India Economy and Trends

INDIA - ECONOMY AND TRENDS
January 2011
INDIA-ECONOMY AND TRENDS January 2011
Contents
 Advantage India
 Current macro-economic indicators
 Growth enablers
 Growth drivers
 Factors shaping the current business environment

 Impact on business environment
 Regulatory update
 Key sectors
 Infrastructure
 Retail
 Telecommunications
 Automotives
 IT/ITeS
 Pharmaceuticals/Healthcare
 Biotechnology
 Tourism and Hospitality
 Banking/Financial Services/Insurance (BFSI)
 Energy
2
ADVANTAGE INDIA
India-Economy and Trends January 2011
Current macro economic indicators

Current scenario and future outlook
• 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.
3
ADVANTAGE INDIA

Current scenario and future outlook
2009–
Projected growth rate (%) 2008–09 2010–11 P**
2010E*
GDP (at factor cost) 6.7 7.4 9.2
Agriculture and allied
1.6 0.2 5.1
activities
Industry 3.9 9.2 9.4
Services 9.8 8.6 10.0
Private final consumption
6.8 4.3 6.5
expenditure
Government final consumption
16.7 10.5 5.0
expenditure
Gross fixed capital formation 4.0 7.2 12.0
Wholesale price index (WPI) 8.0 3.6 7.9
Index of industrial production 2.7 10.5 9.0
Exports 12.3 -2.7 15.2
Imports 19.8 -4.4 19.9
Source: Centre for Monitoring Indian Economy (CMIE)

*CMIE estimates
**CMIE projections
4
ADVANTAGE INDIA

FII inflows and foreign exchange reserves
International comparison of foreign exchange reserves (US$
billion)
• India‘s foreign exchange reserves comprise foreign Country 2005 2006 2007 2008 2009P
currency assets (FCA), gold, special drawing rights
(SDRs) and reserve tranche position (RTP) in the Brazil 53.3 85.2 179.5 192.9 219.8
International Monetary Fund (IMF). 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
Source: Socio Economic Survey, 2009–2010, P: Provisional
Net FII investments
7,100
7000 6,465
6000 5,285 5,468
4,785
5000 4,263
USD million
4000 3,428 3,163

2,727 2,783
3000 1,849 2,424
1,873
2000 1,330
945 946
1000
0
-1000
-2000 -1,505
Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10
Source: Securities and Exchange Board of India
5
ADVANTAGE INDIA

FII inflows and foreign exchange reserves
Indian Rupee joins the elite

group of unique currencies
Foreign exchange reserves in India

300
280 269
264 267 263 265
259 256 259 257
254 253 255
USD billion
260 251
247
240
220
200
Source: CMIE
6
ADVANTAGE INDIA

FDI inflows: India among top 3 destinations FDI in India
40
• According to UNCTAD‘s ‗World Investment 34.7 35.0
Prospects Survey 2009–2011‘, India is the second 35 31.7
most attractive destination for FDI (after China) 30
in the world.
USD billion
25 22.7
20
• India targets to achieve annual FDI worth US$ 14.9
50 billion by 2012 and plans to double the 15
8.9
inflows by 2017. 10
5
0
FY06 FY07 FY08 FY09 FY10 FY11P*
(Apr-Oct)
Source: RBI Bulletin – October2010

FDI includes direct investment in equity, reinvested earnings and
inter company debt transactions of FDI entities
7
ADVANTAGE INDIA

FDI inflows: India among top 3 destinations Number of proposed investments and their value
• In the period between 2003–2010 (up to 350 6371 7,000

September), the value of investment proposals 300 6,000
into India has increased at a compound annual 5218 6338
250 5,000
growth rate (CAGR) of approximately 40 per
No of deals
3818 4085
USD billion
cent. 200 3475 3342 4,000
3991
150 3,000
327.2
• The country has received 3,342 investment 100 178.6 223.8 275.5
2,000
proposals worth US$ 275.5 billion in 2010 (up to 50
127.0
1,000
77.5
September)*. 25.8
58.1
0 0
2003 2004 2005 2006 2007 2008 2009 2010
• The Government has allowed Foreign (Jan-
Sep)
Investment Promotion Board (FIPB) to clear FDI
proposals up to a limit of INR 12 billion (US$ Proposed investment Number of proposals
260.64 million). Earlier investments above INR 6

billion (US$ 130.32 million) were put before Source: Department of Industrial Policy & Promotion,
Government of India
Cabinet Committee of Economic Affairs (CCEA)
for approval.
*Exchange rate =INR 46.04 /US$
8
ADVANTAGE INDIA

FDI for select sectors
Sl No Sector/Activity FDI cap/Equity Entry route
Airports: greenfield projects 100% Automatic
1 Investment upto 74% is under the automatic

Airports: existing projects 100% route and beyond 74% under the
Government route
Upto 49% FDI is under automatic route;
2 Banking (private sector) 74% (FDI + FII) Government route beyond 49% and upto
74%
3 Banking (public sector) 20% Government
Construction — development projects including
Automatic
housing, commercial premises, hotels, resorts,
4 100% (subject to conditions notified vide press
hospitals, educational institutions, recreational
note 2 (2005 series)
facilities and city and regional level infrastructure
Drugs and pharmaceuticals including those involving
5 100% Automatic
the use of recombinant technology
6 Health and medical services 100% Automatic
7 Hotel and tourism related industry 100% Automatic
Automatic (subject to licensing by the
8 Insurance 26% Insurance Regulatory & Development
Authority )
Source: Consolidated FDI Policy, DIPP
9
ADVANTAGE INDIA

9 Ports and harbours 100% Automatic
Non Banking Finance Companies (NBFCs) — approved
10 100% Automatic
activities
Exploration activities of oil and natural gas fields,
infrastructure related to marketing of petroleum
products, actual trading and marketing of petroleum
11 100% Automatic
products, petroleum product pipelines, natural gas/LNG
pipelines, market study and formulation and Petroleum
refining in the private sector
Petroleum refining by the Public
12 49% Government
Sector Undertakings (PSU)
10
ADVANTAGE INDIA

1. Generation and transmission of electric energy
produced in hydroelectric, coal/lignite based thermal,
oil-based thermal and gas-based thermal power
plants
13 100% Automatic
2. Non-conventional energy generation and distribution
3. Distribution of electric energy to households,
industrial, commercial and other users
4. Power trading
74% (including FDI, FII, NRI, Foreign 49%
Telecom: basic and cellular, unified access services, currency convertible bonds (FCCBs), Automatic
national/international long-distance, V-Sat, Public mobile American depositary receipts (ADRs), route;
14 radio trunked services, Global mobile personal Global depositary receipts (GDRs), Government
communications services (GMPCS), and other value convertible preference shares and route
added telecom services proportionate foreign equity in Indian beyond 49%
promoters/investing company) upto 74%
11
ADVANTAGE INDIA

