Transcript Slide 0

AN OVERVIEW OF INDIA
January 2007
Information contained in this document is prepared by The Boston Consulting Group, Lda
Summary
INDIA FACTS
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

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5,000 year old civilization
Population of 1.1 billion
World’s largest democracy
World’s 10th largest economy (GDP $800 Billion)
-4th largest in PPP terms
 Second fastest growing large economy (GDP rate 8%)
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
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336 tribes, 325 languages, 1,652 dialects
18 official languages
7 classical dance forms, >45 folk dances
5600 dailies, 15000 weeklies, 20000 periodicals in 21
languages with total circulation ~ 142 Mn
 Parliamentary form of Government
 29 states, 5 union territories
 Largest English-speaking nation in the world
 2nd largest pool of scientists and engineers
 3rd largest standing army, over 1.5 Mn strong
Copyright BCG
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History
INDIA’S 5000 YEAR HISTORY MARKED BY SEVERAL,
VERY DIFFERENT PHASES
BC 3300
• Earliest urban civilization in India
• Centred around ‘Indus’ river valley
• Gives India its name
Indus Valley Civilization
BC 1300
• Pastoral Aryans from north-west
• Origin of the Sanskrit language
• Principal Hindu texts & epics written
Vedic Civilization
BC 500
• Advent of Jainism and Buddhism
• Asoka’s message of peace
• Golden age for Arts & Sciences
Middle Hindu Kingdoms
AD 1200
• Arab / Turk / Afghan invasions
• Introduction of Islam
• Qutub Minar erected
Islamic Sultanates
AD 1525
• Turko-Persian invasion
• Series of great Mughal monarchs
• Mughal architecture, including Taj Mahal
Mughal Era
AD 1750
• French, Portuguese & English colonies
• English emerged as strongest power
• Phase of modernization but oppression
Colonial Era
AD 1857
• Rise of intellectual Indian politics
• Long struggle for freedom
• Emergence of Gandhi and other leaders
Independence Movement
AD 1947
• Independence of India
• Division into India & Pakistan
• Sovereign Democratic Republic
Republic of India
Today
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History
SIGNIFICANT CONTRIBUTIONS ACROSS MANY FIELDS
3300-500BC
Advent of Hinduism
Birth of Buddhism &
Jainism, introduction of
Christianity in India
Yoga – now practiced
worldwide
Ayurveda – earliest
school of medicine
Sanskrit
Takshila – world's first
university
Invention of decimal
system, invention of
zero, algebra and
calculus
Religions
Sciences
Education
Literature
500BC-1000 AD
1700-1950 AD
Introduction of Islam
Arrival of Zoroastrianism
Strengthening of Sikhs
JC Bose - pioneer of
wireless communication
Raman Effect
Introduction of English
Geetanjali by Tagore
Principal Hindu texts &
epics including the
Vedas
Ajanta & Ellora Caves
Architecture
Others
1000-1700 AD
Islamic architecture –
including the Taj Mahal,
Red Fort, Qutub Minar,
city of Fatehpur Sikri
Non-violent movement for
freedom struggle
No fights for power,
never invaded any other
country
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Economy
INDIA IS CURRENTLY THE 10TH LARGEST ECONOMY
IN THE WORLD
GDP ($ Bn in 2005)
United States
12456
Japan
4560
Germany
2798
China
2264
United Kingdom
2227
France
2125
Italy
1765
Canada
1132
Spain
1126
India
796
Brazil
796
South Korea
788
Mexico
768
Russia
764
Australia
708
Source: World bank, Analyst reports, RBI database, BCG analysis
Copyright BCG
