India Calling 2009 KPMG

India Calling 2009
India - Europe Business Partnership Summit

September 30 - October 03, 2009, Brussels
KPMG IN INDIA
Contents
Foreword 02
Executive Summary 04
Global Economic Overview 08
India EU Overview 12
Sector Overview 36
India - A Global Manufacturing Hub

? 38
Alternate Energy
? 42
Agriculture and Food Processing

? 46
Education
? 52
Energy (Oil, Gas and Power)

? 58
Environment and Technology Transfer

? 64
Fashion (Luxury Brands)

? 68
Financial Services
? 74
Gems and Jewellery

? 80
IT-ITeS
? 86
Infrastructure
? 92
Media and Entertainment

? 98
Pharmaceutical, Biotech and Healthcare

? 106
Retail
? 112
Telecommunications
? 118
Travel and Leisure

? 124
Doing Business in India - Regulatory Framework on Investment in India 130
Conclusion 154
Acknowledgments 156
© 2009 KPMG, an Indian registered partnership and a member firm of the KPMG network of independent member firms affiliated with
KPMG International, Swiss cooperative. All rights reserved.
© 2009 KPMG, an Indian registered partnership and a member firm of the KPMG network of independent
member firms affiliated with KPMG International, Swiss cooperative. All rights reserved. 01 India Calling 2009
Foreword
02
Foreword
It is with great pride that we introduce to you this Knowledge Paper. In fact, it is a research
document that goes beyond its purpose of being a mere backgrounder.
The Knowledge Paper by KPMG aims to enlighten the reader on specific areas of
IMAGE OF GUL
collaboration between India and the European Union. Apart from providing a brief overview
of India and EU, it brings to you a wealth of information on various sectors that can benefit
from a joint India-EU partnership. It is indeed an exhaustive and crisp manuscript aimed at
appraising the reader of the possibilities of a collaborative way forward.
It is our belief that both India and EU have immense scope for establishing a synergistic
relation, with India as a budding market and the EU as a mature and diverse economy.
The EU has much to gain from India’s demographic advantage and burgeoning middle class.
It can benefit from a wide spectrum of unexplored opportunities in India.
The performance of the Indian economy in the global context has been noteworthy. The
country is meeting the challenges of the global economic slowdown with remarkable
resilience. India, emerging as a strong and pro business economy, is forging ahead with
recent revolutionary regulatory reforms such as Direct Tax Code, Goods and Services Tax
and the 3G Auction Telecom Policy which would unleash India’s unrealized entrepreneurial
and innovative spirit.
India can derive benefits from the technological expertise of the EU. The region is renowned
for its hi-tech infrastructure and R&D activities. A talented, techno-savvy pool of skilled
professionals abound in the region.
In our view, this Knowledge Paper provides an appropriate backdrop to the flagship India
Calling conclave of the Indian Merchants’ Chamber (IMC) . The conference enjoys the
support of many official bodies such as the Ministry of Overseas Indian Affairs, Ministry of
Commerce, Embassy of India in Brussels, (Belgium), Embassy of Belgium in India and EU
Commission and Consulate Generals of all EU Countries and we express our sincere
gratitude to them.
It is noteworthy that the conference has come at a time when the world economy
continues to be in turmoil, although some green shoots of recovery are visible. It is only
collaborative efforts by countries that can lead to a sustainable economic recovery. The India
Calling (2009) is one such effort which aims to nurture and deepen the alliance between
India and the member countries of the EU. The backgrounder is a step in this direction. It
does the spadework and prepares the participants towards achieving a joint partnership.
We sincerely hope that the document will prove useful to a diverse readership of investors,
businessmen, applied researchers and policy makers.
Gul Kripalani Russell Parera

President Chief Executive Officer
Indian Merchants’ Chambers KPMG in India
Executive Summary
04
Executive Summary
The year gone by has posed newer challenges in the global arena….
While 2008 witnessed global economies experiencing a downturn, industry stakeholders
across the world started bracing challenges and risks posed by the downturn by fostering
innovation and competitiveness, contributing to business growth and delivering through
collaborative efforts.
In fact, the crisis has presented an opportunity for greater global collaboration since it is
only joint effort that can finally pull the world economy out of a recession. Fostering deeper
ties between the emerging/developing countries and the developed countries can play a
significant role in this regard.
…necessitating the need for global collaboration….

Furthering such a relation between India and the European Union is a case in point. As two
of the world’s leading democracies, India and the European Union, both share common
values and beliefs that make them natural partners. Both also seek ways to take advantage
of globalization through developing skills and strategic partnerships. The demographic
profile of the two regions also provides ample opportunities to draw potential benefits from
a synergistic relationship. The ongoing negotiations for the India-EU FTA also aim to nurture
a healthy strategic partnership among all stakeholders.
05 India Calling 2009
A strong domestic market, with relatively low dependence on exports, combined with high
savings, has made India one of the leading performers in this slowdown. India’s strong
fundamentals and inherent advantages continue to present immense opportunities for the
EU nations. The Indian Government, through the Union Budget 2009-10 and the recently
announced Foreign Trade Policy has sent positive signals to the world about its pro-business
and pro-growth approach. Greater thrust on infrastructure (physical & social) and skill
development has been high on the Government’s agenda.
…through industry opportunities and potential partnerships…

The Indian manufacturing sector has emerged in its own right. Numerous SMEs have
transformed into large businesses on the back of growth in the domestic market, opening
up of the economy and the availability of capital financing. A number of companies from
various countries are increasingly setting up their manufacturing units in India due to the
cost and market advantages available to them. Similarly, Indian companies are making
forays in foreign lands for access to new markets and technology.
The EU nations, on the other hand, present vast opportunities in terms of diverse cultures,
changing consumer demands, advanced technology and forthcoming regulatory
environment conducive to do business. All these factors can potentially be tapped by Indian
players, enabling them to gain access to wider markets.
The diversity within the respective regions is also a similarity that exists between India and
the EU. The EU comprises 27 nations, while India consists of 28 states. ‘Unity in Diversity’
therefore holds very well for both the regions. Due to this characteristic, both India and the
EU face similar challenges in areas of policy making and execution of the same.
Additionally, India’s demographic dividend can fill the EU’s labor supply gap, thereby,
ensuring a steady supply of young professionals to EU member countries.
Sectoral opportunities identified…

Even as the EU continues to be India’s largest trading partner and biggest foreign investor1,
there is immense scope for greater engagement between the two, especially in certain key
sectors. To further demonstrate the partnership potential, sectoral opportunities have been
identified, namely -- agro and food processing, diamond, gems and jewellery, education,
fashion, financial services, IT/ITeS, infrastructure, energy, pharmaceutical, biotech and
healthcare, retail, tourism and hospitality, telecom, media and entertainment. These sectors
highlight the key strengths India and the EU present for each other in terms of labor, talent,
cost advantage as well as demand potential in their respective domestic markets. In most
of these sectors, Foreign Direct Investment (FDI)is allowed through the automatic route in
India, thereby smoothening the road for prospective investors.
In case of many such sectors, the EUs technical expertise and India’s burgeoning market
present an opportunity for collaborative ventures. For instance, in environment technology,
the EU and India can compliment each other. The former has already entered the sector in a
1. Ministry of Commerce, Government of India
06
big way and the latter’s demand for such technology will escalate as it rapidly industrializes.
Similarly, the fashion industry of the EU is renowned for its designer appeal and the
emerging middle class in India is increasingly becoming brand conscious. The IT/ITeS sector
is extremely well-developed in India and due to its cost and skill advantage the country has
become an outsourcing destination for foreign companies. The pharmaceutical sector can
benefit from EU’s R&D experience and capabilities and India’s highly skilled and young
research professionals. India’s low financial services penetration and EUs developed
industry can gain immensely from each other.
…thereby, strengthening the Indo-EU partnership…

Hence, it is the confluence of such demand supply patterns in the above identified sectors
that will catalyze the partnership to sustain over a longer time horizon.
India and the EU must therefore effectively utilize the opportunities available and develop
stronger ties. IMC along with KPMG believe that closer economic openness between India
and the European Union is in the long term economic and strategic interest of both the
regions.
The Global Economic Overview

08
The Global Economic Overview
Introduction
The year 2008 may go down in history as an exceptional phase in the global economic
diaspora. The unprecedented crisis occurred in an era when the integration of the world
economy had catapulted to newer heights.
Originating in the financial sector, it soon resulted in a deep recession in the developed
world. The collapse of the real estate sector, followed by fallout of the liquidity constrained
financial institutions, attenuating international capital flows and a marked decline in
consumer and producer confidence derailed the global economy from a reasonably fast
growth trajectory.
However, Governments around the globe fostered measures to improve credit conditions.
For instance, the US Federal Reserve established enhanced facilities to access liquidity; the
Governments in both the US and the EU region injected capital into banks and guaranteed
deposits of some large financial institutions. Similarly, Central Bank authorities globally
resorted to measures to respond to this crisis.
One could say that India was comparatively less impacted by the crisis- this can be
attributed to India’s domestic driven market as against export oriented economies such as
China, Taiwan, Singapore, etc. India’s export to GDP ratio stands at 24 percent compared to
234 percent for Singapore, 74 percent for Taiwan and 36 percent for China1. Additionally, the
Indian banking system has been quite robust and was able to withstand the liquidity crunch.
Revival Measures by Nations Impacted by the Sub-prime
Iceland Netherlands Russia
UK Denmark
Ireland Germany
Belgium
USA Greece
Spain
Bail-out
Nationalisation
Australia
Deposit guarantee
Extra Government funding
Interest rate cut
Source: www.federalreserve.gov, Aug 21, 2009; www.cfr.org, 2009
1. EIU Estimates as on August 2009 – includes services
Global equity markets that had crashed, losing close to USD 3 trillion in 20082, are slowly on
the mode to recovery. With the resultant downward adjustments in growth forecasts,
demand-side pressures on inflation too have reduced. Further, significant decline in crude oil
prices from a high of USD 147 per barrel to around USD 40 per barrel2, has subsided
inflationary pressures. This, in turn, appears to have helped Central Banks ease monetary
policies and boost liquidity into the system to help prevent further damage to the financial
system.
While uncertainties around the globe with problems as acute as banks collapsing have
undoubtedly impacted industries, many companies have taken adequate measures and
tapped opportunities which have enabled them to overcome the crisis.
Is the Worst Behind Us?...
Real GDP Growth (%) 2008 2009E 2009E*
Global (Mkt exchange rates) 1.9 -3.1 1.3
USA 1.1 -2.9 1.0
Eurozone 0.7 -4.5 -0.7
Japan -0.7 -7.0 1.0
China 9.0 6.8 7.3
India** 9.0 6.7 6.0

*EIU Estimates, ** RBI
Source: EIU as on June 2009
Improvement in growth in the developing economies is also reflected in moderate

improvement in global trade. Global imports of business, professional and technical services
(including information-technology services outsourced to places like India) have been 4
percent higher in the first quarter of 2009 than a year earlier3. Positive economic growth
forecasts and expectations of the current economic downturn bottoming out soon are
gradually reviving risk appetite.
Additionally, stimulus measures taken by Governments have helped in reviving consumer

demand and sentiments. For instance, a USD 35 billion4 stimulus plan is currently being
implemented by the Indian Government comprising infrastructure spending, tax cuts and
various other incentives to increase spending while sustaining growth. Further, the recent
Union Budget announced in India with increased Government spending is likely to facilitate
flow of money in the market, which is likely to boost demand for goods and services.
Consequently, the rally in global markets that began in early March has continued well
beyond most people’s expectations, delivering positive returns YTD. India is up 62 percent,
outperforming other emerging markets2.
2. Bloomberg 4. India Strategy, ENAM, 16 April 2009

3. WTO, Economist June 2090
10
0 10 20 30 40 50 60 70
Source: Bloomberg, August 2009
Thus, the global economy is moving through an inflection point and according to analysts
around the globe most economies are likely to ‘exit’ the recession by the end of this year or
early next year.
Indo-EU Overview
12
Indo-EU Overview
Crisis has necessitated collaboration between global economies…

Prospects for global collaboration have never been better than in the current scenario. In an
increasingly competitive and uncertain business environment, there exists an urgent need
for closer collaboration. A global crisis of this stature can only be solved with close global
cooperation.
One such relationship that can be further developed is the one between India and the
European Union.
Demographic synergies between EU and India

The EU and India can draw great synergies from the demographic trends that exist in each
of these regions.
Demographics (2008) Working Population (aged 15-64)
1200
1.12
40 523
1000
800
25.3
600
224 0.5
400
200
0
Median Age Labor Force Population 1950 2000 2025 2050
in Yrs in Million in Billion
EU27 India
EU27 India
Source: CIA World Factbook
! Greater synergies can be drawn if professionals from India can move to the EU
countries. This will fill the labor supply gap, thereby ensuring a steady supply of young
professionals to EU member countries
! India’s emergence as a knowledge economy in addition to the rising consumer market

will only further aid this synergy
! Increased migration to EU will also assist India to sustain the flow of inward
remittances, which have been playing a crucial role in financing India's trade deficit.
According to the World Bank, India's inward remittances were USD 52 billion in 2009,
equivalent to 3.3 percent of its GDP, and 15 percent of the global total
! Greater access to EU's labor market by the Indian manpower will help diversify the
source of remittances, and expand the diaspora network which can help deepen
economic and strategic linkages between India and the EU
Relations between India and EU continue to blossom…

India-EU FTA1
India’s relations with the EU date back to as early as 1962, when India established
diplomatic ties with the European Economic Community (EEC). Further, talks on an India-EU
FTA commenced in 2007.
Economic Perspective:
! The agreement (FTA) is perceived as a conduit for promoting trade and investment
across various sectors of the economy
! To achieve this objective, six rounds of negotiations have been alternately held at
Brussels and New Delhi respectively, the 6th Round was held during March 17-19, 2009
The negotiations cover:

- Trade in Goods
- Trade in Services
- Investment, Sanitary and Phytosanitary Measures
- Technical Barriers to Trade
- Rules of Origin
- Trade Facilitation and Customs Cooperation, Competition
- Trade Defence mechanism
- Government Procurement
- Dispute Settlement
- IPR & GIs
! India’s trade with the EU has the potential to reach USD 572 billion by 2015 once the
FTA with the 27-nation bloc gets implemented
! In 2007-08 India’s bilateral trade with the EU stood at USD 73 billion
Framework for cooperation on mobility

The Lisbon summit in 2000 opened doors for increased political dialogues and cooperation
between India and the EU. A number of agreements seeking to cooperate on issues related
to science and technology, health, education, terrorism and cultural exchange have been
signed since then. Currently, negotiations for an FTA are in progress in order to promote
trade and investment between the two entities. This is also time to take this cooperation to
a new level, where mobility of professionals and service providers is facilitated.
Such a ‘framework on cooperation on mobility’ will culminate into a win-win situation for
both the negotiating parties for the following reasons –
! Demographics: EUs demographic profile suggests an increasingly ageing population,

where there will be a shortage of a young workforce. India on the other hand enjoys the
1. www.euractiv.com, May 26, 2009
India Calling 2009 14
advantage of a young demographic profile. Hence, a smooth flow of professional will

provide the EU member countries with a young and productive workforce, while
providing employment opportunities to a vast Indian population
! The Lisbon Strategy: The ‘Lisbon Strategy’ aims at transforming EU into the world’s
most competitive and dynamic knowledge based economy. To attain this objective, the
EU plans to further develop the channels of education, innovation and development
through research
! India is emerging as a knowledge and service driven economy and skilled

professionals and researched from India can aid the EU in fulfilling its goals. India also
has a comparative advantage in the export of Mode 4 (movement of natural persons)
type of services. In a globalized era, excellence can be achieved only through
international cooperation and therefore mobility of professionals is essential
! Free Trade: The tenets of free trade should not merely be restricted to goods and
services, but should be expanded to incorporate free market access to labor
! Prevent unlawful migration: An open migration policy will also go a long way
promoting legitimate migration to the EU
Thus, the framework must incorporate issues of demand skill development; market
calibrated migratory flows; social security coordination; new modes of mobility including
temporary and circular migration.
The ‘EU Blue Card’2

The EU council has already taken some steps in this direction by adopting the ‘Blue Card
Directive’ in May 2009. The ‘EU Blue Card’ will facilitate access to the labor market to their
holders (the validity will be between 1 and 4 years, with the possibility of renewal); and will
entitle them to a series of socio-economic rights (including recognition of qualifications and
social security provision), and favourable conditions for family reunification and movement
across the EU.
Through the Blue Card initiative, the EU hopes sustain its international competitiveness, and
ensure that it continues to remain a major global economic, technological, and strategic
power in the twenty-first century.
2. DNA India, Eu’s Blue Card Directive: Can India make the most of the opportunity, Asher & Nandy, August 5, 2009
EU Snapshot
Country Highlights Agriculture Industry

(GCI Rank)
Austria (14) Center for communication, trade and

? Contributes to 1.9% of GDP
? Contributes to 30% of GDP
?
cultural exchange in Europe
Small and fragmented farms, production
? Few large and greater number of small
?
Capital city Vienna is home to
? is relatively expensive and medium enterprises
international organizations like the
Major Products – Wheat, rye, oats,
? Chief industrial products - Pig iron, crude
?
International Atomic Energy Agency
barley, corn, potatoes, sugar beets and steel, rolled steel, motor vehicles,
(IAEA), United Nations Industrial
turnip cement & fertilizers
Development Organization (UNIDO), &
OPEC Main Manufacturing Products - textiles,
?
metals, alcoholic beverages, leather,
12th richest country in the world
?
paper, sugar, glass, porcelain etc.
Tourism is an important industry
?
accounting for 10% of the GDP,
employing about 8% of the population
Financial service sector is of importance
?
and employs about 70% of the
population
Belgium (19) Founding member of the EU.Enjoys a

