Indian Economy

Opportunities Unlimited

India: Fastest Growing Free Market Democracy

GDP Growth
1990 4.9 percent

Forex
< USD 1 billion

FII Flow 93
USD 1 million

FDI
USD 97 million

Per Capita
USD 390

Inflation
9 percent

2007

9.4 percent

USD 246 billion

USD 15 billion

USD 16 Billion

USD 720

3.4 percent

Source: Times of India

India: Among the Top-15 Countries in terms of GDP at constant prices

Indias GDP has witnessed high growth, and was the second fastest growing GDP after China in 2006-07

The Indian economy has witnessed unprecedented growth. Booming services and industry sectors are providing the required impetus to economic growth
India's GDP at Current Prices: 2002-07 900 800 700 600 500 400 300 200 100 0

USD Billion

Fastest GDP growth of 9.4 percent in 2006-07, since last 18 years (at constant prices)
556 638 737 830

469

Indian economy is expected to be 3rd largest in terms of PPP USD 4.5 trillion by the end of 2007

237 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (Q1)

USD Billion

The sound performance of each industry segment is leading to the overall robust performance of the Indian economy

900 800 700 600 500 400 300 200 100 0 191 103 105

Contribution of Services increased from 48 percent to 55 percent

Growth in sectors at Current Prices (2006-07): Industry: 16.2% Services: 16.3% Agriculture: 10.2%
453 398

237 204 125 105 135 145 2006-07 231

Estimated growth rate in various GDP sectors for Q1 (2007-08) is: Industry 15.9 percent, Agriculture 11.4 percent and Services 15.7 percent

1999-00 2002-03 2005-06 Agriculture Industry Services

Source: MOSPI Statistics

India: Robust Economic Platform

Indias strong economic performance has been the major contributor towards increased Forex reserves
India's Forex Reserves: 2001-07 (Till 28 September 2007) 300 248 250 199

USD Billion

200 150 100 50 54 75 141 112

152

at present level of Forex reserves, the country has adequate cover for 12 months of imports

Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08 (Till 28 September)

External Debt-to-GDP Ratio 22 21.1 20.4 19

Forex reserves witnessed an increase of 200 percent for the period 1990-2007
Ratio

Falling Dollar inflates the Indias external debt

17.8 17.3 15.8 16.4

Indias Forex reserves are in excess of external debt

16

Increased confidence of investors in Indian companies has led to a surge in cross border borrowing by corporate houses

13

the decreasing external debt to GDP ratio indicates that India has a sound economic platform
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

10

Source: RBI Statistics

India: Surging Exports

Services sector has been a major contributor to increased exports from India
India's Exports: 2002-08 140 120 100 80 60 40 20 0 126.33 103.42 83.81 52.81 63.95 46.80

USD Billion

Acceptance of Indian products along with the cost advantage has provided an edge to Indian companies

Quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market products and services

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08 (AprilJuly)*
* - 2007-08 provisional data for period of April to July only

USD Billion

Indian companies have chalked out extensive plans to increase their presence abroad

India's Imports: 2002-08 250 200 149.65 150 100 50 0 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (AprilJuly)*
* - 2007-08 provisional data for period of April to July only

190.50 111.89 61.52 78.28 72.40

Product imports by India mainly include petroleum products and minerals

Petroleum products are the major contributors towards Indias growing imports

Source: Ministry of Finance (August Report)

India: Attractive Investment Destination

With improved performance on PE ratio and ROE, Indian markets have attracted large investments
India is ranked second in AT Kearneys FDI
USD Million
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (till June) 4,222 3,134 2,634 3,755
180 percent Increase

FDI Inflow - India: 2001-07 15,730

confidence index

5,546

4,909

Electronic equipment, manufacturing and telecom have witnessed significant FDI inflow

FDI inflow for the period 2006-07 witnessed a growth of 180 percent over the same period last year
USD Billion

Net FII into India: 2001-07 18 16 14 12 10 8 6 4 2 0 16.60

Large FII activity in India has led to an upsurge in the Sensex

10.00

10.20

9.40 6.71

1.80

0.60
2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (till 12 October)

2001-02

Source: DIPP (June Report), SEBI

India: Vibrant Capital Market

Sensex The Bombay Stock Exchange index has risen 18 times from 1990s to reach 18,000 mark in October 2007.

India is among the major destinations across the globe for inflow of US Dollar i.e. FIIs

10/9/2007 Crossed 18,000 mark Sensex has risen 18 times in the period 1990-2007
20000 18000 16000 14000 12000 10000
30 December 1999 Crossed 5,000 mark 07 February 2006 Crossed 10,000 mark 09 July 2007 Crossed 15,000 mark

Emergence of industry and confidence of local investors along with the FIIs has led to increased movement of the Sensex

8000 6000 4000 2000 0

12-Oct-97 12-Oct-98 12-Oct-99 12-Oct-00 12-Oct-01 12-Oct-02 12-Oct-03 12-Oct-04 12-Oct-05 12-Oct-06 12-Oct-07

FIIs have infused large investments into the Indian stock market

Encouraging industry performance

Increased local investors confidence

India: Vibrant Economy Driving M&A Activities

Growth Drivers: Globalisation and increased competition Concentration of companies to achieve economies of scale Lower interest rates and vibrant global markets Cash Reserves with corporates Trends: Ratio of the Size of acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006. Cross-border deals are growing faster than domestic deals Private Equity (PE) houses have funded projects as well as made a few acquisitions in India
Number of Deals and Value 30 25 20
USD Billion

