The India Advantage

after the
Comprehensive Economic
Partnership Agreement

At KCCI
12 March 2010

H.E. Mr. Skand R. Tayal

Ambassador of India
1
• President Lee Myung-bak’s State
Visit to India on 24-27 January 2010.
• Strategic Partnership.
• Comprehensive Economic Partnership
Agreement.
2
 India - Facts
Area 3.3 million sq. km.
Population 1.1 billion
GDP (PPP) $5.16 trillion (2008 est.)
$1.3 trillion (nominal)
{11th (nominal); 3rd (PPP)}
GDP growth 6.7% (2009)
7.8% (2010) projected
GDP per capita $1021 (nominal); $4543 (PPP)
GDP by sector Agriculture: 19.9%
Industry: 19.3%
Services: 60.7% (2006 est.)
3
The Growth Story

India GDP 2007-08:

US $ 1.16 trillion

4
 India’s Decadal GDP Growth rate
% GDP Growth
9.00
7.89
8.00
7.00
6.05
6.00 5.17
5.00
4.00 3.68 3.45
3.29
3.00
2.00
1.00
0.00
1950-51 to 1960-61 to 1970-71 to 1980-81 to 1990-91 to 2000-01 to
1959-60 1969-70 1979-80 1989-90 1999-00 2008-09

5
Source: Handbook of Statistics on Indian Economy, Reserve Bank of India
 INDIAN ECONOMY
INDUSTRY ROLLS AT 16.8 PER CENT IN DECEMBER 2009

39% jump in capital goods augurs well for investments; GDP growth likely to top 7.2%.

Source : Hindu Business Line, February 13th, 2010 6

 Macro-economic stability
303
Forex Reserves (USD bn)
250  Steady increase
192
200
in forex
141
150
reserves now
100 75
standing at
42
50 32
5.8 6.4
20 22
$ 290 Billion.
0
FY 98

FY 99
FY91

FY92

FY93

FY94

FY95

FY96

FY97

FY 00

FY 01

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07

FY08 (March 7 08
Trends in Inflation- WPI (%YoY)

16
 Moderate
14 13.7 inflation
12

10 over last few

8
years
6
5.4
4 4.4

2
0
FY91

FY92

FY93

FY94

FY95

FY96

FY97

FY 98

FY 99

FY 00

FY 01

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07
7
 Trade liberalization –
reduction in tariffs
Trend in Peak Custom Duty
160 150

140

120 110

100
85
(%)

80
65

60 50
45
40
35
40 30
20
12.5 10
20

0
FY97
FY91

FY92

FY93

FY94

FY95

FY96

FY 98

FY 99

FY 00

FY 01

FY 02

FY 03

FY 04

FY 05

FY 06

FY 07
ASEAN levels committed to be reached by 2010
Source: FICCI conference, March 14 – 15 th 2007

Source: Reserve Bank of India

8
 Economy – high growth rates
leading to increasing FDI
Increasing FDI trnd Svgs & Cap Formation % of GDP ( Current prices)

40 33.8
35 32.4
26.3
30 23.1
Increasing FDI Inflows 25
20

30 15
25 10
Actual InflowinUS$Bn

20 5
15 0

FY92

FY93

FY94

FY96

FY97

FY98

FY99

FY01

FY02

FY03

FY04

FY06
FY95

FY00

FY05
10

FY91
5
Source: RBI, DIPP
0 Goss domestic savings
Gross domestic capital formatio
2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008-
01 02 03 04 05 06 07 08 09 (till Source: Reserve Bank of India
Jan)
Years

9
 INDIAN ECONOMY
INDIA INC INVESTMENTS RISE BY MORE THAN 50 PER CENT IN 2009

Source : Financial Express, January 17th, 2010 10

 INDIAN ECONOMY
INDIA TO BE USD2 TRILLION ECONOMY BY 2015

 As per a report by Enam Securities titled 'India Strategy‘, India will be a USD2
trillion economy in the next five years as its GDP growth is likely to average at 12
per cent in nominal terms, powered by a huge consumption demand.

