1. Slide 1 Investing in Emerging Markets – Where Does India Feature? Investing in Emerging Markets 2011 The Harvard Club, New York City Mohit Saraf Senior Partner November 29, 2011

2. Slide 2 United Nations Conference on Trade and Development’s (“UNCTAD”) World Investment Prospects Survey 2010–2012 Where does India rank as a prospective FDI destination? RankEconomy1China 2India 3Brazil 4US 5Russian Federation

3. Slide 3 Will India measure up? o Will this prediction become a trend? o Will the forecasts hold in the short term? o What assumptions support the forecast? o What is the inside story? o Will this prediction become a trend? o Will the forecasts hold in the short term? o What assumptions support the forecast? o What is the inside story?

4. Slide 4 What is a good place to start? World Bank’s comparative survey titled Doing Business 2012

5. Slide 5 BRIC BY BRIC (and how they stack up) Rank UNCTAD Doing Business Starting Business Getting Credit Protecting Investors Paying TaxesTrading Enforcing Contracts1China9115167971226016 2India1321664046147109182 3Brazil1261209879150121118 4US4134172207 5Russia1201119811110516013

6. Slide 6 Ease of starting a business - Challenges China151India166 Brazil120 US13 Russian Federation 111 Sector specific framework of prohibitions, approval requirements, investment caps, investment conditions and exclusions. Ability to find a “best-fit” solution within a restrictive and fluid regulatory matrix. Exchange control regime Changing goalposts – “put options”. Occasional blips can cause impediments.

7. Slide 7 Ease of starting a business - Opportunities China151India166 Brazil120 US13 Russian Federation 111 Reform: A liberal trajectory Very few industries where FDI is prohibited. Foreign exchange reserves have gone up from USD 5 Billion in 1991 to USD 312.90 Billion in June 2011. Emerging Sectors: Aerospace and Defense (offset obligation) Automotive Banking Pharmaceuticals Retail and consumers

8. Slide 8 Getting Credit - Challenges China67India40 Brazil98 US4 Russian Federation 98 High interest rates: raised 12 times in 18 months. External commercial borrowings (“ECBs”): regulates all-in costs, restricts end use stipulates long maturity periods working capital loans not allowed not permitted in capital markets, real estate or for acquisition of other companies RBI imposes directed lending and provisioning norms (risk weights) on banks – this distorts credit flow.

9. Slide 9 Access to funding - Opportunities China67India40 Brazil98 US4 Russian Federation 98 Strong framework of legal rights of borrowers and lenders (a score of 8 on the strength of legal rights index ranging from 0-10 where OECD average is 7). Incipient but vibrant Private Equity Non Banking Finance Companies (NBFCs) ADRs / GDRs / FCCBs NBFCs NBFCs enjoy a “light touch” regulatory regime. Concentrate on financial sector activities which banks and financial institutions may chose to ignore on account of heavier regulatory burdens – E.g. capital markets related funding, real estate funding and structured finance.

10. Slide 10 Protecting Investors – weaknesses and alternatives China97India46 Brazil 79 US 1 Russian Federation 111 Strong protection: Minority investors, related party transactions. Systemic handicap – final verdict on a dispute. Arbitration has emerged as a powerful alternative. Bilateral Investment Treaties - party to over 60 BITS (though unfortunately not with yet with the US. Indo-US BIT on the anvil BITs tend to act as a check against unbridled exercise of executive power

11. Slide 11 Paying Taxes – Challenges and Improvements China122India147 Brazil 150 US 72 Russian Federation 105 On average, a company: makes 33 tax payments a year, spends 254 hours a year filing, preparing and paying taxes pays total taxes amounting to 24.7% of profit. Recent improvements: In 2011 introduced mandatory electronic filing and payment for VAT. In 2011 abolished the fringe benefit tax and improved electronic payment. Proposed induction of “Direct Tax Code 2010” by April 2012 which is expected to improve payment and filing efficiencies significantly. New indirect tax system proposed – remove multiplicity of taxes.

12. Slide 12 Double Taxation Avoidance Treaties India is a party to more than 80 DTATs Tax treaty analyses: A key consideration for investment into India. DTATs with Mauritius, Cyprus and Singapore are pre-eminent - currently relieve capital gains on disposal of Indian investments. Mauritius, accounts for an overwhelming 42% of the aggregate foreign direct investment in India (next in the pecking order are: Singapore 9%, USA 7%, UK 5%) Vodafone’s disposal of its Indian JV assets has brought into question the efficacy of capital gains insulation available under the Mauritius treaty.

13. Slide 13 Enforcement of contracts – Challenges China16India182 Brazil 118 US 7 Russian Federation 12 A contract enforcement: requires 46 procedures takes 1420 days costs 39.6% of the value of the claim 30 million cases pending in Indian courts. 11 judges per million compared to the recommended norm of 50. Taking recourse to international commercial arbitration Excluding Indian procedural law under the arbitration agreement and choosing arbitral venue outside India. Negate above by:

14. Slide 14 Thank You. Mohit Saraf Senior Partner Luthra & Luthra Law Offices Mumbai | New Delhi | Bangalore Email : msaraf@luthra.com