A look back at 4 years of Modi raj

Four years ago, in the biggest election of India’s history, Narendra Modi the three-term chief minister of Gujarat stormed to power with a thumping majority for his vision for a developed India. Not for 30 years had a single party won an electoral majority. Modi's success, his rhetoric and his background all seemed like a decisive break with India's past -- one which many Indians were eager to embrace.

Modi government unleashed the biggest tax reform, revamped a century-old bankruptcy law, revived stalled projects and got the World Bank to say Asia’s third biggest economy is a much better place to do business.

During these four years, the Modi government introduced a number of reforms including Swachch Bharat project, Demonetisation, implementation of Goods and Services tax (GST), Ujjwala Yojna, among others. Even the rating agency Moody’s upgraded India’s sovereign rating after the gap of 14 years long years. Recently, the government has also said that is has connected all villages in the country with electricity. 

The key fact that has the government enthused is that India is one of the fastest growing economies of the world, and is likely to emerge as the fifth largest. The economy is likely to double in seven years. This is a good proposition for any government to work with, be it in its last year or the first. 

Here’s a look at how the economy has fared under Modi and other big changes that defined four years of Modi government.

According to reports India’s economy was growing at higher pace after Modi changed the way GDP was calculated. However, unexpected cash crack down in November 2016 eroded those. But now, growth is showing signs of revival, shrugging off the impact of demonetisation and GST. As Modi enters his final year in office, India is poised to replace China as the world’s fastest growing economy.

As far as fiscal deficit is concerned, the glide path on the fiscal deficit helped Modi bring it down to a 10-year low and win a rating upgrade from Moody’s Investors Service. Crude oil prices helped keep the government’s finances in check in the initial years. However, it could now play spoilsport. India’s budget deficit is still one of the widest in Asia and Modi’s challenge is to narrow it further amid pressures to boost spending ahead of national polls in 2019.

The big changes introduced during these four years included demonetisation. The government on November 8, 2018 announced that Rs 500 and Rs 1,000 currency notes in circulation would be withdrawn and new Rs 500 and Rs 2,000 notes were issued. The idea was to target black money, though that narrative did change over the course of the year. The move sent shockwaves across the economy. Economic growth was subdued and several small businesses were shut. However, the currency in circulation has now significantly improved, and the government is pumping in new currency notes.

The other major change was unified tax. India has been looking at a unified goods and services tax regime for almost two decades. The BJP-led NDA government took it upon itself to push through the indirect taxes reform. The GST has more tax slabs that envisioned and has been revised multiple times. Teething troubles are still being ironed out. 

The introduction of Real Estate (Regulation & Development) Act, or RERA, has been another great move, at the central government level. But state governments have been lackadaisical in implementing it. And implementation as usual remains the key.

One of the key parameters that the government wanted to improve was ease of doing business. The government had made it clear that India’s ranking on the World Bank chart should get better. After slipping briefly, India managed to go up 30 places in the 2018 rankings. 

To conclude, the performance of the Modi government has been above average on the economic front. According to Niti Aayog, all the macroeconomic parameters, including growth, inflation and fiscal deficit, have shown a considerable improvement in the last four years.

MSEs biz Sentiment Improves on Growth Prospects

India’s small businesses confidence continued to remain upbeat about their growth prospects buoyed by gains in the manufacturing sector in the January-March quarter.

According to a statement by the Press Information Bureau, the CriSidEx Index, which measures the business sentiment among micro and small enterprises, rose to 121 in the January-March quarter, reflecting a growing optimism among these firms over their business prospects. That compares with 107 in the three months ended December-its first reading that had indicated a mildly positive sentiment.

The CriSidEx index, developed jointly by Crisil and SIDBI, is based on a diffusion index of eight parameters -five manufacturing and three services -that have equal weights. It measures MSE business sentiment on a scale of 0 to 200.

India’s small businesses sentiment has started improving gradually after the jolt of demonetisation and then the implementation of Goods and Services Tax. Particularly the ones in the informal economy as the cash ban hurt consumption and then GST increased compliance burden.

Within manufacturing, chemicals, auto components, engineering and capital goods-related-small enterprises reported a better January-March period and are the most optimistic about the ongoing quarter. Segments with a significant presence in unorganised enterprises such as leather and leather goods, and gems and jewellery remained subdued.

Among commercial services and supplies providers, 21 per cent reported a subdued quarter, 48 per cent reported a satisfactory one, and 31 per cent reported a good quarter. The corresponding figures for the construction/real estate segments are 15 per cent, 62 per cent and 23 per cent, respectively.

Information technology and IT-enabled services, traders and healthcare providers had a healthy March quarter and are expected to continue doing well, but that is not so with logistics, construction and real estate-based businesses. The services sector remains optimistic, with most industries having only a single-digit share of respondents expecting a turn for the worse.

Unorganised MSEs also reported a slight improvement in performance. About 13 per cent of them, with less than 10 employees, reported a bad survey quarter compared with 22 per cent in October-December.

Meanwhile, lenders hold a neutral view for n​ext quarter, with 9 out of 10 saying the overall business situation will be satisfactory.

As many as 7 out of 10 lenders did not find any change in the situation of MSE non-performing assets (NPA) accounts in survey quarter and majority of lenders do not expect an increase in NPA accounts in next quarter. 

As far as new jobs are concerned, the services and manufacturing sectors are equally optimistic on employment with 15 per cent of respondents in each stating they added employees.