Recent FDI (equity) investments in India
Infrastructure Amount of FDI

Period equity inflows
• GMR Airport Holdings will raise approximately INR (US$ million)
9.6 billion from Mauritius-based private equity firm Jul-Sep 2010 5,233
Macquarie SBI Infrastructure Investments by Apr–Jun 2010 5,772
offloading 39.05% stake by way of compulsorily
convertible preference shares. (November 2010). Jan–Mar 2010 4,968
Oct–Dec 2009 5,596
• The Government has approved the proposal of Jul–Sep 2009 8,235
KKR Mauritius Cement Investment to invest INR
Apr–Jun 2009 6,905
7.15 billion (US$ 154.26 million) (August 2010).
Jan–Mar 2009 6,177
• The government of India has cleared FDI proposal Oct–Dec 2008 3,942
of Transcend Infrastructure (TIL) worth INR 19.3 Jul–Sep 2008 7,137
billion (US$ 416.6 million) for setting up
communication and broadcasting towers business
(July 2010). Sources: RBI Bulletin— November 2010, Business
Standard, Reuters, IBN Live, Karnataka Industry,
Monitor, Economic Times
*Exchange rate =INR 46.32 /US$
12
ADVANTAGE INDIA

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 Shyam
Teleservices Ltd (SSTL), the JV formed between Sistema of Russia and India-based Shyam Group for US$
800 million. (April 2010).
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)
13
ADVANTAGE INDIA

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

FDI equity
Break up of FDI by sectors
2009-2010
Top sectors
Services Sector*
17%
• Services sector continues to be the favorite Housing & Real
investment destination for foreign investors. The Estate
sector attracted USD4.4 billion FDI in FY10 45.4% 11% Construction
Activities
(USD2.1 billion in the first half of FY11). Telecommunications
11%
Power
• Housing and real estate sector attracted the 5.6% 10%
Others**
second- highest FDI in 2009–2010. FDI in this
sector has increased from ‗zero‘ in 2004–05 to 2008-2009
US$ 2.8 billion in 2009–10. Services Sector*
23.1% Housing & Real

• In FY10, power sector witnessed the highest Estate
Construction
growth (58%) in attracting foreign investments 46.4% Activities
over FY09 followed by construction activities 10.3%
Telecommunications
(54%) and housing & real estate (8%). Power

7.2%
9.5% Others**
• In FY11 (Apr-Sep), services sector share in FDI 3.6%
stood at 19% followed by telecommunications Source: Department of Industrial Policy & Promotion,
Government of India
(9%) and metallurgical industries (8%). *Services includes financial and non-financial services, **Others
includes automobile, computer software and hardware,
petroleum and natural gas, chemicals, pharmaceuticals, hotel and
15 tourism and other sectors
ADVANTAGE INDIA

FDI equity Break up of FDI by countries of origin
2009-2010
Top countries
Mauritius
• Mauritius has been the largest source of FDI 32.3%
Singapore
inflows in India for many years. Cumulative FDI 40.2%
inflows from Mauritius reached USD51 billion in US
September 2010 since April 2000. (USD3.8 Cyprus
billion in the first half of FY11). 4.6%

6.3%
Japan
7.5% 9.2% Others
• Singapore and the US remained the second and

third- largest sources of FDI in India in 2009– 2008-2009
2010.
Mauritius
• FDI from Japan increased at a staggering rate of 33%
200 per cent in 2010 over 2009. India is now the 41.3%
Singapore
second most preferred investment destination US

for Japanese companies. Cyprus
1.5%
4.9% Japan
6.5%
12.8% Others
Source: Department of Industrial Policy & Promotion,

Government of India
16
ADVANTAGE INDIA

Inflation picks up, RBI hikes key policy rates Wholesale price index
12%
• WPI in November 2010 rose 7.5% Y-o-Y, lower 11.0%
10.6%
than an 8.6% increase in October. 10% 9.7%
10.3%
9.8% 8.6%
10.2%
8.5% 8.6%
8%
• According to RBI, inflationary expectations 8.5%
6.9%
remain at elevated levels, and global commodity 6%
7.5%
prices are expected to make inflation 4.5%
management difficult. 4%
2%
1.5%
• RBI has revised policy rates to suck out excess
liquidity from the financial system in its annual 0%
credit policy.
Mar-10
Jun-10
Oct-09
Jan-10
Oct-10
Apr-10
May-10
Nov-09
Aug-10
Nov-10
Feb-10
Jul-10
Sep-10
Dec-09
• In November 2010, it further increased the
repo and reverse repo by 25 basis points to Source: Central Statistical Organisation
6.25% and 5.25%, respectively.
17
ADVANTAGE INDIA

Inflation picks up, RBI hikes key policy rates
Annual average inflation by major heads in WPI (per cent)

2008–09 2009–10
Commodities Weight (%) 2004–05 2005–06 2006–07 2007–08
(Apr-Dec) (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 & 14.23 10.14 9.49 5.61 0.93 11.32 -6.35
lubricants
Manufactured
63.75 6.26 3.07 4.43 4.97 9.47 1.77
products
Source: Socio Economic Survey 2009–2010, RBI website
18
ADVANTAGE INDIA

M&A activity
Number of deals and value
• M&A activity in India has started picking up
1,304 1,239
since January 2010. 70.0 1,321 1,239 1400
60.0 1,111 1200

1,048
• USD54 billion worth of M&A activity has
No of deals
50.0 1000
USD billion
taken place during 2010 (Jan-Nov).This 40.0 800
drastic increase is primarily driven by 669
Bharti—Zain Africa deal. 30.0
693 58 54 600
20.0 537 33 42 400

32
• In 2010 (Jan-Nov), oil and gas sector attracted 10.0 20 200
28 per cent of the total deal value in India, 8 6 6
0.0 0
followed by telecommunication (27 per cent)
and pharmaceuticals (8 per cent).
• The US emerged as the top destination for Value of deals Number of deals
outbound M&A activity from India accounting
for approximately 22per cent of total outbound Source: Bloomberg
deals in 2010 (Jan-Nov), followed by UK(13
percent).
19
ADVANTAGE INDIA

M&A activity
• The US also emerged as the top M&A investor in India accounting for 28 per cent of total number of
inbound deals in the first eleven months of 2010. Other major countries include Mauritius (9 percent)
and UK (7 percent).
• Major deals in 2010 (Jan-Nov) 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)
20
ADVANTAGE INDIA

M&A activity
Break-up of number of deals
2002 2009
15% 18%
Outbound
Outbound
16% Inbound
Inbound
54% Domestic
Domestic
27%
69% 2010(Jan-Nov)
17%
Outbound
Inbound
22%
61% Domestic
Source: Bloomberg
21
ADVANTAGE INDIA

Private equity activity has picked up
Private Equity/Venture Capital activity in India Average deal size

60
20 400 53
18 365 350
16 334
296 300 45
14 39
No of deals
USD million
USD billion
12 249 250
29 30
10 200 30
180 23
8 150
17 18
6
11 100
4 15
7 6.2 50
2 4
2
0 0
2005 2006 2007 2008 2009 2010 0
(Jan-Nov) 2005 2006 2007 2008 2009 2010
(Jan-Nov)
Value of deals Number of deals
Source: Asian Venture Capital Journal Source: Asian Venture Capital Journal
22
ADVANTAGE INDIA

