Mumbai is one of India’s most thriving cities, with everyone from international conglomerates to the film industry vying for a piece of the action. Nidhi Kaushik gives a snapshot of what to expect from the city in 2009

According to Danny Boyle, the director of the hit movie Slumdog Millionaire, the real star of the movie is the sharply contrasting city of Mumbai, which is also the financial, cultural and commercial capital of India. Just as the movie Slumdog Millionaire has become a turning point for Indian cinema by creating its own niche on the global stage, the city of Mumbai is getting set to do the same on the world economic stage as well. Mumbai is a home, not only to the glamorous Bollywood industry and the business elite, but also to the country’s largest middle class as it continues to offer huge opportunities and lives up to its reputation as the “Manhattan of the East.”

Mumbai is the capital of Maharashtra and has one of the largest populations of English-speaking, versatile, skilled and cosmopolitan people, who have a fast growing disposable income that contributes to India’s burgeoning market. This enables Mumbai and India in emerging as a viable partner to the global industry. The joint survey conducted in 2006, by the World Bank along with the Confederation of Indian Industries (CII), found that Maharashtra has the best investment climate when compared to other Indian states.


The four main reasons why Maharashtra has always topped the list of states which is conducive to business are:1. Maharashtra has a clear edge on all infrastructural metrics, such as India’s largest and most number of ports, good road connectivity and probably the best power availability and cost.2. Proximity to markets/buyers3.  It is the financial centre of India4. The quality of people, who are both enterprising and industrious

Other parameters in which Maharashtra tops the list are the availability of raw materials and labour, its connectivity to international cities, the flexibility of state government policies and its telecom facilities.

The Growth Story

Mumbai became the state capital of Maharashtra because it has a large percentage of state and central government employees in its workforce. Until the 1980’s Mumbai was mainly known for its textile mills and seaport. After the liberalisation of India in 1991, Mumbai experienced an outstanding development in the economic and financial sector. The local economy grew in various sectors such as engineering, diamond polishing and healthcare.

Mumbai spearheaded the boom in the IT industry, which led to a notable expansion in India and Mumbai’s economy. The city’s other major industry sectors include machine engineering, pharmaceuticals, automobiles, printing and publishing, chemicals and metal products, aerospace, optical engineering, medical research, computers and electronic equipment, shipbuilding and salvaging, renewable energy and power.

Source: ASI

India’s financial sector has been one of the fastest growing sectors in the Indian economy. In recent years, as Mumbai transformed from a city best known for its thriving film industry into a financial powerhouse, which serves as a gateway to India, it has also become the heart of India’s banking industry with some of India’s biggest financial institutions like the Reserve Bank of India, National Stock Exchange and Bombay Stock Exchange, the country’s largest stock exchange, all headquartered there. Mumbai dominates the turnover and total market capitalisation of India’s stock markets. While the turnover share between NSE and BSE is 92 per cent, they collectively represent almost the total market capitalisation of India’s corporate sector.

The city has also had influential entrepreneurial culture, with the prima donnas of business like the Aditya Birla Group, Reliance Group, Godrej Group, Wadia Group and Tata Group (India’s largest conglomerate with revenue of US$62bn and equivalent to about 5.6 per cent of the India’s GDP), which helped to fuel Mumbai’s economic growth.

Today, Mumbai handles nearly a third of India’s foreign trade and is host to a large number of fortune 500 companies and other foreign multinationals including Shell, General Electric, Reliance, Wipro, Infosys, Sony, Seimens, and Nestle.

“Mumbai is an apt representation of India’s underlying strength as a culturally-rich democracy and increasingly capitalist economy,” says Bundeep Singh Rangar, Chairman IndusView, an India-focused cross-border advisory firm. “The city is one of the worlds top ten centres of commerce and contributes to about 5 per cent of India’s US$1 trillion GDP, which makes it attractive to a large migrant population of talented workforce from across the country.”