? Contributes to 1% of GDP & employs
? Contributes to 24% of the GDP and
?
federal form of Government around 2% of the labor force employs almost a quarter of the
workforce
Located at the cross-roads of Central
? Northern Flanders is the major area of
?
Europe, referred to as the ‘Gateway to cultivation Known for its iron and steel industries,
?
Europe’ although these have declined.
Small family farms have disappeared,
?
Nonetheless, still remains the 18th
Strongly globalized economy which
? while large agribusinesses are thriving
largest steel producer in the world
boasts of a highly developed transport
Due to technological advancement and
?
network Antwerp in Belgium is world famous for
?
scientific crop research, yields have
polishing the most high-valued diamonds
Skilled and highly educated workforce
? augmented
in the world
which is considered as one of the most
Chief Products - barley, corn, potatoes,
?
productive in the world The sector is mainly dominated by light
?
sugar beets, wheat, and assorted fruits
manufacturing and refining
Highly service-oriented economy
? and vegetables
US companies have invested heavily in
?
Maintains an anti-protectionist policy
?
chemical, automotive assembly, and
and the economy is heavily dependant on
petroleum refining
foreign trade
Bulgaria (76) Represents a mixed economy with

? Private farm holdings are small and
? Industry plays a significant role
?
moderately advanced private sector and require technical equipment contributing to 28% of the GDP
a number of strategic sectors under state
The country is renowned for sheep’s milk,
? The country produces a significant
?
control
cheese, wine, rose attar, vegetables, amount of minerals, metals and
fruits, medicinal herbs and natural yogurt electricity
While textiles is the oldest industry in
?
Bulgaria, other industries such as
pharmaceuticals, food processing and
tobacco processing are also important
foreign exchange earners
Cyprus (40) Market economy dominated by services

? The economy has shifted from agriculture
? Contribution to GDP is about 20% and
?
sector which contributes to 78% of the to light manufacturing employs almost a fifth of the workforce
GDP
Not self-sufficient in food and has few
? Key Industries – Tourism, food
?
Tourism, financial services and real
? natural resources processing, cement, ship repair,
estate are the major sectors chemicals etc.
GDP Estimates* GDP Composition GDP Per Capita FDI:GDP*** Foreign Trade Trade
(%) by Sector (%): (PPP) (USD) (% for 2008) Relationship
A:I:S** with India
1.6 1.9 : 30.6 : 67.4 39,200 3.3 Other EU members are major
?
trading partners, especially
Germany
US is an important trading
?
partner outside the EU
1.3 1.0 : 24.2 : 74.9 37,500 11.6 Almost 80% of the trade is with
?
EU member states. Germany,
France, Netherlands and UK are
the main trading partners.
Outside the EU, US is an
?
important partner
6.0 4.6 : 28.7 : 66.7 12,900 17.9 Chief Exports - Light industrial
?
products, foods and wine
Chief Imports - Machinery,
?
equipment, chemicals, fuel,
plastics and raw materials
3.6 2.6 : 19.1 : 78.3 28,600 8.5 More than 50% of the trade is
?
with EU member countries and
the Middle East
Chief Exports - Potatoes,
?
pharmaceuticals and clothing
Chief Imports - Consumer
?
goods, petroleum, machinery
and transport equipment

(GCI Rank)
Czech One of the most stable and prosperous

? The sector comprises about 2% of the
? Contributes to almost 40% of the GDP,
?
Republic (33) states of central and eastern Europe economy and employs almost similar employing almost similar percent of the
An open investment climate has enabled
?
percent of the work force total workforce
the country to transit from a communist Small private farms were taken over by
? Manufacturing is a major economic
?
to a capitalist economy the Government to create state-owned activity, especially the production of
Enjoys a relatively low cost structure and
?
cooperatives automobiles, machine tools, and
well-qualified labor force making it an The sector suffers from high labor,
?
engineering products
attractive destination for foreign machinery, fertilizer and other agriculture
investors input costs
Produces world famous beer and wine
?
Denmark (3) Modern market economy with high

? The sector is extremely high-tech.
? The small scale and corporate sector is
?
dependence on foreign trade Contributes to about 1% of the GDP technologically advanced and up-to-date
Government has provided many welfare
? Climate is extremely conducive to
? The industrial sector contributes to
?
measures agricultural production, thereby enabling almost a quarter of the GDP
Economy is fairly stable with equitable
?
the country to export produce The manufacturing sector’s main areas of
?
distribution of income and comfortable substantially activity include food products, chemicals,
standard of living Agriculture and industrial sector are
? machiner metal products, electronic and
Fiscal position is amongst the strongest
?
closely linked. Food and wood based transport equipment, beer and paper and
in the EU industries depend heavily on agriculture, wood products
while requiring high technology to
Has few natural resources. Self-
?
process them. The fishing industry is also
sufficient in energy extremely large
Most flexible labor market in Europe
?
Estonia (32) Enjoys one of the highest per capita

? Contributes to about 3% of the GDP and
? Contributes almost a third of the GDP
?
income levels in Central Europe employs nearly 5% of the workforce Progressed due to substantial
?
Boasts of a strong electronics and
? Chief Products – cereals, potatoes, fruits,
? participation of Scandinavian investors
telecom sector vegetables, fish and animal products Traditional industries include oil shell
?
Has pursued relatively sound fiscal
? mining shipbuilding, electric motors,
policies cement etc.
Finland (6) Highly industrialized, free market

? Climatic conditions impede the growth of
? Comprises almost a third of the GDP, but
?
economy agriculture beyond self-sufficiency levels employs less than 20% of the labor force
Per capita output equals that of UK,
? Forestry is an important exchange earner
? Key industries include metals,
?
France, Germany and Italy and source of employment for the rural engineering, telecommunications and
Ratio of exports to GDP is as high as
?
population electronics. Also specializes in
37% Finland’s fur industry is also world
?
environmental technology
World leader in telecommunication

?
famous The country holds a leading position in
?
equipment the building of icebreakers, luxury liners

and other specialized ships
A:I:S** with India
3.9 2.6 : 38.7 : 58.7 26,100 5.0 Chief exports include

?
machinery and transport goods
and raw materials
Chief imports comprise raw
?
materials, chemicals, machinery
and transport goods
Member EU countries (esp.
?
Germany) are the major trading
partners of the country
(0.6) 1.4 : 25.9 : 72.7 37,400 3.4 Is a net exporter of food and
?
energy and enjoys surplus
Balance of Payments (BoP)
Chief Exports - machinery,
?
instruments and food products
Chief Imports - raw materials,
?
semi-manufactured goods for
industry, chemicals and grains
US is the largest non-EU trading
?
partner
(3.0) 2.9 : 32.3 : 64.8 21,200 8.5 The country has strong trade
?
ties with Finland, Sweden and
Germany
Chief Exports - Machinery,
?
equipment, food products and
metals
Chief Imports - Textiles,
?
machinery, mineral fuels and
chemicals
1.5 2.8 : 33.2 : 64.0 37,200 -1.6 The country is known for it’s
?
high-tech exports such as
mobile phones
Depends heavily on imports of
?
raw materials, energy and
components of manufactured
goods
Major trading partners are
?
the EU member countries, the
US and China

(GCI Rank)
France (16) Fifth largest economy in the world,

? Contributes to about 2% of the GDP
? Fourth leading industrial power in the
?
largest country in the EU Heavily subsidized sector
?
world
Member of the G8
?
Accounts for 22% of the total agriculture
?
Contributes to about 20% of the GDP
?
Transitioning to a capitalist economy

? output of the EU Transiting towards privatization
?
Strong Government. Presence in Power,

? Self-sufficient in basic food production
? Government control over automobile,
?
Public Transport and Defense Endowed with favourable climate, rich
?
aeronautics, defense, energy industries
Highest number of tourist arrivals and
? soil and skilled farm labor Key Industries – Telecommunication,
?
third largest forex earner through tourism Major Exports – Wheat, beef, pork,
?
defense & aerospace, shipbuilding,
poultry, dairy products, sugar and wine automobile, construction, food
processing, chemicals, tourism and
Major Imports – Cotton, tobacco &
?
textiles
vegetable oil
Germany (7) Largest economy in the EU and 5th

? Accounts for a miniscule share of the
? Comprises about 30% of the GDP and
?
largest in the world in terms of GDP (PPP) GDP (less than a percent) employs almost a quarter of the
An export-dependent economy and top-
? Ranks as the 3rd largest agriculture
?
workforce
most exporter in the world, with exports producer in the EU and is able to provide Large and healthy manufacturing sector,
?
valued at more than a trillion dollars for 90% of the country’s need through excelling in the production of
World’s 3rd largest automobile maker
?
domestic production automobiles, machine tools, precision
after the US and Japan Chief Products – Potatoes, wheat, barley,
?
instruments and high quality customized
sugar beet, fruits and cabbage machinery and chemicals
Tourism is an important industry
?
generating about 8% of the GDP
Greece (67) Capitalist economy with public sector

? The sector suffers from lack of natural
?
accounting for 40% of the GDP resources and 70% of the land cannot be employing approximately a similar ratio
Tourism is a significant industry
?
cultivated due to poor soil conditions of workforce
contributing to 15% of the GDP Low rainfall, rural landownership and
? Shipping has been the most profitable &
?
Immigrant make up one fifth of the work

?
migration of workers from rural to urban important industry due to the business
force areas further impede growth of the know-how of the ship-owners
sector The Greek owned maritime fleet is the
?
Foreign investment in the country
?
increased after it joined the EU Major producer of cotton and tobacco
? largest in the world
Famous for it’s olives and exports of olive
? Key industries – Ship building, Textile
?
oil production, food processing, cement and
Grapes, tomatoes, melons, peaches are
?
construction
also important exports
Hungary (62) Landlocked country in eastern Central

? Sector contributes about 3% to the GDP
? Contributes to more than 30% of the
?
Europe and employs nearly 5% of the workforce GDP and almost a third of the workforce
Fairly open economy and undertook
? Majority of the cultivated landholdings
?
is engaged in this sector
economic reforms in the 1990s. The are privately owned Manufacturing is mainly concentrated in
?
private sector is dominant contributing to Self-sufficient economy in agricultural
?
heavy machinery
more than 80% of the GDP production and contributes significantly Mining, machinery, electronics,
?
Shifting to an increasingly service-based
? to exports chemicals and foodstuffs are important
economy Has several wine regions producing
?
industries for the economy
world famous wines
Important Products – Corn, wheat, sugar
?
beet, barley, potatoes, sunflower and
fruits
A:I:S** with India
0.7 2.2 : 20.3 : 77.4 32,700 4.2 Key Export Partners -

?
Germany, Spain, Italy, U.K.,
U.S.A.
Major Import Partners -
?
Germany, Belgium, Italy, Spain,
Netherlands, U.K., U.S.A
1.3 0.9 : 30.1 : 68.0 34,800 0.7 Chief Exports - Machinery,

?
vehicles, chemicals, metals and
electronics
?
vehicles, chemicals and textiles
Major Trading partners -
?
France, U.S., U.K., Italy,
Netherlands and Belgium
2.8 3.5 : 23.4 : 73.1 32,000 1.5 Chief Exports - Foodstuffs,

?
manufactured goods, beverages
& fuels
Chief Imports - Chemicals,
?
fuels manufactures
Key Trading Partners are
?
members of the EU
(1.5) 3.2 : 31.9 : 65.0 19,800 4.1 Chief Exports - Machinery &
?
equipment, food products
Chief imports - Machinery, fuel
?
and electricity
Most of the trade occurs with
?
EU member countries

(GCI Rank)
Ireland (22) Transformed itself from a largely

? Contribution to GDP is 50%, employing a
?
agricultural to a technologically employs nearly 6% of the workforce quarter of the workforce
advanced economy Conducive climatic conditions have
? Manufacturing sector is extremely high
?
Is a small trade dependent economy with
? enabled agriculture to prosper in the tech and much of it is owned by
GDP growth averaging 8% for the period country multinationals
1995-2007 Extremely reliant on EU subisdies
?
Export sector dominated by foreign
?
multinationals has been the driver of
economic growth
Has significant reserves of zinc, lead
?
ores and natural gas
Italy Diversified industrial economy

? Contributes to nearly 2% of the GDP
? Comprises about a quarter of the GDP
?
comprising of a developed industrial The agriculture sector is hugely
? Manufacturing is mainly dominated by
?
northern part dominated by private supported by the Common Agricultural SMEs
enterprises and a less developed, Policy (CAP) of the EU, which provides
welfare dependent agricultural south Known for fashion houses like Versace,
?
subsidies & incentives to sustain prices Fendi, Gucci, Prada, Gabbana, Armani
Large number of small & medium
?
Is not self-sufficient in agriculture
? etc. The fashion industry is crucial to the
enterprises and family-owned firms products due to only 5% of the available economy
Tourism is the most profitable and the
? land under cultivation Chief Industries – Iron and steel,
?
fastest growing sector Is a world leader in olive oil production
? chemicals, textiles, automobiles, home
Major Exports – Rice, tomatoes and wine
?
appliances, clothing & footwear
Major Imports – Meat, dairy products

?
Major Exports – precision machinery,
?
motor vehicles (luxury, utility), electronic
goods and chemicals
Latvia (54) Has been the fastest growing economy

? Latvia is a low-lying country with large
? Contribution to GDP is about 22% and
?
in Europe forests that supply timber for employs nearly a quarter of the work
Most of the companies have been
?
construction and paper industries force
privatized Agricultural land decreased giving way to
? Chief Products – Transport equipment,
?
Foreign investment is still modest in

?
industrial production agricultural machinery, synthetic fibres,
comparison to other EU countries Although contributing to merely 3% of
?
pharmaceuticals and processed foods
the GDP, agriculture eploys almost four
time the work force
Chief Products – Beef, pork, milk eggs,
?
fish, vegetables and grain
Lithuania (44) A majority of the state-owned entities

? The sector contributes to nearly 4% of
? Contributes to about a third of the GDP
?
have been privatized the GDP and employs almost 14% of the Due to low wages, many foreign
?
The country has been greatly aided by
?
labor force companies relocated their manufacturing
foreign govt. and business support to Chief Products – Butter, cheese, fish,
? plants in the country
make the transition from a communist to milk, pet food, sugar beet, wheat and Chemicals such as nitrogen and
?
a capitalist economy. potatoes phosphate fertilizers are produced on a
Infrastructure is well developed and
? large scale and is the most profitable
modern industry in the country
Highly dependent on foreign markets
? Wood and paper processing industry,
?
Enjoys low labor costs and a highly

?
metal cutting, electric motors,
educated workforce along with a good refrigerators and freezers and textiles
geographic location in Northern Europe are other important industries
A:I:S** with India
(1.7) 5.0 : 46.0 : 49.0 46,200 -4.4 Chief Exports - Machinery,

?
computers, chemicals, live
animals and animal products
Chief Imports - Data procesing
?
equipment, petroleum, textiles
and clothing
Major Trading Partners are
?
the EU member countries
(0.7) 2.0 : 26.7 : 71.3 31,000 0.5 Entirely dependant on imports

?
for it’s energy requirements
Most of the trade is with EU
?
member countries
US is an important non-EU trade
?
partner
(5.0) 3.3 : 22.3 : 74.4 17,800 4.2 Chief Exports - Textiles,

?
machinery and equipment, wood
products and metals
?
chemicals, fuels and vehicles
3.2 4.3 : 32.8 : 62.8 17,700 3.8 Chief Exports - Mineral

?
products, textiles, machinery,
wood products and chemicals
Chief Imports
? - mineral
products, transport equipment,
chemicals and metals
?
Russia, Belarus and other EU
member countries

(GCI Rank)
Luxemburg (25) High-income economy with low inflation

? Contribution to GDP is less than a
? Contribution to GDP is about 13%
?
and low unemployment percent and is based on small family Initially dominated by steel, but has
?
One of the smallest nation in the world,
?
owned farms diversified into chemicals, rubber etc.
it depends on foreign and cross-border A small fraction of the population is
?
Major foreign-owned chemical and
?
workers for 60% of the labor force engaged in agriculture, most foodstuffs rubber manufacturing companies have
Banking and Financial Services is the
?
are imported set up their plants
most important sector contributing to Most of the agriculture products are
?
Services sector forms backbone of the
?
28% of the GDP exported economy
World’s 2nd largest investment fund
?
Banking, insurance and financial services
?
centre after the U.S. and the most are particularly crucial and most of the
important private banking centre in the banks are foreign owned
Euro Zone
Malta (54) Has few domestic energy sources

? Malta produces only about 20% of its
? Due to it’s location the country is a major
?
The financial services industry has grown

?
food needs, has limited fresh water port and ships products to Europe from
in recent years, but is not fully supplies Africa and Middle East
modernized The sector is small but diverse
? Major Industries - Shipbuilding and
?
Malta's economy is highly dependent on

? Chief Crops – Potatoes, cauliflower,
?
repair, construction, electronics, and
foreign trade. The country bnefits from grapes, wheat, barley and tomatoes textiles
it’s location, reserves of limestone and a
skilled workforce
Netherlands (8) Prosperous, open economy which is

? A highly mechanized agriculture sector
? Many manufacturing industries are
?
heavily dependant on foreign trade that provides large surpluses for the food based on the processing of raw materials
Economy is noted for stable industrial
?
processing industry and exports or semi-finished materials into finished
relations, moderate unemployment and a Employs only 3% of the labor force and
?
products
current a\c surplus contributes to 2% of the GDP Diversified industry ranging from
?
Serves as a transportation hub for

? The nation’s extensive waterways and
?
manufacturing, mining and energy
Europe network of dams allow for easy irrigation production to construction & chemical
and have led to highly fertile soils manufacturing
One of the leading European nations for
?
attracting FDI The activity is divided into 3 broad areas
?
Major industries – Food processing,
?
– crop production, dairy and livestock chemicals, petroleum refining and

One of the four largest investors in the
?
electrical machinery
US. production & horticulture
Location of the country gives primary

