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Indian Economy

Opportunities Unlimited
India: Fastest Growing Free Market Democracy 2
India: Among the Top-15 Countries in terms of GDP at constant prices 3

The Indian economy has witnessed an unprecedented growth. Booming Indian services and
industry sector are providing the required impetus to the economic growth
Indias GDP
witnessed high
India's GDP: 2002-07 9.4%
growth and was the 8.4%
700
second fastest
8.5% 7.5%
growing GDP after 600 Fastest GDP growth of 9.4
China percent in 2006-07, since last 18
500
USD Billion
years
400
4% 631
300 590
484 534
200 424
Indian economy is
the 4th largest in 100
terms of PPP USD
4.1 trillion in 2006 0
2002-03 2003-04 2004-05 2005-06 2006-07
GDP at Constant Prices

Contribution of
The sound Services -
performance of each increased from
industry segment is 700 49 percent to
leading to the 55 percent
overall robust 600
performance of the 168
500 155
Indian economy Growth in sectors (2006-07):
USD Billion

400 117 Industry: 10.9%


104 109 116
Services: 11%
300
103 91 Agriculture: 2.7%
200
319 347
100 205 223

0
1999-00 2002-03 2005-06 2006-07
Services Agriculture Industry
India: Robust Economic Platform 4

India's Forex Reserves: 2001-07 (Till 22 June 2007)


Indias enhanced 250
economic 213
199
performance has 200
been the major
USD Billion 141
152 at present level of Forex
contributor towards 150 reserves, the country has
increased Forex 112
adequate cover for 12 months of
reserves 100 75 imports
54
50
Steadily increasing
Forex reserves offer 0
adequate security 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
against any possible (Till 22
currency crisis or June)
monetary instability
Indias Forex
External Debt-to-GDP Ratio reserves are in
22 excess of
21.1
Forex reserves 20.4 Falling Dollar inflates external debt
witnessed an the Indias external debt
increase of 200 19
percent for the 17.8
17.3
period 1990-2007 16.4
15.8
Ratio

16

Increased
confidence of
13 the decreasing external debt to
investors in Indian
GDP ratio indicates that India has
companies have led
a sound economic platform
to a surge in cross
border borrowing by 10
the corporate 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
houses
India: Surging Exports 5

India's Exports: 2002-07 (till February 2007)


Services sector has 112.40
120 103.42
been a major
contributor to 100 83.81
increased exports USD Billion 80 63.95
from India 60
52.81 Quality and cost advantage are the two
40
important parameters leveraged by the
20
Indian producers to increasingly
Acceptance of 0
market their products and services
Indian products 2002-03 2003-04 2004-05 2005-06 2006-07
along with the cost (upto Feb.
advantage has 07)
provided an edge to
Indian companies

Indian companies India's Import: 2002-07 (till February 2007)


have chalked out
180 162.30
extensive plans to 149.65
160
increase their
140
USD Billion

presence abroad 111.89


120
100 78.28
80 61.52
60
Petroleum products are the major
40 contributors towards Indias growing
Imports of products
by India mainly
20 imports
0
includes petroleum
2002-03 2003-04 2004-05 2005-06 2006-07
products and
(upto Feb.
minerals
07)
India: Attractive Investment Destination 6

With improved performance on PE ratio and ROE, Indian markets have attracted
India is ranked
second in AT large investments
Kearney FDI
confidence index FDI Inflow - India: 2001-07
18,000
15,730
16,000
14,000
180 percent

USD Million
Telecom and 12,000
Increase
Electronics topped 10,000
Return on the Investments in India (2006 Q1)
the list of inward FDI 8,000
Market PE Ratio P/B Ratio RoE (%) 5,546
6,000 4,222 3,755
India 16.1 4.53 22 4,000 3,134 2,634
China 10.62 2.06 17 2,000
FDI inflow for the
0
period 2006-07 Indonesia 10.26 3.09 NA
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
witnessed a growth
Korea 9.85 1.84 16
of 180 percent over
the same period last Malaysia 13.21 1.82 16
year Net FII into India: 2001-07
Taiwan 12.17 2 11 12
Thailand 9.84 2.32 23 10.00 10.20
10 9.40
EM Asia 11.19 2.12 15