According to the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity published by the Bank for International Settlements, India’s share in the geographical distribution of forex market turnover has risen from 0.3 per cent in 2004 to 0.9 per cent in 2007. Mumbai has made its presence felt in both in money market and the foreign exchange market transactions. Its share in the forex market is as high as four-fifths of the total forex market transactions turnover. Multinational banks and other corporate institutions cash in on the difference in the dollar-rupee exchange rate available in Mumbai (over the counter) currency market and the unofficial unregulated markets like Singapore, Dubai and London.

The city of Mumbai is also an important centre for gem trade and Bollywood is the largest film making industry in the world, making Mumbai India’s entertainment capital too.

Mumbai’s Role in Indian Economy – 2009 and Beyond

With a growth rate of 8.5 per cent Mumbai is, without a doubt, India’s main economic engine. Mumbai has a population which is one per cent of India’s total population, per capita income which is three times that of India’s and a contribution of Rs.40,323 crores as tax revenue to the central and the state government annually. Mumbai’s share of total revenue collection is 50 per cent more than any of India’s other metropolitan cities including Delhi and Hyderabad.

Source: CSO


According to the latest International Monetary Fund (IMF) projections, in 2009 the world economy will register its slowest growth rate at 0.5 per cent since Second World War. The advanced economies are projected to record a two per cent decline in output says the IMF. With the recent terror attacks in Mumbai and the ongoing global recession, the short-term impacts are easy to imagine. Even though the Indian economy is losing some of its steam with a reduction in tourism and the slowing down of the GDP growth from nine per cent to approximately 6.5 per cent, it still remains one of the top performing economies in the world. India and Mumbai’s economy is undoubtedly on its way to recovery and will be one of the countries that will buoy up the world economy in 2009.

“India’s growth story is based on domestic demand. It is not based on the export market entirely and we can continue to maintain our domestic demand-driven growth,” says Kamal Nath, Commerce and Industry Minister in a recent interview on BBC’s Hard Talk.

“Those economies which are heavily dependent on exports for economic growth are going to take a hit. We have only 15-16 per cent of GDP in exports,” he added.

Even global cues currently override the importance of results and are an important determinant of the near-term trend. According to a poll conducted by TNS Gallup International, a global market information company, India is still among the top ten countries that can expect a bright economic outlook for year 2009.

Analysis across various industries by IndusView mirrors the optimistic outlook with growth trends in India’s IT sector, which is expected to be on track to achieve its aspired target of US$60bn in software and services exports and US$75bn in overall software and services revenues by 2010.

India’s consumer finance sector, with the current market size US$45bn, is expected to maintain its existing growth rate of 28 per cent, with the revival of the housing loans segment due to the government’s initiative of lowering interest rates. The healthcare sector is expected to grow to about US$75bn by 2012 from the present US$35bn market size. This sector is growing at 42 per cent annually and accounts for 5.2 per cent of the GDP, making it the third largest growth industry in India. The US$34bn Indian automotive sector is expected to show continued growth at more than 15 per cent as oil prices dip and new vehicles are launched. Suzuki’s single largest market is India so it is less vulnerable to the dollar’s fall than its domestic competitors.

India is the world’s fastest-growing mobile phone market, adding more than 9 million new customers each month, and is driving the US$31bn telecom industry, which is projected to be worth US$54bn by 2012. Thanks to Vodafone’s expansion in India, and other emerging markets in the past two years, the third quarter sales (ending December 31st 2008) for the company showed an unprecedented growth of 14 per cent as the pound weakened and the sales revenue from the Indian market increased. The projected annual growth of the telecom industry is 27 per cent and is expected to reach 500 million subscribers by March 2010. Despite the recessionary trends, the Indian telecom industry is buzzing with multi-billion dollar deals. International telecom service providers are drafting major investment plans for India in order to participate and grab their share in the world’s fastest growing telecom market.

As per an investment commission of India, India’s consumer market is at a transformational stage as over 300 million Indians (63 million households) are expected to have a household income of over US$6000 by 2015 (over US$30000 in PPP* terms). The economic reforms in the early 1990’s have unleashed a new entrepreneurial spirit thereby, creating a vibrant economy, which is supported by an increasing per capita income. India is experiencing a rapid growth in consumer spending combined with low manufacturing costs. According to a report by management consultancy firm McKinsey, India is expected to become the world’s fifth largest consumer market by 2025, from its twelfth position in 2007.


