Economic Analysis Of India
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ECONOMIC ANALYSIS of India
Global FDI trends 2000 Record FDI flows of US$ 1.3 trillion in 2000 Developed world still favourite (over 75% of global share; mainly cross-border M&A) US$ 240 billion to developing countries Developing Asia gets US$ 143 billion, of which China and Hong Kong-China alone account for US$ 105 billion Latin America gets US$ 86 billion WHAT WE ARE REALLY LOOKING AT IS A SIGNIFICANT SHARE OF WHAT COMES TO ASIA Source: UNCTAD WIR01
% Share of Selected Countries in Total FDI Inflow in Developing Countries 1995
1998
1999
2000
Brazil
4.9
15.1
14.1
13.9
China
31.6
23.2
18.2
17.0
India
1.0
1.4
1.0
1.0
Malaysia
5.1
1.4
1.6
2.3
South Korea
1.6
2.9
4.8
4.2
Singapore
7.8
3.3
3.2
2.7
Thailand
1.8
2.7
1.6
1.0
113.3
188.4
222.0
240.2
Total Dev. Countries (US$ Bn)
Ratio of FDI Inflow (%) to Gross Domestic Product 1995
1998
1999
2000
Brazil
0.8
3.6
5.9
5.7
China
5.1
4.6
4.1
3.8
India
0.6
0.6
0.5
0.5
Malaysia
6.8
3.8
4.4
3.9
South Korea
0.4
1.7
2.6
2.2
Singapore
10.5
7.6
8.6
7.0
Thailand
1.2
4.6
3.0
2.0
Sectoral Targets for Achieving 8% GDP Growth ( $7-8 Bn) Sector
FDI Target (US$ Bn)
Telecom
2.5
Power
1.2
Financial Services
0.8
LNG & Oil Exploration
1.0
Food & beverage
0.4
Transportation
0.4
Textiles
0.3
Ports
0.3
Chemicals & Petrochemicals
0.2
Hotels & Tourism
0.2
Real Estate
0.2
Roads
0.2
Civil Aviation
0.2
Dis-investment
0.5
Total
8.9
0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
5 .5 %
. %
. %
5 .5 5 %
. %
(A E)
-0 0
-
00
00
-
-
-
-0 0 00
-
5 .5 %
00
Growth Rate (%)
Key Economic Indicators: GDP Growth Rate (1993-94 as base year) 5 .5 5 %
00
00
00
.
00 00
5 5 .5
5 5 .5
.
00
00
00
.
. .
00
0 0 .0 0
00
00
.
5 5 .5 5
00
.
00
00
00 00
00
0
0
0 -
-
-
-
-
0 0 0 0 -0 0
0 0 0 0 -0 0
0 0 0 0 -0 0 (as on 00 -00 00)
Exchange Rate (Rs/US$)
Foreign Exchange Reserves (US$ billion)
Key Economic Indicators: External sector
INDIA: TRACING FIRST GENERATION REFORMS • Industrial delicensing • Liberal FDI regime • Freedom to invest & expand • Simplification of investment procedures • Tax rationalisation • Current Account convertibility • Public sector divestment • WTO compatibility – Patents, etc.
The Reforms Process Ahead Public sector divestment Cutting fiscal deficit Amendments to crucial economic legislations Financial sector reforms Labour reforms Corporate governance Meeting all multilateral commitments in terms of GATT, GATS, TRIPS, etc.
INVESTMENT OPPORTUNITIES
INFRASTRUCTURE INVESTMENT REQUIREMENT: US $ 347 Bn Sector
Present Capacity
Power
0 .0 0 Lakh MW
, , MW
0 0 M Lines
0 0 M Lines
MT
MT
0
0 0 , 0 0 0 Kms
, Kms
, , Kms
, Kms , Kms
Telecom Ports Roads a. National Highways b. State Highways c. Super N. H. Urban I nfrastructure Service
Capacity Addition By 0000
Investment By 0000 (US $ Bn)
00
Source: Rakesh Mohan Committee Report (1996-2006)
Economic Scenario : Post Liberalisation • India - One of the fastest growing economies in the world • Average GDP growth (1995 -2005) : 6.2 % per annum • Average annual growth (1995-2005) Agriculture & Allied
:
+ 2.1 % per annum
Industry
:
+ 6.6 % per annum
Services
:
+ 7.8 % per annum
• Average Per Capita Income growth (1995 - 2005): 3.8 % per annum • Inflation down to a single digit level continuously for the last ten years • Foreign exchange reserves increased from US $ 2 b (March 1991) to US $ 145 b (September 2005) • Merchandise Exports : +20 % average rate of growth in last three years • Booming Services Exports from US $ 4.6 b in 1990-91 to US $ 51.3 b in 2004-05 11
Economic Scenario : Post Liberalization • Balance of Payments surplus (US $ 26 b in 2004-05) • External Debt Service Ratio down from 26.2 % in 1995 to 6.2 in 2005 • Foreign Direct Investment (FDI) : Average +US $ 5 b pa in the last five years. • Foreign Portfolio Investment : US $ 11.4 b in 2003-04 and US $ 8.9 b in 2004-05 • Reforms continuing and have unleashed dynamic forces – putting the economy on a trajectory of unparalleled economic growth in the future • The Indian Government is working in close co-operation with industry and trade to mitigate the remaining problems and constraints • Broad consensus across the political spectrum on the need for and direction of the reforms. Some issues still need to be resolved 12
