cold storage capacity of 70,000 tonne.
wastage (especially for fresh foods and vegetables), will increase farmers’
• Fifth largest producer of eggs. Sixth
realizations, will encourage best practices in crop management and will largest producer of fish with harvesting
improve food safety and hygiene. volumes of 5.2 million tones

The food supply chain can be subdivided into the following sectors:

• Primary—Agriculture, horticulture, fisheries and aquaculture are the

primary producers

• Intermediate—Manufacturers who process the food for ready-to-eat or

cook format together with the packaging companies

• Last stage—Retailers, wholesalers and caterers are in this last stage of

the supply chain.

The success of any retail format largely depends on the efficiency of

its supply chain. India has a fairly organised and developed non-food
manufacturing supply chain, mainly due to the presence of large local
and multinational companies that have built significant experience and
scale by following best practices in their respective fields. Like most other
developing economies, however, India lacks in the last mile distribution
segment. The supply chain in India is fairly unidimensional and there is very
little value-added activity since the distribution remains fragmented and
unorganised. This is primarily due to the geographical and cultural diversity
and complexity of the region and the lack of capital available for investing
in technology and modern retail formats.

PricewaterhouseCoopers’ position paper entitled The Rising Elephant:

Benefits of Modern Trade to Indian Economy* indicates that India is among
the top two producers of milk, fruits and vegetables in the world. Yet, the
organised food retail business in the country is among the least developed
in the world.

• A large portion of fruits and vegetables are lost due to inadequate

postharvest handling, cold storage, processing facilities and convenient
marketing channels.

• Huge quantities of grains are also wasted because of improper handling

and storage, pest infestation and poor logistics management. Existing
intermediaries cause delays and eat up a large portion of the earnings
that essentially belong to the farmer. The result is a chain replete with
inefficiencies.

PricewaterhouseCoopers Pvt Ltd. • 15

International modern trade players such as The current food supply chain situation in India is weak:
Metro significantly invest in their operations
in transitional • There are inadequate cold chain units
economies. In the process of expanding
operations, they make a huge difference • Technologies are not incorporated into supply chains
to the lives of farmers and small-scale
vendors by teaching them new techniques • A regulatory environment that protects middlemen
to improve productivity and providing them
with new market access for their products. • Several levels of the supply chain
Source: PricewaterhouseCoopers,
• Increased wastage levels of between 24 to 40 percent
The Rising Elephant: Benefits of Modern Trade to
Indian Economy* • Several small stakeholders (farmers, wholesalers, food manufacturers,
retailers) who work in silos

• Absence of demand forecasting

One of the arguments in favour of FDI is that it will bring with it the
technologies and expertise required to build robust food supply chains. In
the Indian food chain, from farm to fridge, distribution of most food items
involves multiple intermediaries and wastage during transportation and
storage. While Indian consumers demand fresh products, the cumulative
wastage across the supply chain can vary from 24 to 40 percent. Huge
quantities of fresh fruits and vegetables are lost due to the lack of a cold
chain infrastructure. While inefficiencies increase consumer prices, farmers
suffer from extremely low realisations. To unlock operational efficiencies,
facilitate growth, reduce costs and improve the time it takes food to move
from point of manufacture to point of consumption, robust and scalable
supply chains need to be built. The Government too needs to bring in
appropriate legislative changes to catalyse this transition in the food supply
chain. In advanced countries, retailers, such as Walmart, Tesco, etc have
become the Channel Masters of food supply chain, assuming the process
from the food manufacturers. In India, with no superstores, no economies
of scale, several layers of intermediaries, there is an absence of a channel
master. Channel masters manage the supply demand scenario, coordinate
the supply chain and managing logistical activities.

In India, there are very few large food manufacturers.

• Amul, Ruchi Soya, Nestle, MTR, ITC, Dabur, Britannia, HLL’s food and
beverages section, beverage companies such as Coke and Pepsi are
some of the major players.

16 • PricewaterhouseCoopers Pvt Ltd.

• In poultry Godrej Agrovet, Suguna, Pioneer and Venkateswara
hatcheries are some of the companies integrating operations end to
end from breeding to ready to eat chicken foods.
Data integration, financial flow management, supply-demand matching,
collaborative forecasting, information sharing, goods movement
synchronization through efficient transport scheduling, are well practiced
in high technology industries with immense benefits. Food chain clusters
can be formed with the participation of all stakeholders such as farmers,
seed growers, merchants, transporters, wholesalers, retailers, financial
institutions and insurance companies. Information sharing is essential
for generating the efficiencies. Technologies that are based on the
Internet and mobile communications can be used to enable information
and financial transfer between stakeholders. Also, advances in RFID
technology and barcoding will have an impact on the management and
tracking of food as it moves through the supply chain, especially in
source identification, monitoring procedures, assessing inventory levels
and stock-outs and providing supply chain visibility.
“We need a Second Green Revolution.
By 2020, India will require to produce
over 340 million tones of food grains
to feed its growing population. An
increase in production would necessitate
surmounting many impending factors.
Land requirement for afforestation and
environment preservation activities would
force a situation where the present 170
million hectares arable land would not
be fully available for agriculture. It might
shrink to 100 million hectares by 2020.
In addition there will be shortage of
water. The number of farmers available
for agriculture will reduce to less than 50
percent.”
--Former President A P J Abdul Kalam.
PricewaterhouseCoopers Pvt Ltd. • 17
The retailing of fresh produce in India is
increasing. Despite a fragmented supply chain,
retailers are aggressively setting up back end
systems to move goods from farm-to-fork.
As with most emerging economies, food
accounts for over half the expenditure of an
average family. With increases in disposable
incomes, people migrate from consuming
grains to include fruits and vegetables. Fresh
produce accounts for 50 percent of the Indian
shopper’s food and grocery bill compared to
15 percent in the US.
18 • PricewaterhouseCoopers Pvt Ltd.
Contract Farming
While India is currently the second-largest producer of fruits and
vegetables, its agriculture industry is fragmented in the hands of farmers
and select agribusiness houses. That said, the amendment of the
Agricultural Produce Marketing Committee Act in 14 states enables farmers
to sell produce and crops to buyers that offer the best prices. Additionally,
while a law regarding the integration of food protocols is tabled in
Parliament, once passed, it would repeal nine laws and ensure uniformity
among food standards. One outgrowth of a growing agribusiness industry
is the use of contract farming to access land, manpower and farming skill.
Of the total cultivable land in India, contract farming consumes seven
million acres. Companies are entering into contract farming to leverage
the cost savings and revenue benefits that are shared among farmers,
companies and customers as depicted below.
The Food and Agriculture Organisation’s report on contract farming
indicates the positive results from a project involving a large FMCG
major and farmers in north India. The FMCG company issued contracts
to approximately 400 farmers to grow select varieties of tomatoes. A
study of the project revealed that production yields and farmers’ incomes
increased as a result of the use of hybrid seeds and the availability of an
assured market. The yields of contract farmers were 64 percent higher
than those not under contract. Typically, farmers do not have access
to finance, equipment, seeds, fertilisers and machinery; under contract
farming, companies provide access to funds and materials to farmers.
Contract farming is likely to also improve food safety since large corporate
companies will be partnering with farmers to teach them best practices in
crop management and food safety. Studies suggest that almost everything
edible contains some bacteria, heavy metals, artificial additives or chemical
residues, which are the result of increasing pollution and the use of
pesticides. Studies confirm this:
• A 1999 study conducted by the All India Co-ordinated Research Project
on Pesticides Residue on vegetables and fruits confirmed that 90 to 100
percent of tested samples from four states and 45 to 80 percent tested
samples from 12 states were contaminated with pesticides.
• Another 2003 research funded by U.K’s Department for International
Development found 72 percent palak samples from Delhi contained
lead and 21 percent contained zinc that exceeded the limits set by the
Prevention of Food Adulteration Act.
Teaching farmers best practices in crop management, organic farming,
use of pesticides will help decrease the hazards associated with fresh
foods and produce. Also proper cold chain facilities which refrigerate foods
adequately, robust transportation networks, etc will also help in maintaining
the freshness of foods and will help to reduce heath risks.
Cold Chain Storage “Are we using our farms, our farmlands to
full potential? The answer is no. We need
India’s cold chain infrastructure is inadequate and fragmented. The to move the cropping pattern in India from
food grains to crops, which are of high
industry expects the government to provide between 40 to 50 percent of value. India is well-positioned today to
the total investment through viability gap funding. Some estimates suggest feed the world. The vision that we and the
that India produces 140 million tonnes of fruits and vegetables and could Rothschilds have for India is to link Indian
cross the 300 million tonne mark in the next five years; an investment of fields to the world and put the produce, as
about INR18,000 to 20,000 crore in the next five years would be required fresh as it can be, on Western tables in 4-5
to meet about 30 percent of that capacity. Due to a dearth of cold storage days.”
facilities, the seasonal production deteriorates rapidly and has to be sold
-- Sunil Mittal, Chairman and Managing
within weeks. A proper cold chain facility could help meet the demand- Director, Bharti Group
supply gap of various food products including fruits and vegetables. The
cold chain scenario in India is described below:

• Indian supply chain network of six to seven intermediaries between the

primary source (farmers, growers, producers) and the final consumer.

• Food is less than 14 percent of organised retail trade in India, while an

average Indian middle class consumer spends around 50 percent of
his/her income on food and food products. This mismatch is largely due
to infrastructure constraints.

• The shortage of cold storage facilities and refrigerated transport

equipment results in inefficiencies in managing perishable products.
This, in turn, results in increased wastage.

• Since most companies engaged in food processing are in the Small-

Scale Sector (as per Government policy) economies of scale are difficult
to achieve in storage and transportation.

The growth of supermarkets in India also promises to generate greater

sales potential for chilled products such as packaged
meat or fish. Supermarkets enable consumers to Usage Patterns for Transporting Agriculture Produce from
consume fresh produce and products that are stored Production Sources to Marketing Yards
at the correct temperatures and are contained
in wrapped and sealed packaging. Meat or fish Method of Transport Percentage
purchased at a mandi, in contrast, usually must be
prepared and consumed immediately. Consequently, Trucks Ordinary 21
packaging will play an increasingly important role
in cold chain management and the extension of Tractors 18
products’ shelf lives. For example, the need for high-
Tempo Trucks 8
quality plastic packaging for the packing of meats is
related to the development of the delivery systems Bullock Carts 49
to move these packaged products to the retail outlet.
Reefer transportation has been in existence for two Others 4
decades but has now been considered important
with the increase in export of fruits and floriculture Total 100
produce. Initially, reefer transport system was used for
transporting important life-saving drugs, ice-cream, Source: www.nic.gov
frozen food and meat products. Currently grapes and
flowers are being transported from the production location to the exit point
at the seaport or the airport in reefer containers.
PricewaterhouseCoopers Pvt Ltd. • 19
 Mode of Transport Adopted for Produce Over Long Distances

Method of Transport Percentage

Unrefrigerated mode, Traditional packing 83
Unrefrigerated mode, Cartons and boxes 10
Refrigerated trucks 4
Freezer trucks (frozen products) 1
Railway 2
Air negligible
Source: www.nic.gov

20 • PricewaterhouseCoopers Pvt Ltd.

