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					Indian Economy
             Opportunities Unlimited
India: Fastest Growing Free Market Democracy   2
 India: Among the Top-15 Countries in terms of GDP at constant prices                                                                                 3




                       The Indian economy has witnessed an unprecedented growth…. Booming Indian services and
                       industry sector are providing the required impetus to the economic growth
India’s GDP
witnessed high
                                                                     India's GDP: 2002-07                    9.4%
growth and was the                                                                              8.4%
                                                   700
second fastest
                                                                       8.5%          7.5%
growing GDP after                                  600                                                                 Fastest GDP growth of 9.4
China                                                                                                                  percent in 2006-07, since last 18
                                                   500
                              USD Billion
                                                                                                                       years
                                                   400
                                                          4%                                              631
                                                   300                                         590
                                                                      484            534
                                                   200    424
Indian economy is
the 4th largest in                                 100
terms of PPP – USD
4.1 trillion in 2006                                 0
                                                         2002-03     2003-04        2004-05   2005-06    2006-07
                                                                         GDP at Constant Prices


                                                                         Contribution of
The sound                                                                  Services -
performance of each                                                      increased from
industry segment is                                700                    49 percent to
leading to the                                                             55 percent
overall robust                                     600
performance of the                                                                                          168
                                                   500                                        155
Indian economy                                                                                                      Growth in sectors (2006-07):
                                     USD Billion




                                                   400                                                      117     Industry: 10.9%
                                                               104             109            116
                                                                                                                    Services: 11%
                                                   300
                                                               103             91                                   Agriculture: 2.7%
                                                   200
                                                                                              319           347
                                                   100         205             223

                                                     0
                                                           1999-00        2002-03         2005-06         2006-07
                                                                 Services     Agriculture     Industry
 India: Robust Economic Platform                                                                                                                          4




                                              India's Forex Reserves: 2001-07 (Till 22 June 2007)
India’s enhanced                     250
economic                                                                                                         213
                                                                                                      199
performance has                      200
been the major
                       USD Billion                                             141
                                                                                            152                            …at present level of Forex
contributor towards                  150                                                                                   reserves, the country has
increased Forex                                                  112
                                                                                                                           adequate cover for 12 months of
reserves                             100               75                                                                  imports
                                             54
                                      50
Steadily increasing
Forex reserves offer                   0
adequate security                          2001-02   2002-03   2003-04        2004-05   2005-06     2006-07    2007-08
against any possible                                                                                            (Till 22
currency crisis or                                                                                               June)
monetary instability
                                                                                                                                         India’s Forex
                                                            External Debt-to-GDP Ratio                                                  reserves are in
                                      22                                                                                                   excess of
                                             21.1
Forex reserves                                          20.4                            Falling Dollar inflates                         external debt…
witnessed an                                                                            the India’s external debt
increase of 200                       19
percent for the                                                        17.8
                                                                                     17.3
period 1990-2007                                                                                               16.4
                                                                                                   15.8
                              Ratio




                                      16

Increased
confidence of
                                      13                                                                                   …the decreasing external debt to
investors in Indian
                                                                                                                           GDP ratio indicates that India has
companies have led
                                                                                                                           a sound economic platform
to a surge in cross
border borrowing by                   10
the corporate                              2001-02     2002-03     2003-04        2004-05         2005-06     2006-07
houses
 India: Surging Exports                                                                                                                      5




                                             India's Exports: 2002-07 (till February 2007)
Services sector has                                                                           112.40
                                    120                                           103.42
been a major
contributor to                      100                              83.81
increased exports     USD Billion    80                 63.95
from India                           60
                                           52.81                                                          Quality and cost advantage are the two
                                     40
                                                                                                          important parameters leveraged by the
                                     20
                                                                                                          Indian producers to increasingly
Acceptance of                         0
                                                                                                          market their products and services
Indian products                           2002-03     2003-04       2004-05      2005-06      2006-07
along with the cost                                                                          (upto Feb.
advantage has                                                                                   07)
provided an edge to
Indian companies



