Indian Economy – Opportunities Unlimited

Fastest Growing Free Market Democracy

 India: Ranks Among the Top-15 Countries in terms of GDP at
constant prices
Indian economy has
witnessed an Sound performance of each India's GDP: 2002-06 (Till Q2)
unprecedented industry segment is leading to
growth…. 700
the overall robust performance 8.50%
7.50%
8.40%
9.05%

of Indian economy 600

500

Indian economy is

USD Billion
400
the 4th largest in
terms of PPP – USD 300 4% 590
534
3.9 trillion in 2006 484.4
200 423.73

n
ibutio
286
Contr ices - 100
rv
of Se ased
in re to 54
c 0
Registered highest 49
from ent 2002-03 2003-04 2004-05 2005-06 2006-07 (Till
second quarter p rc
e Q2)

growth since 2001- GDP at Constant Prices

02 i.e. 9.2 percent
700

600

500 154.7
Indian GDP has registered one
of the fastest growth rates
USD Billion

Booming Indian 400

116.05
109.4
markets providing 104.4
across the globe
impetus to the 300
103.1 90.9
economic growth 200
319.30

100 204.90 223.40

0
1999-00 2002-03 2005-06

Services Agriculture Manufacturing

 India: Robust Economic Platform
Ever rising Forex
reserves providing
adequate cushion India's Forex Reserves: 2001-07 (Till February 2007)
200
against any 182.8
possibility of 180
153.3
currency crisis or 160
138.2
monetary instability India’s enhanced economic 140

USD Billion
performance has been major 120 106.8
100
contributor towards increased 80 74.8

Forex reserves 60 55.5

External debt-to- 40
GDP ratio has 20
shown remarkable 0
improvement….. 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16
Feb 07)

India’s Forex
reserves are in
excess of external
debt…… External Debt-to-GDP Ratio

22 21.1
20.4

19 17.8
17.3 The decreasing external debt to
15.8
GDP ratio indicates that India has
Ratio

…..at present level 16

of Forex reserves,
the country has
a sound economic platform
13
adequate cover for
12 months of 10
imports 2001-02 2002-03 2003-04 2004-05 2005-06
 India: Attractive Investment Destination

India is ranked With the better performance on PE ratio and ROE, Indian markets have attracted
second in AT
Kearney FDI
large investments
confidence index FDI Inflow - India: 2001-07
18,000
16,000
16,000

14,000

12,000 200 percent

Return on the Investments in India (2006 Q1) Increase

USD Million
Telecom and 10,000

Electronics topped MARKET PE P/B Ratio RoE (%) 8,000

the list of inward FDI Ratio 6,000 5,546
4,222
3,755
India 16.1 4.53 22 4,000 3,134
2,634

China 10.62 2.06 17 2,000

0
Indonesia 10.26 3.09 NA 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

FDI inflow for the Korea 9.85 1.84 16

period April –
Malaysia 13.21 1.82 16
December 2006
witnessed a growth Taiwan 12.17 2 11 Net FII into India: 2001-07 (Till February 2007)
12
of 151 percent over Thailand 9.84 2.32 23 10.20
10.00
the same last year 10 9.40
EM Asia 11.19 2.12 15
8
Latin America 9.35 2.46 18 6.80

USD Billion
Mauritius has been EM Europe 10.9 2.39 15 6

the largest
4
contributor towards
FDI into India….. 2
1.80
0.60
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 (Till 16
Feb 07)
 India: Surging Exports
Services sector has
been a major In d ia ' s E x p o r ts : 2 0 0 1 - 0 6
140
contributor to 1 2 4 .6 5
increased exports 120 The quality and cost advantage
from India.
100
1 0 3 .4 2
are the two important parameters
80
8 3 .8 1 leveraged by the Indian
The acceptance of producers to increasingly market
USD Billion

6 3 .9 5
Indian products 60

along with the cost

5 2 .8 1
their products and services
40
advantage has
provided an edge to 20
Indian companies.
0
2 0 0 2-03 2 0 0 3 -0 4 2 0 0 4 -0 5 20 0 5-0 6 2 0 0 6 -0 7

E x p o rts

The Indian
companies have
In d ia ' s Im p o r t: 2 0 0 1 - 0 6
chalked out 200
extensive plans to 180
1 8 1 .3 7

increase their
160 1 4 9 .6 5
presence abroad
140

Petroleum products are the 120 1 1 1 .8 9

contributor towards the growing USD Billion 100

7 8 .2 8
Imports of products imports by India 80
6 1 .5 2
by India mainly 60

includes petroleum 40
products and 20
minerals 0
2 0 0 2 -0 3 20 0 3-0 4 2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6 -0 7

Im p o rts
 India: Pacing Ahead to Emerge as the Major Economy in the
Globe
India has been
ranked superior to 2006 Global Retail Development Index 2005 Global Services Location Index
other major 100 (GRDI)
countries by many India 3.47 1.26 2.14
prominent surveys…
80
GRDI Score China 3.21 1.17 1.76