Case Examples
Reliance Industries
Reliance Industries signed an MoU
with the government of Punjab in
August 2006. The project, which
proposes to bring an investment of
INR5,000 crore into Punjab, is an
important part of the overall plan
of the retailers’ plans to establish
hypermarkets, supermarkets,
specialty stores and agri-retail stores
across India. Reliance Retail plans to
procure several items from the State
including milk, fruits, vegetables and
grains. The retailer plans to utilize the
best farm practices and create value
for farmers. It also plans to hire and
create captive cold chain facilities.
The Punjab initiative will be spread
across 50 rural business hubs and
will have 250 franchises linked to
these hubs. Media reports suggest
that Reliance is offering farmers
new technology and techniques
to increase yields and quality. (A
simple example is to explain that
planting tomatoes farther apart
results in bigger tomatoes. To move
to a farm-to-fork model, Reliance is
establishing local receiving centers,
where produce is collected, cleaned
and polished. From there, it will
be shipped (typically in fleets of
new, cooled trucks) to one of 68
distribution centers nationwide.
According to media reports, Reliance
will establish distribution points
at Special Economic Zones. At
distribution centers, each fruit or
vegetable will be housed in climates
ideal for food preservation and
freshness. The cold storage will also
enable Reliance to sell produce out
of season. (For example, Indians
eat 80 percent of the apple crop
during four months of the year.
Through improved cold chain
and refrigeration infrastructure,
Reliance will be in the unique
position of being able to sell
apples all year long.) The current
delivery time for most markets is
three to four days; with Reliance’s
mega-farm-to-fork model, delivery
times may be reduced to a day.
By selling in large volumes and
reducing delivery times, Reliance
will ensure better quality and will
be able to offer competitive prices.
Mahindra Group
The Mahindra Group established
Mahindra Agribusiness* in
2000, with an equity stake from
International Finance Corporation.
Mahindra Agribusiness integrates
the agriculture and food chain
from agri inputs right through to
agri commodities, utilizes contract
farming and agri-retailing.
• Mahindra Agribusiness
establishes agri centres in
various districts under the
Mahindra Krishi Vihar franchisee
model or directly as Mahindra
Agribusiness. Its primary focus
is on crops like basmati, maize,
barley, cotton, lentils, soybeans,
durum, hyola and other oilseeds
such as sunflower and mustard.
• Currently, Mahindra Agribusiness
exports 95 percent of its
produce to Europe, with the UK
being the biggest importer and
the remaining produce being
“Poised to usher a new paradigm in
rural areas, the agri-business vision of
Reliance Retail is to build infrastructure
for efficiency, value addition, logistics and
market access to improve farm incomes,
create an efficient market place for the
true price discovery of farm produce,
drive major initiatives to bring the best
technology and thereby bring about drastic
improvements in farm practices.” --
Statement issued by Reliance Retail
sent to West Asia and South East
Asia. Mahindra Agribusiness sells
produce to several European retail
chains, including Carrefour, J
Sainsbury, Albert Heijn, etc. The
division’s main produce is grapes,
mangoes and pomegranates. It
plans to export 5,000 tonnes of
pomegranates and grapes, which
will fetch INR75 crore over three
years.
• Mahindra Agribusiness is involved
in contract farming across 100,000
acres in eight states, covering
30,000 farmers. The company
had set up agri centres in districts
of the country either under the
Mahindra Krishi Vihar franchisee
model or directly as Mahindra
Agribusiness. These centres are
one-stop shop for agro service,
retailing agro inputs and procuring
produce. To supply fresh
produce to the domestic modern
retail formats, the company is
conducting a pilot project in
Punjab over 100 acres. The
company is supplying to retailers
such as Subhiksha, ITC, Namdhari
Fresh, etc.
*The Legal Entity Mahindra Shubhlabh
Services Limited
PricewaterhouseCoopers Pvt Ltd. • 21
“Are we using our farms, our farmlands to
full potential? The answer is no. We need
to move the cropping pattern in India from
food grains to crops, which are of high
value. India is well-positioned today to
feed the world. The vision that we and the
Rothschilds have for India is to link Indian
fields to the world and put the produce,
as fresh as it can be, on Western tables in
4-5 days.” -- Sunil Mittal, Chairman and
Managing Director, Bharti Group
22 • PricewaterhouseCoopers Pvt Ltd.
Pantaloon Retail India Ltd. (PRIL)
While fresh food retailers in India implement the farm-to-fork model,
Pantaloon Retail India Ltd (PRIL) is reportedly assessing an alternative
business model involving the mandi middlemen or arhtiyas, as they are
commonly known, in the procurement value chain for its Food Bazaar
division. The goal is to ensure buy-in from and involve all stakeholders.
Godrej Agrovet Ltd (GAL)
GAL is the agricultural business subsidiary of Godrej Industries Ltd
(GIL), which is reported to be signing a Memorandum of Understanding
(MoU) with the Government of Punjab to launch its farm-to-fork project.
Under this project, fresh chickens are procured from farms, dressed in a
processing plant and placed on sale in the markets of Punjab and other
States. The project can supply between 2,000 to 4,000 chickens a day.
The necessary land for a processing plant will be identified in Punjab; two
plants are already in Bangalore and Mumbai. GAL will also expand its retail
outlets from 12 in Punjab and 2 in Haryana to 200 in 5 years.
Ministry of Railways
The Ministry of Railways, Government of India, is preparing a draft policy
for supply chain infrastructure management of agricultural products. It
is reportedly in discussions with retail companies like Cargil, Pantaloon,
Reliance and ITC and will offer its land to the highest bidder for setting up
agri-retail hubs. There would be a total of 16 hubs, with four hubs in each
of the metros. These will be the main hubs and secondary hubs will be
established in cities like Lucknow, Bhopal, Hyderabad and Ahmedabad.
The Indian Railways may also likely provide supply chain logistics support
to retailers. The proposed deal would entail transportation of both
agricultural and non-agriculture produce throughout India.
Bharti Enterprises
Bharti Enterprises entered into a joint venture with Rothschild to form
FieldFresh. FieldFresh invested INR230 crore into contract farming to
purchase 600 acres and supplies produce to Tesco. FieldFresh Foods
(P) Ltd is an equal partnership venture between Bharti Enterprises, one of
India’s leading business groups with interests in telecom, agri business
and insurance and ELRo Holdings India Ltd, an investment company of the
Rothschild family, formed by Sir Evelyn de Rothschild & Lady Lynn Forester
de Rothschild. The company has planned an outlay of USD50 million
in the first phase. These funds are being used to create state-ofthe- art
infrastructure for research and development, climate controlled processing
facilities and cold stores. FieldFresh Foods (P) Ltd was incorporated in
2004 and is engaged in providing premium quality fresh produce to the
markets worldwide.
The company also:
• Promotes world class standards for agricultural practices
• Teaches progressive farming techniques
• Identifies and adopts appropriate technologies
APMC Act
The present system of agricultural marketing, regulated
under state Agriculture Produce Marketing Committee
(APMC) Acts, is aimed at providing an organized
marketplace, where farmers can sell produce under
the supervision and administration of local APMCs.
The APMC, an autonomous body comprising
representatives of farmers, traders and other
stakeholders, is expected to protect the interests of all
stakeholders, especially the farmer. That said, today,
the AMPC Act protects the interest of middle men
and agents at the expense of farmers. The APMC Act
prohibits farmers from selling directly to organised retail
chains. Each day farmers are subjected to changing and
unfair prices that are quoted by agents. This licensed
commission agents and traders deprive farmers of fair-
market yields. To compound matters, most commission
agents also finance growers’ production and other
needs. The price ultimately paid by agents to farmers
is then “adjusted” to deduct the loan principal and
disguised interest, the latter generally exceeding
the statutory limits. The development of farm-to-
fork models will disintermediate the supply chain,
bring efficiency in the agricultural marketing process
and create a common Indian market. Farmers will
become partners in “farm to fork” value chains and
will see that their realizations will increase without
raising consumers’ prices. To invite investments into
farm-to-fork retail ventures the State and Central
governments can—
• Waive select duties, fees, cesses registration
charges.
• Offer single-window facilities obtain the required
environment, land transfer clearances and other
legalities.
• Facilitate the provision of water, electricity, roads,
bus stops at locations required by the company.
• Encourage the use of Agri Export Zones which
attempt to use particular produce/products located
in an area for developing and sourcing the raw
materials, their processing and packaging (and in
some cases for exports).
Prioritising the development of the food processing
industry to encourage commercialisation, value
addition to agricultural produce and tax benefits.
PricewaterhouseCoopers Pvt Ltd. • 23
“The wastage is occurring at various Conclusion
stages of handling after harvesting
due to fragmented farming, provisions In order to encourage the development of farm-to-fork retail models, the
in the Agricultural Produce Marketing
(Development and Regulation) Act, lack of
Government can offer incentives and tax-related benefits to incentivise
adequate postharvest infrastructure such the development and upgradation of the food supply chain. A robust and
as cold chain facilities, transportation, comprehensive farm-to-fork retail model is required in order to:
proper storage facilities, etc.”
• Ensure a smoother transfer of goods from point of origin to point-of-sale
-- India’s Minister of State for Food
Processing • Increase operational efficiencies

• Reduce overall costs

• Improve customer service since goods can be moved rapidly and

efficiently between factories, warehouses and outlets

• Gain insight into which goods move quickly off shelves and which remain
in stock

• Reduce wastage across the agricultural supply chain from the current
levels of 24 to 40 percent

• Improve farmers’ realizations

• Encourage safer crop management practices

• Ensure that India can supply more fruits and vegetables to overseas
markets

24 • PricewaterhouseCoopers Pvt Ltd.

