Indian Economy

Opportunities Unlimited
2
India: Fastest Growing Free Market Democracy
3
India: Among the Top-15 Countries in terms of GDP at constant prices
The Indian economy has witnessed an unprecedented growth. Booming Indian services and
industry sector are providing the required impetus to the economic growth
The sound
performance of each
industry segment is
leading to the
overall robust
performance of the
Indian economy
Indian economy is
the 4
th
largest in
terms of PPP USD
4.1 trillion in 2006
Indias GDP
witnessed high
growth and was the
second fastest
growing GDP after
China
Growth in sectors (2006-07):
Industry: 10.9%
Services: 11%
Agriculture: 2.7%
Fastest GDP growth of 9.4
percent in 2006-07, since last 18
years
Contribution of
Services -
increased from
49 percent to
55 percent
4%
8.5% 7.5%
8.4%
9.4%
4
India: Robust Economic Platform
Indias enhanced
economic
performance has
been the major
contributor towards
increased Forex
reserves
Steadily increasing
Forex reserves offer
adequate security
against any possible
currency crisis or
monetary instability
Falling Dollar inflates
the Indias external debt
Increased
confidence of
investors in Indian
companies have led
to a surge in cross
border borrowing by
the corporate
houses
Forex reserves
witnessed an
increase of 200
percent for the
period 1990-2007
at present level of Forex
reserves, the country has
adequate cover for 12 months of
imports
Indias Forex
reserves are in
excess of
external debt
the decreasing external debt to
GDP ratio indicates that India has
a sound economic platform
5
India: Surging Exports
Petroleum products are the major
contributors towards Indias growing
imports
Quality and cost advantage are the two
important parameters leveraged by the
Indian producers to increasingly
market their products and services
Services sector has
been a major
contributor to
increased exports
from India
Imports of products
by India mainly
includes petroleum
products and
minerals
Indian companies
have chalked out
extensive plans to
increase their
presence abroad
Acceptance of
Indian products
along with the cost
advantage has
provided an edge to
Indian companies
6
India: Attractive Investment Destination
India is ranked
second in AT
Kearney FDI
confidence index
Telecom and
Electronics topped
the list of inward FDI
FDI inflow for the
period 2006-07
witnessed a growth
of 180 percent over
the same period last
year
Mauritius has been
the largest
contributor towards
FDI into India..
Return on the Investments in India (2006 Q1)
Market PE Ratio P/B Ratio RoE (%)
India 16.1 4.53 22
China 10.62 2.06 17
Indonesia 10.26 3.09 NA
Korea 9.85 1.84 16
Malaysia 13.21 1.82 16
Taiwan 12.17 2 11
Thailand 9.84 2.32 23
EM Asia 11.19 2.12 15
Latin America 9.35 2.46 18
EM Europe 10.9 2.39 15
With improved performance on PE ratio and ROE, Indian markets have attracted
large investments
180 percent
Increase
7
India: Vibrant Capital Market
India is among the
major destinations
across the globe for
inflow of US Dollar
i.e. FIIs
Sensex risen 15
times in the period
1990-2007
Sensex The Bombay stock exchange index has risen 15 times from 1990s to
reach 15,000 mark in July 2007
FIIs augmented
support by infusing
large investments
in Indian stock
market
Exorbitant
industry
performance
Increased local
investors
confidence
Emergence of
industry and
confidence of local
investors along with
the FIIs has led to
increased movement
of sensex
7/9/2007
Crossed
15,000
mark
Crossed 14,000 mark
Crossed 10,000 mark
Crossed 5,000 mark
12/30/1999
2/7/2006
1/12/2007
8
India: Vibrant Economy Driving M&A Activities
SECTOR
USD
(Mn)
SECTOR
USD
(Mn)
Automotive 518 Manufacturing 933
Banking and Financial 1,375 Media 630
Chemicals and
Plastics
1,133 Oil & Gas 384
Electrical and
Electronics
896 Pharma &
biotech
2,520
Energy 1,484 Telecom 2,198
FMCG, Food and
Beverages
1,327 Others 4,006
IT and ITES 2,903 Total 20,305
Growth Drivers:
Globalisation of
competition
Concentration of
companies to
achieve
economies of
scale
Lower interest
rates and vibrant
global markets
Cash Reserves
with Corporates
Contribution of private
equity deals to total
number of deals have
increased from nearly 9
percent in 2004 to 28
percent in 2006
In 2006, there were a
total of 480 M&A deals
and 302 private equity
deals
Average deal size close to
USD 36 million
Trends:
Ratio of the Size of
acquisition to the
size of acquirer
has grown from 10
percent in 2004 to
25 percent in 2006.
Cross-border
deals are growing
faster than
domestic deals
Private Equity (PE)
houses have
funded projects as
well as made a few
acquisitions in
India
9
Major M&A Deals Undertaken Abroad by India Inc.
USD 12.1 billion
Tata Steel buys Corus Plc
USD 6 billion
Hindalco acquired Novelis Inc.
USD 1.58 billion
Essar Steel acquired Algoma Steel
USD 730 million
Videocon Industries acquired Daewoo
Electronics Corporation Limited
USD 1.6 billion
Suzlon Energy Ltd. acquires REpower
10
Major M&A and Investments Announcements in India
USD 11 billion
Vodafone buys Hutch
USD 0.98 billion
Aditya Birla Group increased its stake in Idea
Cellular by acquiring 48.14-percent stake
USD 1 billion
Plans investment in private equity, real estate,
and private wealth management
USD 1.7 billion
Plans to spend on its development operations
in India over the next four years
USD 0.905 billion
Renault, Nissan and Mahindra & Mahindra
has initiated a Greenfield automobile plant
project in Chennai.
Mylan Laboratories acquired a majority stake
in Matrix Laboratories
USD 0.74 billion
11
India: Pacing Ahead to Emerge as a Major Economy in the World
2007 Global Retail Development Index (GRDI)
India has been
ranked superior to
other major
countries by many
prominent surveys
AT Kearney placed
India among the top
three in its FDI
confidence index
the retail market
along with the
services sector has
been attracting the
interest of major
players
India is expected to
outperform its rivals
in the BRIC, in terms
of GDP growth rates,
from 2015
onwards
12
India: Astounding Demographics
2
9
48
221
726
9
17
74
285
710
20
33
120
404
613
2001-02 2005-06 2009-10(E)
Rich (Above 115,000)
High Income (57,000 115,000)
Consuming class (23,000 57,000)
Working class (10,200 23,000)
Needy (Below 10,200)
Annual Household Income
(in USD)
* In PPP terms
P
o
p
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l
a
t
i
o
n

