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					   The Indian Economy



Economic Section -- Embassy New Delhi




          Prepared by Economic Affairs
                        Key Social Indicators
                             1980s    1990s     latest

      Population
                              685      845      1090
       (millions)


   Poverty Incidence
                             44.5      36        25
       (% pop.)


      Teledensity
                             0.37      0.8       12
     (per 100 pop.)

        Literacy              44       52        66


     Infant Mortality
                              115      79        60
    (per 1000 births)


   prevalance of HIV
                              n.a      3.5        6
       (millions)




Sources: CMIE, RBI
             India Economic Facts

GDP is $752 billion; world's 10th largest economy in terms of GDP.

Economic liberalization began in 1991; continues at a slow pace. India is slowly
integrating with global markets.

Since the 1990s, the middle class has grown and poverty levels have fallen.

GDP growth has fallen only slightly to 6.4% (2000-2005) from 6.7% (1994-
1999).

Tariffs are still among the world's highest (average 22%).

Challenges ahead: reduce poverty, accelerate pace of reform, reduce fiscal
deficit, upgrade infrastructure.

India's successes: IT, pharma & biotech, telcom, science and technology skills,
manufacturing gaining competitiveness.

Two-way U.S.-India trade tops $25 billion a year, was $10 billion in 1997.

India's GDP grew at an impressive 7.8% during 2005-2006.
English and education versus higher income
     Speak             Read              Speak            Read
     Hindi             Hindi             English         English


                        YES               NO                   YES
     YES
                                                          NO
           NO           NO




                                 Read           Read
                   Class         Hindi         English
                   Poor            4%            2%
                Middle Class      37%           23%
                Upper Class      11.5%          10%
                   Total         51.5%          35%
Source: New Delhi, B.K. Sharma
      Sectors of the Indian Economy
               1990                           2004
                                                  3.0%
 30.8%
                                                          26.2%




                                    39.5%


                                    54.1%
                                                            16.7%
  29.1%
                   0.6%

                    Services                Agriculture

                    Manufacturing           IT/Software

Source: CMIE, RBI, World bank
                 Nominal and Per Capita GDP
                                      Fiscal year end March



      600




      400




      200




            0
                1996   1997    1998    1999   2000   2001     2002   2003    2004   2005

                              Nominal GDP USD billions      Per Capita GDP US $

Source: Central Statistical Office
                     Real GDP Growth Rates
                                   Fiscal year end March
10


 8


 6


 4


 2


 0




                                                                                     20
     19




                    19
          19

               19



                         19

                              19

                                   19
                                        19
                                             19

                                                  20
                                                       20

                                                            20

                                                                 20
                                                                      20

                                                                           20

                                                                                20

                                                                                      07
      91




                     94
           92

                93



                          95

                               96

                                    97
                                         98
                                              99

                                                   00
                                                        01

                                                             02

                                                                  03
                                                                       04

                                                                            05

                                                                                 06

                                                                                          (e
                                                                                           st
                                                                                           )
                                              factor cost %


Source: Reserve Bank of India, Economic Survey, 2005-2006
              GDP at Factor Cost by Sector
                     (1999-2000 Bare Year Prices)
                                                 %
                Agriculture, forestry, fishing

                       Mining and quarrying

                              Manufacturing

              Electricity, gas & water supply

                                Construction

Trade, hotels, transport, and communication

Financing, insurance, real estate, & services

                                         GDP

                                                 0   2   4   6   8   10   12   14
 Source: The Economic Times, CMIE, CSO
        Comparative Growth Rate of GDP
                               % per annum


         China

         Korea

     Indonesia                                                   2002

      Malaysia                                                   2003

    Philippines                                                  2004

      Thailand                                                   2005

  Bangaladesh                                                    2006

          India

      Pakistan

                  0     2         4        6         8      10

Source: Asian Development Outlook, World Economic Outlook
      Sources of Government Revenue
                             Fiscal year 2006


    excise duty 27.0%
                                                      corporate tax 30.0%