SECTOR
28.2 782 900 800 700 600 500 400 300 200 100 0
Automotive

USD (Mn)
518 1,375 1,133 896 1,484 1,327

SECTOR
Manufacturing Media Oil & Gas Pharma & Biotech Telecom Others

USD (Mn)
933 630 384 2,520 2,198 4,006

Number of deals

18.3 12.3 306 467

Banking and Financial Chemicals and Plastics Electrical and Electronics Energy FMCG, Food and Beverages IT and ITES

15 10 5 0

2004 2005 2006 Deal Value No. of Deals

2,903

Total

20,305

In 2006, there were a total of 480 M&A deals and 302 private equity deals Average deal size close to USD 36 million Average private equity investment deal size increased to USD 26.02 million in 2006 from USD 16.4 million in 2005

Indian companies have clocked M&A deals approximately worth USD 31 billion during the first eight months in 2007

Source: Dealtracker Grant Thornton, Economic Times

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

Suzlon Energy Ltd. acquires REpower

USD 1.6 billion

United Spirits Ltd. acquired Whyte & Mackay

USD 1.1 billion

Major M&A and Investments Announcements in India

Vodafone buys Hutch
USD 11 billion

10

Plans to spend on its development operations in India over the next four years

USD 1.7 billion

Plans investment in private equity, real estate, and private wealth management

USD 1 billion

Aditya Birla Group increased its stake in Idea Cellular by acquiring 48.14-percent stake

USD 0.98 billion

Renault, Nissan and Mahindra & Mahindra have initiated a Greenfield automobile plant project in Chennai.

USD 0.905 billion

Mylan Laboratories acquired a majority stake in Matrix Laboratories

USD 0.74 billion

India: Pacing Ahead to Emerge as a Major Economy in the World

2007 Global Retail Development Index (GRDI)

11

GRDI Score

the retail market along with the services sector has been attracting interest of major global players

2007 Global Services Location Index India 3.2 2.9 2.8 3.2 2.6 3.3 1.3 1.2 1.8 1.5 2.3 2.3 2 1.6 1.5 1.1 1.4 1.4

100 80 60 40 20 0 India Russia Vietnam Ukraine China Chile Latvia

China Malaysia Thailand Brazil Indonesia

AT Kearney has placed India as the most preferable destination for Services sector

Financial structure Business environment

People and skill availablity

GDP Growth Rate (%)

India is the top destination in the AT Kearney Global Retail Development Index (2007)

Projected GDP Growth Rates for Select Upcoming Economies

India is expected to outperform its rivals in the BRIC, in terms of GDP growth rate, from 2015 onwards

0 2005-10 2010-15 2015-20 Brazil

Source: AT Kearney, BRIC Report

2020-25

2025-30 China

2030-35 India

2035-40 Russia

2040-45

2045-50

India: Astounding Demographics

DEMOGRAPHIC TRANSFORMATION OF INDIA
Growth in the higher income categories of Indias population is creating an affluent section with high purchasing power
Annual Household Income (in USD) 2 9 17 74 285 710

12

Population (million)

20 33 120 404 613

Rich (Above 115,000)

High Income (57,000 115,000) Consuming class (23,000 57,000) Working class (10,200 23,000)

9 48 221 726

Needy (Below 10,200)

2001-02

2005-06

2009-10(E)
* In PPP terms

Increasing per capita income and a growing middle class is driving a high level of consumerism in India

700 600 500

Per Capita Income 583 519 461 393

651

USD

400 300 200 100 0

Increasing per capita income coupled with an emerging middle class has provided the necessary impetus to consumerism in India

2002-03

2003-04

2004-05

2005-06

2006-07

Source: RBI Statistics

India: Increasing Working Population

Growth in Global Working Age Population (15-64)
Stock Position 2005 World India Africa China South East Asia Latin America Southern Asia USA Europe Japan 4,168 691 500 934 362 359 132 200 497 85 -3
-5 45 95 145
In Million

13

Addition to Working Age Population by 2010

314 71 64 44 33 31 17 10 0

195

245

295

345

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.
Source: Its Hendersons

Growth Expected in India

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

14

2010
GDP (at constant prices) USD 900 billion

2008
GDP (at constant prices) 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.

GDP growth rate 9% Services contribution 60-65 % Investment target USD 370 billion

2006
GDP (at constant prices) USD 590 billion GDP growth rate 9 % Services contribution 54 % FDI limit less than 100 per cent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade USD (-)46.2 billion Investment target USD 250 billion

Balance of Trade To improve with surging exports

Investment target USD 305 billion

Why India? Quote Unquote

India has evolved into one of the world's leading technology centers.
Craig Barrett Intel Corporation John Redwood Economic Competitiveness Policy Group, UK

15

India is now truly a land of opportunity.

I have never seen India so dynamic, vibrant and full of business opportunities.

By 2032, India will be among the three largest economies in the world.

Peter Loescher President and Chief Executive Siemens

We came to India for the costs, stayed for the quality and are now investing for innovation.

BRIC Report, Goldman Sachs

The Indian market has two core advantages - an increasing presence of multinationals and an upswing in the IT exports.

- Dan Scheinman, Cisco System Inc. as told to Business Week, August 2005

India is a developed country as far as intellectual capital is concerned.

Jack Welch General Electric

India is a very exciting market and the luxury car segment is growing exponentially here.
Mr Paul de Voijs Managing Director Volvo Car India

Travyn Rhall, ACNielsen

16

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