Transcript Why India

Indian Economy
Opportunities Unlimited
India: Fastest Growing Free Market Democracy
2
India: Among the Top-15 Countries in terms of GDP at constant prices
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: 2002-07
700
8.5%
600
USD Billion
India’s GDP
witnessed high
growth and was the
second fastest
growing GDP after
China
8.4%
9.4%
7.5%
Fastest GDP growth of 9.4
percent in 2006-07, since last 18
years
500
400
300
200
Indian economy is
the 4th largest in
terms of PPP – USD
4.1 trillion in 2006
4%
424
484
534
2003-04
2004-05
590
631
2005-06
2006-07
100
0
2002-03
GDP at Constant Prices
Contribution of
Services increased from
49 percent to
55 percent
700
600
155
500
USD Billion
The sound
performance of each
industry segment is
leading to the
overall robust
performance of the
Indian economy
3
400
104
109
103
91
205
223
300
200
100
116
319
168
117
347
0
1999-00
2002-03
2005-06
Services
Agriculture
Industry
2006-07
Growth in sectors (2006-07):
Industry: 10.9%
Services: 11%
Agriculture: 2.7%
India: Robust Economic Platform
India's Forex Reserves: 2001-07 (Till 22 June 2007)
250
199
213
200
USD Billion
India’s enhanced
economic
performance has
been the major
contributor towards
increased Forex
reserves
4
…at present level of Forex
reserves, the country has
adequate cover for 12 months of
imports
152
141
150
112
100
75
54
50
Steadily increasing
Forex reserves offer
adequate security
against any possible
currency crisis or
monetary instability
0
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
(Till 22
June)
External Debt-to-GDP Ratio
22
Forex reserves
witnessed an
increase of 200
percent for the
period 1990-2007
Falling Dollar inflates
the India’s external debt
20.4
19
Ratio
Increased
confidence of
investors in Indian
companies have led
to a surge in cross
border borrowing by
the corporate
houses
21.1
17.8
India’s Forex
reserves are in
excess of
external debt…
17.3
15.8
16
16.4
…the decreasing external debt to
GDP ratio indicates that India has
a sound economic platform
13
10
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
India: Surging Exports
India's Exports: 2002-07 (till February 2007)
120
103.42
100
USD Billion
Services sector has
been a major
contributor to
increased exports
from India
5
83.81
80
60
112.40
52.81
63.95
Quality and cost advantage are the two
important parameters leveraged by the
Indian producers to increasingly
market their products and services
40
20
Acceptance of
Indian products
along with the cost
advantage has
provided an edge to
Indian companies
Imports of products
by India mainly
includes petroleum
products and
minerals
2002-03
2003-04
2004-05
2005-06
2006-07
(upto Feb.
07)
India's Import: 2002-07 (till February 2007)
USD Billion
Indian companies
have chalked out
extensive plans to
increase their
presence abroad
0
180
160
140
120
100
80
60
40
20
0
149.65
162.30
111.89
78.28
61.52
2002-03
Petroleum products are the major
contributors towards India’s growing
imports
2003-04
2004-05
2005-06
2006-07
(upto Feb.
07)
India: Attractive Investment Destination
India is ranked
second in AT
Kearney FDI
confidence index
6
With improved performance on PE ratio and ROE, Indian markets have attracted
large investments
FDI Inflow - India: 2001-07
18,000
15,730
16,000
Return on the Investments in India (2006 Q1)
Market
FDI inflow for the
period 2006-07
witnessed a growth
of 180 percent over
the same period last
year
Mauritius has been
the largest
contributor towards
FDI into India…..
PE Ratio
P/B Ratio
RoE (%)
180 percent
Increase
12,000
10,000
8,000
6,000
India
16.1
4.53
22
4,000
China
10.62
2.06
17
2,000
Indonesia
10.26
3.09
NA
Korea
9.85
1.84
16
Malaysia
13.21
1.82
16
Taiwan
12.17
2
11
Thailand
9.84
2.32
23
EM Asia
11.19
2.12
15
Latin America
9.35
2.46
18
EM Europe
10.9
2.39
15
5,546
4,222
3,755
3,134
2,634
2002-03
2003-04
0
2001-02
2004-05
2005-06
2006-07
Net FII into India: 2001-07
12
10.00
10.20
9.40
10
USD Billion
Telecom and
Electronics topped
the list of inward FDI
USD Million
14,000
8
6.72
6
4
2
1.80
0.60
0
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
India: Vibrant Capital Market
India is among the
major destinations
across the globe for
inflow of US Dollar
i.e. FIIs
7
Sensex – The Bombay stock exchange index has risen 15 times from 1990s to
reach 15,000 mark in July 2007
7/9/2007
Crossed
15,000
mark
16,000
Sensex risen 15
times in the period
1990-2007
FIIs augmented
support by infusing
large investments
in Indian stock
market
1/12/2007
Crossed 14,000 mark
14,000
2/7/2006
Crossed 10,000 mark
12,000
INR
10,000
Emergence of
industry and
confidence of local
investors along with
the FIIs has led to
increased movement
of sensex
8,000
Exorbitant
industry
performance
12/30/1999
Crossed 5,000 mark
6,000
4,000
2,000
Increased local
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
Trends:
 Ratio of the Size of
acquisition to the
size of acquirer
has grown from 10
percent in 2004 to
25 percent in 2006.
