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Economic Analysis (India)

Economy - overview:
India is developing into an open-market economy, yet traces of its past autarkic policies remain.
Economic liberalization, including industrial deregulation, privatization of state-owned
enterprises, and reduced controls on foreign trade and investment, began in the early 1990s and
has served to accelerate the country's growth, which has averaged more than 7% per year since
1997. India's diverse economy encompasses traditional village farming, modern agriculture,
handicrafts, a wide range of modern industries, and a multitude of services. Slightly more than
half of the work force is in agriculture, but services are the major source of economic growth,
accounting for more than half of India's output, with only one-third of its labor force. India has
capitalized on its large educated English-speaking population to become a major exporter of
information technology services and software workers. In 2010, the Indian economy rebounded
robustly from the global financial crisis - in large part because of strong domestic demand - and
growth exceeded 8% year-on-year in real terms. However, India's economic growth in 2011
slowed because of persistently high inflation and interest rates and little progress on economic
reforms. High international crude prices have exacerbated the government's fuel subsidy
expenditures contributing to a higher fiscal deficit, and a worsening current account deficit. Little
economic reform took place in 2011 largely due to corruption scandals that have slowed
legislative work. India's medium-term growth outlook is positive due to a young population and
corresponding low dependency ratio, healthy savings and investment rates, and increasing
integration into the global economy. India has many long-term challenges that it has not yet fully
addressed, including widespread poverty, inadequate physical and social infrastructure, limited
non-agricultural employment opportunities, scarce access to quality basic and higher education,
and accommodating rural-to-urban migration.
According to the World Bank, as of 2011, the Indian economy is nominally worth US$1.848
trillion it is the tenth-largest economy by market exchange rates, and is, at US$4.457 trillion, the
third-largest by purchasing power parity, or PPP. With its average annual GDP growth rate of
5.8% over the past two decades, and reaching 6.1% during 201112, India is one of the world's
fastest-growing economies. However, the country ranks 140th in the world in nominal GDP per
capita and 129th in GDP per capita at PPP. Until 1991, all Indian governments followed
protectionist policies that were influenced by socialist economics. Widespread state intervention
and regulation largely walled the economy off from the outside world. An acute balance of
payments crisis in 1991 forced the nation to liberalise its economy; since then it has slowly
moved towards a free-market system by emphasizing both foreign trade and direct investment
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inflows. India's recent economic model is largely capitalist. India has been a member of WTO
since 1 January 1995.
The 487.6-million worker Indian labor force is the world's second-largest, as of 2011. The
service sector makes up 55.6% of GDP, the industrial sector 26.3% and the agricultural sector
18.1%. Major agricultural products include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and
potatoes. Major industries include textiles, telecommunications, chemicals, pharmaceuticals,
biotechnology, food processing, steel, transport equipment, cement, mining, petroleum,
machinery, and software. In 2006, the share of external trade in India's GDP stood at 24%, up
from 6% in 1985. In 2008, India's share of world trade was 1.68%;In 2011, India was the world's
tenth-largest importer and the nineteenth-largest exporter. Major exports include petroleum
products, textile goods, jewelry, software, engineering goods, chemicals, and leather
manufactures. Major imports include crude oil, machinery, gems, fertilizer, and chemicals.
Between 2001 and 2011, the contribution of petrochemical and engineering goods to total
exports grew from 14% to 42%.
The Bombay Stock Exchange is Asia's oldest and India's largest bourse by market capitalization.
Averaging an economic growth rate of 7.5% for several years prior to 2007, India has more than
doubled its hourly wage rates during the first decade of the 21st century. Some 431 million
Indians have left poverty since 1985; India's middle classes are projected to number around 580
million by 2030. Though ranking 51st in global competitiveness, India ranks 17th in financial
market sophistication, 24th in the banking sector, 44th in business sophistication, and 39th in
innovation, ahead of several advanced economies, as of 2010. With 7 of the world's top 15
information technology outsourcing companies based in India, the country is viewed as the
second-most favorable outsourcing destination after the United States, as of 2009. India's
consumer market, currently the world's eleventh-largest, is expected to become fifth-largest by
2030.India's telecommunication industry, the world's fastest-growing, added 227 million
subscribers during the period 201011. Its automotive industry, the world's second fastest
growing, increased domestic sales by 26% during 200910, and exports by 36% during 200809.
Power capacity is 250 gig watts, of which 8% is renewable. The Pharmaceutical industry in India
is among the significant emerging markets for global pharmacy industry. The Indian
pharmaceutical market is expected to reach $ 48.5 billion by 2020. India's R & D spending
constitutes 60% of Biopharmaceutical industry. India is among the top 12 Biotech destinations
of the world. At the end of 2011, Indian IT Industry employed 2.8 million professionals,
generated revenues close to US$100 billion equaling 7.5% of Indian GDP and contributed 26%
of India's merchandize exports.
Despite impressive economic growth during recent decades, India continues to face socio-
economic challenges. India contains the largest concentration of people living below the World
Bank's international poverty line of US$1.25 per day, the proportion having decreased from 60%
in 1981 to 42% in 2005. Half of the children in India are underweight, and 46% of children under
the age of three suffer from malnutrition. The Mid-Day Meal Scheme attempts to lower these
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rates. Since 1991, economic inequality between India's states has consistently grown: the per-
capita net state domestic product of the richest states in 2007 was 3.2 times that of the poorest.
Corruption in India is perceived to have increased significantly, with one report estimating the
illegal capital flows since independence to be US$462 billion. Driven by growth, India's nominal
GDP per capita has steadily increased from US$329 in 1991, when economic liberalization
began, to US$1,265 in 2010, and is estimated to increase to US$2,110 by 2016; however, it has
always remained lower than those of other Asian developing countries such as Indonesia, Iran,
Malaysia, Philippines, Sri Lanka, and Thailand, and is expected to remain so in the near future.
According to a 2011 PricewaterhouseCoopers report, India's GDP at purchasing power parity
could overtake that of the United States by 2045. During the next four decades, Indian GDP is
expected to grow at an annualized average of 8%, making it potentially the world's fastest-
growing major economy until 2050. The report highlights key growth factors: a young and
rapidly growing working-age population; growth in the manufacturing sector due to rising
education and engineering skill levels; and sustained growth of the consumer market driven by a
rapidly growing middle class. The World Bank cautions that, for India to achieve its economic
potential, it must continue to focus on public sector reform, transport infrastructure, agricultural
and rural development, removal of labor regulations, education, energy security, and public
health and nutrition.Citing persistent inflation pressures, weak public finances, limited progress
on fiscal consolidation and ineffectiveness of the government, rating agency Fitch revised India's
Outlook to Negative from Stable on 18 June 2012. Another credit rating agency S&P had warned
previously that a slowing GDP growth and political roadblocks to economic policy-making could
put India at the risk of losing its investment grade rating.However, Moody didn't revise its
outlook on India keeping it stable, but termed the national government as the "single biggest
drag" on the business activity.
Gross domestic product (GDP)
GDP is the market value of all officially recognized final goods and services produced within a
country in a given period of time. GDP per capita is often considered an indicator of a country's
standard of living.