Indian companies                              India's Import: 2002-07 (till February 2007)
have chalked out
                                    180                                                       162.30
extensive plans to                                                                149.65
                                    160
increase their
                                    140
                      USD Billion




presence abroad                                                      111.89
                                    120
                                    100                 78.28
                                     80    61.52
                                     60
                                                                                                          Petroleum products are the major
                                     40                                                                   contributors towards India’s growing
Imports of products
by India mainly
                                     20                                                                   imports
                                      0
includes petroleum
                                          2002-03      2003-04       2004-05      2005-06     2006-07
products and
                                                                                             (upto Feb.
minerals
                                                                                                07)
 India: Attractive Investment Destination                                                                                                                                 6




                         With improved performance on PE ratio and ROE, Indian markets have attracted
India is ranked
second in AT             large investments
Kearney FDI
confidence index                                                                                                         FDI Inflow - India: 2001-07
                                                                                                 18,000
                                                                                                                                                                      15,730
                                                                                                 16,000
                                                                                                 14,000
                                                                                                                                                        180 percent




                                                                                   USD Million
Telecom and                                                                                      12,000
                                                                                                                                                        Increase
Electronics topped                                                                               10,000
                            Return on the Investments in India (2006 Q1)
the list of inward FDI                                                                            8,000
                            Market       PE Ratio       P/B Ratio        RoE (%)                                                                            5,546
                                                                                                  6,000       4,222                            3,755
                         India           16.1       4.53            22                            4,000                  3,134      2,634
                         China           10.62      2.06            17                            2,000
FDI inflow for the
                                                                                                       0
period 2006-07           Indonesia       10.26      3.09            NA
                                                                                                             2001-02    2002-03    2003-04    2004-05      2005-06    2006-07
witnessed a growth
                         Korea           9.85       1.84            16
of 180 percent over
the same period last     Malaysia        13.21      1.82            16
year                                                                                                                        Net FII into India: 2001-07
                         Taiwan          12.17      2               11                           12
                         Thailand        9.84       2.32            23                                                             10.00      10.20
                                                                                                 10                                                         9.40
                         EM Asia         11.19      2.12            15


                                                                                   USD Billion
Mauritius has been                                                                                 8                                                                   6.72
                         Latin America   9.35       2.46            18
the largest
contributor towards      EM Europe       10.9       2.39            15                             6
FDI into India…..
                                                                                                   4
                                                                                                            1.80
                                                                                                   2
                                                                                                                        0.60
                                                                                                   0
                                                                                                           2001-02     2002-03    2003-04    2004-05      2005-06     2006-07
   India: Vibrant Capital Market                                                                                                                                                   7




                        Sensex – The Bombay stock exchange index has risen 15 times from 1990s to
India is among the      reach 15,000 mark in July 2007
major destinations
across the globe for
inflow of US Dollar
i.e. FIIs                                                                                                                                7/9/2007
                                                                                                                                         Crossed
                                                                                                                                          15,000
                                                                                                                                           mark                  FIIs augmented
                                                                                                                      1/12/2007                                  support by infusing
                             16,000                                                                               Crossed 14,000 mark                            large investments
Sensex risen 15                                                                                                                                                  in Indian stock
times in the period                                                                                                                                              market
1990-2007                    14,000
                                                                                                          2/7/2006
                             12,000                                                                   Crossed 10,000 mark


                             10,000
                       INR




                                              12/30/1999                                                                                                           Exorbitant
                              8,000                                                                                                                                industry
                                          Crossed 5,000 mark
Emergence of                                                                                                                                                       performance
industry and                  6,000
confidence of local
investors along with          4,000
the FIIs has led to
increased movement            2,000
                                                                                                                                                                 Increased local
of sensex                                                                                                                                                        investors’
                                -                                                                                                                                confidence
                                    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
  India: Vibrant Economy Driving M&A Activities                                                                                                                 8