USD Billion
Mauritius has been 8 6.72
Latin America 9.35 2.46 18
the largest
contributor towards EM Europe 10.9 2.39 15 6
FDI into India..
4
1.80
2
0.60
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
India: Vibrant Capital Market 7

Sensex The Bombay stock exchange index has risen 15 times from 1990s to
India is among the reach 15,000 mark in July 2007
major destinations
across the globe for
inflow of US Dollar
i.e. FIIs 7/9/2007
Crossed
15,000
mark FIIs augmented
1/12/2007 support by infusing
16,000 Crossed 14,000 mark large investments
Sensex risen 15 in Indian stock
times in the period market
1990-2007 14,000
2/7/2006
12,000 Crossed 10,000 mark

10,000
INR

12/30/1999 Exorbitant
8,000 industry
Crossed 5,000 mark
Emergence of performance
industry and 6,000
confidence of local
investors along with 4,000
the FIIs has led to
increased movement 2,000
Increased local
of sensex investors
- confidence
7/1/1997 7/1/1998 7/1/1999 7/1/2000 7/1/2001 7/1/2002 7/1/2003 7/1/2004 7/1/2005 7/1/2006 7/1/2007
India: Vibrant Economy Driving M&A Activities 8

USD USD
Growth Drivers: Number of Deals and Values SECTOR SECTOR
28.2 (Mn) (Mn)
30 900
Globalisation of
782 800 Automotive 518 Manufacturing 933
competition 25

Number of deals
700
Concentration of 18.3 Banking and Financial 1,375 Media 630
20 600
companies to
USD Billion

467 500 Chemicals and 1,133 Oil & Gas 384


achieve 15 12.3 Plastics
400
economies of
10 306 300 Electrical and 896 Pharma & 2,520
scale Electronics biotech
200
Lower interest 5
Energy 1,484 Telecom 2,198
100
rates and vibrant
0 0 FMCG, Food and 1,327 Others 4,006
global markets
2004 2005 2006 Beverages
Cash Reserves
Deal Values No. of Deals
with Corporates IT and ITES 2,903 Total 20,305

Trends: In 2006, there were a


Ratio of the Size of
acquisition to the
total of 480 M&A deals
size of acquirer and 302 private equity
has grown from 10 deals
percent in 2004 to
25 percent in 2006. Average deal size close to
Cross-border
deals are growing
USD 36 million
faster than
domestic deals
Contribution of private
Private Equity (PE) equity deals to total
houses have number of deals have
funded projects as
well as made a few
increased from nearly 9
acquisitions in percent in 2004 to 28
India percent in 2006
Major M&A Deals Undertaken Abroad by India Inc. 9

Tata Steel buys Corus Plc USD 12.1 billion

Hindalco acquired Novelis Inc. USD 6 billion

Essar Steel acquired Algoma Steel USD 1.58 billion

Suzlon Energy Ltd. acquires REpower USD 1.6 billion

Videocon Industries acquired Daewoo USD 730 million


Electronics Corporation Limited
Major M&A and Investments Announcements in India 10

Vodafone buys Hutch USD 11 billion

Plans to spend on its development operations USD 1.7 billion


in India over the next four years

Plans investment in private equity, real estate, USD 1 billion


and private wealth management

Aditya Birla Group increased its stake in Idea USD 0.98 billion
Cellular by acquiring 48.14-percent stake

Renault, Nissan and Mahindra & Mahindra


has initiated a Greenfield automobile plant USD 0.905 billion
project in Chennai.

