Indian Economy – Opportunities Unlimited

Fastest Growing Free Market Democracy

India: Ranks Among the Top-15 Countries in terms of GDP at constant prices

204.90 223.40

319.30

103.1 90.9

116.05104.4 109.4

154.7

0

100

200

300

400

500

600

700

1999-00 2002-03 2005-06

US

D B

illio

n

Services Agriculture Manufacturing

Indian economy has witnessed an unprecedented growth….

Contribution

of Services -

increased

from 49 to 54

percent

Sound performance of each industry segment is leading to the overall robust performance of Indian economy

Indian economy is the 4th largest in terms of PPP – USD 3.9 trillion in 2006

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

Booming Indian markets providing impetus to the economic growth

India's GDP: 2002-06 (Till Q2)

423.73484.4

534590

286

0

100

200

300

400

500

600

700

2002-03 2003-04 2004-05 2005-06 2006-07 (TillQ2)

US

D B

illi

on

GDP at Constant Prices

4%

8.50%7.50%

8.40%9.05%

Indian GDP has registered one of the fastest growth rates across the globe

India: Robust Economic Platform

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

55.5

74.8

106.8

138.2

153.3

182.8

0

20

40

60

80

100

120

140

160

180

200

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16Feb 07)

US

D B

illio

n

External Debt-to-GDP Ratio

21.120.4

17.8 17.3

15.8

10

13

16

19

22

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

Rat

ioIndia’s enhanced economic performance has been major contributor towards increased Forex reserves

Ever rising Forex reserves providing adequate cushion against any possibility of currency crisis or monetary instability

External debt-to-GDP ratio has shown remarkable improvement…..

India’s Forex reserves are in excess of external debt……

…..at present level of Forex reserves, the country has adequate cover for 12 months of imports

The decreasing external debt to GDP ratio indicates that India has a sound economic platform

India: Attractive Investment Destination

Net FII into India: 2001-07 (Till February 2007)

1.80

0.60

10.00 10.209.40

6.80

0

2

4

6

8

10

12

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16Feb 07)

US

D B

illio

n

FDI Inflow - India: 2001-07

4,2223,134 2,634

3,755

5,546

16,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

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

US

D M

illio

n

India is ranked second in AT Kearney FDI confidence index

Telecom and Electronics topped the list of inward FDI

FDI inflow for the period April – December 2006 witnessed a growth of 151 percent over the same 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 the better performance on PE ratio and ROE, Indian markets have attracted large investments

200 percent Increase

India: Surging Exports

I n d i a ' s I m p o r t : 2 0 0 1 - 0 6

6 1 . 5 2

7 8 . 2 8

1 1 1 . 8 9

1 4 9 . 6 5

1 8 1 . 3 7

0

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1 8 0

2 0 0

2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6 2 0 0 6 - 0 7

US

D B

illio

n

Im p o r ts

I n d i a ' s E x p o r t s : 2 0 0 1 - 0 6

5 2 . 8 1

6 3 . 9 5

8 3 . 8 1

1 0 3 . 4 2

1 2 4 . 6 5

0

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6 2 0 0 6 - 0 7

US

D B

illio

n

E x p o r ts

Petroleum products are the contributor towards the growing imports by India

The 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

The Indian companies have chalked out extensive plans to increase their presence abroad

The acceptance of Indian products along with the cost advantage has provided an edge to Indian companies.

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

Projected GDP Growth Rates for Select Upcoming Economies

0

2

4

6

8

GD

P G

row

th R

ate

(%)

Brazil

China

India

Russia

0

20

40

60

80

100

India Russia Vietnam Ukraine China Chile Latvia

GR

DI

Sco

re

2006 Global Retail Development Index (GRDI)

2005 Global Services Location Index

3.27

1.62

3.56

2.95

3.21

3.47

1.51

2.67

1.06

2

1.17

1.26

0.94

1.44

1.16

1.12

1.76

2.14

Thailand

Singapore

Philippines

Malaysia

China

India

Financial structure Business environment People and skill availablity

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…

… retail market along with services sector has been attracting lot of interest from the major players

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

India: Vibrant Economy Driving M&A Activities

SECTOR USD (Mn)

