Food industry The Indian food market is estimated at over US$ 182 billion, and

accounts for about two thirds of the total Indian retail market. Further, according to
consultancy firm McKinsey & Co, the retail food sector in India is likely to grow from
around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for a large
chunk of the world food industry, which would grow to US$ 400 billion from US$ 175
billion by 2025.

Exports of agricultural products from India are expected to more than double to top
US$ 20.6 billion in the next five years, according to the commerce
ministry.According to estimates by the Agricultural and Processed Food Products
Export Development Authority (APEDA), the share of India's farm product exports in
the global trade will grow from 2 per cent now to over 5 per cent.Exports of fresh
and processed vegetables, fruits, livestock and cereals rose 10 per cent to US$ 8.67
billion in 2008-09.

Spices

Despite a global slowdown, Indian spice exports are growing. India exported
470,520 tonnes of spices valued at US$ 11.68 billion—an all-time high—in 2008-
09.During the previous financial year, 444,250 tonnes valued at US$ 11.01 billion
were exported.Compared with last year, the export had shown an increase of 19 per
cent in rupee value and six per cent in dollar terms.

Food ProcessingThe food processing industry is presently growing at 14 per cent

against 6-7 per cent growth in 2003-04. The industry received foreign direct
investments (FDI) totalling US$ 143.80 million in 2007-08 against US$ 5.70 million
in the previous fiscal. The cumulative FDI received by the industry from April 2000-
August 2009 stood at US$ 878.32 million.However, India’s share in exports of
processed food in global trade is only 1.5 per cent; whereas the size of the global
processed-food market is estimated at US$ 3.2 trillion and nearly 80 per cent of
agricultural products in the developed countries get processed and packaged.In
order to further grow the food processing industry, the government has formulated
a Vision-2015 action plan under which specific targets have been set. This includes
tripling the size of the food processing industry from around US$ 70 billion to about
US$ 210 billion, raising the level of processing of perishables from 6 per cent to 20
per cent, increasing value addition from 20 per cent to 35 per cent, and enhancing
India’s share in global food trade from 1.5 per cent to 3 per cent. This would require
an investment of US$ 20.6 billion.According to an Ernst and Young (E&Y)
presentation, the food processing industry in India will grow 30-40 per cent as
against the present 15 per cent in the next 10-years.Prime Minister Dr Manmohan
Singh on October 6, 2009 laid out a blueprint for rapid growth in the country’s food
processing sector. The Prime Minister said that this can be achieved by simplifying
the tax structure, formulating a National Food Processing Policy and improving rural
infrastructure.
Snacks and ConfectioneryThe Indian market holds enormous growth potential for
snack food, which is estimated to be worth US$ 3 billion, with the branded snack
market estimated to be around US$ 1.34 billion, growing at 15-20 per cent a year.
While the growth rate of the US$ 1.56 billion unorganised sector is 7-8 per cent.

To pump up volumes in the US$ 1.89 billion branded biscuits market, the three
largest food companies—ITC, Parle Foods and Britannia—plan to spend big on
launches, re-launches and retail activities.

Health Food Recognising the growth potential of the branded health food sector in
India, fast moving consumer goods (FMCG) majors are foraying into this sector in a
big way. As Hindustan Lever Ltd (HUL) is test marketing its health food brand,
Kissan Amaze, in three southern states in India, Godrej Hershey Foods & Beverages
Ltd (GHFBL), a joint venture between Godrej Beverages & Foods Ltd and Hershey
Company, is planning to introduce select brands from its international portfolio in
the domestic market. ITC Foods is also planning to extend the product portfolio of
its health food brand in the next few months.

Dairy According to Dairy India 2007 estimates, the current size of the Indian dairy
sector is US$ 62.67 billion and has been growing at a rate of 5 per cent a year. The
dairy exports in 2007–08 rose to US$ 210.5 million against US$ 113.57 last fiscal,
whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by
2011.