India: A Manufacturing
Destination
Key Opportunities

PricewaterhouseCoopers Pvt Ltd. • 25

Surging Ahead
The revival of the manufacturing sector has been
a happy story in the country’s sustained economic
growth. With a nearly 80 per cent weightage in the
country’s industrial production the manufacturing
growth rate has doubled in the last 5 years – from 6%
in 2002-03 to a record 12.3% in 2006-07. Within the
sector, industries such as machinery and equipment,
food products, basic metals and alloys and chemicals
have emerged as major growth drivers in 2007-08 (up to
May).
In April 2007, Shri Kamal Nath, the Minister of
Commerce & Industry, noted that “… apart from the
remarkable performance in IT services, India is rapidly
emerging as a force in manufacturing exports, with
capital-intensive products featuring prominently”. And
the best is yet to come. According to the Minister,
“The manufacturing investments are the ‘first mile
investments’ in as far as these are likely to be followed
up by further investments to complete the projects and
also for their further expansions”.
The rising investor confidence in India can be
attributed to its rise in position from rank 50 to 43 in
the Global Competitive Index, according to The Global
Competitiveness Report 2006-07 released by the World
Economic Forum in September 2006.
Although the latest figures on manufacturing growth
have not been encouraging, the government is still
optimistic of a strong growth for the sector for another
year. According to estimates of Index of Industrial
Production released in September ’07, a drop in
manufacturing growth to 7.2% was reported in July
compared to 14.3% last year. Industry experts attribute
the decline in industrial output to the high base effect,
a strong rupee and high interest rates. Consumption in
the automotive and consumer durable sectors appears
to have been most impacted.
26 • PricewaterhouseCoopers Pvt Ltd.
Advantage India
Manufacturers across the globe- ABB, Honeywell,
Siemens, Cummins, DaimlerChrysler, Piaggio,
Toyota, Degussa and Rohm & Hass, are setting up
operations in India. India has all the required skills in
process, product, and capital engineering, owing to its
manufacturing history and quality education system.
India has a vast domestic market and a relatively
low-cost skills base which can enable it to become a
manufacturing powerhouse within the next 5-10 years.
The current surge in investments into India may be
attributed to an unprecedented domestic demand
spurred by rising incomes and savings. As India’s
middle class is growing, so is its buying power. With all
the demand drivers in place, more and more MNCs are
setting up manufacturing capacities/ facilities in India
not only for exports but to meet the growing domestic
market. India’s demographics and growing incomes
have resulted in a middle class whose size is larger than
the entire population of USA.
It is expected that if the country’s consumer market
continues growing at this rate, India will soon be
propelled from the position of 12th to the fifth-largest
consumer market in the world, behind the United
States, Japan, China and Britain, displacing Germany.
The world’s top five mobile manufacturers -- Nokia,
Motorola, Samsung, Sony Ericsson and LG – have
all set up manufacturing facilities in India. India has
become the second-largest market for Nokia in volume
terms, displacing the USA. Nokia has gone ahead and
set up a Special Economic Zone (SEZ) near Chennai as
a developer. Nokia and many of its vendors have also
set up their manufacturing plants in the SEZ which is
used as a hub wherein the various suppliers of Nokia
either manufacture or store their products and provide
the same to Nokia as and when required.
The incentives provided by SEZs have the potential to
contribute to further growth in India’s manufacturing
activity. SEZs help in bringing together the factors
conducive to excellence in manufacturing and also
offer an attractive package of incentives, including
several fiscal concessions for the developers, thereby
contributing to an increase in the country’s exports and
also attracting FDI.
Other factors contributing to the India - manufacturing
success story are the following:
• Cost Efficiency: The cost of manufacturing in India
has been found to be more competitive (about 30-
40% lower) than that in the US and Europe. This cost
and quality advantage is helping India emerge as a
preferred sourcing hub for multinationals across the
world.
• Rich Talent Pool: India has a vast pool of talented
engineers and management professionals who are
equipped to take on challenges brought about by
the implementation of new methods and systems
in organizations. India is known for its pool of
highly-skilled engineers who can take on precision-
based tasks. The output of trained human power
at the degree/diploma level has been consistently
increasing since 1985 and touched a figure of
130,000 during the 2000. From a base of 6,800
knowledge workers in 1985-86, the number increased
to 522,000 software and services professionals by
the end of 2001-02 and 814,000 by 2004-05.
• Labour pool: The labour pool in India is exceptionally
rich, with 71 million new entrants set to join the
working age population by 2010. It takes fewer days
to fill skilled job vacancies in India than in either
China or Brazil; remuneration costs are also at the
low end. India is marginally costlier than China but is
significantly cheaper than other emerging economies
such as Brazil and Mexico. India has a young work
force, with the median age being 25 years. The
concerns of an aging population can be deferred for a
much longer time than other countries.
• Highest Returns on Investments: India offers
the highest relative return on investment. Higher
returns are a reflection of the higher value-added
manufacturing investment that India attracts. India
excels in high value-added manufacturing. As
against China, which is good in high volume and
relatively low technology manufacturing, India has the
upper hand in lower-volume manufacturing, where
technology use is more intensive.
• Liberal policies: Manufacturing of most items falls
under the automatic route of FDI. Some exceptions
are items that require industrial licencing and items
reserved for the small scale sector – this list has been
pruned substantially. Recognizing the importance
of manufacturing in overall economic growth of a
country and the need for enhancing its productivity,
competitiveness and employment generation, the
government also created the National Manufacturing
Competitiveness Council (NMCC), an interdisciplinary
and autonomous body to serve as a policy forum
for credible and coherent policy initiatives in
manufacturing sector.
India’s Government has also been proactively
involved in policy-making for specific sectors of
manufacturing to provide additional benefits to the
manufacturers.
• Fiscal sops: Government offers several tax-related
industrial incentives for the manufacturing sector,
including tax holidays, 100% deductible R&D and
capital expenses, accelerated depreciation and
exemptions or deferral of state sales taxes. The SEZ
Acts also provide for substantial fiscal benefits for
units operating in SEZ, as well as to the developers
of SEZs. Other sector specific legislations and
policies, such as for the infrastructure and IT
sector etc., provides further benefits to the specific
industries thereby attempting to create a conducive
environment for attracting more investments.
Defying the traditional view that India is good only for
services, the manufacturing sector in India has been
moving up the value chain. While Hyundai is setting up
a second car plant in the country, Toyota is exporting
transmission systems from a new plant in Bangalore.
The world’s largest auto parts’ maker, Delphi Corp,
has relocated several product lines to India. So has
Bosch, another auto parts giant. The phenomenon is
not restricted to auto and auto-component firms alone.
Companies like Unilever, Kodak, Whirlpool, Timex
Watches, Cummins, Tecumseh, GE, ABB and Siemens
are already sourcing products from their Indian plants
for their global markets. And companies like Nokia and
Elcoteq Network Corporation are considering setting up
plants in India to meet their global demand for mobile
phones.
PricewaterhouseCoopers Pvt Ltd. • 27
Key Opportunities
Electronics & Hardware Manufacturing
Until now the Indian electronics hardware industry
has only managed to capture a minuscule share of
the global electronics hardware market as compared
to neighbouring Asian countries. India’s electronics
hardware market was worth an estimated USD 12.65
bn in 2005-06 and India’s share in the world production
of Electronics and Computer Software/ services was
estimated at 2.08 % in the year 2005-06. This sector
registered a growth of 34.38 % in 2005-06 over the year
2004-05.
The Indian Electronics Industry is a burgeoning one
with the market for electronic products growing rapidly.
In June, 2007, India added over 8 million new wireless
phone users, the highest growth rate in the world.
Penetration levels in other high growth products are
equally brisk and demand for computer/ IT products,
auto electronics and medical electronics is rapidly
increasing. This growth rate has attracted several global
players like Solectron, Flextronics, Jabil, Nokia, Elcoteq
and many more to India. Korean electronics giants LG
and Samsung have also proved their commitment by
establishing large manufacturing facilities and they
now enjoy a significant share in the growing market for
products such as Televisions, CD/DVD Players, Audio
equipment and other entertainment products.
FDI regime
Foreign investment up to 100 per cent is permitted
under the automatic route in manufacturing with the
exceptions being Aerospace & defence equipment
manufacturing (which requires an Industrial licence). In
order to promote exports of Electronics Hardware by
entrepreneurs from India, the Government of India has
initiated several schemes such as self certification of
all import/export operations of units within the SEZs,
statutory services and facilities such as high speed data
connectivity to electronic hardware technology parks.
However, obstacles to India’s growth as a Electronics
& Hardware destination remain. There is lack
of awareness at the global level of investment
opportunities in India. Poor Infrastructure is cited by
investors as the main barrier against foreign investment.
28 • PricewaterhouseCoopers Pvt Ltd.
In an attempt to attract investments into the sector,
in March 2007, the Government announced the
Semiconductor Policy, providing special incentive
packages for the semiconductor and other high tech
industries. The Policy provides for special incentives
packages for encouraging setting up of semiconductor
fabrication and other micro- and nanotechnology
manufacturing industries. In brief, the Policy provides
for a part of the capital expenditure during the first
10 years for manufacturing units to be borne by the
government; no countervailing duty (CVD) on capital
goods in case of units outside the SEZs. The Policy also
prescribes minimum investments for semiconductor
manufacturing (wafer fabs) plants and for ancillary
plants. However, the regulations are yet to be notified
– the delay has caused several MNCs to defer their
investment plans.
The Government is all set to announce its much-
awaited hardware policy which aims to cut duties and
taxes on the industry-manufactured goods almost by
half, bringing it at par with the ASEAN level of 12-16%.
The policy is also expected to address issues such as
infrastructure and skill development besides specifying
measures to leverage on research and development
skills to make India a hardware hub.
The Indian electronic sector faces stiff challenges
in the international market as it has to overcome
infrastructural constraints leading to high operational
costs. There is also a need for forward and backward
integration of hardware and software sectors to take
advantage of India’s burgeoning software sector. India
had been meeting more than half of its electronics
hardware requirements through imports. India now
needs to promote itself as a destination for electronics
and hardware and to promote and develop brand
‘INDIA’ as a big potential market and publicise and
showcase itself as a viable destination. It could also
participate in International trade fairs specially focusing
on Electronics Hardware or its segments;
Outsourcing Of Engineering, Design & R&D Services
Usually the models followed for outsourcing in India are:
1) Captive Development Centers set up by companies
who want to keep designing and R&D as their core
functions thus creating an in-house team by hiring
Indian engineering talent, such as Microsoft, Intel,
Novell, IBM etc;
2) Engineering Services divisions of Indian IT players
who cater to a particular market segment, such as
Wipro, Infosys and TCS; and
3) Small focused players who only outsource
engineering, design, automation etc. services to a wide
range of clients, such as Neilsoft.
Though the top five growth industries in manufacturing
in India have been recognised as gems and jewellery,
cement, steel, pharma, and engineering goods, a
huge potential can also be seen in other fast growing
knowledge based industries such as the outsourcing of
Engineering, Design and R&D Services.
Over the past few years, the Indian IT and BPO
Industries have dominated the global IT/ITeS sector.
Since 1990s there has been a considerable growth
in the use of outsourcing other services as well. The
main factor driving this trend has to be the competitive
pressures that companies all over the globe are facing
to create new products and to bring them to the
market faster or upgrade the existing products to make
them more efficient or functional. In such a scenario,
it makes sense for companies located in countries
where in-house manpower costs are on the higher
side to outsource the engineering and design functions
to outsource vendors to save on manpower costs.
Outsourcing is also resorted to by companies which
need to shift out non-core functions and to focus their
attention on their core capabilities.
Though engineering services outsourcing was a slow
starter, since sharing product development details
required more trust in vendors and involved intellectual
property rights issues, improvements in bandwidth
capabilities and engineering collaboration tools have
helped open up the field.
Also, considering India’s rich young talent pool and high
engineering base, India is emerging as the favoured
outsourcing destination of the world for engineering
services, design, R&D services etc. As outsourcing
moves up the value chain, knowledge based industries
will soon prove to be drivers of India’s economic
growth.
Thanks to India’s higher education system, which
boasts of several world-class engineering and business
schools, several knowledge-based industries (including
biotech) have access to a large pool of well-trained
and talented graduates, thus providing a source
of innovative ideas. Indian companies engaged in
knowledge based industries usually invest heavily in
training their employees to maintain and improve their
skills. In this scenario, growth of these knowledge-
based industries seems like a natural progression.
India leads in the growth of outsourcing services in the
following areas:
• Information Technology/ IT Offshore Outsourcing
• Business Process Outsourcing
• Engineering Services Outsourcing
• Healthcare Services Outsourcing
• Manufacturing Outsourcing
Design in aerospace is also a potential growth area.
While big names such as HCL Technologies and Infosys
Technologies have been working on various systems
like flight management and landing gear etc. for major
players such as Boeing, Airbus, Hamilton Sundstrand,
Boeing etc., aerospace majors like Lockheed Martin,
Thales, Pratt & Whitney, Bombardier, Rolls Royce have
all shown keen interest to participate in this segment.
To realise the potential of this sector, the government
has been doing its part. It has notified the Designs Act,
2000 which provides for protection of designs and lays
down the framework thereof. The government has also
approved the National Design Policy which envisages
setting up of specialized Design Centres or “Innovation
Hubs” for automobile & transportation sector, jewellery,
leather, etc and promoting ‘Designed In India’ as a
by-word for quality. It also envisages setting up an
India Design Council (IDC) on similar lines as other
professional councils such as the Bar Council, Medical
Council etc. for performing functions similar to the said
councils.
Recently the CII has formed a National Committee on
Design which would work closely with the upcoming
IDC & with Department of Industrial Policy and
Promotion to address the various issues related to
development of Design in India and towards creating a
Global Brand of ‘Designed in India’
PricewaterhouseCoopers Pvt Ltd. • 29
The NMCC has identified innovation as an important
factor for growth in its National Manufacturing Strategy
paper. As a good beginning to promoting innovation
in the manufacturing sector, the CII recently launched
the development of the Indian Innovation Index, in
collaboration with the INSEAD, a leading business
school of France. The Innovation Index would lead
to awareness and would be useful in triggering
comparisons and inviting questions and ideas for
improvement.
What the future holds:
According to UN ESCAP, India is emerging as a force in
manufacturing exports. Until recently, India’s services
exports have been a success story. But manufacturing
exports have surged, growing 37.3% year-on-year in
US dollar terms between April and September 2006.
Manufactured exports are dominated by capital-
intensive engineering, chemical and petroleum
products. The main engineering products iron and steel
are feeding large global demand, especially from China.
India’s automotive sector is also expanding rapidly.
Growth in manufacturing exports, along with growth in
domestic demand, is likely to create 25-30 million new
jobs in manufacturing and add 1 per cent to India’s
annual GDP growth rate.
Challenges ahead:
Challenges faced by Indian manufacturing warrant
appropriate responses from both the govt. as well as
the industry for improving the competitiveness of the
sector. There are a few areas where both the govt.
and the industry need to put in efforts through a well-
designed Public-Private partnership mode:
1. Infrastructure: India has the worst infrastructure
amongst the emerging economies. This is affecting the
manufacturing sector’s ability to attract more business.
Primary issues that needs immediate attention are:
• Electricity: Unreliability of power supply is by far the
most significant infrastructural constraint. On an
average, a company can expect nearly 17 significant
power outages per month, against one per month in
Malaysia and fewer than five in China. At the same
30 • PricewaterhouseCoopers Pvt Ltd.
time, the cost of power is high -- about 50% higher
than in China.
• Transport: The high turnaround time at ports, the
deterioration in rail system and the poor plight
of roads and highways costs companies dearly.
India has very few four-lane highways and the bad
condition of its roads is affecting the competitiveness
of Indian companies. They need to maintain higher
inventories, spend more on transportation and face
delays in shipping of their export consignments.
• Water: The cost of water is 40% higher in India
than in Thailand. We need to have a plan for
manufacturing hubs like Chennai that are facing acute
water shortages.
• Natural gas: India does not have piping networks
in major parts of the country, including key
manufacturing locations like Chennai and Bangalore.
This is forcing companies to use more expensive
alternative fuels, leading to an increase in the cost of
operation.
2. Labour laws. India’s archaic and rigid labour laws
prevent companies from adopting flexible hiring
policies. Only Mexico is considered as restrictive as
India in this respect. In contrast, labour regulations
in other countries allow greater flexibility in business
operations while protecting worker interests. In most
countries, the nature of employment is contract based,
with clear stipulations for employment termination
at the discretion of the employer, provided statutory
severance benefits are available and notice period
conditions are met. This allows firms to respond to
business cycles in a flexible manner. Also, in India,
location tends to determine the quality of labour
relations.
3. Multiplicity of taxes: Doing business in India is
made cumbersome by multiple taxes levied on Indian
manufacturing companies, such as octroi, corporate
tax, entry tax, VAT, customs duty etc. Some of these
taxes can be set off, others cannot. Though corporate
taxation rates have significantly come down in the last
15 years – the top basic rate fell from 48% to 30% in
2005, they still continue to be on the higher side.
4. Discrepancies in inter-state regulations: Regulations
between states vary and discourage companies
to operate freely across the country. This applies
especially to industries like liquor and automobile
industry.
Conclusion
India has a significant competitive advantage in the
skill-intensive industries. Over the next decade, the
global trend to manufacture and source products
in low-cost countries is likely to gather strength.
Taking advantage of this trend, India’s manufacturing
exports could increase from US$40 billion in 2002
to approximately US$300 billion by 2015, leading
to a share of approximately 3.5 per cent in world
manufacturing trade.
If India is to achieve this quantum jump in
manufacturing exports, several factors need to play
their part. India’s manufacturing industry needs to
adopt a global mindset and carefully select the product
segments. The government needs to play its part by
implementing key reforms in taxation, infrastructure,
SEZs, labour and skill development.
PricewaterhouseCoopers Pvt Ltd. • 31
Infrastructure: Roads

