fd i summary presentation

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This document is confidential and is intended solely forthe use and information of the client to whom it is addressed.

Foreign Direct Investment in

IndiaAn AMCHAM and Booz & Company Study

Delhi, April 24th 2009


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Booz & CompanyAMCHAM India

Friday, 24 April 2009 1090324 FDI Summary Presentation vf.ppt

33.7

23.0

19.7

7.6

5.0

20082007200620052000-04

Rapid FDI growth in India from 2005 onwards

FDI in India(US$ Bn)

Source: World Investment Report, IHS Global Insight, CIA, DIPP, Ministry of Finance, World Economic Forum, Media Reports, Booz & Company Analysis

(Average)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

0% 1% 2% 3% 4% 5% 6% 7% 8%

FDI Growth Rate(2004-08)

Share ofGlobal FDI

(2008)

Brazil

Russia

China

India

Global comparison of FDI(%)


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FDI growth in line with overall investment growth - local marketdemand key driver

Reasons for FDI InvestmentBooz & Co. and AMCHAM Survey (% of Respondents)

24%

14%

24%24%

29%29%

86%

Local

Market

Demand

Low

Cost

Operations

Easeof

MakingFDI

Labor

Availability

Entryof

Other

Players

Political

Stability

Timezone

Advantage

7.4%

5.6%5.6%

2.6%

3.2%

2000-04 2008200720062005

FDI as % of Gross Total Investment(%)

Source: Booz & Company and AMCHAM Survey; DIPP: Global Insight; Booz & Company analysis


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Growth has been driven by the services sector

3.0

5.7

10.3

Services

Manufacturing

Infrastructure

2008

33.7

12.9

10.5

0.5

2000-04

5.0

1.2

3.1

0.7

1.8

7.6

2005

7.3

9.4

19.7

2006

8.2

8.3

22.2

2007

5.2

Sectoral Distribution of FDI(2000-2008)

(Average)

Housing andReal Estate

ConstructionActivities

Petroleum andNatural Gas

Key Industries Included

Computer S/Wand H/W

Automobile Metallurgical Chemicals

Electrical Equipment

Drugs and Pharma

Paper & Pulp

ITES / BPO / KPO

Telecommunications

Trading

Information and Broadcasting Hotel and Tourism

Consultancy

Hospital and Diagnostic

Source: DIPP: Booz & Company analysis

Power

Ports

Rail

Air Transport andFreight


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Limited FDI impact in the short-run

20%

Undecided

ReducingFDI

10%

No change

70%

Short-Term FDI ExpectationBooz & Co. and AMCHAM Survey

Commitmentcontinues

Source: Booz & Company and AMCHAM Survey; Booz & Company analysis

Re-profiling offlows

Environmentaluncertainty

Developed

Economies

0

5

10

15

20

25

30

35

40

45

50

55

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

Number of FDIApprovals

Approvals($Bn)

Monthly India FDI Approvals(Jan 2007 to Feb 2009)

Aug2007

Sep2007

Oct2007

Nov2007

Dec2007

Jan2008

Feb2008

Mar2008

Apr2008

May2008

Jun2008

Jul2008

Aug2008

Sep2008

Oct2008

Nov2008

Dec2008

Jan2009

Feb2009

# of ApprovalsFDI Approved ($ bn)


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In-fact India is a relative gainer in global FDI share

Developing EconomiesDeveloped Economies

Change in FDI vs. Size of FDI Inflow for Developed and Developing Countries

Strengthened FDIWeakened FDIDevelopedNations

Average

Worldwide

Average

DevelopingNations

Average

Source: Global Insight, Booz & Company analysis

-120% -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120%

80

70

60

40

50

FDI Inflow Size2008 ($Bn)

30

220

20

110

100

10

0ChangeIn FDI

(2007-08)

Egypt

90

South AfricaTurkey

Mexico

IndiaBrazil

Hong Kong RussianFederation

China

United KingdomFrance United States


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In the long-term, continued positive outlookLong-term Outlook on FDI into IndiaBased on Booz & Co. and AMCHAM Survey

19%

0%

52%

29%

Undecided

Less Attractive

Attractive(No Change)

More Attractive

Long-term Drivers

Attractiveness ofDomestic Market

Local Talent Pool

FDI PolicyLiberalization

Improved Infrastructure

Availability of capital

1

2

5

4

3

?

?Source: Booz & Company and AMCHAM Survey; Booz & Company analysis


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Indias opportunitySectoral(1) Comparison of FDI Investment

(Various Years from 2000-2008(2))

1) Multiple sectors reported by DIPP Have been combined together into the three higher level sectors2) Same year data not available across countries, so representative years used from 2000 to 2008; India data is Jan 2008 to Sep 2008

Source: Respective Central / Reserve Bank Statistical Databases, Research Reports, UNCTAD, Booz & Company Analysis

FDI as % of Gross Investment(%)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

2005 2006 2007 2008

Brazil

Russia

China

India

8%

41%

15%

25%

Services

Manufacturing

Infrastructure

China

19%

72%

Russia

11%

48%

Brazil

47%

38%

India

46%

29%


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Seizing the opportunity

Source: Booz & Company and AMCHAM Survey; Booz & Company analysis

40%

20%

25%

55%

60%

Simplified FDIProcesses

Quality and Availability

of Talent

Stable EconomicPolicy

ReducedBureaucracy

InfrastructureDevelopment

Top 5 Drivers for FDI Improvement in India(% of Total Respondents Identifying Initiative within Top 5)

Key Concerns Highlighted by AMCHAM Members(Quotes from Interviews)

It is hard to find economical raw materials for our manufacturingplant due to lack of proper roads

The telecom sector cannot grow without further investingsignificantly in infrastructure development

Educated employees are available but there is a serious lack ofemployable talent

Labor laws are antiquated and have not changed for the last 50yearsfocus is not on improving productivity

It is not clear where we can and where we cannot invest - thegovernment needs to create clear guidelines for FDI investment

Doing business in different states is like doing business in 30different countries

To get funds for manufacturing we used the automatic route, butto set up the plant we needed approvals for starting buildingconstruction, final building audit, manufacturing permit

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