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Economy
INDIA’S CURRENT GROWTH IS UNPRECEDENTED
IN ITS HISTORY
GDP Growth Rate (1995-2006)
12
10
8.1%
8.6%
8
6.1%
6
4
2
India's Average GDP
growth (95-05)
4.9%
5.5%
3.1%
2.8%
3.3%
2.8%
1.2%
0
-2
-4
Max
-6
Average
-8
Min
-10
India (6474)
India (7484)
India (8494)
India (9505)
India (0506)
China
Taiwan
UK
Japan
USA
Second fastest growing large economy
Source: World Bank; IMF
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Economy
INDIA EXPECTED TO BE THE 4TH LARGEST ECONOMY BY 2025
Share of World GDP
1820
2003
2025E
2050E
China
~29%
(1)
~4%
(7)
~17%
(2)
~27%
(1)
India
~16%
(2)
~2%
(12)
~5%
(4)
~17%
(3)
US
~1.8%
(9)
~32%
(1)
~31%
(1)
~21%
(2)
1.12 Bn people
0.3 Bn
people
1.0 Bn
people
Note: Figures in bracket indicate GDP world ranking
Source: Angus Maddison's OECD Book "The World Economy – A Millenial Perspective", IMF, Goldman Sachs projections; BCG Analysis
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Economy
INDIA’S PATTERN OF GROWTH IS UNIQUE
India Real GDP
CAGR (95-05)
Services sector has grown strongly
% share of GDP
100
37.9
75
30
21
Agriculture ~2.1%
27
Industry
~6.2%
51
Service
~8.3%
57.4
27
24.4
50
14.7
25
27.9
37.7
43
1979-80
1994-95
0
1950-51
2004-05
Source: RBI
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Economy
SIGNIFICANT IMPROVEMENT ACROSS
KEY ECONOMIC INDICATORS
1996
2005
13.7%(1)
8.1%
Indicator
6.3%
Interest rate on 5 yr G-sec paper
+
6.4%
Inflation (WPI)
+
Exports ($ Bn)
+
Current a/c deficit (% of GDP)
+
Forex reserves ($ Bn)
+
Forex reserves as months of imports
+
Currency appreciation
+
Fiscal deficit
+
79.3
31.8
-1.8%
-0.9%
135
17
14.3
4.7
-9.5%
5.1%
Trend
-0.5%
4.0%
(1) 1997 data
Source: Analyst reports; literature review
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Economy
INDIA’S GROWTH DRIVEN BY GROWTH OF
DOMESTIC CONSUMPTION
Higher income segments showing faster growth
No. of HH
164
183
202
210
180
150
5
7
18
12
13
28
24
Income
>$3000
21
$2000-$3000
41
$1350-$2000
CAGR (%)
14.4%
9.6%
7.1%
120
46
Addition of ~65 Mn HH and
~350 Mn into consumption
class income >$1350 pa)
over 10 years
• ~ size of the American
population
69
90
80
$650-$1350
4.9%
36
<$650
-7.1%
60
88
61
30
0
'94-'95
'00-'01
'06-'07(Exp) (1)
Expected figures
Note: Income classification (at 2000-01 prices, per annum. calculated by applying 5% inflation rate to 1994-95 prices);
Assumed exchange rate of $1 = Rs. 50 for 2000-01; Assumed HH size of 5.5 across years
Source: NCAER, SOI; BCG analysis
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Economy
INDIA’S ECONOMIC PAST HAS INFLUENCED THE PRESENT
Five Phases of India’s Economy Post Independence
1950-1965
Industrial foundation
• Industrial growth
driven by government
investments in large
public sector
enterprises
• Government
investments
contributed 53% of
total Gross Capital
Formation and 92% of
all investments in
greenfield projects
• Focus on key
infrastructure
industries and on
being self-sufficient
CAGR
=3.5%
•Strong local players in
some key industries
1965-1980
Import substitution
• Oil shock (1970s) and
devaluation of rupee
• Greater emphasis on
self-sufficiency and
import substitution
• Licensing restrictions
placed on several
industries
• Continued public
sector investments
1980-1990
De-licensing
• Initial and partial delicensing in some key
sectors
• Increased growth of
private companies
• Opening of capital
goods imports
• Formation of the first
MNC-govt JV – MarutiSuzuki