 This growth will be led by the huge consumption demand in sectors like FMCG,
power, auto (small car hub), IT and pharma.

 Insurance companies, financial services and equity markets will flourish as the
country's annual savings pool grows to USD700 billion from USD400 billion at
present.

 "More than half of this (USD700 billion) could flow into financial savings.

 With favourable demographics and average seven per cent real growth, India can
sustain more than 30 per cent savings rate akin to the Asian tigers, or China and
Japan.

Source : Business Standard, November 16th, 2009

11
Drivers of the India Growth Story

12
 India’s Integration with East Asia……..
• India is active participant in the ongoing Asian
economic regionalism. It is the second nation,
after Singapore, in Asian region,
having/negotiating/proposed maximum number
of FTAs.
• Till date, the total number of India’s FTA (both
proposed and concluded) is 32. Out of this , 19
are with the Asian countries.
• Already concluded FTAs with East Asian
countries:
 India-Korea CEPA
 India-ASEAN FTA
 India-Singapore CECA
 India-Thailand FTA

• Proposed/under consultation/under negotiation

 India-Japan
 India-Australia
 India-New Zealand
13
 Why India?
• India to be the 5th largest consumer market by 2025
• India is world’s largest functional democracy with a
population of over One Billion people
• India second fastest growing major economy after China.
• Full National Treatment for Foreign Companies
Incorporated in India
• Profits & Dividends can be Freely Repatriated
• Stable & Well Developed Banking System

India has followed a calibrated globalization process

– liberalization of FDI regime
– reduction in import tariff
– fully convertible current account
– moving towards fuller capital account convertibility
– compliance with WTO norms

14
 India’s Cost Competitiveness
Average annual pay for various jobs in India & China (US$)

Relative Difference
Position India China
(%)
HR manager 15,100 32,000 112 %
Marketing manager 14,300 25,800 80%
Project manager 10,000 23,400 134%
Software developer 10,300 13,400 30%
Financial analyst 8,400 13,200 57%
Accountant 5,700 9,000 58%
Sales representative 4,700 5,100 8%
Production worker 1,900 2,300 21%
Source : FICCI Compilation

India’s labour costs as a percentage of value added

are one of the lowest among Asian countries
15
 Large Intellectual Capital base
Annual additions to the stock of science and
engineering graduates
750000
690000
700000
650000
600000
550000 530000

500000 470000

450000 420000
400000
350000
350000
300000
In d ia C h in a J a pa n US A E u ro p e a n
c o m m u n it y

Source – Morgan Stanley 16

17
 Untapped Market Potential
Figures for Penetration rate Market size
(per 1000 people) (Annual sales in Mn)
Passenger 10 1.1
cars
Motorcycles 39 5.8

Cellular 500 100

subscribers
Internet 6 1.1
subscribers
Televisions 104 12

While the absolute size of the market is large, penetration rates are still low – vast
untapped potential

18
Infrastructure Opportunities: Power / Roads / Ports
Infrastructure: US$ 510 bn in investments planned in next five years

Power

 Energy shortage at 7.7% / Peak shortage of 12.3%

 Ongoing projects: 52000 MW: Investment US$ 60 bn

 Private Ultra Mega Power Projects (4000 MW / USD 4 bn each) thr’