Latin Manharlal Group

Indian Packaged Snack and Savouries Market

Packaged foods include ready-to-eat / cook foods that are packed and sold to consumers. They are primarily aimed at convenience and usually undergo a certain degree of processing to increase shelf life, taste, stability, etc. It includes food items like bakery products, canned / dried processed food, frozen processed food, meal replacement products, dairy products, snacks, confectionaries,beverages, etc.

The Rs 500 billion Indian snacks market is characterised by a large number of unorganised players across all product segments. This stems from each type of snack being very specific to each region, and hence, many small companies used to cater to that market. These players have a slim portfolio of products, usually of a single category and in many cases only provide traditional snacks items. They also operate in a small geographic range confined to a single state or city. Apart from this, there is a large presence of players that supply fresh products in chips and traditional Indian snacks categories.

The organised snacks market has been witnessing high growth over the last few years. This is because of the overall growth in the processed foods segment, followed by the moving trend towards consolidation of markets. Some of the traditional Indian snacks have fared better than western snacks.

Competitive Landscape

In the organised snacks segment the market has been historically dominated by major FMCG companies such as PepsiCo, ITC, Parle Products, etc. PepsiCo, with its Lays’ and Kurkure brand has dominated the chips and extruded snacks market with close to 50% market share in each of the segments. A large portfolio of products, innovative flavours, regular new product launches, aggressive advertisements and promotions, celebrity endorsements, and large retailer margins have been instrumental in PepsiCo gaining dominance in these categories.

Analysis of Extruded Snacks Market in India

Extrusion technologies have an important role in the food industry as an efficient manufacturing process. The products developed by this process are known as extruded snacks and they differ in colour, shape, and aroma. Extruded food products are mainly corn flour and potato-based but a combination of flours can also be used. Fast-paced lifestyle, high disposable income, rising urbanisation, and transforming food culture have attributed to the growth and demand of the Indian snacks market, including extruded snacks.

North and West India are the largest markets for extruded snacks. Both these regions also witness the largest competition in both the organised and unorganised segments. Small pack size is imperative to push sales volumes, especially in the rural markets, where penetration is minimal. Even in extruded snacks, the products that are sold across the various regions vary depending on what is native to the region and the typical flavours enjoyed.

One of the key varieties of extruded snacks is rings. This includes corn rings and accounts for about 8%-10% of the total extruded snacks market. This segment is entirely targeted at children. Corn-based extruded snacks are of various types. But the most common one would be the puffed variety. Variants such as cheese balls, cheese puffs, and spicy corn puffs are popular. Fryums are also a popular category in the market, with a large presence of unorganised players.

The demand for extruded snacks is expected to increase at a CAGR of 15% over the next five years. The market size is expected to be app Rs 125 billion by 2020. An increasing young population, the demand for multiple snacking items and flavours, increasing disposable income and the influence of social media, are some of the major factors that are driving this growth.

Analysis of Chips Market in India

Chips are one of the largest segments in the Indian snacks market. There are a large number of players in the market operating at a national level as well as in the regional level. In addition to packaged chips, there is a notable market for fresh chips (not covered under this study). In addition to potato chips, tapioca chips and banana chips are the top varieties present in the market. Potato is the most popular variety and accounts for more than 90% of the total chips market.

Similar to the other snack segments, the market for chips is also highly unorganised and fragmented; the main difference being chips is already a mature market in India. Even in the organised market, many players are restricted to certain regions or cities, while big players have a larger reach. While the unorganised segment dominates the market, a move toward a more organised industry structure is expected in the future. With increasing urbanisation, exposure to various cultures and tastes, the consumer is becoming increasingly demanding and only companies that play in the organised segment will possess the capabilities to continuously innovate to satisfy consumer demands. Furthermore, companies that play in the organised segment are perceived as healthier and hygienic in comparison to the unorganised ones. Additionally, the colourful and multi-layer packaging seen in branded products is both attractive and retains freshness when compared to products sold by the unorganised players. Hence, a move toward a more organised market is inevitable.

Since chips make a fairly mature market, the demand is expected to grow at 11% over the next five years.The market size is expected to be Rs 130 billion by 2020. Growth in the organised segment is expected to be more than the growth in the unorganised segment

Analysis of Namkeen Market in India

Namkeen covers a broad range of products that are traditionally consumed in India. Most of these products were traditionally cooked at home and consumed. However, current lifestyles restrict the time available for such activities forcing consumers to purchase these products for consumption. This has resulted in the Indian market experiencing high growth over the last few years. The broad range of products, availability of raw materials and higher margins are some of the key factors that deem this segment attractive. In response, many companies are adding more namkeen in their product portfolio. Moong Dal and Aloo Bhujia are the most popular products in the segments. Due to the varied eating habits across India, the preference for traditional snacks varies across the country.

A high growth of nearly 20% over the next four to five years is forecasted. The growth is also supported by the large presence of the unorganised segment, catering to unique taste-requirements in each region and ensuring reach to even the most rural markets. In the long run consolidation of the unorganised sector is expected

Overview of the packaged sweets industry in India

The overall Indian traditional sweets market is estimated at over ₹ 350 billion in 2015 and is largely dominated by the unorganised players. Due to the integral role played by sweets in Indian culture and festivities, the market for traditional Indian sweets is expected to grow at about 10% over the next few years. The organized confectionary market in India is estimated at about Rs 25 billion in 2015. The market for confectionaries is estimated to grow at about 15%-18% over the next four to five years driven primarily by chocolate confectionaries.

Latin Manharlal Group