?
Chief Products – Tomatoes, cucumber,
?
access to UK and Germany pepper, potatoes & dairy products
The port of Rotterdam is the largest port

?
Known for exports of cut flowers, bulbs
?
in Europe and tulips
Poland (53) The country has successfully made the

? Accounts for 4% of the GDP, but employs
? Contributes to about one third of the
?
transition from a centrally planned more than 15% of the total workforce GDP, employing almost 30% of the
economy to a primarily capitalist Leading producer of rye, potatoes,
?
workforce
economy apples, pork and milk Mining of mineral wealth is the most
?
Considered to be one of the fastest
?
Structural problems, surplus labor,
?
important industrial activity
growing economies in Europe inefficient small farms & lack of Undertook reforms in the 1990s which
?
Rich in natural mineral resources
? investment afflict the sector led to privatization of small and medium
including iron, zinc, copper and rock salt Net exports of fruits, vegetables, meat
?
state owned companies
Has provided a natural network of east-
? and dairy products The manufacturing sector has also
?
west trade links to Europe undergone a transformation since the
reforms in the 1990s
A:I:S** with India
3.6 0.4 : 13.6 : 86.0 81,100 145.2 Has close trade and financial
?
ties with other EU members,
especially, Germany, France,
Belgium, Netherlands and U.K.
2.5 14 : 18.0 : 80.6 24,200 10.7 Chief Exports - Machinery and

?
transport equipment,
manufactures
Chief Imports - Food, tobacco,
?
transport equipment and
machinery
?
Singapore, US, Germany, France
and Italy
1.8 20 : 24.4 : 73.6 40,300 0.1 Major Trading Partners -

?
Germany, UK, France, Belgium
China & US
4.8 4.0 : 31.3 : 64.7 17,300 3.1 Chief Exports - Machinery,

?
transport equipment, food and
live animals
?
machinery
Major Trading Partners -
?
Germany, Italy, France, Russia
and China

(GCI Rank)
Portugal (43) Diversified and increasingly service-

? Contribute to 3% of the GDP, but employs
? Contributes to a quarter of the GDP,
?
based economy 10% of the workforce employing 30% of the workforce
Undergone successive liberalization of
? Chief Products – tomatoes, fruits, grapes,
? Key Industries – Oil, petrochemicals,
?
the key areas of the economy including cereals, corn, wheat and olives machinery, cement, automotive
financial and telecommunicating sectors electronics, textiles, leather and
footwear
Romania (68) Began it’s transition from communism in

? Contributes to 8% of the GDP, but
? Accounts for 36% of the GDP, employing
?
1989 employs almost 28% of the labor force about a quarter of the workforce
Due to it’s high growth, it is referred to
? Comprises of both formal and informal
? Manufacturing sector is dominated by
?
as the ‘Tiger of the East’ sector machine building, metals, chemical and
Well-endowed with natural resources
? Agricultural reforms in 1991 and
?
textiles
and has large reserves of petroleum, nationalization policies did not help in Foreign investment is a key issue in the
?
timber, natural gas, iron ore, coal and increasing the growth of the sector country for the development of the
salt domestic industry
Also has large facilities for hydropower.
? Key Industries – Iron and steel,
?
Economic strength lies in processing &

?
nonferrous metals, chemicals, food
manufacturing of goods, primarily in processing, machinery, mining and
SMEs textiles
Slovakia Undergone significant reforms in

? More than one third of Slovak’s territory
? The industrial sector is a large sector of
?
healthcare, taxation, pension & social is cultivated the economy contributing to a third of
welfare since it’s separation from the Contributes to 2.6% of the GDP, but
?
the GDP
Czech Republic in 1993 employs double the amount of workforce A large number of enterprises have been
?
Embraced privatization on a large scale.
? at about 4% privatized
The Government introduced conducive The southern part of the country is known
? FDI has been chiefly concentrated in
?
policies to attract foreign investment on for it’s rich farmlands and fertile plains telecommunications, banking,
a massive scale. Labor market reforms distribution channels and production of
and a flat 19% tax rate was introduced Primary Products – Sugar beet, potatoes,
?
wheat, grapes and animal products electricity, gas and water
to attract FDI
Key Industries – Automotive,
?
The banking sector is dominated by
?
engineering, electronics and information
foreign companies technology
Foreign investment in the automotive
?
and electronics sector has been large
Slovenia (42) Model of economic success & stability

? Due to the mountainous terrain of the
? Contributes to about a third of the GDP
?
for the European nations country and forests covering almost 50% Slovenian firms specialize mainly in mid
?
Has an excellent infrastructure, well-
?
of the area, agriculture sector is small to high tech manufacturing
educated work force and strategic Dairy farming and livestock rearing
?
Chief industries – Ferrous metallurgy,
?
location dominate the sector aluminium products, lead and zinc
Taxes remain relatively high as compared
? The sector contributes to 2% of the GDP
? smelting, automobiles and electric power
to other EU countries and employs almost a similar ration of equipment
the work force
Major Products – Cereals such as corn
?
and wheat, potatoes, sugar beet and
fruits
A:I:S** with India
0.2 30 : 25.6 : 71.5 22,000 1.5 Chief Exports - Clothing,

?
footwear, machinery and
chemicals
Chief Imports - Transport
?
equipment, chemicals and
agriculture products
EU member countries and the
?
US are the major trading
partners
7.6 8.1 : 36.0 : 55.9 12,200 6.7 Chief exports - Textiles and
?
footwear, metals and metal
products
?
minerals and fuels
Major Trading Partners -
?
Italy, Germany, UK, Turkey,
France, Hungary, China and the
US
6.4 2.6 : 33.4 : 64.0 21,900 3.6 Chief Exports - Vehicles,

?
machinery, electrical equipment
?
transport equipment and
intermediate manufactured
goods
Major
? trading partners are
the EU member countries,
Russia and South Korea
4.3 2.2 : 34.2 : 63.6 29,500 3.3 Trade is mainly oriented

?
towards EU economies
Chief Exports - manufactured
?
goods, machinery and transport
equipment
Chief Imports - Fuels,
?
lubricants, food, chemicals and
manufactured goods

(GCI Rank)
Spain (29) A constitutional monarchy with a

? Comprising about 3% of the GDP,
? Contributes to 29% of the GDP with a
?
hereditary monarch and a parliament agriculture is mainly dependant on quarter of the population employed in
with two chambers rainfall this sector
Due to conservative rules and practices,
? Chief Products – Grains, vegetables,
? Continues to be the driving force of the
?
the Spanish banking system is credited olives, wine, grapes, sugar beet, beef, economy, although the importance of
as one the most solid and well-equipped pork, poultry and dairy products services is augmenting
systems in the European world, Greater number of people are
?
especially in the wake of the recent increasingly being employed in large
crisis MNCs as compared to the SMEs
Tourism, finance and construction
?
Chief Industries – Metalworking,
?
services are increasingly contributing the shipbuilding and data processing
growth of the economy equipment
Sweden (4) Successful mix of high tech capitalism

? Agriculture accounts for only a percent of
? Privately owned firms account for 90% of
?
and welfare state. Modern distribution the GDP the industrial output
and communication systems and a Cultivation occurs mainly in the Southern
? The engineering sector is vital to the
?
skilled labor force are the key strengths plains economy contributing to almost 50% of
of the economy the total output and exports
Livestock and animal products are chief
?
Extensive dependence on foreign trade
?
items of exports along with mink fur Chief Industries – motor vehicles,
?
Timber, hydropower and iron ore
? coats pharmaceuticals, telecommunications
constitute most important resources and forestry
Services sector is becoming increasingly
?
important
Deregulation, globalization and
?
technology sector growth have been key
productivity drivers in the economy
UK (12) Second largest economy in the EU

? Contributes to less than a percent of the
? Comprises about 22% of the GDP
?
A leading financial and trading center in

?
GDP Industrial base is extremely diversified
?
the world Highly mechanized contributing to almost
? with industries ranging from aerospace
Has huge coal, natural gas and oil
?
80% of the domestic food needs to chemicals
resources Employs only 2% of the work-force
? Engineering & allied industries are
?
Services sector is extremely important to

? Chief Products - Cereals, oilseeds,
?
significant contributors to the GDP
the economy and banking insurance and potatoes and vegetables Major industries – Machinery, Ship-
?
business services account for a large building, aircraft, chemicals, oil
share of the GDP production
British insurance firms dominate the
?
maritime insurance market
London is the chief international center
?
for buying and selling currencies and
world center for financial services
Bilateral Trade (USD mn) Harveyballs

<=0
1 - 4,000
4,001 - 8,000
Note: *Estimates for 2008; **A:I:S == Agriculture: Industry: Services; ***Calculated as Net flows of direct investment capital by non-residents
8,001 - 12,000 into the country/Gross domestic product (GDP) at current market prices in USD; GCI Ranking = Global Competitiveness Index (2008-09) of the
World Economic Forum amongst a total of 134 countries
>= 12,001 Source: CIA; Eurostat; Foreign Commonwealth Office Website, UK; Department of Commerce, Government of India, EIU, Viewswire
A:I:S** with India
1.1 3.6 : 28.9 : 67.5 34,600 4.2 Major Exports - machinery,

?
motor-vehicles, pharmaceuticals
and medicines
Major Imports - Fuels,
?
chemicals, semi-finished goods
and foodstuffs
Major Trading Partners are
?
the EU member countries, esp.
France, Germany, UK, Italy and
the Netherlands
0.7 1.5 : 28.9 : 69.6 38,500 9.1 Chief Exports - Cars,

?
engineering products, steel,
electronic devices,
communications equipment and
paper products
Exports of the service industry
?
(IT and telecommunications)
have also increased
?
petroleum, petroleum product
0.7 0.9 : 22.8 : 76.2 36,600 3.6 Due to its high dependence on
?
foreign trade, the country has
fewer restrictions on trade and
investment
The EU member countries are
?
the chief trading partners of the
UK
India Snapshot (GCI Rank: 50)

Advantage India
! Fastest growing Economy: Fifth largest economy in terms of GDP (PPP). Second fastest
growing economy in the world after China
! Favorable Demographics: About 64.3 percent of the population falls under the working
age group and 30 percent comprises of children3. Highly skilled, English speaking and
technical manpower is available at lower costs
! Thriving Services Sector: Chief source of economic growth in recent years, contributing to
over half of the country’s GDP, while employing only one-third of labor force
! World’s Largest Democracy: A stable democracy based on the parliamentary system of

governance and an independent judiciary and free press make India better off than it’s
counterparts
! Principal Exports: Petroleum products, textile goods, gems and jewellery, engineering
goods, machinery and instruments, pharma and fine chemicals, metals, transport
equipments, iron ore, primary and semi-finished iron and steel4
! Principal Imports: Petroleum crude and products, electronic goods, transport equipments,
gold, iron and steel, precious and semi-precious stones, organic chemicals, coke, coal and
briquettes, etc4.
India’s GDP Growth GDP Composition by Sector (2008-09)
12
9.5 9.7 Agriculture
10 9
17%
8 6.7
% Growth
6.0
6
Services
4 57%
Industry
2
26%
0
2005-06 2006-07 2007-08 2008-09 2009-10E
Source: Economic Survey, Ministry of External Affairs, Government of India
Forex Reserves FDI Inflows
30 27.3
350
24.5
25
300
250 20 CAGR 65%
15.7
200
USD Mn
15
150
10
100 5.5
3.7 4.4
5
50
0 0
2004-05 2005-06 2006-07 2007-08 2008-09* 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
(Apr - May)
* Apr – Mar (13 Mar 2009) Source: Department of Industrial Policy & Promotion
Source: Reserve Bank of India (RBI)
3. Censusindia.gov.in
4. Ministry of Commerce and Industry
Towards Increased Global Integration through Trade5

India's Exports to the Eu27:
! EU continues to be India’s foremost trading partner and biggest foreign inward investor;
one-fifth of India’s exports are destined to the EU
! In terms of value, India’s merchandise exports to the EU have more than doubled
between 2000-01 and 2007-08, registering a compounded annual growth rate (CAGR) of
18 percent
India’s Exports to EU in Tandem with Total Exports
180
163.0
160
140 Total Exports CAGR : 20% 126.3
USD Bn
120 Indo-EU27 CAGR : 18%

103.1
100 83.5
80 63.8
60 52.7
44.6 43.8
40 26.8 34.5
18.2 23.2
20 10.7 10.2 11.9 14.5
0
2000- 01 2001- 02 2002- 03 2003- 04 2004- 05 2005- 06 2006- 07 2007- 08
India's Exports to EU India's Total Exports
Source: Ministry of Commerce & Industry
Leading Export Destinations within the EU
Country Major Exports 2007-08 Percentage Share of India’s Top 5 Export Destinations in the EU
UK Mineral Fuels, apparels, machinery
25
and mechanical appliances, gems
and jewellery and footwear
21.5
20 19.4
17.8
Netherlands Mineral Fuels, iron and steel,
15.2 14.8
15 13.8
% Share
electrical machinery, organic

chemicals and apparels 12.2 12.2 11.3
10 8.2
Germany Electrical machinery, apparel, organic
chemicals iron and steel and
apparels 5
Belgium Gems and jewellery, iron and steel, 0

organic chemicals, machinery and UK Netherlands Germany Belgium Italy
mechanical appliances
2000-2001 2007-2008
Italy Iron and steel, vehicles, apparel,
footwear and machinery Source: Ministry of Commerce & Industry
! In value terms, UK, Netherlands, Belgium, Germany, Italy, France, Spain, Sweden,
Greece and Denmark are the top 10 destinations of India’s exports within the EU
! While the share of most EU countries has remained more or less stable since 2000-01,
that of Netherlands has almost doubled from 8.23 percent to 15.15 percent in 2007-08
with steady rise in export of textiles, electronic goods chemicals, edible fruits and nuts
etc.
5. Data obtained from Ministry of Commerce and Industry
India Imports from the EU27:
Country Major Imports 2007-08 Eu’s Share in India’s Total Imports

Germany Machinery, Electrical Equipment and
300
Precision instruments
251.6
250
Total Imports CAGR : 25%
France Aircraft, Mechanical Appliances, Indo-EU27 CAGR : 33%
200 185.6
Electrical equipment
149.2
USD Bn
150
111.5
UK Diamonds, Machinery, Precision
100 78.2
Instruments
50.5 51.4 61.4
50 29.8 38.4
19.3 26.0
10.7 10.7 12.8 15.1
Belgium Diamonds
0
2000-01 2001-02 2002-03 2003-04 200-05 2005-06 2006-07 2007-08
Total Imports from the World India's Imports from EU
Italy Machinery, Mechanical Appliances,
Articles of Iron and Steel and Organic Source: Ministry of Commerce & Industry
Chemicals
! The import basket from the EU mainly comprises machinery, aircraft, iron and steel,
ships and precision instruments. Their share in the import basket has also increased
between 2000-01 and 2007-08
! It is important to note that imports of precious stones (rough diamonds) have declined
steeply from 45.27 percent in 2000-01 to 13.13 percent by 2007-08 indicating
diversification of India’s import basket
Leading EU Source Countries for India

! In value terms, Germany, France, UK, Belgium, Italy, Sweden, Netherlands, Spain,
Finland and Austria are the most significant sources of imports for India. Apart from the
UK and Belgium, the share of all other countries in India’s import basket from the EU
has increased
Percentage Share of Top 5 EU Source Countries
35
30
25
% Share
20
15
10
5
0
Germany France UK Belgium Italy
2000-01 2007-08
Source: Ministry of Commerce & Industry
32
FDI – Driving Globalization…

! EU is India’s largest source of FDI and accounts for almost 20 percent of total FDI
FDI Inflows (Apr’00 – May’09)
inflows to India
From EU: 17.6
! Between April 2000 and March 2009, Foreign Direct Investments (FDI) from the EU into
India have been to the tune of USD 18 billion6
! Five countries from the EU (UK, Netherlands, Cyprus, Germany, France and Sweden)
are the largest investors in India. More than 90 percent of the total investments from
the EU mainly come from these countries, with UK and Netherlands making up more
than half of the share
Other Nations: 76.7 ! While 2008 saw unprecedented Indian investments in the EU. Indian FDI in the EU
soared from zero in 2004 to USD 3.4 billion in 20087
Source: Department of Industrial Policy & Promotion (DIPP), Ministry of
Commerce and Industry
! Corporate India is steadily showing growth across the globe. Major drivers that have
encouraged European acquisitions by Indian companies have been – to serve new
markets and customers, map out value chains in the most efficient locations globally
and to access technological and natural resources
6. Department of Industrial Policy and Promotion

