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India China Trading Withthe World

ASHISH KUMAR THANVI

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India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

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The confidence called India

One of the fastest growing economies, second only after

ChinaFourth-largest economy on purchasing power paritybasis

3rd in investor confidence for FDI investments

India offers the best return on investment amongemerging markets

The Time is now..to be in India. This is perhaps the mostoptimistic Ive felt about India in the last 10-15 years that Ive been coming here. Jeffrey Immelt

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Advantage India the growth factor

Indian Economy The 4th largest & 2nd fastest growingeconomy in the world (based on PPP adjusted GDP ~ USD 3.3tri)

Estimated GDP growth (2005-06) is 8,1 %

GDP composition is well diversified across sectors with robustgrowth. Agriculture 22.1%, Industry 21.7% & Services 56.2%

Growth ofEconomy

10 year GDP growth CAGR %8.6

6.2

5.0 5.0 4.8 4.64.2

3.53.1 2.8

01

2

3

4

5

6

7

8

910

China

India

Malaysia

Korea

Singapore

Taiwan

Phillipines

Hong

Kong

Thailand

Indonesia

%

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Global Leaders from India

One of the top IT

Services company inthe world

Worlds largestrefinery plant

Largestproducer of

motorbikes inthe world

Worlds largestproducer ofterry-towels

Worlds 2nd largestforging company withoutsourcing to major carmanufacturers

World leader in viscosestaple fibre and 3rdlargest producer ofinsulator

Amongst top 3 truckmanufacturers in theworld

Worlds largesttube basedtelevision

manufacturer

3rd largest producer ofoptical storage media inthe world

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India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

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Trade - On an All time High Indias total external trade in goods and

services grew by 41.5% in H12005-06 to US $

153 billion. This is expected to go up to US $310 billion by the end of this year. This was justover US $ 74 billion in 1994.

The trade to GDP ratio, calculated at currentprices, has risen to 29.36% in 2004-05 from18.28% in 1993-94.

Economy ismore Openthan ever

before

StrongExportGrowth

Exports have grown to US $ 57.05 billion duringApril-November 2005-2006. They are expected togrow at 26% during the current year to US$ 100billion.

StrongImportsgrowth

Non-oil imports grew at over 28% during April -September 2005 led by demand for capitalgoods.

StrongServiceExports

Service Exports grew by 71% in 2004-05. India'sIT-ITES exports have shown robust growth andare expected to grow by 32% this year to US $ 23

billion.

Source: Reserve Bank of India

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Trade Trends ..

India Exports - Goods and Services

0

50

100

150

200

96-

97

97-

98

98-

99

99-

00

00-

01

01-

02

02-

03

03-

04

04-

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05-

06

(A)

US$

billion

Goods Services

India's Foreign Tra

0

50

10 0

15 0

20 0

25 0

30 0

35 0

1984 1994 2004-05 2005-06 (A )

US$million

Exports Imports Total Trad

Share of Asia

0

20

40

60

80

100

120

140

160

180

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

US

$billion

Asia Non Asia

Source: Reserve Bank of India

India Capital Good Imports

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

US$

billion

Capital Goods Imports Total Imports

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India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

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IncresedInvestments

StrongPerformace ofKey Industries

Growth orientedTrade Policy

Key Growth Drivers

Active Efforts in the area of Regional Integration

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Result in additional demand for materials, with a multiplier effecton: Cement, Steel, Capital goods and other equipment

Expenditure on Infrastructuredevelopment expected to be US $330 billion by 2012

Power - Estimated Investment of US$ 259 billion for power generation,transmission and distributionPorts - Estimated investments of US

$ 22 billion for developing 50 newports and upgrading the existing ports

Roads - Investments of USD 40 billionfor road development

Railway - Estimated Investment ofUS $ 22 billion for devlopment ofbetter railway infrastructure

Infrastructure Development

Gross capital formation up 30% in

FY05

Savings rate up to 29.2% in FY05

Strong domestic and export demand

growth has led to a sharp rise in

capacity utilizations across sectors

The domestic demand is expected togrow strongly, encouraging all

industries to go for capacity addition

expenditures

High capacity utilisation in core

industries like Steel, Alluminium and

Cement.