Share Of Services Sector In GDP On The Rise (%)
60 50 40 30 20 10 0
2 7. 2
4 3. 9 2 8. 1 2 8. 0
1 9 9 0- 9 1
1 9 9 5- 9 6
32. 2
4 0. 6
5 2. 4
4 8. 9 2 7. 2 2 3. 8
2 0 0 0- 0 1
2 7. 1 2 0. 5
2 0 0 4- 0 5
A gric ulture Indus try Serv ic es
13
Agriculture
India • the world’s most irrigated land mass • world’s 2nd largest exporter of rice & 5th largest exporter of wheat
Food production: India’s Ranking in the World
1st
Tea, Milk
2nd
Rice, wheat, sugar
14
Manufacturing
• Rate of growth 2003-04
7%
2004-05
9.2%
• Diversified base of world class capabilities • State-of-the-art technologies • TQM,TPM, Six Sigma & Lean Manufacturing - part of everyday practice • Diversified industrial base with supporting ancillary industries • Overseas acquisitions worth US$ 500 m
15
Services
• Consistent growth 2003-04
9.1%
2004-05
8.9%
• Sectors Driving Growth - ITES - Healthcare - Financial Services - Education
Source:Economic survey, 2004 - 05 16
Average GDP growth - India & the World
6.2
5.5
4.9
4.7 3.3
2.9
2.9
Brazil
USA
Philippines
Mexico
Indonesia
Thailand
India
2.0
S.Korea
9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5
9.4
China
Growth (%)
Average GDP Growth (1990-2001)
Source: WDI, World Bank, 2003 17
Rising share of India’s external trade in GDP
Target : To double share of exports from 0.7% to 1.5% of world trade
S h a re o f e xte rn a l tra d e in G D P 0 0 0 0 0 0
0 0. 0
0 0. 0
.
.
.
.
.
00
0 0 0 - - - - 0 0 0 -0 0 00 0 0 -0 0 0 0 0
0 0 0 0 -0
0 00 0 0 -0 0 0
18
Macro Economic Indicators (2004-05)
• Land Area:
3.29 m sq. km.
• Population:
1.09 b
• GDP:
US $ 630 b
• Real GDP Growth:
6.9%
• Gross Domestic Savings:
28.1% (2003-04)
• Gross Domestic Investment:
26.3% (2003-04)
• Per Capita Income:
US $ 580
• Inflation Rate:
6.4%
19
Macro Economic Indicators (2004-05)
• Exchange Rate:
US $ 1 = 43.75
• Merchandise Exports:
US $ 80b
• Merchandise Imports:
US $ 106b
• Services Exports:
US $ 51b
• Foreign Direct Investment:
US $ 5.5b
• Foreign Portfolio Investment:
US $ 8.9b
• Direct Investment Abroad:
US $ 1.5b 20
Indian MNCs - On a global buying spree
• Number of foreign firms acquired by Indian companies during 2001 - 03
120
• Total worth
US $ 1.6 b
• India - 8th largest investor in the UK • No of investments
440
• No of Indian companies with operations in Singapore
1,441
21
Preferred Destination For Foreign Equity Investors ,
Japan
0,0 0 0
In d ia
, , , , ,
So u th K o r e a Sin g a p o r e , , 000
Au s tr a lia C h in a Hong Kong
000 0 0 0 0 0 0 0 0
0
Ta iw a n M a la ys ia
Sr i La n k a N e w Ze a la n d Ph ilip p in e s Th a ila n d
India attracts second highest private equity investment in Asia Total equity flow to India between 1999 and 2004 doubled Source: NASSCOM
from US$ 5.12 billion to US$ 11.50 billion
22
FDI INFLOWS TO INDIA 0000
0000
0000 0000 0000
0000
0000
0000 0000 0000 0 0 0 0 0 -0 0
0 0 0 0 -0 0
-
-
0 0 0 0 -0 0
*
FDI Inflows ($ million)
23
The India Advantage Excellent network of research laboratories
Well-developed base industries
Pro active policy framework
Proficiency in English
Rich biodiversity
Low manpower costs
Extensive clinical trial opportunities
Trained manpower and knowledge base 24
Demographics: A strong demand driver
25
Growing Knowledge Pool Partnership Driver - Skilled Manpower Global Growth in Working-Age Population ( 00~ 00) Over the Next Six Years ( Mln ) Addl working age population by
Stock Position 2222
World
Availability of Skilled Manpower, 0000
00 0
0 ,0 0 0
Availability of Qualified Engineers, 0000
00 = High
00 = High
0 = Low
0 = Low
Singapore
0 .0
India
8. 9 7. 9
India
000
00
USA
.