SECTOR USD (Mn)

Automotive 518 Manufacturing 933

Banking and Financial

1375 Media 630

Chemicals & Plastics

1133 Oil & Gas 384

Electrical & Electronics

896 Pharma & biotech

2520

Energy 1484 Telecom 2198

FMCG, Food and Beverages

1327 Others 4006

IT & ITES 2903 Total 20305

Growth Drivers: Globalization of

competition Concentration of

companies to achieve economies of scale

Lower interest rates and vibrant global markets

Cash Reserves with Corporate

Trends: Ratio of 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

Private Equity houses have funded projects as well as done some acquisitions in India.

Number of deals and values

12.3

18.3

28.2

306

467

782

0

5

10

15

20

25

30

2004 2005 2006

US

D B

illio

n

0

100

200

300

400

500

600

700

800

900

Nu

mb

er

of

de

als

Deal Values No. of Deals

…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 ones…

… Average deal size close to USD 36 million…

USD 12.1 billion Tata Steel buys Corus Plc.

Major M&A Deals Undertaken Abroad by India Inc.

Essar Steel acquired Algoma Steel

USD 1.58 billion

Tata Tea has acquired 30-percent stake in the US based Energy Brands Inc. USD 677 million

Videocon Industries acquired Daewoo Electronics Corporation Limited USD 730 million

Hindalco acquired Novelis Inc.USD 6 billion

USD 11 billion Vodafone buys Hutch

Major M&A and Investments Announcements in India

Mylan Laboratories acquired a majority stake in Matrix Laboratories USD 0.74 billion

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

USD 1.7 billion

USD 0.905 billion

USD 1 billionPlans investment in private equity, real estate, and private wealth management

Plans to spend on its development operations in India over the next four years

Renault, Nissan and Mahindra & Mahindra to set up Greenfield automobile plant in Chennai.

India: Astounding Demographics

Growth in the

higher income

categories of

India’s

population, has

lead to a

burgeoning

affluent section

of society, which

has significant

level of

purchasing

power

By 2009, India will

have 1.1 million

individuals with a

wealth of USD

100,000

Per Capita Income

393461

519583

638

0

100

200

300

400

500

600

700

2002-03 2003-04 2004-05 2005-06 2006-07 E

2

9

48

221

726

9

17

74

285

710

20

33

120

404

613

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

Rich (Above 115000)

High Income (57000 - 115000)

Consuming class (23000 - 57000)

Working class (10200 - 23000)

Needy (Below 10200)

Annual Household Income

(in USD)

DEMOGRAPHIC TRANSFORMATION OF INDIA

* In PPP terms

(Mill

ion

Po

pu

lati

on

)

Increasing per-capita income coupled with emerging middle class has provided necessary impetus to the consumerism in India

India: Increasing Working Population

-3

0

10

17

31

33

44

64

71

314

-5 45 95 145 195 245 295 345

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

Growth in Global Working Age Population (15-64)

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.

Addition to working age population by 2010

2006

2008

2010

• 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

• 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

• 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

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

India’s Sunrise Sectors

Infrastructure1

Automobile2

Telecom3

Semiconductor4

Aviation5

Defense6

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 to Gain in terms of Economic Prosperity due to Continued Government Initiatives in Infrastructure Sector

Railways has initiated process to develop dedicated freight corridor…

Increase in traffic is expected to amount to 12-15 percent for passenger traffic and 15-18 percent for cargo traffic…

… Government of India spends approximately USD 4 billion annually on road development

There is increasing competition between full services carriers and low cost carriers…..

•The government has initiated the process of up-gradation and modernisation of national airports worth USD 9 billion by 2010.

•It has also initiated process of modernisation of other non-metro airports (more than 40 cities)

‘Golden Quadrilateral’, ‘North-South’ and ‘East-West’ corridors are the major road infrastructure being undertaken by the government. 96 percent work of Golden Quadrilateral has been completed

• Project ‘Sethusamundram’, which involves dredging of the Palk Strait to facilitate maritime trade through it

• Project ‘Sagarmala’ – a USD 22 billion project for the modernisation of major and minor ports

• Private sector can set up coal, gas or liquid based thermal projects, hydel projects and wind or solar projects of any size. Mega power projects permitted in India.

