www.ibef.org

Indian Economy

Opportunities Unlimited

SEPTEMBER 10, 2008, BUDAPEST

Indian Economy

Opportunities Unlimited

SEPTEMBER 10, 2008, BUDAPEST

www.ibef.org 2

India: Fastest Growing Free Market Democracy

GDP Growth Forex FII Flow FDI Per Capita Inflation

1990 4.9 percent < USD 1 billion USD 1 million (1993) USD 97 million USD 390 9 percent

2008* 9.0 percent USD 297.286 billion

(as on August 22, 2008)

USD 16.1 billion in 2007–08

USD 25 billion in 2007–08

USD 740 12.40 percent (for the week ended August 16)

Sources: Times of India, , RBI, RBI, DIPP, Indian Budget, Rediff, The Economic Times

* Annualized data used to show comparison with 1990

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India's GDP at Constant Prices: 2002–07

469 556 638737

8381068

0

200

400

600

800

1000

1200

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08*

US

D B

illio

n

105 105 135 154 190103 125

204245

314

564

191237

398439

0

200

400

600

800

1,000

1,200

1999–00 2002–03 2005–06 2006–07 2007–08

US

D B

illio

n

Agriculture Industry Services

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

The Indian economy has witnessed unprecedented growth. Booming services and industry sectors are providing the required impetus to economic growth

Contribution of Services -

increased from 48

percent to 53 percent

Contribution of Services -

increased from 48

percent to 53 percent

Growth in sectors at Constant Prices (2007–08):

Industry: 10.8%Services: 8.5%

Agriculture: 4.5%

Growth in sectors at Constant Prices (2007–08):

Industry: 10.8%Services: 8.5%

Agriculture: 4.5%

Source: MOSPI Statistics, RBI

* RE - Revised Estimates

Fastest GDP growth of 9.4 percent in 2006–07, since

last 18 years (at constant prices)

India’s GDP has witnessed high growth and was the

second fastest growing GDP after China in 2007-08

The sound performance of each industry segment is

leading to the overall robust performance of the Indian

economy

27 percent Increase

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India: Robust Economic Platform

India's Forex Reserves: 2001–08

5475

112141 152

199

310

0

50

100

150

200

250

300

350

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

US

D B

illio

n

External Debt-to-GDP Ratio

21.120.4

17.818.6

17.217.8

18.8

10

13

16

19

22

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

Ra

tio

Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability

Increased confidence of investors in Indian companies has led to a surge in cross border borrowing by corporate houses

In 2007-08, Forex reserves witnessed a growth of approximately 56 percent over 2006-07.

In 2007-08, Forex reserves witnessed a growth of approximately 56 percent over 2006-07.

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

Source: RBI Statistics

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India: Surging Trade (1/2)

India's Imports: 2002–08

6278

112

150

185

236

0

50

100

150

200

250

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

US

D B

illio

n

India's Exports: 2002–08

5364

84103

126

156

0

20

40

60

80100

120

140

160

180

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

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 products and services

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

Services sector has been a major contributor to increased exports from India

Product imports by India mainly include petroleum products and minerals

Acceptance of Indian products along with the cost advantage has provided an edge to Indian companies

Source: Ministry of Finance (May 2008)

Exports in April 2008 amounted to USD 14.4 Billion increasing by 31.5 percent from April 2007 …

Exports in April 2008 amounted to USD 14.4 Billion increasing by 31.5 percent from April 2007 …

Imports in April 2008 amounted to USD 24.2 Billion increasing by 36.6 percent from April 2007 …

Imports in April 2008 amounted to USD 24.2 Billion increasing by 36.6 percent from April 2007 …

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India: Surging Trade (2/2)

Exports of Top-Five Commodities (Apr-Feb 2007-08 *)

Imports of Top-Five Commodities (Apr-Feb 2007-08 *)

Source: DGFT

S.No. Commodity Amount (in USD mn) Percentage Growth (2006-07) Percentage share in total exports

1 Petroleum (Crude & Products) 24,025.55 40.69 16.82

2 Gems & Jewellery 17,745.57 24.25 12.43

3 Machinery And Instruments 7,850.26 30.45 5.50

4 Rmg Cotton Including Accessories 6,722.09 7.79 4.71

5 Drugs, Pharmaceuticals & Fine Chemicals

6,589.02 24.93 4.61

* Data for April-Feb 2007-08 (Provisional)

S.No. Commodity Amount (in USD mn) Percentage Growth (2006-07)Percentage share in

total exports

1 Petroleum, Crude & Products 70,542.95 34.97 32.75

2 Electronic goods 18,407.72 27.77 8.55

3 Machinery except electrical & electronics

17,490.72 40.88 8.12

4 Gold 15,241.83 17.50 7.08

5 Iron & Steel 7,610.25 41.12 3.53

* Provisional data

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Net FII into India: 2001–08

1.80.6

10.0 10.29.4

6.7

16.1

0

2

4

6

8

10

12

14

16

18

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

US

D B

illio

n

140 percent Increase

India: Attractive Investment Destination

India is ranked

second in AT

Kearney’s FDI

confidence index

(2007)

FDI inflow for the

period 2007-08

witnessed a growth

of 56 percent over

the last year

With improved performance on PE ratio and ROE, Indian markets have attracted large investments

FDI Equity Inf low - India: 2001–08

4,222 3,134 2,6343,755

5,546

15,730

24,579

11,880

0

4,500

9,000

13,500

18,000

22,500

27,000

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 J an–Mar(08)