Singapore
Africa
000
00
India
.
USA
China
000
Germany
.
Hong Kong
S E Asia
000
00
Hong Kong
.
6. 9
Germany
L America
000
00
Japan
.
6. 7
Taiwan
6. 7
Mexico
6. 4
W Asia USA
000
00
000
00
W Europe 000 Source: UN, Morgan Japan ISO: 5555 : 5555
00
0 0. 0 Stanley -0
0 .0
Taiwan Korea Mexico China
0 .0 .
Korea
7. 3
5. 8
Source: IMD Competitiveness Yearbook3. 2003 China 9 .
26
The Cost Advantage
Average wage / year (in thousand US dollars) 30
25
28
25 20 15 10 5
5 .88
6 .4
6 .5
7 .2
7 .2
8
8 .9 6
2 .4
0
Source: NASSCOM
Costs for offshore work 30 - 50 % lower than in USA / Europe 27
Low Wages Total Compensation for Work ers in Heavy Manufacturing (US$ per Hour) 25 20
5 5 .5 5
15 5 .5 5
10 5
.
.
.
5 .5 5
China
India
Indonesia
0 USA
Korea
Source: IMD Competitiveness yearbook, 2003
Mexico
28
Import duty Reductions
R e d u c tio n in P e a k C u s to m s D u tie s o n M a n u fa c tu re d 160 140
in per cent
120
000
100
000
80 60 40
00
20
00
0 0. 0
M a r-
M a r-00
00
00
M a r-
M a r-
00
0 0000
M a r-
M a r-
w . e . f M a rc h 29
India - Economic Enablers 10th largest economy in the world - 4th in terms of PPP Will overtake Japan in PPP terms by 2010, to be 3rd largest in the world Large entrepreneurial base and diversified manufacturing structure Large reservoir of skilled labour at internationally competitive cost Vast pool of scientifically and technically qualified manpower of 20m A large domestic market - 300m+ strong middle class population having substantial purchasing power Largest democratic set - up A broad based and transparent legal framework including arbitration
30
India - Economic Enablers Vast network of bank branches, financial institutions and well-organized capital and money markets
A network of technical and management institutes of highest international standards for development of human resources
India has a record of meeting its international financial obligations as per schedule and has never been a defaulter No communication barrier, as English is the most prevalent business language Strong and vibrant small scale sector that is keen to establish strategic alliances with their foreign counterparts 31
India - Economic Enablers Supportive infrastructure base Strategic location for third country markets, particularly in the rapidly growing south and south-east Asian countries
The strategic location of India and its easy and efficient access to the Middle East, East European countries, CIS countries, Africa, South East Asia and Asia-Pacific countries places it in a unique position as a sourcing ground for entering into strategic alliances in export-oriented industries
Foreign companies can take advantage of India’s strategic location and tap the markets of these countries. India is slowly but surely emerging as an attractive destination for foreign investment Liberalized industrial and foreign investment policies 32
India - Economic Enablers
Sector FDI Limits • Defence
up to 26
• Telecom
up to 74%
• Civil Aviation
up to 49%
• Real estate & construction sector
up to 100 %
• Integrated township development
up to 100 %
• Tea plantation
up to 100 %
33
The India Advantage: Infrastructure • Road length
2.5 m km
Second largest road network in the world • Railway routes
63,000 km
• Cargo handled
298 m tonnes
• Electricity installed capacity
126,000 MW
Sixth in world electricity generation • Telephone Connections
77 m lines
• Fixed lines (Dec, 2004)
44.76 m
8th largest telecom network in the world Source: Department of Economics & Statistics, Tata Services Ltd
34
Growing IT Market Size (2002 - 03) Growth rate
US $ 24 b 28%
CAGR (since 1999)
46%
Share of IT and BPO 2008 projection
1.4% of GDP 7%
Exports (2003 - 04) Growing at
+ US $ 12 b + 30% pa
Employment Over 650,000 Second largest employer in IT services sector 35
Opportunities in Outsourcing • The Indian Outsourcing industry is moving up the value chain • It is BPO today but the future is for Knowledge Process Outsourcing (KPO), Financial Process Outsourcing (FPO) and Legal Process Outsourcing (LPO) • It is providing value through domain expertise rather than process expertise • India, in the new knowledge economy, is all set to emerge as a global KPO,FPO and the LPO hub • It is estimated to capture 71% of the world market by 2010 against 56 % today giving it a market of US $12 b • There are new opportunities, given that there is a serious shortage of quality teachers, in the USA 36
