india - economy and trends 74% (including fdi, fii, nri, foreign currency convertible bonds (fccbs),...

INDIA - ECONOMY AND TRENDS October 2010

2

Advantage India Current macro-economic indicators Enablers Drivers

Factors shaping the current business environment Impact on business environment Regulatory changes

Key sectors Infrastructure Retail Telecommunications Automotives IT/ITeS Pharmaceuticals/Healthcare Biotechnology Tourism and Hospitality Banking/Financial Services/Insurance (BFSI) Energy

Contents

INDIA-ECONOMY AND TRENDS October 2010

3

Current macro economic indicators

India-Economy and Trends October 2010ADVANTAGE INDIA

• GDP is estimated to have grown by 7.4 per cent in 2009– 2010. Robust industrial production (including construction) is expected to drive the GDP growth in 2010–11.

• Rise in wages and salaries in the corporate sector and impressive growth in services will increase consumer spending.

• Sectors such as IT and automotive are looking at hiring in 2010; pay hikes have been announced by leading IT companies.

• Robust foreign capital inflows and domestic project investments will lead to an increase in capital formation.

• Swift recovery in consumption led to healthy rise in production of consumer durables. Expected capacity additions and new projects will support industrial production in 2010–11.

• Revival of global demand in 2010–11 will lead to an increase in exports in 2010–11. Increase in petroleum imports and rise in international prices will drive growth of imports in 2010–11.

Current scenario and future outlook

4


ADVANTAGE INDIA

Source: Centre for Monitoring Indian Economy (CMIE)

*CMIE estimates

**CMIE projections

Current scenario and future outlook

Projected growth rate (%) 2008–092009–

2010E*2010–11 P**

GDP (at factor cost) 6.7 7.4 9.2

Agriculture and allied activities 1.6 0.2 5.7

Industry 3.9 9.2 9.4

Services 9.8 8.6 10.0

Private final consumption expenditure 6.8 4.3 6.5

Government final consumption

expenditure16.7 10.5 5.0

Gross fixed capital formation 4.0 7.2 12.0

Wholesale price index (WPI) 8.4 3.8 8.5

Index of industrial production 2.7 10.4 9.0

Exports 12.3 -2.7 15.2

Imports 19.8 -4.4 19.9

India-Economy and Trends October 2010

5


ADVANTAGE INDIA

• India‘s foreign exchange reserves comprise foreign currency assets (FCA), gold, special drawing rights (SDRs) and reserve tranche position (RTP) in the International Monetary Fund (IMF).

• In 2009–2010, the rupee has strengthened against the US$ due to significant amount of FII inflows, continued inflows under FDI and NRI deposits, better macroeconomic performance of the Indian economy and the weakening of the US$ in international markets.

FII inflows and foreign exchange reserves

Net FII investments

Source: Securities and Exchange Board of IndiaU

S$ m

illio

n

Source: Socio Economic Survey, 2009–2010, P: Provisional

International comparison of foreign exchange reserves (US$

billion)

Country 2005 2006 2007 2008 2009P

Brazil 53.3 85.2 179.5 192.9 219.8

Russia 176.5 296.2 467.6 413.4 380.7

India 132.5 171.3 267.6 248.0 263.1

China 822.5 1069.5 1531.3 1950.3 2240

Mexico 74.1 76.3 87.1 95.1 93.5

3,577

1,059

2,727

945

4,263

3,428

1,3301,873

1,849

946

6,465

2,783

-1,505

2,424

5,285

3,163

-2000

-1000

0

1000

2000

3000

4000

5000

6000

7000

May

-09

Jun

-09

Jul-

09

Au

g-0

9

Sep

-09

Oct

-09

No

v-0

9

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0


6


ADVANTAGE INDIA

FII inflows and foreign exchange reserves

Indian Rupee joins the elite

group of unique currencies

Foreign exchange reserves in India

Source: CMIE

US$ b

illio

n 252 254261 261 264 267

263259 256 254 253 255

247251

259

200

220

240

260

280

300


7


ADVANTAGE INDIA

• According to UNCTAD‘s ‗World Investment Prospects Survey 2009–2011‘, India is the second most attractive destination for FDI (after China) in the world.

• India targets to achieve annual FDI worth US$ 50 billion by 2012 and plans to double the inflows by 2017.

FDI inflows: India among top 3 destinations

FDI in India

Source: RBI Bulletin – July 2010

FDI includes direct investment in equity, reinvested earnings

and inter company debt transactions of FDI entities

US$ b

illio

n

8.9

22.7

34.7 35.0

31.7

0

5

10

15

20

25

30

35

40

2005–06 2006–07 2007–08 2008–09 2009–10(P)


8


ADVANTAGE INDIA

• In the period between 2003–2009, the value of investment proposals into India has increased at a compound annual growth rate (CAGR) of approximately 43 per cent.

• The country has received 2,244 investment proposals worth US$ 188 billion in 2010 (up to June)*.

• The Government has allowed Foreign Investment Promotion Board (FIPB) to clear FDI proposals up to a limit of INR 12 billion (US$ 260.64 million). Earlier investments above INR 6 billion (US$ 130.32 million) were put before Cabinet Committee of Economic Affairs (CCEA) for approval.

FDI inflows: India among top 3 destinations

Number of proposed investments and their value

Source: Department of Industrial Policy & Promotion, Government

of India

US$ b

illio

n

25.8

58.177.5

127.0 178.6

327.2

223.8

3991

5218

63386371

3818

40853475

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0

50

100

150

200

250

300

350

2003 2004 2005 2006 2007 2008 2009

Proposed investment Number of proposals

Num

ber o

f deals

*Exchange rate =INR 46.04 /US$


9


ADVANTAGE INDIA

FDI for select sectors

Sl. No. Sector/Activity FDI cap/Equity Entry route

1.

Airports: greenfield projects 100% Automatic

Airports: existing projects 100%

Investment upto 74% is under the automatic

route and beyond 74% under the Government

route

2 Banking (private sector) 74% (FDI + FII) Upto 49% FDI is under automatic route;

Government route beyond 49% and upto 74%

3 Banking (public sector) 20% Government

4

Construction — development projects including

housing, commercial premises, hotels, resorts,

hospitals, educational institutions, recreational

facilities and city and regional level infrastructure

100%

Automatic

(subject to conditions notified vide press note 2

(2005 series)

5 Drugs and pharmaceuticals including those

involving the use of recombinant technology 100% Automatic

6 Health and medical services 100% Automatic

7 Hotel and tourism related industry 100% Automatic

8 Insurance 26% Automatic (subject to licensing by the Insurance

Regulatory & Development Authority )

Source: Consolidated FDI Policy, DIPP


10


ADVANTAGE INDIA




9 Ports and harbours 100% Automatic

10 Non Banking Finance Companies (NBFCs) — approved

activities 100% Automatic

11

Exploration activities of oil and natural gas fields,

infrastructure related to marketing of petroleum

products, actual trading and marketing of petroleum

products, petroleum product pipelines, natural gas/LNG

pipelines, market study and formulation and Petroleum

refining in the private sector

100% Automatic


11


ADVANTAGE INDIA




12 Petroleum refining by the Public

Sector Undertakings (PSU) 49% Government

13.

1. Generation and transmission of electric energy

produced in hydroelectric, coal/lignite based thermal,

oil-based thermal and gas-based thermal power plants

2. Non-conventional energy generation and distribution

3. Distribution of electric energy to households,

industrial, commercial and other users

4. Power trading

100% Automatic

14.

Telecom: basic and cellular, unified access services,

national/international long-distance, V-Sat, Public mobile

radio trunked services, Global mobile personal

communications services (GMPCS), and other value added

telecom services

74% (including FDI, FII, NRI, Foreign

currency convertible bonds (FCCBs),

American depositary receipts (ADRs),

Global depositary receipts (GDRs),

convertible preference shares and

proportionate foreign equity in Indian

promoters/investing company)

49%

Automatic

route;

Government

route

beyond 49%

upto 74%


12


ADVANTAGE INDIA

Recent FDI (equity) investments in India

Infrastructure

• The Government has approved the proposal of KKR Mauritius Cement Investment to invest INR 7.15 billion (US$ 154.26 million) (August 2010).

• The government of India has cleared FDI proposal of Transcend Infrastructure (TIL) worth INR 19.3 billion (US$ 416.6 million) for setting up communication and broadcasting towers business (July 2010)

• South Korean major Doosan Heavy Industries and Construction Company is seeking 100 per cent FDI approval to set up a new power equipment manufacturing facility in India. (June 2010)

Technology

• Tikona Digital Network has raised over US$ 200 million through sale of shares, debt and equity convertible instruments by existing and new investors. (July 2010)

Telecommunication

• The Russian government plans to acquire a 20 per cent stake by October 2010 in Sistema ShyamTeleservices Ltd. (SSTL), the JV formed between Sistema of Russia and India-based Shyam Group for US$ 800 million. (April 2010)


13


ADVANTAGE INDIA


Media and entertainment

• The Government of India has cleared Star Group's two investment proposals of INR 7.5 billion (US$ 161.91 million) for increased FDI in its media businesses. (May 2010)

• Trivandrum-based Asianet Communications has received permission to raise FDI of INR 4.3 billion (US$ 92.83 million) to undertake business of broadcasting television programmes. (May 2010)

• Walt Disney‘s plans for FDI in India has been cleared by the government (February 2010)

Automobiles

• Bharat Forge Ltd has received approval to raise FDI of INR 5.8 billion (US$ 125.21 million) through issue of warrants. (March 2010).

Petrochemicals

• Reliance Industries Limited (RIL) formed a JV with the Russian company Sibur to make butyl rubber for automobiles at Jamnagar (Gujarat). (July 2010)


14


ADVANTAGE INDIA


Sources: RBI Bulletin— September 2010, Business Standard, Reuters, IBN Live,

Karnataka Industry ,Monitor, Economic Times

*Exchange rate =INR 46.32 /US$

PeriodAmount of FDI equity inflows

(US$ million)

Apr–Jun 2010 5,772

Jan–Mar 2010 4,968

Oct–Dec 2009 5,596

Jul–Sep 2009 8,235

Apr–Jun 2009 6,905

Jan–Mar 2009 6,177

Oct–Dec 2008 3,942

Jul–Sep 2008 7,137

Apr–Jun 2008 10,073


15


ADVANTAGE INDIA

FDI equity

Top sectors

• Services sector continues to be the most preferred sector for foreign investors. The sector has attracted FDI worth US$ 4.4 billion FDI between April 2009 and March 2010.