Beverages According to industry experts, the market for carbonated drinks in India
is worth US$ 1.5 billion while the juice and juice-based drinks market accounts for
US$ 0.25 billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of
the fastest growing in the beverages market. Sports and energy drinks, which
currently have a low penetration in the Indian market, have sufficient potential to
grow.The market for alcoholic beverages has been growing consistently. 'The Future
of Wine', a report on the state of the wine industry over 50 years, suggests that the
market for wine in India was growing at over 25 per cent per year.

Retail Landscape: Food Chains and Restaurants The food and grocery market in
India is the sixth largest in the world. Food and grocery retail contributes to 70 per
cent of the total retail sales. According to industry estimates, the segment is
growing at a rate of 104 per cent and is expected to grow to US$ 482 billion by
2020.According to a BMI forecast, India is likely to see a huge 443 per cent increase
in mass grocery retail (MGR) sales during the 2007-2012 period.

Major investments Private investment has been one of the key drivers for growth of
the Indian food industry. The 'India Food Report 2008', reveals that the total amount
of investments in the food processing sector in the pipeline for the next three years
is about US$ 23 billion.
 * The government has received around 40 expressions of interest (EoI) for the
setting up of 10 MFPs with an investment of US$ 514.37 million.

* Reliance Industries Ltd has invested US$ 1.25 billion in a dairy project.

* PepsiCo is doubling its investment in its Indian beverage business for calendar
2009. The company will invest over US$ 220 million to increase the capacity of the
business.

* Gujarat Co-operative Milk Marketing Federation (GCMMF), which owns and

markets Amul brand, has come up with a long term plan, which envisages
increasing the turnover of all its member dairy co-operatives to US$ 5.72 billion by
2020 from current level of US$ 2.12 billion. GCMMF plans to pump in around US$
550.6 million to achieve its mission.

* Direct selling company Modicare Ltd has entered the food & beverage market
with the launch of a tea brand called ‘Fruit of the Earth.

* Geneva-based food service chain Global Franchise Architects (GFA) aims to

open 250 stores around the world by March 2010, of which 100 will be in India.

Government Initiatives The new trade policy places increased focus on agro-based
industries.

* Food processing industries have been put in the list of priority sectors for bank
lending.

* The government has also started work on 10 Mega Food Parks, and is planning
to increase the number to 30 by 2015.

* Fruit and vegetable processing units have been completely exempted from
paying excise duty.

* Automatic approval for foreign equity up to 100 per cent is permitted for most
of the processed food items.

* Items like fruits and vegetables products, condensed milk, ice cream, meat
production have been completely exempted from Central Excise Duty.

* Excise duty on ready to eat packaged foods and instant food mixes has been
brought down to 8 per cent from 16 per cent.

* Excise duty on aerated drinks has been reduced to 16 per cent from 24 per
cent.

* The Ministry of Food Processing Industry would assist in the setting up of more
food processing units so that the industry could create 10 million jobs by 2015,
according to Mr Subodh Kant Sahai, Union Minister for Food Processing.
Looking ahead According to the India Food and Drink Report Q3 2008 by research
analysis firm Research and Markets, by 2012, India’s processed food output is likely
to grow by 44.2 per cent to touch US$ 90.1 billion, while packaged food sales will
increase by 67.5 per cent to reach US$ 21.7 billion. On a per capita basis, per capita
packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 by
2012.

Moreover, according to a FICCI-E&Y study on the Indian food industry, investment

opportunities in the Indian food industry are set to shoot up by a huge 42.5 per cent
to US$ 181 billion in 2015 and to US$ 318 billion by 2020.

Gems and Jewellery

Sector structure/Market size The Indian gems and jewellery industry is one of the
fastest growing segments in the Indian economy with an annual growth rate of
approximately 15 per cent.The domestic market is estimated to be around US$ 16.1
billion and the All India Gems and Jewellery Trade Federation, a nodal agency
representing 300,000 jewellers across the country, expects it to grow to US$ 25.2
billion in two to three years. The country is also the largest consumer of gold in the
world. It consumes nearly 800 tonnes of gold that accounts for 20 per cent of world
gold consumption, of which nearly 600 tonnes go into making jewellery. India is also
emerging as the world's largest trading centre for gold targeting US$ 16 billion by
2010. The industry has the best skilled manpower for designing and producing high
volumes of exquisite jewellery at low labour costs.