                                                                                                                                      USD                     USD
Growth Drivers:                                 Number of Deals and Values                                    SECTOR                          SECTOR
                                                                             28.2                                                     (Mn)                    (Mn)
                                       30                                             900
 Globalisation of
                                                                                782   800                     Automotive              518     Manufacturing   933
  competition                          25




                                                                                            Number of deals
                                                                                      700
 Concentration of                                           18.3                                             Banking and Financial   1,375   Media           630
                                       20                                             600
  companies to
                         USD Billion


                                                                467                   500                     Chemicals and           1,133   Oil & Gas       384
  achieve                              15      12.3                                                           Plastics
                                                                                      400
  economies of
                                       10         306                                 300                     Electrical and          896     Pharma &        2,520
  scale                                                                                                       Electronics                     biotech
                                                                                      200
 Lower interest                        5
                                                                                                              Energy                  1,484   Telecom         2,198
                                                                                      100
  rates and vibrant
                                        0                                             0                       FMCG, Food and          1,327   Others          4,006
  global markets
                                               2004          2005            2006                             Beverages
 Cash Reserves
                                                   Deal Values      No. of Deals
  with Corporates                                                                                             IT and ITES             2,903   Total           20,305


Trends:                                     In 2006, there were a
 Ratio of the Size of
   acquisition to the
                                            total of 480 M&A deals
   size of acquirer                         and 302 private equity
   has grown from 10                        deals…
   percent in 2004 to
   25 percent in 2006.                                                 … Average deal size close to
 Cross-border
   deals are growing
                                                                          USD 36 million…
   faster than
   domestic deals
                                                                                                                               …Contribution of private
 Private Equity (PE)                                                                                                           equity deals to total
   houses have                                                                                                                  number of deals have
   funded projects as
   well as made a few
                                                                                                                                increased from nearly 9
   acquisitions in                                                                                                              percent in 2004 to 28
   India                                                                                                                        percent in 2006
Major M&A Deals Undertaken Abroad by India Inc.                          9




                     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




                Videocon Industries acquired Daewoo   USD 730 million
                   Electronics Corporation Limited
Major M&A and Investments Announcements in India                                   10




                        Vodafone buys Hutch                     USD 11 billion




            Plans to spend on its development operations        USD 1.7 billion
                   in India over the next four years



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



             Aditya Birla Group increased its stake in Idea    USD 0.98 billion
              Cellular by acquiring 48.14-percent stake


             Renault, Nissan and Mahindra & Mahindra
             has initiated a Greenfield automobile plant       USD 0.905 billion
             project in Chennai.


            Mylan Laboratories acquired a majority stake       USD 0.74 billion
                      in Matrix Laboratories
 India: Pacing Ahead to Emerge as a Major Economy in the World                                                                                                                        11




                                                   2007 Global Retail Development Index (GRDI)                                 2007 Global Services Location Index
India has been                           100
ranked superior to                                                                                                    India           3.2                     2.3           1.4
other major                                   80
countries by many                                                                                                     China          2.9                    2.3            1.4
prominent surveys…
                             GRDI Score

                                              60                                                                 Malaysia            2.8              1.3           2

                                                                                                                 Thailand             3.2               1.2         1.6
                                              40
AT Kearney placed
                                                                                                                      Brazil         2.6              1.8           1.5
India among the top                           20
three in its FDI                                                                                                Indonesia              3.3                  1.5      1.1
confidence index…
                                               0                                                                      Financial structure                   People and skill availablity
                                                   India Russia Vietnam Ukraine China      Chile   Latvia             Business environment

… the retail market
along with the
services sector has                                                        Projected GDP Growth Rates for Select Upcoming Economies
                                              8
been attracting the
interest of major
players
                        GDP Growth Rate (%)




                                              6


India is expected to
outperform its rivals                         4
in the BRIC, in terms
of GDP growth rates,
from 2015                                     2
onwards…

                                              0
                                                    2005-10      2010-15      2015-20         2020-25       2025-30        2030-35          2035-40           2040-45            2045-50

                                                                                  Brazil                China              India               Russia
 India: Astounding Demographics                                                                                                                                 12