32 • PricewaterhouseCoopers Pvt Ltd.

Road Sector in India
India has an existing road network of more than 3.3
million km, which is the second largest in the world.
This is, though lower than USA which has the largest
road network of about 6.3 million km significantly more
than China which has a road network of about 1.4
million km. India has 110 km of road length available
per 100 sq. km, far exceeding the corresponding figures
of 68 km per Sq. km and 15 km per Sq. km for USA
and China respectively. Similarly, India has 3,064 km of
roads per million of population which is although lower
than corresponding figure of 22,064 km per million
population for USA, is significantly higher than that of
China at 1,072 km per million population.
In India, the fact that National Highways and State
Highways together constitute about 6% of the road
network and carry about 80% of the total traffic, clearly
emphasizes the importance of National Highways
and State Highways. On the other hand District
roads and Village roads together constitute 94% of
total road network and carry only about 20% of total
traffic. Irrespective of this, their importance cannot be
underestimated as District Roads and Village Roads are
important from connectivity point of view.
Road network in India requires major initiatives for
enhancing its capacity. Only 12% of the National
Highways are four-lane with two-lane and single-lane
being 50% and 38% respectively. State Highways have
lower capacity, with only 0.7% of total State Highway
length being four-lane and corresponding percentage
for two-lane and single-lane being 20.3% and 79%
respectively.
Government’s Objective for Road Sector
The main objective of Government of India relating
to the road sector is balanced development of the
total network. The tasks include widening of roads,
improvement in riding quality and strengthening, road
Road Network in India
Road network Length (km) App. Percentage of total
Length
National Highway 65,569 2%
State Highway 131,899 4%
Major District Roads 467,763 14%
Other Roads 2,650,000 80%
(Other District Roads and Village Roads)
safety measures and providing wayside amenities to
cater to the growing demand for road services. In
addition, 100 per cent rural connectivity with all-weather
roads is a priority objective in national planning. Inter-
modal issues like road connectivity with airports,
railways, ports etc. are also priority issues.
Ambitious Programs for Road Sector
National Highway Development Programme (NHDP)
National Highway Development Programme (NHDP)
being implemented by National Highway Authority
of India (NHAI) has a total of seven phases with an
estimated cost of Rs. 192,100 crores. North-South &
East-West (NSEW) Corridor project, which forms the
Phase-II of NHDP involves upgradation of existing
two-lane highways and four-laning of around 7,300
km of National Highway, connecting Srinagar to
Kanyakumari (North-South) and Silchar to Porbandar
(East-West). 10,000 km of National Highway is targeted
for 4-laning in NHDP Phase-III. Similarly, 2-laning with
paved shoulders of 20,000 km of National Highways
is targeted under NHDP Phase-IV and 6-laning of
Golden Quadrilateral and some other selected stretches
covering 6,500 km is targeted under NHDP Phase-
Development of 1,000 km of express ways is also
targeted under NHDP Phase-VI. Under Phase-VII, NHAI
plans to build ring roads to decongest the city traffic.
Also, it plans to build bypasses, over-bridges, flyovers,
etc. on the existing corridors to support the growth in
traffic due to the growth of new habitations along the
highways. However, this phase is still in a conceptual
stage and the stretches for this phase are yet to be
identified. NHDP also envisages connecting of all major
ports (Haldia, Paradeep, Vishakapatnam, Chennai &
Ennore, Tuticorin, Kochi, New Mangalore, Marmugoa,
Jawarharlal Nehru Port Trust and Kandla) to the GQ,
through around a 356 km of road network.
Traffic
40%
40%
18%
2%
PricewaterhouseCoopers Pvt Ltd. • 33
Accelerated North East Road Development Programme
(ANERDP)
The Government has also initiated a special program
with the objective of providing connectivity to remote
and backward areas in the north-east with the rest of
the country as well as with neighboring countries. The
programme will be implemented in three phases, with
a target to improve and upgrade 7,639 km of highways
and will require a total investment of Rs.12,100 crores.
Pradhan Mantri Gram Sadak Yojana (PMGSY)
The PMGSY, launched in 2000 and being implemented
by the Ministry of Rural Development, aims at providing
road connectivity through all-weather roads to all
unconnected inhabitations, having a population of
more than 1,000 persons, by 2003 and thereafter, to
those with a population of more than 500 persons;
and to connected habitations (beginning with those
connected by gravel roads) by the end of the Tenth Plan
Period (2007). As per the Ministry of Rural Development
the expenditure to be incurred for the Rural Road
Development program is about Rs 60,000 crores till
2009-10. The performance with respect to PMGSY
projects is far from envisaged. Despite being in its fifth
year of operation, 41,765 habitations with population
of 1,000 and above are yet to be connected and the
connectivity of habitations with population of 500 and
above is also unsatisfactory.
Huge Requirement of Funds in Near Future
In broad terms, the estimation of the investment
needs for Expressways, National Highways, and State
Highways, comes out to around Rs.30,000 crore,
Rs.192,100 crore and Rs.75,000 crore respectively.
PMGSY requires around another Rs. 60,000 crore.
In the context of Urban Roads, India has 16.1% of
developed area occupied by roads which is quite small
when compared to a figure of about 26% for United
States. Increasing urban population and congestion in
cities will increase the demand of urban roads, creating
fund requirement for construction of new urban roads
too.
Apart from funds required for construction and
upgradation of roads, huge amounts of funds are also
required for maintenance of existing roads. Maintaining
34 • PricewaterhouseCoopers Pvt Ltd.
India’s present highway network to appropriate
standards will require annual funding of about Rs.7,000
crores, three times the current level of expenditure.
From road safety perspective, with 23.9 deaths
annually per 10,000 registered vehicles, India suffers
fifteen times the level of traffic deaths experienced
in more industrialized countries such as the UK.
Accidents also have a major impact on the country’s
economy, costing an estimated Rs 3,000 crore or more
than 3% of India’s GDP every year. The estimated
annual expenditure on safety measures required for
reducing this accident rate and economic loss comes
out to be about Rs.1–1.5 lakhs per kilometer.
Such huge funds requirement cannot be met entirely
from the government’s budgetary resources, loans
from multilateral agencies and Central Road Fund
alone and, therefore, an increased level of private
sector participation in the development, operation and
maintenance of the road projects has been planned. In
this direction, NHDP Phase III to NHDP Phase VII have
been planned on (Build-Operate-Transfer) BOT basis.
BOT projects are transferred back to the government
at the end of the pre-determined concession period.
During the concession period, the private developer
recovers his cost and earns a return on investment
through tolls and budgetary support. The NHAI is
also beginning to experiment with private sector
participation in road maintenance for completed NHDP
stretches. The move could herald the beginning of a
new era in road maintenance.
Promoting Involvement of Private Sector
To promote involvement of private sector in road
construction and maintenance, Government of India
has taken some major initiatives. Now 100 per cent
foreign direct investment (FDI) is allowed in road
sector projects. NHAI/Government of India (GoI) may
provide a capital grant up to 40% of the project cost,
in order to enhance the viability on a case-to-case
basis. Furthermore, Land required for the construction
and operation of the facilities may be provided by the
government, free from encumbrances and Concession
period may be allowed up to 30 years depending on
the traffic capacity and the viability of the projects.
Model Concession Agreements (MCAs) for BOT toll-
based, annuity-based projects and also for Operations
and Maintenance of the already constructed projects
have been prepared / are under various stages of
finalization. The Government has decided to have
dispute resolution in line with the Arbitration and
Conciliation Act 1996, based on UNCITRAL provisions.
Apart from these measures, there is 100% tax
exemption in any consecutive 10 years out of 20 years
after commissioning of the project. Also duty free
import of high capacity and modern road construction
equipment is allowed. In addition, external commercial
borrowing norms have been made easier to facilitate
the process of receiving external funds.
Several state governments have also taken initiatives
to facilitate private sector’s role in the development of
state roads on a BOT basis, by enacting infrastructure
development acts (Andhra Pradesh and Gujarat),
making appropriate amendments to either the Motor
Vehicles Tax Act (Gujarat, Maharashtra, Rajasthan and
Karnataka) or the Indian Tolls Act (Madhya Pradesh
and Andhra Pradesh). Many states have also set up
State Road Development Corporations (SRDCs) for the
development and implementation of projects (including
the involvement of the private sector).
In the future, the increased level of private sector
investments, together with increase in the projects
sizes, will put more pressure on the construction
companies to enhance their technical and financial
capacities. In this regard, it would be helpful for
Indian companies to form Joint Ventures with foreign
construction companies. Construction companies will
also require approaching to equity markets to raise
funds for high value projects. In this context, already a
few companies have raised funds through the issue of
equity shares, Global depository Receipts (GDRs) and
Foreign Currency Convertible Bonds (FCCBs).
Conclusion
Road sector in India is seeing a lot of activity and one
can expect this level of activity to carry on in future.
There are ambitious targets set by Government and
those targets can be met if issues from this sector
are suitably addressed and if role of private sector
is enhanced in road construction, operations and
maintenance.

Policy and Regulatory Support – Roads and Highways

Recent Developments
• Committee on Infrastructure has
approved an expanded NHDP
for the next seven years (2005-
2012) largely relying on PPP
• Model Concession Agreement
for PPPs in national Highways
prepared; key features of the
MCA include:
• Partial guarantee of traffic risk to
the Concessionaire.
• Concessionaire’s interest
protected in regard to
competing Roads.
• Performance standards of the
Highways clearly spelt out.
• Focus on Road User’s safety
• Users fee charges, revision
thereof and concession to local
traffic clearly spelt out.
• NHAI responsible for providing
land free from all encumbrances.
NHAI to bear cost of all related
pre-construction activities.
• Force Majeure conditions and
relief to the party under such
conditions clearly spelt out.
• Strong dispute resolution
mechanism.
• 100% FDI under automatic
route permitted for all Road
development projects
• NHAI / GOI may provide capital
grant up to 40% of project cost
to enhance viability on a case to
case basis
• Concession period allowed up to
30 years
• Duty free import of specified
modern high capacity equipment
for Highway construction
• Road Sector declared as an
Industry.
PricewaterhouseCoopers Pvt Ltd. • 35
Infrastructure:
Civil Aviation & Aerospace

36 • PricewaterhouseCoopers Pvt Ltd.

