Indian Economy – Opportunities Unlimited

Fastest Growing Free Market Democracy

 India: Ranks Among the Top-15 Countries in terms of GDP at constant
prices
Indian economy has
witnessed an Sound performance of each industry India's GDP: 2002-06 (Till Q2)

unprecedented segment is leading to the overall 700

growth…. 8.40%
robust performance of Indian 600
8.50%
7.50%
9.05%

economy 500

USD Billion
400

Indian economy is the 300 590

534
4th largest in terms of 423.73
4%
484.4
200
PPP – USD 3.9 trillion in 286
2006 100

0
2002-03 2003-04 2004-05 2005-06 2006-07 (Till
Q2)

GDP at Constant Prices

Registered highest
second quarter growth
since 2001-02 i.e. 9.2
percent
700

600

500 154.7

Indian GDP has registered one of the

USD Billion

400
116.05

Booming Indian markets 300

104.4 109.4
fastest growth rates across the globe
90.9
providing impetus to 103.1

200
the economic growth 319.30

100 204.90 223.40

0
1999-00 2002-03 2005-06

Services Agriculture Manufacturing

 India: Robust Economic Platform
Ever rising Forex
reserves providing
India's Forex Reserves: 2001-07 (Till February 2007)
adequate cushion 200
182.8
against any possibility of 180

currency crisis or 160

138.2
153.3

monetary instability 140

USD Billion
India’s enhanced economic 120
100
106.8

performance has been major 80 74.8

55.5
contributor towards increased Forex 60
40

reserves 20
0
External debt-to-GDP 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16
Feb 07)
ratio has shown
remarkable
improvement…..

India’s Forex reserves

are in excess of external
debt…… External Debt-to-GDP Ratio

22 21.1
20.4

19 17.8
17.3
The decreasing external debt to GDP
Ratio

15.8
16

…..at present level of 13

ratio indicates that India has a sound
Forex reserves, the
country has adequate 10
economic platform
2001-02 2002-03 2003-04 2004-05 2005-06
cover for 12 months of
imports
 India: Attractive Investment Destination

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

14,000

12,000

USD Million
10,000 200 percent
Return on the Investments in India (2006 Q1) 8,000 Increase
Telecom and Electronics 6,000 5,546
topped the list of MARKET PE P/B Ratio RoE (%) 4,000
4,222
3,134
3,755
2,634
inward FDI Ratio 2,000

India 16.1 4.53 22 0

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

China 10.62 2.06 17

Indonesia 10.26 3.09 NA

FDI inflow for the period Korea 9.85 1.84 16

April – December 2006
Malaysia 13.21 1.82 16
witnessed a growth of
Net FII into India: 2001-07 (Till February 2007)
151 percent over the Taiwan 12.17 2 11 12

same last year Thailand 9.84 2.32 23 10

10.00 10.20
9.40

EM Asia 11.19 2.12 15 8

USD Billion
6.80

6
Latin America 9.35 2.46 18

Mauritius has been the EM Europe 10.9 2.39 15

4

largest contributor 2
1.80

towards FDI into 0.60

0
India….. 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16
Feb 07)
 India: Surging Exports
Services sector has been
a major contributor to 140 India's Exports: 2001-06
increased exports from 124.65
120
India. 103.42 The quality and cost advantage are the
100
83.81 two important parameters leveraged
USD Billion
80

60 52.81
63.95 by the Indian producers to increasingly
The acceptance of 40
market their products and services
Indian products along
with the cost advantage 20

has provided an edge to 0

2002-03 2003-04 2004-05 2005-06 2006-07
Indian companies.
Exports

The Indian companies

have chalked out India's Import: 2001-06
extensive plans to 200
181.37
increase their presence 180

160
abroad 149.65
140

USD Billion
120 111.89

Petroleum products are the contributor 100

80
78.28

towards the growing imports by India 60

61.52

Imports of products by 40

20
India mainly includes
0
petroleum products and 2002-03 2003-04 2004-05 2005-06 2006-07

minerals Imports
 India: Pacing Ahead to Emerge as the Major Economy in the Globe

India has been ranked

superior to other major 2005 Global Services Location Index
2006 Global Retail Development Index (GRDI)
countries by many 100
India 3.47 1.26 2.14
prominent surveys…
80 China 3.21 1.17 1.76

GRDI Score
60 Malaysia 2.95 2 1.12

Philippines 3.56 1.06 1.16

40
AT Kearney placed India Singapore 1.62 2.67 1.44
among the top three in 20
its FDI confidence Thailand 3.27 1.51 0.94

index… 0
India Russia Vietnam Ukraine China Chile Latvia Financial structure Business environment People and skill availablity

… retail market along

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

6 Brazil
China
India is expected to 4 India
outperform its rivals in
2 Russia
the BRIC, in terms of
GDP growth rates from 0
2015 onwards…
0

0
-1

-1

-2

-2

-3

-3

-4

-4

-5
05

10

15

20

25

30

35

40

45
20

20

20

20

20

20

20

20

20
 India: Vibrant Economy Driving M&A Activities
Growth Drivers:
 Globalization of
Number of deals and values
competition
30 28.2 900
 Concentration of 800 SECTOR USD SECTOR USD
782
companies to 25
700 (Mn) (Mn)