7. LiveMint, June 8, 2009
Key Inbound Deals between Jan 2008 - August 2009
Deal Type Announce Target Name Target Industry Acquirer Name Acquirer Announced Total Value
Date Sector Country (USD million)
ACQ 10/29/2008 Unitech Wireless Communications Telenor Asa NO 1249.31
ACQ 01/24/2008 Sweta Estates Pvt Ltd Financial Ashmore Group Plc. GB 550.00
ACQ 04/19/2008 Fresenius Kabi Oncology Ltd Consumer, Non-cyclical Fresenius Se GE 285.56
ACQ 10/04/2008 Cambridge Solutions Ltd Technology Xchanging Plc GB 195.65
DIV 04/24/2008 Parryware Roca Pvt Ltd Industrial Roca Sanitario Sa SP 174.13
ACQ 03/10/2009 Radhakrishna Hospitality Ser Consumer, Non-cyclical Sodexo FR 125.00
DIV 12/04/2007 Shree Digvijay Cement Co Industrial Cimpor-cimentos De Portugal PO 99.89
ACQ 03/10/2008 Thomas Cook (India) Limited Consumer, Cyclical Thomas Cook Group Plc GB 86.63
ACQ 04/24/2008 Hindustan Oil Exploration Co Energy Eni Spa IT 81.54
ACQ 03/05/2008 Ramprastha Promoters And Dev Financial Deutsche Bank Ag-registered GE 80.00
ACQ 01/21/2008 Golden Gate Properties Ltd Financial Deutsche Bank Ag-registered GE 70.00
DIV 04/29/2009 Eagleburgmann India Pvt Ltd Industrial Burgmann Industries Gmbh & C GE 70.00
ACQ 05/21/2008 Hsbc Investdirect India Ltd Financial Hsbc Holdings Plc GB 67.24
ACQ 01/22/2008 Boc India Limited Basic Materials Linde Ag GE 66.91
ACQ 12/11/2007 Boc India Limited Basic Materials Linde Ag GE 64.93
DIV 12/02/2008 Man Force Trucks Private Ltd Consumer, Cyclical Man Se GE 59.82
ACQ 06/10/2008 Bosch Chassis Systems India Consumer, Cyclical Robert Bosch Gmbh GE 57.93
ACQ 04/23/2008 Fresenius Kabi Oncology Ltd Consumer, Non-cyclical Fresenius Se GE 52.70
DIV 01/04/2008 Hdfc Standard Life Insurance Financial Standard Life Plc GB 50.68
ACQ 12/15/2008 Lifetree Convergence Ltd Communications Tecnomen Lifetree Oyj FI 45.35
Source: Bloomberg
Key Outbound Deals between Jan 2008 - August 2009
Deal Type Announce Target Name Target Target Industry Acquirer Name Acquirer Announced Total Value
Date Country Sector Industry Sector (USD million)
ACQ 08/26/2008 Imperial Energy Corp Plc GB Energy Oil & Natural Gas Corp Ltd Energy 2607.16
DIV 06/24/2008 Intergen Nv NE Utilities Gmr Infrastructure Ltd Industrial 1100.00
ACQ 09/26/2008 Axon Group Plc GB Technology Hcl Technologies Ltd Technology 731.12
DIV 09/01/2008 Repower Systems Ag-reg'd GE Industrial Suzlon Energy Limited Industrial 394.30
DIV 06/11/2009 Vs Dempo & Co Pvt Ltd IN Basic Materials Sesa Goa Ltd Basic Materials 367.61
DIV 06/05/2008 Repower Systems Ag-reg'd GE Industrial Suzlon Energy Limited Industrial 322.26
DIV 07/10/2008 Aviva Global Services GB Financial Wns Holdings Ltd-adr Consumer, Non-cyclical 227.40
DIV 03/07/2008 Multiple Targets Industrial Infrastructure Dev Finance Financial 205.00
DIV 01/24/2008 Global Trade Finance Ltd IN Financial State Bank Of India Financial 131.88
ACQ 07/07/2008 Honiton Energy Ltd GB Energy Multiple Acquirers 110.00
DIV 04/30/2008 Klopman Group IT Consumer, Cyclical S. Kumars Nationwide Ltd Consumer, Cyclical 109.00
DIV 08/05/2008 Piaggio Aero Industries Spa IT Industrial Tata Group Diversified 108.27
ACQ 04/04/2008 Religare Hichens Harrison GB Financial Religare Enterprises Limited Financial 98.76
ACQ 03/19/2008 Elsamex Sa SP Industrial Infrastructure Leasing & Fin Financial 78.35
ACQ 05/26/2008 Reliance Vanco Group Ltd GB Communications Reliance Communications Ltd Communications 76.90
ACQ 06/11/2008 Franco Tosi Meccanica Spa IT Industrial Gammon India Ltd Industrial 62.22
ACQ 07/31/2008 Geiger Technik Gmbh GE Consumer, Cyclical Sintex Industries Limited Diversified 54.57
DIV 04/24/2008 Brand Guru Consumer, Cyclical Bombay Rayon Fashions Ltd Consumer, Cyclical 51.70
DIV 08/21/2008 Dawnay Day Av Financial Serv IN Financial New Silk Route Financial 45.97
DIV 04/29/2008 Bolix Sa PD Industrial Berger Paints India Limited Basic Materials 38.60
Source: Bloomberg
Tapping Industry Potential

Global recessionary trends have given rise to tremendous business opportunities which can
be jointly tapped between nations to overcome the crisis.
Massive infrastructure spends are paving the way for business opportunities ensuring that
potential exists across a multitude of sectors. Governments’ estimates also suggest that
these sectors will require huge investments in the coming years which can only be met
through closer ties.
Further, the Indian Government's decision of allowing privatization in more sectors indicates
investment prospects across industries.
Several promising economic sectors exist in India and the EU with potential investment
opportunities. The same have been highlighted in the following sections.
member firms affiliated with KPMG International, Swiss cooperative. All rights reserved.
SECTOR
overview

38
Manufacturing sector in India

Though India’s growth story has by and large been characterized by growth in the services
sector, there has been resurgence in the manufacturing sector in recent times. In the last 3-
4 years, after a decade of moderate growth, the sector is back into the limelight. Numerous
SMEs have become large firms on the back of growth in the domestic market, opening up
of the export market and the availability of capital financing. Today, India’s manufacturing
sector is making a global mark and is leading its way forward.
According to a UNIDO analysis based on 2007 figures mentioned in the International

Yearbook of Industrial Statistics 2009:
! India ranks among the top 12 producers of manufacturing value added (MVA)
! In textiles, the country is ranked fourth after China, US and Italy
! In electrical machinery and apparatus, it is ranked fifth
! It holds sixth position in the basic metals category
! Ranked seventh in chemicals and chemical products
! Ranked tenth in leather, leather products, refined petroleum products and nuclear fuel
! Ranked twelfth in machinery and equipment
Source: IBEF
Moreover, India’s low cost, skilled manpower and proximity to Asian markets are attracting a
number of companies, spanning diverse industries; making India a global manufacturing
powerhouse.
A number of favorable factors have positioned India as a global

manufacturing hub, with a number of companies and manufacturers
worldwide offshoring their production and technological capabilities to
India.
Key focus sectors and global company presence:
Key Global Players Sector Activity

North Cluster:
Delhi, Gurgaon, Noida, Hyundai Automobile Export hub for small cars – (Chennai)
Ghaziabad, Ludhiana
Magna International Inc Automotive components Plans Manufacturing facilities
Robert Bosch Automotive components Manufacturing facilities
Airbus Aviation Centre for design and development of its long haul A 350 plane
Samsung Electronics Manufacturing plant
Louis Vuitton and Frette Luxury brands Plans to setup a manufacturing base in India
West Cluster: South Cluster: Cryolor Asia Pacific Oil & Gas Manufacture storage equipment for liquefied gases
Maharashtra Chennai, Andhra Pradesh,
and Gujarat Tamilnadu. Karnataka LG Telecom Mobile handsets
Source: Company Websites, KPMG Analysis
Favorable factors
India has the essential ingredients to transform herself into a global Manufacturing Hub. The
country has considerable prowess in managing the outsourced business model through
which she has gained acceptance for her skills globally. India has a well entrenched and fast
growing manufacturing sector which needs to innovate and invest continually to maintain
the pace of growth.
! Growing domestic Market: India, with a GDP growth rate of 6-8 percent annually, in
spite of the tough global economic climate, is seen as an emerging market with
tremendous potential1
- Proximity to Asian markets: Proximity to growing Asian markets makes India an

attractive production and distribution destination for companies worldwide
! Strong pool of labor: NASSCOM estimates an approximate 4,00,000 diploma &

degree engineers graduating in 2009
- Low cost skilled labor: India’s low-cost advantage is largely attributed to availability
of low-wage skilled labor
- English Speaking Professionals: The fact that most of this skilled labor is English
speaking, gives India an edge over other developing nations
! Emulation of global best practices in production: Over the decade, with a large
amount of FDI flowing into India, global best practices in various industries have
been imported which have improved productivity of labor and resources
- Japanese Manufacturing principles: The concept of Just-in-time, Kanban, kaizen,

Total Productive Maintenance (TPM) had proved successful in shop floors
Challenges & Issues

A few bottlenecks exist that restrict India’s capacity and potential for emerging as a global
manufacturing hub:
! Under-developed infrastructure
! High tax levels
! Erratic supply of water and electricity in many areas
! A high cost of capital
! Continuous up gradation of technical and managerial skills.
Efforts have been made since to eliminate these constraints. Such initiatives include the
setting up of Special Economic Zones (SEZs), projects to improve infrastructure like the
National Highway Development Programme, the New Telecom Policy to reduce
telecommunications costs, and increase privatization in the power sector.
1. EIU, July 2009
40
India’s strong capabilities

Indian manufacturing sector does not solely compete as a low-cost location. India’s
competence also lies in providing greater value by virtue of better quality, design and
innovation.
! Research and Development2

- India’s attractiveness as an R&D location is already an established fact: more than
125 Fortune 500 companies have already setup their R&D bases in India1. Indian
companies are already drawing on local engineering design capability where in the
past they relied on imported auto design.
! Sourcing3
- Large auto and engineering companies have set up their International Purchase
Offices (IPOs) in India to source the components from this region. This number is
expected to double by the year 20104. The OEMs in India include firms like General
Motors, Ford Motor Company, Cummins International, Bosch, Volkswagen, BMW,
MAN (trucks) and JCB (earthmoving equipment) amongst others
? - Leading retail player like Wal-Mart & Tesco source their requirements from India
! Testing and Certification3

- Indian expertise in the automotive sector is coming handy for global car companies
like Japanese manufacturers Nissan, Toyota and Honda and the German luxury car
makers like BMW and Volkswagen to test their vehicle performance and get
international certification
2. KPMG, India Automotive Study, 2007 4. www.osec.ch

3. IBEF
Alternate Energy
42
Alternate Energy
Factors Statistics
Renewable Energy Installed capacity 13,500-14,000 MW
Wind Energy installed capacity ~10,000 MW
Small Hydro Installed Capacity ~2300 MW
Major Players in India and Europe Suzlon, First Solar, Gamesa, Vestas etc.
Source: Infraline
India has emerged in the forefront of various forms of renewable energy, with
approximately 13,500-14000 MW1 of installed capacity available from renewable sources, of
which wind comprises approximately 9700 MW2. This is only likely to increase, given that in
recent times, the issue of climate change has come to the fore-front of thought across the
world.
India also has a high renewable energy potential: approximately 45,000 MW of wind power,
18,000 MW from biomass-based sources and close to 15,000 MW of small hydro resources
(defined as plants each of less than 25 MW capacity)3 as the table below indicates. In
addition, given the country’s latitudinal location, the country receives large amounts of
sunshine, for around 250-300 days per year, indicating that the country can potentially meet
its entire power requirement until the year 2022 through solar power alone4.
Grid Interactive Renewable Power
Sector Potential (MW) Installed Capacity Target as per 11th Total Capacity Approx Investment
till January 2009 plan (MW) expected by 2012 required from
(MW) (MW) 2007-2012 (USD Mn)
Biomass Power (Agro residues) 18,000 683 500 1,069 488
Wind Power 45,000 9,756 10,500 17,592 15,402
Small Hydro Power 15,000 2,345 1,400 3,376 2,053
Cogeneration - bagasse 5,000 1,034 1,200 1,815 1,097
Waste to Energy 2,700 59 400 443 293
Solar Power - 2 50 136 -
Geothermal - - - - -
Tidal / Ocean - - - - -
Total 85,700 13.,879 14,050 24,431 19,333

Source: MNRE, CleanTech VC and PE Investments in India, KPMG analysis
In fact, the possibility of supplementing conventional sources of energy with renewables

has a larger scope in countries like India, which already suffer from enormous energy
shortages. The peak shortage for power has been estimated to be as high as 13-14 percent5
in the country and large areas go without power for long period or face load-shedding for as
much as 16 hours a day, particularly in the summer months.
1. InfraLine 3. MNRE, CleanTech VC and PE Investments in India, KPMG

2. The Hindu Business Line, Indian wind power producers analysis
add nearly 1,500 MW of wind power capacity in 2008-09 4. Renewable energy: An overview and a look at the
representing investments of over Rs 90 billion, April 11, potential, July 29, 2009, MNRE
2009 5. Ministry of Power
Indeed, a few tentative steps have been In addition, India is also looking at alternate sources of energy. These include bio-diesel
taken by the Government in this regard. In through jatropha and karanja plantations, hydrogen-fuelled vehicles and the usage of Gas
order to boost renewable energy generation, Hydrates.
the Electricity Act 2003 has asked the state
utilities to purchase a certain percentage of Jatropha has demonstrated considerable potential as a bio-energy source. There are several
their energy from renewable sources- advantages of the plant, which include:
referred to as Renewable Purchase ! It can grow on almost any kind of soil, including marginal/saline/acidic/alkaline soils
Obligation (RPO). Although many states
! It grows rapidly, even without much care and irrigation
have indeed specified varying percentages
of energy to be purchased in accordance ! Suits dry-land farming and can survive drought
with the obligation, in its current form the
obligation may not lead to the desired effect, Gas hydrates, meanwhile, are a potential fuel of the future. These hydrates are a naturally
since no penalties have been specified if a occurring ‘ice like’ combination of natural gas and water, typically found below the ocean
state fails to meet these obligations. floor and Polar regions. Currently, there is no commercial technology in existence that can
be used to extract natural gas from these hydrates. However, given India’s large potential
In addition to the RPO, certain subsidies (estimated at ~2000 tcf)6 in the Krishna Godavari, Mahanadi and Andaman basin, this
have been specified for renewable energy appears to be an area of technology leadership for India. Accordingly, the National Gas
production, given the environment-friendly Hydrate Programme (NGHP) had been initiated in 1997 and two areas in the Indian waters,
nature of renewables and the fact that one along the East Coast and the other on the West Coast have been identified as ‘Model
‘distributed power generation’ possesses Laboratory Areas’ for further R&D work.
some advantages over a centralized system.
However, in the long run, if renewable Technical collaboration in the field of Hydrogen vehicles provides another opportunity for
energy sources are to supplement Indo-EU partnerships.
conventional sources, the costs of
production from renewables must come
down and be more competitive with those Major Countries for Solar and Wind Power*
based on conventional fuels i.e. achieve grid
parity.
Germany
Wind (20%), solar
In India, ambitious targets have been set for
energy production from renewables. The
Ministry of New and Renewable Energy UK
(MNRE) has envisaged an increase in total Wind (3%), solar
renewable energy capacity from the current

levels of around 13,500 MW to around
Italy
25,000 MW by 2012 and further to about Wind (3%), solar
54,000 MW by the end of 13th Plan period
(2022).
Spain
Wind (14%), solar
Of this, wind-based generation is expected
to retain its prominent position as the single
largest contributor in the renewable portfolio Source: Global Wind Report 2008 by Global Wind Energy Council (GWEC)
mix. However, solar energy is also expected * Figures in brackets indicate percentage of the Global wind installed capacity (2008)
to develop to a significant extent, particularly

as the costs of solar power reduce from
their current levels. Accordingly, a “National
Mission on Solar Energy” has been
launched, with a goal to generate at least 10
percent of India's power from solar energy
over the next several years.
6. The Financial Express, India has 2,000 trn cubic ft prognostic gas hydrates pool, February 2008
India Advantage EU Advantage

Features Advantage Features Advantage
Key Industry Trends Concerns on Climate Change: Global

? Key Industry Trends Rising Demand: EU imports nearly 50 percent
?
warming and climate change issues rising in of its energy consumption; expected to rise to
public consciousness; favourable for 70 percent in the next 20-30 years indicating
Renewables increasing dependence on imports7
Renewables could help meet this demand to
Volatility in the Prices of Conventional Fossil
?
some extent, without the need for imports
Fuels (crude oil, natural gas) means that
Renewables may emerge as a viable alternative Research & Development (R&D): EU firms
?
are aiming to develop new, alternative and
Decreasing Prices due to improvements in
?
efficient sources of energy and spending on
Technology such as larger size wind turbines,
R&D
thin-film solar etc.
EU has committed to reduce emissions.
?
Target to reducing emissions by 20 percent and
raising Renewables proportion of energy
consumption to 20 percent by 20207
Key Drivers Concerns on Climate Change and the need

? Key Drivers Climate Change concerns: Demand for
?
to reduce dependence on fossil fuels Renewables likely to increase in line with
Climate Change concerns
Government Regulations: The Electricity Act
?
2003 prescribes that a certain percentage of Government Incentives to be important. The
?
energy purchased should be from Renewable reduction of support in Spain, for example, in
sources; launch of initiatives such as the likely to result in a sharp fall in addition of
‘National Solar Mission’ Renewable Energy capacity
Govt Incentives: The Central and many State
? Decreasing Costs: due to increased scale and
?
Governments have outlined the incentives they new technologies
would provide for Renewable Energy, including
Investments in new sources of
?
feed-in tariffs, capital subsidies, tax
Renewables –Geothermal, tidal etc.
concessions etc.
Decreasing Costs will be the main driver.
?
Achievement of grid-parity in the long run is
needed
Source:
7. European Monitoring Centre on Change (EMCC) Dossier on the European energy sector, March 31, 2008
Areas for Collaboration:

In EU In India
Opportunities Indian firms

? can leverage the R&D skills and initiatives of EU Large potential
? for Renewables in India, particularly solar
firms
Good engineering
? talent to support R&D initiatives
Indian firms
? could set up subsidiaries abroad/ acquire firms or
Governments
? increasing focus on Renewables means low
establish JVs to cater to large markets in the EU as companies
base has the potential to expand rapidly
such as Suzlon have been doing
Technologies
? for hydrogen fuel, gas hydrates, etc.
Challenges Cultural
? differences have lead to very different market Regulations
? still evolving in India
conditions, which Indian firms need to understand
Land acquisition
? and related issues an emerging problem even
Sector likely
? to see increasing competition in the Renewable sector
Over-capacity
? in solar PV has led to fall in prices and margins Lack of
? grid connectivity, access to finance could hold back
at a global level development