• Cost competitiveness of skilled manpower in India is the primary reason for this.

• Housing and real estate sector attracted the second- highest FDI in 2009–2010. FDI in this sector has increased from ‗zero‘ in 2004–05 to US$ 2.8 billion in 2009–10.

Break up of FDI by sectors

17%

11%

11%

10%5.6%

45.4%

Services Sector*

Housing & Real Estate

Construction Activities

Telecommunications

Power

Others**

2009–2010 2008–09

23.1%

10.3%

7.2%

9.5%3.6%

46.4%

Services Sector*

Housing & Real Estate

Construction Activities

Telecommunications

Power

Others**

Source: Department of Industrial Policy & Promotion, Government of India

*Services includes financial and non-financial services, **Others includes automobile, computer software and hardware, petroleum and natural gas,

chemicals, pharmaceuticals, hotel and tourism and other sectors


16


ADVANTAGE INDIA

FDI equity

Top countries

• Mauritius has been the largest source of FDI inflows in India for many years. Cumulative FDI inflows from Mauritius reached US$ 49.1 billion in June 2010 since April 2000.

• Singapore and the US remained the second and third- largest sources of FDI in India in 2009–2010.

• FDI from Japan increased at a staggering rate of 200 per cent in 2010 over 2009. India is now the second most preferred investment destination for Japanese companies.

Break up of FDI by countries of origin

2009–2010 2008–09

Source: Department of Industrial Policy & Promotion, Government of India

40.2%

9.2%7.5%6.3%

4.6%

32.3%Mauritius

Singapore

US

Cyprus

Japan

Others

41.3%

12.8%6.5%

4.9%1.5%

33%Mauritius

Singapore

US

Cyprus

Japan

Others


17


ADVANTAGE INDIA

Inflation picks up, RBI hikes key policy rates

• WPI in August 2010 witnessed a 8.5 per cent growth (y-o-y) as compared to 9.8 per cent (y-o-y) in June 2010.

• The increase in WPI is driven by high food and fuel prices.

• As per the mid-quarter review of the monetary policy 2010–11 released on September 16, 2010:

• The cash reserve ratio (CRR) has been kept unchanged at 6 per cent.

• It has also increased the repo and reverse repo to 6 per cent and 5 per cent, respectively.

Wholesale price index

Source: Central Statistical Organisation

0.3%1.1%

1.5%

4.5%

6.9%

8.5%

9.7%10.2%

11.0%10.6%

10.3%9.8%

8.5%

0%

2%

4%

6%

8%

10%

12%

Au

g-0

9

Sep

-09

Oct

-09

No

v-0

9

Dec

-09

Jan

-10

Feb

-10

Mar

-10

Ap

r-1

0

May

-10

Jun

-10

Jul-

10

Au

g-1

0


18


ADVANTAGE INDIA

Inflation picks up, RBI hikes key policy rates

Source: Socio Economic Survey 2009–2010, RBI website

Annual average inflation by major heads in WPI (per cent)

CommoditiesWeight

(%)2004–05 2005–06 2006–07 2007–08

2008–09

(Apr-Dec)

2009–10

(Apr-Dec)

All commodities 100.00 6.48 4.43 5.42 4.66 10.20 1.63

Primary articles 22.03 3.69 2.87 7.85 7.61 10.93 8.78

Fuel, power,

light &

lubricants

14.23 10.14 9.49 5.61 0.93 11.32 -6.35

Manufactured

products63.75 6.26 3.07 4.43 4.97 9.47 1.77


19


ADVANTAGE INDIA

M&A activity

• M&A activity in India has started picking up since January 2010.

• US$ 51 billion worth of M&A activity has taken place in the first eight months of 2010. This significant increase is primarily driven by the Bharti-Zain Africa deal.

• In 2010 (Jan-Aug), oil and gas sector attracted 32 per cent of the total deal value in India, followed by telecommunication (30 per cent) and pharmaceuticals (8 per cent).

• The US emerged as the top destination for outbound M&A activity from India accounting for approximately 26 per cent of total outbound deals in 2010 (Jan-Aug).

Number of deals and value

Source: Bloomberg

10 7 10

37

39

67

49

19

51

351 363330

592

727

1034

843

715

515

0

10

20

30

40

50

60

70

0

200

400

600

800

1,000

1,200

CY02 CY03 CY04 CY05 CY06 CYC07 CY08 CY09 CY10 (Jan-Aug)

Value of deals Number of deals


20


ADVANTAGE INDIA

• The US also emerged as the top M&A investor in India accounting for 35 per cent of total number of inbound deals in the first eight months of 2010. Other major countries include France, Japan and Malaysia.

• Major deals in 2010 (Jan-Aug) include:

• Outbound: Bharti-Zain Africa (US$10.7 billion)

• Domestic: GTL Infrastructure-Aircel‘s tower business (US$ 1.8 billion)

• Inbound: Vedanta Resources Plc- Cairn India Ltd. (US$ 8.7 billion)

M&A activity


21


ADVANTAGE INDIA

Break-up of number of deals

15%

16%

69%

Outbound

Inbound

Domestic

2002

18%

27%

54%

Outbound

Inbound

Domestic

2009

2010 (Jan-Aug)

Source: Bloomberg

M&A activity

24%

26%

50%

Outbound

Inbound

Domestic


22


ADVANTAGE INDIA

Private equity activity has picked up

• Private equity (PE) activity has started increasing in 2010:

• The first eight months of 2010 has witnessed PE activity US$ 5.3 billion across 181 deals.

• Average deal size at US$ 34 million has exceeded US$ 23 million for 2009.

• Major deals in 2010 (Jan-Aug) include:

• Consortium of PE funds including Morgan Stanley Infrastructure Partners, General Atlantic LLC, Goldman Sachs Investment Management invested US$ 425 million in Asian Genco Pte Ltd.

• BI Macquarie-led group invested US$ 304 billion in telecom infrastructure company ViomNetworks

• US-based private equity fund Blackstone has invested US$ 300 million in Moser Baer Projects Private Ltd.

Sectoral distribution of PE investments

2010 (Jan-Aug)

Source: Asian Venture Capital Journal

29%

15%

13%

9%

6%

4%

4%

3%

16%

Infrastructure

Telecommunication

Financial services and capital marketsRetail and consumer productsReal estate

Technology

Healthcare

Education

Others


23


ADVANTAGE INDIA

Private equity activity has picked up

Private Equity/Venture Capital activity in India


Average deal size

Num

ber o

f deals

US

$ b

illio

n

US

$ m

illio

n


2

7

17

11

45

296

365

334

180

181

0

2

4

6

8

10

12

14

16

18

20

0

50

100

150

200

250

300

350

400

2005 2006 2007 2008 2009 2010

Value of deals Number of deals

18

29

53

39

23

34

0

10

20

30

40

50

60

2005 2006 2007 2008 2009 2010 Jan-Aug


24




Contents


25

Growth enabler

ADVANTAGE INDIA

Changing demographics: Rise in working population

Indicating favourable demographics (age groups)

mill

ion

Source: ENAM Research

• India is among the world‘s youngest nations with a median age of 25 years as compared to 43 in Japan and 36 in the US.

• 13 million people enter India‘s urban work force each year.

410 415

290 375

300

410

0

200

400

600

800

1000

1200

1400

2001 2013

0-19 20-34 35 & above


26

Growth enabler

ADVANTAGE INDIA

Changing demographics: Rise in working population

Source: ―India Economics,‖ Morgan Stanley, 17 November 2009

• India‘s population grew at 1.7 per cent between 1990 and 2005. It is estimated that the country‘s labour force will grow at 1.7 to1.84 per cent till 2015.

200

156

141

56

53

43

32

14

-7

-15

-50 0 50 100 150 200 250

World

Africa

India

South East Asia

Latin America

China

Western Asia

USA

Japan

Europe

Addition to the working age population by 2018 (millions)

India‘s estimated population in 2025

0% 1% 2% 3% 4% 5%

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80+

Female Male

Source: 2008 World Population Prospects database, UN


27

Growth enabler

ADVANTAGE INDIA

The Eleventh Plan outlines significant initiatives

Health Education

Infrastructure

Industry

Energy

Services

Eleventh Five

Year Plan

(2007–2012)

• National Rural Health Mission (2005–2012) seeks to provide effective

healthcare to rural population with focus on states having weak health

infrastructure. • There are plans to launch the National Urban

Health Mission (NUHM) with a focus on slums and

the urban poor. • Improvements in Health Management

Information System (HMIS) will improve

service delivery.

• Bharat Nirman scheme plans to create 10

million hectares of additional irrigation

capacity of which 6.5 million hectares has

been brought under irrigation till 2009.

• There is increased focus on the

development of dedicated freight corridor

projects with an estimated investment of

INR 280 billion (US$ 6.04 billion).

• Plans for two international size shipyards on East

/West Coasts of India.

• There is a progressive elimination of quantitative

restrictions along with reduction in tariff.

• The focus on the elimination of exit barriers and improving the business

environment has increased.

• Creation of a Mission for Secondary Education to leverage

benefits of Sarva Shiksha Abhiyan, along with a reduction in the

dropout rate at an elementary level to 20 per cent by 2012.

• Focus on expansion and quality of higher education

sector. During 2009, 13 new central universities have

been established.

• A capacity addition programme of 78,700 MW,

three and a half times greater than the Tenth

Plan, is being undertaken. 25 per cent of the

planned augmentation has been achieved till 21

October 2009. • Initiatives such as ultra mega power projects

(UMPPs), merchant power plants and

captive power plants have also been

launched. The UMPPs are very large sized

projects, approximately 4000 MW each

involving an estimated investment of about

Rs.16,000 crore (US$ 3.45 billion).

• Tourism: There is now a revised target of 10.25 million

international tourist arrivals by 2011 along with the

creation of 200,000 rooms across the country

• IT-ITeS: The target of US$ 86 billion in IT-ITeS exports

by 2012 requires an investment of US$ 20 billion.

Source: Planning Commission, Eleventh Five Year Plan


Growth enabler

ADVANTAGE INDIA

Robust financial institutions

• India has a strong, transparent and stable financial market, regulated by RBI.

• The Securities Exchange Board of India (SEBI), the strong and independent capital markets regulator is committed to develop and regulate markets in a systematic way.

