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could prove to be more durable than expected amid strong The Government of India, under the Make in India initiative, is trying to
consumer and business confidence in, for instance, the Euro boost the contribution made by the manufacturing sector and aims
area and in East Asia near-term growth could exceed forecast. to take it up to 25% of GDP from the current 17%. The Government
On the downside, policy uncertainty is more of a concern than has also launched the Digital India initiative, which focuses on three
usual, reflecting, for example difficult-to-predict US regularity core components: creation of digital infrastructure, delivering services
and fiscal policies, the potential adoption of trade restrictions, digitally and improving digital literacy.
negotiation of the United Kingdom’s relationship with the EU
Fast Moving Consumer Goods (‘FMCG’) is the 4th largest sector in
post-Brexit and geopolitical risk.
the Indian economy. There are three main segments in the sector –
II. Beyond the immediate term, risks are skewed to the downside food and beverages which accounts for 19% of the sector, healthcare
and stem from a host of financial tensions, a possible inward accounts for 31% and household and personal care which accounts
looking policy shift and persistently low inflation in advanced for the remaining 50%. Favourable demographics and increasing
economics and a range of non-economic factors. income levels are expected to give a boost to the FMCG market in
India, which is expected to grow at a Compounding Annual Growth
III. Some of the risks around financial tensions are pertaining
to the financial stability risk in China, potential tightening of Rate (‘CAGR’) of 20.6% and expected to reach US$ 103.7 billion by
global financial conditions, risks of capital flow reversal from 2020 from US$ 49 billion in 2016.
the emerging market economies, challenges facing Euro area Key trends which are likely to continue in the consumer goods
banks around non-performing loans (‘NPL’), potential rollback industry are:
of the strengthening of financial regulations, a retreat from
I. Consumption is expected to drive this revival in growth as
Cross-Border Economic Integration and move towards inward
households benefit from higher wages and allowances, along
looking policy shift.
with benign inflation (forecast to be 4.5% in 2018: UN World
Domestic Economic Outlook Economic Situation and Prospects 2018, RBI’s monetary policy
In India, growth slowed in FY 2017-18 due to disruptions from the review) and pre-poll step up in public spending. GST tweaks
currency exchange initiative (‘demonetisation’) in November 2016 will help lower the tax incidence on consumers.
and, more recently, the rollout of the GST in July 2017. Inflation has II. Growing customer awareness, easier access to products and
been low compared with the mid-point target in recent months, changing lifestyles are the key growth drivers for the consumer
driven by lower food prices, allowing the Central Bank to cut its policy market.
rate in August 2017.
III. Increase in rural consumption to drive the FMCG market.
GDP growth forecast for 2017 was cut from 7.2% to 6.7% by IMF
and 2018 forecast set to 7.4%, reflecting the recent slowdown in IV. The Government of India’s policies and regulatory frameworks
economic activity (IMF World Economic Outlook, October 2017). such as relaxation of license rules and approval of 51% Foreign
Economic Survey of India projects a GDP growth of 7.0-7.5% for Direct Investment (‘FDI’) in multi-brand and 100% in single-
FY 2018-19. Growth will be underpinned by private consumption, brand retail are some of the major growth drivers for the FMCG
which has benefitted from low food and energy prices, civil service market.
allowance increases and growth in urban wages, ease in lending rates, Key macroeconomic risks include a slow credit growth due to non-
solid rainfall forecast in the monsoon season and a doubling in farm performing assets on bank balance sheets and tightening access to
loan waivers supporting rural households. credit for higher risk entities, low capacity utilisation in some industrial
A gradual increase in India’s growth rate is expected resulting from sectors and low private investment. However, overall investment
implementation of important structural reforms. GST, which promises is expected to strengthen in 2018, led by public sector capital
the unification of India’s domestic market, is among several measures expenditure alongside FDI.
which is expected to push India’s growth above 8% in the medium In India, reform efforts could be aimed at tackling supply bottlenecks,
term, thus outpacing China’s growth. enhancing the efficiency of labour and product markets and
The Union Budget’s major push is on growth stimulation, providing modernising the agricultural sector. Labour market reforms such
relief to the middle and lower middle class, providing affordable as rationalising labour market regulations may be able to facilitate
housing, curbing black money, digitalisation of the economy, greater and higher-quality job creation. Another priority area of focus
enhancing transparency in political funding and simplifying the tax would be on strengthening public banks’ loss-absorbing buffers,
administration in the country. implementing further public banking sector structural reforms and
enhancing public banks’ debt recovery mechanisms.
The fiscal deficit of the Government of India, which was 4.5% of
GDP in FY 2013-14, has steadily reduced to 3.5% in FY 2016-17 and COMPANY OVERVIEW AND OUR SUSTAINABLE,
is expected to further decrease to 3.2% of the GDP in FY 2017-18, PROFITABLE GROWTH STRATEGY
according to the Reserve Bank of India (‘RBI’). Some modest slippage is
Tata Chemicals Limited (‘the Company’ or ‘TCL’) is a global company
expected from the 3.2% target due to weaker than expected revenue
with interests in businesses that focus on Living, Industry and Farm
from GST, higher oil prices and higher rural expenditure.
Essentials. The story of the Company is about harnessing the fruits of
India’s revenue receipts are estimated to touch ` 28-30 trillion science for goals that go beyond business.
(US$ 436-467 billion) by 2019, resulting from the Government of
The Company started its journey in Mithapur, Gujarat in Western
India’s measures to strengthen infrastructure and reforms such as
India in 1939 with the creation of a small plant that would raise a
demonetisation and GST.
92 Annual Report 2017-18