                                                            other sources 0.3%

  income tax 17.5%                                    service tax 7.8%

                          customs collections 17.4%




Source: India Ministry of Finance, India Budget 2006-2007
   Expenditure of General Government
                   Combined Center and State -- 2005
                                 interest
                                  26.5%




         defense
           16.4%

                                                         other
                                                         25.4%



          subsidies
              9.4%
                         education            other social services
                                     health   6.8%
                           10.5%
                                      4.9%
Source: IMF
         Tax Revenues as Percent of GDP
                             Fiscal Year end March
30


25
                              Fiscal gap
20


15


10


  5


  0
           20
  19




                      20




                                    20




                                                20




                                                          20




                                                                       20




                                                                                   20
              0
     9




                         0




                                       0




                                                   0




                                                             0




                                                                          0




                                                                                      0
              0
      9




                          1




                                      2




                                                  3




                                                             4




                                                                         5




                                                                                      6
           Tax revenues       Total revenue and grants   Total expenditure and net lending


Source: IMF
                    Government Expenditure
      % total expenditure
35

30

25

20

15

10

 5

 0




                                                                               20
 19

       19

            19

                 19

                      19

                           19

                                19

                                     19

                                          19

                                               20

                                                    20

                                                         20

                                                               20

                                                                    20

                                                                         20

                                                                                06
     91

          92

               93

                    94

                         95

                              96

                                   97

                                        98

                                             99

                                                  00

                                                       01

                                                            02

                                                                 03

                                                                      04

                                                                           05


                                                                                    (p
                                                                                       r
                                                                                      oj
                                                                                       )
                           defense      subsidies           interest on debt
Source: IMF
Gross Domestic Savings and Investment
                             % GDP 2002

      China
      Korea
  Indonesia
   Malaysia
 Philippines
   Thailand
Bangaladesh
       India
   Pakistan
   Sri lanka

               0      10         20         30      40   50

                           Investment     Savings

 Source: Asian Development Outlook 2002
              General Government Debt
                         Fiscal year end March


  100

   80

   60

   40

   20

    0
          19




                                                   20
   19




                   19


                         20


                                 20


                                           20




                                                          20


                                                                 20
              98




                                                    03




                                                                     05
     97




                    99


                           00


                                  01


                                            02




                                                           04



                                                                      (p
                                                                         roj
                                                                          .)
                   Debt Stock/ GDP ratio         External Debt/GDP
Source: IMF
     GOI Fiscal Deficit: States vs. Center
     %
     GDP
14

12

10

 8

 6

 4

 2

 0
     19



                 19




                                               19



                                                           20



                                                                       20



                                                                                     20
           19



                       19

                             19

                                   19

                                         19



                                                     19



                                                                 20



                                                                               20
      91



                  93




                                                98



                                                            00



                                                                         02



                                                                                      04
            92



                        94

                              95

                                    96

                                          97



                                                      99



                                                                  01



                                                                                03
                                                     Center           States
Source: Indian Ministry of Finance
          Government Debt/GDP Ratio
                           2003-2007
120

115

110

105

100

 95

 90

 85
 2003         2004               2005         2006   2007

                     Base Case      Reform Case
Source: IMF
                Composition of India's
                 2004 Sovereign Debt
                              IMF
                             1.0%             IDA
                 Bilateral                    19.6
                   19.2%                      %



                                                     IBRD
 Other Multilateral                                  7.0%
              4.6%

        Short-term
              3.0%




                                    Private
                                    45.5%
Source: IBRD
                      India’s External Debt
                             Fiscal year end March
      US $ billions
140

120
                                                        Multilateral

100                                                     Bilateral

                                                        IMF

 80                                                     Trade Credit

                                                        Commercial Borrowing

 60                                                     NRI & FC Deposits

                                                        Russian Rupee Debt

 40                                                     Short-term debt



 20

  0
             19




                19
                19




                20
                20
  19
        19


                19
                19




                19
                19
                19
                20
                20
                20