Competitive Bids

Roads

 Annual growth 12 -15% in passenger traffic and 15 -18% for cargo

 Investment Opportunities US $ 30 billion till 2012

Ports

 960 million tonnes of traffic by 2013-2014

 7.7 % p.a. growth expected in cargo handling till 2013-2014

 Investment opportunities: US $ 20 bn till 2012

19
 INDIAN POWER INDUSTRY
ULTRA MEGA POWER PROJECTS IN PROGRESS
Scheduled date of
UMPP Developer Fuel linkage EPC contract
commissioning
Two coal mines of Indonesia's Bumi Awarded - Doosan
Mundra, Gujarat Tata Power Company Resources, in which TPC has Heavy Industries, Two units by 2012
acquired 26 per cent stake Toshiba Corporation
Moher, Moher-Amlohri extension and Two units by
Sasan, Madhya Reliance Power Chattrasal coal blocks at Singrauli Awarded - Reliance December 2011, all
Pradesh Limited coalfields. The Chattrasal block is Infrastructure Limited six units by April
under development 2013
Talks on with Doosan
Krishnapatnam, Reliance Power Heavy Industries, September 2013 -
Three Indonesian coal mines
Andhra Pradesh Limited Toshiba and Larsen & October 2015
Toubro
Reliance Power Kirandhari B and C coal blocks, North Talks on with Reliance
Tilaiya, Jharkhand By 2015
Limited Karanpura Infrastructure Limited
EPC : Engineeering, procurement and construction

UPCOMING ULTRA MEGA POWER PROJECTS

Project State Current status
Kudgi Karnataka Ministry of Power's approval received
Munge Maharashtra Project site finalised
Cheyyur Tamil Nadu Project site finalised
Bedabaha Orissa Land acquisition in process, coal blocks alloted
20
Source : POWERLINE, February 2009
 INDIAN POWER INDUSTRY
NUCLEAR POWER SECTOR
 India has a flourishing and largely indigenous nuclear power programme and expects to
have 20,000 MWe nuclear capacity on line by 2020.
 Nuclear Power Corporation of India Limited (NPCIL) has a monopoly in the Indian
nuclear power market.
 At present India has a nuclear capacity of 4,120 mw from 17 nuclear reactors.
 Prime Minister, Dr. Manmohan Singh has referred to the target to provide 20 GWe by
2020, as "modest" and capable of being "doubled with the opening up of international
cooperation."
 More recently on 30th September,2009, Dr. Manmohan Singh indicated that using
India’s unique three stage programme, our nuclear industry could potentially yield
4,70,000 MW of power by 2050.

““In India, we see nuclear energy as a vital component of our energy

mix… Our nuclear industry is poised for a major expansion, and there will be
huge opportunities for the global nuclear industry to participate in (this)
expansion… If we can manage our (nuclear) programme well, our three-
stage strategy could yield potentially 4,70,000 MW of power by 2050”
– Prime Minister, Dr. Manmohan Singh, 30th September 2009
21
Source : Indian Infrastructure, September 2009
 PORTS IN INDIA
INVESTMENT OPPORTUNITIES IN THE PORT SECTOR
 Consultancy
 Technical Engineering
 Financial
 Operatorship
 Construction
 Dredging
 Ancillary Services
 Towage
 Pilotage
 Supply of Equipment
 Port Connectivity
 Rail
 Road
 Water
 Warehousing and Distribution
 Ship Yards 22
 ROADS IN INDIA
GOVERNMENT INITIATIVES

 100 per cent foreign direct investment (FDI) allowed under the automatic route in all
road development projects.

 With incentives like 100 per cent income tax exemption for a period of 10 years, the
NHAI provides grants/viability gap funding for marginal projects, and formulation of
model concession agreements among others.

 Investors in identified highway projects permitted to recover investment by way of

collection of tolls for specified sections and periods.

 The government has also announced an increase in the overseas borrowing amount of
infrastructure sectors, to USD500 million from USD100 million.

 In order to tide over the shortage of funds, the road transport and highways ministry has
proposed priority sector status for road development, allowing private highway
developers more funds from banks.
Source : Indian Brand Equity Foundation

23
 RAILWAYS IN INDIA
DEDICATED FREIGHT CORRIDOR PROJECT – ROUTE MAP

Source : Ministry of Indian Railways 24

 RAILWAYS IN INDIA
METRO RAIL SYSTEMS
GOVERNMENT KEEN ON TRANSPORT ALTERNATIVES

 As huge upfront capital investment

required for every metro project,
government is promoting joint venture and
public private partnership (PPP) routes for
the metro projects.

 Bombardier Transportation estimates that

the Investment opportunities for greenfield
metro rail projects and related equipment
(excluding locomotives) in India will be
around USD3.5 billion by 2014.

 Further, it expects the annual demand for

metro rail coaches in India to reach 1,000
units by 2011.