US

D M

illio

n

Source: DIPP (October Report) , SEBI

Electronic equipment, manufacturing and telecom have witnessed significant FDI inflow

Electronic equipment, manufacturing and telecom have witnessed significant FDI inflow

Large FII activity in India has led to an upsurge in the Sensex

Large FII activity in India has led to an upsurge in the Sensex

* FII growth momentum was restricted because of Sub Prime Crisis in 2007-08

FDI for April 2008 amounted to USD 3749 Million

FDI for April 2008 amounted to USD 3749 Million

56 percent Increase

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India: Vibrant Capital Market

India is among the major destinations across the globe for inflow of US Dollar

Sensex has risen 20 times in the period 1990-2007

Sensex – The Bombay Stock Exchange index has risen 20 times from 1990s to reach 20,000 mark in November 2007.

FIIs have infused large investments

into the Indian stock market

Encouraging industry

performance

Increased local investors’ confidence

Emergence of industry and confidence of local investors along with the FIIs has led to upsurge of the Sensex

0

5000

10000

15000

20000

25000

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l-08

11 December 2007 Crossed 20,000 mark

07 February 2006Crossed 10,000 mark30 December 1999

Crossed 5,000 mark

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India: Vibrant Economy Driving M&A Activities

Growth Drivers: Globalisation and increased competition Concentration of companies to achieve economies of

scale Cash Reserves with corporates

Number of Deals and Value

28.2

70

18.312.3

782

1,081

467

306

0

10

20

30

40

50

60

70

80

2004 2005 2006 2007

US

D B

illio

n

0

200

400

600

800

1,000

1,200

Nu

mb

er

of d

ea

ls

Deal Value No. of Deals

Private equity deal value increased to USD 19 billion

In 2007, there were a total of 676 M&A deals and 405 private equity deals… … Total M&A deal value was

close to USD 51 billion…

Trends: 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

Source: Deal Tracker Grant Thornton, Economic Times, IBEF, RBI

In 2007, the total value of M&A and PE deals was USD 70 billion…

…First two months of 2008 have already seen 92 M&A valued at approximately USD 6 Billion

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Major 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 2.3 billion USD 2.3 billion Tata buys Jaguar and Land RoverTata buys Jaguar and Land Rover

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

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

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Major M&A and Investments Announcements in India

USD 11 billion USD 11 billion Vodafone buys HutchVodafone buys Hutch

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 2 billion USD 2 billion Plans to establish three manufacturing plants to produce photo-voltaic units

Plans to establish three manufacturing plants to produce photo-voltaic units

USD 12 billion USD 12 billion POSCO to invest in building steel

manufacturing plants and facilities in India by 2016

POSCO to invest in building steel manufacturing plants and facilities in India by

2016

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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

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

Major M&A and Investments Announcements in India

USD 1 billionUSD 1 billionPlans investment in private equity in Indian markets

Plans investment in private equity in Indian markets

www.ibef.org 13

Major M&A and Investments Announcements in India

USD 0.185 billionUSD 0.185 billionPlans to invest in six private equity funds in Indian market

Plans to invest in six private equity funds in Indian market

Plans expansion of network in IndiaPlans expansion of network in India USD 4–5 billionUSD 4–5 billion

Plans expansion of cement capacity in IndiaPlans expansion of cement capacity in India Over USD 1 billionOver USD 1 billion

Source: The Economic Times

www.ibef.org 14

USD 0.5 billion USD 0.5 billionPlans to invest in the Uganda marketPlans to invest in the Uganda market

Indian Companies Fuelling Future Expansions

USD 0.2 billionUSD 0.2 billionPlans to provide services in the Sri Lanka market

Plans to provide services in the Sri Lanka market

Plans to invest in its global expansion effortsPlans to invest in its global expansion efforts Over USD 2 billionOver USD 2 billion

RIL is planning to invest in its recently acquired polyester manufacturing facility in

North Carolina

RIL is planning to invest in its recently acquired polyester manufacturing facility in

North CarolinaUSD 0.215 billionUSD 0.215 billion

Source: International Business Times, The Financial Express, IBEF, SifyBroadband

www.ibef.org 15

India: 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 Egypt

GR

DI S

core

2008 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

AT Kearney has placed India as the most preferable destination for Services sector (2007)…

Services sector continues to attract interest from major global players and large investments are being pumped into it

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

Source: AT Kearney, BRIC Report

… India ranks second in the AT Kearney Global Retail Development Index (2008)

www.ibef.org 16

BRIC Report, Goldman Sachs

BRIC Report, Goldman Sachs

“I have never seen India so dynamic, vibrant and full of

business opportunities”.

- 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”.

John RedwoodEconomic

Competitiveness Policy Group, UK

John RedwoodEconomic

Competitiveness Policy Group, UK

“India is now truly a land of opportunity”.

Jack WelchGeneral Electric

Jack WelchGeneral Electric

“India is a developed country

as far as intellectual capital is

concerned”.

Peter Loescher President and

Chief Executive Siemens

Peter Loescher President and

Chief Executive Siemens

By 2032, India will be among the three

largest economies in the world.

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“.

Mr Paul de Voijs Managing Director

Volvo Car India

Mr Paul de Voijs Managing Director

Volvo Car India

“India is a very exciting market and the luxury

car segment is growing exponentially here”.

www.ibef.org 17

 

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VISIT www.ibef.org

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