                20
                   92




                   95
                   96




                   03
                   04
      90
           91


                   93
                   94




                   97
                   98
                   99
                   00
                   01
                   02




                   05
      Source: Reserve Bank of India; Finance Ministry
               Gross Nonperforming Loans
                               % of Total Loans
   20



   15



   10



    5



    0
        1997    1998   1999    2000   2001   2002   2003   2004   2005

         Public sector banks      Private sector banks     Foreign banks


Source: IMF
                Indian Saving and Investment
                                      % of GDP


    30


    25

    20

    15


    10

     5

     0
         1996    1997   1998       1999   2000   2001     2002    2003   2004
                        Private Domestic Savings        Private Domestic Investment

Source: IMF, Ministry of Finance
Bet You Didn't Know (Part One)
India is one of only three countries that makes supercomputers (the US and Japan
are the other two).

India is one of six countries that launches satellites.

The Bombay stock exchange lists more than 6,000 companies. Only the NYSE has
more.

Eight Indian companies are listed on the NYSE; three on the NASDAQ.

By volume of pills produced, the Indian pharmaceutical industry is the world's
second largest after China.

India has the second largest community of software developers, after the U.S.

India has the second largest network of paved highways, after the U.S.

India is the world's largest producer of milk, and among the top five producers of
sugar, cotton, tea, coffee, spices, rubber, silk, and fish.

100 of the Fortune 500 companies have R&D facilities in India.
                        Current Account
                 Goods and Services-- Fiscal year end March
      US $ billions
100


 80


 60


 40


 20


  0
   1982 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

                             imports       exports

 Source: IBRD
                     Current Account balance
                                Fiscal year end March
     US $ billions
10

 8

 6

 4

 2

 0

-2

-4

-6

-8
     19

           19

                 19

                          19

                                19

                                      19

                                            19

                                                  19

                                                        20

                                                              20

                                                                    20

                                                                          20

                                                                                20
      92

            92

                     94

                           95

                                 96

                                       97

                                             98

                                                   99

                                                         00

                                                               01

                                                                     02

                                                                           03

                                                                                 04
 Source: IBRD, CMIE
            Sources of Real GDP Growth
                          Fiscal Year End March
14
12
10
 8
 6
 4
 2
 0
-2
-4
     19




                                            20
           19


                 19


                          19


                                20


                                      20




                                                    20


                                                             20


                                                                     20
      96




                                             02
            97


                  98


                           99


                                 00


                                       01




                                                     03


                                                                04


                                                                      05
                                                  Agriculture

                                                  Industry
 Source: CSO, RBI, CMIE                           Services
         Foreign Institutional Investment
                                             2004

            FII $                                                          Sensex Thousands
      2,000 millions                                                                    7


      1,500
                                                                                        6
      1,000


        500                                                                             5


          0
                                                                                        4
       -500


      -1,000                                                                            3
                                       May
                                 Apr




                                                   Jul




                                                                     Oct
                     Feb
               Jan




                                             Jun




                                                         Aug




                                                                                  Dec
                                                               Sep




                                                                            Nov
                           Mar




                                                                                   FII Investments

                                                                                   Sensex average
Source: Reserve Bank of India; SFBI; ABN-AMRO
                  U.S. Investment in India
      US $ billions              Calendar Year

5

4

3

2

1

0
    19




                              19


                                    20




                                                                20


                                                                        20
          19


                 19


                       19




                                           20


                                                 20


                                                          20
     95




                               99


                                      00




                                                                  04


                                                                            05
            96


                  97


                         98




                                            01


                                                     02


                                                           03
                                                                FDI

    Source: SIA, Ministry of Commerce and Industry              Portfolio
Market Capitalization of Listed Companies
                                 2002

            %
            GDP
    India
   Brazil
   China
   Egypt
  Kenya
Malaysia
  Mexico
  Poland
  Turkey
    USA

            0     20   40   60          80   100   120   140   160
 Source: World bank, IMF
                Domestic Listed Companies
                               2003
   India

   Brazil

  China

  Egypt

  Kenya

Malaysia

 Mexico

 Poland

 Turkey

    USA

            0      1      2       3       4   5   6
                              Thousands

Source: World Bank. IMF
      Bet You Didn't Know (Part Two)
Two million people of Indian origin live in the U.S.