46
India Industry Profile:
Parameters Statistics
Overall Indian Food Market Size (2008) USD 182 billion1
Food Processing Industry Size – 2008 USD 67 billion2
Growth in 2007-08 13.1 percent3
CAGR (2008-2015) 20 percent3
FDI Inflows: Apr 2000 – 2009 USD 750 million4
Exports of processed food – 2006-07 USD 20.5 billion3
Foreign Player Presence Unilever, Cadbury Schweppes, PepsiCo, Nestle, Hershey,

Perfetti, etc.
Source:
1. India Food Report, 2008
2. Ministry of Food Processing Industries
3. Indian MSME Ecosystem, November 2008
4. Directorate General of Commercial Intelligence and Statistics (DGCIS)
Key Markets in India
Northern region accounts for 28% of packaged food consumption in

India. North Indian cuisine is distinguished by the proportionally high
use of dairy products; milk, paneer, ghee (clarified butter), and yoghurt
(yogurt, yoghourt) are all common ingredients. Gravies are typically
dairy-based. Other common ingredients include chilies, saffron, and
nuts.
Western region accounts for 30% of packaged food consumption in DELHI

India. Western India has three major food groups: Gujarati,
Maharashtrian and Goan. Coastal regions diet includes fish, breads and
rice. Gujarati cuisine is predominantly vegetarian. Goan cuisine is
influenced by the Portuguese colonization of Goa
KOLKATA
South India region accounts for 25% of packaged food consumption in MUMBAI
India. South Indian cuisine is distinguished by a greater emphasis on
rice as the staple grain, the ubiquity of sambar and rasam, a variety of
pickles and coconut. The dosa, poori, idli, vada, bonda and bajji are
typical South Indian favorites. Hyderabad is very well-known for its
biryani. BANGALORE
HYDERABAD
Eastern region accounts for 17% of packaged food consumption in
India. East Indian cuisine is famous for its desserts, especially milk
based sweets. Fish and shellfish are commonly consumed in the
eastern part of India. Rice is the staple grain in Eastern India. A regular
meal consists of lentils, fish, and vegetables
Source: Euromonitor, Packaged Food India, May 2009
Business Climate in India's Agriculture and Food Processing
Parameter Details
FDI Regulations FDI up to

? 100 percent is permitted under the automatic route
in food infrastructure (food park, cold chain/warehousing)
No FDI
? is permitted into Retail sector except for Single Brand
Product Retailing. This policy is uniform for all retailing
activities
FDI policy
? for manufacture of items reserved for the SSI sector
is uniform for all items
FDI up to
? 100 percent is permitted through the automatic
route for distillation and brewing of alcohol subject to
licensing by the appropriate authority
Automatic
? approval of 100 percent equity for most processed
food items.
Most of
? the processed food segments are exempt from
industrial licensing, with the exception of beer and alcoholic
drinks and items reserved for Small Scale Sector, like bakery,
bread and vinegar among others
Constraints/Challenges Poor infrastructure

? in terms of cold storage, warehousing, etc.
Inadequate
? quality control and testing infrastructure
Inefficient
? supply chain and the involvement of middlemen
High transportation
? and inventory carrying cost
Affordability,
? cultural and regional preference of fresh food
High taxation
?
High packaging
? cost
Source: Indian MSME Ecosystem, Lotus Knowlwealth Analyst Report, March 2008
Key Markets in the EU Region

Key Bilateral Investments Key Markets in the EU Region
Promoter - Country Project Details

Account for 70 percent of
Heinz (IT) and Glaxo In 1994, Heinz acquired the Family consumption of processed food
Product Division of Glaxo with
brands such as Complan, Glucon-D,
Nycil and Sampriti
Perfetti Van Melle Subsidiary holds 25 percent market

share in the Indian sugar
UK
confectionery market
Germany
Source: Company websites France

Italy
Spain
Source: www.foodprocessing.de
India EU Advantage
Key Industry Trends Increasing

? integration and collaboration across Key Industry Trends Backward
? integration witnessed with many
players in the value chain, to garner mutual retailers having integrated with supermarkets to
benefits develop their own brands
Growing
? demand in the organic food market and Increase
? in Organic, Natural, Functional and
immense opportunities for exports Health Foods
Rising demand
? in the branded packaged food 70 percent
? of the turnover is realized in France,
industry Germany, Italy, Great Britain and Spain3
Market
? trends demand innovation in products
and processes
Mechanization
? and automation of food
production is speeding up
Key Drivers Increasing

? spends on health and nutritional Key Drivers Organized
? retail and private level penetration
foods
Urbanization
? and rising number of nuclear
families and working women
Organized
? retail and private label penetration
Competitive Abundant
? availability of raw material Competitive Markets
? in Europe are mature. Quality and
Advantage Advantage safety issues are given high importance
Priority
? sector status for agro-processing given
by the central Government Price pressures
? create a continual search for
new market potentials at home and abroad
Vast network
? of manufacturing facilities all over
the country One can
? enter into the European market by
starting up a new company or diversifying an
Vast domestic
? market
existing company. In case of foreign producers,
Cost of
? production in India is lower by about 40 one can begin through exports to the region.
percent over a comparable location in EU and There are relatively very few restrictions
10-15 percent over UK1
Government Income
? Tax rebate is allowed, 100 percent of Government Deregulation
? - removing regulations from the
Incentives2 profits for 5 years and 25 percent of profits for Incentives4 statute book, leading to greater liberalization of
the next 5 years, for new industries to process, previously regulated regimes
preserve and package fruits and vegetables
Consolidation
? - bringing together different
Investment-linked
? tax incentives for setting up regulations into a more manageable form and
cold chain infrastructure and warehousing restating the law more clearly. By improving
facilities transparency and understanding, it should
reduce compliance costs
Customs
? duty on food processing machinery and
parts reduced from 7.5 percent to 5 percent, Rationalization
? - using ‘horizontal’ legislation to
dairy machineries are completely exempted from replace a variety of sector specific ‘vertical’
Central Excise Duty regulations and resolving overlapping or
inconsistent regulations
Custom
? duty on Packaging Machines to be
reduced from 15 percent to 5 percent
Customs
? Duty on refrigerated vans reduced from
20 percent to 10 percent
Abolishment
? of excise duty on milk, ice cream,
preparations of meat, fish and poultry, pectin,
ectatesand food mixes
Reduction
? in excise duties on various other
products
Source: Source:
1. Lotus Knowlwealth Analyst Report, March 2008 3. www.foodprocessing.de
2. Ministry of Food Processing Industries 4. Better Regulation Task Force, Government of UK

For India For EU
Opportunities The European

? packaged foods and meats market is Large crop
? and material base offering a vast potential for agro
fragmented, with the top three players holding an aggregate processing activities
share of less than 10 percent of the total market by volume5
Setting
? of SEZ/AEZ and food parks for providing added
The processed
? food industry in EU is developed incentive to develop Greenfield projects
Even during
? the slowdown period the sales in the top 5 Integration
? of development in contemporary technologies such
consuming countries have shown a rise which shows the as electronics, material science, bio-technology etc. offer vast
steadiness of the industry scope for rapid improvement and progress
Technology
? transfers from EU countries as they are well Developing
? supply chain, warehousing and cold storage
developed opportunities
Challenges Higher
? cost of manufacturing High duty
? structure – 36 percent on machinery6
High capital
? expenditure Poor infrastructure
?
Labeling
? laws in the EU are very strict and requires attention Limited
? awareness, restricted only to metros and Tier-I cities
Player Strategies Exporting

? is generally preferred by Indian companies as the Setting
? up a 100 percent subsidiary has been widely used by
cost of setting up unit in EU are higher many companies to enter into the Indian market
Source:
5. Datamonitor
6. The Indo-Italian Chamber of Commerce and Industry
Success Stories:
Company Name Success Story
Perfetti Van Melle 100 percent

? subsidiary of the global Italian conglomerate, started operations in India in 1992 with the setting up of its factory
It launched
? its first brand in the Indian market in 1994, the popular brand Center Fresh. Today as a confectionery company of notable
repute, it leads the Indian sugar confectionery market with more than 25 percent of the value share of the market
The company
? strives to leverage the international brand portfolio in India, while adapting flavors and blends to the local tastes
Perfetti
? Van Melle has doubled its turnover and is amongst the top players in confectionary market
KEY SUCCESS FACTORS:

Innovative
? products: Perfetti Van Melle has introduced several innovations in its products, cases in point being Center Shock,
Alpenliebe Swirl and Happydent Gum
Constant
? Re-invention of Brands: The company continually works towards developing its brands and goes to the extent of re-
inventing the same if the situation demands. An example is the brand Cofitos that was re-launched at a lower price point because of the
market demands
Source: IBEF, Company Website
We want to improve
agricultural productivity. We member firms affiliated with KPMG International, Swiss cooperative. All rights reserved.
want to get more of the

agricultural dollar into the
hands of the farmer. We want
India to do more food
processing and value-added
agriculture. And we are going
to be working with India very
closely.
– Hillary Clinton
U.S. Secretary of State
Source:
www.ap-foodtechnology.com,
July 20, 2009, 'Clinton backs Indian food
processing industry expansion'
Education
52
Education
Industry Size – 2009 USD 50 billion (2008)

CAGR -14%
(Private Spend on Education) USD 80 billion (2012)
Education Spend (% of GDP) 3.7 percent (10th Five-Year Plan(FYP))

6 percent (Proposed in 11th FYP)
Target Population (5 - 24 years) 445 million ( 2008)

486 million( 2025E)
Schools and Institutions A network of ~1.3 million schools, ~20,000 Higher Education
Institutions (HEIs) and 350 Universities
Key Private Players Educomp, Everonn, NIIT, Kidzee, Career-Launcher, Core Projects
Source: IDFC-SSKI, 'Indian Education Long way from graduation' 16 January 2009, ICICI Securities, Education Services, February 2008;
business.gov.in
Prestigious Institutes in India
Roorkee
Delhi Shillong
Lucknow Guwahati
Kanpur
Ahmedabad Indore Kharagpur

Kolkatta
Mumbai
Bangalore
Kozhikode Chennai Indian Institute of Technology (IITs)

Indian Institutes of Management
Source: www.indiaedu.com, IIM websites
Business Climate in India's Education Sector:

Parameter Details
FDI Regulations FDI in education,

? including higher education, has been allowed under the
automatic route without any sectoral cap since 2000
Constraints / Educational
? institutes in India are to be run as ‘not-for-profit’ centers under
Challenges a society (registration under the Societies Registration Act 1860) or a public
trust (Registration Act 1908)
K12 institutes
? are required to be affiliated to education boards; either
central boards like ICSE and CBSE or a state board
Regulations
? may differ from state to state
Note: K12 = Kindergarten to Grade 12

Source: IDFC-SSKI, Indian Education Long way from graduation, January 16, 2009
Key Bilateral Investments
UK India Education and The initiative is for – Higher Education and Research, Schools and
?
Research Initiative Professional and Technical Skills development
UK has pledged USD 34.5 million through contributions by the

?
Department for Innovation and Skills, Foreign and Commonwealth
Office, the British Council and devolved authorities of Northern Ireland,
Scotland and Wales. Department of Science and Technology (DST),
Government of India has also pledged similar funding for science
related collaboration
The first ever India-UK Virtual Graduate Research School (VGRS) has
?
been established to drive collaborative fundamental research programs,
research training and technology transfer between the UK and India
Indo-German Training With an aim to provide training based on practical and theoretical
?
Centre (IGTC) learning, IGTC was established in Mumbai in 1991 followed by the IGTC,
Chennai in 2005 and the IGTC, Bangalore in 2008
Indira Gandhi National IGNOU plans to open centres in the UK and Germany. It has signed a
?
Open University (IGNOU) memorandum of understanding with UK-based Lincoln University.
IIM Ahmedabad(A) and IIMA and French business School ESSEC have collaborated for a double-
?
Essec, France degree program for a limited number of students. The post-graduate
double-degree program would be open to select five students in a year
from both the management schools at the same tuition fees
IIT Madras IIT – M is a flagship project under Indo-German cooperation for higher
?
education.
Erasmus Mundus EMAI was established with an objective to promote EU as a centre of

?
Association of India excellence in the field of higher education in India
(EMAI)
Sarva Siksha Abhiyan EC* signed an agreement with the Government of India (GoI) in
?
(SSA) November 2001 to support SSA programme, the national initiative for
Universalisation of Elementary Education. About USD 284.5 million were
committed for 7 years of implementation.
Pearson Plc -UK British education and publishing firm Pearson Plc. plans to invest USD
?
30 million in India to acquire stake in two Indian education companies-
- USD 17.5 million for a 50 percent interest in New Delhi-based

Educomp Solutions Ltd.'s vocational training business and
- USD 12.5 million for a 17.2 percent stake in TutorVista Global Pvt.
Ltd., an online tutoring firm in Bangalore
*EC= European Commission
Source: Institution Websites, The Hindu Business Line, Pearson to invest in India, June 2009; UK - India Education and Research Initiatives;
www.diplomatist.com
Key Education Institutes in the EU
NORWAY FINLAND
- Universitetet i Oslo - University of Helsinki
- Universitetet I Bergen - University of Tampere
- Universitetet i Stavanger - University of Jyväskylä
SWEDEN
- Stockholm University
- Umeå University
GERMANY
- University of Gothenburg
- Universität Hamburg
- Universität Heidelberg
UK
- Universität Leipzig
- University of Cambridge
- University of Oxford
- London Business School
- Imperial College
- University of Manchester SPAIN
- University of Edunburgh - Universidad Complutense de Madrid
- Universidad Politécnica de Valencia
FRANCE - Universidad de Granada
- INSEAD - IE Business School
- Université de Nantes - IESE
- Université de Poitiers
- Université d’Orléans
- École Normale Supérieure
ITALY
SWITZERLAND - University of BOLOGNA
- ETH Zurich - Politecnico di MILANO
- EPFL - SapienzaUniversity of Rome
Source: The Google College Rankings; 01 May 2009, QSTopmba.com

Key Industry Trends Government

? is encouraging Public- Key Industry Trends There has
? been a rise in the number of years of
Private–Partnership in the sector compulsory education, and some countries
require pupils to continue beyond the
Demand
? for skilled workers across sectors is
compulsory age in order to obtain a certificate
fuelling the market for vocational training
of basic education
institutes
Higher
? education has seen a massive rise in the
The e-learning
? market comprising of: digital
number of students, in the younger age groups
content in private schools, Information,
and female students in particular
Communication and Technology (ICT) program
for Government schools and online education Long-term
? demographic projections of the EU
market is gaining importance population show a fall of around 11 percent in
the age group of 5-9 years in the region, by
Foreign
? universities are offering online courses
2020. In the age group of 10-14 years, the
to Indian students
projections show an extreme situation with
some countries set to experience a decline in
the population by over 40 percent
Source: india.gov.in Source: European Commission, Key data on Education in Europe, 2009
Key Drivers Government

? is treating education as a priority Key Drivers Education
? represents almost 11 percent of EU
for achieving rapid and inclusive growth public expenditure
Average
? household spending on education is In most
? of the European countries, a large
estimated to increase 5.4 percent over 2005-25 degree of autonomy is granted to schools for the
use of public funds
A target
? population of around 445 million in the
age group of 5- 24 years in 2008 is expected to
increase to ~486mn by 2025E, far exceeding the
combined target population in China (354million)
and the US (91million)
Increased
? Government focus on ICT@ school and
National skill Development Mission
Increased
? demand for skilled labor from
booming service sector in the country
The 11th
? FYP has proposed an almost 10-fold
increase in outlay for higher and technical
education
Government Increase
? expenditure on education to 6 percent Government EU launched
? the Erasmus Mundus programme, -
Incentives of GDP Incentives a project to ensure that European Universities
are recognised as centres of excellence across
Tax Benefits:
? Under the provisions of certain tax
the world and to enable partnerships between
treaties between India and foreign countries,
European universities and other countries
income earned by foreign professors/ teachers
who visit India for the purpose of teaching at a Education
? ministers from EU Member States
university or other approved institution, is have set themselves 13 specific areas for
exempt from tax in India improvement in national systems, including
education and training of teachers, key
Government
? is likely to allow the IITs and IIMs to
competences, language learning, ICT, maths,
open campuses in foreign countries
science and technology, active citizenship and
social cohesion
Source: 11th Five Year Plan document; ICICI Securities, Education Services, February 2008 Source: The Education, Audiovisual and Culture Executive Agency (EACEA), Press Releases etc.