Private equity activity has picked up
• Private equity (PE) activity has started increasing in Sectoral distribution of PE investments
2010: 2010 (Jan-Nov)
Infrastructure
• During 2010 (Jan-Nov) PE activity witnessed 249
deals worth USD6.2 billion. 9%
6%
Telecommunication
13%
4% Financial services and capital
4%
• Average deal size at USD30 million has markets
Retail and consumer products
3%
exceeded USD23 million for 2009. 15%
Real estate
• Major deals in 2010 (Jan-Nov) include: 16% Technology
Healthcare
• Consortium of PE funds including Morgan 29%
Stanley Infrastructure Partners, General Atlantic Education
LLC, Goldman Sachs Investment Management Others

invested US$ 425 million in Asian Genco Pte Ltd
Source: Factiva; ISI Emerging Markets; VC Circle; Mergermarkets
• BI Macquarie-led group invested US$ 304 billion
in telecom infrastructure company Viom
Networks
• US-based private equity fund Blackstone has

invested US$ 300 million in Moser Baer Projects
Private Ltd
23
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
24
ADVANTAGE INDIA
Growth enablers
Changing demographics: Rise in working population
India‘s estimated population in 2025 Indicating favourable demographics (age groups)
1400
80+
70-74 1200
60-64 1000 410
Millions
50-54 800 300
40-44
600
290 375
30-34
20-24 400
10-14 200 410 415

0-4 0
0% 1% 2% 3% 4% 5% 2001 2013
Female Male 0-19 20-34 35 & above
Source: 2008 World Population Prospects database, UN Source: ENAM Research
25
ADVANTAGE INDIA
Growth enablers
Changing demographics: Rise in working population
Addition to the working age population by Total employment in India (millions)

2018 (millions)
900
828.95
Europe -15 800
Japan -7 700
645.09
USA 14 600
516.41
Western Asia 32 500
China 43 390.15
400 337.88
Latin America 53
300
South East Asia 56
200
India 141
100
Africa 156
World 200 0
2004-05 2008-09 2015-16 2020-21 2025-26
-50 0 50 100 150 200 250
Source: ―India Economics,‖ Morgan Stanley, 17 November 2009 Source: India Labour Report 2009
• 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.

26
ADVANTAGE INDIA
Growth enablers
The Eleventh Plan outlines significant initiatives
• National Rural Health Mission (2005–2012) seeks to provide • Creation of a Mission for Secondary Education to leverage
effective healthcare to rural population with focus on states benefits of Sarva Shiksha Abhiyan, along with a reduction in
having weak health infrastructure. the dropout rate at an elementary level to 20 per cent by
• There are plans to launch the National Urban Health Mission 2012.
(NUHM) with a focus on slums and the urban poor. • Focus on expansion and quality of higher education sector.
• Improvements in Health Management Information During 2009, 13 new central universities have been
System (HMIS) will improve service delivery. Health Education established.
• Bharat Nirman scheme aimed at providing • A capacity addition programme of 78,700 MW,
all-weather road connectivity to all three and a half times greater than the Tenth Plan,
habitations by 2009. Till now, 84 per cent is being undertaken. 25 per cent of the planned
of the target has been met, the remaining augmentation has been achieved till 21 October
16 per cent will be completed by 2011. Eleventh Five 2009.
• There is increased focus on the Infrastructure Energy • Initiatives such as ultra mega power projects
Year Plan
development of dedicated freight corridor (UMPPs), merchant power plants and captive
projects with an estimated investment of (2007–2012) power plants have also been launched. The UMPPs
INR 280 billion (US$ 6.04 billion). are very large sized projects, approximately 4000
• Plans for two international size shipyards MW each involving an estimated investment of
on East /West Coasts of India. about Rs.16,000 crore (US$ 3.45 billion).
•Tourism: There is now a revised target of 10.25 million

• There is a progressive elimination of quantitative Industry Services
international tourist arrivals by 2011 along with the creation
restrictions along with reduction in tariff.
of 200,000 rooms across the country
• The focus on the elimination of exit barriers and improving
• IT-ITeS: The target of US$ 86 billion in IT-ITeS exports by 2012
the business environment has increased.
requires an investment of US$ 20 billion.
Source: Planning Commission, Eleventh Five Year Plan, Mid-term appraisal 27

ADVANTAGE INDIA
Growth enablers
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 demat accounts.
• 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 FY10.The credit-deposit ratio of Indian SCBs stood at 74.5 in November
2010. Bank credit has grown by 22.6% as of November 2010.
• The Government has made provision for recapitalisation of banks worth INR165 billion in FY11 budget,
to help banks maintain a Tier I capital adequacy ratio in excess of 8%.
Source: RBI, NSDL website
28
ADVANTAGE INDIA
Growth enablers
Robust financial institutions
Banking infrastructure in India (2009-10) — number of Credit –deposit ratio of SCBs

branches of SCBs
80 73.5
72.4
58,825 72.2
70 62.6 74.6
Public sector 70.1
10,027
Private Sector 60 56.9
Banks banks
50 55.9
53.8
308 Foreign Banks 40
Stable and
conservative 30
Source: RBI
credit- 20
deposit
ratio 10
0
FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Source: RBI
29
ADVANTAGE INDIA
Growth enablers
Special Economic Zones (SEZs) Exports from SEZs
60
Number of formal
577 50 47.65
approvals
Number of notified 363 (out of 577) + 40
USD billion
SEZs (7 central Govt. + 12 state/private
30
(as on August 27, 2010) SEZs) 21.52
Number of in-principle 20
155
approvals 10
114 (Out of this 14 are multi
0
product SEZs, remaining are
Operational SEZs IT/ITeS, engineering, electronic 2008-09 2009-2010
(as on June 30, 2010) hardware, textiles, biotechnology,
gems & jewellery SEZs and other Notified SEZs in India (as on June 2010)
sector-specific SEZs)
Units approved in SEZs
3,048 19% IT/ITeS/Semiconductors
(as on June 30, 2010)
Pharma/Chemicals
Total investment US$ 35.95 billion (INR166,526.43 4%
(as on June 30, 2010) crore) Biotech
4%
62 % Engineering
Total employment 5%
550,323
(as on June 30, 2010) 6% Multi-product
Others
Source: www.sezindia.nic.in
30
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
31
ADVANTAGE INDIA
Growth drivers
Exports: India’s position is strengthening
• India is a leading exporter of IT services in the India‘s exports – Goods and services
world. The US and the UK together account for a 350
dominant share of India‘s IT-BPO exports at 300
approximately 61% and 18%, respectively.
250
UAE is the top destination for India‘s merchandise
USD billion
• 200
exports accounting for approximately 13.4 per
cent of the total exports during 2009–2010. 150
Other major countries include the US (10.9 per 100
cent) and China (6.5 per cent).
50
• India accounts for approximately 1.64 per cent of 0

global trade in goods and services currently.The FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Q1FY
government aims to double this share by 2020.
Goods Services
Source: RBI
32
ADVANTAGE INDIA
Growth drivers
Exports: India’s position is strengthening
Composition of services exports 2009–2010 (P) Composition of merchandise exports 2009–2010 (P)
53.0% Agricultural and allied

