Chillin' out till it needs to be funded
Our booming lifestyle and personal care market
TOI discussed India’s shadow Economy again, sticking to a mould of 40% over and above India’s obvious GDP. We stick to our estimates of INR 120 Trillion in the Shadow Economy. Counterfeit Goods may not be significant, but it is true that even if this $3 Trillion is taxed at a SME rate of 10%, India would be richer by twice this year’s planned tax collections ( for Professionals in Service the Turnover tax equivalent is 8000 or $200 for a $100K turnover. Thus tax leakage calculations at 30% are nothing but shoddy jingoism.
But that is just a feel good beginning where, the real issue is that all of India’s Personal care and Pharmaceutical Industries are a little over INR 1 Trillion each and Telecom services also might be less than half that despite 10 million new connections a month. That means we do not have the developed bandwidth to handle big volumes nor do we have the capability to service our own growth of 20% in IIP every month.
INR 1 Trillion amunts to 2.5% of the GDP while Outsourcing Services at a huge cash discount with multiple failures in premium positioning, earn INR 600 bn in assured annuity revenues. Tourism , India’s weakest link with only 6 million tourist arrivals seems to be bigger brother to these three most promising growth areas, reducing them to little more than sunrise sectors.
Sleight of Hand or not, this is a significant loss of opportunity. In the Edible Oils market for example, unbranded products make 85-90% of all sales. Retail Hypermarkets from Carrefour and Shoprite are discussing investments in millions not billions. It is much like the advent of European HSBC in USA who is counting its good fortune on having started 18 branches, even if in prime locations in the whole of United States with a banked Population of more than 250 million people.
Selling peanuts to Charlie Brown
However, US analysts also seem to continue to revel in making some half ass assumptions like Chennai Super Kings and running themselves out with contentions linking India’s weaker market with Obama’s reform. India’s pharmaceutical industry’s strength lie in Cost control in both Production and Research and given this small base, we will continue an era of hypergrowth in the business.