• The Bombay Stock Exchange (BSE) is the world‘s largest stock exchange in terms of number of listed companies and the National Stock Exchange (NSE) is the world's third-largest stock exchange in terms of number of transactions.

• The Multi-Commodity Exchange of India (MCX) is among the top three bullion exchanges and top four energy exchanges of the world.

• National Securities Depository Ltd. (NSDL), the first and largest depository for equity market in India manages more than 10 million demataccounts.

Banking infrastructure in India — number of branches of

SCBs (2008–09)

55,438

8,877

293

Public sector

banksPrivate Sector

Banks

Foreign Banks

Source: RBI

Sources: RBI, NSDL website

28


Growth enabler

ADVANTAGE INDIA

Robust financial institutions

• Net NPAs of India‘s Scheduled Commercial Banks (SCBs) have declined from 7.6 per cent of net advances in 1997–98 to 1.08 per cent in 2009–2010.The credit-deposit ratio of Indian SCBs is estimated at 72.4 per cent in July 2010.

Credit –deposit ratio of SCBs

Stable and

conservative credit-

deposit ratio

Source: RBI

Sources: RBI, NSDL website

29

53.8

56.9

55.9

62.670.1

73.5

74.6

72.4

72.2

0

10

20

30

40

50

60

70

80

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10(P)


Growth enabler

ADVANTAGE INDIA

Special Economic Zones (SEZs)

30

Number of formal approvals 577

Number of notified SEZs

(as on August 27, 2010)

363 (out of 577) +

(7 central Govt. + 12 state/private SEZs)

Number of in-principle approvals 155

Operational SEZs

(as on June 30, 2010)

114 (Out of this 14 are multi product SEZs, remaining are IT/ITeS, engineering,

electronic hardware, textiles, biotechnology, gems & jewellery SEZs and other

sector-specific SEZs)

Units approved in SEZs

(as on June 30, 2010)3,048

Total investment

(as on June 30, 2010)US$ 35.95 billion (INR166,526.43 crore)

Total employment

(as on June 30, 2010)550,323


Growth enabler

ADVANTAGE INDIA

Special Economic Zones (SEZs)

Source: www.sezindia.nic.in

Exports from SEZs

US

$ b

illio

n

Notified SEZs in Ind (as on June 2010)

31

62%

6%

5%

4%

4%

19%

IT/ITeS/Semiconductors

Pharma/Chemicals

Biotech

Engineering

Multi-product

Others

21.52

47.65

0

10

20

30

40

50

60

2008-09 2009-2010


32




Contents


Growth driver

ADVANTAGE INDIA

Exports: India’s position is strengthening

• India is the largest exporter of IT-BPO services in the world with a 55 per cent share of global offshoring market. The US and the UK together account for a dominant share of India‘s IT-BPO exports at 61 per cent and 18 per cent, respectively.

• UAE is the top destination for India‘s merchandise exports accounting for approximately 13.4 per cent of the total exports during 2009–2010 (Apr-Dec). Other major countries include the US (10.9 per cent) and China (6.5 per cent).

• India accounts for approximately 1.64 per cent of global trade in goods and services currently. The government aims to double this share by 2020.

India‘s exports — Goods and services

0

50

100

150

200

250

300

350

Goods Services U

S$ b

illio

n

Source: RBI

33


Growth driver

ADVANTAGE INDIA

Exports: India’s position is strengthening

Composition of services exports 2009–2010 (P)

12.6%

11.9%

53.0%

12.4%

10.1%

Travel

Transportation

Software services

Business Services

Others

Composition of merchandise exports 2009–2010 (P)

7.1% 4.9%

15.7%

18.3%

10.7%

13.6%

29.7%

Agricultural and allied products

Ores and minerals

Petroleum and crude products

Engineering goods

Textiles

Chemicals and related products

Others

Source: RBI Bulletin— July 2010 Source: Directorate General of Foreign Trade

34


Growth driver

ADVANTAGE INDIA

Investment climate expected to remain favourable

• India‘s industrial sector is expected to witness capital expenditure worth INR 22 trillion (US$ 483.5 billion) in 2010–13.

• Electricity sector is expected to witness the highest capacity addition worth INR 4.4 trillion (US$ 96.6 billion) by 2010–13.

• Other sectors that are expected to witness significant investments during 2010–13 include:

• Steel (INR 2,370 billion/US$ 52.1 billion)

• Roadways (INR 1,606 billion/US$ 35.3 billion)

• Telecommunications (INR 1,546 billion/US$ 34 billion)

• Petroleum products (INR 1,411 billion/US$ 31 billion)

Trends in share of gross fixed capital formation (GFCF)

Source: CMIE

Exchange rate of INR 46.47 /US$ has been used for 2008–09. For the remaining figures exchange rate used is INR45.5/US$.

35

22.923.6

24.7

28.8

30.3

31.733.3

33.0 32.8

0

5

10

15

20

25

30

35

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

Public sector Private corporate sector

Household sector GFCF as % of GDP

INR

bill

ion


Growth driver

ADVANTAGE INDIA

Investment climate expected to remain favourable

Exchange rate of INR 46.47 /US$ has been used for 2008–09. For the remaining figures exchange rate used is INR45.5/US$.

India’s industrial sector witnessed capital expenditure

INR 2.3 trillion (US$ 49.5 billion). in 2008–09 and INR

4 trillion (US$ 88 billion) in 2009–2010.

Gujarat, Orissa and Andhra Pradesh accounted for

the majority share of the investment proposals made

in 2009, with 15.4 per cent, 12.6 per cent and 8.1 per

cent, respectively.

36


Growth driver

ADVANTAGE INDIA

Consumer spends: Increasing middle class

High, 1%

Upper middle, 5%

Middle, 22%

Low, 72%

High, 4%

Upper middle, 10%

Middle, 34%

Low, 52%

188 million households 222 million households

Distribution by income of households* in India

Source: ―India Economics,‖ Morgan Stanley, 17 November 2009

Low – upto US$ 2,000

Middle – US$ 2,000-4,200

Upper-Middle – 4,200-10,500

High – US$10,500 and above

*Definitions of income level

RURAL

Households (HH): 155 mn

Population: 732 mn (72%)

Average HH size: 5 persons

Earners per HH: 1.4 persons

URBAN

Households (HH): 67 mn

Population: 295 mn (28%)

Average HH size: 4.8 persons

Earners per HH: 1.3 persons

2002 2010E

Source: ENAM Research

37


Growth driver

ADVANTAGE INDIA

Consumer spends: Increasing middle class

• India has approximately 222 million households, with more than 30 per cent of the population living in 5,000 cities and towns.

• Companies are catering to rural demand — tapping the ―bottom of the pyramid‖ — for inclusive growth.

• According to CII–Technopak, the rural consumer market, which grew 25 per cent in 2008, is expected to reach US$ 425 billion in 2010–11 with 720 to 790 million customers.

38


Growth driver

ADVANTAGE INDIA

Consumer spends: Urban and rural India are spending

• The rural market constituted 33.4 per cent of the total FMCG sales in 2008–09.

• According to Citi Investment Research and Analysis estimates, the demand for detergents is maximum in the rural market, constituting 75.6 per cent of the total demand for products. This is followed by beverages (73 per cent) and motor cycles (48.3 per cent).

Trends in public and private consumption

Source: RBI and CMIE

39

FMCG Sales — INR 1,064 billion (US$ 22.9 billion)

Source: Nielsen Research, March 2009

62

64

66

68

70

72

74

76

0

5000

10000

15000

20000

25000

30000

35000

40000

2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09

Private consumption expenditure

Government consumption expenditure

Consumption as % of GDP28.1

20.617.9

33.4 Metro

Town Class I

Rest of Urban

Rural


Growth driver

ADVANTAGE INDIA

Consumer spends: Urban and rural India are spending

40

India‘s consumption spending pattern

41%

6%12%3%

8%

16%

2%5%

7%

2005 Food, beverages and tobaccoApparel

Housing and utilities

Household products

Personal products and servicesTransportation

Communication

Education and recreationHealth care

34%

5%

12%3%9%

19%

3%6%

9%

2015 F* Food, beverages and tobaccoApparel

Housing and utilities

Household products

Personal products and servicesTransportation

Communication

Education and recreation

*Forecasts

Source: ENAM research


Growth driver

ADVANTAGE INDIA

The growing manufacturing sector

41

• The manufacturing sector in India contributed US$ 27.6 billion to India‘s GDP for the Q2 period of July to September in 2009–2010, recording a growth of 9.3 per cent over the same period in the previous year.

• The key sectors contributing significantly to the Indian manufacturing sector include:

• Automotives and auto components • Pharmaceuticals • Biotechnology • Engineering • Textiles and apparel • Food processing • Electrical machinery/electronics • Construction eq uipment • Steel

• The sectors or industry groups that recorded

maximum growth (over 20 per cent) in 2008–09 include — nitrogen gas, phosphate, argon, industrial gases, nitrogen, oxygen, motor starters, earth-moving and construction equipment, multi purpose vehicles

• The Indian chemical industry is the third largest in

Asia (in terms of volume)

• India is the largest producer of sponge iron in the

world, estimated at 21 million tonnes.