Indian-born Americans are among the most affluent and best educated of the recent
immigrant groups in the U.S.

Thirty percent of the R&D researchers in American pharmaceutical companies are Indian
Americans.

Nearly 49% of the high-tech startups in silicon Valley and Washington, D.C. are owned by
Indians or Indian-Americans.

There are over 700 companies in Silicon Valley owned by Indian-Americans.

India sends more students to U.S. colleges than any country in the world. In 2004-2005,
over 80,000 Indian students entered the U.S. China sent only 65,000 students during the
same time.

In a case decided by the U.S. Supreme Court, an Indian-American woman scientist, Dr.
Ananda Chakrabaty, won the argument that persons may be granted patents for useful
 manufacture of living organisms. She defeated the U.S. Patent Office, that argued that
living things may not be patented, thus establishing the legal foundation for the biotech
industry, (Diamond vs. Chakrabaty, 1980). Dr. Chakrabaty invented a microbe that eats oil
spills.
             Indian Rupees to 1 USD
                     Monthly Average - December
50


40


30


20


10


 0
19




                                      20
       19

             19

                   19

                         19

                                19




                                            20

                                                  20

                                                        20

                                                              20

                                                                    20
  94




                                       00
        95

              96

                    97

                          98

                                 99




                                             01

                                                   02

                                                         03

                                                               04

                                                                     05
Source: Reserve Bank of India
              Indian Rupees to 1 USD
                           Monthly average
 50


 40


 30


 20


 10


  0
       A
       Fe

       M



       M




       Fe
       A

       Se



       N




       A
       O




       M
  Ja




       Ju

       Ju




       D

       Ja
        pr




         ug




         ov




         pr
         ec
         ct
         ar



         ay




         ar
   n




          n
          b




          b
          ne

          ly



          p




Source: Reserve Bank of India, CMIE
           World's Ten Wealthiest Countries
           GDP
   USA
  Japan
Germany
 Britain
 France
   Italy
  China
  Spain
 Canada
   India

           0     1   2   3   4    5    6    7     8   9   10   11   12

                             $US (In Trillions)

 Source: World Bank
Forex Reserves Increase and Import Cover
        US$bn                                                                                                            Mnths
  200                                                                                                                             18

  180                                                                                                                             16

  160                                                                                                                             14

  140                                                                                                                             12
  120
                                                                                                                                  10
  100
                                                                                                                                  8
   80
                                                                                                                                  6
   60
                                                                                                                                  4
   40
                                                                                                                                  2
   20

    0                                                                                                                             0

                                                                        FY00




                                                                                                                  FY06
                       FY93

                              FY94




                                                   FY97

                                                          FY98

                                                                 FY99




                                                                               FY01

                                                                                      FY02




                                                                                                    FY04
                                     FY95




                                                                                                           FY05
        FY91

                FY92




                                            FY96




                                                                                             FY03




                                                                                                                          FY07E
                                                                   Reserves

                                                                   Months of Import Cover

Source: DGCI&S; RBI; Citigroup
                  Foreign Exchange Reserves
       US $             Fiscal Year end March
       billions
 160

