Indian EconomyOpportunities Unlimited

Indian EconomyOpportunities Unlimited

2India: Fastest Growing Free Market Democracy

3India: Among the Top-15 Countries in terms of GDP at constant prices

205 223319 347

103 91

116117

104 109

155168

0

100

200

300

400

500

600

700

1999-00 2002-03 2005-06 2006-07

US

D B

illio

n

Services Agriculture Industry

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 4th largest in terms of PPP – USD 4.1 trillion in 2006

India’s 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%

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

Fastest GDP growth of 9.4 percent in 2006-07, since last 18 years

Contribution of Services -

increased from 49

percent to 55 percent

Contribution of Services -

increased from 49

percent to 55 percent

India's GDP: 2002-07

424484 534

590 631

0

100

200

300

400

500

600

700

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

US

D B

illio

n

GDP at Constant Prices

4%

8.5% 7.5%

8.4%9.4%

4India: Robust Economic Platform

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

5475

112

141152

199213

0

50

100

150

200

250

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08(Till 22June)

US

D B

illio

n

External Debt-to-GDP Ratio

21.120.4

17.817.3

15.816.4

10

13

16

19

22

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

Ra

tio

India’s 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 India’s external debt

Falling Dollar inflates the India’s 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

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

India’s Forex reserves are in

excess of external debt…

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

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

5India: Surging Exports

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

61.5278.28

111.89

149.65162.30

020406080

100120140160180

2002-03 2003-04 2004-05 2005-06 2006-07(upto Feb.

07)

US

D B

illio

n

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

52.8163.95

83.81

103.42112.40

0

20

40

60

80

100

120

2002-03 2003-04 2004-05 2005-06 2006-07(upto Feb.

07)

US

D B

illio

n

Petroleum products are the major contributors towards India’s growing imports

Petroleum products are the major contributors towards India’s growing imports

Quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market their products and services

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

6India: Attractive Investment Destination

Net FII into India: 2001-07

1.80

0.60

10.00 10.209.40

6.72

0

2

4

6

8

10

12

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

US

D B

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 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

FDI Inflow - India: 2001-07

4,2223,134 2,634

3,755

5,546

15,730

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 180 percent Increase

7India: 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

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

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

INR

7/9/2007Crossed 15,000 mark

Crossed 14,000 mark

Crossed 10,000 mark

Crossed 5,000 mark12/30/1999

2/7/2006

1/12/2007

8India: 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

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

400500

600

700

800

900

Nu

mb

er

of d

ea

ls

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 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

9Major M&A Deals Undertaken Abroad by India Inc.

USD 12.1 billion USD 12.1 billion Tata Steel buys Corus PlcTata Steel buys Corus Plc

USD 6 billion USD 6 billion Hindalco acquired Novelis Inc.Hindalco acquired Novelis Inc.

USD 1.58 billion USD 1.58 billion Essar Steel acquired Algoma Steel Essar Steel acquired Algoma Steel

USD 730 million USD 730 million Videocon Industries acquired Daewoo Electronics Corporation Limited

Videocon Industries acquired Daewoo Electronics Corporation Limited

USD 1.6 billion USD 1.6 billion Suzlon Energy Ltd. acquires REpower Suzlon Energy Ltd. acquires REpower

10Major M&A and Investments Announcements in India

USD 11 billion USD 11 billion Vodafone buys HutchVodafone buys Hutch

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

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

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

Plans investment in private equity, real estate, and private wealth management

USD 1.7 billionUSD 1.7 billionPlans to spend on its development operations in India over the next four years

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

USD 0.905 billionUSD 0.905 billionRenault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.

Renault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.

Mylan Laboratories acquired a majority stake in Matrix Laboratories

Mylan Laboratories acquired a majority stake in Matrix Laboratories

USD 0.74 billionUSD 0.74 billion

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

Projected GDP Growth Rates for Select Upcoming Economies

0

2

4

6

8

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

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 S

core

2007 Global Retail Development Index (GRDI) 2007 Global Services Location Index

3.3

2.6

3.2

2.8

2.9

3.2

1.5

1.8

1.2

1.3

2.3

2.3

1.1

1.5

1.6

2

1.4

1.4

Indonesia

Brazil

Thailand

Malaysia

China

India

Financial structure People and skill availablityBusiness environment

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…

12India: Astounding Demographics

Per Capita Income

393

461519

583

651

0

100

200

300

400

500

600

700

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

US

D2

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

Pop

ula

tion

(mill

ion

)

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 India’s 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.

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

-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

In Million

Addition to Working Age Population by 2010

Growth in Global Working Age Population (15-64)

14

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

20062006

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

20082008

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

20102010

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

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

- 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

A T KearneyFDI Confidence Index 2005

India is among the three most attractive

FDI destinations in the world.

Jack WelchGeneral Electric

Jack WelchGeneral Electric

“India is a developed country as far as

intellectual capital is concerned”.

US Department of Commerce

US Department of Commerce

By 2032, India will be among the three

largest economies in the world.

BRIC Report, Goldman SachsBRIC Report, Goldman Sachs

Why India? – Quote Unquote

Travyn Rhall,ACNielsen

Travyn Rhall,ACNielsen

“The Indian market has two core advantages - an

increasing presence of multinationals and an upswing

in the IT exports”.

Craig BarrettIntel Corporation

Craig BarrettIntel Corporation

“India has evolved into one of the world's leading technology

centers“.

16

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