Diamonds India is the largest diamond cutting and polishing centre in the world—
the industry enjoys 60 per cent value share, 82 per cent carat share and 95 per
cent share of the world market in terms of number of pieces. In other words, nearly
9 out of 10 diamonds sold worldwide are cut and polished in India. India exported
cut and polished diamonds worth US$ 14.18 billion in 2007-08. Due to the Indian
consumers’ attraction for diamond for its high aspirational store value, Rio Tinto has
launched pink diamond for the first time in India on the occasion of its 20th
anniversary in the country.

Retail Sector The Indian gems and jewellery market continues to be dominated by
the unorganised sector. However, with the Indian consumer becoming more aware
and quality conscious, branded jewellery is becoming very popular and the market
for branded jewellery is likely to be worth US$ 2.2 billion by 2010, according to a
McKinsey report. The All India Gem and Jewellery Trade Federation is targeting for
2013 a 50 per cent growth in the retail turnover of the domestic jewellery industry,
which is currently worth US$ 23.24 billion.Moreover, the government allows 51 per
cent FDI in single brand retail outlets, attracting both global and domestic players to
this sector. According to a report released by Technopak Advisors on the Changing
Retail Landscape in India, the jewellery and watches market is pegged at about US$
13.70 billion. It is expected to register a 12 per cent growth by 2012, touching US$
23.60 billion.

The World Gold Council recently estimated the size of India's gold coin market at
about US$ 2.11 billion.In order to increase the demand during recession, jewelers
are concentrating on newer designs in light weight jewellery. Jewellery major
Joyalukkas has targeted a US$ 2 billion business volume by March 2012.
Significantly, 60 per cent of that volume is expected to come from Joyalukkas’
operations in the Gulf, headquartered in Dubai. Joyalukkas had business volumes of
US$ 302.3 million from its India operations in 2008-09, which is projected to touch
US$ 834 million in 2011-12, at which time the Gulf operations are expected to gross
US$ 1.25 billion. The government has cleared Damas LLC’s plans to establish a joint
venture company with Gitanjali Lifestyle Ltd for retail trading of jewellery and
related accessories. The joint venture where Damas would hold 51 per cent stake
entails a foreign direct investment (FDI) inflow of US$ 38 million. Jewellery retailer
Tanishq plans to expand majority of its 117 outlets in 75 cities as the company sees
growth in gold and diamond jewellery market in India despite slowdown. While
Tanishq will have four new outlets ready in some time, it will increase its annual
average sales per outlet to more than US$ 17 million against the present figure of
more than US$ 12.3 million.

Exports According to the figures released by the Gem & Jewellery Export Promotion
Council (GJEPC), India's gem and jewellery exports posted a modest growth of 1.45
per cent during 2008-09 at US$ 21.1 billion, primarily driven by gold jewellery
exports, including medallions and ornaments. The country exported US$ 20.8 billion
of gem and jewellery in 2007-08. The United Arab Emirates (UAE) was the largest
importer of gems and jewellery from India in 2008-09, with a share of 31 per cent.
This was followed by Hong Kong with 25 per cent and the US with 20 per cent. The
gem and jewellery sector accounted for 13 per cent of India’s total merchandise
exports. The export industry mainly comprises of small-to-large units based in
various special economic zones (SEZs) supplying primarily diamond-studded
jewellery. Gems and jewellery exports in July 2009 aggregated to US$ 1.9 billion as
compared to US$ 1.7 billion in June 2009, according to figures released by GJEPC.
There has been a growth of 9 per cent in the export of gold jewellery in July this
year. The total export of gold jewellery stood at US$ 627 million as compared to
US$ 576 million in the corresponding month last year. Also, there has been a 24
percent rise in the export of coloured gemstones. Last July, around US$ 20 million
were exported as compared to US$ 25 million this year. The total export of cut and
polished diamonds for the month of July 2009 stood at US$ 1239 million.