Number of deals
achieve USD Billion 20 18.3 600

economies of 15 12.3
467
500
Automotive 518 Manufacturing 933
400
scale 10 306 300

 Lower interest 5
200
Banking and 1375 Media 630
rates and vibrant 100
Financial
0 0
global markets 2004 2005 2006
Chemicals & 1133 Oil & Gas 384
 Cash Reserves Deal Values No. of Deals
Plastics
with Corporate
Trends: Electrical & 896 Pharma & 2520
 Ratio of Size of Electronics biotech
acquisition to the Energy 1484 Telecom 2198
size of acquirer
has grown from In 2006, there were a total of FMCG, Food and 1327 Others 4006
10 percent in 480 M&A deals and 302 Beverages
2004 to 25
percent in 2006. private equity ones… IT & ITES 2903 Total 20305
 Cross-border
deals are growing … Average deal size close to
faster than
domestic USD 36 million…
 Private Equity
houses have …Contribution of private equity
funded projects as
well as done
deals to total number of
some acquisitions deals have increased from
in India. nearly 9 percent in 2004 to
28 percent in 2006
Major M&A Deals Undertaken Abroad by India Inc.

Tata Steel buys Corus USD 12.1 billion

Plc.

Hindalco acquired Novelis Inc.

USD 6 billion

Essar Steel acquired Algoma Steel

USD 1.58 billion

Videocon Industries acquired Daewoo

USD 730 million
Electronics Corporation Limited

Tata Tea has acquired 30-percent stake

USD 677 million
in the US based Energy Brands Inc.
Major M&A and Investments Announcements in India

Vodafone buys Hutch USD 11 billion

Plans to spend on its development USD 1.7 billion

operations in India over the next four
years
Plans investment in private equity, real
USD 1 billion
estate, and private wealth
management
Aditya Birla Group increased its stake in
USD 0.98 billion
Idea Cellular by buying 48.14-percent
stake
Renault, Nissan and Mahindra & USD 0.905 billion
Mahindra to set up Greenfield
automobile plant in Chennai.
Mylan Laboratories acquired a majority
stake in Matrix Laboratories USD 0.74 billion
 India: Astounding Demographics

Growth in the
higher income
DEMOGRAPHIC TRANSFORMATION OF INDIA
categories of India’s Annual Household Income
population, has (in USD)
2 9 20 Rich (Above 115000)
lead to a (Million Population)
burgeoning affluent 9 17 33 High Income (57000 - 115000)
section of society,
48 74 120 Consuming class (23000 - 57000)
which has
221 285 404 Working class (10200 - 23000)
significant level of
726 710 613 Needy (Below 10200)
purchasing power
2001-02 2005-06 2009-10(E)
* In PPP terms

Per Capita Income

By 2009, India will 700 638

583
have 1.1 million
600
461
519 Increasing per-capita income
500
393 coupled with emerging middle
individuals with a 400
300 class has provided necessary
wealth of USD 100,000 200
100
impetus to the consumerism in
0 India
2002-03 2003-04 2004-05 2005-06 2006-07 E
India: Increasing Working Population

Growth in Global Working Age Population (15-64)

Stock Position Addition to working age population by 2010
2005
314
World 4,168
71
India 691
64

Africa 500 44

33
China 934
31
South East Asia 362 17

10
Latin America 359
0
Southern Asia 132
-3

USA 200 -5 45 95 145 195 245 295 345

Europe 497

Japan 85 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
To sustain the GDP growth of more than 8 percent India
requires an investments of USD 1.5 trillion in the next
five years
2006
• 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
2008
• 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
2010
• 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
India’s Sunrise Sectors

1 Infrastructure

2 Automobile

3 Telecom

4 Semiconductor

5 Aviation

6 Defense
 India to Gain in terms of Economic Prosperity due to Continued
Government Initiatives in Infrastructure Sector
Railways has initiated ‘Golden Quadrilateral’, ‘North-South’ and ‘East-
process to develop West’ corridors are the major road infrastructure
dedicated freight being undertaken by the government. 96 percent • Project ‘Sethusamundram’, which
corridor… involves dredging of the Palk Strait to
work of Golden Quadrilateral has been completed
facilitate maritime trade through it
• Project ‘Sagarmala’ – a USD 22 billion
Increase in traffic is project for the modernisation of major and
expected to amount to minor ports
12-15 percent for
passenger traffic and •The government has initiated the
15-18 percent for cargo process of up-gradation and
traffic… modernisation of national airports • Private sector can set up coal, gas or
worth USD 9 billion by 2010. liquid based thermal projects, hydel
projects and wind or solar projects of any
… Government of India •It has also initiated process of size. Mega power projects permitted in
spends approximately modernisation of other non-metro India.
USD 4 billion annually airports (more than 40 cities)
on road development • Foreign equity participation upto 100
percent is allowed in the power sector
through automatic route.

