INDIA IN THE NEW KNOWLEDGE ECONOMY

The Changing Scenario

Dr. Naresh Trehan Chairman, CII National Committee on Healthcare & Executive Director Escorts Heart Institute and Research Centre, New Delhi, India

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 India

PRODUCT DEVELOPMENT REQUIRES ONE FOURTH THE INVESTMENT IN INDIA

INDIA IN THE NEW KNOWLEDGE ECONOMY

Healthcare

Pharma & Biotechnology

Information & Communication Technology (ICT)

Indian Healthcare : The Changing Scenario

Current Healthcare Landscape

Indian Healthcare : The Changing Scenario

INDIA SPENDS US $ 22.7 BILLION ON HEALTHCARE

5.2% of GDP

22.7 3.7 19

Total Healthcare Market

* Retail Source: National Accounts Statistics 2001; McKinsey analysis

Pharma market*

Healthcare delivery market

Indian Healthcare : The Changing Scenario

THE HEALTHCARE DELIVERY SECTOR PLAYS AN IMPORTANT ROLE IN THE ECONOMY TODAY
Sector Direct employment Million, 2000-2001 Revenues/GDP Per cent, 2000-2001

Healthcare Education Retail banking Power Railways Telecom Hotels, restaurants IT

4.0 5.3 1.0 1.2 1.6 0.8 1.7 0.4 1.8 1.4 0.9 1.7 3.5 3.0

5.2 4.8
Healthcare is the largest service industry in terms of revenues and the second largest after education in terms of employment

By 2012, the sector could account for 7 to 8 per cent of GDP and provide direct and indirect employment of 9 million
Source: National Accounts Statistics, 2001; Manpower profile; CBHI; McKinsey analysis

Indian Healthcare : The Changing Scenario

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

Healthcare provision, 2002 Per cent of total spending

100% = US $ 19 billion
Private providers (individual, charitable and for-profit) Government and public employers*

63

37

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

Indian Healthcare : The Changing Scenario

INDIA: AN EMERGING HEALTHCARE HUB

INDIAN HEALTHCARE CAPABILITY

FACT#1: Proven Indian healthcare system

Over 60,000 cardiac surgeries done

per year with out comes at par with international standards

Multi organ transplants like Renal,

Liver, Heart, Bone Marrow Transplants, are successfully performed at one tenth the cost.

Patients from over 55 countries

treated at Indian Hospitals.

DIA HAS THE OPPOURTUNITY TO PROVIDE THE BEST O THE WEST & EASTERN HEALTCARE SYSTEMS
Indian Systems Of Medicine Staging a Comeback
Ayurveda recognized as an
official healthcare system in Hungary.

Indias Gift to the World

Ayurveda Yoga Siddha

Doctors in the west are

increasingly prescribing Indian Systems of Medicine

More than 70% of the

American population prefer a natural approach to health Americans are said to spend around $25bn on non-traditional medical therapies and products *

Source : Los Angeles Times * Economic times dated 25th July 2003

HEALTHCARE.THE SUNRISE INDUSTRY

Physicians, Nurses, Medical Technicians and Other Scientific Occupations will Become Growth Industries to Rival the IT Sector within the Next Decade
- India Vision 2020 Report

Indian Healthcare : The Changing Scenario

Cost Advantage
PROCEDURE
US US Heart Surgery Bone Marrow Transplant Liver Transplant Knee Replacement Cosmetic Surgery 40,000 2,50,000 3,00,000 20,000 20,000 THAILAND THAILAND

COST (US$)
INDIA UK

7,500 ------------8,000 3,500

6,000 26,000 69,000 6,000 2,000

23,000 1,50,000 2,00,000 12,000 10,000

Indian Healthcare : The Changing Scenario

HUGE GROWTH POTENTIAL TO GROW BETWEEN US $ 43 US $ 60 BILLION IN 2012
60.0
US $ IN BILLION at 2000-2001 prices

51.0 43
8.0 8.0

17.0

ESTIMATE

Government spending Private spending

19
3.76 15.24
2001 2012 Scenario 1: Baseline increase in private spend

43.0 35.0

43.0

2012 Scenario 2: Baseline with insurance in middle class

Key Assumption

Government Spending

2012 Scenario 3: Baseline with insurance and high government spending 2% GDP

1% GDP

1% GDP

With 6% GDP real growth per year

Indian Healthcare : The Changing Scenario

INDIA OFFERS HUGE POTENTIAL FOR INVESTMENTS IN HEALTHCARE OVER THE NEXT 10 YEARS
Investment requirements in India (Estimates) US $ in Billion Next 10 years

Healthcare

22-31 Investment needs of the healthcare sector are comparable to other infrastructure sectors

Power**

95-126

Telecom**

40-51

Roads**

24-33

* 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

INDIA IN THE NEW KNOWLEDGE ECONOMY

Indias Growth Sectors Pharmaceuticals & Biotech

The Indian Pharmaceutical Industry has practically achieved Self sufficiency & Global recognition as a Low cost producer of High-quality bulk drugs & formulations

