India Opportunities 1 Gopi Shankar Victorian Government

India – Opportunities 1 Gopi Shankar, Victorian Government Business Office, India June / July 2010

The Yin and Yang of India Ø An estimated 300 million strong middle-class and growing Ø Half the population under 25 Ø By the end of the next decade a 500 million strong workforce, larger than even China Ø But two-thirds of the population in villages, dependent on subsistence agriculture Ø Agriculture – just 15% to the GDP Ø Largest child labour force in the world Ø Poverty and illiteracy widespread Ø Widespread environmental degradation – pressure on resources 2

The Yin and Yang of India Ø Socialist and state-controlled till 1991 Ø Open and free market now – very few controls remain but dealing with lower bureaucracy can be a pain! Ø Infrastructure bottlenecks remain – getting worse in places; huge improvements in others (roads, telecom) Ø High customs tariffs, but significant tax reforms. VAT and towards GST Ø Two Indias – a slow moving state sector and an entrepreneurial private sector that can take on the best in the world! 3

The world’s fastest growing free-market economy q Higher than expected 7. 4% growth in 2009 – 10 q GDP – US$1 trillion (conventional method) q 4 th largest economy by PPP method q Per capital income up by 10. 5% in 2009 – 10 to US$947. 21 q Predominantly services – 60% of the GDP q FDI inflows – US$26 billion in 2009 – 10 q Forex kitty – US$275 billion q Inflation at about 10%, budget deficit at 10% q Domestic consumption driven growth 4

The happening sectors! In an economy growing at over 8% all sectors booming, but some more than the others… AVIATION & AEROSPACE AUTOMOTIVE FOOD & BEVERAGE INFORMATION AND COMMUNICATION TECHNOLOGIES BIOTECHNOLOGY DEFENCE (& HOMELAND SECURITY) BUILDING AND CONSTRUCTION 5

Automotive Ø 7 th largest passenger car maker in the world, 2 m cars, 10 m motorcycles, 25% growth and 18% of the revenues from exports Ø Ford, GM, Honda, Renault, Hyundai, Suzuki / Tata Motors, Mahindra & Mahindra. 75% of the cars are small / compact cars Ø Components US$ 19. 1 billion in 2008 – 09. US$ 40 billion in 2014 – 15, nearly half of it from exports. Many OEMs have IPOs in the country Ø India emerging as a global hub for compact car manufacturing 6

Automotive – opportunities and challenges Ø Mature sector, thin margins and cost pressures Ø Established vendors, vendor consolidation and difficult to break in, long sales cycles Ø Local presence / manufacturing imperative Ø New technologies that deliver cost and fuel efficiencies Ø Engage with the OEM from the design stage Ø Emerging R&D in the country – plug in? Ø Victorian companies have been successful and mostly with Indian OEMs 7

Aviation Ø The sector hit most by the slowdown in 2008 – 09. Excess capacity, consolidation Ø 45 million domestic passengers in 2009 – 10. Less than 5% of the people fly. Growth driven by LCCs Ø The looming presence of the State, but diminishing Ø Airbus – India requires 1, 032 new aircraft by 2028 worth US$ 138 billion; Boeing – 1, 000 new aircraft worth US$ 100 billion 8

Aviation – the opportunities Ø Airport development – metros taken, opp in secondary airports. AAI to invest US$ 1 billion this year to modernize 24 airports. Indian partners critical Ø India needs 500 operational airports by 2020 Ø Indian companies quickly learning – the GMR example Ø General aviation – just 300 aircraft in India Ø Education and training Ø MRO 9

Aerospace Ø A cluster of HAL plus 300 companies around Bangalore Ø Mostly defence, small civilian components. No civilian programme Ø Many Western OEMs investing – RR, EADS, UTC, Moog, Goodrich etc Ø Indian companies such as Tata, Mahindra & Mahindra entering the sector, attracted by offset opportunities – 30% offset clause, capacity constraint in local companies Ø 126 multi-role combat aircraft – US$ 9 billion, 6 OEMs - $ 3 billion offset opp Ø Supply into HAL programmes or those of OEMs like Sikorsky Helicopters Ø Speciality alloys and metals, surface treatment facilities Ø 26% FDI cap (on defence) 10

Defence Ø “The neighbourhood” – India traditionally a large spender and emerged as the largest arms importer in the last decade Ø Traditional suppliers – Russia, UK and France, but recently Israel. US expected to take the top slot Ø US$ 100 billion expenditure in 10 years - 30% offset opportunity – a large part will be engineering services Ø Opportunity to find a niche in the supply chain Ø Homeland security – after 26/11 11

Building, Construction and Infrastructure Ø 2012 – 2017 US$ 500 billion investment in physical infrastructure, 16 million units – housing shortage every year Ø Second largest employer, 10% to the GDP, but labour intensive and low-tech Ø Opportunity for both products and services – pre-cast, materials etc and architectural services, urban planning Ø Green buildings – India second largest market and by 2012, likely to be the largest 12

Food and Beverage Ø Organised retail less than 5%, but growing at 30% Ø Emerging, aspirant middle class, global tastes and demands and a developing cold chain. Mostly gourmet stores – upper middle classes Ø Niche opportunities in health foods, organics in addition to dairy, snacks, fruit juices Ø Food processing – less than 5 of the food is processed. A third of the fruit and vegetable produce is wasted. Ø Small volumes, duties, logistics and competition from other geographies 13

ICT Ø “coal to Newcastle”? Ø Indian companies are predominantly service companies. Small presence in the product segment Ø Emerging domestic opportunity – niche segments like VAS for mobile operators Ø Solutions for the manufacturing sector that deliver efficiencies Ø Opportunity to ride piggy back Ø Commercialise your IP 14

Biotechnology Ø A US$ 3 billion industry growing at 25% Ø Mostly contract research driven, but rapidly moving into R&D and drug development Ø Strong collaborative opportunities - commercialise research or joint research opportunities - AISRF Ø India a strong base for multi-site clinical trials Ø IP concerns – manageable 15

What we can do for you? Victorian Government Business Office in Bangalore. ACCESS INDIA PROGRAMME TRADE MISSIONS AND FAIRS Gopi. shankar@invest. vic. gov. au 16