60 Malaysia 2.95 2 1.12

AT Kearney placed
40 Philippines 3.56 1.06 1.16
India among the top
three in its FDI
Singapore 1.62 2.67 1.44
confidence index… 20
Thailand 3.27 1.51 0.94
0
… retail market India Russia Vietnam Ukraine China Chile Latvia Financial structure Business environment People and skill availablity
along with services
sector has been
attracting lot of
interest from the Projected GDP Growth Rates for Select Upcoming
major players Economies

8
GDP Growth Rate (%)

India is expected to 6
outperform its rivals Brazil
in the BRIC, in terms 4 China
of GDP growth rates India
from 2015 2
Russia
onwards…
0
 India: Vibrant Economy Driving M&A Activities
Growth Drivers:
 Globalization of
competition Number of deals and values
 Concentration of 30 28.2 900 SECTOR USD SECTOR USD
companies to 782 800 (Mn) (Mn)
25
achieve 700

Number of deals
economies of 20 18.3 600
Automotive 518 Manufacturing 933
USD Billion

scale 500
15 467
12.3
 Lower interest 400
Banking and 1375 Media 630
rates and vibrant 10 306 300
Financial
global markets 5
200
Chemicals & 1133 Oil & Gas 384
 Cash Reserves 100

0 0 Plastics
with Corporate 2004 2005 2006

Trends: Electrical & 896 Pharma & 2520

 Ratio of Size of Deal Values No. of Deals Electronics biotech
acquisition to Energy 1484 Telecom 2198
the size of
acquirer has In 2006, there were a total of FMCG, Food and 1327 Others 4006
grown from 10 480 M&A deals and 302 Beverages
percent in 2004
to 25 percent in private equity ones… IT & ITES 2903 Total 20305
2006.
 Cross-border … Average deal size close to
deals are
growing faster USD 36 million…
than domestic
 Private Equity …Contribution of private equity
houses have
funded projects
deals to total number of
as well as done deals have increased from
some nearly 9 percent in 2004 to
acquisitions in 28 percent in 2006
India.
Major M&A Deals Undertaken Abroad by India Inc.

Tata Steel buys Corus Plc.

USD 12.1 billion

Hindalco acquired Novelis Inc.

USD 6 billion

Essar Steel acquired Algoma Steel

USD 1.58 billion

Videocon Industries acquired Daewoo Electronics

Corporation Limited USD 730 million

Tata Tea has acquired 30-percent stake in the US

based Energy Brands Inc. USD 677 million
Major M&A and Investments Announcements in India

Vodafone buys Hutch

USD 11 billion

Plans to spend on its development operations USD 1.7 billion

in India over the next four years

Plans investment in private equity, real estate,

and private wealth management USD 1 billion

Aditya Birla Group increased its stake in Idea

Cellular by buying 48.14-percent stake USD 0.98 billion

Renault, Nissan and Mahindra & Mahindra to set

up Greenfield automobile plant in Chennai. USD 0.905 billion

Mylan Laboratories acquired a majority stake in

Matrix Laboratories USD 0.74 billion
 India: Astounding Demographics

Growth in the
higher income
DEMOGRAPHIC TRANSFORMATION OF INDIA
categories of Annual Household Income
India’s (in USD)

population, has (Million Population) 2 9 20 Rich (Above 115000)

lead to a 9 17 33 High Income (57000 - 115000)

burgeoning 48 74 120 Consuming class (23000 - 57000)
affluent section
221 285 404 Working class (10200 - 23000)
of society, which
726 710 613 Needy (Below 10200)
has significant
level of 2001-02 2005-06 2009-10(E)
purchasing * In PPP terms

power

Per Capita Income

By 2009, India will Increasing per-capita
700 638
583
have 1.1 million 600 519 income coupled with
461
individuals with a 500
393 emerging middle class has
wealth of USD
400 provided necessary
300
100,000
impetus to the
200
consumerism in India
100
0
2002-03 2003-04 2004-05 2005-06 2006-07 E
India: Increasing Working Population

Growth in Global Working Age Population (15-64)

Stock Position Addition to working age population by 2010
2005
World 4,168 314

India 691 71

64
Africa 500
44
China 934
33
South East Asia 362
31
Latin America 359
17
Southern Asia 132 10
USA 200 0

Europe 497 -3

Japan 85 -5 45 95 145 195 245 295 345

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.
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
2006
• 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
2008
• 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
2010
• 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
India’s Sunrise Sectors

1 Infrastructure

2 Automobile

3 Telecom

4 Semiconductor

5 Aviation

6 Defense
 India to Gain in terms of Economic Prosperity due to Continued
Government Initiatives in Infrastructure Sector
Railways has ‘Golden Quadrilateral’, ‘North-South’ and
initiated process to ‘East-West’ corridors are the major road
develop dedicated infrastructure being undertaken by the • Project ‘Sethusamundram’, which
freight corridor… involves dredging of the Palk Strait to
government. 96 percent work of Golden
Quadrilateral has been completed facilitate maritime trade through it
• Project ‘Sagarmala’ – a USD 22 billion
Increase in traffic is project for the modernisation of major and
expected to amount minor ports
to 12-15 percent for
passenger traffic • The government has initiated the
and 15-18 percent process of up-gradation and
for cargo traffic… modernisation of national airports • Private sector can set up coal, gas or
worth USD 9 billion by 2010. liquid based thermal projects, hydel
projects and wind or solar projects of any
… Government of • It has also initiated process of size. Mega power projects permitted in
India spends modernisation of other non-metro India.
approximately USD 4 airports (more than 40 cities)
billion annually on • Foreign equity participation upto 100
road development percent is allowed in the power sector
through automatic route.