10.7%
Travel 18.3% products
Transportation Ores and minerals
13.6%
Software services
Petroleum and crude
11.9% Business Services products
15.7%
Others Engineering goods
12.4%
12.6% 4.9% 29.7% Textiles

10.1%
7.1%
Chemicals and related
products
Others
Source: RBI Bulletin— July 2010
Source: Directorate General of Foreign Trade
33
ADVANTAGE INDIA
Growth drivers
Investment climate expected to remain favourable
A stable political environment and improvement

A strong investment in the domestic and global investment climate is
culture should drive
expected to drive growth in domestic capital
growth in capital
formation. formation.
India‘s industrial sector witnessed capital

expenditure worth INR 2.3 trillion (USD 49.5
billion) in FY09 and INR 4 trillion in FY10 (USD
88 billion).
Gujarat, Orissa and Andhra Pradesh accounted

Corporate India is for the majority share of the investment
planning significant
proposals made in 2009, with 15.4%, 12.6% and
investments.
8.1% respectively.
Exchange rate of INR 46.47 /US$ has been used for 2008–09. For the remaining figures exchange rate used is INR45.5/US$.
34
ADVANTAGE INDIA
Growth drivers
Investment climate expected to remain favourable
• India‘s industrial sector is expected to witness Trends in share of gross fixed

capital expenditure worth INR 22 trillion (US$ capital formation (GFCF)
483.5 billion) in 2010–13. 18,000 33.3 32.2 32.8 35.0
16,000 30.3
30.0
• Electricity sector is expected to witness the 14,000 24.7
31.7
highest capacity addition worth INR 4.4 trillion 12,000
22.9 28.8 25.0
INR billion
(US$ 96.6 billion) by 2010–13. 10,000
23.6 20.0
8,000 15.0
• Other sectors that are expected to witness 6,000
10.0
significant investments during 2010–13 include: 4,000
2,000 5.0
• Steel (INR 2,370 billion/US$ 52.1 billion). 0 0.0
• Roadways (INR 1,606 billion/US$ 35.3 billion).
Public sector Private corporate sector
• Telecommunications (INR 1,546 billion/US$ 34 Household sector GFCF as % of GDP

billion).
Source: CMIE
• Petroleum products (INR 1,411 billion/US$ 31
billion).
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
ADVANTAGE INDIA
Growth drivers
Consumer spends: Increasing middle class
Distribution by income of households* in India
2002 2010E RURAL

Households (HH): 155 mn
High, 1% High, 4%
Population: 732 mn (72%)
Upper middle, 5% Upper middle, 10% Average HH size: 5 persons
Middle, 22% Earners per HH: 1.4 persons
Middle, 34%
URBAN
Low, 72% Low, 52% Households (HH): 67 mn
Population: 295 mn (28%)
Average HH size: 4.8 persons
Earners per HH: 1.3 persons
188 million households 222 million households
Source: ―India Economics,‖ Morgan Stanley, 17 November 2009 Source: ENAM Research
*Definitions of income level

Low – upto US$ 2,000 Upper-Middle – 4,200-10,500
Middle – US$ 2,000-4,200 High – US$10,500 and above
36
ADVANTAGE INDIA
Growth drivers
Consumer spends: Increasing middle class
• India has approximately 222 million households, with more than 30% of the population living in 5,000
cities and towns.
• 13 million people enter India‘s urban work force each year.
• India‘s population grew at 1.5% during 2005-2010. It is estimated that by about 2025 India will have 25%
of the worlds total workforce.
• 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% in 2008, is expected to reach
USD425 billion in 2010-11 with 720-790 million customers,This will be double the 2004-05 market size
of USD220 billion.
37
ADVANTAGE INDIA
Growth drivers
Consumer spends: Urban and rural India are spending
Increase in consumer choices Trends in public and private consumption

50000 74
CAGR
2000 2005 2010 73
(2000-10) 40000 72
INR billion
Media 71
30000 70
TV channels 161 251 395 9.4% 69
Retail 20000 68
67
Malls 10 100 400 44.6% 10000 66
65
Franchisees 400 32,000 120,000 76.9% 0 64
Consumer Durables (no of models) 2003– 2004– 2005– 2006– 2007– 2008– 2009-10
04 05 06 07 08 09
Car 20 55 95 16.9%
Television 30 64 100 12.8% Private consumption expenditure
Government consumption expenditure
Refrigerator 48 96 160 13.8%
Consumption as % of GDP
Air conditioner 30 56 100 12.8%
Source: Ambit Capital research Source: RBI and CMIE
38
ADVANTAGE INDIA
Growth drivers
India‘s consumption spending pattern
Food, beverages and Food, beverages and

tobacco tobacco
Apparel Apparel
7% 9%
2% 5% Housing and utilities Housing and utilities
6%
Household products 3% 34% Household products
41%
16%
Personal products and Personal products and
services 19% services
Transportation Transportation
8%
Communication 5% Communication
3% 9%
12% 6% 3% 12%
Education and recreation Education and recreation
Health care Health care
2005 2015F*
*Forecasts
Source: ENAM research
39
ADVANTAGE INDIA
Growth drivers
FMCG Sales — INR 1,064 billion

(US$ 22.9 billion)
28.1
Metro
33.4
Town Class I
Rest of Urban
20.6 Rural
17.9
Source: Nielsen Research, March 2009
40
ADVANTAGE INDIA
Growth drivers
The growing manufacturing sector
• The Index of Industrial Production (IIP) quick estimates data for October 2010 shows a growth of 11.3 per
cent in the manufacturing sector as compared to October 2009.
• 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 equipment
• Steel
• As per the Industrial Outlook Survey conducted by the Reserve Bank of India (RBI) for October-December
2010 quarter the Indian manufacturing sector showed positive overall business sentiment in the quarter.
41
ADVANTAGE INDIA
Growth drivers
The growing manufacturing sector
Growth trends in the Indian manufacturing sector

April–Sept Apr– June Apr 2008–
Apr– Sept 2008 July– Sept 2009
2009 2009 March 2009
Excellent
9.47 % 6.93 % 12.9 % 9.33 % 6.25 %
(more than 20%)
High
26.32 % 26.73 % 35.48 % 22.67 % 18.75 %
(10-20 %)
Moderate
35.79 % 42.57 % 32.26 % 28 % 45 %
(0-10 %)
Negative
28.42 % 23.76 % 19.35 % 40 % 30 %
(less than 0 %)
Source: CII m-ASCON survey, November 2009
• 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
42
ADVANTAGE INDIA
Growth drivers
Top companies in India*
* Indicative
43
ADVANTAGE INDIA
Growth drivers
Top companies in India*
* Indicative
44
ADVANTAGE INDIA
Growth drivers
India: R&D and innovation hub
• 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.
• 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.
45
ADVANTAGE INDIA
Growth drivers
Growth in the number of Indian scientific publications R&D expenditure by few Indian companies
Number
Number Growth Company Expenditure (US$ mn) 2008
Category (1999 to
(2004 to 2008) (%)
2003) Tata Motors 246
Chemistry 21,206 33,504 10 BHEL 115
Physics 11,700 17,295 14 Dr Reddy‘s Laboratories 84
Plant and Sun Pharmaceuticals 71
8,132 10,190 19
animal sciences
Engineering 8,101 14,103 5 Source: Economics Times article dated November 14, 2009
Materials
6,960 11,126 9
science
Agricultural
4,303 5,634 17
science
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
Source: ―2010 Global R&D funding forecast‖, December 2009,