Sources: Department of Chemicals & Petrochemicals, Ministry of

Steel


Growth driver

ADVANTAGE INDIA

The growing manufacturing sector

42

Growth trends in the Indian manufacturing sector

April–Sept 2009 Apr– Sept 2008 July– Sept 2009 Apr– June 2009 Apr 2008–March 2009

Excellent

(more than 20%) 9.47 % 6.93 % 12.9 % 9.33 % 6.25 %

High

(10-20 %) 26.32 % 26.73 % 35.48 % 22.67 % 18.75 %

Moderate (0-10 %) 35.79 % 42.57 % 32.26 % 28 % 45 %

Negative (less than 0 %) 28.42 % 23.76 % 19.35 % 40 % 30 %

Source: CII m-ASCON survey, November 2009


Growth driver

ADVANTAGE INDIA

Top companies in India*

43

* Indicative


http://images.google.co.in/imgres?imgurl=http://trak.in/wp-content/uploads/2007/08/reliance-industries-logo.png&imgrefurl=http://trak.in/tags/business/2008/06/05/reliance-retail-bharti-walmart-battle-winner/pt/&usg=__jXHhuvL6EhIHUZypevL_-ujCnSA=&h=420&w=640&sz=150&hl=en&start=1&tbnid=b9GVjEuUnN0sFM:&tbnh=90&tbnw=137&prev=/images?q=logo+reliance&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.techshout.com/images/reliance-logo-long.jpg&imgrefurl=http://www.techshout.com/mobile-phones/2007/19/reliance-lifetime-validity-recharge-at-rs499-launched-in-india/&usg=__1_l5Ps94mDI_w3ZI2ijwNUjXTTY=&h=157&w=273&sz=16&hl=en&start=2&tbnid=97HqgeFZwPA9mM:&tbnh=65&tbnw=113&prev=/images?q=logo+reliance&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.topnews.in/files/ongc_logo_0.jpg&imgrefurl=http://www.topnews.in/ongc-tripura-power-signs-deal-worth-2200-crore-bhel-259680&usg=__2CedRix_wVPl0N0tYohto3y20cU=&h=448&w=449&sz=80&hl=en&start=1&tbnid=AAVp7MK-oOQKsM:&tbnh=127&tbnw=127&prev=/images?q=logo+ongc&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.cr2.in/images/logo_adani.gif&imgrefurl=http://www.cr2.in/about_customers.html&usg=__T8pZdwd26D4YkorMjZ5puHxfC3M=&h=100&w=100&sz=4&hl=en&start=1&tbnid=THwwohGC_VKRDM:&tbnh=82&tbnw=82&prev=/images?q=logo+adani&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.mrtc.mdh.se/lessbugs/pictures/logo_bombardier.jpg&imgrefurl=http://www.mrtc.mdh.se/lessbugs/&usg=__96kFqd0qeW_1Dum6BCZy78-qgQY=&h=246&w=250&sz=15&hl=en&start=1&tbnid=so6xWcDhKTLrBM:&tbnh=109&tbnw=111&prev=/images?q=logo+bombardier&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.infraline.com/clients/TorrentPowerLogo.jpg&imgrefurl=http://www.infraline.com/clients/newclients.htm&usg=__7w5oFgHFpQu3jNMsOsqZNh8TedQ=&h=71&w=200&sz=19&hl=en&start=7&tbnid=XPzHAAJ-A72bPM:&tbnh=37&tbnw=104&prev=/images?q=logo+torrent+power&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.moneycontrol.com/news_image_files/ABG_Logo.gif&imgrefurl=http://www.moneycontrol.com/india/news/stockmarket/brokeragereports/21/54/121/55/next/0&usg=__JJ2wfTX1uw0LTq5S-pf7EBglosI=&h=120&w=120&sz=3&hl=en&start=2&tbnid=IttTmOi1zxxX6M:&tbnh=88&tbnw=88&prev=/images?q=logo+abg+shipyard&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.ftconferences.com/energy2008/images/contentpage/suzlon-logo2.gif&imgrefurl=http://www.ftconferences.com/energy2008/AssociateSponsors.asp&usg=__GGEJRhTYPjfyc1ru9lh2ZNFQx64=&h=87&w=87&sz=4&hl=en&start=2&tbnid=0ZYk4X6YJ3GtnM:&tbnh=77&tbnw=77&prev=/images?q=logo+suzlon&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.brandsoftheworld.com/brands/0017/3049/brand.gif&imgrefurl=http://www.brandsoftheworld.com/search/75634029&usg=__Oj947Am9HaNKrRyETRZhuFOuMsA=&h=200&w=200&sz=4&hl=en&start=5&tbnid=BvAYL-OfSya3ZM:&tbnh=104&tbnw=104&prev=/images?q=logo+aditya+birla&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.moneycontrol.com/news_image_files/bhel-logo.jpg&imgrefurl=http://news.moneycontrol.com/india/news/stockmarket/brokeragereports/05/46/121&usg=__4QcvL6ZdvgwwD2yzfctVmWjObfM=&h=125&w=120&sz=3&hl=en&start=13&tbnid=FFq97rn6HSMMbM:&tbnh=90&tbnw=86&prev=/images?q=logo+bhel&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.ctwmi.com/images/Logo_ABB.jpg&imgrefurl=http://www.ctwmi.com/libros.htm&usg=__8vzyp7HFAdznb-egidw7yWkhd9E=&h=255&w=652&sz=27&hl=en&start=1&tbnid=OCL791G29PNnkM:&tbnh=54&tbnw=138&prev=/images?q=logo+abb&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.acc-tv.com/images/globalnews/dowchemical_logo.jpg&imgrefurl=http://afghanbuzz.com/diary/&usg=__DozGVyPDezjL2EIFLYRoE_jt1gk=&h=240&w=352&sz=25&hl=en&start=5&tbnid=ydBQu5h4ImIicM:&tbnh=82&tbnw=120&prev=/images?q=logo+dow+chemicals&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.indiacatalog.com/images/logos/local/th_nirma.jpg&imgrefurl=http://www.indiacatalog.com/cgi-bin/show_wd_details.pl?t=Nirma+Limited&usg=__SvQqvZGIL9yZTnCWa3eYiDVIc8M=&h=95&w=95&sz=3&hl=en&start=18&tbnid=Y_3ecTPnrRAieM:&tbnh=80&tbnw=80&prev=/images?q=logo+nirma&gbv=2&hl=en

http://images.google.co.in/imgres?imgurl=http://www.jobships.com/jobships_2.0/uploaded/company_add_logo/ambuja_cement.jpg&imgrefurl=http://www.jobships.com/jobships_2.0/jobshipsindia/homepage/default.asp&h=40&w=180&sz=9&hl=en&start=6&tbnid=esRQA4OcgGAoOM:&tbnh=22&tbnw=101&prev=/images?q=ambuja+cement,+logo&gbv=2&svnum=10&hl=en

http://www.biocon.com/

http://www.google.co.in/imgres?imgurl=http://www.directtrainingcentre.co.uk/images/sce/Dr Reddys logo2.jpg&imgrefurl=http://www.directtrainingcentre.co.uk/Clients-and-Testimonials.aspx&usg=__D5cWAIAje-bkeYgBNQewnkWBYvs=&h=200&w=200&sz=2&hl=en&start=3&um=1&itbs=1&tbnid=RpRdMVvSvkD_NM:&tbnh=104&tbnw=104&prev=/images?q=dr.+reddy's+++logo&um=1&hl=en&sa=N&tbs=isch:1

Growth driver

ADVANTAGE INDIA

India: R&D and innovation hub

Growth in the number of Indian scientific publications

Category Number

(1999 to 2003)

Number

(2004 to 2008)

Growth

(%)

Chemistry 21,206 33,504 10

Physics 11,700 17,295 14

Plant and animal

sciences 8,132 10,190 19

Engineering 8,101 14,103 5

Materials science 6,960 11,126 9

Agricultural

science 4,303 5,634 17

Geosciences 2,839 4,266 13

Pharmacology 2,034 3,866 3

Space science 1,322 1,665 18

Microbiology 1,078 2,273 2

• India is fast emerging as a potential R&D destination for global companies due to low costs and availability of skilled manpower.

• India, as a signatory to the World Trade Organisation (WTO) and the agreement on Trade-Related Intellectual Property Rights (TRIPS), entered the product patent regime in 2005, a step that has led to an increase in innovation.

• India has a strong public R&D system supported by a skilled workforce, with premier institutes such as the Council of Scientific and Industrial Research (CSIR), which conduct research in diverse areas such as agriculture, space, science and technology.

• The IITs (Indian Institutes of Technology), which are engineering and technology-oriented institutes of higher education, were established to train scientists and engineers.

Source: ―2010 Global R&D funding forecast‖, December 2009, Battelle,

R&D magazine

44


Growth driver

ADVANTAGE INDIA


• The cost of conducting a clinical trial in India is 50 per cent lower than that in a developed market.

• Most of the research activities undertaken in India are in the pharmaceutical, biotechnology, software, IT and auto component sectors.

Source: Economics Times article dated November 14, 2009

R&D expenditure by few Indian companies

Company Expenditure (US$ mn) 2008

Tata Motors 246

BHEL 115

Dr. Reddy‘s Laboratories 84

Sun Pharmaceuticals 71

45


Growth driver

ADVANTAGE INDIA


• Key organisations in the public sector that focus on R&D include:

• Council of Scientific and Industrial Research (CSIR) • Defence Research & Development Organisation

(DRDO) • Department of Biotechnology (DBT) • Department of Atomic Energy (DAE) • Indian Council of Agricultural Research (ICAR)

• Examples of innovation include:

• ITC‘s e-Choupal — a unique web-based initiative of ITC‘s agri-business division offering farmers requisite information on the products and services required to enhance productivity.

• Tata Nano — The world‘s first sub US$ 2,500 car, it is a first-in-class vehicle in the small car segment in the Indian automobile industry.

• The ‗Incredible India‘ campaign was launched in 2002 by the Government to promote India as a tourist destination.

Indian companies in the Fortune 500

Company Rank

Indian Oil Corporation 125

Reliance Industries Limited 175

State Bank of India 282

Bharat Petroleum 307

Hindustan Petroleum 354

Tata Steel 410

Oil & Natural Gas Corporation (ONGC) 413

Tata Motors 442

46


Growth driver

ADVANTAGE INDIA


• India‘s top innovator companies:

• IT/ITeS, Telecom, Financial Services • Citibank India, HDFC Bank, ICICI Bank, Infosys Technologies, Wipro Technologies, Tata

Consultancy Services, Airtel, IBM Daksh

• Healthcare, Pharma, Biotech • Aravind Eye Care, Apollo Hospitals, Narayana Hrudayalaya, Ranbaxy, Dr. Reddy‘s Laboratories,

Dabur India

• Aviation, Auto — Jet Airways, Mahindra & Mahindra, Tata Motors

• Retail, FMCG — Marico, ITC

• Key foreign players with research operations in India include Adobe Systems, Google, GE, IBM, Microsoft, Pfizer

47

Sources: ―India‘s most innovative companies‖, Business Today website, March 31, 2008, www.money.cnn.com


48




Contents


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Lehman Brothers

file for bankruptcy

Terror attacks

on MumbaiSatyam scam

Election results

Union Budget

disappointment

Dubai debt

crisis

European

debt crisis

Impact on the business environment

FACTORS SHAPING THE CURRENT BUSINESS ENVIRONMENT

Recent events

49

BSE Sensex

• Key political events such as elections and budget announcements have affected the trend of the BSE Sensex. The Sensex has been rising since March 2010 and has been affected by international events such as the European debt crisis.