GDP (purchasing power parity)
2009 $3.806 trillion
2010 $4.21 trillion
2011 $4.515 trillion
From the above shown data it can be analyzed that in India purchasing power parity is in
increasing trend. This indicates india is a growing country
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GDP - per capita (PPP)
2009 $3200
2010 $3500
2011 $3700

From the above table it can be analyzed that per capital income is increasing but it increasing at a
lower rate.
GDP - composition by sector (2011)
Agriculture industry services
17.2% 26.4% 56.4%
From above table it can be analyzed that service sector contributes maximum to GDP. Industry
sector is in increasing trend.
Saving and Investment (gross fixed):
32.8% of GDP (2011 est.)
This record shows total business spending on fixed assets, such as factories, machinery,
equipment, dwellings, and inventories of raw materials, which provide the basis for future
production. It is measured gross of the depreciation of the assets, i.e., it includes investment that
merely replaces worn-out or scrapped capital.
Inflation Rate:

Inflation rate is a measure of inflation, or the rate of increase of a price index such as the
consumer price index. It is the percentage rate of change in price level over time, usually one
year. Inflation rate in 2010 it was 12% and in 2011 it was 11%. This decrease in rate shows the
increase in purchasing power.

Interest Rates
Interest rate the annualized interest rate a country's central bank charges commercial, depository
banks for loans to meet temporary shortages of funds.in 2010 it was 5.5 % and in 2011 it was 6%

Budget:
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A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for
saving, borrowing and spending.
Budget: revenues: $196.4billion
expenditures: $308.8 billion (2011 est.)
Tax Structure:
India has a THREE-TIER TAX STRUCTURE, wherein the constitution empowers the union
government to levy income tax, tax on capital transactions (wealth tax, inheritance tax), sales tax,
service tax, customs and excise duties and the state governments to levy sales tax on intrastate
sale of goods, tax on entertainment and professions, excise duties on manufacture of alcohol,
stamp duties on transfer of property and collect land revenue (levy on land owned). The local
governments are empowered by the state government to levy property tax and charge users for
public utilities like water supply, sewage etc.[2][3] More than half of the revenues of the union
and state governments come from taxes, of which 3/4 come from direct taxes. More than a
quarter of the union government's tax revenues is shared with the state governments.
The tax reforms, initiated in 1991, have sought to rationalize the tax structure and increase
compliance by taking steps in the following directions:Reducing the rates of individual and
corporate income taxes, excises, customs and making it more progressive
Reducing exemptions and concessions
Simplification of laws and procedures
Introduction of permanent account number (PAN) to track monetary transactions21 of the 28
states introduced value added tax (VAT) on 1 April 2005 to replace the complex and multiple
sales tax system. The non-tax revenues of the central government come from fiscal services,
interest receipts, public sector dividends, etc., while the non-tax revenues of the States are grants
from the central government, interest receipts, dividends and income from general, economic and
social services. Inter-state share in the federal tax pool is decided by the recommendations of the
Finance Commission to the President. Total tax receipts of Centre and State amount to
approximately 18% of national GDP.

Consumer Spending
The amount of money spent by households in an economy. The spending includes durables, such
as washing machines, and nondurables, such as food. It is also known as consumption, and is
measured monthly. John Maynard Keynes considered consumer spending to be the most
important determinant of short-term demand in an economy.
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From the above given chart it can be analyzed that the consumer spending is increasing day by
day. People are earning more and spending more.

Investment spending:

Money spent on capital goods, or goods used in the production of capital, goods, or services.
Investment spending may include purchases such as machinery, land, production inputs, or
infrastructure. Investment spending should not be confused with investment, which refers to the
purchase of financial instruments such as stocks, bonds, and derivatives. Also called capital
formation.

