Indian Economy

Opportunities Unlimited
India: Fastest Growing Free Market Democracy 2
 India: Among the Top-15 Countries in terms of GDP at 3

constant prices
The Indian economy has witnessed an unprecedented growth…. Booming Indian services and
industry sector are providing the required impetus to the economic growth
India’s GDP
witnessed high
India's GDP: 2002-07 9.4%
growth and was the 8.4%
700
second fastest
8.5% 7.5%
growing GDP after 600 Fastest GDP growth of 9.4
China percent in 2006-07, since last 18
500
years
400
300 4% 631
590
USD Billion 484 534
200 424
Indian economy is
the 4th largest in 100
terms of PPP – USD
4.1 trillion in 2006 0
2002-03 2003-04 2004-05 2005-06 2006-07
GDP at Constant Prices

Contribution
The sound of Services -
increased
performance of each from 49
industry segment is 700 percent to 55
leading to the overall percent
robust performance 600
of the Indian 168
500 155
economy Growth in sectors (2006-07):
400 117 Industry: 10.9%
104 109 116
Services: 11%
300
USD Billion 103 91 Agriculture: 2.7%
200
319 347
100 205 223

0
1999-00 2002-03 2005-06 2006-07
Services Agriculture Industry
 India: Robust Economic Platform 4

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

India’s enhanced 250
economic 213
199
performance has 200
been the major 152
141 …at present level of Forex
contributor towards 150
112 reserves, the country has
increased Forex
adequate cover for 12 months of
reserves 100 75 imports
USD Billion54
50
Steadily increasing
Forex reserves offer 0
adequate security 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
against any possible (Till 22
currency crisis or June)
monetary instability
India’s Forex
External Debt-to-GDP Ratio reserves are in
22 21.1 excess of
Forex reserves 20.4 Falling Dollar inflates external debt…
witnessed an the India’s external debt
increase of 200 19
percent for the 17.8
17.3
period 1990-2007 16.4
15.8
16
Ratio
Increased
confidence of
13 …the decreasing external debt to
investors in Indian
GDP ratio indicates that India has
companies have led
a sound economic platform
to a surge in cross
border borrowing by 10
the corporate 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
houses
 India: Surging Exports 5

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

Services sector has 112.40
120 103.42
been a major
contributor to 100 83.81
increased exports 80 63.95
from India 60
52.81 Quality and cost advantage are the two
40 important parameters leveraged by the
USD Billion
20 Indian producers to increasingly
Acceptance of 0 market their products and services
Indian products 2002-03 2003-04 2004-05 2005-06 2006-07
along with the cost (upto Feb.
advantage has 07)
provided an edge to
Indian companies

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

have chalked out
180 162.30
extensive plans to 160 149.65
increase their 140
presence abroad 111.89
120
100 78.28
80 61.52
USD60
Billion
Petroleum products are the major
40 contributors towards India’s growing
Imports of products
by India mainly
20 imports
0
includes petroleum
2002-03 2003-04 2004-05 2005-06 2006-07
products and
(upto Feb.
minerals
07)
 India: Attractive Investment Destination 6

With improved performance on PE ratio and ROE, Indian markets have attracted
India is ranked
second in AT large investments
Kearney FDI
confidence index FDI Inflow - India: 2001-07
18,000
15,730
16,000
14,000
12,000 180 percent
Telecom and
Increase
Electronics topped Return on the Investments in India (2006 Q1) 10,000
the list of inward FDI 8,000
Market PE Ratio P/B Ratio RoE (%) 5,546
USD Million4,222
6,000
India 16.1 4.53 22 3,755
4,000 3,134 2,634
China 10.62 2.06 17 2,000
FDI inflow for the
Indonesia 10.26 3.09 NA 0
period 2006-07
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
witnessed a growth Korea 9.85 1.84 16
of 180 percent over
the same period last Malaysia 13.21 1.82 16
year Net FII into India: 2001-07
Taiwan 12.17 2 11
12
Thailand 9.84 2.32 23 10.00 10.20
10 9.40
EM Asia 11.19 2.12 15