In EU In India
Opportunities Collaborate
? with EU institutes to get the expertise and Large untapped
? market in India
enhance skill development in the country
About 1.5
? lakh students from India go abroad for higher
Establish
? presence in EU to offer courses in Indian history, education and this number is rising by 35 percent annually
culture, art, dance etc.
During
? 2007-08, about 1,700 students went to France, while
Belgium’s
? market for e-learning, ESL and vocational training is 4,500 students opted for Germany as their educational
well-developed. India can enter into JVs with the country for destination
its expertise.
At present,
? only two percent of Indian schools are equipped
with computers offering room for growth
Challenges Language
? constraints especially in Italy, France , Spain and Indian Education
? Sector is highly regulated
Germany
Cost of
? studying in Europe is high
Source: The Education, Audiovisual and Culture Executive Agency, Key Data on Education in Europe 2009, July 2009; Datamonitor, Belgium Education, December 2008
FDI must come into India. Entry into the

education sector must neither be limited nor
over-regulated. I want the system to be
accessible from outside too
– Kapil Sibal
Human Resource Development Minister, India
Source:
The Times of India, FDI in education top
priority Kapil Sibal, June 25, 2009

58
Oil & Gas Industry Size USD 110 billion
Crude Oil Production 34.1 million tonnes
Crude Oil Reserves 726 million tonnes
Natural Gas 1055 billion cubic metres
Gross Crude Oil Imports USD 68.2 billion*
Petroleum Exports USD 26.9 billion*
Central Government subsidies for Oil and Gas USD 18.2 billion*
EU players in India (Oil and Gas) BP, BG Group, Shell, Cairn, Gaz de France, Total among others
Power Generation Growth 2008-09 724 billion units
Installed Capacity (June 2009) 148,265 MW
Transmission Lines (March 2009) 222,746 circuit kms
Ultra Mega Power Projects (UMPP) Sasan, Mundra, Tilaiya, Krishnapatnam
EU Players in India (Power) Alstom, Areva T&D among others
Note: *Oil & Gas data for 2007-08

Source: Ministry of Petroleum, IBEF, Ministry of Power, Press Articles
Key Oil & Gas Basins in India
Barmer Fields
Cambay Basin KG Basin
Cauvery Basin
Source: Ministry of Petroleum
Business Climate in India's Energy

Parameter Details
FDI Regulations1 Hundred

? percent FDI in private refineries, petroleum products, exploration, gas
pipelines; 49 percent in state-owned refineries
In the power
? sector, 100 percent foreign equity participation in all segments
excepting atomic energy
Constraints / Challenges
? around land acquisition, obtaining approvals and clearances
Challenges have delayed a number of projects
The Transmission
? and Distribution (T&D) sector is characterized by huge
losses
In power,
? actual capacity additions remain far behind the planned capacity
additions
Domestic
? reserves / production not sufficient to meet demand,
necessitating reliance on imports and consequent concerns over ‘energy
security’
Intense
? competition from China in terms of acquisition of oil assets abroad
Source:
1. IBEF, Power – Market & Opportunities, July 2008
BP – UK In 1989, BP formed a Joint Venture (JV) with Tata's to form Tata BP Solar
Cairn – UK Partner with ONGC for Barmer fields in Rajasthan
Norsk Hydro – Norway In 2007, ONGC tied up with Norsk Hydro Produksjon AS, to develop
Deepwater Oil & Gas blocks off the Indian coasts
Shell – Netherlands Shell sells lubricants in India; Earlier it had a JV with BPCL
ONGC Formed a JV in 2005 with Mittal Investment Sarl’s E&P blocks abroad
Source: Bloomberg, Company websites
UK 10%
Germany 12.9%
France 9%
Italy 9.4%
Spain 7.1%
Source: EUROPA, Datamonitor Oil & Gas Country Reports, May 2009

Key Industry Trends ? Recent increase in Production: Gas from Key Industry Trends Rising
? Demand: EU imports nearly 50 percent
Reliance’s KG Basin fields and Cairn India’s of its energy consumption; expected to rise to
Barmer fields 70 percent in the next 20-30 years indicating
increasing dependence on imports3
? Setting up UMPPs: Four projects have been
allocated so far; more are planned Research
? & Development (R&D): EU firms are
aiming to develop new, alternative and efficient
? Nuclear deal: Post the Nuclear Suppliers Group
sources of energy
(NSG) waiver, India has entered into bilateral
nuclear deal with France, and others (Russia, EU has
? committed to reduce emissions. Target
Kazakhstan) to reducing emissions by 20 percent and raising
renewables proportion of energy consumption to
? Private sector involvement: Private sector is
20 percent by 20203
expected to play an increasingly important role
Key Drivers Domestic

? Demand: Large scale domestic Key Drivers Market
? Liberalisation: Has fostered
demand in line with robust GDP growth consumer-friendliness- open access allowed
and no bundling of networks
Hydrocarbon
? Discoveries: Significant
discoveries of oil and gas recently and large - Consumers are free to choose their energy
planned capacity additions in power will help supplier in many countries
balance the demand supply gap, leading to
Demand
? for Gas and Renewables likely to
development of transmission and distribution
increase in line with Climate Change concerns
infrastructure
Competitive Favourable
? Location: close to oil-producing Competitive ? Service providers such as Schlumberger,
Advantage regions of the Middle East helps the country Advantage Baker Hughes etc are located in Europe and
emerge as a refining hub service the oil and natural gas industry
worldwide
Lower construction
? and operating costs,
availability of skilled and cheap manpower ? Key Market: For exports of petroleum products
? R&D: In the fore-front of technological change
Government New Exploration

? Licensing Policy (NELP): Government Is targeting
? reduction in greenhouse gas
Incentives Allocates oil and gas blocks through a Incentives emissions by 20 percent and raising renewables
competitive bidding process, thereby, providing a proportion of energy consumption to 20 percent
level playing field to the Public and the Private by 20203
sector
Petroleum
? and Natural Gas Regulatory
Board (PNGRB): Regulates downstream
activities
Power
? Projects: Special incentives granted for
Mega Power Projects (over 1000 MW thermal
and 500 MW hydro capacities respectively) and
Ultra Mega Power Projects (~4000 MW each)2
Source: Source:
2. IBEF, Power Market and Opportunities, December 2008 3. European Monitoring Centre on Change (EMCC) Dossier on the European energy sector, March 31, 2008

In EU In India
Opportunities ? India as a Refining Hub: Environmental concerns in EU, US India needs

? deepwater exploration technology
has meant that new capacity addition has occurred in
- ONGC has entered into a JV with Statoil and Norsk Hydro
emerging economies such as India to explore the KG Basin; was earlier looking to rope in BP
India can
? export petroleum based products, including and others
petrochemicals to the European market NELP and
? CBM: The NELP continues to attract substantial
Indian and
? European firms can collaborate for building investments and interest
refineries across the world - Cairn India, BG and BP have won E&P and Coal Bed
Indian service
? contractors (L&T, Punj Lloyd, etc) could Methane (CBM) blocks
undertake contracts across the world, including Europe Power:
?
India is
? also a supplier of relatively low-cost manpower to - European firms can invest across the Power sector
European firms
- Areva has signed a MoU to supply nuclear fuel and reactors
to India
- European players such as Alstom, Areva T&D, ABB etc.
provide power generation and transmission equipment
Outsourcing:
? Opportunities also exist in outsourcing certain
activities
- Shell
? has established a Technology and Shared Services
centre in India
Challenges The presence

? of firms like BP, Shell, Total and others act as a Foreign
? bidders under NELP tend to face stiff competition from
significant barrier to entry domestic companies
EU also
? has many restrictions regarding environmental impact Extent of
? seismic studies conducted in India is low
Gaining
? captive coal blocks in India is a challenge
Player Strategies ? Reliance Industries Ltd.4 Cairn Energy

RIL has
? announced its entry into United Kingdom’s (UK) ? Cairn India has been actively exploring hydrocarbons in the
petroleum trading business and has incorporated a wholly- country. The company has partnerships with ONGC, Videocon,
owned subsidiary in London Tata, Marubeni and ENI
Aims to
? tap emerging opportunities in the global markets BG
The joint
? operator of the Panna-Mukta-Tapti fields has a
strong presence in India, through its E&P division and
subsidiaries Gujarat Gas and Mahanagar Gas
Source: Company Websites

4. www.mydigitalfc.com, RIL enters petroleum trading with arms in UK, Singapore, September 9, 2008
Success Stories:
Cairn India Cairn has

? been operating in India for over a decade. Has interest in 14 blocks
Cairn’s
? big oil discovery in Rajasthan- is the biggest in India in the past two decades
Production
? of crude oil is expected to commence from the Mangala, Bhagyam and Aishwarya (MBA) fields shortly. Peak production is
expected to be ~175,000 barrels / day
Cairn is
? likely to pay a royalty of USD 1.6 million (INR 8 Crores) to the Govt. per day at peak production
Cairn’s
? operations are quite profitable; its operating cost is less at USD five per barrel on average
Some concerns
? expressed over the crude oil quality of Barmer crude (highly waxy)
Another
? issue is the decline in its producing fields of Ravva and Cambay
Source: Cairn Corporate Presentation, May 2009; Reinitiating Coverage, Cairn India Ltd., First Global India Research, June 3, 2009;
Govt. losing lakhs daily as Cairn output gets delayed, Daily News and Analysis, June 1, 2009
Oil and gas, railways and power sector, despite

confronting pressures of huge subsidies
burdens, have announced the highest
investments plans in fiscal 2008-09, which is a
matter of great satisfaction and others need to
emulate them.
– Sajjan Jindal
Assocham President
Source:
The Economic Times, Oil PSUs ahead in investment
announcements in ‘08-09, June 26, 2009
Environment Technology Transfer

64
Environment Technology Transfer
Over 150 countries have signed the Montreal Protocol; a landmark international agreement
to restore the Earth’s deteriorating stratospheric ozone layer. The global success of this
effort to protect stratospheric ozone requires that the world’s developed and developing
countries eliminate emissions to the atmosphere of most ozone-depleting substances
(ODS), which include chlorofluorocarbons (CFCs) and other chlorinated and brominated
compounds.
Achieving this goal in many economic sectors requires momentous industrial change,
including the development, installation, and use of new technologies. Since many of these
technologies are widely available only in a relatively few countries, and since the global
market has been slow in bringing these technologies to some parts of the world, deliberate
and active international technology transfer programs are needed if ODS emissions are to
be eliminated1.
Stages of Technology Transfer
An ODS-consuming enterprise decides to switch to non-ODS or ODS-conserving technologies:
! Enterprise becomes aware of the potential for technological change in their operations
! Enterprise is motivated to act
Non-ODS technologies are evaluated and specific options are selected:
! Non-ODS technologies are identified
! Non-ODS technologies are evaluated
! Appropriate / preferred non-ODS technology is selected
A project is designed and financing is obtained:
! Project proposal is prepared
! Project receives approval from Implementing Agency
! Project receives approval from Executive Committee of the Multilateral Fund
! Funds are disbursed for the project
The new technology is acquired, installed, and used:
! Technology is purchased or acquired
! Non-ODS technology is delivered and installed on the “shop floor”
! Non-ODS technology is adapted to local conditions and put into use

Source: Report on Environmental Technology Transfer to Developing Countries, ICF Consulting
Opportunity for India:

It is a well known fact that India is expected to become one of the fastest growing
economies in the world. While it is appreciated that this growth will bring lot of prosperity to
the country, on the other hand, India will increase its energy consumption to be able to
achieve this feat. This means that the country’s carbon emissions, which are one of the
lowest in the world on a per-capita basis, could multiply exponentially in years to come.
According to The Energy and Resources Institute (TERI), India will emit five times the
1. Report on Environmental Technology Transfer to Developing Countries, ICF Consulting
current emissions by 2035 and the investment needed to modify the energy consumption
patterns will approximately be four to seven times that in a ‘Business as Usual’ scenario2.
Advantages of Environment Technology:

! Environmentally-friendly technologies are less polluting, use less resources, and recycle
more wastes and products than their alternatives
! Europe is already a proven leader in usage of environment-friendly technologies.

According to a report by the European Commission in 2006, the estimated turnover of
eco-industries in the EU-25 was around USD 320 billion (Euro 227 billion) while goods
and services provided by eco-industries represent around 2.2 percent of EU-25 GDP3.

! Both India and Europe can leverage each others’ position to strengthen their current
relationship
! India, which is on the threshold to witness rapid industrial growth, will need
considerable investments in environmental technology, which Europe has already
pioneered in
! This in turn, will enable both the economies to assist in the overall global objective of
reduction in carbon emissions
2. Indian Express, Trillions needed for India's growth to be carbon neutral, July 13, 2009
3. www.euractiv.com

68
Industry Size – 2007 USD 0.8 billion1
Expected Growth for the next 5 years 25 percent1
Share of Global Market 0.4 percent1
Number of Luxury brands (2008) 25 (8 in 2005)2
Foreign Player Presence Armani, Gucci, Louis Vuitton Moet Hennessy (LVMH),
Prada, Jimmy Choo, Dolce and Gabbana, Versace, Chanel,
Cartier, Llardo, Valentino, Christian Dior, Longines, Zara,
FCUK, Hugo Boss, Hermes, etc.
Source:
1. Business India, December 14, 2008
2. Milano Fashion Global Summit, Value Partners India, November 2008
Key India Markets:
Delhi
- Political Capital of India
- Luxury Consumers: Politicians, Bureaucrats,
Businessmen and Senior Executives
Chandigarh
Mumbai Delhi
- Commercial Capital of India and home to Bollywood
- Luxury Consumers: Filmstars, CEO’s and
Executives, Socialites Jaipur
Ahmedabad Surat
Kolkatta
Bangalore
- IT Capital of India with an elite group of CEO’s and Mumbai
top level executives Pune
- Luxury industry still to make an impact
Hyderabad
Chennai
Bangalore
- Currently untapped has huge potential Luxury Ready Cities
- Luxury consumers: Filmstars, Politicians
Kochi Coimbatore
Luxury Ready by 2010-11
and Businessmen
Chennai
Luxury Ready 2015-20
Source: KPMG Analysis
Business Climate in India's Fashion Industry

Parameter Details
FDI Regulations Government

? recently allowed 51 percent FDI in single -brand stores
Constraints / Poor infrastructure

? for luxury retailing
Challenges Entry of
? various brands in the last couple of years has increased competition
Luxury hotels
? are key point of sales in India where rentals are very high,
thus impacting the profitability of a company
Currently,
? there are only two luxury retail malls in India. One in Delhi and
another in Bangalore. Mumbai, the financial capital of India and with the
highest spend potential does not have a luxury retail mall. This is both a
challenge and an opportunity
Counterfeiting
? is a key point of concern for luxury brands
Competition
? from other emerging destinations for low cost manufacturing
Source: IBEF, KPMG Analysis
Comparison between Mono stores in EU and India (in EUR):

Revenue per sq. mt. 15,000-40,000 5,000-14,000
COGS 35-40% 45-60%
Rent (per sq mt.) 10-20% 20-35%

(1,500 – 4,000) (1,000 – 3,000)
Personnel 15-25% 8-12%
Margin at store level 25-40% (-20)-12%
Source: Milano Fashion Global Summit, Value Partners India, November 2008
S. Kumars: Escada (GR), Alfred Dunhill (UK) Manufacturing and retailing rights (May
2007)
TSG International Marketing: Moschino (IT), Alberta Distribution tie-up (early 2007)
Ferretti (IT) and Jean Paul Gautier (FR)
Gavin Fashions: Pal Zileri (IT), with others in the pipeline Franchising (2008)
Sports Station India (SSIPL): Aigner, Salvatore Ferragamo Distributing tie-up (April 2004 and 2006
(IT), Fratelli Rossetti (IT) respectively)
Murjani group: Gucci (IT), Jimmy Choo (UK), FCUK (UK) Master Franchisors (February 2006)
Jashanmal group: Burberry (UK) JV (November 2008)
Forbes Gokak: Trussardi (IT), Daks (UK), Saville Row (UK) Licensee (Feb 2006, Feb 2002, Feb 2005)
Tata Group: Inditex JV to open Zara stores (February 2009)
Blue Clothing Company and Versace (IT), Cadini (IT), Franchisee to open four stores in India
Corneliani (IT) and Sisley(IT) (March 2008)
Source: Company Websites, Luxury in 2007 and Beyond, Images Yearbook, Vol. IV, No.1
UK - London
- Alfred Dunhill
- Burberry
- Jimmy Choo
- FCUK
France - Paris
- Jean Paul Gautier
- Louis Vuitton
Italy - Milan
London
- Armani
- Moschino
- Alberta Ferretti
Paris
- Pal Zileri Milan
- Aigner
- Gucci
- Versace
- Trussardi Fashion Capitals

Key Industry Trends ? Market driven by niche segment, thereby, Key Industry Trends Due to
? current economic scenario fashion
minimal impact of slowdown on purchases industry across EU has taken a dip
? Brands like Cartier, Hermes, Hugo Boss, Longines
and Christian Dior are estimating a 30 percent
sales growth in the current slowdown3
? India’s luxury fashion industry is in its nascent
stage and is on the wish list of many brands
? Luxury malls like DLF's Emporio Mall in Delhi and
UB City Mall in Bangalore are the latest formats
of luxury retailing in India
Key Drivers One of

? the fastest growing millionaires club; Key Drivers -
expected to reach 411,000 by 20174
Industry
? largely driven by Bollywood
Changing
? lifestyle a rising brand awareness
driving the shift from unbranded to branded
Competitive Ability to
? manufacture at comparatively low cost Competitive Italy and
? France are recognized across the world
Advantage Advantage for their fashion industry
Increasing
? presence of high street malls in major
cities Shopping
? destinations for celebrities from
across the globe
Well developed
? media industry for advertising
and marketing Paris is
? known as the design and fashion capital
Home to
? maximum number of luxury fashion
brands like Versace, Armani, LVMH, Jimmy
Choo, Gucci to name a few
Switzerland
? known for its luxury watch industry
Source:
3. Economic Times, India home to fastest growing number of millionaires, October 17, 2008
4. Barclays Wealth Insights, May 2008

In EU In India
Opportunities ? Leading Indian designers have set shops in western countries Demand
? for fashion brands rising steadily
which enables them to showcase their creations at a global
? India being a low-cost destination, companies can outsource
level manufacturing of products
? Indian fashion is accepted across the world ? Design process outsourcing gaining momentum as Indian
? Margin at store levels in the range of 25-40 percent as creations are gaining world-wide recognition
compared to 20-12 percent in India5 ? Sixty percent of European brands are still not present in India
and providing an early entry advantage6
Challenges Competition
? with leading global brands FDI limit
? of 51 percent which leaves international brands with
Operating
? cost in European countries is comparatively higher limited market entry options
than that in India Infrastructure
? bottlenecks
Threat from
? cheap counterfeit products/replicas
Player Strategies ? Ritu Beri’s label is available at Liberty’s in London ? The most common modes of entry are through JVs or
? Tarun Tahiliani’s label is available at Whistles in London Franchising
? Kimono by Kiran Uttam Ghosh is available at RCKC in London
Source:
5. Milano Fashion Global Summit, Value Partners India, November 2008
6. Luxury in 2007 and Beyond, Images Yearbook, Vol. IV, No.1
Success Stories:
LVMH Entered
? India in 2002, with other leading brands like Dior, Tag Heuer and Fendi. Has over 60 brands under its umbrella
Louis Vuitton
? and Fendi were two of the first foreign brands permitted to take a 51 percent stake in their local distributors
Strong
? presence in India, which allows them to negotiate over real estate and advertising space. For instance, purchased bulk ad space
in ‘Vogue’ – a fashion magazine for its brands at a discounted rate
Has recently
? acquired space in Emporia Mall in Delhi for LV and Dior, planning to acquire more space for other brands like Fendi and
Celine
Only luxury-goods
? conglomerate to build up a group presence in India. Closest competitor being Italian brand Gucci, the anchor of Gucci
Group which is dependent on its local distributor, the Murjani Group, instead of leveraging its multi-brand structure
Source: Luxeplosion
Financial Services
74
Financial Services
Parameters Banking Insurance Mutual Fund
Industry Size (2008) USD 1081 bn Life = USD 48.6 bn USD 98.7 bn
Non-Life = USD 8.7 bn
Expected Industry USD 2130.1 bn Life = USD 80-100 bn USD 192.8 bn