 140

 120

 100

  80

  60

  40

  20

   0
   19
   19
   19
   19




   19
   19
   19


   19
   19
   19




   20
   20
   20
   19
   19




   19




   20




   20
   M
   19




   19


   20




     ar
      85
      86
      87
      88




      92
      93
      94


      96
      97
      98




      02
      03
      04
      90
      91




      95




      00




      05
      89




      99


      01




        20
          06
                                         SDRs

                                         Gold
Source: Reserve Bank of India            Foreign Currency Assets
                Exports by Commodity
                    A China-India Comparison


                                               China   India

Agricultural products                          22.2    7.9

Fuels and mining products                      18.1    6.4

Manufactures                                   397.0   48.0

      Of which
      Iron and steel                             4.8    2.9
      Chemicals                                 19.6    7.3
      Machinery and transport equipment        187.8    6.1
      Textiles and clothing                     79.0   13.5
      Others                                   105.8   18.2

Total                                          437      62
(2003, US$bn)


Source: WTO
                    Share of World Output
                   Select Asian Developing Countries -- 2004
               %
      China
       India
South Korea
  Indonesia
     Taiwan
   Thailand
 Philippines
   Malaysia
 Hong Kong
   Vietnam
 Singapore

               0        2      4          6      8    10       12   14

                                   1982       1992    2004
Source: IMF
Total pop. of India
                                              Rural India
                                                                                            248
                                                                 91


                                                   Total female workers   Total female non-workers




                                                                                 Female non-workers
                                       Female




                           Urban India
                36
                                      121
                                              Main workers

Total female workers   Total female non-workers


                                                   Marginal workers
Source: 2001 Census of India (millions)
                                                                               Total female workers
 Comparative Export of High-Technology
         Manufactured Goods
   India
  Brazil
  China
  Egypt
  Kenya
Malaysia
 Mexico
 Poland
 Turkey
   USA

           0      10        20      30        40        50        60

                                 % of High-technology Manufactured Goods

 Source: Dun & Bradstreet
           Comparative Annual Wages in
                 Manufacturing
   India

  Brazil

  China

  Egypt

Malaysia

 Mexico

 Poland

Thailand

 Turkey

   USA

           0          10      20       30   40
                           Thousands
Source: Dun & Bradstreet
            India’s Share of World Exports
                               % of Global Trade


  1


 0.8


 0.6


 0.4


 0.2


  0
             19

                   19




                                     19

                                           19




                                                       20

                                                             20

                                                                   20




                                                                               20
       19




                         19

                               19




                                                 19




                                                                         20
              75

                    80




                                      95

                                            98




                                                        00

                                                              01

                                                                    02




                                                                                04
        70




                          85

                                90




                                                  99




                                                                          03
Source: IBRD; WTO
        Comparative Customs Duty Rates
                   India and other Developing Countries
               %

      India

   Pakistan

      Brazil

     China

  Indonesia

   Thailand

South Korea

               0       10         20          30          40         50

                              All goods    Agriculture    Manufacturing
   Source: IMF
   India’s Top Trade Partners - Exports
                              2004-2005
                                                 France 2.1%
       Other 44.2%
                                                        Singapore 5.0%

                                                            Italy 2.9%


                                                               Belgium 3.2%

                                                               Japan 2.6%



                                                               Germany 3.5%


                                                             UK 4.7%



                                                        Hong Kong 4.8%


                                             UAE 9.4%

                 USA 17.5%


Source: India Trade promotion Organization
      India’s Top Trade Partners - Imports
                                2004-2005


Other 60.7%

                                                                   Malaysia 2.1%
                                                                     Japan 2.8%

                                                                      Belgium 4.3%



                                                                      Singapore 2.4%


                                                                     Switzerland 5.4%


                                                                 Australia 3.3%

                                                           Germany 3.6%

                                                    China 6.3%
                                          UK 3.2%
                  USA 5.9%


  Source: India Trade promotion Organization
             Commodity Composition of Trade
                      Others 25.0%


EU 21.0%
                                        Japan 3.0%
                                         ASEAN 5.0%