Mauritius has been 8

Latin America 9.35 2.46 18 6.72
the largest
EM Europe 10.9 2.39 15 6
contributor towards
FDI into India….. USD
4 Billion
1.80
2
0.60
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
 India: Vibrant Capital Market 7

Sensex – The Bombay stock exchange index has risen 15 times from 1990s to
India is among the reach 15,000 mark in July 2007
major destinations
across the globe for
inflow of US Dollar
i.e. FIIs 7/9/2007
Crossed
15,000
mark FIIs augmented
1/12/2007 support by infusing
16,000 Crossed 14,000 mark large investments
Sensex risen 15 in Indian stock
times in the period market
14,000
1990-2007
2/7/2006
12,000 Crossed 10,000 mark

10,000

8,000 12/30/1999 Exorbitant

IN R Crossed 5,000 mark industry
Emergence of performance
6,000
industry and
confidence of local
4,000
investors along with
the FIIs has led to
2,000
increased movement Increased local
of sensex investors’
- confidence
7 / 1 /1 9 9 7 / 1 / 1 9 9 87 /1 / 1 9 9 97 / 1 / 2 0 0 07 / 1 / 2 0 0 71 / 1 /2 0 0 27 /1 / 2 0 0 37 / 1 / 2 0 0 47 / 1 / 2 0 0 57 /1 / 2 0 0 67 /1 / 2 0 0 7
 India: Vibrant Economy Driving M&A 8

Activities
SECTOR USD (Mn) SECTOR USD
Number of Deals and Values (Mn)
Growth Drivers: 28.2
30 900
 Globalisation of Automotive 518 Manufacturing 933
782 800
competition 25
700 Banking and Financial 1,375 Media 630
 Concentration of 20 18.3 600
companies to 500 Chemicals and Plastics 1,133 Oil & Gas 384
achieve 15 12.3 467
400
economies of 10 306 300 Electrical and Electronics 896 Pharma & biotech 2,520
scale Number of deals
USD Billion 200
 Lower interest 5 Energy 1,484 Telecom 2,198
100
rates and vibrant 0 0 FMCG, Food and 1,327 Others 4,006
global markets Beverages
2004 2005 2006
 Cash Reserves
Deal Values No. of Deals IT and ITES 2,903 Total 20,305
with Corporates

Trends: In 2006, there were a

 Ratio of the Size of
acquisition to the total of 480 M&A deals
size of acquirer and 302 private equity
has grown from 10 deals…
percent in 2004 to
25 percent in 2006. … Average deal size close
 Cross-border
deals are growing
to USD 36 million…
faster than
domestic deals
…Contribution of private
 Private Equity (PE) equity deals to total
houses have number of deals have
funded projects as
well as made a few
increased from nearly 9
acquisitions in percent in 2004 to 28
India percent in 2006
Major M&A Deals Undertaken Abroad by India Inc. 9

Tata
TataSteel
Steelbuys
buysCorus
CorusPlc
Plc
USD 12.1 billion

Hindalco
Hindalcoacquired
acquiredNovelis
NovelisInc.
Inc.
USD 6 billion

Essar
EssarSteel
Steelacquired
acquiredAlgoma
AlgomaSteel
Steel
USD 1.58 billion

Suzlon
SuzlonEnergy
EnergyLtd.
Ltd.acquires
acquiresREpower
REpower
USD 1.6 billion

Videocon
VideoconIndustries
Industriesacquired
acquiredDaewoo
Daewoo USD 730 million
Electronics Corporation Limited
Electronics Corporation Limited
Major M&A and Investments Announcements in India 10

Vodafone
Vodafonebuys
buysHutch
Hutch
USD 11 billion

Plans
Planstotospend
spendon onits
itsdevelopment
developmentoperations
operations USD 1.7 billion
ininIndia over the next four years
India over the next four years