Indian Civil Aviation Sector: Soaring High
Civil aviation in India has been witnessing phenomenal
growth. As highlighted in the Economic Survey of
India for 2006-07, policy initiatives have had a marked
impact upon air traffic. India’s booming economy
and reforms have led to around half a dozen private
airlines starting operations in the past three years.
Over the last 2 years, passenger traffic (international
and domestic) has been reported to have grown
at over 25% per annum while air cargo traffic has
registered a growth at over 10% per annum.
According to the Airports Council International, Asia
will witness an annual growth in air traffic of 9% with
India likely to be one of the fastest-growing markets
(annual growth of 10.4%) over the next 20 years.
In this emerging scenario there is an urgent need for
modern airports in India with larger capacities and
better efficiencies.
Indian Airport Sector
There are around 450 airports / airstrips in the
country, of which over 120 airports are managed by
the Airport Authority of India (AAI). The unprecedented
growth in air traffic over the recent past has put
tremendous pressure on airports – not only in metro
cities like Delhi, Mumbai, Chennai, Bangalore, Kolkata
and Hyderabad, but also numerous non-metro cities
including State capitals and industrial hubs.
India’s growing economy has already led to the
opening of air corridors to smaller cities. Many of
these are now connected by direct air routes, making
them more accessible and leading to growth in
business, travel & tourism.
Report of the Task Force, set up by the Committee
on Infrastructure (Planning Commission, Government
of India) on preparing a Financing Plan for Airports
(published in July 2006), noted that an investment of
about USD 10 Billion is projected for the development
of airports in India between 2006-07 and 2013-14. Of
this, about USD 700 Million is projected to be required
towards capital cost of equipment and instrumentation
alone.
Going forward, the Task Force expected Public
Private Partnerships (PPPs) to play a key role in the
development of Indian Airports and contribute towards
a total investment of about USD 7.7 Billion. Already,
a number of Airport projects with private sector
participation, initiated over the last few years, are now
taking shape.
Modernisation of Delhi and Mumbai Airports
With a view to developing world-class airports at Delhi
and Mumbai, the Government of India invited private
players to bid for taking over operations, management
and development of these airports. The bidding
process generated considerable interest and witnessed
participation of several international players like Fraport
(owner & operator of Frankfurt Airport), ASA Mexico,
Turkish airport operator – TAV, Airports Company South
Africa, etc. in association with Indian private players.
Upon completion of this bidding process, operations
at these airports were handed over to two joint venture
companies – Delhi International Airport (P) Ltd. (DIAL)
and Mumbai International Airport (P) Ltd. (MIAL). A
consortium led by M/s GMR Group holds a 74 % stake
in DIAL with the balance share being held by AAI.
Similarly, a consortium led by M/s GVK Group holds
a 74 % stake in MIAL (remaining 26% being held by
AAI). Various agreements / contracts for handing over
the control of the two airports to DIAL and MIAL were
executed in April 2006.
PricewaterhouseCoopers Pvt Ltd. • 37
 Greenfield Airports at Bangalore and Hyderabad
Simultaneously, green-field airports of international
standards are being constructed at Hyderabad and
Bangalore and are expected to become operational
by the middle of 2008. Bangalore International Airport
Limited (BIAL) has Siemens Project Ventures, Larsen
and Toubro (L&T) and Unique Zurich Airport as
equity holders from the private sector, while AAI and
Karnataka State Industrial Investment Development
Corporation are the two public sector shareholders in
the Company. Similarly, GMR Hyderabad International
Airport Ltd is a Joint-Venture between GMR Group,
Malaysia Airport Holdings Berhad (MAHB), AAI and the
State Government of Andhra Pradesh.
The ‘Runway’ Ahead
• Proposed Modernisation of Chennai and Kolkata
Airports: The Prime Minister’s Committee on
Infrastructure has given an in-principle approval for
the modernisation of Chennai and Kolkata airports,
which witnessed average annual growth in passenger
traffic of about 15.7% and 14.5% respectively over
2001-02 to 2005-06. During 2005-06, these airports
handled about 6.8 million and 4.4 million passengers
respectively.
• Development of Non-Metro Airports: Besides
the development of the major metro airports, the
Government of India is also focusing on developing
airports in non-metro (Tier-II) cities so as to equip
them to handle the phenomenal growth in passenger
and cargo traffic currently being witnessed. While the
modalities for the development of these airports are
being worked out (including consideration of various
options like involvement of private players in the
development of ‘city-side’ (commercial) infrastructure,
public-private joint-ventures for select airports,
inviting private participation in the modernisation of
a ‘cluster’ of airports, etc.), it is certain that private
38 • PricewaterhouseCoopers Pvt Ltd.
sector involvement will be targeted. It is expected
that an investment of about USD 1.8 Billion would
be required for the development of 35 such non-
metro airports.
These proposed airport development plans have
already attracted a host of private companies,
including international operators like Changi Airport
International (a wholly owned subsidiary of the
Civil Aviation Authority of Singapore) and a number
of Indian corporate houses, who are keen on
participating in these projects. The GVK Consortium
(involved with the Mumbai airport modernisation) has
been reported to see potential for low-budget airport
in non-metro areas possibly clubbing them with what
are being called as ‘Merchant Airports’ where cargo
operations from various textile, pharmaceutical or
agriculture hubs could enhance their feasibility.
• Merchant Airports: The Ministry of Civil Aviation
has received three separate proposals from the
private players for setting up of Merchant Airports
in Durgapur (West Bengal), Jhajjar (Haryana) and
Gwalior (Madhya Pradesh). The Gwalior proposal
aims at setting up a cargo airport and involves an
investment of Rs 300 crore while the Durgapur
proposal envisages a passenger airport being
developed over 2000 acres of land. The Jhajjar
proposal has come from Reliance Industries
and involves the setting up of an international
cargo airport within Reliance’s Special Economic
Zone. This interest from private players comes in
response to a new policy expected to be ready in a
couple of months to allow privately-owned airports.
Under this policy the private sector would be able
to identify land and build and operate airports
without government assistance and without being
required to pay the government a revenue share.
• Other Greenfield Airports: A number of proposals
for setting up Greenfield Airports are under active
consideration of the Government of India. These
include Navi Mumbai, Greater Noida and airports
like Paykong Airport (Gangtok), Cheithu Airport
(Kohima) and an airport at Itanagar for connectivity
to North-East. Further, in an effort to support
industrial growth, several State Governments like
Karnataka and Maharashtra are exploring options
for setting up green-field airport projects in other
Tier-II cities.
Conclusion
There are unique opportunities in the Indian airport
sector for potential investors which may extend well
beyond the main metro markets. However, private
sector participation in these opportunities would require
consideration of a number of issues with respect to
the legislative & regulatory framework and commercial
aspects so as to enable private players to anticipate
and deal with the complexities and to facilitate effective
project planning.

Projected investment for Indian Airports

(2006-07 to 2013-14)

Figures in USD Billion

0.20
0.38 0.15 0.71

1.17

2.85

3.13

1.43
Delhi & Mumbai Cityside infrastructure for 35
non-metro airports
Kolkata & Chennai
Greenfield airports in North East
7 Greenfield airports (including
Bangalore & Hyderabad) Other aerodrome works

Airside infrastructure for 35 non- Equipment & Infrastructure

metro airports

PricewaterhouseCoopers Pvt Ltd. • 39

Infrastructure: Port Sector

40 • PricewaterhouseCoopers Pvt Ltd.

Current Status
India, with a coastline of over 7000 Kms has a vibrant
ports sector, which includes 12 large Ports managed
by the Central Government ( referred to as Major Ports)
and a very large number of small and large other Ports
( managed by State Governments or run by private
sector – 187 In all). The major ports handle bulk of the
cargo (75%).
The economy has seen a healthy cargo growth of 10%
over the last seven years with cargo volumes (in 2005-
06) at over 569 million tonnes.
Clearly liquid and solid bulk such as Petroleum, Iron
and Coal has been dominating the Indian cargo.
Containers too account for about 15%. However this
proportion is set to grow as the container penetration
in Indian ports is still below world and Asian standards.
The container traffic, in India, has grown at CAGR of
16% over the last 7 years to reach 4.7 Million TEUs at
the end of FY 2005-06.
Importantly, efficiency of Indian ports continues to
improve although they are still short of world standards.
Most Major Ports have been consistently improving
their turn around times. Ennore Port, India’s only
corporatized major port has the distinction of the fastest
average turn-around time at 1.19 days. Overall the
turnaround time was 3.50 days during 2005-06 with an
average output per ship per day was 9267 tonnes.
Enhanced role of Private Sector
The Government has taken a number of initiatives
in enhancing the role of private sector in ports, as a
part of Government policy of increasing private sector
participation in all infrastructure areas. For example,
Cargo Profile at Major Ports (Mn Tonne)
(2005-06)
Petroleum & Oil Products Iron Ore
Fertiliser & Raw Materials Coal & Coking Coal
Container Others
(Source - IPA)
PricewaterhouseCoopers Pvt Ltd. • 41
 Port Operation Private Operator
Major Ports

Nhava Sheva, JNPT Container Terminal, P & O Ports, Australia

BOT 30 years
JNPT Third Container Terminal Maersk – Concor
Chennai Port Container Terminal P & O Ports, Australia

Visakhapatnam Container Terminal: Visakha Dubai Ports International

& J.M.Baxi

Visakhapatnam BOT – Berth EQ-8 Gammon India & Portia

Mgmt Services
Cochin Container Terminal: BOT Dubai Ports International

Tuticorin Container Terminal Port of Singapore Authority

& SPIC Group
Kolkata Container Terminal Cardinal Logistics
Ennore Port Liquid Cargo Terminal IMC Group – L&T
Ennore Port Iron Ore & Coal Terminals Adani Group

Minor Ports

Hazira, Gujarat Greenfield port BOOT, Royal Dutch/Shell Group,

35 years concession TotalGaz Electricite Holdings,
France

Kulpi, West Bengal Privatization & development, P&O Ports, Australia, WBIDC,
50 yr concession, Mukund-Keventor
SEZ attached.

Gujarat Pipavav Ports Container facilities Maersk India, Port of Singapore

Authority, SeaKing Infrastructure

Mundra, Gujarat Container Terminal P&O Ports, Australia, Adani Group

Vadinar, Gujarat All weather port Essar Group
Jamnagar, Gujarat POL port Reliance

42 • PricewaterhouseCoopers Pvt Ltd.

privatization of specific terminals in Major Ports,
permission to private parties to set up multi-purpose
minor ports and permission to set up captive jetties/
ports are a few well established steps now.
Private participation in development and operation of
berths at major ports has achieved a good degree of
success. New private ports, particularly in Gujarat, have
established themselves very well.
Till date, projects worth more than USD 2 billion
have been approved in the Ports sector and either
commissioned or at various stages of implementation,
where private sector is involved.
The following table gives a broad based view of the
current private sector activities in the Indian Ports
sector.
Ports - a big opportunity now
The Planning Commission has projected an investment
of Rs.870 billion (almost USD 22 billion), in this sector,
during the 11th Five Year Plan period 2007-12. With
increasing emphasis on the enhanced role of private
sector, there are a large number of interesting economic
opportunities for the private sector now - ranging from
dredging contracts to O&M contracts to investment
opportunities in specific berths as well as setting up of
Minor Ports. Container berths in particular have also
seen a lot of M & A activity recently. In more specific
terms, there are the identified opportunities in each
of the maritime states, where private sector is being
wooed. For example, Rewas, Dighi and Jaigad ports in
Maharashtra, Simar, Vansi-Borsi, Mithivirdi, Bedi and
Maroli ports in Gujarat, Alapuzha, Azhikkal, Beypore
and Vizhinjam ports in Kerala, Sandheads and Sagar
Island in West Bengal, Cuddalore Port, Nagapattinam
and Colachel ports in the southern state of Tamil Nadu,
Tadri port in Karnataka etc. These are apart from
additional terminals in almost all the Major Ports.
Container Traffic Growth
(Source - IPA)
PricewaterhouseCoopers Pvt Ltd. • 43
Pressing Issues that needs to be addressed
Despite improvement in efficiencies and cargo handling
as well as the healthy trends witnessed in port sector
investments and private participation, it is clear that
some critical issues facing the port sector still need to
be resolved. These would need to be resolved as soon
as possible in order to prepare the country for a much
needed export thrust:
• It has been seen that a number of competing
developments, involving huge sums of money, are
being promoted in a sub-optimal manner from a
national standpoint. State and Central Government
developing competing projects is one such example.
These should be resolved to avoid duplication of
resources.
• Port projects, by their very nature, are long gestation
projects – the useful life of a berth or a dredged channel
often exceeds 50 years. This would correspondingly
involve huge capital investments and therefore, debt
products with long tenors. Such products are currently
not easily available in the Indian financial markets.
• Port is only one of the components in the logistics
chain. To be effective roads and rail projects need to
be envisaged and implemented in conjugation with the
port sector development plans in order to optimize the
transport sector scenario of the country.
• Dredging cost is one of the major capital costs
incurred by port companies/trusts. Currently,
the management accounting treatment for such
projects is neither clear nor standardized. This
results in skewing the measurement of viability
for projects as well as the performance of various
berths in a port.
• The bulk of traffic in India is handled by Major Ports
which come under the Government of India. It is felt
that this is at times impeding development of much
needed infrastructure since Government approvals
can be a lengthy process. Greater autonomy
including corporatization could be considered as a
first step towards privatization.
• It is high time that Government relook at the limited
role played by TAMP (Tariff Authority for Major
Ports) in regulating tariffs and came out with a
comprehensive position on regulation of tariffs and
service standards.
Conclusion
Given the strong GDP growth of over 9% and even
better growth of exports, it is only natural that a
corresponding ramping up of ports infrastructure
would be required. While the port sector has
seen some landmark projects in the past few
years, investment in the sector would have to be
considerably ramped up to accommodate the growing
volume of import-export traffic.