50




Contents


Regulatory update

FACTORS SHAPING THE CURRENT BUSINESS ENVIRONMENT

51

Goods and Services

Tax (GST)

Direct Tax Code

(DTC)

Competition Act

IFRS

Others

• Ministry of Corporate Affairs (MCA) has published IFRS roadmap; IFRS to be phased in between 2011–2014

depending on listing status and net worth.

• Some companies delayed (e.g. listed companies <INR 500 Cr net worth not required until 2014)

• Some companies accelerated (e.g. non-listed companies with net worth > INR 1000 Cr required in 2011)

• New tax regime to revamp the current indirect tax regime and simplify it; proposes to introduce a broad based

and a single comprehensive tax on goods and services.

• Aimed at improving supply chain efficiencies

• Proposed to be implemented by April 2011

• Meant to replace the current Income Tax Code; all direct taxes to be brought under its purview

• Draft code available; proposed to be implemented from 2011

• In June 2010, a revised DTC discussion paper was released addressing the suggestions/concerns raised by the

stakeholders in lieu of the original DTC. DTC focuses on bringing stability and simplicity to the tax regime

• Passed in Parliament in 2002; notified for implementation in May 2009

• To be implemented by the Competition Commission of India (CCI)

• The Parliament has enacted the Limited Liability Partnership Bill 2008.

• A revised Companies Bill 2009 has been introduced to replace the Companies Act 1956.

• The Unique identification program (UID) initiative aims at transforming the delivery of social welfare programs by

making them more inclusive. It is also expected to broaden India‘s reach to financial infrastructure.


52




Contents


Infrastructure

KEY SECTORS

53

Significant investments are being planned

During the Twelfth Five Year Plan (2012–2017), the total investment in infrastructure is projected to be around INR 41 trillion (US$1

trillion).

In 2008–09, expenditure worth approximately 7.2 per cent

of the GDP was spent on infrastructure.

The government aims to increase the country‘s

infrastructure expenditure to 9 per cent of its GDP by 2014.

Infrastructure investments

US$

bill

ion

per ce

nt

Source: Planning Commission

Government initiatives to meet this target

• The government established the India Infrastructure Finance Company Limited (IIFCL) and introduced the ―takeout financing scheme‖ to provide long-term financial support to infrastructure projects. The government has allocated 46 per cent of its total planned expenditure (INR 1.7 trillion) in the Union Budget 2010–11 for the development of infrastructure.

• The government has called for the refinancing of 60 per cent of commercial bank loans under the ―takeout financing scheme‖ for public private partnership projects (PPP).

• Permission has been granted to NBFCs to seek external commercial borrowings for infrastructure projects from multilateral or bilateral institutions under the approval route of the RBI.

Sources: Planning commission, Indian Road Network, NHAI,

Ministry of Shipping, Ministry of Railways

5.0 5.2 5.4 5.6 5.8 6.0 6.0

6.5 7.2

0

2

4

6

8

0

10

20

30

40

50

60

70

80

90

FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10

infrastructure investments % of GDP


Infrastructure

KEY SECTORS

Significant investments are being planned

• Roads and highways: India has the world’s second-largest road network (after the US), spanning around 3.3 million km. Roads account for 85 per cent of passenger traffic and 65 per cent of freight traffic. The National Highways account for 2 per cent of the total road length and account for around 40 per cent of its traffic.

• Railways: India‘s rail network , the fourth-largest in the world, is spread across 64,000 km, connecting 8,000 stations. The Indian Railways carries around 40 per cent of the country‘s total freight traffic and 20 per cent of its passenger traffic.

• Ports: The country has 12 major and 200 non-major ports. Major ports account for around 70 per cent of India‘s total cargo traffic, while non-major ports manage the rest. The traffic-handling capacity of major ports has increased from 456.2 million tonnes (mt) in 2005–06 to 599.3 mt in 2009–2010.

54

Sources: Planning commission, Indian Road Network, NHAI, Ministry of Shipping, Ministry of Railways


Infrastructure

KEY SECTORS

Opportunities for the private sector

• Roads and highways: The Government has plans to develop various projects which include four-laningof 12,109 km (National Highway Development Programme) Phase – III, two-laning of 5,000 km of National Highways, development of 1,000 km of expressways and development of ring roads, bypasses, grade separators and service roads. As per the Planning Commission, about US$ 65.4 billion is expected to be invested in the roads sector during the Eleventh Plan Period. The private sector will contribute 34 per cent of this amount.

• Railways: The Ministry of Railways has proposed the development of 50 world-class stations on PPP mode. Some recent PPP projects include construction of dedicated freight corridors (DFCs), modernisation of metro stations and manufacture of rolling stock including coaches, wagons and locomotives through special purpose vehicles (SPVs).

• Ports: Containerisation and container traffic at major ports grew at a CAGR of 15.9 per cent between 2003–04 and 2007–08, presenting an opportunity for the development of container berths and container-handling facilities in India. In addition, the Government is also encouraging private sector participation in development of dry docks, installation of cargo-handling equipment on a Build-Operate-Transfer (BOT) basis and building of transshipment ports.

• Real Estate: The transition of IT-BPO companies towards tier II and tier III cities has increased the demand for commercial and hospitality real estate. Due to an increase in urbanisation, there is a greater demand for affordable housing, with several players having launched projects in this segment.

55


Infrastructure

KEY SECTORS

Opportunities for the private sector

Sector Players

Ports

Adani Group, Larsen & Toubro (L&T), Essar

Group, Maersk Group, P&O Ports, Dubai Ports

International, PSA Singapore

Roads

DS Construction Limited, GMR Infrastructure

Limited, Hindustan Construction Company, L&T,

Gammon Infrastructure Projects Limited

Railways

Container Corporation of India Limited, DFC

Corporation of India lImited, Rail Vikas Nigam

Limited, Punj Lloyd, Gammon Infrastructure

Limited

Real

Estate

Ascendas (Singapore), Emaar (Dubai), Unitech,

DLF, Ansal Properties, K. Raheja Corporation,

Sobha Developers, Parsvnath Developers

Revised segment-wise composition of infrastructure

expenditure in the Eleventh Five Year Plan

Sources: Planning commission, Indian Road Network, NHAI,

Ministry of Shipping, Ministry of Railways

56

32.1%

13.6%

16.8%

9.8%

12.0%

5.4%

2.0%1.8%

0.4% 6.2%

Power

Roads and bridges

Telecom

Railways

Irrigation

Water supply

Ports

Airports

Storage

Gas


Infrastructure

KEY SECTORS

Investments

• Roads and highways: The Government has invested US$ 1.94 billion for the development of national highways and state roads. Construction activities, including roads and highways have attracted FDI worth US$ 2.8 billion.

• Railways: Bombardier Transportation, a subsidiary of Swiss-based Bombardier Inc, has set up a new facility in Savli, Gujarat to cater to orders worth US$ 137 million secured from the Delhi Metro Rail Corporation (DMRC).

• Ports: At the end of 2008–09, 17 private sector projects with an investment of about US$ 1.1 billion (INR 55 billion) have become operational. The sector witnessed FDI worth US$ 490 million between April 2008 and March 2009. The sector attracted private equity investments worth US$ 340 million between 2005 and September 2009.

• Real Estate: The sector is one of the highest FDI-attracting sectors in India, having recorded FDI inflows worth over US$ 8.3 billion between 2000 and 2010. In the last decade, several international developers such as Emaar, Ascendas, Keppel Land, Tishman Speyer and Nakheel Group have entered the market.

57


Infrastructure

KEY SECTORS

Investments

Key deals

Year Sector Target name Acquirer Details

April 2010 Transport

services Flyjac Logistics Pvt. Ltd.

Hitachi Transport

System Ltd. (Japan) US$ 56.4 million (deal value)

January 2010 Ports ABG Shipyard Ltd. Precious Shipping PCL

(Thailand) N/A

August 2009 Ports Continental warehousing Nhava

Sheva

Aureos India Fund and

ePlanet Venture US$ 16.4 billion (deal value)

April 2009 Roads Ashoka Buildcon Ltd. IDFC Project Equity US$ 50 million (deal value)

February 2009 Ports Krishnapatnam Port Company Ltd. 3I Group US$ 161 million (deal value)

September 2008 Ports Gangavaram Ports Limited Warburg Pincus 30 per cent stake

Sources: ―The opportunity framework—Private equity in Indian Infrastructure,‖ Ernst & Young, October 2009, via RAD; Ministry of Road Transport &

Highways,

2008–09 annual report, ―Roads: Economic Survey 2009–2010,‖ Union budget and economic survey website , Bloomberg

58


59




Contents


Retail

KEY SECTORS

India ranks first globally in terms of market potential

• The retail sector in India is estimated at US$ 420 billion by the end of 2010, and is expected to increase to US$ 464 billion by 2013.

• The share of organised retail has gradually increased over the years, from less than 1 per cent in 1999 to 5 per cent in 2009.

• The ―food and grocery‖ category has the highest share in the overall Indian retail market, at approximately 60 per cent of total retail revenues.

• Several foreign players have entered the Indian retail market through JVs with Indian companies in multi-brand retailing, providing back-end logistical and supply chain management support.

• Wal-Mart Stores — JV with Bharti Enterprise.

• Carrefour SA — Franchise operations. Carrefour is also in talks with Pantaloon Retail to set up a cash and carry business in 2010.

• Tesco PLC — Global services arm.

• Metro AG — Independent subsidiary operates in five locations in the country.

• Target Corporation — Subsidiary established in 2005.

60

Source: A.T. Kearney


Retail

KEY SECTORS

India ranks first globally in terms of market potential

• The implementation of GST is expected to further improve the competitive position of organisedretailers.

• Key players include Tata Group, Future Group, Reliance Group, RPG Group, K. Raheja Group, Landmark Group, Aditya Birla Group

Retail market in India

US

$ b

illio

n

2009 Global Retail Development Index (GRDI) ranking

Source: ENAM Securities

61

225

331

4645

19

60

0

100

200

300

400

500

600

2003 2008 2013

Unorganised retail Organised retail

3.2x

12

34

56

78

910

0

2

4

6

8

10

12


Retail

KEY SECTORS

Recent developments

The government has recently proposed 100 per cent FDI in multi-brand retail sector to promote foreign

participation.