 Cross-border
deals are growing
faster than
domestic deals
 Private Equity (PE)
houses have
funded projects as
well as made a few
acquisitions in
India
28.2
30
782
25
18.3
20
15
10
12.3
467
306
5
0
2005
2004
Deal Values
2006
No. of Deals
900
800
700
600
500
400
300
200
100
0
Number of deals
Number of Deals and Values
USD Billion
Growth Drivers:
 Globalisation of
competition
 Concentration of
companies to
achieve
economies of
scale
 Lower interest
rates and vibrant
global markets
 Cash Reserves
with Corporates
8
SECTOR
USD
(Mn)
SECTOR
USD
(Mn)
Automotive
518
Manufacturing
933
Banking and Financial
1,375
Media
630
Chemicals and
Plastics
1,133
Oil & Gas
384
Electrical and
Electronics
896
Pharma &
biotech
2,520
Energy
1,484
Telecom
2,198
FMCG, Food and
Beverages
1,327
Others
4,006
IT and ITES
2,903
Total
20,305
In 2006, there were a
total of 480 M&A deals
and 302 private equity
deals…
… Average deal size close to
USD 36 million…
…Contribution of private
equity deals to total
number of deals have
increased from nearly 9
percent in 2004 to 28
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
Electronics Corporation Limited
USD 730 million
Major M&A and Investments Announcements in India
10
Vodafone buys Hutch
USD 11 billion
Plans to spend on its development operations
in India over the next four years
USD 1.7 billion
Plans investment in private equity, real estate,
and private wealth management
USD 1 billion
Aditya Birla Group increased its stake in Idea
Cellular by acquiring 48.14-percent stake
USD 0.98 billion
Renault, Nissan and Mahindra & Mahindra
has initiated a Greenfield automobile plant
project in Chennai.
USD 0.905 billion
Mylan Laboratories acquired a majority stake
in Matrix Laboratories
USD 0.74 billion
India: Pacing Ahead to Emerge as a Major Economy in the World
2007 Global Retail Development Index (GRDI)
AT Kearney placed
India among the top
three in its FDI
confidence index…
India
80
60
Malaysia
2.8
Indonesia
0
Chile
2.3
2.3
1.3
3.2
2.6
1.6
1.8
3.3
1.4
2
1.2
1.5
1.5
Financial structure
Business environment
Latvia
1.4
1.1
People and skill availablity
Projected GDP Growth Rates for Select Upcoming Economies
8
GDP Growth Rate (%)
India is expected to
outperform its rivals
in the BRIC, in terms
of GDP growth rates,
from 2015
onwards…
2.9
Brazil
20
3.2
China
Thailand
40
India Russia Vietnam Ukraine China
… the retail market
along with the
services sector has
been attracting the
interest of major
players
2007 Global Services Location Index
100
GRDI Score
India has been
ranked superior to
other major
countries by many
prominent surveys…
11
6
4
2
0
2005-10
2010-15
2015-20
Brazil
2020-25
2025-30
China
2030-35
India
2035-40
Russia
2040-45
2045-50
India: Astounding Demographics
DEMOGRAPHIC TRANSFORMATION OF INDIA
Annual Household Income
(in USD)
Population (million)
Growth in the higher
income categories
of India’s population
has created an
affluent section of
society, which has
significant level of
purchasing power
12
2
9
20
Rich (Above 115,000)
9
17
33
High Income (57,000 – 115,000)
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)
2005-06
2001-02
2009-10(E)
* In PPP terms
519
Increasing per capita income
coupled with an emerging middle
class has provided the necessary
impetus to consumerism in India
461
500
400
651
583
600
USD
Increasing per capita
income and large
population moving
into middle class
has led to high level
of consumerism in
India
Per Capita Income
700
393
300
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)
Addition to Working Age Population by 2010
Stock Position 2005
World
4,168
India
691
Africa
500
China
934
South East Asia
362
Latin America
359
Southern Asia
132
USA
200
Europe
497
Japan
314
71
64
44
33
31
17
10
0
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
 GDP – USD 750 billion
 GDP growth rate – 9.5%
2006
 Services contribution – 60 %
 Services contribution – 54 %
 FDI limit is expected to be close to
100 percent in major industry
sectors such as Telecom,
Semiconductors, Automobiles, etc.
 FDI limit not 100 percent in major
industry sectors such as Telecom,
Semiconductors, Automobiles, etc.
 Balance of Trade – Should
increase with surging exports as
compared with imports
 Balance of Trade – USD (-)46.2
billion
 Investment goal – USD 305 billion
 GDP – USD 590 billion
 GDP growth rate – 9 %
 Investment goal – USD 250 billion
 Services contribution – 60-65 %
 FDI limit is expected to be 100
percent in major industry sectors
such as Telecom,
Semiconductors, Automobiles, etc.
 Balance of Trade – Should be
positive with increased level of
exports as compared with imports
 Investment goal – USD 370 billion
Why India? – Quote Unquote
India is among the
three most attractive
FDI destinations in the
world.
15
“India has evolved into
one of the world's
leading technology
centers“.
India has among the
highest returns on
foreign investment.
Craig Barrett
Intel Corporation
A T Kearney
FDI Confidence Index 2005
By 2032, India will be
among the three
largest economies in
the world.
BRIC Report, Goldman Sachs
“We came to India for the
costs, stayed for the
quality and are now
investing for innovation”.
“India is a developed
country as far as
intellectual capital is
concerned”.
- Dan Scheinman, Cisco System Inc. as told
to Business Week, August 2005
Jack Welch
General Electric
US Department of
Commerce
“The Indian market has two
core advantages - an
increasing presence of
multinationals and an upswing
in the IT exports”.
Travyn Rhall,
ACNielsen
16
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