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INDIA IN THE NEW KNOWLEDGE ECONOMY

The Changing Scenario

Dr. Naresh TrehanChairman, CII National Committee onHealthcare & Executive DirectorEscorts Heart Institute and ResearchCentre, New Delhi, India

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INDIA IN THE NEW KNOWLEDGE ECONOMY

Transition from BPO to KPO Destination

Growth of Services sector

Contribution to Indias GDP

8 + %

51 + %

Knowledge Process Outsourcing - To grow 46% to $ 17 Billion by 2010

Emerging Trends in the last two years:

Silicon Valley VCs setting shop

US companies relocating up to 95% of R&D work in next generation technologies especially in the

wireless space & optical networking systems.

Intel, Cisco doing core development work on chip design.

Texas Instrument has its global centre for wireless LAN & semi-conductors R&D based in India

Tech Multinationals have filed 1, 700 global patents for product developed out of India

Automotive engineering design services (AEDS) projects already executed $ 500 million worth of

Global Contacts Boschs Indian team does major chunk of Diesel systems development in IndiaPRODUCT DEVELOPMENT REQUIRES ONE FOURTH THE INVESTMENT IN INDIA

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INDIA IN THE NEW KNOWLEDGE ECONOMY

Healthcare

Pharma & Biotechnology

Information & CommunicationTechnology (ICT)

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Indian Healthcare : The Changing Scenario

Current Healthcare Landscape

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Indian Healthcare : The Changing Scenario

INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE

3.7

22.7

5.2% ofGDP

TotalHealthcare

Market

Pharmamarket*

Healthcaredeliverymarket

* Retail

Source: National Accounts Statistics 2001; McKinsey analysis

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Indian Healthcare : The Changing Scenario

THE HEALTHCARE DELIVERY SECTOR PLAYS ANIMPORTANT ROLE IN THE ECONOMY TODAY

Sector Direct employment Revenues/GDP

Million, 2000-2001 Per cent, 2000-2001

4.0

5.3

1.0

1.2

1.6

0.8

1.7

0.4

5.2

4.8

3.5

3.0

1.8

1.4

0.9

1.7

Healthcare

Education

Retail banking

Power

Railways

Telecom

Hotels, restaurants

Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis

IT

Healthcare is the

largest serviceindustry in termsof revenues and

the secondlargest aftereducation in

terms ofemployment

By 2012, the sector could account for 7 to 8 per cent of GDP and provide

direct and indirect employment of 9 million

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Indian Healthcare : The Changing Scenario

IN TERMS OF DELIVERY, PRIVATE PROVIDERS CAPTURE 63%0F THE US $ 19 BILLION SPEND

633

Government and publicemployers*

Healthcare provision, 2002

Per cent of total spending

Private providers(individual, charitableand for-profit)

100% = US $ 19 billion

* Including government spend (20%), public employers spend (11%) and out-of-pocket spend at government providers (6%)

Source: McKinsey analysis

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Indian Healthcare : The Changing Scenario

INDIA: AN EMERGING HEALTHCARE HUB

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Over 60,000 cardiac surgeries doneper year with out comes at par withinternational standards

Multi organ transplants like Renal,Liver, Heart, Bone MarrowTransplants, are successfullyperformed at one tenth the cost.

Patients from over 55 countriestreated at Indian Hospitals.

INDIAN HEALTHCARE CAPABILITYFACT#1: Proven Indian healthcare system

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Ayurveda recognized as anofficial healthcare system inHungary.

Doctors in the west areincreasingly prescribing

Indian Systems of Medicine

More than 70% of theAmerican population prefer anatural approach to health

Americans are said tospend around $25bn onnon-traditional medicaltherapies and products *

Source : Los Angeles Times

* Economic times dated 25th

July 2003

Ayurveda

Yoga

Siddha

Indias Gift to the World

IA HAS THE OPPOURTUNITY TO PROVIDE THE BESTTHE WEST & EASTERN HEALTCARE SYSTEMS

Indian Systems Of Medicine Staging a Comeback

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Physicians, Nurses, Medical Technicians and OtherScientific Occupations will Become Growth Industries to

Rival the IT Sector within the Next Decade

- India Vision 2020 Report

.