• Foreign equity participation upto 100 percent is allowed in the power sector through automatic route.

Largest two wheeler manufacturer….

……Fifth largest CV manufacturer in the world

Domestic production of auto components has increased to USD 10 billion in 2005-06, a jump of 17 percent…

Exports have grown by 30 percent to USD 1.8 billion

India’s Sunrise Sector: Automobile

Total Commercial VehiclesCAGR for production : 24.5%

CAGR for sales : 24.3%

50

150

250

350

450

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

Uni

ts (

thou

sand

s)

Domestic SalesProduction

Total Two WheelersCAGR for production : 15.1%

CAGR for sales : 13.8%

500

2,500

4,500

6,500

8,500

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

Uni

ts (

thou

sand

s)

The Indian automobile sector generates a revenue of USD 34 billion per year. Its contribution to GDP is around 3-4 percent.

Production and domestic sales figures for commercial vehicles are growing at a rate of approximately 24 percent.

Production and domestic sales of two wheelers are growing at a rate of approximately 15 and 14 percent respectively.

Tele-Density

45

7

9

13

17

0

4

8

12

16

20

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)

Tele

-Den

sity

(%

)

Internet Subscribers

3 4

5

6

7

9

0

2

4

6

8

10

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)

Su

bsc

rib

ers

(in

Mn

)Telecom Subscribers (Wireline & Wireless)

4453

76

98

140

190

0

40

80

120

160

200

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07(Q3)

Su

bscri

be

rs (

in M

n)

The Indian mobile market is witnessing strong growth and is slated to become the third largest in the world behind US and China in the next two to three years

India’s Sunrise Sector: Telecom

India ranks among the top 10 countries of the world with regards to its telecom network.

India has 40.3 million wireline subscribers and 149.6 million wireless (mobile and WLL-F) subscribers.

Tele-density has more than doubled in the last 3 years.

Mobile communication and internet penetration are adding to the momentum of telecommunication sector

Semiconductor Design Market and its Components: 2005

78%18%

4%

VLSI Design Hardware Design Embedded Software

Semiconductor Design Market: 2004-06

2.43.2

4.6

0

2

4

6

8

10

2004 2005 2006

US

D B

illio

n

India’s Sunrise Sector: Semiconductor

Indian companies have chalked out plans to establish fabrication units thus catering to the overall demand from designing to manufacturing phase

India has developed strong competence in design side of semiconductor industry….

India has approximately 125 companies operating in the semiconductor domain

Captive semiconductor units in India contribute 62 percent to the total revenues being generated by the industry….

Many international players such as Intel, AMD, etc have established their R&D centres in India, which assists them to develop novel products at fast pace

Investment Opportunities in Indian Aviation Industry

Activities in the Indian Aviation Industry

Carrier Proposed Requirement

Air India 50 Aircrafts

Indian Airlines 43 Aircrafts

Jet Airways 30 Aircrafts

Air Deccan 60 Aircrafts

Kingfisher 48 Aircrafts

Spicejet 20 Aircrafts

Indigo 100 Aircrafts

GoAir 15 Aircrafts

Paramount 5 Aircrafts

Magic Air 10 Aircrafts

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.

GMR has undertaken project for modernisation of Delhi airport. The project worth is USD 1.94 billion.

Airbus plans to invest USD 1 billion over a period of 10 years to establish training centres, maintenance, repair and overhauling (MRO) centre, and engineering and design centre in India.

EADS plans to invest USD 2.57 billion over a period of next 15 years to establish technology centre in India.

Indian carriers have placed orders for approximately 480 aircrafts to be delivered by 2012. State operated carriers – Indian airlines and Air India have placed orders worth USD 8 billion for approximately 100 aircrafts to modernise its fleet.

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.

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 KearneyFDI Confidence Index 2005

India is among the three most attractive FDI destinations in

the world

Jack WelchGeneral 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 ReportGoldman Sachs, October 2003

Why India? – Quote Unquote

For detailed information on India, visit the IBEF website: www.ibef.orgContact IBEF at j.bhuyan@ciionline.org

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