- 0 - PRESENTATION ON INDIAN ECONOMY February 2010

- 1 - RESILIENT ECONOMY OPPORTUNITY INDIA TRENDS

- 2 - STRONG MACRO FUNDAMENTALS World’s fourth-largest economy in terms of PPP* and ranked 12th in US$ terms. GDP has increased rapidly over the past 15 years from $250 billion to over US$ 1 trillion currently. Per Capita Income in : - US$ 2,563 in PPP terms - US$ 831 in nominal terms * PPP : Purchasing Power Parity terms – – –

- 3 - GROWING SAVINGS RATE Year Household savings Public sector Private corporate sector Savings and Investments Savings Breakup: Households, public and private sector (% GDP) Recent increase in savings-to-GDP ratio has been due to improved savings of all three categories – households, public and private sector India’s dependence on foreign savings for financing domestic investments is limited

- 4 - GDP growth (%) CONSISTENT GROWTH… 8.5 per cent average GDP growth from 2004 to 2009

- 5 - Source: IMF India is set to grow faster than other regions (Annual Percentage change) Economies Projections World Advanced Economies United States Euro Area Japan Developing Asia China India Brazil …OUTPACING THE WORLD

- 6 - GDP Composition: and RISE OF SERVICES AND INDUSTRY

- 7 - Export-Import of Merchandise goods (US$ bn) Export-Import of Services (US$ bn) GLOBAL TRADE Exports at three-month positive run Jan 2010 exports - $14.34 bn vs $12.9bn in Jan’ 09 Nov 09 exports - $13.2 bn 15-month high in Dec 09 - exports touched $14.61 bn. 127% growth in Exports from SEZs Apr-Dec 2009 to over US$ bn y-o-y

- 8 - FDI and Portfolio Inflows (US$ bn) *Apr-Dec 2009 CAPITAL INFLOWS ARE RISING Foreign Direct Investment (FDI) in Jan 2010 grew 13.2 per cent over the previous month, to touch US$ 1.54 billion Private equity investments in India doubled in Jan 2010, with deals of over US$ 386 mn being announced. The recent recovery in capital inflows has lead to a 5-6% recovery in the value of the Rupee, which is currently trading at levels of Rs /US$.

- 9 - RESILIENT ECONOMY OPPORTUNITY INDIA TRENDS

DEMOGRAPHIC ADVANTAGE India’s Biggest Advantage: One of the youngest populations in the world Percentage of population aged 65 and older Source: United Nations, 2008

GROWING MIDDLE CLASS YearThe PoorMiddle ClassThe Rich Annual household income (Rs.)< 200,000200,000 – 1,000,000> 1,000, Number of Households (In million) Source: National Council for Applied Economic Research/ McKinsey Global Institute

per cent of the population under 25 Among top three of 30 nations in availability of skilled labour 7.7 mn new entrants to the workforce every year Dependency ratio expected to fall from current 60 per cent to 48 per cent by 2025 STRONG DEMOGRAPHI C DIVIDEND BOOSTING INCREDIBLE ASPIRATIONS

Home to 10 of the world’s fastest growing urban areas 20 Indian cities account for:  10% of India’s population  60% of total surplus income  21% of total spending  And generate 31% of total disposable income CONSISTENT GROWTH IT GLOBALPOWER SMALL CAR EXPORT HUB GLOBAL RESEARCH HUB HUGE OPPORTUNITY IN INFRASTRUCTURE FASTEST GROWING TELECOM MARKET BREAKTHROUGH SPACE TECHNOLOGY DYNAMIC AND GROWING MARKET

In 2009, 156 cross-border deals and 174 domestic deals were signed  Cross-border deal value: US$ 5.26 bn  Domestic deal value: US$ 6.70 bn 20 Indian companies in the 2009 BCG 100 New Global Challengers list GROWTH DRIVERS Globalisation and increased competition Focus on achieving economies of scale Focus on emerging markets EMERGENCE OF THE INDIAN MULTINATIONAL

US$ billion RELENTLESS ENTREPRENEURSHIP Emergent Indian enterprises across sectors ranging from engineering to financial services. Market capitalisation of top-500 companies in excess of $800 bn or about 70% of GDP