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PROCEDURE COST (US$)

THAILANDTHAILAND INDIA

Heart Surgery

Bone Marrow Transplant

Liver Transplant

Knee Replacement

Cosmetic Surgery

7,500

-------

-------

8,000

3,500

6,000

26,000

69,000

6,000

2,000

USUS

40,000

2,50,000

3,00,000

20,000

20,000

UK

23,000

1,50,000

2,00,000

12,000

10,000

Indian Healthcare : The Changing Scenario

Cost Advantage

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HUGE GROWTH POTENTIAL TO GROW BETWEENUS $ 43 US $ 60 BILLION IN 2012

* With 6% GDP real growth per year

US $ IN BILLION at 2000-2001 prices

2001

Private

spending

Government

spending

ESTIMATE

2012

Scenario 1:Baseline

increase inprivate spend

2012

Scenario 2:Baseline withinsurance inmiddle class

2012

Scenario 3:Baseline withinsurance and

highgovernmentspending

19

43

51.0

60.0

3.76

15.24

8.0

8.0

17.0

35.0

43.043.0

Key

Assumption1% GDP

GovernmentSpending 1% GDP 2% GDP

Indian Healthcare : The Changing Scenario

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INDIA OFFERS HUGE POTENTIAL FOR INVESTMENTS INHEALTHCARE OVER THE NEXT 10 YEARS

Investment requirements in India (Estimates)

US $ in Billion Next 10 years

Healthcare

Power**

Telecom**

Roads**

22-31

24-33

40-51

95-126

* Estimates based on analysis detailed in Chapter 3 of this report

** Estimates computed by scaling 2002-06 estimates from Rakesh Mohan committee report by a factor of 1.5-2.0

Investment needsof the healthcare

sector arecomparable to

other infrastructuresectors

Indian Healthcare : The Changing Scenario

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Indias Growth Sectors -Pharmaceuticals & Biotech

INDIA IN THE NEW KNOWLEDGE ECONOMY

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The Indian Pharmaceutical Industryhas practically achieved

Self sufficiency

&

Global recognition

as a

Low cost producer

ofHigh-quality bulk drugs & formulations

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KEY ACHIEVEMENTS

India has the 2nd highest number of

qualified doctors in theworld. Of every six

medical doctors in theUS, one is Indian

700,000 science and

engineering graduates& 1500 PhDs qualify

annually. Over 15,000scientists

Investigational NewDrug stage costs

about $100 to 150million in US, but

costs only around $10

to 15 million in India

Indian companies areoffering custom synthesisservices at 30-50% cost

savings compared toglobal costs

While clinical trialscost approximately$300 to 350 million

in US, they cost onlyabout $25 million in

India

Indias hugepopulation and the

prevalence of a widespectrum of disease

conditions offer a widepatient-resource for

clinical trials

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CHANGING FACE OF INDIAN PHARMA

Playersthinking local

Playersthinkingglobal

Top 5 Companies Sales & Export Revenues

Source: Company reports

Rank Compan

1 RanbaxyPharmaceutical exportsincreased at a CAGR of 23%during FY1995-FY2002

Indian pharma companies filedthe largest number of DrugMaster Files (DMFs) for APIsand 23% of ANDAs with theUSFDA during 2003

Ranbaxy acquired RPGAventis, France; Wockhardtacquired CP Pharmaceuticals,UK; Zydus Cadila acquiredAlpharma, France

Export revenues nowcontribute over half thetotal revenues for theIndian pharma majors

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CHANGING FACE OF INDIAN PHARMA

MNC-Domestic

Competition

MNC-Domestic

Collaboration

New Drug Research

Glaxo SmithKline'srecent R&D alliance

with RanbaxyLaboratories

Clinical Trials

Novartis, Astra Zenecaand Eli Lilly making

India a global hub forclinical trials

Co-marketing

Glaxo-Cipla,Wockhardt-Bayer,

Ranbaxy-Knoll tie-ups

In-licensing

Ranbaxy licensingagreement with KSB,

UK for marketingTransMID

Pharma - IT

Novartis processes drugsafety data and isdesigning clinical

development software

Local research

Astra Zenecas $40million R&D facility inBangalore for TB drug

discovery

COLLABORATION

Source: Media Reports, E&Y

CHANGING FACE OF INDIAN PHARMA

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BIOTECHNOLOGY

INDIA IN THE NEW KNOWLEDGE ECONOMY

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Market - A Consistent Uptrend