Government Initiatives The Indian government has provided an impetus to the

booming gems and jewellery industry with favourable foreign trade policies:
 * 100 per cent foreign direct investment (FDI) in gems and jewellery through the
automatic route is allowed.

* The government has lowered import duty on platinum and has exempted rough
coloured precious gems stones from customs duty.

* Rough, semi-precious stones are also exempt from import duty.

* Duty-free import of consumables for metals other than gold and platinum up to
2 per cent of freight on board (f.o.b) value of exports.

* Duty-free import entitlement for rejected jewellery up to 2 per cent of f.o.b

value of exports.

* Import of gold of 18 carat and above under the replenishment scheme.

* Setting up of SEZs and gems and jewellery parks to promote investment in the
sector.

* In May 2007, the government abolished import duty on polished diamonds.

* The government has raised the limit value of jewellery parcels for export
through foreign post office (including via speed post) from US$ 50,000 to US$
75,000 and the time period for re-import of branded jewellery remaining unsold has
been extended from 180 days to 365 days.

* The export of coloured gemstones on a consignment basis has been allowed.

The government has announced a series of measures to help gems and jewellery
exports in the Foreign Trade Policy 2009-14.

* It has been decided to neutralise duty incidence on gold jewellery exports, to

allow Duty Drawback on such exports.

* In an endeavour to make India a diamond international trading hub, it has been

planned to establish "Diamond Bourses".

* A new facility to allow import on consignment basis of cut and polished

diamonds for the purpose of grading/certification purposes has been introduced.

* To promote export of gems and jewellery products, the value limits of personal
carriage have been increased from US$ 2 million to US$ 5 million in case of
participation in overseas exhibitions. The limit in case of personal carriage, as
samples, for export promotion tours, has been increased from US$ 0.1 million to
US$ 1 million.
Healthcare

Sector structure/Market size Healthcare, which is a US$ 35 billion industry in India,

is expected to reach over US$ 75 billion by 2012 and US$ 150 billion by 2017,
according to Technopak Advisors in their report – ‘India Healthcare Trends 2008’.
The sector offers immense potential to healthcare players as the country witnesses
a rise in the incidence of lifestyle-related and other diseases. A growing elderly
population and rise in income levels are also pushing for better facilities in the
country.

To meet this growing demand, the country needs US$ 50 billion annually for the
next 20 years, says a Confederation of Indian Industry (CII) study. India needs to
add 3.1 million beds by 2018 to the existing 1.1 million, and requires immediate
investments of US$ 82 billion, as per the Technopak Advisors report.

Adds a FICCI-Ernst and Young report, India needs an investment of US$ 14.4 billion
in the healthcare sector by 2025, to increase its bed density to at least two per
thousand population. According to a latest report by McKinsey, driven by strong
local demand, Indian healthcare market is expected to continue growing close to
previously projected rates of 10 to 12 per cent. With average household
consumption expected to increase by more than seven per cent per annum, the
annual healthcare expenditure is projected to grow at 10 per cent and also the
number of insured is likely to jump from 100 million to 220 million. India's
healthcare industry registered 42.44 per cent growth in net profit during April-June
2009, according to the Associated Chambers of Commerce and Industry
(ASSOCHAM). In the healthcare sector, the leading 10 companies posted a growth of
23.94 per cent in total income and 21.37 per cent in total expenditure during the
quarter, the study said.

