The economy continues to grow strongly in India

Indias economy continues to grow strongly [8.9% year-on-year in Q3 of 2010], with domestic demand rising and recovery evident even in those sectors that were most adversely affected by the downturn: notably real estate and textiles.

Infrastructure is attracting considerable levels of investment, with both public and private investors developing Indias road network. Improvements to the quantity and quality of Indias highways are vital, as freight and passenger traffic on Indias roads is expected to increase extensively over the next few years: the latter boosted by higher levels of car ownership by Indias burgeoning  middle class and the willingness of banks to finance car purchases. The deregulation of petrol prices earlier this year does not appear to have had a major impact on car sales so far.

The telecom sector is also a success story in India, with the total number of mobile phone subscribers now believed to exceed 480 million, and penetration of 60%. However, the sector has recently been beset by allegations of corruption following the award of 2G licences. Moreover, the sector is now crowded with 15 operators vying for business. This has led to a price war and some of the lowest call rates in the world, resulting in poor financial results for many operators. As a consequence, we expect to see some consolidation in this sector in the near future.

The food sector is also expanding rapidly, with many multinational and local companies seeing opportunities for growth.  The mass grocery retail sector can expect phenomenal growth provided that distribution infrastructure issues can be resolved and average incomes continue to rise. The downside risks include food price inflation, but these inflationary pressures are expected to ease following a better than expected monsoon in 2010.

Payment experience in India

Crédito y Caución received fewer notifications of slow payment in 2010, and in general our experience of Indian payment performance and commercial morality remains good, with many companies reporting improved results in the year to March 2010. Nevertheless, it remains imperative for suppliers to get up-to-date information on their buyers to satisfy themselves of their buyers ability to meet trade-related obligations.