Foreign Exchange

Exchange rate (also known as the foreign-exchange rate, forex rate or FX rate) between two
currencies is the rate at which one currency will be exchanged for another. It is also regarded as
the value of one countrys currency in terms of another currency.[1] For example, an interbank
exchange rate of 91 Japanese yen (JPY, ) to the United States dollar (US$) means that 91 will
be exchanged for each US$1 or that US$1 will be exchanged for each 91







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Foreign Exchange Rate
Year Indian rupee. U.S $
2007 41.487 1
2008 43.319 1
2009 48.405 1
2010 45.726 1
2011 44.64 1
http://www.indexmundi.com/india/exchange_rates.html

India Exports

India exports were worth 23.2 billion USD in October of 2012. Historically, from 1994 until
2012, India Exports averaged 8603.2 USD Million reaching an all time high of 30418.0 USD
Million in March of 2011 and a record low of 1805.0 USD Million in May of 1994. Exports
amount to 22% of Indias GDP. Gems and jewelry constitute the single largest export item,
accounting for 16 percent of exports. India is also leading exporter of textile goods, engineering
goods, chemicals, leather manufactures and services. Indias main export partners are European
Union, United States, United Arab Emirates and China. This page includes a chart with historical
data for India Exports.








Balance Of Payments BOP

A record of all transactions made between one particular country and all other countries during
a specified period of time. BOP compares the dollar difference of the amount of exports and
imports, including all financial exports and imports. A negative balance of payments means that
more money is flowing out of the country than coming in, and vice versa.



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Monsoon and Agriculture:
Monsoon and Agriculture in India has a significant history. Today, India ranks second
worldwide in farm output. Agriculture and allied sectors like forestry and fisheries accounted for
16.6% of the GDP in 2009, about 50% of the total workforce. The economic contribution of
agriculture to India's GDP is steadily declining with the country's broad-based economic growth.
Still, agriculture is demographically the broadest economic sector and plays a significant role in
the overall socio-economic fabric of India.Monsoon does play an important role on the economy
of a country. Economy of a country depends on Agricultural, Industrial sector especially in a
country like India. In India, agriculture provides around 70% of employment either directly or
indirectly. This is the major reason for the economic growth of India to depend on Monsoon
season. Monsoon season in India starts from June and continue till September. If the monsoon is
good, it boosts up the economy of the country and helps in maintaining GDP growth. But if
monsoon rains get delayed even by 15 days, it becomes a cause of worry for the government to
maintain GDP growth. But as per the estimates given by India Meteorological Department, rains
this year in 2012 have not been so good till now. Rainfall in June already saw a 31 percent deficit
and 82 per cent of the area of the country, including the states of Punjab and Haryana, have
received deficient or scanty rainfall. Many parts of Maharashtra and Punjab are declared as
drought-hit as they received less than 50% rainfall this year by mid-August.
If the rainfall would have been normal as were in 2010 and 2011, it could encourage government
to ease curbs on export of wheat and rice, and good rainfall will boost output of grain and oil
seeds, and help calm inflation; which does not seem to be the case this year. Rainfall in North
India has been delayed by over 20 days and India's largest dam, the BhakraNangal, has reached a
critical level. There is a similar situation at other reservoirs in the North, which has worsened the
power situation further with major outages across Punjab, Haryana, and Delhi.
Unemployment rate:
In India was last reported at 3.8 percent in 2010/11 fiscal year. Historically, from 1983 until
2011, India Unemployment Rate averaged 7.57 Percent reaching an all-time high of 9.40 Percent
in December of 2009 and a record low of 3.80 Percent in December of 2011. The unemployment
rate can be defined as the number of people actively looking for a job as a percentage of the
labor force. This page includes a chart with historical data for India Unemployment Rate.







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Fiscal Policy

The fiscal policy is concerned with the raising of government revenue and incurring of
government expenditure. To generate revenue and to incur expenditure, the government frames a
policy called budgetary policy or fiscal policy. So, the fiscal policy is concerned with
government expenditure and government revenue.

Fiscal policy has to decide on the size and pattern of flow of expenditure from the government to
the economy and from the economy back to the government. So, in broad term fiscal policy
refers to "that segment of national economic policy which is primarily concerned with the
receipts and expenditure of central government." In other words, fiscal policy refers to the policy
of the government with regard to taxation, public expenditure and public borrowings.
The importance of fiscal policy is high in underdeveloped countries. The state has to play active
and important role. In a democratic society direct methods are not approved. So, the government
has to depend on indirect methods of regulations. In this way, fiscal policy is a powerful weapon
in the hands of government by means of which it can achieve the objectives of development.