KEY ACHIEVEMENTS

Indias huge population and the prevalence of a wide spectrum of disease conditions offer a wide patient-resource for clinical trials While clinical trials cost approximately $300 to 350 million in US, they cost only about $25 million in Indian companies are India offering custom synthesis Investigational New services at 30-50% cost Drug stage costs savings compared to about $100 to 150 global costs million in US, but 700,000 science and costs only around $10 engineering graduates to 15 million in India & 1500 PhDs qualify annually. Over 15,000 scientists India has the 2nd highest number of qualified doctors in the world. Of every six medical doctors in the US, one is Indian

CHANGING FACE OF INDIAN PHARMA

Players thinking local
Indian pharma companies filed the largest number of Drug Master Files (DMFs) for APIs and 23% of ANDAs with the USFDA during 2003

Players thinking global

Export revenues now contribute over half the total revenues for the Indian pharma majors

Top 5 Companies Sales & Export Revenues

Rank Company
Source: Company reports

Ranbaxy acquired RPG Aventis, France; Wockhardt acquired CP Pharmaceuticals, UK; Zydus Cadila acquired Alpharma, France

Ranbaxy
Pharmaceutical exports increased at a CAGR of 23% during FY1995-FY2002

CHANGING FACE OF INDIAN PHARMA FACE OF INDIAN

MNCDomestic Competition
Co-marketing Glaxo-Cipla, Wockhardt-Bayer, Ranbaxy-Knoll tie-ups

MNCDomestic Collaboration
New Drug Research Glaxo SmithKline's recent R&D alliance with Ranbaxy Laboratories Clinical Trials

Pharma - IT

COLLABORATION
Novartis processes drug safety data and is designing clinical development software

Novartis, Astra Zeneca and Eli Lilly making India a global hub for clinical trials

In-licensing Ranbaxy licensing agreement with KSB, UK for marketing TransMID

Local research Astra Zenecas $40 million R&D facility in Bangalore for TB drug discovery
Source: Media Reports, E&Y

INDIA IN THE NEW KNOWLEDGE ECONOMY

BIOTECHNOLOGY

Market - A Consistent Uptrend

25% growth in investment 2002-03 70% growth in employment 74% growth in R&D manpower USD 5 billion annual revenues 2010 1 million skilled jobs 10% of global industry
Source: Confederation of Indian Industry (CII)

GOING GLOBALINDIA BIOTECH SOURCE FROM IN

Indias first genetically engineered vaccine costs less than half the price of competing vaccines

Shantha BiotechSHANVAC-B meets 40% of the global demand of Hepatitis B vaccine.

Clinton Foundation sourcing HIV treatment from four firms - three of which are from India

India: largest producer of Measles & DTP vaccines. Vaccine Biogenerics exports to over 130 $25 billion countries biological products

going off patent in 2004. Indian companies strong in biogenerics

Bio Agri India (2nd largest producer of food) offers significant opportunities to source products

Biocon was the first enzyme company globally to receive ISO certification in 1993

One out of every two children in the world is immunized by a vaccine made in India
Source: Newspaper Reports

The India Advantage

Excellent network of research laboratories

Well-developed base industries

Rich biodiversity

Extensive clinical trials opportunities

Trained manpower and knowledge base

INDIA IN THE NEW KNOWLEDGE ECONOMY

nformation & Communication Technology (ICT)

India : Key IT figures

Software & services export(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

35 30 25 20 15 12.2 3.8 5.03 6.05 8.67 13.5 17.1 23.8 31.7

nb $ S U

Software & services domestic(2004-05) ~ US $ 4.5 bn IT enabled services(2004-05) ~US $ 4.9 bn IT domestic hardware(200405) ~ US $ 4.8 bn

10 5 2.04 2.88 0

94-95 95-96 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 0405

Balanced Portfolio of IT offerings

Source: McKinsey:NASSCOM

India: Moving up the Value Chain

Consulting Embedded software Network Security Network Management Package Implementation E-business applications Web Enabling legacy

Application development Package Implementation Facilities management Unix-based coding 1960 Mainframe Client / Server Migration & Reengineering Maintenance Internet

Maintenance 2000

Aligned to Technology Needs

Source: SSB, Fall 2000

Telecom Market
7th largest telecom network in the world Size (2003) 2010 (projected) Telecom network growth rate Fixed lines (Dec, 2004) Wireless connections (Dec, 2004) US$ 9 billion US$ 23 billion 30% 44.76 million 48 million

Rising Teledensity & Telephone Subscribers

St o

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 AVENUES OF SUPPLY

Potential surplus population in working age group (2020)
Germany-3 Mn UK
0Mn -2 Mn -1 Mn Iraq Czech Republic Turkey 2Mn Israel Iran 0Mn 3Mn

Russia -6 Mn China -10 Mn Pakistan

19 Mn -9 Mn 5Mn

Ireland US
-17Mn

France Spain

-3 Mn -3 Mn

2Mn -2 Mn

Japan

5Mn Mexico

Italy

4Mn Egypt

47 Mn
India

7 Mn Bangladesh

Philippines

4Mn 1Mn 5Mn

Vietnam

Malaysia
3Mn Brazil

Indonesia
-0.5 Mn

Australia

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

THANK YOU