Opportunities in Outsourcing
• The remote education market is about US $ 15 b by 2008 • The current leaders are Engineering design – US $ 400 m, basic data search, integration and management – US $300 m and Biotech and Pharma – US $ 280 m • The Compounded estimated annual growth of KPO for India is 50 % whereas BPO will grow at about 30 % • KPO is expected to engage 250,000 people by 2010 • It will be in areas such as biotechnology,animation and graphics,design in aerospace & automotive, health care, pharma research, learning solutions, data management, customer analytics and entertainment • FPO will include insurance underwriting, risk assessment, equity research and corporate market research 37
ITES - BPO Sector Contribution of IT Enabled Services in total IT exports 0 0 0 0 -0 0 0 0 00%
- %
0 0 0 0 -0 0 0 0 %
0 0 0 0 -0 0 0 0 00%
- ITES exports projected to touch US$ 24 b by 2008 - India offers combination of cost-quality-scale advantage 38
Opportunities in Retail Sector The ongoing buoyancy in India’s spending, arising from the changing demographics and the resultant rise in income levels, has resulted in a distinct consumer preference for value-added products across the retail spectrum, providing a platform for the rapid growth of the retailing sector which could emerge as one of the fastest growing sector in coming years •
Organized retailing industry to rise from US $ 4b to US $ 15b by 2010 The total retailing industry, estimated at US $ 200b is largely in the unorganized sector with organized retailing accounting for less than 2% (US $ 4b)
•
The organized retailing segment to grow fourfold in 5 years
•
According to NCAER, the Indian middle class (household income between $ 4,500 – 23,000) currently at 92m, is expected to cross 153m by 2010
•
Substantial mall construction: The number of malls is expected to rise from the current 40 to around 250 by 2010
•
Close to 50m sq. ft. of retail space is expected to be developed over the next 5 years
US
39
India – The new Asian Powerhouse
India is currently the world’s fastest growing economy after China Strong GDP Growth
$417
$438
$467
100 0 FY01
•
• • • •
FY02
FY03 FY04
0 0 -0 -0 -0
'
200
$550
'S ep t
30 0
0
FY
4.0%
FY
4.4%
Services
0
FY
400
Industry
0
FY
5 .8 %
Agriculture
00
FY 00
600
7 .8% 9 8 6 .9 % 7 6 5 $631 4 3 2 1 0 FY05 FY06 P
Real GDP Growth (%)
Nominal GDP (US$ Bln)
Real GDP Growth
500
00
8 .5 %
Real GDP Growth(%)
Nominal GDP
700
Changing GDP Composition
(1)
-0
Changing composition of GDP – Reduced dependence on agriculture and growing industrial and services sector Strong outsourcing growth momentum – IT services, financial services, healthcare & manufacturing Growing Infrastructure investments and corporate Capex Strong improvement in external sector and phased fiscal deficit correction Attracting large foreign investments (1)
Source : RBI
India – Among the strongest growing economies BSE Sensex vis a vis International Stock Markets
Real GDP Growth(1) 10.0%
8.1%
9.0% 8.0%
7.5%
7.0%
5.3%
6.0% 5.0% 4.0%
3.8%
3.0%
5.1% 4.7%
2.0% 1.0% 0.0% 2001 India Hong Kong
• •
2002
2003
2004E
China Thailand
2005E Malaysia Korea
Second fastest growing economy Fourth largest economy in the world in terms of PPP (2)
Indian stock index outperformed international indices:
High growth prospects - Control in inflation, - Strong Rupee, - Strong FII Inflow, - Improved corporate earnings
(1) (1) Source: Source: EIU EIU (2) (2) Source: Source: World World Bank Bank
Booming exports 90
79.2
80 70
US $ billion
63.8
60
52.7 44.6
50
43.8
40 30 20 10 0 FY01
FY02
FY03
FY04
FY05
Fiscal Deficit as %age to GDP
Strong Macro Economic Fundamentals
US $ million
5000 4000
5036
5526 4674
4031
3000 2000 1000 0 FY01
FY02
FY03
FY04
FY05
6.2
6
5.9
5
4.5
4.5
4.3
FY04
FY05E
FY06E
4 3 2 1 0 FY02
FY03
160 Forex Reserve 140 139 142 120 100 113 80 60 71 51 40 20 0 Mar-02 Mar-03 Apr-04 Mar-05 'Jan 06
US$ Billion
6125
6000
7
Expanding Foreign Exchange Reserves
Increasing FDI Inflows 7000
Decreasing Fiscal Deficit
Strengthened Banking Sector Outstanding Bank Credit
Savings Deposits with Scheduled Commercial Banks