Health Insurance Currently only 10 per cent of the Indian population has health
insurance, which means that there is tremendous scope for growth in this area. The
Indian health insurance business is growing at 50 per cent. The sector is projected
to grow to US$ 5.75 billion by 2010, according to a study by the PHD Chamber of
Commerce and Industry. Investments in Healthcare The sector has been attracting
huge investments from domestic players as well as financial investors and private
equity (PE) firms. Funds such as ICICI Ventures, IFC, Ashmore and Apax Partners
invested about US$ 450 million in the first six months of 2008-09 compared with
US$ 125 million in the same period a year ago, according to an analysis carried out
by Feedback Ventures. Feedback Ventures expects PE funds to invest at least US$ 1
billion in the healthcare sector in the next five years. In February 2009, India
Venture invested almost US$ 18 million in Tamil Nadu-based Kavery Medical while
in June IFC invested US$ 30 million in Max India. Piramal Life Sciences, the research
and development (R&D) arm of Piramal Group is investing US$ 41.17 million in the
next two years’ period to discover and develop new chemical entities and novel
drug delivery systems. The Hinduja Group will invest up to US$ 72 million in
increasing capacity of its hospital in Mumbai by 350 beds in the next four years
through expansion of existing facility and setting up of a new unit. As part of its
‘Healthymagination’ initiative, GE will spend US$ 3 billion over the next six years on
research and development, provide US$ 2 billion of financing over the next six years
to drive healthcare information technology and health in rural and underserved
areas, and invest US$ 1 billion in partnerships, content and services. The
government, along with participation from the private sector, is planning to invest
US$ 1 billion to US$ 2 billion in an effort to make India one of the top five global
pharmaceutical innovation hubs by 2020. The Ajay Piramal Group-owned private
equity (PE) firm, India Venture Advisors, will launch its second US$ 150 million
healthcare fund next year.

Medical Tourism

In 2007, India treated 450,000 foreign patients ranking it second in medical tourism.

According to a study by McKinsey and the CII, medical tourism in India could
become a US$ 2 billion industry by 2012 (from US$ 350 million in 2006). Credit
Suisse estimates medical tourism to be growing at between 25-30 per cent
annually.

The key selling points of the medical tourism industry are its cost effectiveness and
its combination with the attractions of tourism. Treatment cost is lowest in India –
20 per cent of the average cost incurred in the US, Singapore, Thailand and South
Africa.

Besides world class medical facilities, India is also trying to promote its traditional
medicine such as ayurveda.

Areas of Opportunity

The fast growth in the Indian healthcare sector has created various pockets of
opportunities for investors. A recent FICCI-Ernst and Young report highlights several
such areas within the healthcare sector.

* Medical infrastructure forms the largest portion of the healthcare pie. Beds in
excess of one million need to be added to reach a ratio of 1.85 per thousand at an
investment of US$ 77.9 billion.

* The medical equipment industry is around US$ 2.17 billion and is growing at 15
per cent per year. It is estimated to reach US$ 4.97 billion by 2012.

* The medical textiles industry is projected to double to reach US$ 753 million by
2012.
 * Clinical trials have the potential to become a US$ 1 billion industry by 2010 and
the health services outsourcing sector has the potential to grow to US$ 7.4 billion by
2012, from US$ 3.7 billion in 2006.

Notwithstanding the current economic slowdown, the US$ 2.26 billion Indian
wellness services market is expected to grow at about 30-35 per cent for the next
five years on the back of rising consumerism, globalisation and changing lifestyles,
according to a FICCI-Ernst and Young study.

The report classified wellness industry into seven core segments of allopathy,
alternative therapies, beauty, counselling, fitness/slimming, nutrition and
rejuvenation. While rejuvenation services such as spas, alternative therapies,
ayurveda treatments and beauty services are expected to grow by as much as 30
per cent, fitness comprising gyms and slimming centres are expected to grow by
more than 25 per cent.

Government Initiative

The Government launched the National Rural Health Mission (NRHM) in 2005. It
aims to provide quality healthcare for all and increase the expenditure on
healthcare from 0.9 per cent of GDP to 2-3 per cent of GDP by 2012.

During the 2009 interim budget, the government allocated US$ 2.42 billion for
NRHM.

The Tamil Nadu government has allocated US$ 698.16 million for health and family
care for the year 2009-10, up from US$ 564.34 million a year ago. The increased
budget includes creating a mega blood bank—Asia’s largest—in Chennai and
upgrading several hospitals, besides launching a new insurance scheme.

The government has announced a US$ 63.2 million initiative to promote domestic
manufacture of medical devices such as stents, catheters, heart valves and
orthopaedic implants that will lead to lower prices of these critical equipment.

