indian economy today

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INDIA: FASTEST GROWING FREE MARKET DEMOCRACY

Even though the world has just discovered it, the India’s

growth story is not new. Ithas been going on for 25years now.



RISING GDP GROWTH

% average annual GDP growth

1900 – 1950 1.01950 – 1980 3.51980 – 2002 6.02002 – 2006 8.02006 – 2010 10.0

Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001), 2000-2005 Finance Ministry



POPULATION GROWTH IS

SLOWING% average annual growth

1901 – 1950 1.01951 – 1980 2.21981 – 1990 2.11991 – 2000 1.8

2001 – 2010 1.5

Sources: 1900-1990: Angus Maddison (1995), Monitoring the World Economy, 1990-2000:Census of India (2001)



LITERACY IS RISING%

1950 17

1990 52

2000 65

2015 (proj) 80

Source: Census of India (2001)



MIDDLE CLASS ISEXPLODING

% Million

People

1980 8 65

2000 22 220

2010 (proj) 32 368

Source: The Consuming Class, National Council of Applied Economic Research, 2002



POVERTY IS DECLINING

1980 46%

2000 26%

2015 (proj) 16%

1% of the people have been crossing poverty lineeach year for 20 years. Equals ~ 200 million.



PER CAPITA INCOME

GAINS(US$ ppp)

1980 1178

2000 3051

Source: World Bank



PRODUCTIVITY IS

RISING

30% to 40% of GDP growth isdue to

rising productivity



RISE OF GLOBALLY COMPETITIVE

INDIAN COMPANIES

Reliance, Jet Airways, Infosys, Wipro,Ranbaxy, Bharat Forge, Tata Motors,

TCS, Bharati, ICICI and HDFC Banks



n a as a v ran pr va espace

> 100 Indian Companies have market

cap of US$ 1 billion> 1000 Indian Companies have

received foreign institutional

investment

> 125 Fortune 500 companies haveR&D bases in India

> 390 Fortune 500 companies have

outsourced software development to India.

< 2% bad loans in Indian banks (vs ~ 20% inChina)

> 80% credit goes to private sector (vs~10% in

China)



DEMOGRAPHIC TREND POINTS TO SHARP INCREASES IN INPUT FACTORS

54%

46%

25+

yrs

0-25

yrs

Demographic Split

420

800

0

200

400

600

800

1,000

1,2001,400

1,600

2005 2025

1.5 bn

1.1 bn

Labor

Forc

e

Labor Force will double in the next 20 years



DEMOGRAPHIC TREND POINTS TO SHARP INCREASES IN INPUT FACTORS

Age Dependency

17%

42.0%45%

35+%

24%

0%

10%

20%

30%

40%

50%

1980's 2002 2008 2025 China 2008

Savings Rate

Higher savings and investment rate will translate into higher GDP growth

O G O CO S S O G



INDIA: AMONG THE TOP-15 COUNTRIES IN TERMS OF GDPAT CONSTANT PRICES

339 347

3 9

67

4 9

68

3

4

6

7

999- -3 -6 6-7

U S D B i l l i o n

Services Agriculture Industry

The Indian economy has witnessed an unprecedented growth…. Booming Indian services and industry

sector are providing the required impetus to the economic growth

The sound

performance of each

industry segment is

leading to the overall

robust performance of

the Indian economy

Indian economy is the

4th largest in terms of

PPP – USD 4.1 trillion

in 2006

India’s GDP

witnessed high growth

and was the secondfastest growing GDP

after China

Growth in sectors (2006-07):

Industry: 10.9%

Services: 11%

Agriculture: 2.7%

Fastest GDP growth of 9.4 percent

in 2006-07, since last 18 years

Contributionof Services -

increased

from 49

percent to 55

percent

India's GDP: 2002-07

2

550 1

0

100

200

00

00

500

00

00

2002-0 200-0 200-05 2005-0 200-0

U S D B i l l i o n

GDP at Cons tant Prices

4%

8.5% 7.5%

8.4%

9.4%



INDIA: ROBUST ECONOMIC PLATFORM

India's Forex Reserves: 2001-07 (Till 22 June 2007)

55

112

11 152

121

0

50

100

150

200

250

2001-02 2002-0 200-0 200-05 2005-0 200-0 200-0

(Till 22

June)

U S D B i l l i o n

External Debt-to-GDP Ratio

21.120.4

17.817.3

15.816.4

10

13

16

19

22

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

R

a t i o

India’s enhanced

economic

performance has been

the major contributor towards increased

Forex reserves

Steadily increasing

Forex reserves offer

adequate security

against any possible

currency crisis or monetary instability

Falling Dollar inflates the

India’s external debt

Increased confidence

of investors in Indian

companies have led to

a surge in cross

border borrowing by

the corporate houses

Forex reserves

witnessed an increase

of 200 percent for the

period 1990-2007

…at present level of Forex

reserves, the country has adequate

cover for 12 months of imports

India’s Forex

reserves are in

excess of external

debt…

…the decreasing external debt to

GDP ratio indicates that India has a

sound economic platform



India: Vibrant Capital Market

India is among the

major destinations

across the globe for inflow of US Dollar i.e.