Battelle, R&D magazine
46
ADVANTAGE INDIA
Growth drivers
• 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.
Sources: ―India‘s most innovative companies‖, Business Today website, March 31, 2008, www.money.cnn.com
47
ADVANTAGE INDIA
Growth drivers
• India‘s top innovator companies: Indian companies in the Fortune 500
• IT/ITeS,Telecom, Financial Services Company Rank

Indian Oil Corporation 125
• Citibank India, HDFC Bank, ICICI Bank,
Infosys Technologies, Wipro Technologies, Reliance Industries Limited 175
Tata Consultancy Services, Airtel, IBM Daksh
State Bank of India 282
• Healthcare, Pharma, Biotech Bharat Petroleum 307
Hindustan Petroleum 354
• Aravind Eye Care, Apollo Hospitals, Narayana
Hrudayalaya, Ranbaxy, Dr Reddy‘s Tata Steel 410
Laboratories, Dabur India
Oil & Natural Gas Corporation (ONGC) 413
• Aviation, Auto — Jet Airways, Mahindra & Tata Motors 442
Mahindra,Tata Motors
• Retail, FMCG — Marico, ITC
• Key foreign players with research operations in
India include Adobe Systems, Google, GE, IBM,
Microsoft, Pfizer
48
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
49
FACTORS SHAPING THE CURRENT BUSINESS ENVIRONMENT
Impact on the business environment

Recent events
BSE Sensex
25,000.00
Lehman Dubai debt
Brothers file crisis
for bankruptcy
Election results
20,000.00
Terror attacks
15,000.00 on Mumbai
Satyam scam
Union Budget European
10,000.00 disappointment debt crisis
5,000.00
0.00
• 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
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
51
Regulatory update
• Ministry of Corporate Affairs (MCA) has published IFRS roadmap; IFRS to be phased in between
2011–2014 depending on listing status and net worth.
IFRS • 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
Goods and Services broad based and a single comprehensive tax on goods and services. Aimed at bringing supply chain
Tax (GST) efficiencies and higher volume growth.
• Proposed to be implemented from April 2012 along with the Direct Tax Code.
• Meant to replace the current Income Tax Code; all direct taxes to be brought under its purview
• Proposed to be implemented from 2012
Direct Tax Code
• In June 2010, a revised DTC discussion paper was released addressing the suggestions/concerns
(DTC)
raised by the stakeholders in lieu of the original DTC. DTC focuses on bringing stability and simplicity
to the tax regime.
52
Regulatory update
• Passed in Parliament in 2002; notified for implementation in May 2009

Competition Act
• 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.
Others • The Unique Identification programme (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.
53
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
54
KEY SECTORS
Infrastructure
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).
The government aims to increase the country‘s

In 2009–10, expenditure worth approximately 7.2 per
infrastructure expenditure to 9 per cent of its GDP by
cent of the GDP was spent on infrastructure.
2014.
Infrastructure investments
90 7.2 8 Government initiatives to meet this target
6.5
80 • The government established the India Infrastructure
6.0 6.0
70 5.6 6
Finance Company Limited (IIFCL) and introduced the
5.2 ―takeout financing scheme‖ to provide long-term financial
60
USD billion
5.8 support to infrastructure projects. The government has

50 5.4
5.0 4 allocated 46 per cent of its total planned expenditure
%
40 (INR 1.7 trillion) in the Union Budget 2010–11 for the
30 development of infrastructure.
2
20 • The government has called for the refinancing of 60 per
10 cent of commercial bank loans under the ―takeout
0 0 financing scheme‖ for public private partnership projects
(PPP).
• Permission has been granted to NBFCs to seek external
infrastructure investments % of GDP commercial borrowings for infrastructure projects from
multilateral or bilateral institutions under the approval
Source: Planning Commission route of the RBI.
55
KEY SECTORS
Infrastructure
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.
Sources: Planning commission, Indian Road Network, NHAI, Ministry of Shipping, Ministry of Railways
56
KEY SECTORS
Infrastructure
Opportunities for the private sector
• Roads and highways: The Government has plans to develop various projects which include four-laning
of 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.
57
KEY SECTORS
Infrastructure
Opportunities for the private sector
Revised segment-wise composition of infrastructure

Sector Players expenditure in the Eleventh Five Year Plan
Adani Group, Larsen & Toubro (L&T), Essar
Ports Group, Maersk Group, P&O Ports, Dubai Ports
International, PSA Singapore Power
DS Construction Limited, GMR Infrastructure 32.1% Roads and bridges
Roads Limited, Hindustan Construction Company, L&T, Telecom
Gammon Infrastructure Projects Limited
Railways
Container Corporation of India Limited, DFC 6.2%
0.4% 13.6% Irrigation
Corporation of India lImited, Rail Vikas Nigam 1.8%
Railways 2.0%
Limited, Punj Lloyd, Gammon Infrastructure Water supply
Limited 5.4%
Ports
Ascendas (Singapore), Emaar (Dubai), Unitech, 16.8%
Real 12.0% Airports
DLF, Ansal Properties, K. Raheja Corporation,
Estate 9.8% Storage
Sobha Developers, Parsvnath Developers
Gas
Sources: Planning commission, Indian Road Network,

NHAI, Ministry of Shipping, Ministry of Railways
58
KEY SECTORS
Infrastructure
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.
59
KEY SECTORS
Infrastructure
Investments
Key deals
Year Sector Target name Acquirer Details
April 2010 Transport Flyjac Logistics Pvt Ltd Hitachi Transport System US$ 56.4 million (deal
services Ltd (Japan) value)
January 2010 Ports ABG Shipyard Ltd Precious Shipping PCL N/A
(Thailand)
August 2009 Ports Continental warehousing Nhava Aureos India Fund and US$ 16.4 billion (deal
Sheva ePlanet Venture 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
60
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
61
KEY SECTORS
Retail
India ranks first globally in terms of market potential
• The retail sector in India is estimated at US$ 420 Retail market in India
billion by the end of 2010, and is expected to 600
increase to US$ 464 billion by 2013. 60
500
3.2x
• The share of organised retail has gradually
US$ billion
increased over the years, from less than 1 per cent 400
19
in 1999 to 5 per cent in 2009. 300
5
• The ―food and grocery‖ category has the highest 200
464
share in the overall Indian retail market, at 331
approximately 60 per cent of total retail revenues. 100 225
• Several foreign players have entered the Indian 0

retail market through JVs with Indian companies in 2003 2008 2013
multi-brand retailing, providing back-end logistical
and supply chain management support. Unorganised retail Organised retail
• Wal-Mart Stores — JV with Bharti Enterprise. Source: ENAM Securities

• Carrefour, the world‘s second-largest retailer
opened its first cash-and-carry store in New
Delhi in December 2010.
• Tesco PLC — Global services arm.
• Metro AG — Independent subsidiary operates
in five locations in the country.
• Target Corporation — Subsidiary established in
2005.
62
KEY SECTORS
Retail
India ranks first globally in terms of market potential
• The implementation of GST is expected to further 2009 Global Retail Development Index (GRDI) ranking
improve the competitive position of organised
retailers.
• French retail giant Carrefour has started its 1
wholesale and cash-and-carry business in India in 2