Information Technology

The Indian information technology industry has played a key role in putting India on
the global map. Thanks to the success of the IT industry, India is now a power to
reckon with. According to the National Association of Software and Service
Companies (NASSCOM), the apex body for software services in India, the revenue of
the information technology sector has risen from 1.2 per cent of the gross domestic
product (GDP) in FY 1997-98 to an estimated 5.8 per cent in FY 2008-09.

India's IT growth in the world is primarily dominated by IT software and services

such as Custom Application Development and Maintenance (CADM), System
Integration, IT Consulting, Application Management, Infrastructure Management
Services, Software testing, Service-oriented architecture and Web services.

As per NASSCOM's latest findings:

* Indian IT-BPO sector grew by 12 per cent in FY 2009 to reach US$ 71.7 billion in
aggregate revenue (including hardware). Of this, the software and services segment
accounted for US$ 59.6 billion.

* IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40.9
billion in FY 2007-08 to US$ 47.3 billion in FY 2008-09. Moreover, according to a
study by Springboard Research, the Indian IT services market is estimated to
remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.
Despite the uncertainty in the global economy, the top three IT majors— Infosys,
TCS and Wipro—have seen revenue growth from all important sources of income:
from the North American and European regions, in the financial services vertical
and from application maintenance and development (ADM) offerings between fiscal
years 2008 and 2009. At present, there are 60 million Internet users in the country.
According to Manufacturer’s Association of IT (MAIT), the number of active Internet
entities rose to 8.6 million by March 2009 from 7.2 million units in March 2008. MAIT
has outlined 'Goal 511', an ambitious target that talks about 500 million Internet
users, 100 million broadband connections, and 100 million connected devices by
2012.

A latest study by MAIT estimated that the total PC sale in India is likely to grow by 7
per cent in 2009-10, with total sales expected to cross 7.3 million units.

Outsourcing

A research by Gartner forecasts India as the undisputed leader in the outsourcing

space in the year 2008. India's most prized resource is its readily available technical
work force. India has the second largest English-speaking scientific professionals in
the world, second only to the US. It is estimated that India has over 4 million
technical workers, over 1,832 educational institutions and polytechnics, which train
more than 67,785 computer software professionals every year. The enormous base
of skilled manpower is a major draw for global customers.

According to NASSCOM, software and services exports (including exports of IT

services, BPO, engineering services and R&D and software products) reached US$
47 billion in FY 2008-09, contributing nearly 78 per cent to the total software and
services revenue of US$ 59.6 billion.

India continues to be the most preferred destination for companies looking to

offshore their IT and back-office functions. It also retains its low-cost advantage and
is among the most financially attractive locations when viewed in combination with
the business environment it offers and the availability of skilled people, according to
global management consultancy AT Kearney.

India has retained its numero uno position even as some other well-established
outsourcing hubs dropped in their attractiveness to be replaced by new emerging
destinations in AT Kearney’s latest ranking of the top outsourcing destinations
across the globe. The top three countries in the 2009 Global Services Location Index
(GSLI) remain the same — India, China and Malaysia.

Domestic Markets India's domestic market has also become a force to reckon with,
as the existing IT infrastructure evolves both in terms of technology and depth of
penetration

According to NASSCOM, domestic IT market (including hardware) reached US$ 24.3

billion in FY 2008-09 as against US$ 23.1 billion in FY 2007-08, a growth of 5.3 per
cent.

India Inc's demand for IT services and products has bolstered growth in the
domestic sector with deal sizes going up remarkably and contracts worth US$ 50
million-US$ 100 million up for grabs.

The market for enterprise networking equipment in India is estimated to grow from
US$ 1 billion in 2008 to US$ 1.7 billion by 2012, recording a compounded annual
growth rate (CAGR) of 15 per cent during this period, according to a study by
Springboard Research.

Investments

* Infosys Technologies Ltd, will invest US$ 70 million over the next three quarters
of the current financial year towards increasing its sales and marketing staff
overseas, building new capabilities and hiring local resources for its international
centres.