FIIs

Sensex risen 15 times

in the period 1990-

2007

Sensex – The Bombay stock exchange index has risen 15 times from 1990s to reach

15,000 mark in July 2007

FIIs augmented

support by infusing

large investments in

Indian stock market

Exorbitant industry

performance

Increased local

investors’ confidence

Emergence of industry

and confidence of

local investors along

with the FIIs has led to

increased movementof sensex-

2 , 0 0 0

4 , 0 0 0

6 , 0 0 0

8 , 0 0 0

1 0 , 0 0 0

1 2 , 0 0 0

1 4 , 0 0 0

1 6 , 0 0 0

7/1/1997 7/1/1998 7/1/1999 7/1/2000 7/1/2001 7/1/2002 7/1/2003 7/1/2004 7/1/2005 7/1/2006 7/1/2007

I N R

7/9/2007

Crossed

15,000

mark

Crossed 14,000 mark

Crossed 10,000 mark

Crossed 5,000 mark

12/30/1999

2/7/2006

1/12/2007



India: Vibrant Economy Driving M&A Activities

SECTOR USD (Mn) SECTOR USD(Mn)

Automotive 518 Manufacturing 933

Banking and Financial 1,375 Media 630

Chemicals and Plastics 1,133 Oil & Gas 384

Electrical and Electronics 896 Pharma & biotech 2,520

Energy 1,484 Telecom 2,198

FMCG, Food andBeverages

1,327 Others 4,006

IT and ITES 2,903 Total 20,305

Growth Drivers:

Globalisation of

competition Concentration of

companies to

achieve economies

of scale

Lower interest rates

and vibrant global

markets

Cash Reserves with

Corporates

Number of Deals and Values

12.

1.

2.2

0

2

0

5

10

15

20

25

0

200 2005 200

U S D B i l l i o n

0

100

200

00

00

500

0000

00

00

N u m b e r o f d e a l s

Deal Values No. of Deals

…Contribution of private

equity deals to total

number of deals have

increased from nearly 9

percent in 2004 to 28

percent in 2006

In 2006, there were a total

of 480 M&A deals and 302

private equity deals…

… Average deal size close to

USD 36 million…

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



Major M&A Deals Undertaken Abroad by India Inc.

USD 12.1 billionTata Steel buys Corus PlcTata Steel buys Corus Plc

USD 6 billionHindalco acquired Novelis Inc.Hindalco acquired Novelis Inc.

USD 1.58 billionEssar Steel acquired Algoma SteelEssar Steel acquired Algoma Steel

USD 730 millionVideocon Industries acquired Daewoo

Electronics Corporation Limited

Videocon Industries acquired Daewoo

Electronics Corporation Limited

USD 1.6 billionSuzlon Energy Ltd. acquires REpower Suzlon Energy Ltd. acquires REpower



19Major M&A and Investments Announcements in India

USD 11 billionVodafone buys HutchVodafone buys Hutch

USD 0.98 billionAditya Birla Group increased its stake in Idea

Cellular by acquiring 48.14-percent stake

Aditya Birla Group increased its stake in Idea

Cellular by acquiring 48.14-percent stake

USD 1 billionPlans investment in private equity, real estate,and private wealth management

Plans investment in private equity, real estate,

and private wealth management

USD 1.7 billionPlans to spend on its development operations

in India over the next four years

Plans to spend on its development operations

in India over the next four years

USD 0.905 billionRenault, Nissan and Mahindra & Mahindra

has initiated a Greenfield automobile plant

project in Chennai.

Renault, Nissan and Mahindra & Mahindra

has initiated a Greenfield automobile plant

project in Chennai.

Mylan Laboratories acquired a majority stake

in Matrix Laboratories

Mylan Laboratories acquired a majority stake

in Matrix LaboratoriesUSD 0.74 billion

India Pacing Ahead to Emerge as a Major Econom in the



India: Pacing Ahead to Emerge as a Major Economy in theWorld

Projected GDP Growth Rates for Select Upcoming Economies

0

2

2005-10 2010-15 2015-20 2020-25 2025-0 200-5 205-0 200-5 205-50

G D P G r o w t h R a t e ( % )

Brazil China India Russia

0

20

0

0

0

100

India Russia VietnamUkraine China Chile Latvia

G R D I S c o r e

2007 Global Retail Development Index (GRDI)2007 Global Services Location Index

3.3

2.6

3.2

2.8

2.9

3.2

1.5

1.8

1.2

1.3

2.3

2.3

1.1

1.5

1.6

2

1.4

1.4

Indonesia

Brazil

Thailand

Malaysia

China

India

Financial structure People and ski ll availablBusiness environment

India has been ranked

superior to other

major countries bymany prominent

surveys…

AT Kearney placed

India among the top

three in its FDI

confidence index…

… the retail market

along with the

services sector has

been attracting the

interest of major

players

India is expected to

outperform its rivals in

the BRIC, in terms of

GDP growth rates,

from 2015 onwards…



India: Attractive Investment Destination

India is ranked second

in AT Kearney FDI

confidence index

Telecom and

Electronics topped the

list of inward FDI

FDI inflow for the

period 2006-07

witnessed a growth of

180 percent over the

same period last year

Mauritius has beenthe largest contributor

towards FDI into

India…..

