destination india
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Destination India
Story of Success_____ January 23, 2006
2©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
India today is fast changing – setting the pace for growth and stability…
• Slow rate of growth
• Bureaucratic
• Protected and slow
• Small consumer markets
• Underdeveloped infrastructure
• One of the fastest growing world economies
• Reasonably proactive
• Opening up of sectors for investment
• Promising consumer markets
• Significant investment in infrastructure creation for industry
YESTERDAY
TODAY
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4©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
0 5,000 10,000 15,000 20,000 25,000
RussiaIndia
MexicoBrazilChina
CanadaItaly
FranceUK
Germany
JapanUS
GDP (US$bn)
Year 2000 vs. Year 2020 predictions
India emerging as one of the top global economies
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Opportunity niches
A Few Specific Sectors of Interest
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India is one of the fastest growing automotive markets in Asia Pacific…
Sales of passenger cars by country - 2003-2008
4.5 4.7 4.6 4.5 4.6 4.6
2.0 2.3 2.6 2.9 3.4 4.10.91.0 1.1 1.2
1.51.6
1.31.1 1.2 1.3
1.31.4
0.40.6 0.6 0.7
0.80.9
1.01.1
1.21.3
1.41.4
10.110.8
11.311.9
13.014.1
0
2
4
6
8
10
12
14
16
2003 2004 2005 2006 2007 2008
Mil
lio
n u
nit
s
Japan ChinaIndia South KoreaThailand Others
Note: "Others" includes Malaysia, Indonesia, Philippines, Taiwan and Vietnam
Source: EIU, "World automotive outlook", 2004
Extra 3 million units expected from China and
India
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…driven by growing economies and low vehicle penetration levels
Vehicle penetration vis-à-vis GDP
Source: Autodata Presentation from Mr. W. Vahland -Volkswagen do Brasil - 10/16/2000
0
5
10
15
20
25
30
35
40
0 100 200 300 400 500 600 700 800
China Thailand
Mexico
Argentina
South Korea
Taiwan
Greece Portugal
SpainNew Zealand
Italy
Australia
England
Belgium’
NorwayDenmark
Germany
Canada
Japan
Switzerland
USA
Pe
r c
ap
ita
GD
P (
US
$ 1
,00
0)
Brazil
France
India
Penetration levels in India are less than 10 per 1000
population
Vehicle population expected to grow with GDP, leading to high demand potential in
these countries
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In sum, India is emerging as a key growth area for the automotive industry in the Asia Pacific region
• Low penetration levels
• Growing economies
• High export potential
• Mature markets stagnating
• Shift in investment to Asia
Pacific countries
Demand side growth
Supply side growth
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The Indian infrastructure industry is witnessing rapid growth
Prospects in the longer term remain Positive. Industry projected to further grow by 7-8% annually - faster than the country’s projected GDP growth
• Indian Engineering and Construction industry
recorded a CAGR of 8.4% over the last two decades
• The industry is widely expected to continue its growth performance in the medium term
…Thrust area for the Indian government
…Witnessing Abundance of Opportunity
Construction & Infrastructure Development viewed as a major growth engine of the Indian Economy
Select top companies ruling High volume projects, entry of Several New and Small Players Entry of International players, alliances & JV’s
…Growing and Gaining complexity
Booming Indian Economy, Improved Living conditions, Policy & Taxation reforms, Rise in Gross Capital Formation
Global Engineering & Construction spending growth‘03-’04 ‘04-’07
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Opportunity Areas for Engineering Firms
Sector Opportunity Areas
Oil & Gas
•Upstream
•Refining
•Petrochemicals & Fertilizers
•Pipeline, Tankage, and
Terminal
• NELP – Investment in the range of $100-150 bn expected in next 10-15 years. Indian & foreign companies to particiapte
• Industry research shows that additional refining capacity of around 110 mn tonnes will be required in India by 2010.
• Indian companies like IFFCO planning to expand capacity in India
• Crude, product and gas pipeline as well as tank farms are likely to attract large investments.
LNG terminals – huge potential in India
Power Demand supply gap widening - Government plans “Power to all” within another decade
Major capacity addition likely in the next 10 years – over 100,000 MW is planned to be added
Thrust on Hydel – since very low potential has been tapped
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Urban Infrastructure
Another area where the demand far outstrips supply is the urban infrastructure amenities. The government is stressing on large capacity addition in various segments of the sector. Urban transportation, water supply and housing are some of the key areas. Other than a huge plan outlay, private participation is also considerable
Special Economic Zone development is also an area to look out for
Ports An increase in port capacity from 334 MT to 470 MT by the end of the Tenth Five Year Plan envisaged. Investments of around Rs 163 bn planned.