44 • PricewaterhouseCoopers Pvt Ltd.

Infrastructure: Real Estate

PricewaterhouseCoopers Pvt Ltd. • 45

Office Demand Growth Spurred by the IT Industry
India is the world’s back office, currently commanding
44% of the global market for IT and business process
outsourcing (BPO) services, according to the National
Association of Software and Service Companies
(Nasscom), India’s IT industry association. In 2006,
service and software exports amounted to $17.1 billion
and hardware export another $6.9 billion. Since fiscal
year 1999-2000, the Indian IT and IT-enabled services
(ITES) industry has expanded at a compound annual
growth rate of 28%. The industry’s contribution to
India’s GDP has risen from 1.9% in 1999-2000 to a
projected 4.8% in 2005-06. This has led to strong
demand in the office sector, with most occupier
demand coming from the growth of IT and ITES, along
with BPO, as multinationals try to capitalize on the
young, educated and inexpensive work force.
The global demand for Indian outsourcing and
offshoring activities stems from a need to reduce
production costs. Wage levels in the IT sector have
been steadily rising since 2000, but they are still low
compared with developed countries. A young IT
employee in India still earns about US$8,000 per year,
much less than a Western counterpart, who makes
about US$50,000-$70,000. Even when the costs of
power, telecommunications, office set-up and other
infrastructure are included, India retains its cost
advantage. A Deutsche Bank report, estimating the per
employee cost per year in several offshore locations,
showed India’s advantageous position, with a cost of
US$5,300. China and Russia trailed at US$7,700 and
US$14,450, respectively. Other factors driving the
growth of the IT-ITES-BPO sector are a large pool of
English-speaking professionals, government policies
actively promoting IT export, good quality control
systems and the presence of cybersecurity and privacy
laws.
The growth in offshoring has led to the classification
of Indian cities into three tiers in terms of their
attractiveness. Tier I cities provide the largest and most
qualified labor pool and better infrastructure and real
estate formats. They include Bangalore, Mumbai and
the National Capital Region (Delhi and surrounding
satellite towns such as Gurgaon and Noida). Tier II cities
provide relatively smaller work force pools but offer
similar quality labor at a cost advantage of 15% to 20%
over Tier I cities. They include Hyderabad, Chennai and
Pune. Tier III cities provide more cost advantages than
46 • PricewaterhouseCoopers Pvt Ltd.
Tier I and II cities through lower labor and real estate
costs and lower staff attrition but are riskier in terms of
much smaller labor pools and somewhat lower-quality
infrastructure. They include Kolkata, Ahmadabad,
Chandigarh, Indore, Nagpur, Vishakhapatnam and
Kochi.
Nasscom estimates that the IT and BPO industries
will create one million additional jobs in the five major
hubs (New Delhi, Bangalore, Hyderabad, Chennai and
Mumbai) and about 600,000 jobs in other Tier II and
III cities by 2010. This should result in office space
demand of roughly 21 million m² (226 million square
feet), which compares with the total office stock in
Central London, for example, of 19 million m² (205
million square feet). Corresponding to the high demand-
side dynamics, development activity is extensive and is
mainly focused on secondary locations. The combined
total office stock in the major cities is estimated to
stand at about 10 million m² (108 million square feet).
Structural Shift in the Retail Sector
India ranks as the most attractive retail destination
among all emerging markets, according to A.T.
Kearney’s Global Retail Development Index. Total sales
account for more than US$300 billion and are projected
to rise between 6% and 10% per year in the medium
term, considering India’s projected upward growth
trend and favorable demographics.
The retail sector offers opportunities stemming from
an ongoing structural change. India’s retail market
until recently was very fragmented. The retail scene
is still characterized primarily by small, family-owned
enterprises and street markets. The largest 10 retailers
account just for 2% of the total market. One major
reason for the underdevelopment of the retail market
was government protection of local retailing from
foreign competition. Only as recently as early 2006 has
the government allowed 51% FDI in single-brand retail,
with Reebok, Nike, Levi Strauss and Benetton opening
outlets. However, multibrand retail chains like Wal-
Mart have not yet been allowed entry, although further
opening of the market is likely in the near future.
India’s accelerated growth potential, the rise of a
growing middle class with high disposable income
and greater contact with the West have all sparked a
boom in modern shopping centers that are similar to
Western malls. In recent years, the trend toward larger
retail formats, such as shopping malls and department
stores, has grown, and the major companies likely will
capture up to 10% of total market share within the next
five years. Developers have started to respond to the
structural shift. By 2007, India will have about seven
million m² (75 million square feet) of mall space, out of
which 57% will be in Delhi and Mumbai, notes a study
by Knight Frank.
Although this could result in pockets of oversupply in
selected micro-locations, the provision per capita in
India overall should remain relatively low, at less than 10
m² (107.6 square feet) per 1,000 inhabitants, compared
with the EU15 average of 200 m² (2,153 square feet) per
1,000.
Shopping malls are becoming more common, not
only in Tier I cities, but also in other large cities (those
with populations of more than one million). Based
on announced development plans, at least 150 new
shopping malls should appear by 2008. Mall developers
are adapting quickly to the preferences of their
customers. Some new types of projects are automobile
malls and wedding malls, which are one-stop shopping
destinations. The number of department stores is
growing much faster than overall retail, at an annual
rate of 24%. Supermarkets have garnered a growing
share of the food and grocery trade over the past two
decades.
Housing Market on a Steep Growth Path
Strong urbanization effects are augmenting the
growth potential arising from India’s young, expanding
population. Less than 30% of the population now
lives in urban areas. But India’s Planning Commission
forecasts that the urban population will rise by more
than 40% by 2020, meaning an increase of about 140
million over the next 15 years, or nearly 10 million per
year.
Household formation is growing due to population
growth and the shift from joint families to nuclear
families. The average number in each household has
fallen from 5.8 in 1990 to 5.3 in 2005. According to the
Tenth Five-Year Plan, a shortage of 22.4 million dwelling
units exists.
Additional housing needed each year from 2002 to 2007
has been estimated at 4.5 million units. Real income
growth should rise from 5.9% per year in 1991-2005
to 8.7% per year in 2006-2010. The percentage of
households with nominal disposable incomes of more
than US$3,000 per year should rise from today’s 25%
to 56% in 2010. Also, India has moved to a lower-
interest-rate environment, with easier availability of
home mortgages. Prime lending rates fell from 16.5%
in May 1996 to 11% in May 2006. Government action
has also helped to raise housing demand via greater tax
incentives. Now, more interest and debt service can be
deducted from income taxes than in the ’90s. Positive
demographics, rising income, growing urbanization
and lower interest rates bode well for demand in the
residential sector.
India’s homeownership today is estimated at about
30%, compared with roughly 69% in the U.S.
Additionally, the availability of financing choices,
including the development of a mortgage market,
is increasing to meet pent-up demand. Even then,
mortgages currently equal less than 3% of India’s GDP,
compared with more than 30% in other South Asian
countries.
Industry Trends
With 40 cities of more than one million residents,
totaling 128 million people, India offers many potential
investment locations. Despite this, commercial sectors
tend to concentrate in Tier I and II cities due to the
availability of skilled human resources and adequate
infrastructure. Real estate investment focuses on a few
major cities, which follow their own economic and real
estate agenda. The most important investment locations
include Delhi (the political center), Mumbai (the financial
capital) and Bangalore (the major IT hub). Moreover,
Chennai and Hyderabad could establish themselves
successfully as investment locations. However, as
costs have risen and labor shortages have appeared,
cities like Ahmadabad and Chandigarh should compete
successfully due to their lower cost basis, and cities like
Calcutta and Nagpur likely will take advantage of their
relatively large pool of skilled workers.
Many cross-border developers plan to enter the
residential sector via the emerging trend of integrated
townships. With land scarce in most major cities,
but large parcels available just outside the city limits,
developers are moving toward large, integrated
developments with commercial, retail, residential and
even medical facilities. Most are joint ventures with
PricewaterhouseCoopers Pvt Ltd. • 47
Indian developers, and some are also in public-private
partnerships, with local governments as minority
stakeholders.
Developers are also showing interest is Special
Economic Zones (SEZ). SEZs are specifically
delineated, duty-free enclaves outside the customs
territory of India. SEZs are approved by the Ministry of
Commerce and can be set up by private developers
or by central/state government or jointly by any two or
more of these. SEZs can be multiproduct or for a single
sector, such as IT, pharmaceuticals or textiles.
Businesses operating in SEZs enjoy a corporate tax
holiday on export earnings, indirect tax exemptions
and liberal exchange controls. Developers also receive
many fiscal benefits. The income-tax incentives for a
SEZ developer include a 10-year tax holiday; exemption
from dividend distribution tax; tax-exempt interest on
long-term financing; tax-exempt long-term capital gains
arising on the transfer of shares in the developer’s
company; and no minimum alternative tax. The indirect
tax incentives include no import duty; no excise duty;
exemption from service tax; and exemption from tax on
the sale of electricity for self-generated and purchased
power.
Traditionally, India has predominantly been a
developer’s market, whose main source of financing
was private debt. International real estate investors
have played only a minor role in India, as FDI into real
estate was very restricted and had high threshold
requirements. Thus, foreign investment flows were very
limited. But India has progressed by introducing reforms
and liberalizing investment policies. In early 2005,
the government relaxed FDI norms, and now FDI in
“greenfield” real estate developments are automatically
approved, without a cumbersome permission procedure
from the Foreign Investment Promotion Board, if they
fulfill certain conditions. That said, FDI is still somewhat
limited, and barriers to entry for foreigners are still
considerable. For example, foreigner investors cannot
buy existing buildings.
We estimate that higher-quality commercial real estate
in India totals about US$100 billion, equaling about
0.6% of the global commercial real estate stock. In the
long term, India’s real estate share should rise to more
than 3% of global commercial real estate stock and
more than 12% of the Asian stock due to the structural
transformation of India’s economy.
48 • PricewaterhouseCoopers Pvt Ltd.
So far, private debt has been the most important source
of financing in this sector. The recent growing demand
for real estate is driving the substantial demand for
construction financing and, according to the Reserve Bank
of India, loans to commercial real estate rose in 2005-06
by 84%, to US$2.4 billion.
Since 2004, venture capital funds have been permitted
to invest in real estate, allowing domestic and foreign
investment managers to operate real estate fund vehicles
via a private equity route. The first real estate funds are
now up and running, and several are in the planning
stage. Several foreign funds are exploring investment
opportunities, reflecting a strong interest from domestic
and international investors. Roughly US$15 billion have
been raised on behalf of foreign funds targeting Indian real
estate.
Currently, real estate investment trusts (REITs) are not
allowed in India, but in June 2006 the Securities and
Exchange Board of India approved guidelines for real
estate mutual funds.
Challenges faced by the Indian Real Estate Sector
India is an emerging market. Although country risk is
hard to measure, Euromoney’s rankings of the country’s
creditworthiness based on political, economic and capital
market risk can be used as a proxy. With a rating of
56 out of 100, India falls in the lower end of the range,
implying higher investment risks. India’s real estate
market is opaque. Real estate related data is patchy,
key time series are nonexistent or too fragmentary to
allow robust analysis, and no historic reference points
exist. Hence, valuations and investment decision-making
in India are challenging tasks. Investors are faced with
typical emerging-market characteristics, most notably low
transparency, lack of suitable investment products and low
liquidity.
Another major barrier to entry is the fragmented ownership
structure and absence of clear land titles, restricting
organized dealings. Currently, title insurance is unavailable,
although, according to press reports, some Indian financial
companies are looking into the issues of structuring and
pricing such a product. Accessing the Indian real estate
market is very difficult due to the lack of investment-grade
properties. This lack is reflected by the 0.3 m² (3.2 square
feet) of office space per capita in major Indian cities, which
is 10 times less than in a typical Western European city.
Research by the World Bank suggests that it takes
five times longer to register a property in India than
in the U.S. and three times longer than in the UK.
Additionally, lease terms in India are rather short.
While longer-term leases, up to nine years, can be
negotiated, the typical commercial lease term is three
years, with options to renew for two more terms of
three years.
Relative underdevelopment of the capital market
in the real estate arena is another drawback. The
primary debt and equity markets are active, but the
absence of REITs, commercial mortgage-backed
securities and other secondary investment vehicles
are hindering capital flows. Also, domestic institutional
investors, such as pension funds and insurance
companies, are prohibited by law from investing
directly in real estate, even though they can invest
a small portion of their total investments in publicly
listed securities.
Regulatory risk is another area of concern. The
Urban Land Ceiling Act, which imposes a ceiling
on the maximum amount of land under individual
possession, and a high stamp duty, creating a higher
transaction cost, are two such examples. However
progress is being made in this area, with the central
government and some of the state governments
liberalizing these restrictions.
Also, RBI regulations concerning the repatriation of
capital somewhat limit exits for cross-border funds.
Another challenge that India needs to meet is the
inadequacy of its physical infrastructure. Even though
India has made significant progress in telecom
infrastructure, at least in the urban areas, much
needs to be done to improve the quality of transport
infrastructure. The quality of Indian roads, railways
and airports leaves much to be desired. Moreover,
each commercial property needs to have its own
back-up generator due to the unreliable supply and
distribution of electricity.
Conclusion
Clearly the Indian real estate sector has enormous
potential. It is a sunrise sector which will be positively
impacted by major demographic, cultural and industrial
shifts that are currently ongoing in India. The boom
in the IT and BPO industries as also the fundamental
changes occurring in the retail sector augur well for
the prospects of the real estate sector. Equally, home
ownership growth, through relatively easier financing
options, will be another key driver in the significant
expansion of the sector. The growth will percolate down
from Tier 1 to Tier 2 and other tier cities and this will
bring forth rapid and significant increase in demand for
quality commercial and residential real estate. However,
key challenges remain in the form of significant
structural deficiencies in the market. The relative
underdevelopment of capital market instruments in
relation to real estate and the regulatory hurdles posed
by the present provisions relating to land and property
ownership are major concerns. Equally, the deficiencies
in the physical infrastructure can crimp the growth
prospects for the real estate sector. It is therefore true
to suggest that in many ways the real estate is at a
cross roads. Should India address these structural
challenges in a sustained and realistic manner, there
is no reason why the real estate sector cannot grow
manifold in the years to come.
PricewaterhouseCoopers Pvt Ltd. • 49
Healthcare in India