Size (2012) (2013)
Non-Life = USD 18.3 bn
(2013)
Major Foreign Players France's Societe Aviva, Standard Life, Bajaj Allianz, Fidelity,
In India Generale, Barclays, Bajaj Allianz, ING, HSBC etc.
BNP Paribas
Major Indian Players State Bank of India NA NA

in EU (Germany, Belgium,
France), Bank of
Baroda (Belgium),
ICICI(UK and Belgium)
Note: 1) For banking, Industry size represents total assets and penetration in the form of total bank loans as percent of GDP
2) For Insurance, Industry size represents total premiums and penetration in the form of premiums as percent of GDP
3) For Mutual Funds, Industry size represents total assets under management (AUM) and penetration in form of AUM as percent of GDP
4) Mutual fund expected industry size for 2012 converted on the basis of 2009 conversion rate
Source: AMFI, IRDA, RBI, BMI, Credit Suisse Report, Centrum Banking sector Report, June 2009, CRISIL Banking Outlook
Key India Markets:
Chandigarh
Lucknow
Agra
Patna Guwahati
Udaipur
Ahmedabad
Bhubaneswar
Goa Pune
Hyderabad
Kochi
Tamil Nadu
Opportunities for microfinance
& agri-credit services
Source: Press Releases, KPMG Analysis
Business Climate in India's Financial Service Sector

Parameter Details
FDI Regulations Foreign

? banks can do business in India either by setting up branches or through
a wholly-owned subsidiary, after approval from the Reserve Bank of India (RBI),
India’s central bank
Indian private
? banks are allowed 74 percent foreign ownership, with a 5
percent cap on ownership by any one entity
The cap
? on foreign companies’ equity stakes in insurance joint ventures is 26
percent, but is expected to rise to 49 percent
Foreign
? equity (FDI) in Non Banking Finance Companies (NBFC) is allowed up to
100 percent under the automatic route subject to minimum capitalization
norms
Constraints / Regulatory
? barriers for entry of foreign players in banking and insurance sector
Challenges Volatile
? financial market
Other Incentives Like domestic

? banks, foreign banks are allowed to undertake various banking
activities in India (e.g. wholesale, retail, private banking, investment banking,
foreign exchange, etc.)
Government
? has put major thrust on financial inclusion which has helped
expand the reach of financial services
Source: RBI, Ministry of Overseas Indian Affairs, Global Research 2009, Ministry of Commerce, European Commission
Incofin – Belgium Belgium microfinance company Incofin acquired a 34

percent stake in India-based NBFC Asomi Finance
Private Ltd. in June this year
Allianz Global Investors (Allianz GI) – Since 2001, Bajaj Group and Allianz Group have
Germany launched insurance joint ventures namely Bajaj
Allianz Life Insurance and Bajaj Allianz General
Insurance
Swiss Re – Switzerland Religare and Swiss Reinsurance Company formed an

insurance JV in June this year
BNP Paribas – France BNP Paribas acquired a majority stake in Geojit in

October 2006
Deutsche Krankenversicherung AG(DKV) – Apollo Hospitals Enterprise Limited and DKV formed a
Germany 74:26 joint venture in January 2008
Bank Sarasin & Co – Switzerland In June this year, Bank Sarasin & Co has announced
plans to enter the Indian financial service sector
Source: Merger Market, Company websites
Netherlands
UK
Germany
Belgium
France
Switzerland
Indian Banks Operating in the EU Region
EU-based Banks Operating in India India
EU-based Banks Planning to Enter India

Key Industry Trends ? Rise in entry of foreign players in financial Key Industry Trends Consolidation
? in the market through M&A
service sector among commercial banks within the national
markets
? Indian banks venturing into new opportunities
like insurance and mutual fund Sophistication
? in product offerings
Key Drivers Low penetration

? of financial services Key Drivers Within
? Europe, the UK is the largest centre for
cross-border banking
Rising income
? levels
Competitive Low dependence

? on exports and high reliance on Competitive Leading
? financial service centre
Advantage domestic market Advantage Western
? centre for Islamic banking
Low exposure
? to sub-prime loans
Favourable
? tax and regulatory environment
High savings
? rate
Advanced
? technology
Source: Analyst Reports (Business Monitor International March 2009, Cygnus Business Source: UKinvest.gov, Centre for Economic Policy Research
Consulting & Research, January - March 2009); CII; IBA, CRISIL

In EU In India
Opportunities ? Largest commercial banking industry, especially the UK Low retail

? credit penetration of 10 percent
? The UK, is the second largest insurance industry in the world Opportunity
? in booming sectors such as SME finance,
after the US agriculture and rural finance, institutional finance, trade
finance and private equity
? Highest insurance penetration
Opportunities
? in the domestic insurance market, with health
insurance industry expected to grow at a CAGR of 25 percent
to reach nearly USD 5.7 billion by FY15

In EU In India
Challenges ? Current economic downturn Tough regulatory

? environment
? Difference in market structures and lending practices across Limited
? geographic reach and distribution
Europe
Lack of
? investor education and awareness
Player Strategies ? Entering into EU by expanding their branch network and Entering
? into India through acquisitions, joint ventures and
setting up wholly- owned subsidiaries wholly-owned subsidiaries
? Entering through joint ventures and acquisitions Entering
? by setting up private equity funds
Offshoring
? of banking and financial services to India
Source: Centrum Banking sector Report, June 2009, Ministry of Commerce, Government of India, Centre for Economic Policy Research
Success Stories:
HSBC Holdings HSBC entered

? the Indian Market in 1959
Second
? largest foreign bank in terms of branch network
Has product
? offerings across the financial spectrum in segments including private equity, audit service, investment banking, insurance,
software development and asset management
The bank
? has leveraged upon its global experience to innovate products and services to suit local requirements
One of
? the first banks to start the innovative product offering - floating interest rate home loans
Has plans
? to grow its retail customer base and product base
Source: Company website, IBEF, RBI
The Indian markets have shown

early signs of recovery and India
will become one of the world's
economic engines. Hence, it is a
very important market for us and
we have strengthened our
presence in India through this
launch.
– Mr Fidelis M Goetz,
Head of Private Banking - Bank Sarasin &
Source:
The Hindu Business Line,
Swiss Sarasin Group to Enter
Indian Market, June 23, 2009
Gems and Jewellery

80
Gems and Jewellery
Domestic Industry Size – 2008 USD 16.1 billion
Expected size of industry (2015) USD 30 billion
Exports (2008) USD 20.8 billion
Export of cut and polished diamonds (2008) USD 14.2 billion
Export of gold jewellery (2008) USD 5.6 billion
Export of coloured gemstones (2008) USD 276.4 million

Source: IBEF, CII-Indian MSME Ecosystem, Gems & Jewellery, February 2009
Key India Markets:
Delhi
Silver Jewelry and articles
Jaipur
Polishing precious and semi-precious gemstones
Surat
Diamond processing center
Delhi
Kolkata
Light weight plain gold jewelry Jaipur
Mumbai
Machine made jewelry Surat
Kolkatta
Hyderabad Mumbai
Precious and semi-precious studded jewelry
Nellore
Captive source for hand made jewelry Hyderabad
Nellore
Trichur
Gold jewelry and diamond cutting Trichur
Coimbatore
Coimbatore
Casting Jewelry
Business Climate in India's Gems and Jewelry Sector:

Parameter Details
FDI Regulations Allowance

? of 100 percent through automatic route
Government Reduction
? of value addition norms for gold and silver jewellery exports from
Regulations 7 percent to 4.5 percent
Abolishing
? duty on polished diamonds in 2007
Import duty
? exemption on rough Cubic Zirconia
Reduction
? of import duty on cut and polished Cubic Zirconia and rough Coral
from 10 percent to 5 percent
Gold, silver
? and platinum jewellery exporters are allowed to import/procure
duty free inputs for manufacturing
Constraints / Highly unorganized

? market – accounting for 96 percent of the total market
Challenges Small firms
? lack technological and export information expertise
Since majority
? of the raw material needs to be imported, companies
normally stock huge quantities of inventory resulting in high inventory
carrying costs
China, Sri
? Lanka and Thailand's entry into the small diamond segment
Source: Ministry of External Affairs, Government of India, Foreign Trade Policy, August 2009
Morellato & Sector Group, Italy1 Joint Venture with Gitanjali Gems in November 2007
Mariella Burani Fashion Group, Italy 2 50:50 JV with Gitanjali Gems in December 2007
Cartier, France 3 JV with Navratna Bharat Retail Pvt. Ltd. in May 2008
Source: 1. Diamond News, December 20, 2007
2. International Business Times, November 21, 2007
3. Diamond World News Service, May 10, 2008
UK
Key Jewellery consumption centre and large trading centre for diamonds
Belgium
Key gemstone processing destination Large trading centre for diamonds
France
Key Jewellery consumption centre
UK
Italy Belgium
Key Jewellery fabrication and consumption centre France
Italy
Turkey Turkey
Key Jewellery fabrication centre


Key Industry Trends Branded

? jewellery is likely to be the fastest- Key Industry Trends Growing
? demand for coloured stones across
growing segment in domestic sales Europe
? Consumers are very design, brand and quality
conscious
? Turkey is one of the major manufacturing
destinations in Europe
Key Drivers Growing

? organised retail sector Key Drivers Increasing
? levels of disposable income
Increase
? in income levels Increasing
? promotion of jewellery products
Growing
? branding and brand promotion
activities (GBP 50 mn spent in UK alone in
2005)4
Proactive
? industry trade associations and
reputed international jewellery fairs
Italy, UK
? and Turkey are the top 3 jewellery
consumers in Europe, cumulative they account
for over 11 percent of global consumption4
Competitive India boasts

? of around 450,000 goldsmiths, Competitive ? Proximity to Western Markets
Advantage 100,000 gold jewellers, 6,000 diamond Advantage ? Design and technological expertise, for instance,
processing players and 8,000 diamond jewellers Italy is known for its strength in design and use
Low-cost
? destination of advanced equipments and machineries
Largest
? consumer of gold in the world – around ? Antwerp in Belgium is known as the trading hub
20 percent of the global consumption Largest for diamonds
diamond cutting and polishing centre in the
world - nearly 9 out of 10 diamonds sold
worldwide are cut and polished in India
Dedicated
? SEZ’s for Gems and Jewellery sector
Government Rough coloured

? precious gems stones are Government The European
? Union has reduced tariffs on gems
Incentives exempt from customs duty Incentives and jewellery originating from India under its
Generalised System of Preferences (GSP), which
Duty-free
? import of consumables for metals
has been extended for the period from January
other than gold and platinum, up to 2 percent of
1, 2009 until the end of 20115
freight on board value of exports
Import of
? gold of 18 carat and above under the
replenishment scheme
No import
? duty on polished diamonds
Export of
? coloured gemstones on a consignment-
basis has been allowed
Interest
? subvention of 2 percent on pre-shipment
credit extended to March 2010
Excise duty
? on branded jewellery to be reduced
from 2 percent to Nil
Customs
? duty on unworked Corals to be reduced
from 5 percent to Nil
Source: Ministry of External Affairs, Government of India; IBEF; CII-Indian MSME Ecosystem; Source:
Gem & Jewelry, February 2009 4. The Gems and Jewellery Export Promotion Council
5. DNA Money, July 25, 2008

In EU In India
Opportunities ? Europe’s technical expertise holds immense opportunities for Since there
? is no cap on FDI, companies can manufacture at
Indian firms lower cost in India
? The same is applicable for designing; countries like Italy and Demand
? for branded jewellery in India is on the rise and with
France are well-known for their superior designs the Government abolishing excise duty on branded jewellery,
the segment is expected to witness growth
? Strategic alliances can also provide Indian companies with
easy access to Western countries Growing
? retail segment provides immense opportunity for
branded jewellery
? Increasing acceptance of Indian jewellery in overseas markets
due to the widely dispersed Indian Diaspora Demand
? for fashionable, lightweight and innovative designs in
which EU companies hold expertise
? Indian gems and jewellery exports to EU, comprising jewellery,
pearls, precious and semi-precious stones and metals, India accounts
? for 95 percent of diamonds polished in the
estimated at USD 2.7 billion (2007) is expected to grow as EU world in terms of pieces
reduces its tariffs6
Challenges ? Current challenges are with respect to slowdown in the Gems and
? Jewellery industry in India is highly unorganised
Western countries and fragmented with around 96 percent of total players being
family-owned businesses
? Due to lack of demand in Europe and US; the major markets for
the Indian gems and jewellery industry, exports have fallen by Small firms
? lack technological expertise
4.6 percent for the period April 2008 to February 20097 Infrastructure
? bottlenecks
Unusual
? increase in price of gold and rough diamonds
Threat from
? Sri Lanka and Thailand, on account of their entry
into the small diamond segment
Player Strategies ? Indian players have generally followed the joint venture Joint Venture
? approach is considered to be most preferable by
approach foreign players while entering into India
? Strategic acquisition is considered by companies to enhance JV approach
? is expected to provide international firms with
capabilities and technical expertise, expand operations local expertise and access to local distribution networks
geographically and benefit from other well established brands
in the diamond and jewellery businesses
Source:
6. Thaindian News, July 29, 2008
7. Livemint, July 21, 2009
Success Stories:
JV between Investment
? in the India arm - Morellato India Pvt. Ltd. in the range of USD 15-20 million
Morellato & The venture
? would distribute watch and jewellery brands of the Italian group in India
Sector Group, Italy
The company
? plans to assemble products in India through technical support from Morellato
and Gitanjali
Gems Morellato,
? Miss Sixty and Just Cavalli, are the three brands that company is looking to assemble in India
Company
? plans to operate through self-owned as well as franchise route in India
Source: Analyst Report, Commerce Ministry, Government of India
India is an important partner for

Rio Tinto. More than 90 per cent of
the Argyle production is cut and
processed here. More than 60 per
cent produce of Diavik mine in
Canada is cut and polished here.
When we talk about diamond
mine, India comes first in our
mind.”
– Bruce Cox
Managing Director, Rio Tinto Diamonds
Source:
Business Standard, India key to
our future plans, August 11, 2009
IT-ITeS
86
IT-ITeS
Industry Size USD 64.0 billion (2008)

USD 71.7 billion (2009E) CAGR -16.4%
USD 137 billion (2013E)
IT -BPO Exports USD 40.9 billion (2008)

USD 47.3 billion (2009E)
Contribution to GDP 5.5 percent (2008)

5.8 percent (2009E)
Expected growth rate (2008 to 2013) 16.4 percent
Regulatory Indian IT-ITeS faces minimal regulatory restrictions, coupled with

a range of several fiscal incentives
Employment ~ 2 million
Key Players Indian -TCS, Wipro, Infosys Technology, Tech Mahindra,HCL

Technologies
Foreign - IBM, Cognizant, Accenture, Microsoft, Dell, Oracle,
Xansa, Capgemini, SAP, etc.
Source: NASSCOM Strategic Review -2009
Leading IT-BPO service delivery locations constitute

over 97 percent of total IT-BPO revenues in India
Delhi-Gurgaon
17%
Noida
17%
Mumbai
15% Pune
15%
Hyderabad
Bangalore 14%
36%
Chennai
15%
IT-ITeS Hubs in India
Source: NASSCOM Strategic Review -2009
Business Climate in India's IT-ITeS

Parameter Details
FDI Regulations Hundred

? percent FDI permitted through automatic route
Constraints / Global slowdown

? especially in US and UK which account for about 80
Challenges percent of industry’s exports
Meltdown
? in BFSI* sector which accounts for ~40 percent of revenues
Increasing
? competition from other low-cost countries like Philippines,
Malaysia, China and Eastern Europe
Forex fluctuations
? impact industry’s revenues; one-third of which come from
exports
IT spending
? growth is seen as easing further in 2009, this in turn, could put
pressure on IT companies while trying to negotiate new contracts or renew
existing ones
* BFSI: Banking, Financial Services and Insurance
Source: NASSCOM
HCL- Axon UK HCL AXON is a fully-owned subsidiary of India –based HCL

Technologies Ltd., formed after the reverse merger of the HCL SAP
practice and UK’s AXON Group plc in December 2008
SAP - Germany SAP Labs India is one of the four global development hubs of
Germany–based SAP that contribute to all areas of the SAP product
value chain- Research & Breakthrough Innovation, Product
Development, Global Services & Support and Customer Solutions &
Operations
Xansa -UK UK-based IT company Xansa employs ~ 3,000 people in India and
has plans to increase its staff count to 10,000 in the next 5 years
Infosys –Royal Phillips (UK) In June 2007, Infosys Technologies Ltd. received a USD 250
million BPO contract from Royal Philips Electronics N.V. in a
unique deal in which Infosys also acquired Philips' services delivery
centers in India, Thailand, and Poland for USD 28 million
TCS In May 2009, TCS bagged an IT outsourcing contract from service

automaker Volkswagen in Germany and in April 2009, TCS won a
USD 80 million outsourcing contract from UK’s state-owned Child
Maintenance and Enforcement Commission (CMEC)
Capgemini – France France based Capgemini employs over 18,000 people in India
WNS WNS acquired UK-based auto insurance claims processing firm Call
24/7 in April 2008
In July 2008, WNS acquired UK insurance major Aviva’s BPO

business Aviva Global Services (AGS) for around USD 228 million
Source: UKIBC, Company Websites, Indiatimes Infotech April 2009, www.vccircle.com
Companies Share from Europe
Infosys 25.3%
TCS 29.5%
Wipro 26.0%
Tech Mahindra 66.8%
HCL 30.2%
Source: Annual Reports, OneSource