• Nationalization of
banks and other
industries
CAGR
=4%
1990-2000
Liberalisation
2000 onwards
Global competitiveness
• Economic and
payments crisis
• Removal of most
import controls
• Broad reforms,
reduction of licensing
and protection
• Resurgence of key
industries
• Higher competition,
access to technology
and imported inputs
• Indian companies
acquiring companies
abroad, gaining global
identity
• Higher share of private
sector in fixed
investment
• Outsourcing boom
• Increased threat
perception from China
CAGR
= 5%
•Development of process expertise
•Development of local capital equipment industry
•Mindset of asset optimization to avoid imports
•Focus on flexibility rather than scale
CAGR
= 6%
•Cost reduction and
restructuring waves to
achieve
competitiveness
CAGR
= 7-8%
•Innovation and global
expansion
Note: GDP numbers are approximate
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Demography
INDIA WILL BENEFIT FROM A DEMOGRAPHIC DIVIDEND
2020
India Demographic Profile
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
60
-60
China Demographic Profile
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
40
-40
20
-20
0
20
60
40
Mn people
60
-60
France Demographic Profile
Age group
80+
75-79
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0-4
40
-40
20
-20
0
20
60
40
Mn people
3
-3
2
-2
1
-1
0
1
2
3
Mn people
20 - 35 age group :
20 - 35 age group :
20 - 35 age group :
325 mn people (~25 %)
308 mn people (~21 %)
11 mn people (~17 %)
Source: CII Conference 2002; CSFB Report; UN Population Division; BCG analysis
Copyright BCG
Female
Male
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India’s challenges
INDIA’S REGIONAL DIVERSITY POSES UNIQUE CHALLENGES...
EAST
NORTH
•
•
•
•
•
Jammu &
Kashmir
Main Language: Hindi
Main Religions: Hindu, Sikh, Muslim
Agricultural Hub
GDP/Cap: $580
22.4% of India GDP
Punjab
18
Himachal
Pradesh
4
Haryana
16.4
Rajasthan
23.2
WEST
• Main Languages: Hindi,
Gujarati, Marathi
• Religions: Hindu, Parsi, Muslim
• Financial Hub
• GDP/Cap: $790
• 26.8% of India GDP
Gujarat
37.2
Bihar
12.5
Seven Sisters
2.5
Jarkhand
Madhya Pradesh
8.8 West Bengal
22.5
42.2
Chattisgarh
8.6
Orissa
CENTRAL
12
Maharashtra
74
Goa
2.1
Main Languages: Hindi, Bengali
Religions: Hindu
Natural Resources Hub
GDP/Cap: $415
18% of India GDP
Delhi
18.6
Uttar Pradesh
47.8
SOUTH
• Main Languages: Tamil,
Malyalam, Kanada
• Religions: Hindu, Christian
• Technological Hub
• GDP/Cap: $717
• 26.6% of India GDP
•
•
•
•
•
Andhra
Pradesh
41
Karnataka
29.4
State GDP Per
Capita (US$)
•
•
•
•
Main Languages: Hindi
Religions: Hindu
GDP/Cap: $430
5.8% of India GDP
Below 400
400-700
Kerala
19.9
Tamilnadu
37.4
700-900
More than 900
Note: Numbers Under State Names Indicate State GDP (US$Bn) for 2004
Source: Statistical Outline of India, Central Statistical Organisation
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India’s challenges
Backup
...AS DOES THE RURAL-URBAN DIVIDE
Key Indicators
Rural
Contrasting Penetration
Urban
Rural
Urban
Per Capita GDP ($)
CTVs
3
1175
470
MPCE(1) ($)
13
Refrigerators
4
24
% of Population
Shampoos
80
66
35
Tele-density (%)
Two-Wheelers
1.7 26.2
80 -60
60 -40
40 -20
20 0
-80
54
15
Adult Literacy (%)
59
34
Cable TV
26
74
30
7
20 40 60 80
25
-80
80 -60
60 -40
40 -20
20 0 20 40 60 80
%
(1) Monthly Per Capita Consumption Expenditure
Source: NCAER, Literature Review, BCG Analysis
Copyright BCG
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India’s challenges
CONTINUED SIGNIFICANT POVERTY...