Retailers expanding

presence, adding new

stores

Foreign retailers

firming their plans for

India entry

• July 2010: Reliance Retail is planning to add 900 new stores in India and double its presence in the

next five years. The company is also exploring options to expand in international markets and has

allocated a budget of US$ 250 million to fund the international expansion.

• July 2010: Future Group is planning to set up 60 more Big Bazaar stores within 18 months at a cost

of US$ 129.53 million (INR 6 billion).

• June 2010: Landmark Group is planning to invest US$ 215.88 million (INR10) billion over the next

three years to increase the number of Lifestyle stores to 40 and also expand its supermarkets and

hypermarkets.

• June 2010: The Bharti–Wal-Mart joint venture plans to open up to 15 cash-and-carry stores in India

during the next three years.

• May 2010: French retail giant Carrefour will start its wholesale and cash-and-carry business in India

in coming three to four months by opening its first store in Delhi. The company has also formed an

alliance with Future Group and plans to open between 150 and 300 Carrefour-branded

hypermarkets in India over the next five years.

• April 2010: British retail giant Tesco, plans to open its first cash-and-carry store in India by the end

of the current year. Tata Group firm Trent is the joint venture partner of Tesco for the cash-and-

carry business.

62


Retail

KEY SECTORS

Recent developments

63

Raising capital

• August 2010: Cantabil Retail is planning to raise US$ 22.66 million (INR 1.05 billion) from the issue of

its initial public offering. It plans to use US$ 5.39 million (INR 250 million) of the proceeds to open

561 new stores across the country by the next fiscal end and the remaining for functioning capital

and the repayment of debt.

• July 2010: Aditya Birla Group plans to raise nearly US$ 53.97 million (INR 2.5 billion) in debt to

establish more than 120 retail outlets across India.

• June 2010: Shopper's Stop is planning to raise US$ 64.76 million (INR 3 billion) through a Qualified

Institutional Placement over the next two quarters to fund expansion plans. The company has

received shareholder approval to invest US$ 43.17 million (INR 2 billion) in the Raheja Group's

Hypercity Retail and plans to increase the Hypercity store count to 25 in the next three years.


64




Contents


Telecommunications

KEY SECTORS

Sector has grown rapidly over the last decade

65

• The Indian telecom services sector is one of the fastest growing in the world, growing at over 25 per cent for the last three years. In 2008–09, more than 10 million subscribers were added every month.

• Telecom industry revenues are projected to reach US$ 45 billion by 2012 as compared to US$ 33.2 billion in 2009.

• By the end of June 2010, total subscriber base reached 671.7 million, with the overall tele-density recorded at 56.8 per cent. The total subscriber base is expected to reach about 700 million by 2012.

• Broadband subscriber base was 9.45 million by June 2010. It is expected to grow to 25 to 30 million by 2012 and may further increase by 30 to 40 per cent with the launch of WiMAX.

• Key players in the Indian telecom market include Bharat Sanchar Nigam Ltd (BSNL), MahanagarTelephone Nigam Limited (MTNL), Bharti Airtel Limited, Reliance Communication, Vodafone, Idea Cellular, Aircel and Tata Teleservices.

• Rural markets will be the next growth driver for the Indian telecom industry due to the growing population and disposable income of rural India.

• 74 to 100 per cent FDI is permitted for various telecom services. The sector attracted FDI worth US$ 2.55 billion in 2009–2010, making it the sector attracting the third-highest number of FDI


Telecommunications

KEY SECTORS

Sector has grown rapidly over the last decade

66

Subscriber base and tele-density trends

Source: "Telecom Subscription Data as on 30th June 2010,"

TRAI website, accessed on 12 August 2010

Market share by operators, June 2010

Others include players such as Loop Telecom, HFCL, SSTL,

Stel, Uninor

Source: "Telecom Subscription Data as on 30th June 2010,"

TRAI website, accessed on 12 August 2010

21.5%

17.4%

17.2%

11.4%

11.4%

10.8%

6.6%

3.7%Bharti

Reliance

Vodafone

BSNL

TTSL

Idea

Aircel

Others

54.3 76.5 98.4140.4

206.8

300.5

429.7

621.28671.69

5.2%7.0% 9.1%

12.8%

19.2%

26.2%

37.0%

52.7%

56.8%

0%

10%

20%

30%

40%

50%

60%

0

100

200

300

400

500

600

700

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 10-Jun

Subscriber base Teledensity

Subsc

ribers

(m

illio

n) T

ele

density

(%)


Telecommunications

KEY SECTORS

Recent developments

67

Entry of

foreign players

in India

August 2010:

• Bharti Airtel has announced its plans to acquire 100 per cent stake in Telecom Seychelles for US$ 62 million.

• Japan‘s NTT DoCoMo Inc. is expected to raise its stake to 35 to 40 per cent from 26 per cent in in Tata

Teleservices, with an additional investment of US$ 1 billion.

• Transcend Infrastructure Ltd., the Indian subsidiary of American Tower Corporation has completed the

acquisition of Essar Telecom Infrastructure Pvt. Ltd. for US$ 430 million.

July 2010:

• GTL Infrastructure Ltd and Reliance Communications have entered into an agreement to merge their telecom

tower businesses. GTL and Reliance Communications plan to combine operations that would own more than

80,000 towers and have an enterprise value of over US$ 11 billion.

• GTL Infrastructure has completed the acquisition of 17,500 towers from telecom operator Aircel for US$ 1.73

billion (INR 80.26 billion). Post this transaction, GTL Infra has around 32,500 towers across India.

• Qualcomm has divested its 26 per cent stake to Global Holdings and Tulip Telecom for US$ 66.92 million (INR

3.1 billion).

Regulatory

developments

August 2010:

• The Indian defence forces are expected to get pan-India wireless broadband network. The Department of

Telecommunications (DoT) has accepted the armed forces demand that one slot of pan-India wireless broadband

airwaves be reserved for it.

July 2010:

• The Indian government has made it mandatory for equipment suppliers to share the source code and the design

details to address security concerns. The amended conditions also envisage that a penalty, equivalent to 100 per

cent of the contract value, shall be imposed on telecom equipment suppliers in case of detection of any security

breach.

Source: Bloomberg


Telecommunications

KEY SECTORS

Recent developments

68

Network

expansion

August 2010:

• Reliance Communications expects to roll out 3G services by the end of 2010, provided government allocates

spectrum by September 2010.

• Uninor has announced the launch of its GPRS based data services in Kolkata and West Bengal including Sikkim.

Source: Bloomberg


Telecommunications

KEY SECTORS

Recent developments

69

Key deals

Year Target name Acquirer Details

March 2010 Zain (African assets) Bharti US$ 10.7 billion

February 2010 M2Junction Singlepoint (USA) N/A

January 2010 Micromax TA Associates Inc US$ 10.7 billion

December 2009 Warid Telecom (Bangladesh‘s fourth-largest

telecom operator) Bharti 70% stake

December 2009 Aircel GTL Infrastructure Acquisition of towers for US$

861 million

October 2009 Transcend Infrastructure American Tower Corp

CIA

Source: Bloomberg


70




Contents


Automotives

KEY SECTORS

In the medium term, expected to become a key player

71

• The gross turnover of the Indian automobile

industry stood at US$ 38.2 billion in 2008–09.

• Between 2004–05 and 2009–2010, automobile

production increased from 9.7 to 14 million

units. Exports more than doubled in five years

to 1.8 million units in 2009–2010 from 0.8

million units in 2004–05

Segment share of automotives in 2009-2010

Indian players

Tata Motors, Mahindra & Mahindra, Bajaj Auto, Ashok Leyland,

Maruti Suzuki, TVS Motor Company, Hindustan Motors, Eicher

International players

Toyota Motors, Volkswagen AG, General Motors, Ford Motors,

Honda Motors, Daimler AG, Fiat, Hyundai Motors, Renault,

Piaggio Vehicles

• World’s second-largest two-wheeler market

• Asia’s third-largest passenger vehicle market

• World’s fifth-largest bus and truck market (by volume)

• World’s fourth-largest commercial vehicle market

Ran

kin

gs

78.0%

17.4%

4.6%

4.2%

Two-wheelers

Passenger vehicles

Three-wheelers

Commercial vehicles


Automotives

KEY SECTORS


72

Personal Vehicles (PVs)

• India is emerging as a manufacturing and R&D hub, especially for small cars.

• The sector witnessed the launch of the world‘s first sub-US$ 2,500 PV, Tata Nano (an innovation in the ultra-low

cost segment).

• Domestic sales of PVs reached 1.9 million units in 2009–2010, while exports were 0.4 million units.

Two-wheelers

• India is home to the largest two-wheeler company in the world – Hero Honda

• In 2009–2010, domestic sales of the industry increased by 26 per cent to reach 9.3 million units, while exports were

1.1 million units.

Commercial vehicles( CVs)

• The segment is undergoing a structural shift towards the smaller and light commercial vehicle category.

• In 2009–2010, domestic sales were 0.5 million units while exports were 45,000 units.

Auto components

• In 2008–09, turnover reached US$ 19 billion while exports were US$ 3.8 billion.

• The industry is expected to grow to US$ 40 billion by 2016.

Curr

ent

stat

eIndia-Economy and Trends October 2010

Automotives

KEY SECTORS


73

• India is expected to become the world‘s seventh-largest automobile market by 2016 and the third largest by

2030.

• Total sales are expected to reach US$ 120 to US$ 160 billion by 2016 with a total investment requirement

estimated at US$35 to US$ 40 billion.

Outlook

Source: Society of Indian Automobile Manufacturers


Automotives

KEY SECTORS

Recent developments

74

Surging demand for

motorbikes

Focus on the

compact car

segment

• Demand for motorbikes has unexpectedly surged since beginning of 2010, driven by rising consumer

confidence and higher disposable incomes . Thus, Hero Honda, Bajaj Auto, Yamaha and Honda

Motorcycle & Scooter India (HMSI) now have waiting periods that stretch from three to six weeks.

• To cater to the rising demand, HMSI plans to set up a second production plant in India and Hero Honda

is conducting a feasibility study for a fourth plant in India.

• August 2010: Toyota launched the Toyota Etios hatchback and sedan model, commercial production

to begin from December 2010

• July 2010: Nissan rolled out its Micra compact car which is being built at its facility in Chennai, PSA

Peugeot Citroen announced plan to set up a manufacturing facility in India to build a compact car.

