Delhi, April 24th 2009

Foreign Direct Investment in India
An AMCHAM and Booz & Company Study

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Booz & Company Analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf.Rapid FDI growth in India from 2005 onwards FDI in India (US$ Bn) FDI Growth Rate (2004-08) 70% 65% 60% Global comparison of FDI (%) India 33.0 15% 10% 5% 0% 0% 1% 2% 3% 4% 5% 6% 7% China Share of Global FDI 8% (2008) 2000-04 (Average) 2005 2006 2007 2008 Source: World Investment Report. CIA. 24 April 2009 1 .7 40% 35% 30% 25% 20% Russia Brazil 7. Ministry of Finance. IHS Global Insight.7 55% 50% 45% 23.0 19.6 5.ppt Friday. Media Reports. DIPP. World Economic Forum.

local market demand key driver Reasons for FDI Investment Booz & Co. DIPP: Global Insight. Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf. and AMCHAM Survey (% of Respondents) 86% FDI as % of Gross Total Investment (%) 7.6% 5.FDI growth in line with overall investment growth .ppt Friday.6% 3.4% 5.6% Low Cost Operations Ease of Making FDI Entry of Other Players Labor Availability Political Stability Time zone Advantage Local Market Demand 2000-04 2005 2006 2007 2008 Source: Booz & Company and AMCHAM Survey.2% 29% 29% 24% 24% 24% 14% 2. 24 April 2009 2 .

7 Housing and Real Estate Construction Activities Petroleum and Natural Gas Computer S/W and H/W Automobile Metallurgical Chemicals ITES / BPO / KPO Telecommunications 12.0 5.2 5.4 8. 24 April 2009 3 .8 2005 2006 8.2 19.7 3.3 Infrastructure 22.9 9.1 1.Growth has been driven by the services sector Sectoral Distribution of FDI (2000-2008) 33.2 2000-04 (Average) 2007 2008 Source: DIPP: Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf.0 0.6 0.5 5.3 Services Trading Information and Broadcasting Hotel and Tourism Consultancy Hospital and Diagnostic Power Ports Rail Air Transport and Freight Electrical Equipment Drugs and Pharma Paper & Pulp Key Industries Included 10.7 10.7 3.2 1.3 7.5 Manufacturing 7.ppt Friday.

5 1.3 1. 24 April 2009 # of Approvals Feb 2009 Mar 2008 Jan 2008 Apr 2008 Jan 2009 Oct 2007 Oct 2008 Nov2007 Nov2008 Jul 2008 No change 0.2 0.7 0. and AMCHAM Survey Approvals ($Bn) 1.4 1.Limited FDI impact in the short-run Short-Term FDI Expectation Booz & Co.2 45 40 35 30 25 20 15 Monthly India FDI Approvals (Jan 2007 to Feb 2009) Number of FDI Approvals 55 50 Undecided 20% 1. Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf.3 0.1 1.5 0.4 Commitment continues “Re-profiling” of flows Environmental uncertainty Reducing 10% FDI 70% 0.1 May 2008 Aug 2007 Developed Economies 10 5 Aug 2008 Sep 2007 Dec 2007 Sep 2008 Dec 2008 Feb 2008 Jun 2008 FDI Approved ($ bn) Source: Booz & Company and AMCHAM Survey.6 0.8 0.ppt Friday.0 0.0 0 4 .9 0.

In-fact India is a relative gainer in global FDI share Change in FDI vs.ppt Friday. Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf. Size of FDI Inflow for Developed and Developing Countries FDI Inflow Size 2008 ($Bn) 220 110 100 90 80 70 60 50 40 30 20 10 0 -120% United Kingdom France Developed Nations Average United States Developing Nations Average Worldwide Average China Weakened FDI Strengthened FDI Russian Federation Hong Kong Brazil India Turkey Mexico Egypt South Africa Change In FDI (2007-08) -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% Developed Economies Source: Global Insight. 24 April 2009 Developing Economies 5 .

In the long-term. 24 April 2009 FDI Policy Liberalization . continued positive outlook Long-term Outlook on FDI into India Based on Booz & Co. and AMCHAM Survey Long-term Drivers 1 Attractiveness of Domestic Market More Attractive 29% 2 Local Talent Pool Attractive (No Change) 52% 3 Availability of capital Less Attractive 0% 4 Improved Infrastructure ? ? 6 Undecided 19% 5 Source: Booz & Company and AMCHAM Survey. Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf.ppt Friday.

UNCTAD. Booz & Company Analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf. 24 April 2009 7 . India data is Jan 2008 to Sep 2008 Source: Respective Central / Reserve Bank Statistical Databases. Research Reports.India’s opportunity Sectoral(1) Comparison of FDI Investment (Various Years from 2000-2008(2)) 18% 15% 25% 41% 8% FDI as % of Gross Investment (%) Infrastructure 16% Brazil 14% 12% Russia 38% 29% 72% Manufacturing 10% 8% India China 48% 46% 47% 19% 11% India Brazil Russia China Services 6% 4% 2% 0% 2005 2006 2007 2008 1) Multiple sectors reported by DIPP Have been combined together into the three higher level sectors 2) Same year data not available across countries.ppt Friday. so representative years used from 2000 to 2008.

manufacturing permit… Educated employees are available but there is a serious lack of “employable talent” Labor laws are antiquated and have not changed for the last 50 years…focus is not on improving productivity Doing business in different states is like doing business in 30 different countries Infrastructure Development 60% Simplified FDI Processes 55% Reduced Bureaucracy 40% Quality and Availability of Talent 25% Stable Economic Policy 20% Source: Booz & Company and AMCHAM Survey.ppt Friday.Seizing the opportunity Top 5 Drivers for FDI Improvement in India (% of Total Respondents Identifying Initiative within Top 5) Key Concerns Highlighted by AMCHAM Members (Quotes from Interviews) It is hard to find economical raw materials for our manufacturing plant due to lack of proper roads The telecom sector cannot grow without further investing significantly in infrastructure development It is not clear where we can and where we cannot invest .the government needs to create clear guidelines for FDI investment To get funds for manufacturing we used the automatic route. 24 April 2009 8 . Booz & Company analysis Booz & Company AMCHAM India 090324 FDI Summary Presentation vf. final building audit. but to set up the plant we needed approvals for starting building construction.

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