Source : Indian Infrastructure December 2009

25
 INDIAN TELECOM INDUSTRY
A BRIEF OUTLOOK
The Indian telecom industry continues its growth trajectory amidst the economic slowdown –
 As per the Telecom Regulatory Authority of India (TRAI) during January 2009 :
 Total Telephone subscriber base reached 581.81 Million
Wireless subscription reached 545.05 Million
Wireline subscription declined to 36.76
 19. 90 Million new additions in wireless
 Wireline subscription declined by 0.31 Million
 Overall Tele-density reached 49.5
 Broadband subscription is 8.03 million
 FDI inflows during 2008-2009 touched Rs 117.27 billion (USD 2.56 billion),
during April-November 2009 it reached Rs 108.11 billion (USD 2.22 billion).

 Anticipated launch of 3G and Wi-Max services.

 New operators launching services.

 Rural telephony to witness strong growth.

Source : Indian Infrastructure, August and November 2009 26
 INDIAN TELECOM INDUSTRY
FUTURE OUTLOOK
 Total telecom subscriber base to reach close to 690 - 700 million by 2012.

 Wireless subscriber growth to continue, expected to reach 640 - 650 million in

2012.

 The fixed line base is estimated to reach approximately 45 - 50 million in 2012.

 India’s telecom services industry revenue projected to reach USD54 billion.

 Rural telecom will be the new growth constituency with tele-density levels
reaching about 40 per cent.

 25 - 30 million 3G subscribers estimated by 2012, WiMax subscribers to reach 8

- 10 million.

 By 2012, internet and broadband subscribers to reach 45 million and 25 - 30

million respectively while 196 million subscribers are expected to access the
internet through the mobile.
Source : Confederation of Indian Industry (CII) Ernst & Young report titled ‘India 2012: Telecom Growth Continues’

As per the Reliance Equities report, released in September 2009, the number of telecom towers
in India in 2010-2011 is projected to grow to 337,375 from an estimated 282,074 in 2009-2010 .
27
 Chemicals

• Indian consumption levels 1/10th of global average

• New Petroleum, Chemicals and Petrochemicals
Investment Region (PCPIR) policy. Each PCPIR to
have 250 sq.km area, refinery/petrochemical feed stock
company.
• These regions to be in West Bengal, Gujarat and
Andhra Pradesh.
• 6th IndiaChem 2010 (Exhibition and Conference) to be
held in Mumbai 28-30 October at Bombay Exhibition
Centre. It would focus on chemicals, technologies,
process plant machinery, control and automation
systems and petrochemicals. Japan was partner
country in 2004 and Korea is requested for 2010.
• www.indiachem.in

28
Several factors make India a favourite
investment destination

29
 Consumer Market in India
1. Low margin – high volumes model.
2. 506 million Mobile phones.
3. Consumer looking for a “deal.”
4. 40 million new consumers coming
into market every year.
5. Single use products – shampoo in
sachets.
6. Appliances designed for power
failures.

30
 Indian Subsidiaries Outshine Overseas Parents
Better Financial Performance
Trends visible in many sectors:
IT, auto, pharma & consumar durables

Overseas parent Sales Indian Subsidiary Sales

Growth Growth
(%) (%)
Unilever 8.6 Hindustan Unilever 11.6

Siemens 14 Siemens India 56

ABB 2.5 ABB India 32

Colgate 4.5 Colgate India 26

Hyundai Motors 6 India (exported a million cars!) 25

Samsung Global 15 Samsung India 29

LG Global 12.5 LG India 21

31
 Bilateral Context

• Excellent political relations

• President Lee’s landmark State Visit in Jan ‘10
• Growing economic content – trade in 2008 was
15.6 billion dollars.
• Bilateral Trade Target for 2014 is US$ 30
Billion
• CEPA is operational from January, 2010
• Indian market hospitable to Korean business.
• Leading Korean Companies household names.