Capital Expansion

Investment Cycle on the up, getting a double thrust

Increased Investments

Source: Ministry of Finance, Budget Speech February 2005

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Leading to Strong Growth inIndustry

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1997-

98

1998-

991999-

00

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

Index of Industrial ProductionManufacturing

EBITDA/Gross Fixed Assets

17.0

18.0

19.0

20.0

21.0

22.0

23.0

24.0

25.0

26.0

1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

%

Source: CMIE date of select sectors

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Strong Performance of KeyIndustries

Industry estimated to be US $ 36 billion in 2005-06. growing at CAGR of 35% since 2000. To reach

US $ 60 billion by 2010 TCS, Infosys, Wipro, and HCL are billion dollar

companies

India well placed become a major player in theglobal Knowledge Process Outsourcing businessby 2010

Companies capitalizing on availability of vastskilled IT knowledge workers

IT-ITES

India is a top 10 producer of low cost high qualitybulk drugs and formulations.

Highest number of annual bulk drugs filings (120)with US FDA

Exports growing at CAGR of 23% since 1993. Toreach US $ 12 billion by 2010 from US $ 5 billionthis year.

Ranbaxy is the 9th largest generics company inUSA.

Pharma

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Strong Performance of KeyIndustries ..

Textile exports in 2005-06 likely to be US $ 15billion, up 20% over 2004 due to opening up of

US and EU. Exports targeted to reach US $ 50 billion by 2010

Strong craftsmanship skills and low cost drive theglobal competitiveness of this industry

Textiles

Exports have grown 31% in 2005

Industry has shown CAGR of 11.3% since 1995 toreach 1.5 million units, US $ 12 billion, in 2005

Major global players have setup facilities in India

Component exports CAGR at 20.3% since 1998

A host of auto majors including Ford, General

Motors, Volvo sourcing from India Auto component Industry expected to triple to US

$ 17 billion by 2012

Auto / AutoAncillariarie

s

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Growth Oriented Trade Policy

Double India's share in global merchandise tradeby 2009 to 1.5%

Give thrust to employment generation, especiallyin semi-urban and rural areas.

Aim

Removal of Quantitative Restrictions on imports

Peak customs duty rate down to 12.5% for 2006-07 from a high of 150% in 1991-92

Rationalization of duties across sectors

Specific sectoral strategies prepared forimportant sectors like Services, Agri, Gems andJewellery

Export promotion of Capital Goods Scheme for

furthering import of capital goods Active promotion of Special Economic Zones for

Export oriented industries.

Incentives for exclusive Export Oriented Units

KeyInitiatives

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Trade Policy Measures ..

Founding member of the Bangkok Agreement in1975

Signed Framework Agreement with ASEANnations in 2003.

Adopted SAFTA with SAARC countries from Jan2005

Has Free Trade Agreements with BIMST-EC

countries. Has Free Trade and Transit treaties with Nepal

and Bhutan

Signed a bilateral Free Trade Agreement with SriLanka, operational from 2000

Executed a FTAs with Sri Lanka (2000), Thailand(2003) and Singapore (2005)

Negotiations involving preferential or free tradearrangements are on with GCC, Mercosur, SouthAfrica, Brazil and Egypt.

RegionalIntegration

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Conclusion

Banks to play an active role to support emerging

trade dynamicsAsian corporates increasingly becoming global sized

Create models to support open account transactions

Efficiencies would be one of the key drivers to retaincompetitive edge

Integrate technology to build supply chain structuresCorporates to have wider geographical presence

Regional strategic alliances amongst banks to supportlocal corporate requirements

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Thank You