Main Objectives of Fiscal Policy In India
The fiscal policy is designed to achive certain objectives as follows :-
1. Development by effective Mobilization of Resources
The principal objective of fiscal policy is to ensure rapid economic growth and development.
This objective of economic growth and development can be achieved by Mobilization of
Financial Resources.The central and the state governments in India have used fiscal policy to
mobilize resources.The financial resources can be mobilized by
Taxation: Through effective fiscal policies, the government aims to mobilize resources by way of
direct taxes as well as indirect taxes because most important source of resource mobilization in
India is taxation.
Public Savings: The resources can be mobilized through public savings by reducing government
expenditure and increasing surpluses of public sector enterprises.
Private Savings: Through effective fiscal measures such as tax benefits, the government can raise
resources from private sector and households. Resources can be mobilized through government
borrowings by ways of treasury bills, issue of government bonds, etc., loans from domestic and
foreign parties and by deficit financing.
2. Efficient allocation of Financial Resources
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The central and state governments have tried to make efficient allocation of financial resources.
These resources are allocated for Development Activities which includes expenditure on
railways, infrastructure, etc. While Non-development Activities includes expenditure on defence,
interest payments, subsidies, etc.But generally the fiscal policy should ensure that the resources
are allocated for generation of goods and services which are socially desirable. Therefore, India's
fiscal policy is designed in such a manner so as to encourage production of desirable goods and
discourage those goods which are socially undesirable.
3. Reduction in inequalities of Income and Wealth
Fiscal policy aims at achieving equity or social justice by reducing income inequalities among
different sections of the society. The direct taxes such as income tax are charged more on the rich
people as compared to lower income groups. Indirect taxes are also more in the case of semi-
luxury and luxury items, which are mostly consumed by the upper middle class and the upper
class. The government invests a significant proportion of its tax revenue in the implementation of
Poverty Alleviation Programmes to improve the conditions of poor people in society.
4. Price Stability and Control of Inflation
One of the main objective of fiscal policy is to control inflation and stabilize price. Therefore, the
government always aims to control the inflation by Reducing fiscal deficits, introducing tax
savings schemes, Productive use of financial resources, etc.
5. Employment Generation
The government is making every possible effort to increase employment in the country through
effective fiscal measure. Investment in infrastructure has resulted in direct and indirect
employment. Lower taxes and duties on small-scale industrial (SSI) units encourage more
investment and consequently generates more employment. Various rural employment
programmes have been undertaken by the Government of India to solve problems in rural areas.
Similarly, self employment scheme is taken to provide employment to technically qualified
persons in the urban areas.
6. Balanced Regional Development
Another main objective of the fiscal policy is to bring about a balanced regional development.
There are various incentives from the government for setting up projects in backward areas such
as Cash subsidy, Concession in taxes and duties in the form of tax holidays, Finance at
concessional interest rates, etc
7. Reducing the Deficit in the Balance of Payment

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Fiscal policy attempts to encourage more exports by way of fiscal measures like Exemption of
income tax on export earnings, Exemption of central excise duties and customs, Exemption of
sales tax and octroi, etc.The foreign exchange is also conserved by Providing fiscal benefits to
import substitute industries, Imposing customs duties on imports, etc.The foreign exchange
earned by way of exports and saved by way of import substitutes helps to solve balance of
payments problem. In this way adverse balance of payment can be corrected either by imposing
duties on imports or by giving subsidies to export.

8. Capital Formation
The objective of fiscal policy in India is also to increase the rate of capital formation so as to
accelerate the rate of economic growth. An underdeveloped country is trapped in vicious
(danger) circle of poverty mainly on account of capital deficiency. In order to increase the rate of
capital formation, the fiscal policy must be efficiently designed to encourage savings and
discourage and reduce spending.
9. Increasing National Income
The fiscal policy aims to increase the national income of a country. This is because fiscal policy
facilitates the capital formation. This results in economic growth, which in turn increases the
GDP, per capita income and national income of the country.
10. Development of Infrastructure
Government has placed emphasis on the infrastructure development for the purpose of achieving
economic growth. The fiscal policy measure such as taxation generates revenue to the
government. A part of the government's revenue is invested in the infrastructure development.
Due to this, all sectors of the economy get a boost.
11. Foreign Exchange Earnings
Fiscal policy attempts to encourage more exports by way of Fiscal Measures like, exemption of
income tax on export earnings, exemption of sales tax and octroi, etc. Foreign exchange provides
fiscal benefits to import substitute industries. The foreign exchange earned by way of exports
and saved by way of import substitutes helps to solve balance of payments problem.
Conclusion On Fiscal Policy
The objectives of fiscal policy such as economic development, price stability, social justice, etc.
can be achieved only if the tools of policy like Public Expenditure, Taxation, Borrowing and
deficit financing are effectively used.Though there are gaps in India's fiscal policy, there is also
an urgent need for making India's fiscal policy a rationalized and growth oriented one.The
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success of fiscal policy depends upon taking timely measures and their effective administration
during implementation.
Monetary policy:
Monetary policy is the process by which monetary authority of a country, generally a central
bank controls the supply of money in the economy by exercising its control over interest rates in
order to maintain price stability and achieve high economic growth.[1] In India, the central
monetary authority is the Reserve Bank of India (RBI). is so designed as to maintain the price
stability in the economy. Other objectives of the monetary policy of India, as stated by RBI, are:
Price Stability
Price Stability implies promoting economic development with considerable emphasis on price
stability. The centre of focus is to facilitate the environment which is favourable to the
architecture that enables the developmental projects to run swiftly while also maintaining
reasonable price stability.
Controlled Expansion Of Bank Credit
One of the important functions of RBI is the controlled expansion of bank credit and money
supply with special attention to seasonal requirement for credit without affecting the output.
Promotion of Fixed Investment
The aim here is to increase the productivity of investment by restraining non essential fixed
investment.
Restriction of Inventories
Overfilling of stocks and products becoming outdated due to excess of stock often results is
sickness of the unit. To avoid this problem the central monetary authority carries out this
essential function of restricting the inventories. The main objective of this policy is to avoid
over-stocking and idle money in the organization
Promotion of Exports and Food Procurement Operations
Monetary policy pays special attention in order to boost exports and facilitate the trade. It is an
independent objective of monetary policy.
Desired Distribution of Credit
Monetary authority has control over the decisions regarding the allocation of credit to priority
sector and small borrowers. This policy decides over the specified percentage of credit that is to
be allocated to priority sector and small borrowers.
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Equitable Distribution of Credit
The policy of Reserve Bank aims equitable distribution to all sectors of the economy and all
social and economic class of people
To Promote Efficiency
It is another essential aspect where the central banks pay a lot of attention. It tries to increase the
efficiency in the financial system and tries to incorporate structural changes such as deregulating
interest rates, ease operational constraints in the credit delivery system, to introduce new money
market instruments etc.
Reducing the Rigidity
RBI tries to bring about the flexibilities in the operations which provide a considerable
autonomy. It encourages more competitive environment and diversification. It maintains its
control over financial system whenever and wherever necessary to maintain the discipline and
prudence in operations of the financial system.
Gross domestic savings:





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The Gross domestic savings (% of GDP) in India was last reported at 30.31 in 2011, according to
a World Bank report published in 2012. Gross domestic savings are calculated as GDP less final
consumption expenditure (total consumption).This page includes a historical data chart, news
and forecasts for Gross domestic savings (% of GDP) in India. India's diverse economy
encompasses traditional village farming, modern agriculture, handicrafts, a wide range of
modern industries, and a multitude of services. Services are the major source of economic
growth, accounting for more than half of India's output with less than one third of its labor force.
The economy has posted an average growth rate of more than 7% in the decade since 1997,
reducing poverty by about 10 percentage points.
















