Indian Position in Indian Position in Globalize worldGlobalize world

the journey…the journey…

CERF and Alphametrics

Flow of PresentationFlow of Presentation

ObjectiveObjective Look at Asian EconomiesLook at Asian Economies Strength & WeaknessesStrength & Weaknesses TransformationTransformation Self SufficiencySelf Sufficiency Break – up of the EconomyBreak – up of the Economy Drivers of Global EconomyDrivers of Global Economy What lead to India Shinning What lead to India Shinning EvaluationEvaluation Sources of InformationSources of Information

CERF and Alphametrics

ObjectiveObjective

The review of past Indian EconomyThe review of past Indian Economy Assessing the current scenarioAssessing the current scenario How India highly competitive How India highly competitive Future predictions about Indian EconomyFuture predictions about Indian Economy Future Investments in IndiaFuture Investments in India

UnderUnderconstructionconstruction

Korea

PhilippinesVietnam

Singapore

Thailand

China

Bangladesh

India

Pakistan

Japan

Taiwan

MalaysiaIndonesia

Fastest Growing Free Market DemocracyFastest Growing Free Market Democracy

8.8% average annual GDP growth rate from 2003–04 to 2007–08

GDP Growth Forex Reserve FII Flow FDI Per Capita Inflation

1990 4.9 per cent < US$ 1 billion US$ 1 million (1993)

US$ 97 million US$ 390 9 per cent

2008 9.0 per cent US$ 300.01 billion as on

August 08, 2008

US$ 16.1 billion in 2007–08

US$ 25 billion in 2007–08

US$ 740 12.14 per cent as on September

13, 2008

Sources: Times of India, RBI, The Economic Times.

The Transformation...The Transformation...

Self Sufficiency Self Sufficiency India's Forex Reserves: 2001–08

5475

112141 152

199

310

0

50

100

150

200

250

300

350

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

US

D B

illio

n

External Debt-to-GDP Ratio

21.120.4

17.818.6

17.217.8

18.8

10

13

16

19

22

2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08

Ra

tioSteadily increasing forex reserves offer adequate security against any possible currency crisis or monetary instability

Increased confidence of investors in Indian companies has led to a surge in cross-border borrowings by corporate houses

In 2007–08, forex reserves witnessed a growth of approximately 56 per cent over 2006–07

In 2007–08, forex reserves witnessed a growth of approximately 56 per cent over 2006–07

…the decreasing external debt to GDP ratio indicates that India has a sound economic platform

…the decreasing external debt to GDP ratio indicates that India has a sound economic platform

India’s forex reserves are in excess of

external debt…

Break – up of the EconomyBreak – up of the Economy

105 105 135 154 190103 125

204245

314

564

191237

398439

0

200

400

600

800

1,000

1,200

1999–00 2002–03 2005–06 2006–07 2007–08

US

D B

illio

n

Agriculture Industry Services

Contribution of Services— increased from 48 per cent in 1999–00 to 53 per cent in 2007–08

Contribution of Services— increased from 48 per cent in 1999–00 to 53 per cent in 2007–08

Fastest GDP growth of 9.4 per

cent in 2006–07.

India’s GDP (8.7 per cent) has

witnessed high growth and

was the second fastest-

growing GDP after China (11.4

per cent) in 2007–08.

The sound performance of

each industry segment is

leading to the overall robust

performance of the Indian

economy.Source: MOSPI Statistics, RBI.

The Drivers of the Global Economy

Source: Goldman Sachs BRIC report

Engines of growth US and Europe are expected to grow at 2-4%

Brazil, Russia, India and China are going to be the next big drivers of the global economy

In less than 40 years, the BRIC companies could be larger than the G6 in dollar terms

Among BRICs, India will be the fastest growing and will rank behind China and USA by 2033

The movement of capital

Higher growth will lead to higher returns

Increased demand for capital will mean more fund flows in these countries.

Cumulative FDI InflowIndia has witnessed a strong inflow of FDI in the last 5 years

Source: Reserve Bank of India

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY19

91FY

1992

FY19

93FY

1994

FY19

95FY

1996

FY19

97FY

1998

FY19

99FY

2000

FY20

01FY

2002

FY20

03FY

2004

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000Cumulative FDI (USDmn) FDI (USDmn)

CERF and Alphametrics

India: Sweeping reforms post liberalization

Dismantling Protectionism

Average imports tariffs have reduced from 53% in 1988 to 18% In 2002

Strong Infrastructure

-Avoid direct government Involvement-Allowing FDI-Sound regulatory framework (TRAI)-Introduction of competition

Disinvestment

- Major successes include VSNL, BALCO, Maruti Udyog, GAIL, ONGC, NTPC- Progress by state governments as well

Financial SectorReforms

-Sound regulatory base in banking, insurance and securities

Fiscal Reforms

- Removal of distortionary taxes,- Migration to VAT regime- Simplicity and low cost of compliance

Globalisation

- Reduced barriers to movement of goods and capital- Well-poised to exploit the Internet

The economic reforms process has been a key source of convergence among the

political parties, with every successive government taking the reforms forward

Indian firms seek global reach

Tata Steel bought Corus Plc

Hindalco acquired Novelis Inc.