50 • PricewaterhouseCoopers Pvt Ltd.

Healthcare is one of India’s rapidly expanding sectors,
in terms of both revenue and employment. During
the 1990s, Indian healthcare grew at a compound
annual rate of 16%. Today the total value of the
sector is more than $34 billion. This translates to $34
per capita, or roughly 6% of GDP. By 2012, India’s
healthcare sector is projected to grow to nearly $40
billion.
The demand side of the Healthcare Industry is being
constantly fuelled by the ever increasing Indian
population particularly the middle class which is
estimated to touch 62.95% of the total population.
Added to this is the growing number of foreign
tourists coming to India for world class medical
services at much lower cost compared to their home
countries.
On the supply side we have the healthcare
service providers, public and private hospitals,
pharmaceutical companies, medical, surgical and
diagnostic equipment manufacturer and suppliers and
insurance companies.
In this document we would be exploring Emerging
Trends, Medical Tourism and Investment
Opportunities in the Indian Healthcare sector.
Emerging Trends in Healthcare in India
The Indian Healthcare Sector is poised for robust
growth. The healthcare sector has been going through
constant change over the last decade and now new
trends are emerging in this sector.
Growth in Healthcare expenditure and World Class
Medical Facilities
The rising Indian middle class, along with its
increasing purchasing power and willingness to pay
for quality healthcare, has led to the emergence
of high quality corporate hospitals. To meet the
emerging demand for improved healthcare services,
a number of corporate houses have established their
chain of hospitals across the country resulting in
world class medical facilities in India.
Change in Demographics and Disease Profile
One of the most visible trends is the changing
demographics and the disease profiles. Owing
to Govt. emphasis on providing better healthcare
facilities in rural and urban areas and eradicating
diseases like hepatitis and polio, India is doing
much better on various healthcare parameters like
infant mortality rate, life expectancy etc. Though
the ailments like poliomyelitis, leprosy and neonatal
tetanus will be eradicated soon, there has been rise
in infectious and chronic diseases like AIDS. Certain
communicable diseases like dengue fever, viral
hepatitis, tuberculosis, malaria etc seems to have
developed new strains or have become more resistant
to drugs. Add to this the increase in “lifestyle” or
“chronic” diseases like hypertension, cancer and
diabetes.
In 2005, it was estimated that chronic diseases in
India accounted for almost 53% of all deaths and
44% of disability-adjusted life years (DALYs). It is
estimated that deaths from chronic diseases would
register a sharp increase from 3.78 million in 1990
to 7.63 million in 2020 accounting for 66.7% of all
deaths. In India diabetic nephropathy is expected
to develop in 6.6 million of the 30 million patients
suffering from diabetes. Number of people with
hypertension is expected to see a quantum leap from
an estimated 118.2 million in 2000 to 213.5 million in
2025.
Dr. Anbumani Ramadoss, Minister of Health & Family
Welfare, Government of India acknowledges that
the country’s public health advocacy till date has
concentrated mainly on infectious diseases. He does
mention, however, that the Government is aware that
almost 66% of all deaths in 2020 is likely to be from
chronic diseases. The Government has now decided
to address the issues related to chronic diseases with
equal energy and focus and is keen to involve and
work together with the private sector and the civil
society with a goal to prevent chronic diseases and
save millions of lives.
Growth of Private Healthcare Facilities
India’s healthcare infrastructure has not kept
pace with the economy’s growth. The physical
infrastructure is woefully inadequate to meet today’s
healthcare demands, much less tomorrow’s. While
India has several centers of excellence in healthcare
delivery, these facilities are limited in their ability
PricewaterhouseCoopers Pvt Ltd. • 51
to drive healthcare standards because of the poor
condition of the infrastructure in the vast majority of the
country.
Of the 15,393 hospitals in India in 2002, roughly two-
thirds were public. After years of under-funding, most
public health facilities provide only basic care. The total
healthcare financing by the public sector is dwarfed by
private sector spending. Private firms are now thought
to provide about 60% of all outpatient care in India and
as much as 40% of all in-patient care. It is estimated
that nearly 70% of all hospitals and 40% of hospital
beds in the country are in the private sector.
Slow Acceptance of Health Insurance
A widespread lack of health insurance compounds the
healthcare challenges that India faces. Although some
form of health protection is provided by government
and major private employers, the health insurance
schemes available to the Indian public are generally
basic and inaccessible to most people. Only 11%
of the population has any form of health insurance
coverage out of which only 1% of the population was
covered by private health insurance in 2004-05 and
group insurance accounted for 35% of the total health
insurance business during that period.
But with the rise of disposable income and a growing
middle class the demand for health insurance is bound
to go up. To bring more people under the insurance
coverage, Govt. is partnering with private sector to
provide coverage at low cost. In some cases it has
been successful like Yashaswini Insurance Scheme in
Karnataka.
International and National Accreditation for Hospitals
Hospitals are going for national and international
accreditation like JCI and NABH. Possible drivers for
this could be improved efficiency (lower costs) and
better quality services. In recognition of the quality of
healthcare delivery services in India, a number of Indian
hospitals have received accreditation from international
agencies worldwide. For e.g.:
• Five hospitals in India -- Indraprastha Apollo Hospital
(New Delhi), Apollo Hospital (Chennai), Apollo
Hospital (Hyderabad), Wockhardt Hospital (Mumbai)
52 • PricewaterhouseCoopers Pvt Ltd.
and Shroff Eye Hospital (Mumbai) - have been
accredited to the leading healthcare accreditation
agency in the United States, Joint Commission
International (JCI).
• NHS of the UK has indicated that India is a favoured
destination for surgeries.
• The British Standards Institute has now accredited
the Delhi-based Escorts Hospital.
• India’s independent credit rating agency CRISIL
has assigned a grade ‘A’ rating to super specialty
hospitals like Escorts and multi specialty hospitals
like Apollo.
• Wockhardt Hospital has an exclusive association
with Harvard Medical International, the global arm of
Harvard Medical School, the world’s leading medical
institution.
• Max Healthcare, in collaboration with Singapore
General Hospital, is into clinical practice, research
and training
National Accreditation Board for Hospitals & Healthcare
Providers (NABH) is a constituent board of Quality
Council of India, set up to establish and operate
accreditation programme for healthcare organizations.
Although relatively new, the following Hospitals have
already been accredited:
• B.M. Birla Heart Research Centre, Kolkata
• MIMS Hospital (MIMS Ltd.), Calicut
• Kerala Institute of Medical Science,
Thiruvananthapuram
• Max Super Speciality Hospital, New Delhi
• Max Devki Devi Heart & Vascular Institute, New Delhi
• Moolchand Hospital, New Delhi
• Narayana Hrudayalaya, Bangalore
Growth of Pharmaceutical Industry
The huge population of India and the increase in
expenditure on medicines makes India a very lucrative
market for pharmaceutical companies. Further driven
by knowledge skills, growing enterprises, low costs,
improved quality and buoyant demand (both domestic
and international), the pharmaceutical sector’s value
of output grew more than tenfold from US$ 1.1 billion
in 1990 to over US$ 12.4 billion during 2005-06. With
value of exports at over US$ 4.7 billion in 2005-06, India
is today recognised as one of the leading global players
in pharmaceuticals.
Medical Tourism
Healthcare sector. The growing Indian population,
increasing disposable income, increasing medical
tourism and change in urban lifestyle leading to
increase in lifestyle disease would sustain the growth.
It is estimated that by 2012 healthcare spending could
contribute 8% of GDP.