Government has identified infrastructure as a priority sector to sustain the momentum of the
There is increasing
competition between
GDP growth rate. The investment goal for infrastructure sector are:
full services carriers • Power – USD 140 billion by 2010
and low cost
carriers….. • 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’s Sunrise Sector: Automobile

The Indian automobile sector generates a revenue of USD 34 billion per year. Its
contribution to GDP is around 3-4 percent.
Largest two
wheeler
manufacturer…. Total Commercial Vehicles
CAGR for production : 24.5%
450 CAGR for sales : 24.3%
Units (thousands)

……Fifth largest 350 Production and domestic sales

CV manufacturer in figures for commercial vehicles
the world 250 are growing at a rate of
approximately 24 percent.
150

50
2001-02 2002-03 2003-04 2004-05 2005-06

Domestic Total Two Wheelers

production of auto CAGR for production : 15.1%
8,500 CAGR for sales : 13.8%
components has

Units (thousands)
increased to USD
6,500
10 billion in 2005- Production and domestic sales of
06, a jump of 17
percent…
two wheelers are growing at a 4,500
rate of approximately 15 and 14
percent respectively. 2,500

500
Exports have 2001-02 2002-03 2003-04 2004-05 2005-06
grown by 30
percent to USD 1.8
billion
Production Domestic Sales
 India’s Sunrise Sector: Telecom

The Indian mobile market is witnessing strong growth and is slated to become the
India ranks among
third largest in the world behind US and China in the next two to three years
the top 10 countries
of the world with 20 Tele-Density
Telecom Subscribers (Wireline & Wireless) 17
regards to its
200 190
telecom network. 16
13

Tele-Density (%)
Subscribers (in Mn)

160
140 12
9
120
98 7
8
76
80 5
53 4
Tele-density has 44 4
more than doubled 40
in the last 3 years. 0
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Q3) (Q3)

India has 40.3

million wireline 10 Internet Subscribers
subscribers and 9
149.6 million 8 Mobile communication and
Subscribers (in Mn)

7
wireless (mobile internet penetration are
and WLL-F) 6 6 adding to the momentum of
subscribers. 5
telecommunication sector
4 3 4

0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
(Q3)
 India’s Sunrise Sector: Semiconductor

India has developed Semiconductor Design Market: 2004-06

strong competence 10
in design side of Many international players such
semiconductor 8 as Intel, AMD, etc have
industry….
established their R&D centres in
USD Billion

6
4.6 India, which assists them to
4 3.2 develop novel products at fast
2.4
Captive
2
pace
semiconductor
units in India
0
contribute 62 2004 2005 2006
percent to the total
revenues being
generated by the
industry…. Semiconductor Design Market and its Components: 2005

India has
Indian companies have chalked
approximately 125 out plans to establish fabrication 18%
companies units thus catering to the overall 78%
operating in the
semiconductor demand from designing to
domain manufacturing phase 4%

VLSI Design Hardware Des ign Embedded Software

Investment Opportunities in Indian Aviation Industry

Activities in the Indian Aviation Industry

 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. Carrier Proposed Requirement

 GMR has undertaken project for modernisation of Delhi airport. The Air India 50 Aircrafts
project worth is USD 1.94 billion. Indian Airlines 43 Aircrafts

 Airbus plans to invest USD 1 billion over a period of 10 years to Jet Airways 30 Aircrafts
establish training centres, maintenance, repair and overhauling Air Deccan 60 Aircrafts
(MRO) centre, and engineering and design centre in India.
Kingfisher 48 Aircrafts
 EADS plans to invest USD 2.57 billion over a period of next 15 years Spicejet 20 Aircrafts
to establish technology centre in India.
Indigo 100 Aircrafts
 Indian carriers have placed orders for approximately 480 aircrafts to GoAir 15 Aircrafts
be delivered by 2012. State operated carriers – Indian airlines and
Air India have placed orders worth USD 8 billion for approximately Paramount 5 Aircrafts
100 aircrafts to modernise its fleet. Magic Air 10 Aircrafts
 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.
Why India? – Quote Unquote

India is among the India has among the

three most attractive highest returns on
FDI destinations in foreign investment
the world
US Department of
A T Kearney Commerce
FDI Confidence Index 2005
By 2032, India will be
among the three largest
economies in the world
BRIC Report
Goldman Sachs, October 2003

“We came to India for the “India is a developed

costs, stayed for the country as far as
quality and are now intellectual capital is
investing for innovation.” concerned.”

Jack Welch
- Dan Scheinman, Cisco System
General Electric
Inc. as told to Business Week,
August 2005