Thanks to the government’s recent stimulus packages the rising inflation has been reined under control, so, the prices for basics like FMCG products, food, education and health remain unaffected. Driven by the demands of an enormous population, the market for basic goods such as groceries and textiles is already vast. Despite the economic slowdown the consumer goods market is expected to post an average growth of 19 per cent in sales and 10.5 per cent in profits.

Markets for other products are fast increasing in size, for example, over 8 million TV sets and 4 million refrigerators are sold annually and the market is expected to grow at 20 per cent, per annum.

After spending a week at the World Economic Forum in Davos, Switzerland, the President of CII, Mr KV Kamath said in an interview with CNBC that on an optimistic note, India does not really need a fiscal stimulus package with the exception of the textiles and export industries, particularly in the small and medium enterprise (SME) sector. For the most part SMEs are in need of an urgent helping hand. According to Kamath, rural India, which accounts for 45 per cent of the economy, continues to do well; FMCG is still growing at 15-20 per cent if not the expected 20-25 per cent; knowledge areas, like the services sector, are not growing at the expected 20-25 per cent, but at 15-20 per cent.

So the areas that are truly hurting now could be commercial vehicles, textiles, auto ancillaries and some areas of downstream oil where adjustment process is going on. Therefore, about 75-80 per cent of India is back on track. Infrastructure investment is the need of the hour and that will occur.



“The infrastructure industry has a lot of potential too,” says Bundeep. “Due to the current economic scenario there is a considerable reduction of prices in the components of construction, like raw materials and wages now. This is the time that the government should invest in a private-public partnership for infrastructural projects.” Larson & Toubro, India’s largest engineering company more than tripled its net profit from Rs 482 crores a year earlier to Rs 1520 crores in the third quarter ending December 31st 2008, as it built more roads, bridges and factories. It also expects the revenue to increase by 30 per cent in the next fiscal year,

India offers investment opportunities in excess of US$850bn in diverse sectors over the next five years. While addressing the Partnership Summit 2009 of the Confederation of Indian Industry, Kamal Nath said that his government was also paying attention toward infrastructure and is keen on getting all the projects executed, especially those under the private-public partnership model.

“The other sectors which will be coming up are the power sector and the life sciences sector,” says Bundeep. India has the fifth largest electricity generation capacity in the world and the third largest transmission and distribution network in the world. Currently, there is a large demand-supply gap so the government is keen to draw private investment into this sector. In the near future, the Bhabha Atomic Research Centre (BARC) in Mumbai will see its role gaining significance once the Indo-US civil nuclear deal comes in to force.

Mumbai and its surrounding regions including Pune and Nashik currently contribute to over 20 per cent of Maharashtra’s GDP. Mumbai contributes 25 per cent of industrial output, 40 per cent of maritime trade, and 70 per cent of capital transactions to the economy as well as boasting a per-capita income that is almost three times the national average.***

Sectoral growth rates of Maharashtra (GSDP) Percentage change over previous year     Sector  2006 – 07 2007-08Agriculture & Allied Activities 9 5.8Mining & Quarrying 0.1 4.9Manufacturing 12.1 9.8Electricity, Gas & Water Supply 3.5 7Construction 21 14Trade, Hotels, Storage & Communications 11.5 11.1Finance, Real Estate, Insurance & Business Services 7.7 8.8Community & Personal Services 3 4.7Gross State Domestic Product  9.7 9Source: Central Statistical Organisation (CSO)


Mumbai also serves as an important gateway to India’s foreign trade (imports and exports) and handles more than 50 per cent of India’s foreign trade (Mumbai Port and Jawaharlal Nehru Port Trust – JNPT – combined). India has 12 major ports and the government has identified an investment need of US$12.4bn in all these ports under National Maritime Development Program (NMDP) to boost infrastructure in the next nine years. Public–private partnership is seen by the government as the key to improve major and minor ports. This also includes a fourth terminal at JNPT, which is likely to involve an investment of US$1bn.