2002-03

2010

25% growth in investment

70% growth in employment

74% growth in R&D

manpower

10% of global industry

1 million skilled jobs

USD 5 billion annual

revenues

Source: Confederation of Indian Industry (CII)

GOING GLOBAL IN BIOTECH

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SOURCE FROM INDIA

Indias first genetically

engineered vaccinecosts less than half the

price of competingvaccines

Bio Agri -

India (2nd largestproducer of food) offerssignificant opportunities

to source products

Biogenerics -$25 billion

biological productsgoing off patent in

2004. Indian

companies strong inbiogenerics

Biocon was the firstenzyme company globallyto receive ISO certification

in 1993

India: largest producerof Measles & DTPvaccines. Vaccineexports to over 130

countries

Clinton Foundationsourcing HIV treatmentfrom four firms - threeof which are from India

Source: Newspaper Reports

One out of every two children inthe world is immunized by a

vaccine made in India

Shantha Biotech-SHANVAC-B meets

40% of the globaldemand of Hepatitis

B vaccine.

GOING GLOBAL IN BIOTECH

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The India Advantage

Trained manpowerand knowledge base

Rich biodiversity Extensive clinical trialsopportunities

Excellent networkof research laboratories

Well-developedbase industries

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formation & Communication

Technology (ICT)

INDIA IN THE NEW KNOWLEDGE ECONOMY

I di K IT fi

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India : Key IT figures

Software & servicesexport(2004-05) ~ US $ 17.5

billion

Grown from a $150m in 1991-92

CAGR in last 10 yrs: 35%

Projected to be US $ 50 b in 2008

Software & services

domestic(2004-05) ~ US $ 4.5

bn

IT enabled services(2004-05)

~US $ 4.9 bn

IT domestic hardware(2004-05) ~ US $ 4.8 bn

Source: McKinsey:NASSCOM

Balanced Portfolio of IT offerings

2.04 2.88.8 5.0

.058.7

12.21.5

17.1

2.8

1.7

0

5

10

15

20

25

0

5

94-9595-9 9-9797-98 98-9999-0000-0101-0202-0 0-04 04-

05

US$

bn

India: Moving up the Value Chain

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India: Moving up the Value Chain

Source: SSB, Fall 2000

1960 2000Client / Server InternetMainframe

Facilitiesmanagement

Unix-based

coding Maintenance

Migration & Re-engineering

PackageImplementation

Applicationdevelopment

Web Enablinglegacy

Consulting

Maintenance

Package

Implementation

E-businessapplications

Embeddedsoftware

NetworkManagement

NetworkSecurity

Aligned to Technology Needs

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Telecom Market

7

th

largest telecom network in the world

Telecom network growth rate 30%

Fixed lines (Dec, 2004) 44.76 million

Wireless connections (Dec, 2004) 48 million

Size (2003) US$ 9 billion

2010 (projected) US$ 23 billion

Ri i T l d i & T l h S b ib

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Rising Teledensity & Telephone Subscribers

Sot

India is targeting 250 million users by 2007

India needs $30 billion to meet a target of one phone for every five people by 2010

Total telecom revenues expected to almost triple from USD9 billion in 2002 to

USD 23-25 billion by 2007.

WORKFORCE SHORTAGES AND

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47Mn

19

Mn 7Mn

3Mn

5Mn

3Mn

India

Bangladesh

PakistanIran

Brazil

Mexico

Philippines

5Mn

4MnVietnam

2Mn

Turkey

Potential surplus population in working age group (2020)

-10Mn

China

-6Mn

Russia

5Mn

Indonesia

1Mn

Malaysia

0Mn

Ireland

Israel

0Mn

Iraq

2Mn

-1Mn

CzechRepublic

Note: Potential surplus is calculated keeping the ratio of working population (age group 15 59) to total population constant;Source: U.S. Census Bureau; BCG Analysis

4Mn

Egypt

-17MnUS

-2 MnUK

-2 Mn

Italy

-3 MnFrance-9 Mn Japan

-0.5Mn

Australia

-3 MnSpain

-3 MnGermany

WORKFORCE SHORTAGES AND

AVENUES OF SUPPLY

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THANK YOU