Distribution of households (in ’000s) by income class
20
Rural vs. urban split
Super Rich
> 1 cr
40
Sheer Rich
50 lacs-1 cr
201
Clear Rich
20-50 lacs
546
Near Rich
10-20 lacs
1,712
Strivers
5-10 lacs
9,034
Seekers
2 -5 lacs
41,262
Aspirers
90,000-2 lacs
135,378
Deprived
< 90,000
11%
48%
89%
42%
85%
19%
20%
35%
80%
19%
25%
29%
75%
18%
30%
24%
17%
70%
36%
18%
16%
64%
48%
52%
6%
11%
82%
1%
2%
18%
0.5
Rural
Copyright BCG
18%
15%
0
(1) Excluding Delhi and Mumbai
Note: Income figures in Rs. per annum
Source: NCAER
Urban agglomeration
1
Urban
0
0.2
Delhi &
Mumbai
0.4
0.6
Top 10
cities-(1)14 -
India’s challenges
...AND WIDENING INCOME DISPARITY
Copyright BCG
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India’s challenges
EXTREME VARIATIONS IN INFRASTRUCTURE
Few spectacular successes...
... but lots more to be done
Delhi Metro
(USD 2 billion)
Golden Quadrangle
(USD 15 billion)
Copyright BCG
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India’s challenges
CHALLENGES OF MANAGING GOVERNMENT COALITIONS OFTEN
HELD RESPONSIBLE FOR SLOWER PACE OF REFORMS
Appeasement of Many Identities
• Indian National Congress (INC) dominates
politics
Independence • INC led by Nehru-Gandhi family retain
- 1970’s
power
1978 - 79
Caste
• First non-congress coalition government
‘Janata Party’
• Retains power for only a short period
1980 - 1990
• Political instability
- 7 governments in 10 years
• INC only party able to maintain a stable 5
year government
1999 - 2004
• First stable non INC coalition government
led by Bharatiya Janata Party (BJP)
Region
Many political identities
Economic
principles
Religion
2004 - 2005
• INC wins election by narrow margin
• Coalition government with regional parties
and Communist Party of India
Source: Election Commission Of India ; Press Review
Copyright BCG
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India’s challenges
AND CERTAIN FEATURES THAT HAMPER BUSINESS EFFICIENCY
Comparison Of Various Aspects Of Setting Up A New Business
75
India
71.0
Ranking of Countries As Per Corruption Perception Index,
2005
200
61.7
Asia-Pacific
150
50
39.7
35.3
100
25
126
11.0
50
78
7.9
158
137
88
39
0
0
No. of procedures
in setting up a
business
Time (days) to set
up a business
1
Iceland
Cost (% of income
per capita) for
setting up business
China
Malaysia
Russia
India
Bangladesh
Indonesia
Source: World Bank Economy Rating 2005; Literature Review, Transparency International Corruption Perception Index 2005
Copyright BCG
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India opportunity
SEVERAL FACETS TO THE INDIA OPPORTUNITY
1. Large and growing markets
4. Attractive LCC
sourcing base
2. A source of talent
3. Base for business
process offshoring
Copyright BCG
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1. Large and growing markets
India opportunity
SEVERAL INDIAN CONSUMER MARKETS BECOMING ATTRACTIVE
FMCG
Size: US$14Bn
Growth: 9%
Consumer Durables
Size: US$5.1Bn
Growth: 15-20%
Travel & Tourism
Size: US$13Bn
Growth: 8.9%
Apparels
Size: US$20Bn
Growth: 15-25%
Media & Entertainment
Size: US$11Bn
Growth: 15-17%
Retail
Size: US$210Bn
Growth: 10-15%
Copyright BCG
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2. A source of talent
India opportunity
INDIA HAS A STRONG TALENT BASE
A large pool of skilled people...
...with high end qualifications...
