India Destination of Choice for Global Business

Why  India?  

Strong  economic  fundamentals  that  make  India  a5rac6ve  to  investors  

 Stable  and  Well  Regulate  Financial  System  and  an  Economy  rela6vely  insulated  from  global  

shocks  

One  of  the  largest  markets  driven  by  a  large  emerging  middle  class,  cost  compe66veness  

and  a  mammoth  pool  of  talent  

Recently  introduced  second  –genera6on  economic  reforms  by  the  Government  of  India  

have  further  opened  up  new  investment  opportuni6es  in  various  sectors    

Fastest  Growing  Free  Market  Democracy  

Ø 10th  largest  economy  (in  current  prices)  and  4th  largest  in  terms  of  Purchasing  Power  Parity  in  the  world  

Ø India’s  GDP  has  grown  at  an  average  of  8.5%  in  last  five  years  against  the  World  average  of  4.3%  

Ø Higher  savings  and  investment  rates  than  other  leading  economies  

Strong  Economic  Fundamentals  

-­‐  Large  English  speaking  base  of  cost-­‐compe66ve  skilled  manpower  

-­‐  Approximately  65%  of  India’s  popula6on  in  the  working  age  group  of  15  to  64  years  

-­‐  Median  age  of  26.2  years  -­‐  lower  than  most  countries  in  the  world  

-­‐  More  than  600  universi6es,  30,000  colleges,  7,000  technical  ins6tu6ons  and  18,000  voca6onal  training  ins6tutes  

Future growth fuelled by rising incomes of a young population

Share of India population per age group (%)

Dramatic growth in middle class ('08 → '15)

0

2001

80 + 1

70 - 79 2

60 - 69 5

50 - 59 6

40 - 49 10

10

30 - 39 14

20 - 29 17

10 - 19 22

0 - 9 23

20 30

Age group

47%

1,029

xx%Share of working-age population in total population +xx

Additional working-age population (M)

30

17

17

12

10

6

3

1

2020

0 10 20

16

19

56%

1,364+280

1. Population between 20-59 years oldSource: Census of India 2001, Population projections 2001-2026 (Dec 2006); TeamLease India Labour Report 2006; EIU market data and BCG analysis

India population distribution by income ('08→'15)

>$35,000

$25,000~$35,000

$15,000~$25,000

$10,000~$15,000

$5,000~$10,000

$3,000~$5,000

$1,000~$3,000

Total householdnumber (M)

217

2008 2015

241

2%

2%

2%

16%

3%

27%

10%

20082015

52%

7%

39%

12%

29%

Annual household income (US $)

-­‐  Approx.  4.2  million  people  added  to  

talent  pool  every  year,  with  4  million  

graduates  and  0.26  million  post-­‐

graduates  

-­‐  By  2025  India  expected  to  become  the  

fi\h  largest  consuming  country  

-­‐  Middle  class  expected  to  increase  12  

6mes  between  2005  and  2025  

-­‐  Private  domes6c  consump6on  accounts  

for  58  %  of  GDP  

Favorable  Demographics  &  Huge  Market  

-­‐  Fast  growing  infrastructure  sector  -­‐  Investment  on  Infrastructure  sector  doubling  in  each  Five-­‐Year  Plan  

-­‐  Total  investment  in  infrastructure  projected  to  be  around  US$1  trillion  during  the  12th  Five  Year  Plan  (2012–2017)  –  one  of  the  largest  in  the  world  

-­‐  50%  expected  to  be  contributed  by  the  private  sector  

44.13  

23.17  

7.5   7.11   6.47   6.09  

Total  Subscribers  

Highways  Length  

Installed  Capacity  

Freight  Traffic  

Refining  Capacity  

Gross  Registered  Tonnage  

Telecom   Roads   Power   Railways   Oil    &  Gas  

Ports  &    Shipping  

Infrastructure  Sector-­‐wise  Average  Annual  Growth  Rate  (Mar  2005-­‐Mar  2011)  

Focus  on  Building  Robust  Physical  Infrastructure  

Major Plans for Infrastructure Development

(US  $  billion)   Projected  investment   Private  sector  contribuQon  

Electricity   329.3   173.2  

Roads  &  bridges   173.4   55.5  

TelecommunicaQons   166.6   146.4  

Railways   105.1   23.0  

IrrigaQon   81.0   0  

Water  supply  and  sanitaQon   39.1   0.9  

Ports   30.3   26.2  

Oil  &  gas  pipelines   22.7   10.6  

Airports   13.4   10.6  

Storage   9.0   6.4  

Total   970.0   452.8  

Projected Investment in XII Plan (2012-13 to 2016-17)

• Huge  investment  opportunity;  es6mated  at  approx  US$  30  Bn  6ll  2020.    