(1)
300 120
US $ Billion
253
250 200
168
150
USD bln
105.4
100
88.2
80
192
60
47.8
57.2
65.6
40
136
20
100 2002
2004
2005
Jan'06
0 FY01
FY02
FY03
FY04
FY05
Growth and Performance drivers -
2003
Robust retail demand Low consumer-finance penetration Positive age demographics, rising disposable incomes Favorable interest rates and easier availability Recovery in key commodity sectors – steel, textiles Improvement in corporate financial performance and business outlook
Strengthening regulatory regime -
RBI aligning prudential banking norms in tune with international standards Consolidation to improve intrinsic strength of the sector -
Strong revaluation of banking stocks (1) Source : RBI, Ministry of Finance, CSO
Global FDI trends 2000 Record FDI flows of US$ 1.3 trillion in 2000 Developed world still favourite (over 75% of global share; mainly cross-border M&A) US$ 240 billion to developing countries Developing Asia gets US$ 143 billion, of which China and Hong Kong-China alone account for US$ 105 billion Latin America gets US$ 86 billion WHAT WE ARE REALLY LOOKING AT IS A SIGNIFICANT SHARE OF WHAT COMES TO ASIA Source: UNCTAD WIR01
% Share of Selected Countries in Total FDI Inflow in Developing Countries 1995
1998
1999
2000
Brazil
4.9
15.1
14.1
13.9
China
31.6
23.2
18.2
17.0
India
1.0
1.4
1.0
1.0
Malaysia
5.1
1.4
1.6
2.3
South Korea
1.6
2.9
4.8
4.2
Singapore
7.8
3.3
3.2
2.7
Thailand
1.8
2.7
1.6
1.0
113.3
188.4
222.0
240.2
Total Dev. Countries (US$ Bn)
Ratio of FDI Inflow (%) to Gross Domestic Product 1995
1998
1999
2000
Brazil
0.8
3.6
5.9
5.7
China
5.1
4.6
4.1
3.8
India
0.6
0.6
0.5
0.5
Malaysia
6.8
3.8
4.4
3.9
South Korea
0.4
1.7
2.6
2.2
Singapore
10.5
7.6
8.6
7.0
Thailand
1.2
4.6
3.0
2.0
Sectoral Targets for Achieving 8% GDP Growth ( $7-8 Bn) Sector
FDI Target (US$ Bn)
Telecom
2.5
Power
1.2
Financial Services
0.8
LNG & Oil Exploration
1.0
Food & beverage
0.4
Transportation
0.4
Textiles
0.3
Ports
0.3
Chemicals & Petrochemicals
0.2
Hotels & Tourism
0.2
Real Estate
0.2
Roads
0.2
Civil Aviation
0.2
Dis-investment
0.5
Total
8.9
0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
5 .5 %
. %
. %
5 .5 5 %
. %
(A E)
-0 0
-
00
00
-
-
-
-0 0 00
-
5 .5 %
00
Growth Rate (%)
Key Economic Indicators: GDP Growth Rate (1993-94 as base year) 5 .5 5 %
00
00
00
.
00 00
5 5 .5
5 5 .5
.
00
00
00
.
. .
00
0 0 .0 0
00
00
.
5 5 .5 5
00
.
00
00
00 00
00
0
0
0 -
-
-
-
-
0 0 0 0 -0 0
0 0 0 0 -0 0
0 0 0 0 -0 0 (as on 00 -00 00)
Exchange Rate (Rs/US$)
Foreign Exchange Reserves (US$ billion)
Key Economic Indicators: External sector
INDIA: TRACING FIRST GENERATION REFORMS • Industrial delicensing • Liberal FDI regime • Freedom to invest & expand • Simplification of investment procedures • Tax rationalisation • Current Account convertibility • Public sector divestment • WTO compatibility – Patents, etc.
The Reforms Process Ahead Public sector divestment Cutting fiscal deficit Amendments to crucial economic legislations Financial sector reforms Labour reforms Corporate governance Meeting all multilateral commitments in terms of GATT, GATS, TRIPS, etc.
INVESTMENT OPPORTUNITIES
INFRASTRUCTURE INVESTMENT REQUIREMENT: US $ 347 Bn Sector
Present Capacity
Power
0 .0 0 Lakh MW
, , MW
0 0 M Lines
0 0 M Lines
MT
MT
0
0 0 , 0 0 0 Kms
, Kms
, , Kms
, Kms , Kms
Telecom Ports Roads a. National Highways b. State Highways c. Super N. H. Urban I nfrastructure Service
Capacity Addition By 0000
Investment By 0000 (US $ Bn)
00
Source: Rakesh Mohan Committee Report (1996-2006)
Economic Scenario : Post Liberalisation • India - One of the fastest growing economies in the world • Average GDP growth (1995 -2005) : 6.2 % per annum • Average annual growth (1995-2005) Agriculture & Allied
:
+ 2.1 % per annum
Industry
:
+ 6.6 % per annum
Services
:
+ 7.8 % per annum
• Average Per Capita Income growth (1995 - 2005): 3.8 % per annum • Inflation down to a single digit level continuously for the last ten years • Foreign exchange reserves increased from US $ 2 b (March 1991) to US $ 145 b (September 2005) • Merchandise Exports : +20 % average rate of growth in last three years • Booming Services Exports from US $ 4.6 b in 1990-91 to US $ 51.3 b in 2004-05 11