...and extremely cost efficient
Availability of skilled labour, 2005
Availability of qualified engineers,
2005
Total compensation for engineers,
2004(1)
India
7.6
India
USA
7.6
USA
Germany
7.1
Russia
Brazil
Mexico
China
6.5
5.3
5.0
4.3
8.6
7.2
Germany
Mexico
106
105
Russia
6.4
Russia
Brazil
6.3
USA
Germany
6.3
Brazil
5.1
Mexico
China
4
135
India
China
94
52
43
33
India is the largest English speaking nation in the world
India has the second largest pool of Scientists and Engineers in the World
(1) Compensation is (US$ ‘000) and includes salary plus bonuses
Note: Survey results: 1=low; 10 = high
Source: IMD world competitiveness Yearbook 2005
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2. A source of talent
India opportunity
THE INDIA WORKFORCE SURPLUS IS LIKELY TO CONTINUE
While Other Countries Face Shortages
Potential surplus population in working age group (2020)
Germany -3 Mn
UK
-2 Mn
0Mn
-1
Mn
Iraq
Ireland
US
-17Mn
France
Spain
-3 Mn
Czech
Republic
2Mn
-3 Mn
-2 Mn
2Mn
Israel
Iran
0Mn
3Mn
4Mn
Egypt
Mexico
-6
Mn
Turkey
Italy
5Mn
Russia
China
Pakistan
19
Mn
47
Mn
-10
Mn
-9 Mn
Japan
5Mn
7
Mn
Bangladesh
Philippines
4Mn
India
Vietnam
1Mn
Malaysia
3Mn
5Mn
Indonesia
Brazil
-0.5
Mn
Australia
Note: Potential workforce surplus is calculated keeping the ratio of working population (age group 15 – 59) to total population constant and under the assumption that
this ratio needs to be broadly constant to support economic growth. Therefore, India will have 47 Million more people in the working age group/total population by
2020 compared to today, while France will have a deficit of 3 Million people in the working age group compared to today.
Source: U.S. Census Bureau; BCG Analysis
- 22 Copyright BCG
3. Base for business process off-shoring
India opportunity
SEVERAL FIRMS HAVE OUTSOURCED OPERATIONS TO INDIA
Select Examples
Financial Services
Industrial Goods
Copyright BCG
Consumer/Services/Hi-Tech
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3. Base for business process off-shoring
India opportunity
MNCs DEEPENING R&D PRESENCE IN INDIA
4. Fundamental
research
Level of
expertise
3. End-to-end product
development for
global markets
2. End-to-end product
development for
emerging markets
GE: 1700 people;
77 patents; 2
products
1. Selected steps in
product
development
Akzo Nobel:
75 of 400
people in
India
TI: 900 people;
225 IPs, 20
products
Time/Extent
of success
Source: Literature, BCG interviews
Copyright BCG
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4. Attractive LCC sourcing base
India opportunity
INDIA HAS POTENTIAL TO BE A GLOBAL SOURCING HUB ACROSS
MANY INDUSTRIES
Manufactured products outsourcing
projected to be ~€50 Bn by 2015
€ Bn
60
Where is this going to come from?
Automobiles
• Even within our different factories worldwide we believe India will be most
competitive for small cars
- BG Lee, Executive Director,
Hyundai Motor Company
CAGR: 25%
~50
50
40
30
22%
43
20
10
0
Engineering goods
• Our proposal to source transmission from
India had competition from China and
Philippines. We believe it would be more
economical in India
- Atsushi Toyoshima, Managing
Director, Toyota Kirloskar Motor
26%
4.3
2004
8.5
2007
Pharmaceuticals
• Shasun chemicals and drugs
- sole supplier of Nizatidine, Eli Lilly's
~€190 Mn anti ulcer drug
- 60% of Knoll Pharma's global
requirement of Ibuprofen
2015
Source: Business World – 12 May 2003; BCG analysis
Copyright BCG
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JUST ANOTHER DAY IN INDIA...
Copyright BCG
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