• Expected  to  see  investments  worth  US$33.17  billion  during  the  12th  Five  Year  Plan  

• Na6onal  Highway  Dev.  Prog.  is  being  developed  in  phases  6ll  2015  with  proposed  investment  of  US$  60  bn.  

• 75,000  MW  of  genera6on  capacity  to  be  added  in  XII  Plan  (2012-­‐17)  

Power   Roads  

Civil  Avia6on  Ports  

Power  • FDI  up  to  51%  is  permi5ed  under  the  automa6c  route  for  genera6on  and  transmission  of  electricity  produced  in  selected  segments  

Highways  100%  FDI  under  automa6c  route  permi5ed  in  highways  with  no  restric6on  on  repatria6on  

Ports  &  Shipping  100%  FDI  allowed  in  ports  sector  to  supplement  domes6c  capital,  technology  &  skills  

AviaQon  while  100%  FDI  under  the  automa6c  route  is  permissible  for  green-­‐field  airports,  49%  FDI  is  permissible  in  domes6c  airlines.  

OpportuniQes  

Investment  OpportuniQes:  Infrastructure    Liberalized  FDI  Norms  

AutomoQve  100%  FDI  under  the  automa6c  route  is  allowed  in  the  sector  

Food  Processing  100%  FDI    is  allowed  in  the  sector  

Bio  Technology  FDI  up  to  100%  is  permi5ed  through  the  automa6c  route  for  the  manufacture  of  drugs  and  pharmaceu6cals.  

PharmaceuQcals  100%  FDI  under  the  automa6c  route  is  allowed  in  the  sector.  

Chemicals  100%  FDI  is  allowed  in  the  sector  

TexQles&  Apparels  FDI  up  to  100%  is  allowed  in  the  sector  through  the  automa6c  route  

Liberalized  FDI  Norms  

 India  ranks  second  in  world  produc6on  of  fruits  and  vegetables.    Food  Processing  sector  is  valued  at  approx.  US$135  billion  (2012)  and  is  expected  to  grow  at  a  CAGR  of  10%  to  about  US$200  billion  by  2015.    

 India  is  amongst  the  top  12  biotech  des6na6ons  in  the  world  and  ranks  2nd  in  Asia.  The  sector  stood  at  US$4.3  billion,  and  is  expected  to  increase  to  US$11.6  billion  by  2017  

OpportuniQes  

 India  is  the  world’s  second  largest  producer  of  tex6les  and  garments.  The  sector  was  pegged  at  US$99.7  billion  in  2011.    

 India  is  the  12th  largest  producer  of  chemicals  in  the  world  and  3rd  largest  in  Asia.  In  order  to  make  investment  in  the  sector  a5rac6ve,  no  licenses  are  required  for  produc6on  of  most  of  the  chemicals,  including  organic,  inorganic,  dyestuff  and  pes6cides  

 The  sector  accounts  for  over  8%  of  global  pharmaceu6cal  produc6on.    

 India  is  the  world’s  2nd  largest  producer  of  two-­‐wheelers  and  5th  largest  commercial  vehicle  manufacturer.  It  is  expected  to  become  the  world’s  7th  largest  automobile  market  by  2016  and  3rd  largest  by  2030.  

Investment  OpportuniQes:  Manufacturing    

Investment  OpportuniQes:  Services    

• The  sector’s  market  size  is  es6mated  at  US$78  billion  and  is  expected  to  reach  US$280  billion  by  2020.  India  is  the  world’s  second  largest  des6na6on  for  medical  tourists.  FDI  up  to  100%  is  permi5ed  under  the  automa6c  route  for  the  hospital  

Healthcare  

• The  sector’s  market  size  is  expected  to  rise  to  US$225  billion  by  2020.  Over  75%  of  the  Fortune  500  companies  source  their  so\ware  from  India.  100%  FDI  is  allowed  under  the  automa6c  route  in  electronics  and  IT  sector.    

IT  &  ITES  

• Burgeoning  middle-­‐class  has  propelled  the  Indian  retail  industry  to  5th  rank  in  the  Global  Retail  Development  Index  2012.  Share  of  organized  retail  is  expected  to  reach  10.2%  by  2015,  up  from  7.8%  es6mated  in  2012.  51%  is  allowed  in  mul6-­‐brand  retail.  

Retail  

• One  of  the  fastest  growing  telecom  markets  in  the  world,  accounts  for  almost  3%  of  the  Indian  GDP.  Surge  in  mass  broadband  adop6on  is  expected  to  be,  led  by  the  launch  of  3G  and  4G  services  and  huge  demand  for  smart  mobile  devices.  While,  FDI  up  to  74%  to  100%    is  permi5ed  for  various  telecom  services,  100%  FDI  is  permi5ed  in  the  area  of  telecom  equipment  manufacturing  and  provision  of  IT  enabled  services.  