Media and entertainment industry Analysis:


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Industry life cycle:
Entertainment Industry in India comprises of Film Industry and Television Industry. The Indian
entertainment industry is among the fastest growing sectors in the country. In the past two
decades entertainment industry in India has witnessed explosive growth. In television alone,
from a single state owned television network, Doordarshan in 1991, today there are over 300
national, regional and local channels being beamed across the country. Indian film industry is the
largest film industry in the world, producing on an average, close to a thousand films a year in all
languages. In terms of film production India exceeds Hollywood's production volume by over
three times. Some of the fastest growing segments in the Indian entertainment industry include
music, cable and satellite television, animation and FM.According to an estimate by FICCI and
Ernst and Young Indian entertainment industry would worth more than Rs. 400,000 million in
2008. Several positive developments like the accordance of the 'industry' status to the film
industry, satellite channel penetration, the retail boom in the channels for music sales (Music
World & Planet M), the use of digital technology in all spheres of entertainment and the growth
of multiplexes have contributed to the growth of this sector.

Entertainment industry in India is presently in a consolidation phase as boundary lines between
films, music and television are fast disappearing. Skills and resources are being pooled
extensively. Besides adaptation to high-end digital technology, the entertainment industry is also
witnessing rapid development of state-of-the-art studios and post production facilities. In terms
of employment, an estimated 6 million people earn their livelihood from the entertainment
industry and this number is all set to grow. Entertainment industry in India is projected to be one
of the major economic driving forces of the country. In India, television is the major segment of
entertainment industry. Presently, India has the third largest television market in the world
behind only china and the USA. Today, television reaches about hundred million Indian
households. India has the world's biggest movie industry in terms of the number of movies
produced. Presently, the technology of film-making in India is perhaps the best among all
developing countries. Indian film industry is now increasingly getting professional and a lot of
production houses such as Yash Raj Productions, Dharma Productions, Mukta Arts etc. are now
working on corporate lines. The popularity of Indian entertainment industry goes well beyond
the geographical frontiers of the country. Indian television channels and films are viewed and
enjoyed across the entire South Asia. Across the Middle East, parts of South East Asia and
Africa, large expatriate populations ensure that Indian TV channels and films are a regular part
of their entertainment bouquet. In UK and North America (USA and Canada), Indian TV
channels and films are increasingly finding a foothold beyond the expatriate pockets as the
audience there has started to enjoy and identify with the contemporary Indian culture. Quite a
few of Indian filmstars are also getting good offers from Hollywood.
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The future prospects of Indian entertainment industry look to be extremely good. As India's
profile rises on the global stage outside interest in India's culture and entertainment industry is
also bound to grow. So it is in Growing stage.


Structure of industry:


Media can be divided into
Television - In 2009, the industry generated estimated revenues of US$ 5.68 billion (INR
272.7 billion). India is home to 134 million TV households, of which 90 million are
served by cable and satellite TV. As many as 500 TV channels were operational in 2009.
The adoption of digital distribution platforms direct-to-home (DTH) and digital cable
is helping TV distribution become more organised. From about two million digital TV
households in 2006, the platform currently caters to about 15 to 17 million digital
subscribers.
Radio - The FM radio segment is one of the fastest-growing entertainment segments in
India. Revenues in this segment have almost doubled since 2006. In 2009, the industry
was estimated at US$ 201 million (INR 9.7 billion). GoI-controlled All India Radio
MEDIA AND
ENTERTAINMENT
Print
News paper Magazine
Electronic
Tv
Radio
Internet
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(AIR) and 37 private FM radio companies that operate close to 280 FM radio stations in
India cater to this segment.
Music - Film-based music dominates music sales in India. As in most global markets,
digital sales of music are becoming the norm in India. The music industry generated
revenues of US$ 369 million (INR 17.7 billion) in 2009. Distribution via digital formats
on the Internet and through mobile phones is the emerging business model for music
companies. In fact Airtel has become the largest music company in the country.
Films - In 2009, the industry generated estimated revenues of US$ 2.73 billion (INR
131.1 billion). The industry remains dependent on domestic theatrical collections, which
generate 70 to 80 per cent of a films revenue. More than 1,000 films are produced
annually in more than 20 languages. In 2008, 3.3 billion tickets were sold for films
screened across 10,000 theatre screens. There are presently more than 800 multiplex
screens in India, and this is estimated to grow to 1,500 screens in the next two to three
years.
New Media (Including Internet) - Increasing broadband penetration is expected to
attract more content online. As the second-largest mobile telephony market in the world,
India has provided a new platform for content delivery. In India, the trend to access
videos through the Internet and mobile phones is fast gathering momentum. Almost every
major M&E player now has a strategy to host its content on new media platforms.
Consumers can now access entertainment content online or on their mobile devices in the
form of audio and video files and text-based content.
The entertainment industry in India generated about US$ 9.1 billion (INR 439.1 billion) in
revenues in CY2009, which is expected to grow at a rate of 12.6 per cent to reach revenues of
US$ 10.3 billion (INR 494.3 billion) in 2010