INDIA INC. GOING GLOBAL US$ 2.8 billion ONGC acquired Imperial Energy PLC in 2008 US$ million Spice Group acquired 20 per cent stake in MediaRing Ltd. in 2009 US$ 82 million Shree Renuka Sugars Ltd. acquired Vale Do Ivai S.A. Acucar E Alcool sugar and ethanol company in Brazil in 2009 Sources: 1. Tribune IndiaTribune India 2. The First ReporterThe First Reporter Bharti Airtel has acquired a 70 per cent stake in Warid Telecom in 2010 Planned investment - US$ 300 million

Abundant Natural Resources Fifth-largest bauxite reserves in the world, fourth-largest coal reserves, sixth-largest iron ore deposits Low-cost Skilled Talent India offers skilled and trained human resource at low cost Huge Demand Large population base and surging middle class with high disposable income Easy Access to Other Markets India’s strategic geographical location offers an opportunity to access neighboring South Asian markets Gains in Productivity India's productivity growth was 5.5 per cent in 2008, as compared with 2.3 per cent globally India: Manufacturing Hub Sources: The Conference Board; CIAThe Conference BoardCIA INDIA: GROWING MANUFACTURING HUB

INDIA: FAVOURED R&D HUB Sources:: 1. Asia Times; 2. Business StandardAsia TimesBusiness Standard Vast pool of manpower According to the IMD World Competitiveness Year Book, India ranks among the top three of 30 nations in terms of availability of skilled labour Higher productivity Indian graduates, on an average, work 2,350 hours a year as compared with 1,900– 1,700 hours in the US Tax benefits Companies engaged in scientific R&D projects in India are entitled to a 100 per cent tax relief on profits for 10 years Growing domestic market The growing demand for technologically-advanced products in the Indian market is increasingly drawing MNCs to set up R&D centres here India: R&D Hub

RESILIENT ECONOMY OPPORTUNITY INDIA TRENDS

India is:  The largest two-wheeler manufacturer in the world  The largest three-wheeler market in the world  The second-largest two- wheeler market in the world.  The fourth-largest commercial vehicle market in the world *Compound Annual Growth Rate (CAGR) SegmentShare in total 5-year CAGR* Two-wheelers75.4%8.8 % Passenger vehicles16.4%16.7 % Three-wheelers4.5%10.4 % Commercial vehicles 3.7%12.6 % Source: Society of Indian Automobile Manufacturers (SIAM)/ IMACS Analysis CAGR 9.08% Automotive production (million units) Share of automotive segments ( ) AUTOMOTIVES

AUTOMOTIVES – ADVANTAGE INDIA Proven product developmental capabilities More than 200 Fortune 500 Companies (including large auto companies) have R&D centres in India Proximity to markets Proximity to other Asian economies and emerging markets such as Africa High quality standards 11 Indian component manufacturers have won the Deming award for quality Large & growing domestic demand Demand growth of 14 per cent CAGR makes India one of the fastest growing markets Export potential Total value of exports by 2015 expected to reach US$ 8 billion to US$ 10 billion for vehicles and US$ 20 billion to US$ 25 billion for components India: Automotive Hub

INFRASTRUCTURE OPPORTUNITY – THE PPP MODEL Planned investment for NHDP - USD 49,301 mn, excluding port connectivity and other NHAI projects, for 7 phases. Private sector investment needed for USD 25,371 mn through BOT/SPV mode, and USD 17,273 mn through Cess and Market Borrowings. Public private partnership (PPP) approach for highways development has been successful in India. As on date, 102 projects have been awarded to private sector covering 7188 kms involving an investment of almost USD 12,167 million. No of ConcessionsTotal LengthTotal cost (Rs. Crores) Investment committed (US$ million) BOT Toll Awarded Awards under process BOT Annuity Awarded Awards under process Total Awarded , Total Awards under process ,

AIR SERVICES - Associated areas like maintenance, repair and overhaul (MRO) and training offer high investment potential. A report by Ernst & Young says the MRO category in the aviation sector can absorb up to US$ 120 billion worth of investments by There are ample opportunities for co- operation in the field of civil aviation infrastructure and upgrading the non- metro airports, Air Traffic Control system, general aviation, aerospace and MRO in India. ParticularsAirportIndicative Cost Restructuring / Modernisation for world class airports Delhi & Mumbai Chennai & Kolkata 15,000 5,000 Greenfield airports Bangalore, Hyderabad, Goa, Pune, Navi Mumbai, Nagpur (Hub) & Greater Noida 10,000 Upgradation25 selected airports 7,000 Modernisation/ Improvement 55 airports3,000 Total investment by ,000 Source: Financing Plan for Airports, CoI, Planning Commission INFRASTRUCTURE OPPORTUNITY – THE PPP MODEL