Telecom  

• Vibrant  capital  market    with  a  presence  of    20  stock  exchanges.  Banking  sector  had  total  asset  size  of  US$1.63  trillion  at  the  end  of  FY12.  

Banking,  Financial  Services  &  Insurance  

Mining  

• India  is  home  to  high  reserves  of  iron-­‐ore,  bauxite  and  coal  and  is  posi6oned    among  the  leading  10    countries  globally  for  these  ores.    

• FDI  of  up  to  100%  is  allowed  through  the  automa6c  route  for  all  non-­‐fuel  and  non-­‐atomic  minerals  including  diamond  and  precious  stones.  

Oil  &  Gas  

• India  is  5th  largest  consumer  of  primary  energy  in  the  world,  impor6ng  83%  of  its  crude  requirement  in  FY11  

• The  sector  has  lot  of  untapped  poten6al  as  can  be  inferred  from  the  fact  that  78%  of  the  country’s  sedimentary  area  is  yet  to  be  explored.  

• 100%  FDI  is  allowed  for  Indian  companies  in  refineries  and    in  petroleum  products  and  pipeline  sector.  

Steel  

• India  is  world’s  fourth-­‐largest  producer  of  crude  steel  and  is  expected  to  become  the  second  largest  by  2015.    

• The  total  market  value  of  the  sector  has  been  es6mated  at  US$55.1  billion  in  2011.    

• The  produc6on  of  the  sector  is  expected  to  reach  275  MT  by  2020.    

• 100%  FDI  for  iron    and  steel  industry  is  allowed  through  the  automa6c  route.  

Investment  OpportuniQes:  Resources    

The Current State of the Economy  

GDP Growth – India

GDP Growth (%)

•  In 2012-13, GDP growth has moderated on account of recessionary conditions in the west and investment slowdown at home

•  The economy is expected to recover gradually to 6%+ growth in 2013-14.

Inflation Finally Moderating

•  Inflation has shown a downward movement in recent months and stands at 6.8% for February 2013, down from 9.5% in February 2011.

•  Food inflation has remained stubbornly high and is a cause for concern. Supply side bottlenecks are responsible for still high level of food inflation

•  Deregulation of fuel prices responsible for rising Inflation in fuels.

WPI Inflation (%)

Monetary Policy is Easing

EffecQve  Dates   Repo  rate   Reverse  Repo  rate   CRR  

Jan-­‐11   6.50   5.50   6.00  Mar-­‐11   6.75   5.75   6.00  May-­‐11   7.25   6.25   6.00  June-­‐11   7.50   6.50   6.00  July-­‐11   8.00   7.00   6.00  

Sep-­‐11   8.25   7.25   6.00  

Oct-­‐11   8.50   7.50   6.00  

Jan-­‐12   8.50   7.50   5.50  

Mar-­‐12   8.50   7.50   4.75  

Mar-­‐12   8.50   7.50   4.75  

Apr-­‐12   8.00   7.00   4.75  

Sep-­‐12   8.00   7.00   4.50  

Oct-­‐12   8.00   7.00   4.25  

Jan-­‐13   7.75   6.75   4.00  

Mar-­‐13   7.50   6.50   4.00  

•  The RBI increased the reverse repo rate and the repo rate several times till October 2011, in order to tame inflation; however, this cycle has peaked and the RBI has started cutting key policy rates since April 2012.

•  The RBI has also reduced the Cash Reserve ratio (CRR) to contain the shortage in liquidity. The CRR has been reduced by 200 basis points since January 2012 releasing funds into the banking system.

•  The RBI has also been conducting Open Market Operations (OMOs) to further ease the liquidity situation.

Change in Policy Rates of RBI

As Fiscal Policy is Being Tightened

 •  Fiscal   Deficit   for   2012-­‐13   stood   at   5.2%  

of   GDP,   lower   than   the   previous   year’s  level  of  5.8%.  

•  Budget   2013   has   projected   a   decline   in  the  deficit  to  4.8%  of  GDP  in  2013-­‐14.  

•  Fiscal  Deficit  to  be  progressively  reduced  to  3.0%  by  2016-­‐17.  