Nature of competition:
In media and entertainment industry pure competition can be seen. It is a highly competitive
industry. The Riverly within industry is very high. It is a highly fragmented industry. People
finds a lot many source for entertainment now a days. People have print media electronic media
for their entertainment. The rivals competition in the industry is high and the rivals have
diversified business. The switching cost is less people can easily swich over from one source to
another it is also one of the reason of high competition. The competition amongst broadcasters is
expected to increase further with Government approving 75 licenses for launch of new channels
or re launch of existing channels in HD after a 2 year freeze. The major players who are
launching new channels and HD channels are Discovery, UTV, Fox, ZEE and STAR amongst
others.
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Cost, efficiency & profitability of industry:
The current market size of media and entertainment industry can be estimated at 61000 crores.
This industry is growing at a CAGR rate of 19%. And it is expected to reach 105200 crores in
2013. There are national and regional 300 channels are on air currently and maximum growth is
to be expected from television and film segment. The FDI policies across all the industry is very
liberal and close to 1000 films are made every year. The government is focusing on regulations
to give further impetus to industry.

Technology & research in industry:
Digitalization is the inevitable path forward, to achieve better quality viewing and transparency
in revenue earning and sharing. A true digital environ to give super- lative experience will call
for digital content, riding on digital platform, viewed on a digital screen. Till 1990, TV
Households (HH) were dominated by handful of channels transmitted by Government owned
Doordarshan (DD) through free-to-air (FTA) terrestrial signals. Liberalization and live
transmission of First Gulf war by CNN in the country saw immergence of LCOs distributing
satellite channels through analogue cable to the subscribers. The cable & satellite (C&S) HH
made further inroads on the back of private channels launched by ZEE and subsequently by
STAR. Currently digital DTH addressable system is the torchbearer of growth in C&S HH. Due
to technological advantage over incumbent analogue cable, DTH has been able to connect semi-
urban and rural areas to the world of Indian Television channels. On an average, the last mile
operator can carry 60-70 channels on his analog network due to technological constraints versus
approximately 600 channels available in the country. Set Top Box (STB), one of the most
important components for digitalization, is currently being largely imported. As per the industry
experts, local sourcing in short to medium term is not possible as there are no sufficient
manufacturing capabilities.




Industry sales growth rate:
Size of TV industry in india

19








In 2010, subscription revenues contributed around 63% to the total television and stood at us$3.9
billion,while advertising constituted 33% at us$ 2.1 billion, while advertising constituted
approximately 4% to the total television market at us$ 260 milliom. Despite one of the lowest
average revenue per user ,TV distribution dominated the total television revenue pie and saw a
strong growth of 15% in 2010. Largely due to rapid DTH expansion. TV Advertising which has
a high contribution towards broadcasters revenue grow at 13% in 2010.
Key success factors for the industry:
The main key success factors for this industry are as follows. One of the important factor is
Technology. Currently digital DTH addressable system is the torchbearer of growth in C&S HH.
Due to technological advantage over incumbent analogue cable, DTH has been able to connect
semi-urban and rural areas to the world of Indian Television channels. The another key success
factor is Consumerism. Consumerism is a movement or policies aimed at regulating the
products or services, methods or standards of manufacturers, sellers and advertisers in the
interest of buyers, such regulation may be institutional, statutory or embodied in a voluntary code
occupied by a particular industry or it may result more indirectly from the influence of
consumers organizations. The other factor is the Content. In TV industry the content is most
important what type of content channel is providing affects its business. The other factor is
Advertisement. Advertisement is the big source of revenue for this industry.



Porters five force model:



20








Bargaining power of consumer (High):
Consumer can switch channel.
Increase globalization.
Availability of various alternative source of entertainment
Threat of new entrants (Low)
High sunk cost
High capital requirement
Difficult access to distribution
Steeper learning curve because of mature market.
Riverly within industry (High):
Highly Fragmented industry.
High fixed cost.
Highly diversified rivals.
Highly perishable products.
Bargaining power of supplier (Low):
Decreasing bargaining power of supplier.
Increasing number content providers.
Threat of substitutes:
Film industry
Sports event like world cup
Significant cultural event
Print media
Internet
21




Industry growth rate:
The Indian Media & Entertainment (M&E) Industry registered a growth of 12 percent over
2010, to reach INR 728 billon, says the FICCI-KPMG report. The growth trajectory is backed
by strong consumption in Tier 2 and 3 cities, continued growth of regional media, and fast
increasing new media business. Overall, the industry is expected to register a CAGR of 15
percent to touch INR 1,457 billion by 2016. The printindustrygrew by 8.3 percent from
INR193 billion in 2010 toINR 209 billion in 2011. The over-all television industry
isestimatedtobe INR329 billion in 2011, andis expected to grow at aCAGRof17
percentover2011-16, toreach INR 735 billion in2016. . The Indian film industry is projected to
grow at a CAGR of 10.1 percent to touch INR150 Billion in2016.The industry is estimated
tobeINR93 billion in 2011 indicating a growthof 11.5 percentvis--vis2010. The Indian
musicindustryachieved revenuesofINR9 billion in 2011, registering a growth of5percent
over2010.







