Confederation of Indian Industry State of the Indian

Confederation of Indian Industry State of the Indian Economy, July 2008 © Confederation of Indian Industry

State of the Indian Economy 1 Robust GDP Growth 2 Manufacturing & Services are leading the way 3 Strong Macro Economic Fundamentals 4 Growing Externalisation of the Economy © Confederation of Indian Industry

Robust GDP Growth 1 Large and Growing Economy GDP growth projections: GDP & Inflation (2007 - 08) 7. 7% to 9. 5% for 2008 -09 ®GDP Targeted to reach 10% by 2012 ® growth: 9% Average Inflation: 5. 1% AE Stands for Advance Estimates © Confederation of Indian Industry

1 Robust GDP Growth (%) India is the 4 th largest economy in terms of PPP GDP of India is US $ 3787. 3 billion in PPP terms © Confederation of Indian Industry

1 Robust GDP Growth QE=Quick Estimates, RE= Revised Estimates Source: CSO © Confederation of Indian Industry

1 Robust GDP Growth GDP Composition Undergoing a Drastic Change Source: Reserve Bank of India © Confederation of Indian Industry

2 Manufacturing & Services are leading the way Sectoral Growth Industry: Improving Trend in Sectoral Growth (%) Source: CSO, AE Stands for Advance Estimates © Confederation of Indian Industry

2 Manufacturing & Services are leading the way Sectoral Growth Services: Improving Trend in Sectoral Growth (%) Source: CSO, AE Stands for Advance Estimates © Confederation of Indian Industry

3 Strong Macro Economic Fundamentals Rising Savings & Investment Source: CSO © Confederation of Indian Industry

3 Strong Macro Economic Fundamentals Corporate Performance: growing top line Source: CMIE © Confederation of Indian Industry

4 Growing Externalisation of the Economy © Confederation of Indian Industry

4 Growing Externalisation of the Economy Trade as a % of GDP is on a rise 41 21. 1 13. 9 6 © Confederation of Indian Industry

4 Growing Externalisation of the Economy Trade Performance Impressive Growth in Export and Import (%) Source: DGCI&S © Confederation of Indian Industry

4 Growing Externalisation of the Economy Foreign Capital Inflows ( US $ Billion) Expanding Foreign Investment 19. 4 7 Source: RBI FDI in 2007 -08: US$ 25 billion © Confederation of Indian Industry

4 Growing Externalisation of the Economy Rapid Expansion in Foreign Reserve (US $ Bn) Forex Reserves US $ 301 billion (As on June 28, 2008) 2. 24 Source: RBI © Confederation of Indian Industry

4 Growing Externalisation of the Economy India’s FDI Abroad: Rapid Increase Source: RBI © Confederation of Indian Industry

Sectors of Opportunity in India n n n Infrastructure Manufacturing Services Technology Agri-products Education © Confederation of Indian Industry

Investment Estimate for Infra Sectors (US$ bn) Tenth Plan Eleventh Plan 2002 -2007 -2012 Energy 70. 5 150. 4 Roads and bridges 31. 7 76. 1 Telecommunication 22. 5 65. 1 Railways 20. 3 62. 2 Irrigation 32. 1 53. 1 Water supply and sanitation 15. 6 48. 6 Ports 1. 3 18. 0 Airports 2. 1 8. 5 Storage and gas 4. 4 10. 5 200. 5 492. 4 Total © Confederation of Indian Industry

Policy Framework for Infrastructure n n n n Public Private Partnership to build confidence and extend support to private sector participation Open to Private Sector Participation Government investment to increase over the period 20072012 100% FDI allowed in most sectors Tax Incentives to encourage investments International bidding – open & transparent Independent Regulatory Authorities © Confederation of Indian Industry

Sectoral Perspective – Airports • • Number of operational airports: 88 Passengers handled in 2006 -07: 96 million; growth of 31% Freight carried in 2006 -07: 1. 6 MT; growth of 11% Number of scheduled operators: 14 350 MT in 2020 96 million in 06 -07 Projected Investment of US$ 9 billion by 2012 Ø The fast growth of air traffic has resulted in straining the aviation infrastructure, leading to air traffic congestion and delays Ø Major upgradation of airport infrastructure, modernisation of communication, navigation & surveillance facilities are currently being undertaken Ø Modernisation of Delhi and Mumbai airports as well as greenfield airports at Ø Hyderabad and Bangalore are being developed by the private sector Ø 35 non-metro airports are also being revamped by the government © Confederation of Indian Industry

Welcome ! The Indian Infrastructure Sector welcomes participation across all areas : n Advisory n Engineering n Project Management n Project Development n Construction n Financing n Operations & Maintenance © Confederation of Indian Industry

MANUFACTURING IN INDIA Advantage INDIA • Indian manufacturing sector is expected to grow at 12% to 14 % over the next decade • India is ranked 48 in the latest GCI index • The quality of Indian work force is one of India’s key competitive advantages • Indian economy expected to grow at 8% to 10% over the next decade INDIA IS AMONG THE MOST COMPETENT MANUFACTURING LOCATIONS FOR A WIDE VARIETY OF REASONS © Confederation of Indian Industry