•  However,   subsidies   on   account   of   food  and  fuel  may  cause  a  problem  

Fiscal deficit (as % of GDP)

The Early Burst of Reforms

•  The reforms in the early to mid nineties made sweeping changes such as

•  Reduction in tariff barriers •  Removal of barriers to entry in industry •  Removal of controls in the financial sector •  Encouragement to foreign investment and technology •  Rationalization of tax structure

•  These have ensured macroeconomic stability and driven the economy towards greater competitiveness

•  These measures have also helped India in emerging as a resurgent, vibrant and

dynamic nation, leading global growth

•  India is the second fastest growing major economy in the world after China •  India was able to withstand the repercussion of the global economic crisis •  India’s participation is required in all global negotiations ranging from global trade to

climate related deals

Recent Policy Reforms

Fiscal consolidation

–  De-regulation of diesel prices –  Cap on availability of subsidised LPG cylinders –  Direct transfer of subsidies to poor people by opening of a bank account –  Approval for disinvestment in several Public Sector Units (PSUs)

Power sector reforms

–  The central government recently also approved the scheme for Financial Restructuring of State Distribution Companies (Discoms). The scheme contains various measures required to be taken by State Discoms and State Governments for achieving the financial turnaround of the Discoms by restructuring their debt with support through a transitional finance mechanism by the Central Government.

–  These reforms were the need of the hour as the accumulated losses of the state power

distribution companies (Discoms) are estimated to be about Rs 1.9 trillion as on 31st March, 2011.

Recent Policy Reforms

•  FDI Reforms: Increase in FDI cap in several sectors –  FDI cap in multi brand retail upto 51% subject to state permission and 100% in single-

brand retail –  Upto 49% foreign investment each in the aviation sector and power trading exchanges –  Upto 74% in broadcasting sector

•  Monetary Policy: Gradual move away from tight monetary stance –  Reduction in SLR form 24% to 23% –  Cut in CRR from 4.75% to 4.00% –  Easing of repo rate by 100 bps in 2012-13

•  Financial Reforms –  Cabinet has approved 49% FDI limit (as opposed to 26% currently) in insurance sector;

bill needs to be passed in Parliament –  FDI limit in Pension funds to be hiked in line with the insurance sector once the PFRDA

Bill is passed in Parliament

.

Union Budget 2013-14 Unleashed Pro-Growth Measures •  Boosting Infrastructure

–  Encourage Infrastructure Debt Fund (IDF) –  Allow some institutions to raise tax-free bonds up to 50,000 crore (100 per cent more than the

current year) –  India Infrastructure Finance Corporation (IIFC), in partnership with ADB, to help infrastructure

companies to access the bond market to tap long-term funds

•  Boosting Investments & Savings –  15% investment deduction allowance apart from depreciation for companies investing Rs 100

crore of more in plant & machinery in April 1, 2013 to March 31, 2015 –  Proposal to launch inflation indexed bonds to protect savings from inflation

•  Financial Sector Reforms –  Rs 14,000 crore will be provided to public sector banks for capital infusion in 2013-14 –  Foreign institutional investors will be allowed to participate in exchange-traded currency

derivatives  –  FIIs, will be permitted to use their investments in corporate bonds and G-secs as collateral to

meet their margin requirements .

………Contd

•  Tax Proposals - Slabs and rate for personal income tax unchanged

–  Tax credit of Rs 2,000 to every person with total income up to Rs 5 lakh –  Increase in surcharge from 5 to 10 per cent on domestic companies whose taxable

income exceeds Rs 10 crores –  10 per cent surcharge on persons (other than companies) with taxable income

exceeding Rs 1 crore –  India Infrastructure Finance Corporation (IIFC), in partnership with ADB, to help

infrastructure companies to access the bond market to tap long-term funds

•  Subsides –  Rs 10,000 crore of additional allocation to the Food Security Bill –  Petroleum subsidies, at Rs 65000 crore, have been adequately provisioned for

.

Budgetary Central Plan Outlay Growth

-17.5

6.4 7.3 10.2 12.2

45.8

32.6

20.1 18.5 16.2

-20

-10

0

10

20

30

40

50

RuralDevelopment

Health andFamily Welfare

HigherEducation

Women andChild

Development

SchoolEducation and

Literacy

% y-o-y

RE 2012-13 over Actuals 2011-12 BE 2013-14 over RE 2012-13

-1.4-7.9

8.3

-4.2

25.416.9

10.517.6

29.122.4

29.6

49.9

21.9

58.8

-15.0

0.0

15.0

30.0

45.0

60.0

Agricultu

re a

nd

Allied A

ctiv

ities

Rura

lD

evelo

pm

ent

Industr

y a

nd

Min

era

ls

Tra

nsport

Com

munic

atio

ns

Socia

l Serv

ices

Genera

lS

erv

ices

% y-o-y

RE 2012-13 over Actuals 2011-12 BE 2013-14 over RE 2012-13

•  The Union Budget 2013-14 saw an increase in central plan outlays of almost all the ministries/

departments

Thank-You