Return on the Investments in India (2006 Q1)

Market PE Ratio P/B Ratio RoE (%)

India 16.1 4.53 22

China 10.62 2.06 17

Indonesia 10.26 3.09 NA

Korea 9.85 1.84 16

Malaysia 13.21 1.82 16

Taiwan 12.17 2 11

Thailand 9.84 2.32 23

EM Asia 11.19 2.12 15

Latin America 9.35 2.46 18

EM Europe 10.9 2.39 15

With improved performance on PE ratio and ROE, Indian markets have attracted large

investments

FDI Inflow - India: 2001-07

4,2223,134 2,634

3,755

5,546

15,730

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,00018,000

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

U S D

M i l l i o n

180 percent

Increase



India: Astounding Demographics

Per Capita Income

151

5

51

0

100

200

00

00

500

00

00

2002-0 200-0 200-05 2005-0 200-0

U S D

2

9

48

221

726

9

17

74

285

710

20

33

120

404

613

2001-02 2005-06 2009-10(E)

Rich (Above 115,000)

High Income (57,000 – 115,000)

Consuming class (23,000 – 57,000)

Working class (10,200 – 23,000)

Needy (Below 10,200)

Annual Household Income

(in USD)

* In PPP terms

Population(million)

Increasing per capita income

coupled with an emerging middle

class has provided the necessary

impetus to consumerism in India

Growth in the higher

income categories of

India’s population hascreated an affluent

section of society,

which has significant

level of purchasing

power

Increasing per capita

income and large

population moving into

middle class has led

to high level of consumerism in India

DEMOGRAPHIC TRANSFORMATION OF INDIA



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.

India: Increasing Working Population

-3

0

10

17

31

33

44

64

71

3

-5 45 95 145 195 245 295

Stock Position 2005

South East Asia 362

Southern Asia 132

India 691

Africa 500

China 934

Latin America 359

USA 200

Europe 497

Japan 85

World 4,168

In Million

Addition to Working Age Population by 2010

Growth in Global Working Age Population (15-64)



India: Exports

India's Import: 2002-07 (till February 2007)

1.52.2

111.

1.512.0

020

00

0

100

12010

10

10

2002-0 200-0 200 -05 2005-0 200-0

(upto Feb.

0)

U S D B i l l i o n

India's Exports: 2002-07 (till February 2007)

52.81 63.95

83.81

103.42112.40

0

20

40

6080

100

120

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

(upto Feb.

07)

U S D

B i l l i o n

Petroleum products are the major

contributors towards India’s growingimports

Quality and cost advantage are the two

important parameters leveraged by the

Indian producers to increasingly market

their products and services

Services sector has

been a major

contributor to

increased exports

from India

Imports of products by

India mainly includes

petroleum products

and minerals

Indian companies

have chalked out

extensive plans to

increase their

presence abroad

Acceptance of Indian

products along with

the cost advantage

has provided an edge

to Indian companies



GDP – USD 590 billion

GDP growth rate – 9 %

Services contribution – 54 %

FDI limit not 100 percent in major industry sectors such as Telecom,

Semiconductors, Automobiles,

etc.

Balance of Trade – USD (-)46.2

billion

Investment goal – USD 250 billion

20062006

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,


etc.

Balance of Trade – Should

increase with surging exports as

compared with imports

20152015

GDP growth rate – 13%

Services contribution – 65-70%

FDI limit is expected to be 100

percent in major industry sectors

such as Telecom,


etc.

Balance of Trade – Should be

positive with increased level of

exports as compared with imports

20202020

Growth Expected in India



India has among the

highest returns on

foreign investment.

- Dan Scheinman, Cisco System Inc. as told

to Business Week, August 2005

“We came to India for

the costs, stayed for thequality and are now

investing for innovation”.

A T Kearney

FDI Confidence Index 2005

India is among the

three most attractive

FDI destinations in the

world.

Jack Welch

General Electric

“India is a developed

country as far as

intellectual capital is

concerned”.

US Department of

CommerceBy 2032, India will be

among the three

largest economies inthe world.

BRIC Report, Goldman Sachs

Why India? – Quote Unquote

Travyn Rhall,

ACNielsen

“The Indian market has two

core advantages - an

increasing presence of

multinationals and an upswing

in the IT exports”.

Craig Barrett

Intel Corporation

“India has evolved into

one of the world's

leading technologycenters“.

indian economy today

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