Disinvestment and

Industry Analysis

Concept of Disinvestment
The action of an organization or government selling or

liquidating an asset or subsidiary

It is also referred to as divestment or divestiture.
Disinvestment typically refers to sale from the government,

partly or fully, of a government-owned enterprise

Causes for Disinvestment in PSUs

Negative rate of return on capital employed
Inefficient PSUs had become and were continuing to be a drag

on the Governments resources

The national gross domestic product and gross national

savings were also getting adversely affected by low returns

from PSUs.

Factors responsible for low profits in the PSUs

Price policy of public sector undertakings
Underutilisation of capacity
Problems related to planning and construction of projects
Problems of labour, personnel and management
Lack of autonomy

Main objectives of disinvestment

To reduce the financial burden on the Government
To improve public finances
To introduce, competition and market discipline
To fund growth
To encourage wider share of ownership

Arguments against Disinvestment

Considerable PSU disinvestment would squeeze this important

source of revenue for the Government

Using funds made available from disinvestment to bridge the fiscal

deficit is an unhealthy and a short term practice. It is said that it is

equivalent of selling 'family silver' to meet short term monetary
requirements
Some employees of PSUs would lose jobs
It would increase private monopolies

Industry Analysis

Textiles Industry

Textiles
The textile industry continues to be the second largest employment generating sector in India, after agricultural sector
Major products:
Man Made Fibers: These includes manufacturing of clothes using fiber or filament synthetic yarns. It is produced in the large power

loom factories. They account for the largest sector of the textile production in India. This sector has a share of 62% of the India's total
production and provides employment to about 4.8 million people.
The Cotton Sector: It is the second most developed sector in the Indian Textile industries. It provides employment to huge amount of

people but its productions and employment is seasonal depending upon the seasonal nature of the production.
The Handloom Sector: It is well developed and is mainly dependent on the Self Help Groups for their funds. Its market share is 13%

of the total cloth produced in India.

The Woolen Sector: India is the one largest producer of the wool in the world. India also produces 1.8% of the world's total wool.
The Jute Sector: The jute or the golden fiber in India is mainly produced in the Eastern states of India like Assam and West Bengal.

India is the largest producer of jute in the world.

The Sericulture and Silk Sector: India is the 2nd largest producer of silk in the world. India produces 18% of the world's total silk.

Mulberry, Eri, Tasar, and Muga are the main types of silk produced in the country. It is a labor-intensive sector.

Problems of Textile Industry

Global Competition
Technology upgradataion as major semi skilled and unskilled

workers are absorbed/ labour intensive

Raw Materials seasonal in nature

Road Ahead
Promote training facilities
Technology transfers
Private public partnership
Marketing and visibility of products expo, exhibitions
Multi-utility of products jute bags

INDIAN ELECTRONIC
INDUSTRY

INDIAN ELECTRONIC INDUSTRY

Size of the Industry: Indian electronics industry today

stands at US $ 25 billion
Geographical distribution: All the major Metropolitans cities

in the India
Output per annum: It is growing at over 25% per annum

The demand for electronics is expected to be

fuelled by the growth of
Telecommunications (250 million subscribers by the next few

years)
PCs and Notebooks (5 million every year)
Broad-Band connectivity reaching rural areas

Top leading Companies

Video Projectors: Phil Systems, Keltron Projectors, Birla 3M,

Samrat Video Vision

Colour Television: LG Electronics, Philips, Sony; Sansui,

Samsung, BPL, Videocon, Onida, Aiwa, Akai, Thompson,

Panasonic.
Cameras/Camcorders: Sony, Canon, Olympus, Fuji film,

Nikon

Latest developments
The Indian Electronic industry constitutes less than 1% of the global market
Today India remains a major importer of electronic materials, components and

finished equipment mainly from China

India is growing up to be one of the biggest markets for electronic

instrumentations
Multi national corporations provide growing electronics market to India at lower

costs
To attract foreign investment the government has adopted Chinese style Special

Economic Zones with the aim to provide islands of excellence where the
infrastructure is world standard

FMCG INDUSTRY

FMCG
The fast movingconsumer goods(FMCG) segment is the fourth largest sector

in the Indian economy

Food products is the leading segment, accounting for 43 per cent of the

overall market. Personal care (22 per cent) and fabric care (12 per cent)
come next in terms of market share
FMCG goods are popularly known as consumer packaged goods. Items in

this category include all consumables (other than groceries/pulses) people

buy at regular intervals. The most common in the list are toilet soaps,
detergents, shampoos, toothpaste, shaving products, shoe polish, packaged
foodstuff, and household accessories and extends to certain electronic goods.
These items are meant for daily or frequent consumption and have a high
return.

Rural set to rise

Rural areas expected to be the major driver for FMCG, as growth continues

to be high in these regions

Companies are also working towards creating specific products specially

targeted for the rural market.

The Government of India has also been supporting the rural population with

higher minimum support prices (MSPs), loan waivers, and disbursements

through the National Rural Employment Guarantee Act (NREGA) programme.
These measures have helped in reducing poverty inrural Indiaand given a

boost to rural purchasing power.

Urban trends
With rise in disposable incomes, mid- and high-income

consumers in urban areas have shifted their purchasing trend

from essential to premium products.
In response, firms have started enhancing their premium

products portfolio.
Indian and multinational FMCG players are leveraging India as

a strategic sourcing hub for cost-competitive product

development and manufacturing to cater to international
markets.

Top Companies
The top ten India FMCG brands are:
1.Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestl India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble
10. Marico Industries

Road Ahead
FMCG brands would need to focus on R&D and innovation as a means of

growth. Companies that continue to do well would be the ones that have a culture
that promotes using customer insights to create either the next generation of
products or in some cases, new product categories.
One area that we see global and local FMCG brands investing more in is health

and wellness. Health and wellness is a mega trend shaping consumer

preferences and shopping habits and FMCG brands are listening. Leading global
and Indian food and beverage brands have embraced this trend and are focused
on creating new emerging brands in health and wellness.

According to the PwC-FICCI report Winds of change, 2013: the wellness consumer,

nutrition foods, beverages and supplements are growing at 10 to 12%.

Pharmaceuticals
INDUSTRY

Pharmaceuticals
India is among the top six global pharmaceutical producers in the world
Approximately 70 per cent of the patients in developing countries

receive Indian medicines through NGOs like The Clinton Foundation, Bill
& Melinda Gates Foundation, Doctors Without Borders, the UNCTAD etc.
India ranks amongst the top global generic formulation exporters in

volume terms
Manufacturing costs in India are approximately 35-40 per cent of those

in the US due to low installation and manufacturing costs.

Household Spend & Growth in Rural India

The Government of India is committed to setting up robust healthcare and

delivery mechanisms.
Due to increasing population and income levels, demand for high-end

drugs in India is expected to reach US$ 8 billion by 2015.

Expenditure on pharmaceuticals is likely to increase to over 40 per cent of

the total spending on healthcare by households by 2015.

With 70 per cent of India's population residing in rural markets, various

pharma companies are investing in the distribution network in rural areas.

Governments Initiatives
The policies of the Government of India are aimed at:
Building more hospitals
Boosting local access to healthcare
Improving the quality of pharmaceuticals
Improving the quality of medical training