Plans
Plansinvestment
investmentininprivate
privateequity,
equity,real
realestate,
estate, USD 1 billion
and private wealth management
and private wealth management

Aditya
AdityaBirla
BirlaGroup
Groupincreased
increasedits
itsstake
stakeininIdea
Idea USD 0.98 billion
Cellular by acquiring 48.14-percent stake
Cellular by acquiring 48.14-percent stake

Renault,
Renault,Nissan
Nissanand
andMahindra
Mahindra&&Mahindra
Mahindra USD 0.905 billion
has
has initiated a Greenfield automobileplant
initiated a Greenfield automobile plant
project in Chennai.
project in Chennai.

Mylan
MylanLaboratories
Laboratoriesacquired
acquiredaamajority
majoritystake
stake USD 0.74 billion
ininMatrix Laboratories
Matrix Laboratories
 India: Pacing Ahead to Emerge as a Major Economy in the
11

World
2007 Global Retail Development Index (GRDI) 2007 Global Services Location Index
India has been 100
ranked superior to India 3.2 2.3 1.4
other major 80
countries by many China 2.9 2.3 1.4
prominent surveys… 60 Malaysia 2.8 1.3 2

Thailand 3.2 1.2 1.6

40
AT Kearney placed GRDI Score Brazil 2.6 1.8 1.5
India among the top 20
three in its FDI Indonesia 3.3 1.5 1.1
confidence index… 0 Financial structure People and skill availablity
India Russia Vietnam Ukraine China Chile Latvia Business environment

… the retail market

along with the
Projected GDP Growth Rates for Select Upcoming Economies
services sector has 8
been attracting the
interest of major
players
6

India is expected to
4
outperform its rivals
in the BRIC, in terms
of GDP growth rates,
from 2015 2 Growth Rate (%)
GDP
onwards…

0
2005-10 2010-15 2015-20 2020-25 2025-30 2030-35 2035-40 2040-45 2045-50

Brazil China India Russia

 India: Astounding Demographics 12

DEMOGRAPHIC TRANSFORMATION OF INDIA

Growth in the higher
income categories of Annual Household Income
India’s population (in USD)
has created an
2 9 20 Rich (Above 115,000)
affluent section of Population (million)
society, which has 9 17 33 High Income (57,000 – 115,000)
significant level of
purchasing power 48 74 120 Consuming class (23,000 – 57,000)

221 285 404 Working class (10,200 – 23,000)

726 710 613 Needy (Below 10,200)

2001-02 2005-06 2009-10(E)

* In PPP terms

Per Capita Income

700 651
Increasing per capita 583
income and large 600
519 Increasing per capita income
population moving 500 461 coupled with an emerging middle
into middle class 393 class has provided the necessary
has led to high level 400
impetus to consumerism in India
of consumerism in USD
300
India
200

100

0
2002-03 2003-04 2004-05 2005-06 2006-07
India: Increasing Working Population 13

Growth in Global Working Age Population (15-64)

Stock Position 2005 Addition to Working Age Population by 2010
314
World 4,168
71
India 691
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 14

To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion in the
next five years

2006
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
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
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
Why India? – Quote Unquote 15

“India has evolved into

India is among the one of the world's
three most attractive leading technology India has among the
FDI destinations in the centers“. highest returns on
world. foreign investment.
Craig Barrett
Intel Corporation
A T Kearney
FDI Confidence Index 2005 US Department of
By 2032, India will be Commerce
among the three
largest economies in
the world.

“The Indian market has two

BRIC Report, Goldman Sachs
core advantages - an
increasing presence of
“We came to India for multinationals and an upswing
the costs, stayed for the in the IT exports”.
quality and are now
investing for innovation”. “India is a developed Travyn Rhall,
country as far as ACNielsen
intellectual capital is
concerned”.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, August 2005

Jack Welch
General Electric
 16

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