                                        China 5.0%



 USA 18.0%                           NE 10.0%
                                                         Composition of Exports, FY04
                Middle East 13.0%                                    Ores   Agricultural
                                                         Leather     4.0%     12.0%
  Direction of Exports, FY04                               3.0%                            Commodities
                                                                                           4.0%
                                                Chemicals                                       Oil
                                                   10.0%                                        6.0
                                                                                                %

                                                                                                 Other goods
                                                                                                 6.0%



                                           Engineering
                                                18.0%

                                                                                               Gems, jewelry
                                                                                               17.0%

                                                          Textiles
                                                                            Readymades
     Source: DGCI&S                                         10.0%
                                                                               10.0%
U.S. Business Complaints

Excessive government interference.

High tariffs and excessive indirect taxes

Differential tax rates for foreign companies.

Restrictions on foreign investment.

Substandard infrastructure.

Questions about ‘sanctity of contract.’

Weak enforcement of intellectual property rights.
Estimated Trade Losses Due To Copyright
   Piracy And Piracy Levels In-Country


               Motion Pictures   Records & Music Business Software    Entertainment    Books      Total
                                                                        Software                 Losses
               Losses    Piracy Losses Piracy     Losses    Piracy   Losses     Piracy Losses
                         Levels         Levels              Levels              Levels
   Pakistan       12.0       NA    70.0  100%        14.0      82%        NA        NA    52.0     148.0
   Indonesia      32.0      92%    27.6   80%       100.0      87%        NA        NA    32.0     191.6
   India         360.0      55%     102   50%       520.0      73%       59.5      86%    90.0     483.8
   Russia        275.0      80%   411.9   66%       800.0      87%      255.8      73%    42.0    1784.7
   China         280.0      95%   202.9   85%      1488.0      90%      510.0      90%    50.0    2530.0


 (Cost in millions of U.S. dollars)




 Source: International Intellectual Property Alliance
                  Principal Products of
              U.S.-India Merchandise Trade
                         Top ten products in 2005 -- US $ millions
  U.S. Imports from India           Amount           U.S. Exports to India       Amount


     Gems and jewelry                4,730        Airplanes/aircraft machinery    467


  Womens/girls blouses               336                   Fertilizers            413

     Mens/boys shirts                294             Ferrous waste/scrap          126

      Petroleum oils                 303               Bituminous coal            150

     Shrimps/prawns                  290              Transmission apps           107

    Sweaters/pullovers               271                 Industrial oils           99

       Cashew nuts                   261                   Almonds                 94

    Womens/girls skirts              281               Jewelry and parts          101

       Industrial oils               249            Digital data processors        87

    Toilet/kitchen linen             247          Parts for boring machinery       86

         All other                  11,447                 All other              5,235

           Total                    18,709                   Total                6,965


Source: US International Trade Commission
         U.S.-India Trade in Services: 2003
                                US $ millions
         Service Type               U.S. exports   U.S. imports

          Education                    1,457            3

            Travel                     1,180           723

    Business/prof/technical             353            420

            Freight                     170            81

            Telcom                      129            428

   Royalties and license fees           115             8

    Intra-company services              110            262

         Port services                  83             66

       Financial services               56             19

       Passenger fares                  26             167

      Film/TV/tape rentals              14              0

           Insurance                     5              5

             Other                      14              2

        Total Services                 3,728          2,184



Sources: US International Trade Commission
              U.S. - India Trade in Goods
  20



  15



  10



   5



   0
                                            19




                                                                    20
                                19




                                                                                20
 19

        19

              19

                    19

                          19




                                      19




                                                  20

                                                        20

                                                              20




                                                                          20
                                             99




                                                                     03
                                 97




                                                                                 05
   92

         93

               94

                     95

                           96




                                       98




                                                   00

                                                         01

                                                               02




                                                                           04
                                                        Exports to India

                                                        Imports from India
Source: International Trade Commission
            U.S. - India Trade in Services
  5