* The Andhra Pradesh Government expects the IT-related SEZs and Software
Technology Parks of India (STPI) in the State to receive about US$ 3.27 billion
investments in the next five years.

* HCL Technologies has entered into a strategic partnership with South Africa’s
UCS Group. As part of the all-cash deal, HCL will acquire UCS’s enterprise solutions
SAP practice focused on the retail sector for US$ 7.7 million.

Rural Penetration

According to a report of the Internet and Mobile Association of India (IAMAI), rural
India has 3.3 million active internet users. Since rural India was mapped for the first
time, the year-on-year growth of internet users in rural India could not be
estimated.
The research also notes there are 5.5 million people who claim to have used
Internet at some point in time.

Government Initiatives

* The government set up the National Taskforce on Information Technology and

Software Development with the objective of framing a long term National IT Policy
for the country.

* Enactment of the Information Technology Act, which provides a legal framework

to facilitate electronic commerce and electronic transactions.

* The government-led National e-Governance Programme, has played an

important role in increasing internet penetration in rural India.

Road Ahead

The Indian information technology sector continues to be one of the sunshine

sectors of the Indian economy showing rapid growth and promise. According to a
report prepared by McKinsey for NASSCOM, the exports component of the Indian
industry is expected to reach US$ 175 billion in revenue by 2020. The domestic
component will contribute US$ 50 billion in revenue by 2020. Together, the export
and domestic markets are likely to bring in US$ 225 billion in revenue, as new
opportunities emerge in areas such as public sector and healthcare, and as
geographies including BRIC and Japan opt for greater outsourcing.

Insurance The US$ 41-billion Indian insurance industry is the fifth largest life
insurance market in the emerging insurance economies globally, growing at 32-34
per cent annually. Life insurance in India has the First Year Premium (inclusive of
Single Premium) segment accounting for US$ 24 billion and Non-Life Insurance—
US$ 5.6-billion industry—with motor and health segments accounting for 56 per
cent of total business. Currently, there are 22 life insurance firms operating in India
and as per industry estimates, the life category constitutes about 4 per cent of the
total GDP in the country. The foreign direct investment (FDI) limit in the insurance
space for foreign players is capped at 26 per cent—permissible under the automatic
route subject to obtain a licence from the official regulator, Insurance Regulatory
and Development Authority (IRDA)—but the government is planning to raise it to 49
per cent and a bill to give effect to the proposal is pending in the Rajya Sabha. The
life insurance industry has contributed more than four per cent to the country’s
gross domestic product (GDP) since liberalisation and non-life’s contribution has
been at 0.6 per cent for the last nine years.

SBI Life Insurance has been ranked the no. 1 life insurer across the globe, by the
Million Dollar Round Table (MDRT) members. MDRT is an association of the world’s
best life insurance sales professionals.
The country's largest life insurance player, Life Insurance Corporation of India (LIC),
is celebrating its 53rd anniversary week starting September 1, 2009 and has grown
to 35.8 million policies and a sum assured of US$ 80.3 billion in 2008-09. It has
collected US$ 325.27 million through alternate channels in the first four months of
the current fiscal.

MetLife India Insurance became the first private sector life insurer to provide
guaranteed monthly income along with other regular benefits like tax incentives
and bonuses with the launch of 'Met Monthly Income Plan' in August 2009. MetLife
has been among the top three fastest growing life insurance companies
consecutively for the last 30 months. Currently, there are at least 18 third party
agents (TPAs) empanelled with the four PSU insurers. Insurers have also begun
mulling setting up their own TPA mechanism to rectify the current weaknesses.
According a report by rating agency Care, public sector companies continue to
dominate the general insurance market accounting for more than 58 per cent of
market share. The four public sector general insurers—United India Insurance
Company, National Insurance Company, New India Assurance and Oriental
Insurance Company— were able to marginally increase their market share to 59.74
per cent from their combined market share of 59.4 per cent during April 2008-
February 2009. In June 2009, the general insurance industry grew at 7.4 per cent.
Gross underwritten premiums (GWP) of the public sector insurers stood at US$ 319
million, up by eight per cent. The growth in GWP of private sector players was to the
tune of 6.5 per cent at US$ 214.72 million. United India Insurance was the best
performer, among public sector players, growing its business by around 17 per cent.
New India Assurance grew at 8.5 per cent. Overall growth in the life insurance
industry remained moderate, with private insurers reporting a decline of 20 per cent
in the category. They clocked US$ 1.12 billion during the first three months of the
fiscal, while public sector player LIC posted a 20 per cent growth in first year
premiums. Among the larger, Reliance Life is the only private player that has
recorded a positive growth at 20 per cent in its first year premium collections.
According to the data compiled by the insurance regulator, in June 2009, LIC’s new
business premiums were up 10 per cent. Cumulative assets managed by the private
insurance players stood at US$ 31.7 billion as on June 30, 2009, while LIC managed
over US$ 167.37 billion (March 2009).