BIOTECHNOLOGY  India is among the top-12 biotech markets globally.  India ranks third in the Asia-Pacific region, after Japan and Korea.  Expected to touch US$ 5 billion by 2010 and US$ 25 billion by *Source: Top 20 biotech companies, Biospectrum industry survey, June 2009, p.14; Ernst & Young analysis Segment Revenue (in US$ mn) Contribution (in per cent) Biopharma Bioservices Bioagri Bioindustrial Bioinformatics

 Low-cost operations Significantly lower R&D costs; outsourcing to India can save up to US$ 200 million. Cost of clinical trials 50 percent lower in phase I and 60 percent lower in phase II compared to global markets. Clinical trials take significantly lesser time. BIOTECHNOLOGY - ADVANTAGE INDIA  Large pool of talented human resources Large talent pool of science students pursuing higher education PhDs and 1000 post-doctorals in biosciences-related fields. Top-notch life science education and research institutes.  Favourable IP climate Adherence to the TRIPS agreement with regard to the Patent Protection Act implemented in 2005 has increased the confidence of innovator companies in India.

PHARMACEUTICALS  Among the fastest growing pharmaceutical markets in the world; worth US$ 16.6 billion in 2007–08  Domestic retail market expected to cross US$ 10 billion mark in 2010 and reach an estimated US$ 12 billion to US$ 13 billion by  Outsourcing opportunity set to grow to US$ 53 billion in 2010 from US$ 26 billion in Key Multinational Companies in India

PHARMACEUTICALS - ADVANTAGE INDIA The basic production cost in India is almost 50 per cent lower than costs in the US. 85 per cent to 90 per cent manpower cost savings 40 per cent to 50 per cent savings in raw materials 30 per cent to 50 per cent lower depreciation Around 1,000 biotech and biochemistry postgraduates pass out every year Around 10,000 chemistry postgraduate students graduate every year India: Growing pharma market

IT & ITeS India topped the A.T. Kearney Global Services Location Index 2009, beating 49 other countries of the world, emerging to be the destination of choice as an offshoring location of global IT/ITeS powerhouses Revenues by segment – Indian IT industry

India’s share in the global market has increased to four per cent in the IT segment and close to 12 per cent in ITeS in India has maintained its position as the preferred outsourcing destination; Indian IT/ITeS companies are now offering a global delivery model, at par with leading global standards. India offers low costs, technical and language skills, abundant skilled pool, mature industry players and supportive government policies. Sources: ITeS: Industry profile, April 2009, CRIS INFAC IT & ITeS - ADVANTAGE INDIA Financial attractiveness of top 5 global services locations CountryIndex on a scale of 4 India3.13 China2.59 Malaysia2.76 Thailand3.05 Indonesia3.23 Source: A T Kearney Global Service Location index 2009

 The processed food market in India is at an early stage with low penetration and offers huge opportunities.  In the period: – Value of food processing grew from US$57 bn to US$75 bn – Number of registered operating units increased from 24,000 to 25,725. Source: Flavors of incredible India, Ernst & Young, 2009 FOOD PROCESSING Growth in output of processed food (US$ billion)

Advantage India Favourable agro-climatic conditions and strategic location High production volumes India is the largest producer of several fruits such as banana, mango and papaya and the second-largest producer of vegetables Large livestock base India has the largest livestock population, leading globally with 98.7 million buffaloes and 176 million cows 2 Availability of workforce Approximately employed 13 million directly and 35 million employed indirectly 1. The presence of several agriculture research institutes provides a sound skill and innovation base Proximity to importing countries Middle East and South- East Asia are the major export destinations for Indian agricultural commodities and milk Infrastructure development – AEZs and food parks The establishment of 60 3 fully equipped Agriculture Export Zones (AEZs), in addition to food parks acts as an incentive for attracting foreign investment FOOD PROCESSING – HUGE POTENTIAL India’s tropical climate favours the cultivation of exotic and seasonal food and flower crops. India’s peninsular coastline augments the growth of the marine industry

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