3
by opening its first store in Delhi. 4
5
• Key players include Tata Group, Future Group, 6
Reliance Group, RPG Group, K. Raheja Group, 7

8
Landmark Group, Aditya Birla Group 9
10
Source: A.T. Kearney
63
KEY SECTORS
Retail
Recent developments
• The government has recently proposed 100 per cent FDI in multi-brand retail sector to promote foreign
participation.
• 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
Retailers expanding budget of US$ 250 million to fund the international expansion.
presence, adding • July 2010: Future Group is planning to set up 60 more Big Bazaar stores within 18 months at a cost of
new stores 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
Foreign retailers during the next three years.
firming their plans
for India entry • 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.
64
KEY SECTORS
Retail
Recent developments
• 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.
Raising capital • 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.
65
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
66
KEY SECTORS
Telecommunications
Sector has grown rapidly over the last decade
• 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.
• Telecom industry revenues are projected to reach US$ 45 billion by 2012 as compared to US$ 33.2 billion
in 2009.
• The number of telephone subscriber base in the country reached 742.12 million as on October 31, 2010.
The overall tele-density (telephones per 100 people) has touched 62.51.
• The wireless subscriber base has increased to 706.69 million at the end of October 2010.
Subscriber base and tele-density trends

800 62.5% 70%
700 52.7% 60%
600 50%
million
500 37.0%
40%
400 26.2% 742.1
621.3 30%
300 19.2%
200 9.1% 12.8% 429.7 20%
5.2% 7.0% 300.5
100 206.8 10%
54.3 98.4 140.4
0 76.5 0%
FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Oct-10
Subscriber base Teledensity
67
KEY SECTORS
Telecommunications
Sector has grown rapidly over the last decade
• Key players in the Indian telecom market include Market share by wireless operators, June 2010
Bharat Sanchar Nigam Ltd (BSNL), Mahanagar
Telephone Nigam Limited (MTNL), Bharti Airtel
Limited, Reliance Communication,Vodafone, Idea 3.7%
Cellular, Aircel and Tata Teleservices. 6.6% Bharti
21.5%
Reliance
• Rural markets will be the next growth driver for 10.8%
the Indian telecom industry due to the growing Vodafone
population and disposable income of rural India. BSNL
11.4%
TTSL
• 74 to 100 per cent FDI is permitted for various 17.4%
telecom services. The sector attracted FDI Idea
worth US$ 2.55 billion in 2009–2010, making it 11.4% Aircel
the sector attracting the third-highest number of 17.2% Others
FDI.
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
68
KEY SECTORS
Telecommunications
To become the second largest telecom market globally
• Urban-rural digital divide is significant – while Global comparison of mobile connections, 2009 (million)
urban areas are already saturated, the teledensity
in rural areas is very low. China 741.2
• Urban penetration stood at 119.7%, whereas India 489.1

rural penetration is lower at 24.3% in March
2010. US 282.0
• Overall penetration was 52.7% in March 2010. Russia 204.3 India ranks second to
China in the global
Further, in June 2010 the overall penetration Brazil 173.8 wireless market.
increased to 56.8%.
Japan 110.6
• Overall growth can be attributed to the wireless
segment, which accounts for more than 90% of Germany 107.3
the total subscriber base and more than 60% of
revenues of telecom services. 0 100 200 300 400 500 600 700 800
Source: OVUM
69
KEY SECTORS
Telecommunications
To become the second largest telecom market globally
• India is a voice-centric market characterized by Tele-density: Comparison of rural and urban India
high volume and low average revenue per user 140
(ARPU).
119.7
120
• Consumers are so price-sensitive that airtime 100
tariffs have reached as low as INR0.01 per
Tele-density (%)
88.7
second billing. 80
63.7
60 47.2
• Declining tariffs, reduced handset prices, rapidly 38.0 37.0 52.7
increasing network coverage and diminishing 40
21.3 26.2 26.2
network equipment costs are the key factors 20 12.9
18.2
driving the growth of the mobile market. 7.0 9.1
14.8
24.3
0 5.8 9.3
1.7 1.7 1.9
• Subscriber base is expected to reach one billion FY04 FY05 FY06 FY07 FY08 FY09 FY10
by 2014.
Total Urban Rural
Source: Telecom Regulatory Authority of India
70
KEY SECTORS
Telecommunications
Recent 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.
Regulatory
developments 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.
August 2010:
• Reliance Communications expects to roll out 3G services by the end of 2010, provided government
Network expansion 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
71
KEY SECTORS
Telecommunications
Recent developments
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.
Mergers &
Acquisitions 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).
Source: Bloomberg
72
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
73
KEY SECTORS
Automotives
In the medium term, expected to become a key player
• The country has become the seventh largest vehicle producing nation in the world.
• 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
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).
• The passenger vehicles segment during April-September 2010 grew at 32.91 per cent over same
period last year.
Two-wheelers
• Two wheelers registered a growth of 25.86 per cent during April-September 2010. Mopeds, scooters
Current state and motorcycles grew by 23.13 per cent, 44.95 per cent and 22.52 per cent, respectively.
Commercial vehicles( CVs)
• The segment is undergoing a structural shift towards the smaller and light commercial vehicle
category.
• The overall commercial vehicles segment registered a growth of 41.59 per cent during the first half of
2010-11, as compared to the same period last year.
Auto components
• The turnover of the auto component industry is being estimated at around US$ 26 billion in 2010-
11.Exports from the auto component industry are estimated to be worth US$ 5 billion in 2010-11.
• The industry is expected to grow to US$ 40 billion by 2016.
74
KEY SECTORS
Automotives
In the medium term, expected to become a key player
• Total sales are expected to reach US$ 120 to US$ 160 billion by 2016 with a total investment
Outlook
requirement estimated at US$ 35 to US$ 40 billion.
• World‘s second-largest two-wheeler market

• Asia‘s third-largest passenger vehicle market
Ranking
• World‘s fifth-largest bus and truck market (by volume)
• World‘s fourth-largest commercial vehicle market
Segment share of automotives in 2009–2010