Suzlon Energy Ltd. acquired REpower

Dr. Reddy’s acquired Betapharm

United spirits acquired W&M

USD 12.1 billion

USD 6 billion

USD 1.6 billion

USD 0.5 billion

USD 0.5 billion

Acquisition made Tata Steel world’s

fifth largest steel producer globally

Acquisition made Hindalco the world's

largest aluminum rolling company

Acquired German’s third largestgeneric companies

Acquisition made United Spirits world's second largest spirit company

Acquisition made Suzlon world's third

largest wind power company

Major M&A and Investments Announcements in India

USD 11 billion Vodafone buys HutchVodafone buys Hutch

USD 1.7 billionPlans to spend on its development

operations in India over the next four yearsPlans to spend on its development

operations in India over the next four years

USD 12 billion POSCO to invest in building steel

manufacturing plants and facilities in India by 2016

POSCO to invest in building steel manufacturing plants and facilities in India

by 2016

Plans expansion of cement capacity in India

Plans expansion of cement capacity in India Over USD 1 billion

Plans investment in private equity, real estate, and private wealth managementPlans investment in private equity, real estate, and private wealth management

USD 1 billion

CERF and Alphametrics

MNCs finding location of R&D in India : Increases global competitiveness

India- Attractive R&D Destination

Large R&D facility of major MNCs

– Microsoft

– IBM

– ADOBE

– SAP

– Sony Ericsson

– Dell

– The DaimlerChrysler

– Boeing

– Texas Instruments

CERF and Alphametrics

Indian Workers in AmericaIndian Workers in America

38% of Doctors in 38% of Doctors in

America are Indians.America are Indians.

12% of Scientists in 12% of Scientists in

America are Indians.America are Indians.

36% of NASA employees 36% of NASA employees

are Indians.are Indians.

13% of XEROX 13% of XEROX

employees are Indians.employees are Indians.

34% of MICROSOFT 34% of MICROSOFT

employees are Indians.employees are Indians.

28% of IBM employees 28% of IBM employees

are Indians.are Indians.

17% of INTEL 17% of INTEL

employees are Indians.employees are Indians.

Evaluation

Strengths

Sustained growth for over a decade (but recent slowdown)

Strong export potential, current a/c deficit low

Healthy forex reserves Low external debt

Low inflation

Political consensus on reforms

Deepening financial sector Knowledge base advantage,

demographic surge

Weaknesses

Fiscal deficit high, debt GDP ratio high

Fiscal situation of states worse Inadequate infrastructure, huge

funding needed Unsatisfactory investment climate Rising gap between rich and poor Dependence on oil imports,

monsoons Slowing of reforms, coalition

compulsions Social indicators below world

average

15

BRIC Report, Goldman Sachs

BRIC Report, Goldman Sachs

“I have never seen India so dynamic, vibrant and full of

business opportunities”.

- Dan Scheinman, Cisco System Inc. as told to

Business Week, August 2005

- Dan Scheinman, Cisco System Inc. as told to

Business Week, August 2005

“We came to India for the costs, stayed for

the quality and are now investing for innovation”.

John RedwoodEconomic

Competitiveness Policy Group, UK

John RedwoodEconomic

Competitiveness Policy Group, UK

“India is now truly a land of opportunity”.

Jack WelchGeneral Electric

Jack WelchGeneral Electric

“India is a developed country

as far as intellectual capital

is concerned”.

Peter Loescher President and

Chief Executive Siemens

Peter Loescher President and

Chief Executive Siemens

By 2032, India will be among the three

largest economies in the world.

Why India? – Quote Unquote

Travyn Rhall,

ACNielsen

Travyn Rhall,

ACNielsen

“The Indian market has two core advantages - an

increasing presence of multinationals and an

upswing in the IT exports”.

Craig BarrettIntel

Corporation

Craig BarrettIntel

Corporation

“India has evolved into one of the world's leading

technology centers“.

Mr Paul de Voijs Managing Director

Volvo Car India

Mr Paul de Voijs Managing Director

Volvo Car India

“India is a very exciting market and

the luxury car segment is growing exponentially here”.

CERF and Alphametrics

Sources of informationSources of information

Reports,Reports, Goldman Goldman

Sachs,2005Sachs,2005 World World

bank,2007bank,2007 CII report,2005CII report,2005

Websites,Websites, www.et.comwww.et.com www.rbi.orgwww.rbi.org www.gov.nic.inwww.gov.nic.in

Thank YouThank YouROLL NO 57 TO 65ROLL NO 57 TO 65