confederation of indian industry

© Confederation of Indian Industry

Confederation of Indian Industry

State of the Indian Economy, July 2008


State of the Indian Economy

Robust GDP Growth

Manufacturing & Services are leading the way

Strong Macro Economic Fundamentals

Growing Externalisation of the Economy

33

44

22

11


Robust GDP Growth 11

Large and Growing Economy

GDP & Inflation (2007- 08)

GDP growth: 9%

Average Inflation: 5.1%

GDP growth projections:

7.7% to 9.5% for 2008-09

Targeted to reach 10% by 2012

AE Stands for Advance Estimates

4.3

6.8 6.37.3

1.9

4.9 4.25.5

02

46

8

1970-71 to1991(PreReform)

1992-93 to2007-08

1992-93 to1999-00

2000-01to2007-08

GDP Growth (%) Per Capita Growth(%)


9.0

9.69.4

7.58.5

3.8

5.8

4.4

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Robust GDP Growth (%) 11

India is the 4th largest economy in terms of PPP

GDP of India is US $ 3787.3 billion in PPP terms


G r o w t h h a s b e e n p r o p e l l e d b y I n d u s t r y & S e r v i c e s

9

6 .3

- 7 .2

5 .8

3 .74 .5

1 11 0 .3

1 1 .9

1 0 .7

7 .5

9 .4

8 .5

3 .8

5 .8

4 .4

9 .6

1 0

- 0 .20

6 .4

9 .6

8 .1

5 .7

- 1 0

- 5

0

5

1 0

1 5

20

00

-01

20

01

-02

20

02

-03

20

03

-04

20

04

-05

20

05

-06

20

06

-07

(Q

E)

20

07

-08

(AE

)

Pe

r c

en

t

G D P A g r ic u l t u r e In d u s t r y S e r v ic e s

Source: CSO


QE=Quick Estimates,RE= Revised Estimates


GDP Composition Undergoing a Drastic Change


1990-91

32%

27%

41%

Agriculture Industry Services

2006-0718.5%

26.6%

54.9%

Source: Reserve Bank of India


Sectoral Growth

Industry: Improving Trend in Sectoral Growth (%)

Source: CSO,

22 Manufacturing & Services are leading the way

Items 2004-05 2005-06 2006-07 2007-08(AE)Industry 9.8 10.15 11 8.1Mining and Quarrying 7.5 4.87 5.7 4.7Manufacturing 8.7 8.98 12 8.8Electricity, gas & water supply 7.5 4.68 6 6.3Construction 14.1 16.46 12 9.8



Sectoral Growth

Services: Improving Trend in Sectoral Growth (%)

Manufacturing & Services are leading the way22

Source: CSO,

I t e m s 2 0 0 5 - 0 6 2 0 0 6 - 0 7 2 0 0 7 - 0 8 ( A E )S e r v i c e s 1 0 . 3 4 1 1 . 9 1 0 . 7T r a d e , h o t e l s , t r a n s p o r t & c o m m u n i c a t i o n 1 1 . 5 1 1 1 . 8 1 2 . 0F i n a n c i a l , r e a l e s t a t e & b u s i n e s s s e r v i c e s 1 1 . 4 1 1 3 . 9 1 1 . 8C o m m u n i t y , S o c i a l a n d p e r s o n a l S e r v i c e s 7 . 2 1 6 . 9 7 . 3



34.8

35.9

22

24

26

28

30

32

34

36

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

% o

f G

DP

Gross Domestic Savings

Gross Domestic Investment

Rising Savings & Investment

Source: CSO

Strong Macro Economic Fundamentals33


18.6

18

4.1

13.2

13.7

18.4

19

29

22.9

20.4

17.7

5

11.9

16.9

16.2

13.8

16.4

7.9

10.912.6

11.8 12

24

27.9

22.1

35.76

28.4

23.5

29

0

4

8

12

16

20

24

28

32

36

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

Q106-07

Q206-07

Q306-07

Q406-07

H107-08

Q307-08

Q407-08

%

Manfg. Services

Corporate Performance: growing top line

Source: CMIE

Strong Macro Economic Fundamentals33


Growing Externalisation of the Economy44

V a l u e o f E x p o r t s a n d I m p o r t s

52

.7 63

.8

83

.6

10

3.1

12

6.4

15

5.5

0

2 0

4 0

6 0

8 0

1 0 0

1 2 0

1 4 0

1 6 0

1 8 0

2 0 0

2 0 0 2 - 0 3 2 0 0 3 - 0 4 2 0 0 4 - 0 5 2 0 0 5 - 0 6 2 0 0 6 - 0 7 2 0 0 7 - 0 8

Y e a r

US

do

llars

in b

illio

ns

E x p o r t s Im p o r t s


Trade as a % of GDP is on a rise

0

5

10

15

20

25

30

35

40

1990

-91

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

% o

f G

DP

Total Invisibles,netExports Imports


41

21.1

13.9

6


Trade Performance2

0.3

21

.1

30

.8

23 23

.88

23

.03

19

.4 27

.3

42

.7

27

.7

29

.33

27

.01

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Exports Imports

Impressive Growth in Export and Import (%)