Economic Scenario : Post Liberalization • Balance of Payments surplus (US $ 26 b in 2004-05) • External Debt Service Ratio down from 26.2 % in 1995 to 6.2 in 2005 • Foreign Direct Investment (FDI) : Average +US $ 5 b pa in the last five years. • Foreign Portfolio Investment : US $ 11.4 b in 2003-04 and US $ 8.9 b in 2004-05 • Reforms continuing and have unleashed dynamic forces – putting the economy on a trajectory of unparalleled economic growth in the future • The Indian Government is working in close co-operation with industry and trade to mitigate the remaining problems and constraints • Broad consensus across the political spectrum on the need for and direction of the reforms. Some issues still need to be resolved 12
Share Of Services Sector In GDP On The Rise (%)
60 50 40 30 20 10 0
2 7. 2
4 3. 9 2 8. 1 2 8. 0
1 9 9 0- 9 1
1 9 9 5- 9 6
32. 2
4 0. 6
5 2. 4
4 8. 9 2 7. 2 2 3. 8
2 0 0 0- 0 1
2 7. 1 2 0. 5
2 0 0 4- 0 5
A gric ulture Indus try Serv ic es
13
Agriculture
India • the world’s most irrigated land mass • world’s 2nd largest exporter of rice & 5th largest exporter of wheat
Food production: India’s Ranking in the World
1st
Tea, Milk
2nd
Rice, wheat, sugar
14
Manufacturing
• Rate of growth 2003-04
7%
2004-05
9.2%
• Diversified base of world class capabilities • State-of-the-art technologies • TQM,TPM, Six Sigma & Lean Manufacturing - part of everyday practice • Diversified industrial base with supporting ancillary industries • Overseas acquisitions worth US$ 500 m
15
Services
• Consistent growth 2003-04
9.1%
2004-05
8.9%
• Sectors Driving Growth - ITES - Healthcare - Financial Services - Education
Source:Economic survey, 2004 - 05 16
Average GDP growth - India & the World
6.2
5.5
4.9
4.7 3.3
2.9
2.9
Brazil
USA
Philippines
Mexico
Indonesia
Thailand
India
2.0
S.Korea
9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5
9.4
China
Growth (%)
Average GDP Growth (1990-2001)
Source: WDI, World Bank, 2003 17
Rising share of India’s external trade in GDP
Target : To double share of exports from 0.7% to 1.5% of world trade
S h a re o f e xte rn a l tra d e in G D P 0 0 0 0 0 0
0 0. 0
0 0. 0
.
.
.
.
.
00
0 0 0 - - - - 0 0 0 -0 0 00 0 0 -0 0 0 0 0
0 0 0 0 -0
0 00 0 0 -0 0 0
18
Macro Economic Indicators (2004-05)
• Land Area:
3.29 m sq. km.
• Population:
1.09 b
• GDP:
US $ 630 b
• Real GDP Growth:
6.9%
• Gross Domestic Savings:
28.1% (2003-04)
• Gross Domestic Investment:
26.3% (2003-04)
• Per Capita Income:
US $ 580
• Inflation Rate:
6.4%
19
Macro Economic Indicators (2004-05)
• Exchange Rate:
US $ 1 = 43.75
• Merchandise Exports:
US $ 80b
• Merchandise Imports:
US $ 106b
• Services Exports:
US $ 51b
• Foreign Direct Investment:
US $ 5.5b
• Foreign Portfolio Investment:
US $ 8.9b
• Direct Investment Abroad:
US $ 1.5b 20
Indian MNCs - On a global buying spree
• Number of foreign firms acquired by Indian companies during 2001 - 03
120
• Total worth
US $ 1.6 b
• India - 8th largest investor in the UK • No of investments
440
• No of Indian companies with operations in Singapore
1,441
21
Preferred Destination For Foreign Equity Investors ,
Japan
0,0 0 0
In d ia
, , , , ,
So u th K o r e a Sin g a p o r e , , 000
Au s tr a lia C h in a Hong Kong
000 0 0 0 0 0 0 0 0
0
Ta iw a n M a la ys ia
Sr i La n k a N e w Ze a la n d Ph ilip p in e s Th a ila n d
India attracts second highest private equity investment in Asia Total equity flow to India between 1999 and 2004 doubled Source: NASSCOM
from US$ 5.12 billion to US$ 11.50 billion
22
FDI INFLOWS TO INDIA 0000
0000
0000 0000 0000
0000
0000
0000 0000 0000 0 0 0 0 0 -0 0
0 0 0 0 -0 0
-
-
0 0 0 0 -0 0
*
FDI Inflows ($ million)
23
The India Advantage Excellent network of research laboratories
Well-developed base industries
Pro active policy framework
Proficiency in English
Rich biodiversity
Low manpower costs
Extensive clinical trial opportunities
Trained manpower and knowledge base 24
Demographics: A strong demand driver
25
Growing Knowledge Pool Partnership Driver - Skilled Manpower Global Growth in Working-Age Population ( 00~ 00) Over the Next Six Years ( Mln ) Addl working age population by
Stock Position 2222
World
Availability of Skilled Manpower, 0000
00 0
0 ,0 0 0
Availability of Qualified Engineers, 0000
00 = High
00 = High
0 = Low
0 = Low
Singapore
0 .0
India
8. 9 7. 9
India
000
00
USA
.