Indian players
4.2%
Tata Motors, Mahindra & Mahindra, Bajaj Auto, Ashok Two-wheelers
4.6%
Leyland, Maruti Suzuki, TVS Motor Company, Hindustan
Motors, Eicher 17.4% Passenger
International players vehicles
Three-wheelers
Toyota Motors, Volkswagen AG, General Motors, Ford
Motors, Honda Motors, Daimler AG, Fiat, Hyundai Motors,
Renault, Piaggio Vehicles 78.0% Commercial
vehicles
75
KEY SECTORS
Automotives
Recent developments
• August 2010: Toyota launched the Toyota Etios hatchback and sedan model, commercial production
Focus on the to begin from December 2010
compact car • July 2010: Nissan rolled out its Micra compact car which is being built at its facility in Chennai, PSA
segment 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
• Demand for motorbikes has unexpectedly surged since beginning of 2010, driven by rising consumer
Surging demand for confidence and higher disposable incomes . Thus, Bajaj Auto, Yamaha and Honda Motorcycle &
motorbikes 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.
• Jan 2010: Harley Davidson is set to enter India with its full range of five motorcycle families, the
…..and Luxury
Sportster, the Dyna, the VRSC, the Softail and the top-of-the-range Touring series.
brands making India
• Dec 2009: Italy‘s Ducati is looking to ride the fledgling Indian superbike market with models costing
entry
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
76
KEY SECTORS
Automotives
Recent developments
Focus on newer • Maruti Suzuki and Hyundai Motors India are now looking at potential markets such as South America,
export markets Australia, Taiwan, South-east Asia and South Africa for their exports.
• India is currently negotiating foreign trade agreements (FTAs) with South Korea, ASEAN, the EU and
Free Trade Japan.
Agreements • 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.
• According to the annual forecast of the Society of Indian Automobile Manufacturers (SIAM),Passenger
vehicle sales in the country will be 21,96,791 units in 2010-11. While two-wheeler sales are expected
Rising sales to be up 9-10 per cent at 10,287,837 units from 9,368,230 units in 2009-10, commercial vehicle sales
in India will grow 17-18 per cent at 6,21,681 units vis-à-vis 5,31,395 units last financial year.
77
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
78
KEY SECTORS
IT/ITeS
The growing IT industry
• Total revenues for Indian IT industry touched Domestic revenue segmentation of 2009–2010
US$ 73.1 billion in 2009–2010 as compared to (share %)
US$ 70.5 billion in 2008–09 growing over 5.4
per cent.
IT services
• India‘s software and services sector revenues 13%
(excluding hardware), have touched US$ 63.7
billion in 2009–2010, constituting 87 per cent of
ITes-BPO
the total industry revenues. 20%
57%
• The sector‘s contribution to India‘s GDP
increased to 6.1 per cent in 2009–2010 as Engineering
services/product
compared with 1.2 per cent in 1997–98. development
23%
• Key players include: Tata Consultancy Services Harware
(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).
79
KEY SECTORS
IT/ITeS
The growing IT industry
• India‘s Knowledge Process Outsourcing (KPO) Technology sector M&A deal volume and value
export market constitutes about 8 per cent of 5000 200
India‘s ITeS revenues.
159
4000
150
• India is poised to become the hub for 97
102
Engineering Process Outsourcing (EPO), with its 3000
market size estimated to touch US$ 30 billion 2000
100
annually by 2015, attracting 25 per cent of the 2886 3393
US$ 70 billion global EPO industry. 1000 2903 50
• Bechtel, GM, Ford, John Deere, Caterpillar, 0 0

Silicon Automation Systems and John Brown 2006–07 2007–08 2008–09
Engineering are few companies that have set up
their engineering service divisions in India. M&A deal value M&A deal count
Sources: "The IT-BPO Sector in India - Strategic Review

2009: Executive summary", NASSCOM website
80
KEY SECTORS
IT/ITeS
Key deals
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
Source: Bloomberg
81
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
82
KEY SECTORS
Pharmaceuticals/Healthcare
The outsourcing destination
• 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$ 1.82 billion between November 2000 and August 2010.
83
KEY SECTORS
The outsourcing destination
Indian players Indian pharmaceutical R&D expenditure

Cipla, Ranbaxy Laboratories, Dr Reddy‘s Laboratories, Sun Specifics 2001-02 2009-10#
Pharma, Lupin Ltd, Aurobindo Pharma, Piramal Health, Cadila
Healthcare, Matrix Labs, Wockhardt R&D expenditure as a
1.4 7.5
percentage of sales
International players
R&D expenditure in
GlaxoSmithKline Pharma, Aventis Pharma, Abbott India, 55 622
absolute terms (US$ mn)
Pfizer, Novartis India, Merck, Wyeth Laboratories,
AstraZeneca Pharma, Solvay Pharma, Fulford (India)
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
Note : # represents top 20 pharmaceutical companies
84
KEY SECTORS
Opportunities
• 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.
85
KEY SECTORS
Opportunities
Key deals
Target name Acquirer Deal value (US$ million)
Piramal Healthcare Ltd Abbott Laboratories 3,712.8
Parkway Holdings Ltd (Singapore) Fortis Healthcare Ltd 686.1
Orchid Chemicals Injectible business Hospira, Inc 400
Taro Pharma Sun Pharma India 332.4
Aspen Pharmacare Hldg Ltd Strides Arcolab Ltd 75
Solvay Pharma India Ltd Abbott Capital India Ltd 66.8
Pyramid Healthcare Solutions (USA) Avantha Group (India) 20
Fulford India Ltd Schering- Plough Corp 8.4
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
86
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
87
KEY SECTORS
Biotechnology
The R&D destination
• In 2009–2010, the industry recorded revenues Indian biotechnology market size

worth US$ 3 billion, registering a y-o-y growth of 3
17 per cent (in value) from 2008–09. 2.67
2.5
• The bio-pharma segment accounts for the 2.26
majority (62 per cent) of the biotech industry‘s 1.88
2
revenues, followed by bio-services (18.7 per cent),
US$ billion
bio-agri (13.7 per cent), bio-industrial (4 per cent) 1.43
and bio-informatics (1.6 per cent). 1.5
1.04
• Revenues from biotech exports have been valued 1
at US$ 1.57 billion in 2009–2010, constituting 53
per cent of the total biotech industry revenues. 0.5
0
2004–05 2005–06 2006–07 2007–08 2008–09
Sources: Bloomberg, ABLE Biospectrum Industry Survey 2010
88
KEY SECTORS
Biotechnology
The R&D destination
• Lonza Biosciences is planning to set up a Key deals

manufacturing base in India at an investment of Target name Acquirer
US$ 150 million in Hyderabad. The investment
outlay has been planned over two phases. Bangalore Genei India Pvt Ltd Merck KGaA (Germany)
Preclinical Cell and Molecular Lonza Group AG-RE
• Leading companies include Serum Institute of Biology Assets (Switzerland)
India, Biocon, Panacea Biotec, Rasi Seeds,
Nuziveedu Seeds, Novo Nordisk, Siro Clinpharm, Du Pont (E I) De Nemours
Cotton Germplasm
Novozymes, Shantha Biotech, Jubilant. (USA)
Rxelite Holdings Ltd Piramal Healthcare Ltd
Crosbyton Seed Co (USA) Advanta India Ltd
89
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
90
KEY SECTORS
Tourism and Hospitality

On a high growth trajectory
• 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$
431.7 billion by 2020.
• 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 October 2010, international tourist arrivals were 4.3 million. Between January and
October 2010, foreign exchange earnings from tourism increased by 28.6 per cent to US$ 11.2 billion.
• 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 customized 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.
91
KEY SECTORS