                                                                          DEMOGRAPHIC TRANSFORMATION OF INDIA
Growth in the higher
income categories                                                                                                                 Annual Household Income
of India’s population                                                                                                             (in USD)
has created an
                                                            2                                   9                20               Rich (Above 115,000)
affluent section of     Population (million)
society, which has                                          9                                17                  33               High Income (57,000 – 115,000)
significant level of
purchasing power                                            48                               74                 120               Consuming class (23,000 – 57,000)

                                                            221                              285                404               Working class (10,200 – 23,000)

                                                            726                              710                613               Needy (Below 10,200)

                                                      2001-02                            2005-06              2009-10(E)
                                                                                                                                * In PPP terms




                                                                  Per Capita Income
                                               700                                                   651
Increasing per capita                                                                  583
income and large                               600
                                                                              519                                   Increasing per capita income
population moving                                                   461
                                               500                                                                coupled with an emerging middle
into middle class                                     393                                                         class has provided the necessary
has led to high level                          400
                        USD




                                                                                                                  impetus to consumerism in India
of consumerism in
                                               300
India
                                               200

                                               100

                                                 0
                                                     2002-03      2003-04   2004-05   2005-06       2006-07
India: Increasing Working Population                                                                                                    13




                                                             Growth in Global Working Age Population (15-64)
          Stock Position 2005                                            Addition to Working Age Population by 2010

                                                                                                                                  314
           World     4,168
                                                                    71
            India      691
                                                               64
           Africa      500
                                                         44
          China       934
                                                   33
 South East Asia       362
                                                   31
   Latin America       359
                                              17
  Southern Asia       132

           USA        200                10

         Europe       497            0

          Japan        85 -3

                                -5                      45                 95            145                195       245   295         345
                                                                                               In Million




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.
Growth Expected in India                                                                                                            14




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




                                                                                                        2010
                                                                                                      GDP – USD 900 billion
                                                                                                      GDP growth rate – 9%
                                                       2008                                           Services contribution – 60-65 %
                                                     GDP – USD 750 billion                           FDI limit is expected to be 100
                                                                                                       percent in major industry sectors
                                                     GDP growth rate – 9.5%                           such as Telecom,
       2006                                          Services contribution – 60 %                     Semiconductors, Automobiles, etc.

      GDP – USD 590 billion                         FDI limit is expected to be close to            Balance of Trade – Should be
                                                      100 percent in major industry                    positive with increased level of
      GDP growth rate – 9 %                          sectors such as Telecom,                         exports as compared with imports
      Services contribution – 54 %                   Semiconductors, Automobiles, etc.               Investment goal – USD 370 billion
      FDI limit not 100 percent in major            Balance of Trade – Should
       industry sectors such as Telecom,              increase with surging exports as
       Semiconductors, Automobiles, etc.              compared with imports
      Balance of Trade – USD (-)46.2                Investment goal – USD 305 billion
       billion
      Investment goal – USD 250 billion
Why India? – Quote Unquote                                                                                                            15




                                                            “India has evolved into
          India is among the                                   one of the world's
         three most attractive                                leading technology                              India has among the
        FDI destinations in the                                    centers“.                                    highest returns on
                 world.
                                                                                                               foreign investment.
                                                                                       Craig Barrett
                                                                                       Intel Corporation
  A T Kearney
  FDI Confidence Index 2005                    By 2032, India will be                                                 US Department of
                                                 among the three                                                      Commerce

                                               largest economies in
                                                    the world.

                                                                                                    “The Indian market has two
                                             BRIC Report, Goldman Sachs
                                                                                                       core advantages - an
                                                                                                      increasing presence of
        “We came to India for the                                                                  multinationals and an upswing
           costs, stayed for the                                                                         in the IT exports”.
            quality and are now
         investing for innovation”.                              “India is a developed
                                                                    country as far as                                 Travyn Rhall,
                                                                                                                      ACNielsen
                                                                 intellectual capital is
                                                                      concerned”.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, August 2005

                                                                    Jack Welch
                                                                    General Electric
                                                                                                                   16




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