Singapore
Africa
000
00
India
.
USA
China
000
Germany
.
Hong Kong
S E Asia
000
00
Hong Kong
.
6. 9
Germany
L America
000
00
Japan
.
6. 7
Taiwan
6. 7
Mexico
6. 4
W Asia USA
000
00
000
00
W Europe 000 Source: UN, Morgan Japan ISO: 5555 : 5555
00
0 0. 0 Stanley -0
0 .0
Taiwan Korea Mexico China
0 .0 .
Korea
7. 3
5. 8
Source: IMD Competitiveness Yearbook3. 2003 China 9 .
26
The Cost Advantage
Average wage / year (in thousand US dollars) 30
25
28
25 20 15 10 5
5 .88
6 .4
6 .5
7 .2
7 .2
8
8 .9 6
2 .4
0
Source: NASSCOM
Costs for offshore work 30 - 50 % lower than in USA / Europe 27
Low Wages Total Compensation for Work ers in Heavy Manufacturing (US$ per Hour) 25 20
5 5 .5 5
15 5 .5 5
10 5
.
.
.
5 .5 5
China
India
Indonesia
0 USA
Korea
Source: IMD Competitiveness yearbook, 2003
Mexico
28
Import duty Reductions
R e d u c tio n in P e a k C u s to m s D u tie s o n M a n u fa c tu re d 160 140
in per cent
120
000
100
000
80 60 40
00
20
00
0 0. 0
M a r-
M a r-00
00
00
M a r-
M a r-
00
0 0000
M a r-
M a r-
w . e . f M a rc h 29
India - Economic Enablers 10th largest economy in the world - 4th in terms of PPP Will overtake Japan in PPP terms by 2010, to be 3rd largest in the world Large entrepreneurial base and diversified manufacturing structure Large reservoir of skilled labour at internationally competitive cost Vast pool of scientifically and technically qualified manpower of 20m A large domestic market - 300m+ strong middle class population having substantial purchasing power Largest democratic set - up A broad based and transparent legal framework including arbitration
30
India - Economic Enablers Vast network of bank branches, financial institutions and well-organized capital and money markets
A network of technical and management institutes of highest international standards for development of human resources
India has a record of meeting its international financial obligations as per schedule and has never been a defaulter No communication barrier, as English is the most prevalent business language Strong and vibrant small scale sector that is keen to establish strategic alliances with their foreign counterparts 31
India - Economic Enablers Supportive infrastructure base Strategic location for third country markets, particularly in the rapidly growing south and south-east Asian countries
The strategic location of India and its easy and efficient access to the Middle East, East European countries, CIS countries, Africa, South East Asia and Asia-Pacific countries places it in a unique position as a sourcing ground for entering into strategic alliances in export-oriented industries
Foreign companies can take advantage of India’s strategic location and tap the markets of these countries. India is slowly but surely emerging as an attractive destination for foreign investment Liberalized industrial and foreign investment policies 32
India - Economic Enablers
Sector FDI Limits • Defence
up to 26
• Telecom
up to 74%
• Civil Aviation
up to 49%
• Real estate & construction sector
up to 100 %
• Integrated township development
up to 100 %
• Tea plantation
up to 100 %
33
The India Advantage: Infrastructure • Road length
2.5 m km
Second largest road network in the world • Railway routes
63,000 km
• Cargo handled
298 m tonnes
• Electricity installed capacity
126,000 MW
Sixth in world electricity generation • Telephone Connections
77 m lines
• Fixed lines (Dec, 2004)
44.76 m
8th largest telecom network in the world Source: Department of Economics & Statistics, Tata Services Ltd
34
Growing IT Market Size (2002 - 03) Growth rate
US $ 24 b 28%
CAGR (since 1999)
46%
Share of IT and BPO 2008 projection
1.4% of GDP 7%
Exports (2003 - 04) Growing at
+ US $ 12 b + 30% pa
Employment Over 650,000 Second largest employer in IT services sector 35
Opportunities in Outsourcing • The Indian Outsourcing industry is moving up the value chain • It is BPO today but the future is for Knowledge Process Outsourcing (KPO), Financial Process Outsourcing (FPO) and Legal Process Outsourcing (LPO) • It is providing value through domain expertise rather than process expertise • India, in the new knowledge economy, is all set to emerge as a global KPO,FPO and the LPO hub • It is estimated to capture 71% of the world market by 2010 against 56 % today giving it a market of US $12 b • There are new opportunities, given that there is a serious shortage of quality teachers, in the USA 36
Opportunities in Outsourcing