On a high growth trajectory
• Various areas that have witnessed a spate of Indian travel and tourism demand
investments include: 500
450 431.7
• Serviced apartments: examples include Taj 400
Wellington Mews, Homestead Serviced
Apartments, Marriott Executive Apartments, 350
US$ billion
Star City, Grand Hyatt Residences and 300
Seasons. 250
200
• Budget hotels 142.4
124.3
144.4
150 119.4
88.2 98.8
• Bed-and-breakfast: a concept which is rapidly 100
gaining popularity among tourists in India. 50
0
2005 2006 2007 2008 2009E 2010F 2020F
Source: ―Travel and tourism economic impact: India, 2010,‖

World Travel and Tourism Council website, www.wttc.org,
accessed 2 December 2010.
E: Estimate; F: Forecast
92
KEY SECTORS

Increasing investments
• 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$ 2.18billion between April 2000 and
September 2010.
93
KEY SECTORS

Increasing investments
Recent investment plans
Company Details
IHCL IHCL plans to construct 50 budget hotels under the Ginger brand in the next four years.
EIH EIH plans to develop 750 additional hotel rooms under the Trident brand in the next 2.5 years.
Carlson Carlson plans to increase its presence in India to 78 hotels by 2012, from 28 in 2009.
Marriott Marriott plans to open 30 hotels in India in the next three years.
ITC plans to construct 60 new hotel properties by 2013 – 2014. The company is likely to prefer
ITC
investment in high-end luxury hotels.
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.
94
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
95
KEY SECTORS
Banking/Financial Services/Insurance (BFSI)

Strong financial structure
• 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
96
KEY SECTORS

Strong financial structure
Key deals
Year Target Acquirer
October 2010 Red Fort Capital Management Co LLC Farhat Developers Pvt Ltd
October 2010 Anchor Investment & Trading Pvt Ltd Future Capital Holdings Ltd
June 2010 Northgate Capital Group LLC Religare Enterprises Ltd
June 2010 Bureau of Collections Recovery (USA) Aditya Birla Group

Royal Bafokeng Capital Proprietary Ltd
April 2010 JSW Energy Ltd
(South Africa)
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
97
KEY SECTORS

Players
Public sector banks Private banks Foreign banks
State Bank of India Axis Bank The Royal Bank of Scotland
Punjab National Bank Bank of Rajasthan Abu Dhabi Commercial Bank
Bank of Baroda Kotak Mahindra 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 Yes 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
Vijaya Bank Jammu & Kashmir Bank Barclays Bank
98
KEY SECTORS

Players
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
99
Contents
 Advantage India
 Growth enablers
 Growth drivers

 Key sectors
 Infrastructure
 Retail
 Automotives
 IT/ITeS
 Biotechnology
 Energy
100
KEY SECTORS
Energy
• 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 tons (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.
• 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.
101
KEY SECTORS
Energy
Energy consumption mix in India (2008) Projected energy consumption mix in India (2030)
Energy source Unit Consumption Product Unit World India
Coal MTOE 231.4
Oil MTOE 5,775 435
Oil MMT 135
Natural Gas BCM 41.4 Gas MTOE 4,125 224
Hydroelectricity MTOE 26.2

Coal MTOE 3,597 816
Nuclear Energy MTOE 3.5
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
102
KEY SECTORS
Energy
Investments
• The oil and gas sector witnessed cumulative FDI worth Total installed capacity of power generation in %
US$ 2.84 billion between April 2000 and May 2010, while (as on October 31,2010)
the power sector witnessed FDI worth US$ 4.9 billion.
• Malaysian oil firm Petroliam Nasional Berhad (PETRONAS) 9%
3%
has bought a 2.3 per cent stake in Cairn India for US$ 240
million. 10% Thermal
Hydro
• ONGC, in association with Hinduja Group and Petronet Captive
LNG have entered into agreements with Iranian authorities 58%
in December 2009 for participation in the development of 20%
Renewable
gas fields and liquefaction facilities in Iran, in return for 6 Nuclear
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.
Sources: Ministry of Petroleum & Natural Gas, Directorate
General of Hydrocarbons 103
KEY SECTORS
Energy
Investments
Indian players Number of blocks offered under NELP
Indian Oil Corporation (IOC), Oil & Natural Gas Corporation Year Number
(ONGC), Hindustan Petroleum Corporation Limited (HPCL),
1998 48
Bharat Petroleum Corporation Limited (BPCL), Oil India
Limited (OIL), GAIL (India) Limited, Reliance Industries 2000 25
Limited (RIL), Essar Oil Limited, Adani Gas, Petronet LNG,
NTPC, NHPC Limited, Power Grid Corporation of India 2002 27
Limited, Tata Power, Torrent Power 2003 24
International players 2005 20
Cairn Energy India Pty Limited, Shell, BG Group, BP, CLP 2006 55
Group, Alstom
2007 57
2009 70
104
DISCLAIMER
India Brand Equity Foundation (―IBEF‖) engaged Ernst & presentation to ensure that the information is accurate to
Young Pvt Ltd to prepare this presentation and the same the best of Ernst & Young and IBEF‘s knowledge and belief,
has been prepared by Ernst & Young in consultation with the content is not to be construed in any manner
IBEF. whatsoever as a substitute for professional advice.
All rights reserved. All copyright in this presentation and Ernst & Young and IBEF neither recommend nor endorse
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INDIA - ECONOMY AND TRENDS

 Factors shaping the current business environment

Current macro economic indicators

Current macro economic indicators

Source: Centre for Monitoring Indian Economy (CMIE)

Current macro economic indicators

4000 3,428 3,163

Current macro economic indicators

Indian Rupee joins the elite

Foreign exchange reserves in India

Current macro economic indicators

Source: RBI Bulletin – October2010

Current macro economic indicators

• In the period between 2003–2010 (up to 350 6371 7,000

260.64 million). Earlier investments above INR 6

*Exchange rate =INR 46.04 /US$

Current macro economic indicators

1 Investment upto 74% is under the automatic

Current macro economic indicators

Source: Consolidated FDI Policy, DIPP

Current macro economic indicators

Source: Consolidated FDI Policy, DIPP

Current macro economic indicators

Infrastructure Amount of FDI

Current macro economic indicators

Media and entertainment

Current macro economic indicators

Current macro economic indicators

23.1% Housing & Real

(54%) and housing & real estate (8%). Power

Current macro economic indicators

September 2010 since April 2000. (USD3.8 Cyprus

billion in the first half of FY11). 4.6%

• Singapore and the US remained the second and

second most preferred investment destination US

Source: Department of Industrial Policy & Promotion,

Current macro economic indicators

Current macro economic indicators

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

Source: Socio Economic Survey 2009–2010, RBI website

Current macro economic indicators

60.0 1,111 1200

20.0 537 33 42 400

Current macro economic indicators

• Major deals in 2010 (Jan-Nov) 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)

Current macro economic indicators

Current macro economic indicators

Private Equity/Venture Capital activity in India Average deal size

Current macro economic indicators

• Major deals in 2010 (Jan-Nov) include: 16% Technology

LLC, Goldman Sachs Investment Management Others

• US-based private equity fund Blackstone has

 Factors shaping the current business environment

India‘s estimated population in 2025 Indicating favourable demographics (age groups)

60-64 1000 410

10-14 200 410 415

Female Male 0-19 20-34 35 & above

Source: 2008 World Population Prospects database, UN Source: ENAM Research

Addition to the working age population by Total employment in India (millions)

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