Mumbai has been a leader in contributing to the country’s economic growth story, though there is still an overabundance of poverty and occasional terror attacks. Yet, surviving it all Mumbai has managed to position itself proudly as a global cultural and financial capital with one of the world’s busiest stock exchange, an enviable banking community and a thriving nightlife.

Mumbai’s sites

India’s inbound and outbound tourism has experienced a phenomenal growth, presenting a significant strategic and business advantage for global travel and tourism players in this emerging market. From 2008 to 2012, the Indian outbound tourist flow is expected to increase at a compounded annual growth rate (CAGR) of 13.30 per cent, according to RNCOS.

The Maharashtra Tourism Development Corporation (MTDC) has also identified the tourism potential and new opportunities for development of this sector especially in Medical Tourism, Coastal Tourism, Eco-Tourism, Agro-Tourism, etc. India will be strengthening internal security too, particularly in Mumbai. Recognising tourism as an essential and vibrant growth sector, the MTDC announced a first-of-its-kind international travel and tourism event, Mumbai International Tourism Expo (MITE) from January 7-9 2010.

Mr Suresh Shetty, Minister of State for Tourism, Government of Maharashtra said: “The heart of Maharashtra, Mumbai has been a popular international destination for business as well as pleasure. Our efforts have yielded the desired results and have impacted the economy in a positive way. We, in the tourism sector, believe that now is the time to take our efforts to the next level by having a dedicated tourism event that will make a significant impact by, not only opening Mumbai wider to the world, but also making the Industry a significant contributor to our gross domestic product (GDP).”

With the incorporation of two high growth tourism sectors under the MITE India 2010 and the CRUISE India 2010 shows, India hopes to provide a range of dynamic tourism opportunities for aspiring national and international tourism companies.

The IT city

Out of India’s total exports, the share of IT products, mainly software, has increased from one per cent in the early 1990s, to 18 per cent in 2001. Mumbai had provided the initial lead in the Infotech industry from the 1990s to 2001 and thereafter. Despite stiff competition from Bangalore, Mumbai has managed to create a niche in the Indian IT sector, with a large number of multinationals as well as small software units located here. The Santacruz Electronic Export Processing Zone (SEEPZ) and the International Infotech Park offer excellent facilities to IT companies. Bundeep Singh Rangar says: “The good news that has come out of the recession for the outsourcing sector is that due to the decrease in demand for these services, India is becoming more cost efficient compared to other countries.”

The state government of Maharashtra is also planning on developing public IT parks in different areas of the state through the City and Industrial Development Corporation (CIDCO) and the Maharashtra Industrial Development Corporation (MIDC). Thirty-three IT parks will be government-owned or public and 245 will be private IT parks. These IT parks are expected to generate 1.15 million employment opportunities with a private investment of Rs 15,005 crores.

As per the mid-year review presented by the Indian parliament, during the fiscal year 2008-09, Foreign Direct Investment (FDI) inflows are estimated to touch $35bn.

Source: ASI

After adopting the liberalisation policy in July 2007 under the FDI, 3,982 projects with an investment of Rs 70,856 crores have been approved by the government of India for setting up industries in Maharashtra. As far as FDIs are considered, Maharashtra has remained the most favoured state in India. Even in the case of domestic investments, Maharashtra has attracted the maximum number of proposals. The FDI projects that have been approved in Maharashtra are mainly in the field of services (24 per cent), IT (21 per cent), infrastructure (12 per cent) and automobiles (10 per cent).

The consistent growth in the GSDP during the last four years indicates a potential of higher growth trajectory in all the economic sectors of Maharashtra in the near future. The competitiveness in terms of quality and cost of natural and human resources makes Mumbai an ideal destination for investors. With the economy surging ahead with a healthy GDP and with lakhs of people enjoying a high per capita disposable income and an increasing the standard of living, Mumbai is growing with a huge revenue sharing model for one and all, 2009 and beyond.Sources: IndusView * RBI, ** Source: Indicus Analytics, *** MMRDA