  4

  3

  2

  1

  0
             19




                                                 20
                         19




                                                                   20
 19

       19



                   19



                               19

                                     19

                                           19



                                                       20

                                                             20



                                                                         20

                                                                               20
              94




                                                  00
                          96




                                                                    03
  92

        93



                    95



                                97

                                      98

                                            99



                                                        01

                                                              02



                                                                          04

                                                                                05
                                                      Exports to India

                                                      Imports from India


Source: International Trade Commission
                 Total U.S. Trade with India
        US$ billions
   20



   15



   10



    5



    0
          19

                 19




                               19

                                      19




                                                    19

                                                           20

                                                                  20

                                                                         20

                                                                                20

                                                                                       20

                                                                                              20
   19




                        19




                                             19
            93

                   94




                                 96

                                        97




                                                      99

                                                             00

                                                                    01

                                                                           02

                                                                                  03

                                                                                         04

                                                                                                05
     92




                          95




                                               98



                                                           Total exports to India

                                                           Total imports from India


Source: International Trade Commission
                  Top Ten Reasons Favoring
                       FDI in Retailing
•    Experience of other countries shows that retailing has attracted significant FDI.

•    FDI would bring technical know-how and skill.

•    It would speed up the growth of organized retailing, set up supply chaings and lead to
     implementation of Information Technology.

•    Joint ventures would ease capital constraints of existing organized retailers.

•    Domestic retailers would get access to global best management practices.

•    Sourcing from India would increase.

•    There will be more investment in upstream activities and allied sectors.

•    Competition would drive down prices.

•    Protection leads to inefficiency.

•    FDI would lead to development of different retail formats and modernization of the
     sector.

    Source: FDI in Retail Sector, India 2005
States Attracting Highest FDI Flows in India
                (2000-2003)

                    2000            2001           2002            2003
              Amount % Share Amount % Share Amount % Share Amount % Share
Delhi          24576     30.6 69183      18.9 29943     18.5 21047       22
Maharashtra    35789     44.5 29917      43.7 48657     30.1 10228      10.7
Karnataka      5826       7.2 13104      8.3  8929       5.5  9991      10.5
Tamil Nadu     5519      6.87 7427       4.7  13412      8.3  8055       8.4
Chandigarh                                    8426       5.2
Gujurat                                                      10426      10.9
Andra Pradesh  2517      3.13 3398       2.1
(Amount in INR millions)




Source: World Bank
                  Sectoral FDI Equity Caps
                    Sector                  FDI cap in %
        Retailing (single-brand only)            51
                   Real Estate                   0
           Small Scale Industries               24
               New print media                  26
                  Insurance                     26
          Defense Industry Sector               26
          Refining with Public Cos              26
           Private Sector Banking               74*
              Domestic Airlines                 49
            Telecommunications                  74
                   Trading                      51
          Internet service provider             74
                    Mining                      74
                 Oil marketing                  100
*Includes FDI and FII

Source: Ministry of Commerce and Industry
  More Economic Data and Forecasts
A 36% surge in imports at US$106bn resulted in India's trade deficit touching a
record high of US$26.5bn in FY05 compared to US$14.3bn in FY04.

The predicted trade deficit for FY06 is US$30.9bn.

Citigroup estimates that the value of Indian currency is expected to decline by
15% over the next 4 years.

India's savings rate has risen to 28.1%, while investments have risen by 26.3%.

Non-agricultural sector growth may trend to 9% in the coming years.

In FY04, India committed more revenue to subsidies (nearly US$1bn) than it did
to non-capital defense expenditures.

Almost 55% of India's tax revenue in FY04 was collected from excise duties and
customs collections.

India's FY06 budget targets a fiscal deficit of 4.3% of GDP.