Medical tourism is one of the major external drivers of Key Opportunities Sectors in the Indian Healthcare
growth of the Indian healthcare sector. The emergence Sector are:
of India as a destination for medical tourism leverages
the country’s well educated, English-speaking medical • Hospital Services
staff, state-of-the art private hospitals and diagnostic
• Training and Education in Healthcare Sector
facilities, and relatively low cost to address the spiraling
healthcare costs of the western world. India provides • Wellness Clinics
best-in-class treatment, in some cases at less than
• Medical Tourism
one-tenth the cost incurred in the US. India’s private
hospitals excel in fields such as cardiology, joint • Health Insurance
replacement, orthopedic surgery, gastroenterology,
• Pathology Services
ophthalmology, transplants and urology.
• Pharmaceutical Industry
According to a joint study by the Confederation of
• Tele Medicine
Indian Industry and McKinsey, Indian medical tourism
was estimated at $350 million in 2006 and has the • Medical Devices
potential to grow into a $2 billion industry by 2012. An
estimated 180,000 medical tourists were treated at
Indian facilities in 2004 (up from 10,000 just five years
Hospital Services
earlier), and the number has been growing at 25-30%
annually. India has the potential to attract one million
The Market - India’s physical healthcare infrastructure
medical tourists each year, which could contribute an
is far from being able to meet the current demand. If we
estimated $5 billion to the economy, according to the
consider the huge growth in demand for healthcare that
Confederation of Indian Industries.
India would be facing in near future, we can see a huge
potential investment opportunity for private players.
In addition to receiving traditional medical treatments,
Enormous private capital will be required to enhance
a growing number of western tourists are traveling to
and expand the infrastructure to meet the demand.
India to pursue alternate medicines such as ayurveda,
It is estimated that 450,000 additional hospital beds
which has blossomed in the state of Kerala, in
will be required by 2010 – an investment estimated at
southwestern India. The number of medical tourists
about $25.7 billion. The Govt. is expected to contribute
visiting Kerala was close to 15,000 in 2006 and is
only 15-20%, thus providing enormous opportunity for
expected to reach 100,000 by 2010.
private players.
To encourage the growth of medical tourism, the
The corporate hospital sector of the country is all set to
government is providing a variety of incentives,
take away a significant share of the tertiary healthcare
including lower import duties and higher depreciation
service business from individual private healthcare
rates on medical equipment, as well as expedited visas
providers by 2010. With the advent of private insurance
for overseas patients seeking medical care in India.
and the emergence of India as a medical tourism
destination, there also has been a surge of growth in
Investment Opportunities in Indian Healthcare Sector
so-called “super specialty” hospitals, which have teams
of specialists, sophisticated equipment, links to other
There is tremendous growth potential in the Indian

PricewaterhouseCoopers Pvt Ltd. • 53

medical centers, and the ability to treat a broad range of
ailments.
Growth Drivers - Government fiscal constraints are
driving the growth of Public Private Partnerships
(PPPs) to help meet India’s growing demand for
healthcare infrastructure. In addition to participating
in infrastructure PPPs, opportunities are emerging for
foreign companies to create super-specialty hospitals
in collaboration with Indian corporations. For instance,
Wockhardt Hospitals Group has partnered with
Harvard Medical International to create a chain of super
specialty hospitals in India.
Training and Education in Healthcare sector
The Market – India has quite a few world class medical
and nursing colleges. Most of these colleges are
financed by the Govt. Owning to fiscal problems the
number of Govt. backed hospitals hasn’t increased
significantly over the years. There are 174 recognised
medical colleges, and 68 colleges have been permitted
u/s 10A of the Indian Medical Council Act, 1956 during
the year under review. Approx. 27000 graduates pass
out every year from these colleges. Such graduates
after completing compulsory rotating internship are
required to be registered with State Medical Council or
the Medical Council of India to practice medicine in the
country.
Growth Drivers - In addition to a deteriorating physical
infrastructure, India faces a huge shortage of trained
medical personnel, including doctors, nurses and
especially paramedics, who may be more willing than
doctors to live in rural areas where access to care
is limited. There is an immediate need for medical
education and training, which could provide additional
opportunities for private sector providers or public-
private partnerships.
Wellness Clinics
The Market – Wellness clinics are targeted at chronic
or lifestyle diseases that are affecting more and more
people across the country. With increase in tobacco
intake, unhealthy diet and excessive energy intake and
physical inactivity, all sections of the society and people
from different age groups including those who are in
working age are getting affected by chronic diseases
54 • PricewaterhouseCoopers Pvt Ltd.
like diabetes, hypertension and heart diseases. People
working in the service sector are the ones most likely
to suffer from chronic diseases due to their sedentary
lifestyle, unhealthy working hours and unhealthy food
habits. It is estimated that about 53% of all deaths in
2005 is attributed to chronic diseases. With no signs
of abating and Govt. not in a position to tackle this
menace, the rate is bound to go up.
Growth Drivers - Preventing chronic diseases is
possible by tackling their associated risks and the
best place to do so is at the workplace. Corporates
are increasingly focusing more on the “wellness” of
their employees so as to reduce loss due to illness
and absenteeism and increase productivity. Wellness
Programs need to be designed and rolled out and
regular health and nutrition related consultation have
to be provided. Companies like Wipro and Infosys
have already taken the plunge in this direction and
more and more companies would soon be joining the
initiative. There is a huge opportunity for healthcare
companies to invest in Wellness Clinics and join hands
with corporates to increase the general health of the
employees.
Medical Tourism
The Market - With lower cost of medical services in
India, well trained and highly educated medical service
providers, world class super specialty hospitals and
a government policies favoring the growth of medical
tourism, the Medical Tourism business in India is set
to boom in near future. About 180,000 patients arrived
in 2004 from across the globe for medical treatment
and the market in India estimated at US$ 333 million in
2004, grew by about 25 %.
Growth Drivers - Not only are patients coming from
developed countries like US and UK but India is
currently seeing a surge of patients from countries as
well as from South Africa and West Asia.
Medical Tourism is set to boom in India and private
players are all set to cash in on this booming industry.
Health Insurance
The Market - Owing to liberalization and a growing
middle class with increased spending power, there has
been an increase in the number of insurance policies
issued in the country. In 2001-02, 7.5 million policies
were sold. By 2003-4, the number of policies issued
had increased by 37%, to 10.3 million.
Growth Drivers - The Insurance Regulatory and
Development Authority (IRDA) eliminated tariffs on
general insurance as of January 1, 2007, and this
move is expected to drive additional growth of private
insurance products. In the wake of liberalization, health
insurance is projected to grow to $5.75 billion by 2010,
according to a study by the New Delhi-based PHD
Chamber of Commerce and Industry.
In another effort to improve the insurance prospects
for India, the IRDA is focused on standardizing medical
definitions to ensure consistent pricing and products,
and is providing incentives for stand-alone insurance
companies.
In addition, government subsidies and tax incentives for
health insurance are expected to increase the number
of policy holders and attract key players to the industry.
Pathology Services
The Market - The domestic pathology industry has been
growing over the last 5 years at an estimated CAGR of
20% and it currently comprises almost 2.5 per cent of
the overall healthcare delivery market.
Presently there are few big names in this market and
this market is largely serviced by small unorganized
players and hospitals. With 40,000 independent
pathology laboratories in the country, the industry is
highly competitive and price driven.
Growth Drivers - Molecular diagnostic and
pharmacogenomic testing are the future growth drivers
of this industry. Outsourcing of pathology tests by
foreign hospital is also becoming a huge opportunity.
Preventive healthcare and health insurance will further
drive domestic growth. Big players can enter this
market and set up accredited pathology labs to capture
a considerable pie of the market.
Pharmaceutical Industry
The Market - Despite widespread poverty and
inadequate public healthcare provision, India has much
to offer to leading drug makers. Increase in lifestyle
diseases, combined with a growing middle class that
has more disposable income to spend on treatment,
will provide new opportunities for global pharmaceutical
firms.
Not only does India provide a huge market for foreign
pharmaceutical companies, India has also emerged
as a major supplier of several bulk drugs. These drugs
particularly generic and OTC drugs are produced
at much lower prices compared to formulation
producers worldwide. Many multinational generics
companies have been sourcing products from Indian
manufacturers for some years. Some also use Indian
contract manufacturers to manufacture the finished
product. Contract manufacturing, currently estimated
at $350 million, is expected to reach $1billion by 2010,
according to CRISIL.
Growth Drivers - Some companies encouraged by
the relaxation of the rules on foreign ownership and
a favorable tax regime have gone beyond contract
manufacturing, setting up their own local manufacturing
facilities. The financial incentive is compelling: Goldman
Sachs estimates that the cost of setting up and running
a new manufacturing facility in India is one-fifth of the
cost of doing so in the Wes
Pharmaceutical research is also one area that is
expected to achieve tremendous growth in the coming
decade, due to India’s huge and growing population,
low per capita drug usage, and increasing incidence of
disease.
Tele Medicine
The Market - Only 25% of India’s specialist physicians
reside in semi-urban areas, and a mere 3 % live in
rural areas. As a result, rural areas, with a population
approaching 700 million, continue to be deprived of
proper healthcare facilities.
One solution is telemedicine—the remote
diagnosis, monitoring and treatment of patients via
videoconferencing or the Internet. Telemedicine
is a fast-emerging trend in India, supported by
exponential growth in the country’s information
and communications technology (ICT) sector, and
plummeting telecom costs.
PricewaterhouseCoopers Pvt Ltd. • 55
Several major private hospitals have adopted
telemedicine services, and a number of hospitals have
developed public-private partnerships (PPPs), among
them Apollo, AIIMS, Narayana Hridayalaya, Aravind
Hospitals and Sankara Nethralaya.
Growth Drivers - The early successes of telemedicine
pioneers have led to increased acceptance and
proliferation of telemedicine. There is a growing
movement within India to establish a health grid
that connects medical institutions and practitioners
throughout the country. This would allow super
specialists to exchange case studies, compare
experiences, and hold virtual conferences to discuss
critical disease patterns and provide treatment.
Eventually, telemedicine likely will be practiced in
the majority of Indian hospitals, initially in a separate
department, and eventually, integrated into medical
specialties.
Medical Devices
The Market - The rebuilding of India’s healthcare
infrastructure, combined with the emergence of medical
tourism and telemedicine, will drive strong demand
for medical equipment, such as x-ray machines, CT
scanners and electrocardiograph (EKG) machines.
Leading international companies market most high
value medical equipment, while only consumables
and disposable equipment are made locally. Many
international companies have expanded their operations
in the Indian market in recent years and established
manufacturing facilities to assemble equipment for the
domestic market and export sales. The competition is
expected to intensify with the entry of more global firms
into the medical equipment marketplace.
Growth Drivers - The government is encouraging the
growth of this market, through policies such as a
reduction in import duties on medical equipment, higher
depreciation on life-saving medical equipment (40%, up
from 25%), and a number of other tax incentives.
Many international companies have expanded their
operations in the Indian market in recent years and
established manufacturing facilities to assemble
equipment for the domestic market and export sales.
The competition is expected to intensify with the
entry of more global firms into the medical equipment
marketplace.
56 • PricewaterhouseCoopers Pvt Ltd.
Conclusion
Healthcare in India is in rapid and sustained expansion.
It will contribute significantly to revenues and to
employment generation. Key drivers on both the
demand and supply side, which take the form of
demographic and life style changes on the demand
side and the significant expansion of healthcare
infrastructure on the supply side will ensure the
growth of this sector for a long time to come. There
are however significant challenges that need to be
addressed. The lack of adequate healthcare insurance
for a vast number of people is a fundamental problem.
Equally, the fact that chronic diseases continue to recur
is a matter of concern. Public health is fundamental to
India’s economic growth prospects and an appropriate
public private partnership model, to ensure this,
could be the relevant answer. The growth in medical
and healthcare infrastructure needs to be sustained,
consistent and widespread. Inevitably, Government
policy on healthcare will majorly affect the prospects
of growth in the healthcare industry. The entry of
big reputed names in both the manufacturing and
the services segment of the sector and increased
competition will promote quality in all its dimensions.
Regulatory policies need to incentivise such
competition while ensuring, of course, that healthcare
remains, at a fundamental level, affordable and available
to most people. Healthcare today in India is at a
nascent stage and is poised for exponential growth, if
judiciously managed through an appropriate choice of
regulatory, fiscal and structural reform policy measures.
 Contacts

If you would like to discuss issues raised in this report in more detail,
please speak with or write to any one of our experts below:

Jairaj Purandare
[91] (22) 6669 1400
jairaj.purandare@in.pwc.com

Vivek Mehra
[91] (11) 4115 0503
vivek.mehra@in.pwc.com

S Madhavan
[91] (11) 4115 0505
s.madhavan@in.pwc.com

Bharti Gupta Ramola

[91] (124) 462 0503
bharti.gupta.ramola@in.pwc.com

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[91] (124) 462 0501
ashwani.puri@in.pwc.com

Amrit Pandurangi
[91] (124) 462 0517
amrit.pandurangi@in.pwc.com

Rajarshi Sengupta
[91] (33) 2357 3391
rajarshi.sengupta@in.pwc.com

N.V. Sivakumar
[91] (80) 2558 5663
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