India: A Market of Opportunities 3 rd largest car market – 7. 4 m vehicles in Apr-Dec 2007 surpassing China · Among the world’s largest cable TV networks - 70 mn connections · Number of telephone lines have increased 10 -fold in the last decade · Major investments in infrastructure and manufacturing providing impetus to growth. Agriculture and Food Processing: · 14 agri-zones – 2 nd largest producer of vegetables, 3 rd largest in fruits, 91 mn tons of rice production · Food processing to be next engine of growth · $23. 5 bn investments in pipeline over next 3 years · © Confederation of Indian Industry

Some Opportunity Areas in Manufacturing in India n n n n Automotives Automotive Components Machine Tools Electrical & Power Equipment Earthmoving and Construction Equipment Process Plant Equipment Textile Machinery Steel Consumer Durables Castings and Forgings Telecom and Telecom Equipment Textiles Chemicals Oil and Gas © Confederation of Indian Industry

Automotive Components n n n India has a very large diversified automotive components industry which exports 51% of its production. There has been a production growth rate of 20% in the automotive component industry in April-June 2008(estimated) over same period in 2007. Indian automotive companies are well positioned in terms of skills, price and quality to cater to global supply chains. A number of global players are currently sourcing components for their global supply chain from India, these include Ford, General Motors, Volvo etc. Indian Auto component companies are looking for technology upgradation to cater to international requirements. This includes fully automated Weingarten press lines, single location forging facilities, fully integrated CAD-CAM-CAE, high crankshaft manufacturing capacity, in-house tool making and online procurement. © Confederation of Indian Industry

Machine Tools n n n The Indian machine tool industry is approximately a $ 0. 5 billion industry, manufacturing metal cutting, metal forming, conventional and automated machine tools. There has been a significant shift from general purpose machines to CNCs which now constitutes 70% of total production. There has been a 23% rate of growth in the industry in April-June 2008 (estimated)over same period in 2007. Approximately 4. 7% of the production in India is exported. Exports include CNC Lathes, vertical machining centres, grinding machines, etc. The export destinations are USA, Germany, China, Italy, Mexico, Canada, UK and Brazil. In the 1980’s, the machine tools industry acquired a wide range of technology for modernization, especially for special purpose machine tools. The industry is looking at up-grading technology, especially in auxiliary equipment supplies. The areas of interest include gear cutting, CNC grinding, high pressure forming, laser applications, software for 5 axis machining, near net shape forming, hydro forming and high speed pressing. © Confederation of Indian Industry

Electrical & Power Equipment n n The Indian electrical and power equipment industry is a $ 6. 3 billion industry. The industry has seen the following trends in growth rate in April. June 2008 (estimated) over same period in 2007 : n n n n Transformers – 4. 1% Motors & Starters – -14. 58% Boilers – 35% Export in 2007 -08 grew by 14% India has a competitive advantage in Transformers, Switch Gears above 1000 V, Steam Boilers, Steam Vapour Turbines etc. The larger players have access to modern technologies. There is a technology lag in areas like precision control of AC motors, linear motors and software engineering for various applications. In process innovation, Indian companies have adopted CAD / CAM design optimization etc. However, the use of remote diagnostics to identify defects is still limited. © Confederation of Indian Industry

Key Services Sectors in India v HEALTHCARE v TOURISM v RETAIL v LEGAL SERVICES v ACCOUNTING SERVICES © Confederation of Indian Industry

HEALTHCARE The Big Opportunity : • World’s largest industry : revenues of US$ 2. 8 trillion • India – Revenues : US# 30 Billion , contributes 5% to GDP, Employment provider to 4 million people • By 2025 : US$ 100 Billion in revenues and 10% of GDP • Healthcare in India is dominated by the Private players : 10 largest national healthcare networks would absorb 30% of the market share by 2025. © Confederation of Indian Industry

HEALTHCARE Key Success Drivers : • Medical Value Travel / Medical Tourism : US$ 2 billion by 2012 - world class treatment at fraction of cost (almost 1/10 th) - no waiting time for surgeries • Outsourcing of Diagnostics, Pathology and Lab tests to India due to high cost differential • Clinical Trials : availability of huge patient pool, and cost advantage of testing of drugs at 60% of price • Health Insurance : less than 10% of population insured for any sort of health insurance © Confederation of Indian Industry

TOURISM The Big Opportunity : • Indian Tourism second only to China - Contributes 5. 9% to GDP - Provides Employment to 41. 8 million people • World Travel and Tourism Council has named India, along with China, as one of the fastest growing tourism industries for next 10 -15 years • Liberal investment norms : 100% FDI allowed through automatic route © Confederation of Indian Industry

TOURISM Key Success Drivers : India offers many options to the world traveler : • • Medical Tourism Adventure tourism Heritage Tourism Wellness Tourism Pilgrimage Tourism Golf-Tourism Eco-Tourism Wildlife tourism © Confederation of Indian Industry

RETAIL Key Success Drivers : • India topped AT Kearney’s annual Global Retail Development Index for 3 rd consecutive year : ranked as most attractive market for Retail investment globally • Consumer class of 400 million with rising disposable incomes, sense of optimism within the economy, deep rooted entrepreneurial culture provide a big fillip to the sector • Liberalized norms for investment by Government of India - 100% FDI in Cash-and-Carry through automatic route - 51% in FDI in single brand outlets © Confederation of Indian Industry

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