• The remote education market is about US $ 15 b by 2008 • The current leaders are Engineering design – US $ 400 m, basic data search, integration and management – US $300 m and Biotech and Pharma – US $ 280 m • The Compounded estimated annual growth of KPO for India is 50 % whereas BPO will grow at about 30 % • KPO is expected to engage 250,000 people by 2010 • It will be in areas such as biotechnology,animation and graphics,design in aerospace & automotive, health care, pharma research, learning solutions, data management, customer analytics and entertainment • FPO will include insurance underwriting, risk assessment, equity research and corporate market research 37
ITES - BPO Sector Contribution of IT Enabled Services in total IT exports 0 0 0 0 -0 0 0 0 00%
- %
0 0 0 0 -0 0 0 0 %
0 0 0 0 -0 0 0 0 00%
- ITES exports projected to touch US$ 24 b by 2008 - India offers combination of cost-quality-scale advantage 38
Opportunities in Retail Sector The ongoing buoyancy in India’s spending, arising from the changing demographics and the resultant rise in income levels, has resulted in a distinct consumer preference for value-added products across the retail spectrum, providing a platform for the rapid growth of the retailing sector which could emerge as one of the fastest growing sector in coming years •
Organized retailing industry to rise from US $ 4b to US $ 15b by 2010 The total retailing industry, estimated at US $ 200b is largely in the unorganized sector with organized retailing accounting for less than 2% (US $ 4b)
•
The organized retailing segment to grow fourfold in 5 years
•
According to NCAER, the Indian middle class (household income between $ 4,500 – 23,000) currently at 92m, is expected to cross 153m by 2010
•
Substantial mall construction: The number of malls is expected to rise from the current 40 to around 250 by 2010
•
Close to 50m sq. ft. of retail space is expected to be developed over the next 5 years
US
39
India – The new Asian Powerhouse
India is currently the world’s fastest growing economy after China Strong GDP Growth
$417
$438
$467
100 0 FY01
•
• • • •
FY02
FY03 FY04
0 0 -0 -0 -0
'
200
$550
'S ep t
30 0
0
FY
4.0%
FY
4.4%
Services
0
FY
400
Industry
0
FY
5 .8 %
Agriculture
00
FY 00
600
7 .8% 9 8 6 .9 % 7 6 5 $631 4 3 2 1 0 FY05 FY06 P
Real GDP Growth (%)
Nominal GDP (US$ Bln)
Real GDP Growth
500
00
8 .5 %
Real GDP Growth(%)
Nominal GDP
700
Changing GDP Composition
(1)
-0
Changing composition of GDP – Reduced dependence on agriculture and growing industrial and services sector Strong outsourcing growth momentum – IT services, financial services, healthcare & manufacturing Growing Infrastructure investments and corporate Capex Strong improvement in external sector and phased fiscal deficit correction Attracting large foreign investments (1)
Source : RBI
India – Among the strongest growing economies BSE Sensex vis a vis International Stock Markets
Real GDP Growth(1) 10.0%
8.1%
9.0% 8.0%
7.5%
7.0%
5.3%
6.0% 5.0% 4.0%
3.8%
3.0%
5.1% 4.7%
2.0% 1.0% 0.0% 2001 India Hong Kong
• •
2002
2003
2004E
China Thailand
2005E Malaysia Korea
Second fastest growing economy Fourth largest economy in the world in terms of PPP (2)
Indian stock index outperformed international indices:
High growth prospects - Control in inflation, - Strong Rupee, - Strong FII Inflow, - Improved corporate earnings
(1) (1) Source: Source: EIU EIU (2) (2) Source: Source: World World Bank Bank
Booming exports 90
79.2
80 70
US $ billion
63.8
60
52.7 44.6
50
43.8
40 30 20 10 0 FY01
FY02
FY03
FY04
FY05
Fiscal Deficit as %age to GDP
Strong Macro Economic Fundamentals
US $ million
5000 4000
5036
5526 4674
4031
3000 2000 1000 0 FY01
FY02
FY03
FY04
FY05
6.2
6
5.9
5
4.5
4.5
4.3
FY04
FY05E
FY06E
4 3 2 1 0 FY02
FY03
160 Forex Reserve 140 139 142 120 100 113 80 60 71 51 40 20 0 Mar-02 Mar-03 Apr-04 Mar-05 'Jan 06
US$ Billion
6125
6000
7
Expanding Foreign Exchange Reserves
Increasing FDI Inflows 7000
Decreasing Fiscal Deficit
Strengthened Banking Sector Outstanding Bank Credit
Savings Deposits with Scheduled Commercial Banks
(1)
300 120
US $ Billion
253
250 200
168
150
USD bln
105.4
100
88.2
80
192
60
47.8
57.2
65.6
40
136
20
100 2002
2004
2005
Jan'06
0 FY01
FY02
FY03
FY04
FY05
Growth and Performance drivers -
2003
Robust retail demand Low consumer-finance penetration Positive age demographics, rising disposable incomes Favorable interest rates and easier availability Recovery in key commodity sectors – steel, textiles Improvement in corporate financial performance and business outlook
Strengthening regulatory regime -
RBI aligning prudential banking norms in tune with international standards Consolidation to improve intrinsic strength of the sector -
Strong revaluation of banking stocks (1) Source : RBI, Ministry of Finance, CSO
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