• Feb 2010: Ford India commenced commercial production of its compact car Figo

…..and Luxury

brands making India

entry

• Jan 2010: Harley Davidson is set to enter India with its full range of five motorcycle families, the

Sportster, the Dyna, the VRSC, the Softail and the top-of-the-range Touring series.

• Dec 2009: Italy‘s Ducati is looking to ride the fledgling Indian superbike market with models costing

more than a top-end car; hopes to sell 150 bikes in India in 2010.

• July 2009: BMW is planning to introduce its high-end Motorrad motorcycles in the country

Focus on newer

export markets

• Maruti Suzuki and Hyundai Motors India are now looking at potential markets such as South America,

Australia, Taiwan, South-east Asia and South Africa for their exports.

Free Trade

Agreements

• India is currently negotiating foreign trade agreements (FTAs) with South Korea, ASEAN, the EU and

Japan.

• Under these FTAs, the government may reduce or completely remove import duty on completely

built units, completely knocked-down units and a range of auto components.


75




Contents


IT/ITeS

KEY SECTORS

The growing IT industry

76

• Total revenues for Indian IT industry touched US$ 73.1 billion in 2009–2010 as compared to US$ 70.5

billion in 2008–09 growing over 5.4 per cent.

• India‘s software and services sector revenues (excluding hardware), have touched US$ 63.7 billion in

2009–2010, constituting 87 per cent of the total industry revenues.

• The sector‘s contribution to India‘s GDP increased to 6.1 per cent in 2009–2010 as compared with 1.2

per cent in 1997–98.

• Key players include: Tata Consultancy Services (TCS), Infosys Technologies, Wipro Technologies, HCL

Technologies Ltd., Tech Mahindra Ltd., Patni Computer Systems Ltd., Oracle Financial, Mphasis, IBM,

Accenture, Genpact, Cognizant Technology Services (CTS).

• India‘s Knowledge Process Outsourcing (KPO) export market constitutes about 8 per cent of India‘s ITeS

revenues.

• India is poised to become the hub for Engineering Process Outsourcing (EPO), with its market size

estimated to touch US$ 30 billion annually by 2015, attracting 25 per cent of the US$ 70 billion global

EPO industry.

• Bechtel, GM, Ford, John Deere, Caterpillar, Silicon Automation Systems and John Brown Engineering are

few companies that have set up their engineering service divisions in India.


IT/ITeS

KEY SECTORS

The growing IT industry

77

Domestic revenue segmentation of 2009-2010

(share%)

Technology sector M&A deal volume and value

Sources: "The IT-BPO Sector in India - Strategic Review 2009:

Executive summary", NASSCOM website

57%23%

20%IT services

BPO

Engineering services/product development

2903 2886

3393

97

159

102

0

50

100

150

200

0

1000

2000

3000

4000

5000

2006-07 2007-08 2008-09

M&A deal value M&A deal count


IT/ITeS

KEY SECTORS

Key deals

78

Key deals

Target name Acquirer Deal value (US$ million)

Flextronics Software System Kohlberg Kravis Roberts and

Co. 900

Axon Group PLC HCL Technologies 731

Citi Group Global Services TCS 505

Open bit Oy (Finland) Tanla Solutions Ltd. 481

Intervoice Inc Convergys Corporation 335

People Soft Inc Aegis BPO 250

Aviva Global Services WNS Holdings 230

Brainhunter Inc (Canada) Zylog Systems Ltd 32.9

Postclick Ltd. (Australia) Komli Media India Pvt Ltd N/A

Ethos Networks (Israel) Tejas Networks Pvt. Ltd N/A


79




Contents


Pharmaceuticals/Healthcare

KEY SECTORS

The outsourcing destination

80

• India is among the world‘s leading five Active Pharmaceutical Ingredients (APIs) producers. Indian firms

produce about 60,000 generic brands across 60 therapeutic categories. India is ranked 14th in the

world in terms of value and is the third largest in terms of volume.

• With a compound annual growth rate (CAGR) of 11.7 per cent, the Indian pharmaceutical market is

estimated to grow from US$ 11.5 billion in 2009 to US$ 20 billion by 2015 and enter the league of the

world‘s top 10 leading markets

• R&D costs in India are one-eighth of that in the US. India produces some of the world‘s least

expensive drugs, since labour costs are 50 to 55 per cent lower than in the West.

• India has the highest number of US Food and Drug Administration (USFDA)-approved

manufacturing plants outside the US.

• The Government has been promoting collaboration among industry, academia and government through

various programmes such as New Millennium Indian Technology Leadership (NMITLI) and Drugs and

Pharmaceuticals Research Program (DPRP).

• The Department of Pharmaceuticals was established in 2008 under the Ministry of Chemicals and

Fertilisers.

• The sector has attracted FDI worth US$ 1.71 billion between April 2000 and May 2010.



KEY SECTORS

The outsourcing destination

81

Indian players

Cipla, Ranbaxy Laboratories, Dr. Reddy‘s Laboratories,

Sun Pharma, Lupin Ltd., Aurobindo Pharma, Piramal

Health, Cadila Healthcare, Matrix Labs, Wockhardt


GlaxoSmithKline Pharma, Aventis Pharma, Abbott India,

Pfizer, Novartis India, Merck, Wyeth Laboratories,

AstraZeneca Pharma, Solvay Pharma, Fulford (India)

Indian pharmaceutical R&D expenditure

Specifics 2001 2008

R&D expenditure as a

percentage of sales1.4 9.9

R&D expenditure in

absolute terms (US$ mn)55 660

Sources: Taking Wings, Ernst & Young 2009, Ministry of Commerce and Industry, Government of India; Ernst & Young analysis; ―Pharma exports

up by 29% in 2008–09, Anand Sharma addresses Indo-Africa Pharma Business Meet,‖ Ministry of Commerce and Industry press



KEY SECTORS

Opportunities

82

• Dr. Reddy‘s Laboratories‘ new chemical entity Balaglitazone is India‘s first indigenously-developed

molecule to enter the Phase – III trial.

• Global companies can explore in-licensing opportunities in India.

• The Indian pharmaceutical manufacturing outsourcing market is valued at US$ 1.1 billion in 2008, and

the segment is growing at thrice the global market rate.

• India is a potential destination for medical tourism since the costs of medical services in India is almost

30 per cent lower than that in Western countries and the cheapest in South East Asia. Tourists visit India

for treatment of cardiac surgeries, oncology, cosmetology. India has a large number of English-speaking

doctors and nurses, which is a significant advantage over other South East Asian countries.

• India is witnessing tourist arrival for various purposes such as medical tourism, wellness (including

Ayurveda, yoga, meditation and hi-tech healing).

• Patients from over 55 countries are treated at Indian hospitals.

• A medical visa is granted for treatment in reputed hospitals in India.



KEY SECTORS

Opportunities

83

Key deals

Target name Acquirer Deal value (US$ million)

Parkway Holdings Ltd. (Singapore) Fortis Healthcare Ltd 686.1

Pyramid Healthcare Solutions (USA) Avantha Group (India) 20

Fulford India Ltd. Schering- Plough Corp. 8.4

Rxelite Holdings Ltd. Piramal Healthcare Ltd 4.2

Cantabria Pharma SL Wanbury Limited N/A

Multicare Pharmaceuticals Lupin Ltd. N/A

Mascareignes Pharmaceutical (Mauritius) Parenteral Drugs India N/A

A CII study states that the medical tourism field in India has a potential of becoming a US$ 2.3 billion business by 2012.

Sources: Bloomberg, www.india.gov.in


84




Contents


Biotechnology

KEY SECTORS

The R&D destination

85

• In 2009–2010, the industry recorded revenues worth US$ 3 billion, registering a y-o-y growth of 17 per

cent (in value) from 2008–09.

• The bio-pharma segment accounts for the majority (62 per cent) of the biotech industry‘s revenues,

followed by bio-services (18.7 per cent), bio-agri (13.7 per cent), bio-industrial (4 per cent) and bio-

informatics (1.6 per cent).

• Revenues from biotech exports have been valued at US$ 1.57 billion in 2009–2010, constituting 53 per

cent of the total biotech industry revenues.

• Lonza Biosciences is planning to set up a manufacturing base in India at an investment of US$ 150

million in Hyderabad. The investment outlay has been planned over two phases.

• Leading companies include Serum Institute of India, Biocon, Panacea Biotec, Rasi Seeds, Nuziveedu

Seeds, Novo Nordisk, Siro Clinpharm, Novozymes, Shantha Biotech, Jubilant.


Biotechnology

KEY SECTORS

The R&D destination

86

Indian biotechnology market size

1.04

1.43

1.88

2.26

2.67

0

0.5

1

1.5

2

2.5

3

2004–05 2005–06 2006–07 2007–08 2008–09

US$

bill

ion

Key deals

Target name Acquirer

Bangalore Genei India Pvt. Ltd. Merck KGaA (Germany)

Preclinical Cell and Molecular

Biology Assets

Lonza Group AG-RE

(Switzerland)

Cotton Germplasm Du Pont (E I) De Nemours

(USA)

Rxelite Holdings Ltd. Piramal Healthcare Ltd

Crosbyton Seed Co. (USA) Advanta India Ltd.

Source: Bloomberg

Sources: Bloomberg, ABLE Biospectrum Industry Survey 2010


87




Contents


Tourism & Hospitality

KEY SECTORS

On a high growth trajectory

88

• India is one of the fastest-growing travel and tourism markets in the world. The travel and tourism

demand in India has increased at a CAGR of 11.8 per cent between 2005 and 2010, and is expected to

reach US$ 266.1 billion by 2019.

• According to the Travel and Tourism Competitiveness Report 2009 by the World Economic Forum

(WEF), India is ranked 11th in the Asia Pacific region and 62nd overall among 133 countries

assessed.

• International tourist arrivals in India have increased at a CAGR of 8.1 per cent between 2004 and 2009.

Between January and August 2010, international tourist arrivals were 3.5 million. The foreign exchange

earnings from tourism have increased by over 30.7 per cent to reach US$ 8.9 billion during the same

period.

• Outbound travel is becoming increasingly popular due to the higher disposable income of the middle

class and the entry of various private travel agencies offering attractive and customised tour packages to

customers.

• The Government has also been undertaking several initiatives to upgrade the requisite infrastructure,

such as the development of international airports of global standards, including the new international

airport at Delhi, which has become operational in July 2010.