(
m
i
l
l
i
o
n
)


Increasing per capita income
coupled with an emerging middle
class has provided the necessary
impetus to consumerism in India
Growth in the higher
income categories
of Indias population
has created an
affluent section of
society, which has
significant level of
purchasing power
Increasing per capita
income and large
population moving
into middle class
has led to high level
of consumerism in
India
DEMOGRAPHIC TRANSFORMATION OF INDIA
13
Countries worldwide are anticipating a shortage of working population in the future. India is expected to emerge as a
clear winner, and by 2050, it will have the largest working age population.
India: Increasing Working Population
Stock Position 2005
South East Asia 362
Southern Asia 132
India 691
Africa 500
China 934
Latin America 359
USA 200
Europe 497
Japan 85
World 4,168
In Million
Addition to Working Age Population by 2010
Growth in Global Working Age Population (15-64)
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GDP USD 590 billion
GDP growth rate 9 %
Services contribution 54 %
FDI limit not 100 percent in major
industry sectors such as Telecom,
Semiconductors, Automobiles, etc.
Balance of Trade USD (-)46.2
billion
Investment goal USD 250 billion
2006
GDP USD 750 billion
GDP growth rate 9.5%
Services contribution 60 %
FDI limit is expected to be close to
100 percent in major industry
sectors such as Telecom,
Semiconductors, Automobiles, etc.
Balance of Trade Should
increase with surging exports as
compared with imports
Investment goal USD 305 billion
2008
GDP USD 900 billion
GDP growth rate 9%
Services contribution 60-65 %
FDI limit is expected to be 100
percent in major industry sectors
such as Telecom,
Semiconductors, Automobiles, etc.
Balance of Trade Should be
positive with increased level of
exports as compared with imports
Investment goal USD 370 billion
2010
Growth Expected in India
To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion
in the next five years
15
India has among the
highest returns on
foreign investment.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, August 2005
We came to India for the
costs, stayed for the
quality and are now
investing for innovation.
A T Kearney
FDI Confidence Index 2005
India is among the
three most attractive
FDI destinations in the
world.
Jack Welch
General Electric
India is a developed
country as far as
intellectual capital is
concerned.
US Department of
Commerce
By 2032, India will be
among the three
largest economies in
the world.
BRIC Report, Goldman Sachs
Why India? Quote Unquote
Travyn Rhall,
ACNielsen
The Indian market has two
core advantages - an
increasing presence of
multinationals and an upswing
in the IT exports.
Craig Barrett
Intel Corporation
India has evolved into
one of the world's
leading technology
centers.
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