32
Share of Top Sectors Attracting FDI
Inflows from South Korea
Rank Sector Percentage FDI
Inflows from
South Korea

1. Automobile Industry 18.07

2. Metallurgical Industries 15.18
3. Electronics 14.73
4. Housing & Real Estate 9.96
5. Industrial Machinery 7.41

Total Investment from Korea 1.6 Billion

(from January 2000 to May 2009)

33
 Potential Areas for Korean
Investments in India
• Auto & Auto Ancillary
• Defense
• Pharmaceutical & Chemical Products
• Healthcare
• Information Technology
• Infrastructure
• Shipping & Ports
• Textile, Garment & Apparel Industry
• Mechanical tools
• Machinery
• Food Processing Industries
• Solar Power
34
 Example -
Hyundai Motor India Ltd. [HMIL]
• Fastest Growth in Exports from Year Exports (Cars)
India - Total of 1 million cars in 1999 20
2010 2000 3,823
• No. 1 Exporter of Automobiles 2001 6,092
from India 2002 8,245
• Accounts for 66% of Total 2003 30,416
Passenger Car Exports from 2004 75,871
India 2005 96,560
• Exports to over 113 countries 2006 113,339
from India (120 by end 2010) 2007 126,749
• Biggest Operations outside of 2008 243,919
Korea in India 2009 210,007
• Over 50% of production in India Total 975,041
is Exported

35
Source: Business Line
 Information Technology
• Indian IT-BPO sector US$ 71 billion

• Software and services exports

US$ 47 billion in 2008

• Indian IT companies are experts in:

– Custom Application Development and
Maintenance (CADM)
– System Integration
– IT Consulting
– Application Management
– Computer Aided Designing (CAD)
– Legal Process Outsourcing
– Animation Industry

• IT Enabled Services
36
 India – Preferred IT Services Supplier to the World
Company Outsourcing for

IT Services
Infosys Goldman Sachs, Aetna, Northwestern Mutual, Am Ex DHL, Verizon
Tata Consultancy Services GE, Honda, UBS, HSBC
(TCS)
Wipro Transco, HP – Compaq, Nortel, General Motors, CISCO, Sony

IT Enabled Services
Mphasis BFL Citi Group, Accenture, Auto Zone, Capital One
Spectramind Dell, American Express, Capital One

Recent IT Contracts for Indian Companies

1. British Petroleum with TCS, Infosys & Wipro

2. Etisalat DB telecom with Tech Mahindra (S161 million)
3. Cardiff City Council with Tata Consultancy Services ($248 million)
37
 Pharmaceutical Industry in India
1. Medicines at affordable cost
2. Third largest in the world in volume terms
3. Over $20 billion in terms of value
4. Exports over $8 billion worth of drugs and
pharmaceuticals to US, Europe, Japan, Australia, etc.
5. Advantage in GENERIC DRUGS ($80 billion worth
drugs patent expiring by 2012.
6. Ranbaxy – majority share bought by Daiichi-Sankyo
worth $4.6 Billion.

38
 Global Reach of
Indian Pharmaceuticals
US FDA Approved 65
Pharma Plants in India
US Pharma Patents >200
for Indian formulations
Indian Pharma Companies Manufacturing for
CIPLA Ivey, Watson Pharma, Eon Labs

Shashun Chemicals Eli Lily, Glaxo-SmithKline Pharma

Lupin Laboratories Apotex, APP, Watson Pharma

Torrent Pharma Novo Nordisk (26 million vials /

annum of insulin)
39
 Partnership in Space,
Science & Technology
• On 26 May 1999 India’s Polar Satellite Launch Vehicle
PSLV C2 successfully launched Korean satellite KITSAT-3
into space.

• India has 54 satellites in space.

• 22 Satellites launched for companies from Germany, Italy,

Belgium, Indonesia and Argentina.

• India’s capacity to design, fabricate, launch and track

satellites on own Launch Vehicles.

• Chandrayaan orbiting the Moon.

• $10 Million Common Fund for R&D in S&T.