KEY SECTORS

On a high growth trajectory

89

• Various areas that have witnessed a spate of

investments include:

• Serviced apartments: examples include Taj

Wellington Mews, Homestead Serviced

Apartments, Marriott Executive Apartments,

Star City, Grand Hyatt Residences and Seasons.

• Budget hotels

• Bed-and-breakfast: a concept which is rapidly

gaining popularity among tourists in India.

Indian travel and tourism demand

42.958.7 66.2

83.493.6 91.7

266.1

0

50

100

150

200

250

300

2004 2005 2006 2007 2008E 2009E 2019EU

S$ b

illio

nSource: ―Travel and tourism economic impact: India, 2009,‖

World Travel and Tourism Council website, www.wttc.org



KEY SECTORS

Increasing investments

90

• Some of the key players include: The Indian Hotels Company, which is the largest player in the industry,

East India Hotels, ITC, Bharat Hotels, Asian Hotels, Hotel Leelaventure.

• Some of the key international players include: Intercontinental, Marriott, Starwood and Accor.

• Several international players are entering India by establishing alliances with local hotel chains. Carlson

Hotels Worldwide increased its stake in RHW Hotel Management Services, owners of Radisson brand

in India, while Choice Hotels International, Inc has announced plans to acquire the remaining 60 per

cent stake in Choice Hospitality India Ltd .

• There is a rising demand for hotels with the opening up of the smaller cities such as Udaipur, Pune,

Bhubaneshwar and Chandigarh towards business and leisure.

• The tourism and hospitality industry witnessed FDI worth US$ 2.1 billion between April 2000 and June

2010.



KEY SECTORS

Increasing investments

91

Recent investment plans

Company Details

IHCLIHCL plans to construct 50 budget hotels under the Ginger

brand in the next four years.

EIHEIH plans to develop 750 additional hotel rooms under the

Trident brand in the next 2.5 years.

CarlsonCarlson plans to increase its presence in India to 78 hotels

by 2012, from 28 in 2009.

MarriottMarriott plans to open 30 hotels in India in the next three

years.

Sources: ―Travel and tourism economic impact: India, 2009,‖ World Travel and Tourism Council website, www.wttc.org, ―Tata Group plans 50

Ginger hotels in India,‖ Rediff Business website, http://business.rediff.com/report/2009/dec/14/tata-group-plans-50-ginger-hotels-in-india.htm,

accessed 25 January 2010; ―Carlson bets big on India,‖ The Hindu website, http://beta.thehindu.com/business/companies/article80951.ece, accessed

25 January 2010; ―Marriott plans to introduce mid-market brand Fairfield Inn in India,‖ HospitalitybizIndia.com,

http://www.hospitalitybizindia.com/detailNews.aspx?aid=7221&sid=1, accessed 25 January 2010.


92




Contents


BFSI

KEY SECTORS

Strong financial structure

93

• India‘s banking sector compares favourably with most of its global peers on metrics such as asset quality,

capital adequacy, profitability and overall contribution to GDP. In India, at present, almost 30,000 villages

have bank branches out of around 700,000 villages.

• The banking system in India, controlled by the Reserve Bank of India, is dominated by Scheduled

Commercial Banks (SCBs) with a pan-India presence.

• India has over 20 stock exchanges, with NSE and BSE being the main ones. There are over 8,000 brokers

registered with the SEBI. The NSE ranks fourth among the top stock exchanges in the world, with respect

to the number of trades in equity shares.

• Opportunities in banking and finance:

• Banks are venturing into new avenues such as wealth management, private banking, doorstep banking,

credit cards, investment advisory services and various financial products.

• Retail and corporate banking — NBFCs and Microfinance — the growth of non-government

organisations (NGOs) and self-help groups and their linkage with banks offer ample scope to facilitate

microfinance activities in rural areas.

• Asset management business — This refers to the professional management of investments such as

stocks and bonds, along with real estate. Numerous professional firms and investment banks offer

asset management services, which are often handled by a team of financial professionals


BFSI

KEY SECTORS

Strong financial structure

94

Key deals

Year Target Acquirer

June 2010 Bureau of Collections

Recovery (USA) Aditya Birla Group

April 2010

Royal Bafokeng Capital

Proprietary Ltd (South

Africa)

JSW Energy Ltd.

March 2010 Compass BPO Ltd.

(Britain) Aditya Birla Group

November 2009 Sajja Finance Private Ltd. Accion

International (USA)

October 2009 UTI Asset Management

Company Ltd.

T Rowe Price

Group Inc (USA)

Source: Bloomberg


BFSI

KEY SECTORS

Players

95

Public sector banks Private banks Foreign banks

State Bank of India Axis Bank The Royal Bank of Scotland

Andhra Bank Bank of Rajasthan Abu Dhabi Commercial Bank

Bank of Baroda Catholic Syrian Bank American Express Banking Corporation

Bank of India City Union Bank Antwerp Diamond Bank

Bank of Maharashtra Development Credit Bank Mizuho Corporate Bank

Canara Bank Dhanalakshmi Bank Bank International Indonesia

Central Bank of India Federal Bank Bank of America

Corporation Bank HDFC Bank BNP Paribas

Dena Bank ICICI Bank Deutsche Bank

IDBI Bank Ltd. IndusInd Bank Bank of Nova Scotia

Oriental Bank of Commerce ING Vysya Bank Bank of Tokyo Mitsubishi UFJ

Indian Overseas bank Jammu & Kashmir Bank Barclays Bank


BFSI

KEY SECTORS

Players

96

Retail brokerage

India Infoline Investment Services Ltd., Motilal Oswal Financial Services, HDFC

Securities, Religare Enterprises Ltd., Sharekhan.com, Indiabulls Securities Services Ltd.,

Edelweiss Capital Ltd.

Asset management companies

Reliance Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Franklin

Templeton Mutual Fund, Kotak Mahindra Mutual Fund, DSP Black Rock Mutual Fund

NBFCs

Sundaram Finance, Bajaj Finance, Tata Finance, Mahindra Finance, Manappuram Finance

Microfinance Institutes

SKS Microfinance Ltd., Share Microfin Ltd., Spandana Sphooty Financial Ltd.


97




Contents


Energy

KEY SECTORS

98

• India is well-endowed with both renewable and non-renewable forms of energy. Coal, oil and natural gas

are India‘s three primary sources of energy. The other sources include nuclear, hydro and renewable

energy.

• India has the fourth-largest coal reserves in the world, amounting to 58.6 billion tonnes (2008). The

increasing population has led to an increase in the demand for coal and crude oil, with India being the

third-highest and fourth-highest consumer of coal and crude oil, respectively. To cater to this high

demand, India relies on significant quantities of crude oil imports.

• The National Exploration Licensing Policy (NELP) was introduced by the Government to reduce India‘s

dependence on exports. The NELP provides both public and private sector companies with an equal

platform for exploration and production (E&P) activities. The number of blocks that have been offered

for E&P activities have been increasing since from 24 in 2003, with a total of 226 blocks offered till 2009.

• The total value of imports of oil and gas products in 2009–2010 was estimated at US$ 86.63 billion,

while export of petroleum products was estimated at US$ 30.53 billion.


Energy

KEY SECTORS

99

• India‘s gross renewable energy potential (up to 2032) is estimated at 22 GW. The renewable energy

sector constitutes 10 per cent (14.8 GW) of the total installed generation capacity of power in India

(148 GW) (as on June 30, 2009).

• India, at present, is among the fastest-growing wind energy markets in the world. Between 2004–05 and

2008–09, the total installed wind power generation capacity in the country increased at a CAGR of 29.9

per cent. The installed wind capacity as on September 2009 was estimated at 10.8 GW.

• India is the fifth largest in solar PV cells installations in the world.

Energy consumption mix in India (2008)

Energy source Unit Consumption

Coal MTOE 231.4

Oil MMT 135

Natural Gas BCM 41.4

Hydroelectricity MTOE 26.2

Nuclear Energy MTOE 3.5

Projected energy consumption mix in India (2030)

Product Unit World India

Oil MTOE 5,775 435

Gas MTOE 4,125 224

Coal MTOE 3,597 816

Sources: ―Draft report of the expert committee on Integrated Energy Policy,‖ Planning Commission 2005, BP Statistical Review of World Energy June

2009,‖ BP.

MTOE: Million tonnes of oil equivalent

BCM: Billion cubic metres


Energy

KEY SECTORS

100

• The oil and gas sector witnessed cumulative FDI worth US$ 2.84 billion between April 2000 and May

2010, while the power sector witnessed FDI worth US$ 4.9 billion.

• Malaysian oil firm Petroliam Nasional Berhad (PETRONAS) has bought a 2.3 per cent stake in Cairn

India for US$ 240 million .

• ONGC, in association with Hinduja Group and Petronet LNG have entered into agreements with

Iranian authorities in December 2009 for participation in the development of gas fields and

liquefaction facilities in Iran, in return for 6 million tonnes of LNG per annum on a long term basis.

• India has witnessed significant transaction activities in the power sector with deals worth US$ 2.15

billion being announced between January 2005 and July 2009. Suzlon‘s acquisition of RE Power, worth

US$ 1.33 billion, accounts for 61.8 per cent of total transaction activity in value.

• Between January 2005 and July 2009, 19 joint ventures have been announced, with several Indian

companies collaborating with foreign players. These include NTPC‘s joint ventures (JV) with Kyushu

Electric Power and Brookfield Renewable Power.

Investments

Sources: Ministry of Petroleum & Natural Gas, Directorate General of Hydrocarbons


Energy

KEY SECTORS

101

Investments

Indian players

Indian Oil Corporation (IOC), Oil & Natural Gas Corporation

(ONGC), Hindustan Petroleum Corporation Limited (HPCL),

Bharat Petroleum Corporation Limited (BPCL), Oil India

Limited (OIL), GAIL (India) Limited, Reliance Industries

Limited (RIL), Essar Oil Limited, Adani Gas, Petronet LNG,

NTPC, NHPC Limited, Power Grid Corporation of India

Limited, Tata Power, Torrent Power


Cairn Energy India Pty Limited, Shell, BG Group, BP, CLP

Group, Alstom

Total installed capacity of power generation (%)

Number of blocks offered under NELP

Year Number

1998 48

2000 25

2002 27

2003 24

2005 20

2006 55

2007 57

2009 70

64%

23%

12%

10%

3%

Thermal

Hydro

Captive

Renewable

Nuclear



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