In India, services account for nearly 50% of GDP.
                  Bottlenecks to Growth
                  (Survey responses by country for each
      %              perceived ‘bottleneck’ category)
100


 80


 60


 40


 20


  0
      Business Regulation   Tax and Customs         Corruption
                                                                 Brazil

                                                                 China

  Source: World Bank Investment Climate Surveys                  India
                 Economic Freedom?

                Political    Days taken to     Competitiveness   Corruption
               Freedom      start a business      ranking         ranking
Brazil        Free                 152              57               59
China         Not Free              41              46               77
Egypt         Not Free              43              62              102
India         Free                  89              55               90
Indonesia     Partly Free          151              69              133
Malaysia      Not Free              30              31               64
Mexico        Free                  58              48               64
Pakistan      Not Free              24              91               39
Philippines   Free                  50              76              102
Russia        Not Free              36              70               71
South Korea   Free                  22              29               47
Thailand      Free                  33              34               90




   Source: Economic Times
          Time Taken to Register Property

    Norway

      China

   Pakistan

S.A. Average

   Sri Lanka

       India

   Malaysia

               0   20   40   60    80       100   120   140   160

                              No. of Days

 Source: World Bank
       Land Cost Relative to Income Level
(Ratio of land cost/sq.m to GDP per capita in 1999, indexed to New Delhi - 100)

 120

 100

  80

  60

  40

  20

   0
           To


                                 Si




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                                                                  M
                                                            Ta
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 Source: World Bank                                Land Cost
     Start-up Times for New Businesses

  Australia
      USA
   England
     Nepal
  Pakistan
  Malaysia
   Belgium
Bangladesh
     China
  Sri Lanka
      India

              0       20    40          60   80   100

                           Days to Set Up

 Source: World Bank
               Time to Enforce a Contract

     Tunisia

      China

   Malaysia

      Nepal

Bangladesh

S.A. Average

   Pakistan

       India

   Sri Lanka

               0      100   200        300   400   500

                             No. of Days

 Source: World Bank
               Bankruptcy Recovery Rate
        (Cents on the Dollar, Recovered From Insolvent Firm)

               Best Recovery
      Japan
   Pakistan
   Malaysia
      China
   Sri Lanka
      Nepal
Bangladesh
S.A. Average
       India

               0         20     40         60        80        100

                               Recovery Rate

 Source: World Bank
                         Real Interest Rate
                         Prime Lending Rate minus WPI

          %


14

12

10

 8

 6

 4

 2

 0
  19

       19

              19




                                                 20

                                                      20




                                                                          20
                   19

                        19

                             19

                                  19

                                       19

                                            19




                                                           20

                                                                20

                                                                     20



                                                                               20
     91

          92

               93




                                                  00

                                                       01




                                                                           05
                    94

                         95

                              96

                                   97

                                        98

                                             99




                                                            02

                                                                 03

                                                                      04



                                                                                06
Source: Reserve Bank of India
      Time To Go Through Insolvency

               Shortest Time
     Ireland
   Sri Lanka
   Malaysia
      China
   Pakistan
Bangladesh
S.A. Average
      Nepal
       India

               0        2      4    6      8   10   12

                                   Years

 Source: World Bank
          Rigidity of Employment Index

               Least Rigid
 Hong Kong
   Malaysia
Bangladesh
      China
   Sri Lanka
S.A. Average
      Nepal
       India
   Pakistan

               0             20   40           60   80   100

                                  Rigidity Index

 Source: World Bank
  Problem: The Transformed Relationship is incomplete.
 Solution: Grow the economic and commercial relationship.

                        Economic
                       Commercial
CEO Forum               Strategy
                                            Private Sector
                                             Involvement

  Energy Dialogue
                     Economic Dialogue               Strategic
                                                      Trade       High Tech
                                                                   Trade
 Finance Dialogue

                    Trade Policy Dialogue
                                            Commerce: High Tech
                                               Cooperation
    Financial
    Intel Unit
                          WTO and
                           USTR             Standards and Trade
                                                Facilitation

				
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