40
 Comprehensive Economic
Partnership Agreement [CEPA]
To deepen co-operation in –

• Trade in goods
• Information Technology
• Transfer of Technology
• Manufacturing sector
• Services sector
• Movement of professionals

41
 Comprehensive Economic
Partnership Agreement [CEPA]
Complete exemption from Basic Customs duty (‘BCD’)
• to 104 specified items
• Main products include - printed books, aircrafts, aircraft
Benefits/ engines, parts of aircraft engines, helicopters specified
Concessions industrial robots, telephone answering machines, etc.
effective
from
January 1, Benefit of concessional BCD provided to 962 specified items
2010 • nuclear reactors, steam or other boilers, engines, combined
refrigerator-freezers, dish washing machines, hair drying/
hand drying apparatus, golf cars, motorcycles with specified
cylinder capacity, etc
42
 CEPA Benefits

• Encourage Korean companies to setup

manufacturing in India

• Korean Companies can Import Raw

Materials, Inputs used in Manufacturing at
Concessional Import Duty in India

• Export to Korea from India with Export

Benefits & Concessional Import Duty in
Korea
43
 Leverage India’s
Human Resources

• R&D Laboratories in India.

– Samsung, LG, Hyundai Motors.
• Indian Engineers and IT Experts in Korea.
– Designing & Research (~1000).
– Scientists and Researchers in Korean Universities
(~600).
• Indian experts will make Korean companies more
competitive globally - Middle-East contracts.
• CEPA opens new doors
– 163 categories of professionals from India can work on
contracts in Korea.
44
 LIST OF PROFESSIONALS
(ANNEXURE 8-A OF CEPA)

1 Computer Hardware Design Engineers

2 Computer network products developer
11 Telecommunication Machinery Engineers and Researchers
21 Wireless communication network manager
22 Electrical circuit manager
30 Optical communication products Design developer
33 Wireless phone developer
34 Digital receiver developer
38 Communication network operation Engineers
43 CDMA technology research developer
52 Computer System Supervision Professionals
53 Computer System Designers and Analysts
59 System Software Programmers
65 Application Software Designers and Analysts
66 Network Programmers
68 Data management application programmer
69 Financing management application programmer
72 Database Designers and Analysts
73 Database Programmers
45
79 LAN Engineers
81 WAN Engineers
84 Web Engineers and Programmers
86 General management consultant
87 Financial management consultant
88 Marketing management consultant
89 Human resources management consultant
93 Electrical Measurement and Control Engineers and Researchers
117 Farming machine (design) Engineers
124 Special Engineering Design Service for automobile (automobile designer)
129 Petroleum and Chemical Engineers and Researchers
130 Rubber and Plastic Engineers and Researchers
131 Pesticide and Fertilizer Engineers and Researchers
134 Natural gas Chemical Engineers
140 Electrical Products Development Engineers and Researchers
141 Power Plant Engineers and Researchers
149 Ship Engineers and Researchers
156 Biologist
157 Biochemist
159 Civil Construction Engineers
160 Advertising Professionals
161 Computer Game Programmers
46
163 Assistant English Teachers6 for primary and secondary schools
Success of Korean Companies in India
1. Pioneers are Samsung Electronics
(1995), Hyundai Motors (1996) and LG
Electronics (1997).
2. Now >400 Korean Corporations in
India with more than US$1.5 billion
investment.
3. POSCO proposes US$12 billion
investment – progress slow but steady.
4. 65% Korean companies in profit.
24% showing growth but still in deficit
11% in deficit.
5. Recent Entrants:
Woori Bank, Samsung SDS, Korean IT
Corporation.

47
Indian Companies in South Korea

http://www.indochamkorea.org
48
 Gujarat Vittal Innovation City FEZ
• Support by KOTRA and Korea Land
Corporation.

• 800 Acres Area Reserved for Korean

SMEs.

• Trilateral MoU between Korea Land

Corporation, GVIC and Government of
Gujarat.

• Korean Ecosystem.

• 70 Korean companies have expressed

interest.

• Electronics, specialty chemicals,

components, light engineering.
49
 The New Brand
Made in INDIA
in
Partnership with KOREA

50
Thank You.

Ambassador of India
amb.seoul@mea.gov.in

51