Source: DGCI&S



Foreign Capital Inflows ( US $ Billion)

Expanding Foreign Investment

Source: RBI


-5.0

0.0

5.0

10.0

15.0

20.0

1999-0

0

2000-0

1

2001-0

2

2002-0

3

2003-0

4

2004-0

5

2005-0

6

2006-0

7

Direct Foreign Investment Portfolio Foreign Investment

7

19.4

FDI in 2007-08: US$ 25 billion


2.2

40

.0

51

.0 72

.0 10

7.0

13

5.6

14

3.9 19

9.2

29

9.2

1990-91 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Rapid Expansion in Foreign Reserve (US $ Bn)

Source: RBI


2.24

Forex Reserves US $ 301 billion (As on June 28, 2008)


India’s FDI Abroad: Rapid Increase

Source: RBI


(US Billion $)

0.761.39

1.82 1.93 2.272.93

11.01

2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07


Sectors of Opportunity in IndiaSectors of Opportunity in India

InfrastructureInfrastructure ManufacturingManufacturing ServicesServices TechnologyTechnology Agri-productsAgri-products EducationEducation


(US$ bn)(US$ bn) Tenth PlanTenth Plan

2002-20072002-2007Eleventh PlanEleventh Plan

2007-20122007-2012

EnergyEnergy 70.570.5 150.4150.4

Roads and bridgesRoads and bridges 31.731.7 76.176.1

TelecommunicationTelecommunication 22.522.5 65.165.1

RailwaysRailways 20.320.3 62.262.2

IrrigationIrrigation 32.132.1 53.153.1

Water supply and Water supply and sanitationsanitation

15.615.6 48.648.6

PortsPorts 1.31.3 18.018.0

AirportsAirports 2.12.1 8.58.5

Storage and gasStorage and gas 4.44.4 10.510.5

TotalTotal 200.5200.5 492.4492.4

Investment Estimate for Infra Sectors


Policy Framework for Infrastructure

Public Private Partnership to build confidence and extend Public Private Partnership to build confidence and extend support to private sector participation support to private sector participation

Open to Private Sector Participation Open to Private Sector Participation Government investment to increase over the period 2007-Government investment to increase over the period 2007-

2012 2012 100% FDI allowed in most sectors 100% FDI allowed in most sectors Tax Incentives to encourage investments Tax Incentives to encourage investments International bidding – open & transparentInternational bidding – open & transparent Independent Regulatory AuthoritiesIndependent Regulatory Authorities


• Number of operational airports: 88• Passengers handled in 2006-07: 96 million; growth of 31% • Freight carried in 2006-07: 1.6 MT; growth of 11%• Number of scheduled operators: 14

Sectoral Perspective – Airports

Projected Investment of US$ 9 billion by 2012

The fast growth of air traffic has resulted in straining the aviation infrastructure, leading to air traffic congestion and delays

Major upgradation of airport infrastructure, modernisation of communication, navigation & surveillance facilities are currently being undertaken

Modernisation of Delhi and Mumbai airports as well as greenfield airports at

Hyderabad and Bangalore are being developed by the private sector

35 non-metro airports are also being revamped by the government

96 million in 06-07 350 MT in 2020


The Indian Infrastructure Sector The Indian Infrastructure Sector welcomes participation across all areas welcomes participation across all areas ::

AdvisoryAdvisory

EngineeringEngineering

Project ManagementProject Management

Project DevelopmentProject Development

ConstructionConstruction

FinancingFinancing

Operations & MaintenanceOperations & Maintenance

Welcome !


Advantage INDIA•Indian manufacturing sector is expected to grow at 12% to 14 % over the next decade

•India is ranked 48 in the latest GCI index

•The quality of Indian work force is one of India’s key competitive advantages

•Indian economy expected to grow at 8% to 10% over the next decade

INDIA IS AMONG THE MOST COMPETENT MANUFACTURING LOCATIONS FOR A WIDE VARIETY OF REASONS

MANUFACTURING IN INDIA


India: A Market of Opportunities

3rd largest car market 3rd largest car market –– 7.4 m vehicles in Apr-Dec 2007 7.4 m vehicles in Apr-Dec 2007 surpassing China surpassing China

Among the worldAmong the world’’s largest cable TV networks - 70 mn s largest cable TV networks - 70 mn connectionsconnections

Number of telephone lines have increased 10-fold in the Number of telephone lines have increased 10-fold in the last decadelast decade

Major investments in infrastructure and manufacturing Major investments in infrastructure and manufacturing providing impetus to growth.providing impetus to growth.