Company Analysis

Zee Entertainment Enterprises Limited
Zee Entertainment Enterprises Limited is one of Indias leading television, media and
entertainment companies. It is amongst the largest producers and aggregators of Hindi
programming in the world, with an extensive library housing over 80,000 hours of television
content. With rights to more than 3,000 movie titles from foremost studios and of iconic film
22

stars, Zee houses the worlds largest Hindi film library.
Through its strong presence worldwide, Zee entertains over 500 million viewers across 167
countries. Pioneer of television entertainment industry in India, Zees well-known brands include
Zee TV, Zee Cinema, Zee Premier, Zee Action, Zee Classic, Ten Sports, Zee Sports, Zee
Cafe, Zee Studio, Zee Trendz, Zee Jagran, Zing, ETC Music and ETC Punjabi. The
company also has a strong offering in the regional language domain with channels such as Zee
Marathi, Zee Bangla, Zee Telugu, Zee Kannada, Zee Talkies and Zee Cinema.
The Zee stable owns an integrated range of businesses. All of these in singularity adhere to the
content-to-consumer value chain model of media and entertainment business. Zee is a pioneer in
every aspect of content aggregation and distribution through traditional media like satellite and
cable and new media like the internet, in India.
Company Strategy

Zee TV, the flagship channel of Zee Network was launched in October 1992. With a reach of
more than 120 countries and access to more than 500 million viewers globally, Zee TV has
created strong brand equity and is the largest media franchise serving the South Asian Diaspora.
With over sixteen years of its launch, Zee TV has driven the growth of the satellite and cable
industry. The popularity of Zee arises from its understanding of Indian culture and beliefs which
are depicted in its programming. Realizing its strength in programming and the need for Indian
entertainment in the overseas market, the company launched Zee TV in the UK / Europe (1995),
the USA (1998), Africa (1998) and today is available across five continents. Zee Entertainment
Enterprise Ltd. Use strategies in different combinations and their main motive is growth. They
have some Strategic Alliances like:

1. 76:24 joint venture between ZEEL and Turner named Zee-Turner.
2. 50:50 joint venture between Zee-Turner and Star-Den named MediaPro.
3. Joint venture with Ten Sports gives three sports channels.
4. Zee have acquired 51% stake in ETC Music and ETC Punjabi.

23

Few other criteria they follow under strategies alternative:
I. Inspire creativity and Continue to run their business as best in class, with viewer
satisfaction as the ultimate goal.
II. Continuous innovation to stay ahead of the curve and seize growth opportunities.
III. Invest in the business in a focused, disciplined way and achieve superior
financialperformance.
IV. To use the strong cash f lows of their business to improve returns to shareholders.
V. Reaffirm their commitment to highest level of integrity and professionalism
throughout their business.








Profit & Loss account Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
12 mths 12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 1,041.99 1,210.24 1,278.74 2,169.94 2,204.00
24

Excise Duty 0 0 0 0 0
Net Sales 1,041.99 1,210.24 1,278.74 2,169.94 2,204.00
Other Income 75.77 56.92 93.66 72.24 106.8
Stock Adjustments 48.36 81.96 130.67 0 0
Total Income 1,166.12 1,349.12 1,503.07 2,242.18 2,310.80
Expenditure
Raw Materials 3.47 4.86 2.69 4.94 3.5
Employee Cost 62.1 92.42 81.46 156.75 157.3
Other Manufacturing Expenses 406.4 581.91 555 879.62 1,014.20
Selling and Admin Expenses 190.65 233.63 218.81 313.37 366.2
Miscellaneous Expenses 18.5 18.11 12.61 23.86 27.6
Preoperative ExpCapitalised 0 0 0 0 0
Total Expenses 681.12 930.93 870.57 1,378.54 1,568.80
Profit & Loss account Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
Operating Profit 409.23 361.27 538.84 791.4 635.2
PBDIT 485 418.19 632.5 863.64 742
Interest 20.05 27.51 12.74 3.37 0.5
PBDT 464.95 390.68 619.76 860.27 741.5
25



Comparison of Balance Sheet
Depreciation 10.6 11.92 11.43 16.67 21.5
Profit Before Tax 454.35 378.76 608.33 843.6 720
Extra-ordinary items 0 63.41 31.3 0.63 7.6
PBT (Post Extra-ord Items) 454.35 442.17 639.63 844.23 727.6
Tax 159.22 132.44 80.8 267.81 237.9
Reported Net Profit 295.12 309.74 558.84 576.42 489.7
Total Value Addition 677.65 926.07 867.87 1,373.61 1,565.30
Equity Dividend 86.8 86.8 194.68 195.63 143.8
Corporate Dividend Tax 14.54 14.54 32.33 31.74 23.3
Shares in issue (lakhs) 4,335.67 4,340.07 4,340.07 9,780.76 9,587.70
Earning Per Share (Rs) 6.81 7.14 12.88 5.89 5.11
Equity Dividend (%) 200 200 400 200 150
Book Value (Rs) 49.09 53.99 64.97 29.69 31.24
Balance Sheet Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
26

Sources Of Funds
Total Share Capital 43.36 43.4 43.4 97.81 95.9
Equity Share Capital 43.36 43.4 43.4 97.81 95.9
Share Application Money 0 0 5.5 0 0
Reserves 2,084.89 2,299.60 2,776.43 2,805.82 2,899.20
Networth 2,128.25 2,343.00 2,825.33 2,903.63 2,995.10
Secured Loans 70.87 121.4 58.5 1.08 1
Unsecured Loans 133.39 49.55 60.4 0 0
Total Debt 204.26 170.95 118.9 1.08 1
Total Liabilities 2,332.51 2,513.95 2,944.23 2,904.71 2,996.10
Application Of Funds
Gross Block 162.2 189.82 216.67 221.96 258.3
Less: Accum. Depreciation 40.08 49.89 58.29 67.17 81.1
Net Block 122.12 139.93 158.38 154.79 177.2
Capital Work in Progress 6.35 18.33 111.1 39.95 57.5
Investments 1,349.47 1,349.62 1,431.93 885.42 1,060.20
Inventories 236.41 319.48 453.13 1,103.09 993
Sundry Debtors 408.28 351.68 463.38 616.89 662.4
27