There is increasing
competition between
full services carriers and
low cost carriers…..
Government has identified infrastructure as a priority sector to sustain the momentum of the GDP growth rate.
The investment goal for infrastructure sector are:
• Power – USD 140 billion by 2010
• Roads – USD 25 to 30 billion by 2010
• Ports – USD 8 to 10 billion by 2010
• Civil Aviation – USD 15 to 17 billion by 2010
• Telecom – USD 22 billion by 2010
India’s Sunrise Sector: Automobile

The Indian automobile sector generates a revenue of USD 34 billion per year.
Largest two wheeler
Its contribution to GDP is around 3-4 percent.
manufacturer….
Total Commercial Vehicles
CAGR for production : 24.5%
450 CAGR for sales : 24.3%
Units (thousands)

……Fifth largest CV 350

manufacturer in the Production and domestic
world 250

sales figures for

150
commercial vehicles are
50
2001-02 2002-03 2003-04 2004-05 2005-06 growing at a rate of
Domestic production
of auto components
approximately 24 percent.
has increased to
USD 10 billion in Total Two Wheelers
CAGR for production : 15.1%
2005-06, a jump of 8,500 CAGR for sales : 13.8%
17 percent…

Units (thousands)
6,500

Production and domestic 4,500

Exports have grown sales of two wheelers are 2,500

by 30 percent to
USD 1.8 billion growing at a rate of 500
2001-02 2002-03 2003-04 2004-05 2005-06

approximately 15 and 14
percent respectively.

Production Domestic Sales

 India’s Sunrise Sector: Telecom

The Indian mobile market is witnessing strong growth and is slated to

India ranks among the
top 10 countries of the
become the third largest in the world behind US and China in the next
20
world with regards to its two to three years Telecom Subscribers (Wireline & Wireless)
Tele-Density
17
telecom network. 200 190 16

Tele-Density (%)
13
160 12
Subscribers (in Mn)

140
9
120
98 8 7
76 5
80 4
53 4
44
40

Tele-density has more 0

0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
than doubled in the 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Q3)
(Q3)
last 3 years.

India has 40.3 million

10
wireline subscribers Internet Subscribers
9
and 149.6 million 8
wireless (mobile and 7 Mobile communication and
Subscribers (in Mn)

WLL-F) subscribers. 6 6 internet penetration are adding

5
4
to the momentum of
4 3
telecommunication sector
2

0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Q3)
 India’s Sunrise Sector: Semiconductor

India has developed Semiconductor Design Market: 2004-06

strong competence in 10

design side of Many international players such as

8
semiconductor Intel, AMD, etc have established their
USD Billion

industry…. 6
4.6 R&D centres in India, which assists
4
2.4
3.2 them to develop novel products at fast
2 pace
Captive semiconductor 0
units in India 2004 2005 2006

contribute 62 percent
to the total revenues
being generated by
the industry….
Semiconductor Design Market and its Components: 2005

Indian companies have chalked out 18%

India has 78%
approximately 125 plans to establish fabrication units thus
companies operating catering to the overall demand from
in the semiconductor 4%
domain designing to manufacturing phase
VLSI Design Hardware Design Embedded Software
Investment Opportunities in Indian Aviation Industry

Activities in the Indian Aviation Industry

 Global aviation major Boeing plans to invest approximately USD 280
million to establish airplane maintenance facility and a pilot training
centre. The company estimates that Indian market will require 470
airplanes worth USD 35 billion by 2025. Carrier Proposed Requirement

 GMR has undertaken project for modernisation of Delhi airport. The Air India 50 Aircrafts
project worth is USD 1.94 billion. Indian Airlines 43 Aircrafts
 Airbus plans to invest USD 1 billion over a period of 10 years to Jet Airways 30 Aircrafts
establish training centres, maintenance, repair and overhauling
Air Deccan 60 Aircrafts
(MRO) centre, and engineering and design centre in India.
Kingfisher 48 Aircrafts
 EADS plans to invest USD 2.57 billion over a period of next 15 years
Spicejet 20 Aircrafts
to establish technology centre in India.
Indigo 100 Aircrafts
 Indian carriers have placed orders for approximately 480 aircrafts to
GoAir 15 Aircrafts
be delivered by 2012. State operated carriers – Indian airlines and Air
India have placed orders worth USD 8 billion for approximately 100 Paramount 5 Aircrafts
aircrafts to modernise its fleet.
Magic Air 10 Aircrafts
 The demand for corporate jets has increased and it is estimated that
number of corporate jets in India will be 300 in next 18 months.

 Canadian avionic firm – CAE plans to expand its operations in India.

It plans to aggressively market its simulation and modelling
technologies to civil and military aviation customers.
Why India? – Quote Unquote

India is among the three India has among the

most attractive FDI highest returns on foreign
destinations in the world investment

US Department of
A T Kearney Commerce
FDI Confidence Index 2005
By 2032, India will be among
the three largest economies
in the world
BRIC Report
Goldman Sachs, October 2003

“We came to India for the “India is a developed

costs, stayed for the quality country as far as
and are now investing for intellectual capital is
innovation.” concerned.”

Jack Welch
- Dan Scheinman, Cisco System
General Electric
Inc. as told to Business Week,
August 2005