Rural business According to IRDA guidelines, a certain portion of the life insurance
company’s business must come from rural markets. LIC has a much wider rural
foothold, with rural business accounting for nearly 40 per cent of the total, while the
private life insurance companies have significantly increased their focus on rural
business in the past two years.

Health Insurance
Both life and non-life insurers provide health insurance schemes. There are
currently over 30 health insurance products offered by as many insurance
companies across India.

Sale of health insurance products in India registered around 30 per cent growth and
garnered US$ 1.36 billion in terms of new premium collection for the year ended
March 2009 owing to growing awareness and rising healthcare costs, as per IRDA.
However, there is still huge potential for growth in the segment as currently the
penetration of health insurance is at around 2 per cent of India’s 1.1 billion-
population.

Tata AIG has launched a health product called ‘Hospicashback’ in early 2009. The
product offers a guaranteed return of premium, irrespective of the claims of the
customers besides paying customers fixed benefits for expenses such as hospital
and ambulance charges.

In August 2009, Metlife entered the health insurance business with the launch of a
new scheme ‘Met Health Care’, offering daily cash benefits in the case of
hospitalisation. Customers can avail of the health insurance without undergoing any
medical tests.Bancassurance Bancassurance simply means selling of insurance
products by banks. In India, the bank branch network encompasses nearly 75,000
branches inclusive of PSU and private banks. Close to 100,000 branches of co-
operative, district co-operative and regional rural banks also exist. Normally,
commercial banks act as a corporate agent and tie-up with one insurance company.
Both Axis bank and HDFC bank are tying up with insurance companies vying for
better share of the commissions.

Policy Initiatives

To improve returns under the unit-linked insurance plans (ULIPS), the regulator has
capped the amount insurance companies can charge the fund. Insurance regulator,
IRDA, also tightened the guidelines by asking the insurance companies to ensure
that no policies are issued to persons with fictitious names.

From June 2009, non-life insurance companies can neither reject the renewal of
existing health insurance policies on the premise that claims had been made in the
previous years, nor arbitrarily increase the premium while renewing cover. The
grounds for such rejection have been made rare and exceptional, according to an
IRDA circular.

Investment Scenario

* Magma Fincorp is foraying into insurance business. The company has tied up
with German insurance major, HDI-Gerling International Holding, to enter the
general insurance sector in India, and will have an initial paid-up equity capital of
US$ 22.65 million.
 * Life Insurance Corporation of India (LIC) is looking at 25 per cent growth in new
premium income in FY 2009-10, after it registered a growth of 69.33 per cent in the
first premium collection in April 2009. It is also planning to invest US$ 8.23 billion in
equities in 2009-10.

The Road Ahead

According to the Investment Commission of India, the Indian insurance market is

expected to be around US$ 52 billion by 2010. The compound annual growth rate
(CAGR) is expected to be over 30 per cent per annum. The total investment
opportunity is estimated to be US$ 14 billion-US$ 15 billion.

Further, according to a report 'Booming Insurance Market in India (2008-2011)’ by

Research and Markets, total life insurance premium in India is projected to grow
US$ 253.2 billion by 2010-11. Total non-life insurance premium is expected to
increase at a CAGR of 25 per cent for the period spanning from 2008-09 to 2010-11.