Trend analysis Profit and loss statement
Profit & Loss account
Cash and Bank Balance 22.21 110.43 37.7 93.92 76.1
Total Current Assets 666.9 781.59 954.21 1,813.90 1,731.50
Loans and Advances 744.36 663.63 564.74 523.61 511.3
Fixed Deposits 0.01 0.01 362.59 160.01 0
Total CA, Loans & Advances 1,411.27 1,445.23 1,881.54 2,497.52 2,242.80
Current Liabilities 384.98 298.94 400.75 417.47 357.7
Provisions 171.74 140.22 237.96 255.51 183.9
Total CL & Provisions 556.72 439.16 638.71 672.98 541.6
Net Current Assets 854.55 1,006.07 1,242.83 1,824.54 1,701.20
Miscellaneous Expenses 0.01 0.01 0 0 0
Total Assets 2,332.50 2,513.96 2,944.24 2,904.70 2,996.10
Contingent Liabilities 703.48 649.16 1,057.97 1,227.85 1,208.80
Book Value (Rs) 49.09 53.99 64.97 29.69 31.24
28

Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
Income
Sales Turnover 100 116.147 122.7209 208.2496 211.5183
Net Sales 100 116.147 122.7209 208.2496 211.5183
Other Income 100 75.1221 123.6109 95.34116 140.9529
Stock Adjustments 100 169.479 270.2026 0 0
Total Income 100 115.693 128.895 192.277 198.1614
Expenditure #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Raw Materials 100 140.058 77.52161 142.3631 100.8646
Power & Fuel Cost #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Employee Cost 100 148.824 131.1755 252.4155 253.3011
Other Manufacturing Expenses 100 143.187 136.565 216.4419 249.5571
Selling and Admin Expenses 100 122.544 114.7705 164.3693 192.0797
Miscellaneous Expenses 100 97.8919 68.16216 128.973 149.1892
Total Expenses 100 136.676 127.8145 202.3931 230.3265
Operating Profit 100 88.2804 131.6717 193.3876 155.2183
PBDIT 100 86.2247 130.4124 178.0701 152.9897
Interest 100 137.207 63.54115 16.80798 2.493766
29

PBDT 100 84.0262 133.2961 185.0242 159.4795
Depreciation 100 112.453 107.8302 157.2642 202.8302
Profit Before Tax 100 83.363 133.8902 185.6718 158.4681
PBT (Post Extra-ord Items) 100 97.3192 140.7791 185.8105 160.1409
Tax 100 83.1805 50.74739 168.2012 149.4159
Reported Net Profit 100 104.954 189.3603 195.3172 165.9325
Total Value Addition 100 136.659 128.0705 202.702 230.9894
Equity Dividend 100 100 224.2857 225.3802 165.6682
Corporate Dividend Tax 100 100 222.3521 218.2944 160.2476
Shares in issue (lakhs) 100 100.101 100.1015 225.5882 221.1354
Earning Per Share (Rs) 100 104.846 189.1336 86.49046 75.03671
Equity Dividend (%) 100 100 200 100 75
Book Value (Rs) 100 109.982 132.3487 60.48075 63.63822




Trend Analysis Balance Sheet
30

Balance Sheet
Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
Sources Of Funds
Total Share Capital 100 100.0923 100.0923 225.5766 221.1716
Equity Share Capital 100 100.0923 100.0923 225.5766 221.1716
Reserves 100 110.2984 133.1691 134.5788 139.0577
Networth 100 110.0904 132.7537 136.4327 140.7306
Secured Loans 100 171.2996 82.54551 1.523917 1.411034
Unsecured Loans 100 37.14671 45.28076 0 0
Total Debt 100 83.69235 58.21012 0.528738 0.489572
Total Liabilities 100 107.7787 126.2258 124.5315 128.4496
Application Of Funds
Gross Block 100 117.0284 133.582 136.8434 159.2478
Less: Accum. Depreciation 100 124.476 145.4341 167.5898 202.3453
Net Block 100 114.584 129.6921 126.7524 145.1032
Capital Work in Progress 100 288.6614 1749.606 629.1339 905.5118
Investments 100 100.0111 106.1105 65.61243 78.56418
Inventories 100 135.1381 191.6712 466.6004 420.033
31






Sundry Debtors 100 86.13696 113.4956 151.0948 162.2416
Cash and Bank Balance 100 497.2085 169.7434 422.8726 342.6385
Total Current Assets 100 117.1975 143.0814 271.9898 259.6341
Loans and Advances 100 89.15444 75.8692 70.34365 68.68988
Fixed Deposits 100 100 3625900 1600100 0
Total CA, Loans & Advances 100 102.4063 133.3225 176.9697 158.9207
Current Liabilities 100 77.65079 104.0963 108.4394 92.91392
Provisions 100 81.64668 138.5583 148.7772 107.0805
Total CL & Provisions 100 78.88346 114.7273 120.883 97.28409
Net Current Assets 100 117.731 145.4368 213.5089 199.0755
Miscellaneous Expenses 100 100 0 0 0
Total Assets 100 107.7796 126.2268 124.5316 128.4502
Contingent Liabilities 100 92.27839 150.3909 174.5394 171.8315
Book Value (Rs) 100 109.9817 132.3487 60.48075 63.63822
32