Mylan Laboratories acquired a majority stake USD 0.74 billion


in Matrix Laboratories
India: Pacing Ahead to Emerge as a Major Economy in the World 11

2007 Global Retail Development Index (GRDI) 2007 Global Services Location Index
India has been 100
ranked superior to India 3.2 2.3 1.4
other major 80
countries by many China 2.9 2.3 1.4
prominent surveys
GRDI Score

60 Malaysia 2.8 1.3 2

Thailand 3.2 1.2 1.6


40
AT Kearney placed
Brazil 2.6 1.8 1.5
India among the top 20
three in its FDI Indonesia 3.3 1.5 1.1
confidence index
0 Financial structure People and skill availablity
India Russia Vietnam Ukraine China Chile Latvia Business environment

the retail market


along with the
services sector has Projected GDP Growth Rates for Select Upcoming Economies
8
been attracting the
interest of major
players
GDP Growth Rate (%)

India is expected to
outperform its rivals 4
in the BRIC, in terms
of GDP growth rates,
from 2015 2
onwards

0
2005-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50

Brazil China India Russia


India: Astounding Demographics 12

DEMOGRAPHIC TRANSFORMATION OF INDIA


Growth in the higher
income categories Annual Household Income
of Indias population (in USD)
has created an
2 9 20 Rich (Above 115,000)
affluent section of Population (million)
society, which has 9 17 33 High Income (57,000 115,000)
significant level of
purchasing power 48 74 120 Consuming class (23,000 57,000)

221 285 404 Working class (10,200 23,000)

726 710 613 Needy (Below 10,200)

2001-02 2005-06 2009-10(E)


* In PPP terms

Per Capita Income


700 651
Increasing per capita 583
income and large 600
519 Increasing per capita income
population moving 461
500 coupled with an emerging middle
into middle class 393 class has provided the necessary
has led to high level 400
USD

impetus to consumerism in India


of consumerism in
300
India
200

100

0
2002-03 2003-04 2004-05 2005-06 2006-07
India: Increasing Working Population 13

Growth in Global Working Age Population (15-64)


Stock Position 2005 Addition to Working Age Population by 2010

314
World 4,168
71
India 691
64
Africa 500
44
China 934
33
South East Asia 362
31
Latin America 359
17
Southern Asia 132

USA 200 10

Europe 497 0

Japan 85 -3

-5 45 95 145 195 245 295 345


In Million

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.
Growth Expected in India 14

To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion
in the next five years

2010
GDP USD 900 billion
GDP growth rate 9%
2008 Services contribution 60-65 %
GDP USD 750 billion FDI limit is expected to be 100
percent in major industry sectors
GDP growth rate 9.5% such as Telecom,
2006 Services contribution 60 % Semiconductors, Automobiles, etc.

GDP USD 590 billion FDI limit is expected to be close to Balance of Trade Should be
100 percent in major industry positive with increased level of
GDP growth rate 9 % sectors such as Telecom, exports as compared with imports
Services contribution 54 % Semiconductors, Automobiles, etc. Investment goal USD 370 billion
FDI limit not 100 percent in major Balance of Trade Should
industry sectors such as Telecom, increase with surging exports as
Semiconductors, Automobiles, etc. compared with imports
Balance of Trade USD (-)46.2 Investment goal USD 305 billion
billion
Investment goal USD 250 billion
Why India? Quote Unquote 15

India has evolved into


India is among the one of the world's
three most attractive leading technology India has among the
FDI destinations in the centers. highest returns on
world.
foreign investment.
Craig Barrett
Intel Corporation
A T Kearney
FDI Confidence Index 2005 By 2032, India will be US Department of
among the three Commerce

largest economies in
the world.

The Indian market has two


BRIC Report, Goldman Sachs
core advantages - an
increasing presence of
We came to India for the multinationals and an upswing
costs, stayed for the in the IT exports.
quality and are now
investing for innovation. India is a developed
country as far as Travyn Rhall,
ACNielsen
intellectual capital is
concerned.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, August 2005

Jack Welch
General Electric
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