Agriculture and Food Processing:Agriculture and Food Processing: 14 agri-zones – 214 agri-zones – 2ndnd largest producer of vegetables, 3 largest producer of vegetables, 3rdrd

largest in fruits, 91 mn tons of rice productionlargest in fruits, 91 mn tons of rice production Food processing to be next engine of growth Food processing to be next engine of growth $23.5 bn investments in pipeline over next 3 years$23.5 bn investments in pipeline over next 3 years


Some Opportunity Areas in Manufacturing in India

AutomotivesAutomotives Automotive ComponentsAutomotive Components Machine ToolsMachine Tools Electrical & Power EquipmentElectrical & Power Equipment Earthmoving and Construction EquipmentEarthmoving and Construction Equipment Process Plant Equipment Process Plant Equipment Textile MachineryTextile Machinery SteelSteel Consumer DurablesConsumer Durables Castings and ForgingsCastings and Forgings Telecom and Telecom EquipmentTelecom and Telecom Equipment TextilesTextiles ChemicalsChemicals Oil and GasOil and Gas


Automotive Components

India has a very large diversified automotive components industry which exports 51% of its production.

There has been a production growth rate of 20% in the automotive component industry in April-June 2008(estimated) over same period in 2007.

Indian automotive companies are well positioned in terms of skills, price and quality to cater to global supply chains.

A number of global players are currently sourcing components for their global supply chain from India, these include Ford, General Motors, Volvo etc.

Indian Auto component companies are looking for technology up-gradation to cater to international requirements.This includes fully automated Weingarten press lines,single location forging facilities,fully integrated CAD-CAM-CAE, high crankshaft manufacturing capacity,in-house tool making and online procurement.


Machine Tools

The Indian machine tool industry is approximately a $ 0.5 billion industry,manufacturing metal cutting, metal forming, conventional and automated machine tools.

There has been a significant shift from general purpose machines to CNCs which now constitutes 70% of total production.

There has been a 23% rate of growth in the industry in April-June 2008 (estimated)over same period in 2007. Approximately 4.7% of the production in India is exported. Exports include CNC Lathes, vertical machining centres, grinding machines, etc.The export destinations are USA, Germany, China, Italy, Mexico, Canada, UK and Brazil.

In the 1980’s, the machine tools industry acquired a wide range of technology for modernization, especially for special purpose machine tools.

The industry is looking at up-grading technology, especially in auxiliary equipment supplies. The areas of interest include gear cutting, CNC grinding, high pressure forming, laser applications, software for 5 axis machining, near net shape forming, hydro forming and high speed pressing.


Electrical & Power Equipment

The Indian electrical and power equipment industry is a $ 6.3 billion industry. The industry has seen the following trends in growth rate in April-June 2008

(estimated) over same period in 2007 :- Transformers – 4.1% Motors & Starters – -14.58% Boilers – 35%

Export in 2007-08 grew by 14% India has a competitive advantage in Transformers, Switch Gears above 1000V,

Steam Boilers, Steam Vapour Turbines etc. The larger players have access to modern technologies. There is a technology lag in

areas like precision control of AC motors, linear motors and software engineering for various applications.

In process innovation, Indian companies have adopted CAD / CAM design optimization etc. However, the use of remote diagnostics to identify defects is still limited.


Key Services Sectors in India

HEALTHCARE

TOURISM

RETAIL

LEGAL SERVICES

ACCOUNTING SERVICES


HEALTHCARE

The Big Opportunity :

• World’s largest industry : revenues of US$ 2.8 trillion

• India – Revenues : US# 30 Billion , contributes 5% to GDP, Employment provider to 4 million people

• By 2025 : US$ 100 Billion in revenues and 10% of GDP

• Healthcare in India is dominated by the Private players : 10 largest national healthcare networks would absorb 30% of the market share by 2025.


HEALTHCARE

Key Success Drivers :

• Medical Value Travel / Medical Tourism : US$ 2 billion by 2012

- world class treatment at fraction of cost (almost 1/10th)

- no waiting time for surgeries

• Outsourcing of Diagnostics, Pathology and Lab tests to India due to high cost differential

• Clinical Trials : availability of huge patient pool, and cost advantage of testing of drugs at 60% of price

• Health Insurance : less than 10% of population insured for any sort of health insurance


TOURISM

The Big Opportunity :

• Indian Tourism second only to China - Contributes 5.9% to GDP

- Provides Employment to 41.8 million people

• World Travel and Tourism Council has named India, along with China, as one of the fastest growing tourism industries for next 10-15 years

• Liberal investment norms : 100% FDI allowed through automatic route


TOURISM

Key Success Drivers :

India offers many options to the world traveler :

• Medical Tourism • Adventure tourism• Heritage Tourism• Wellness Tourism • Pilgrimage Tourism • Golf-Tourism• Eco-Tourism• Wildlife tourism


RETAIL

Key Success Drivers :• India topped AT Kearney’s annual Global

Retail Development Index for 3rd consecutive year : ranked as most attractive market for Retail investment globally

• Consumer class of 400 million with rising disposable incomes, sense of optimism within the economy, deep rooted entrepreneurial culture provide a big fillip to the sector

• Liberalized norms for investment by Government of India

- 100% FDI in Cash-and-Carry through automatic route

- 51% in FDI in single brand outlets


www.cii.in

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