Airports Privatization and upgradation of four metro airports planned. A number of airports, including international airports at Hyderabad and Bangalore, to be built. Investment of over Rs 164 bn proposed
Opportunity Areas for Engineering Firms … cont’d
Roads Investments upwards of USD55 billion planned. Plans are on to build or widen 14,162 kms and 105,000 of roads by the central sector (NHAI) and state sector respectively.
Opportunities in O&M of road projects also substantial
Infrastructure investment in the next 3 years estimated at around INR 4,000 bn of which Engineering & Construction is expected to be around INR 2,600 bn
Sector Opportunity Areas
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IT & IT-enabled sectors
IT industry is one of the fastest growing industries in India – grown at a CAGR of 29% over the last 5 years
Industry like to maintain high growth and is expected to generate revenues of USD 62 bn by 2008 and USD 148 bn by 2012 (NASSCOM-KPMG estimates)
In India the IT sector employs around 650,000 people currently, which is likely to increase to 2 million by 2010
Government backing for the sector
Infrastructure support through setting up of technology parks and continuing strengthening of communication facilities
100% FDI allowed in the sector through the automatic route
India exports IT products and IT enabled services to 133 countries
220 of the Fortune 500 companies outsource their software from india
Huge export potential yet to
be tapped Lower cost
High end research, analytics and design, large pool of skilled technical personnel available
O pportunitiesIT & ITeS Sectors
India seen as an outsourcing hub
Higher value added services planned and new markets
aggressively targeted
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Pharmaceuticals & Biotechnology
India is the world’s fourth largest pharmaceuticals producer – 8% of global production volume and 1.5% by value
Major manufacturing base for generic drugs
Indian pharmaceuticals manufacturers have a huge cost advantage over their developed country counterparts – almost one-twentieth of the cost
Exports are a vital component of growth strategy of pharma companies
Exports have grown by over 20% in the last five years – the US is the largest export market
Biotechnology market also growing rapidly
According to market analysts, the Indian biotech market, estimated at USD 0.5 billion in 2003 is expected to grow to around USD 5 billion by 2010
Government providing extensive policy and infrastructural support to both sectors
Rapid growth and large
export potential
Generic drug market growing
High end research,, large pool of skilled manpower available
O pportunitiesPharma & Bio Tech
Major cost advantage
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15©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
Opportunity niches
India – An enabling business environment
16©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
17©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
FDI – Financial collaboration
100% FDI permitted in most sectors
No prior approval necessary; Only post-facto filings
FDI should be brought through normal banking channels
Investment represented by fresh issue of shares
Automatic Route
Prior Approval
Generally, applicable in following cases:• Certain cases where
FDI is regulated• Investor has existing
joint venture / collaboration in same field existing prior to 13 Jan 2005
• Acquisition of existing shares in financial services sector
Applications processed by Foreign Investment Promotion Board [FIPB]
Negative List
FDI not allowed in certain sensitive sectors e.g.:• Agriculture• Atomic energy• Railway Transport• Real Estate (except
townships/ industrial parks, etc)
IT ITES Textiles Pharma Oil & Gas AMC NBFC Integrated township development Industrial parks Industrial model towns Hotels and tourism SEZ’sAtomic energyRailway transportLottery business, gambling and betting
FDI in select sectors
FDI is permitted up to 100% under automatic route in Indian companies in the petrochemicals sector other than products requiring industrial approval [Hydrocyanic acid and its derivatives and Phosgene and its derivatives]
18©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
19©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved. Slide | 19
Overview of tax regime in India
Indian tax regime
Income tax
Foreign Trade Policy
Customs Duty
Service tax
R&D cess
Cenvat (Excise) Duty
Sales tax/ Value Added Tax (“VAT”)
Indirect taxes
20©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
India has not only established its leadership in the software sector, but also proved its pre-eminence in the fields of aeronautics and aerospace, thanks to a strong industrial and engineering base, built over the last four decades
- Mr. Dominique Paris, Sr VP, Snecma (France)
I'm amazed at the kind of engines and the number of engines that are made in India- Mr. David Friedman, Managing Director, Ford India
India in the eyes of MNCs - that have chosen India …
There is a high potential of very good technical people in India and the cost to the company is almost a fourth
-Mr. Hans Juffermans, Technical Director (R&D operations), Akzo Nobel India
The driving reason why GE has come to India is not the cost, but the talent pool- Mr. Guillermo Wille, Managing Director, John F. Welch Technology Centre, India
Working with our Indian partners, we intend to increase our presence on the world market-Mr. Philippe Camus, CEO, EADS
21©2006 KPMG, the Indian member firm of KPMG International, a Swiss cooperative. All rights reserved.
Thank you!