Key Industry Trends Indian IT

? industry has evolved from being an Key Industry Trends Central
? and Eastern Europe are fast emerging
outsourcing destination for non-core services to regions
becoming a partner for new age technology
Western
? Europe accounts for ~37 percent of the
solutions
global spend on IT services
Exports
? form the backbone of this sector,
India’s share
? from Continental Europe has been
generating two-thirds of total revenues
growing at CAGR 50 percent (2004-08)
BFSI continues
? to be the largest industry vertical
The number
? of UK organisations near-shoring or
but increased growth is coming from hi-
off-shoring leapt from 47 percent to 57 percent
tech/telecom and manufacturing
in 2007 — with all of them offshoring some or
The industry
? is dominated by large integrated all of that work to India
players and is fairly balanced in terms of Indian
and foreign players presence
Players
? are targeting new verticals like retail,
healthcare and new geographies like Latin
America, Middle East to diversify their business
model
Key Drivers Enhancing

? efficiencies and domestic shortage of Key Drivers European
? market is comparatively unexplored by
qualified personnel are emerging as strategic Indian IT firms
drivers
Economic
? downturn is likely to support further
India accounts
? for over 28 percent of the total growth in IT outsourcing services in the region
suitable talent pool
Cost remains
? the primary motivation for IT
Global quality
? and security standards outsourcing in Europe
Industry
? is supported by strong fundamentals Some recent
? changes in the labor laws and
and robust enabling environment facilitated by Government regulations by many European
Government and NASSCOM initiatives countries is likely to boost R&D offshoring
?
Emerging
? Domestic and SMB (Small and
Medium Business) market
Competitive Abundant
? talent and cost advantage Competitive -
Advantage Advantage

Government Tax holiday

? benefit is given to the sector under Government -
Incentives the Software Technology Park of India (STPI) and Incentives
the Export Oriented unit (EoU) schemes
Government
? has introduced the SEZ scheme
which seeks to provide benefits similar to
sections 10A and 10B
The International
? Cooperation and Bilateral
Trade (ICBT) division of Department of
Information Technology has been set up to
promote international cooperation in the
emerging and frontier areas of information
technology under bilateral, multilateral or
regional framework
Source: NASSCOM Strategic Review 2009, Business India, December 2008

In EU In India
Opportunities ? BBC has reported that 30 percent of European companies Low penetration
? of PCs and internet provide opportunity for IT
intend to outsource some of their operations companies to explore further
? Furthermore, Gartner forecasts that IT outsourcing in Europe Research
? and Development off-shoring in India is poised for
will reach USD 90.9 billion in 2009 the next phase of growth
Small and
? medium businesses (SMBs) are one of the most
important segments that IT companies are trying to serve
India accounts
? for over 28 percent of the total suitable talent
pool across all the low-cost locations. The talent pool is
growing steadily with 3.5 million additions expected in FY2009
*KPO, LPO,
? and ESO services provide significant cost arbitrage
Challenges ? Clients are more interested in nearshoring to the Central and Language
? and cultural compatibility issues
Eastern European region than offshoring to India
? East European countries like Poland, Romania and Hungary are
emerging as competitors due to their cultural and
geographical proximity to Europe
? Rising wage costs in India
? STPI* benefits have been extended by just one year
Player Strategies ? All major Indian IT players like TCS, Infosys, HCL and Wipro Establish
? Centers - SAP and Temenos were the first two
have presence in Europe European companies to establish their captive development
centres in India. While there were just four captive
? Acquisitions -Players focus on acquiring firms and adopt niche
development centres of European software product firms in
skills For e.g.: HCL acquired Axon
India in 2001, the number has touched 18 in 2008.
? Setting up Offices/Centers- Indian players have set up offices
Outsource
? – To bring in cost efficiencies European firms
in Eastern Europe where German and French speaking labor
continue to outsource process or part of process to India
supply is abundant and to gain easy access to Europe
For e.g.
For e.g.:
- Lloyds TSB plans to outsource a major part of its IT
- Wipro has a 250-seater office in Bucharest division, replacing 80 percent of its local IT workforce with
- Infosys has 450-seater centre in Czech Republic top Indian tech outsourcing firms such as Wipro and TCS
- Barclays (BCS) is likely to move its global infrastructure and

service delivery (GISD) to India
- Germany based Infineon Technologies AG has awarded
multi-year contract to TCS to operate and maintain
solutions for its Supply Chain Management landscape
Note:*LPO –Legal Process Outsourcing; ESO – Engineering Services Outsourcing; KPO – Knowledge Process Outsourcing
* STPI – Software Technology Park
Source: Crisil Reserach 2008, NASSCOM, Company Websites
Infrastructure
92
Infrastructure
Industry Size USD 500 billion to be spent during the XIth plan
Infrastructure Investment as a percentage XIth plan to see investment of about 7.53 percent of GDP
of GDP
Key Players Aviation: Jet Airways, Kingfisher, NACIL, SpiceJet etc.
Roads, Ports, Shipping, Railways: L&T Ltd., GVK, GMR, IRB

Infrastructure: Reliance ADAG, Nagarjuna, HCC, Gammon,
CONCOR, GE Shipping, Shipping Corporation of India etc.
EU players present in India Airport: Siemens, Fraport AG, South Africa Airport Company,
Unique Zurich
Roads: Emirates Trading Agency
Ports: DP World, Maersk, PSA Singapore, P&O Ports
Water Sanitisation: Veolia
Source: Company Websites; Planning Commission; CLSA report on Infrastructure, April 2009
Presence of EU Players in India
Delhi - Fraport
Gujurat: PPP
Projects for
Port Developmentl
Kolkata
Nagpur - Veolia
Mumbai: PPP
Projects for Roads,
Ports & Metro Rail
Hyderabad
Bangalore - Seimens Airport
& Unique Zurich Airport Projects: Siemens, Unique Zurich, Fraport
Water Sanitisation Veolia
Dedicated Western and Eastern Freight Corridor
PPP initiatives in India
Source: Press Releases, KPMG Analysis
Business Climate in India's Infrastructure Sector

Parameter Details
FDI Regulations Airports:

? 100 percent under automatic route for Greenfield airports, 100
percent for existing airports with FIPB approval for investment beyond 74
percent
Air Transport:
? 49 percent FDI, 100 percent NRI Investment allowed
Ports: 51
? percent under automatic route for support services to water transport
such as operations and maintenance of piers, loading and discharging of
vehicles and 100 percent under automatic route for construction and
maintenance of ports and harbours
Railways:
? 100 percent under automatic route for railway related components
Roads:
? 100 percent under automatic route
Inland waterways
? and transport: 100 percent under automatic route
Urban infrastructure:
? 100 percent under automatic route
Constraints / Land acquisition

? for new infrastructure projects
Challenges Lack of
? proper dispute resolution mechanism
Lack of
? skilled manpower
Delay in
? implementation of projects due to political constraints
Source: DIPP; CLSA Report on Indian Infrastructure, April 2009
Fraport AG – Germany Holds 10 percent stake in a consortium with GMR, Eraman

Malaysia and AAI which is developing the Delhi airport since 2004
Siemens Project Ventures – Germany In a consortium with L&T, Unique Zurich since 1999
Unique (Flughafen Zürich AG) - Zurich Since 1999, holds 17 percent stake in a consortium with L&T,
Airport, Switzerland Siemens project ventures, AAI and KSIIDC; which is developing
the Bangalore International Airport Ltd.
Veolia Water – France Entered India in the mid-90s; provides services in the areas of
drinking water production and distribution to towns like
Jamshedpur, Chennai and Nagpur, and to the state of Karnataka
EADS – France Owns a 100 percent subsidiary since 2006 and plans to set-up a
technology center. Also plans to invest in India’s defense sector
GMR – India Appointed to modernize the Istanbul airport in 2007
IL&FS – India Set up an office in London in January this year to tap on financing
opportunities
Source: Company websites

(PPP initiatives in CEE and other EU Regions providing greater opportunity for investments)
Estonia
Latvia
Lithuania
Poland
Germany Czech Republic

France
Slovakia Romania
Slovenia
Bulgaria
Greece
Source: Report on PPP Initiatives in CEE Countries, 2008

Key Industry Trends Increased

? Government’s focus on infrastructure Key Industry Trends Increase
? in infrastructure development in
Central and Eastern Europe
Increased
? opportunities for private sector
investments in various infrastructure projects Boost to
? PPP developments through involvement
of private players
Key Drivers Increased

? involvement of private companies in Key Drivers Large scale
? infrastructure development planned
infrastructure development throughout Europe
Capacity
? additions in to meet the growth in
trade, and other industries
Competitive Low cost

? of labor Competitive High technical
? capabilities
Advantage Advantage
Government Model Concession

? Agreements for development Government Encouraging
? private sector investment
Incentives in roads and ports Incentives
Tax holiday
? for infrastructure development
Source: Planning Commission Source: European Commission

In EU In India
Opportunities ? EU’s trans-European infrastructure plan by 2020 includes rail Road, port,
? airport
road, inland waterway network as well as 294 seaports and
Urban infrastructure
? like water sanitization, waste disposal
366 airports etc.
? Estimated investment of USD 793 billion ( Euro 556 billion) Inland waterways
?
? Road and airport development in Central and Eastern Europe Defense
?
? Transportation infrastructure in Spain, France and Germany

In EU In India
Challenges ? Dealing with certain Governments could be a challenge Slow pace

? of approvals and consequent delays
? Obtaining Financing for large Projects could be difficult under Obtaining
? finance is a lengthy process
current market conditions
? Regulatory delays could hamper projects
? Slow pace of privatization especially in Germany
Source: Planning Commission – India, CLSA Report on Indian Infrastructure, April 2009; Report on PPP Initiatives in CEE Countries, 2008
Success Stories:
Fraport AG The company

? holds 10 percent stake in a consortium with GMR, Eraman Malaysia and AAI which is developing the Delhi airport
Its significant
? experience in airport development and management globally has been leveraged in the Delhi airport project
Veolia Water The company

? has entered India by setting up a subsidiary to provide services in the areas of drinking water production and distribution
Has presence
? in Jamshedpur, Chennai and Nagpur, and also provides services in the state of Karnataka
It is providing
? solutions for water network for 24 hour water supply, re-furbish old network, improve drinking water plants etc.
Seeking
? more such investments in India
As per the Joint Action Plan of 2004 both

India and EU have agreed to set up an
expert group to identify policy level
changes required to promote PPP. This is
expected to help in exchange of
information and experiences and also
enhance infrastructure investments.
d partnership and a member firm of the KPMG network of independent member firms affiliated with
perative. All rights reserved.

98
Industry Size – 2008 USD 11.7 billion
Industry Size – 2013 USD 21.0 billion
CAGR (2009-13) 12.5 percent
Advertising-to-GDP Ratio 0.47 percent
Number of Television Households (2008) 123 million
Foreign Players in India BBC, News Corp, Viacom, Disney, Sony Pictures Entertainment,
Turner, Discovery, etc.
Source: FICCI – KPMG, Media and Entertainment Industry Report, 2009
Pathankot
Amritsar
Ludhiana Jallundar
Dehradun
Delhi
Siligudi
Jaipur
Ahmedabad
Jamnagar
Surat
Mumbai Kolkatta
- Media and Entertainment Hub of India Nashik
Mumbai Berhampur
- Home of Bollywood, Hindi film industry Pune
- CAS implemented zone
Major Film Hubs
Hyderabad Hyderabad
Belgaum Mandatory CAS Implemented Zone
- Home of Tollywood, Telugu Film Industry
- Cinema of Andhra Pradesh, movies made in Telugu Language Mysore Chennai Few cities expected to get FM Radio
licenses in Phase 3 of FM Radio Policy
Chennai
- Tamil Film Industry aka Kollywood Cochin Key cities for multiplex expansion
plans by players
Source: Company Website; FICCI – KPMG, Media and Entertainment Industry Report, 2009; Telecom Regulatory Authority of India, Consultancy
Paper on Issues Relating to 3rd Phase of Private FM Radio Broadcasting
Business Climate in India's Media and Entertainment Sector:

Parameter Details
FDI Regulations FDI limit

? of 100 percent is permitted in television channels other than news
and current affairs
FDI limit
? of 49 percent for cable network and direct – to – home players
FDI limit
? of 100 percent is permitted in film industry and advertising through
the automatic route
Hundred
? percent FDI1 allowed in the facsimile edition of foreign newspaper
and magazines
FDI limit
? of 20 percent is permitted in FM Radio sector
Constraints / Entertainment
? tax rates vary from state to state
Challenges Antiquated
? Indian Cinematograph Act
Inadequate
? facilities e.g. shooting floors, dubbing studios, equipment,
exhibition centres – is compounded due to TV industry competing for the
same limited resources
Home video
? piracy and illegal movie and music downloads affect legitimate
revenue collections
Leakages
? on account of under declaration of subscribers by cable operators
Source: FICCI – KPMG, Media and Entertainment Industry Report, 2009

1. The Financial Express, 100 percent FDI in fax edition of foreign newspapers, January 15, 2009
UTV Software Communication– India Acquired UK-based gaming firm Ignition Entertainment in 2006
Bennet Coleman – India In June 2008, acquired UK-based Virgin Radio for USD 105 million
Zee TV – India Operates television channels in Austria, Belgium, Denmark,

Finland, France, Germany, Greece, Italy, Netherland, Poland,
Portugal, Spain, Sweden and UK. In UK, Zee offers channels via
Sky Digital
Sun TV – India Operates television channels in Denmark, France, Germany, Italy,

Netherlands, Norway, Sweden and UK
JCDecaux – France Has limited presence in India, with offices in Mumbai, Delhi and
Bangalore
Aegis Group - UK In July 2009, acquired Indian marketing firm Communicate2 and
IMCS
Financial Times – UK Has got approval from the Foreign Investment Promotion Board to
induct Foreign equity up to 100 percent for facsimile edition in
India
BBC - UK Operates news and entertainment channels in India
Prime Focus – India In 2006, acquired 55 percent stake in VTR Group, a European
media company and Clear Post Production, a visual effects
company
Source: Company Websites; FICCI – KPMG, Media and Entertainment Industry Report, 2009
Germany
Contributed 22% of the total industry value in 2008
UK
Belgium
Contributed 6.5% of the total industry value in 2008
France
Spain
Spain, France UK and Germany are key markets for Animated Content
Italy
Luxembourg
RTL Group, leading media company having 42 television channels and 32 radio stations
Source: Datamonitor, Media in Europe, Oct, 2008; Association of Commercial Television in Europe, Fact Book, 2008

Key Industry Trends Conversion

? from analog to digital Key Industry Trends Gaining
? popularity for online media, especially
contents:digital TV distribution platforms – IPTV, in Print Media
DTH; digitalisation of music libraries and sales
European
? Media players are targeting key niche
of online and mobile music; digitalisation of
markets and regional markets
films
Home video
? sales proved to be the most
Animation
? and Gaming are emerging sectors in
profitable for European Films entertainment
India
market, generating total revenues of USD 14.2
Narrowcasting:
? providing niche content. For e.g.: billion in 2008
rising number of niche TV channels, cross over
content in music and films as well as large
number of magazine launches in the niche
genres
Regionalisation:
? providing local content in local
language. Tier II and Tier III towns are emerging
as important growth centres. For e.g.: growth in
regional channels and city-specific channels,
English Newspaper players are foraying in Hindi
and vernacular languages
Key Drivers Favourable

? consumer demographics Key Drivers -
Expansion
? into under penetrated segments: Low
penetration levels within the M&E industry
(across segments), offers huge underlying
potential for growth
Corporatisation
? of Indian players and entry of
foreign players
Convergence
? of media platforms

Competitive Liberal
? foreign investment regimes in various Competitive -
Advantage sectors like, Print, Television, Films, etc. Advantage
India has
? cost advantage in producing animated
content. For e.g.: A 22-24 minute series can cost
up to USD 0.25- 0.3 million in Europe where as
in India the same can be done in approximately
USD 60,000
Government As a relief
? measure for the Hindi Film Industry, Government Formation
? of The Association of Commercial
Incentives Maharashtra Government has included the Incentives Television (ACT) in Europe, represents the
audio-video piracy under the Maharashtra business interests of the commercial television
Prevention of Dangerous Activities (MPDA) Act. sector in the EU region
Additionally the state Government is creating an
anti-piracy cell to oversee the enforcement
related to the act
Appointment
? of the Telecom Regulatory
Authority of India (TRAI) in 2004 as a regulator
for the television industry (with its scope
increased to cover broadcasting and cable
services)
Granting
? Industry status to Indian Film Sector in
2000 and permitting FDI up to 100 percent in
film related activities
Providing
? Entertainment Tax exemptions to
multiplexes
Roll out
? of Phase II of the Radio licensing policy
in 2005, with a number of reforms including a
more rational license fee structure
The Government
? has given permission to private
broadcasters to set-up hubs for satellite up-
linking
Source: FICCI – KPMG, Media and Entertainment Industry Report, 2009; Thaindian News, 16 July 2009; Source: Datamonitor, Media in Europe, Oct 2008; Datamonitor, Movie and Entertainment in Europe,
Televisionpoint.com, Animation India: Building on age-old storytelling skills June 2009; ACT website

In EU In India
Opportunities ? India is considered as the animation off-shoring hub. Europe is Indian Animation
? industry is projected to reach USD 401
major consumer of animated content, Indian companies can million in 2009 from USD 397 million in 2008 and is expected
target entering into co-production agreements with European to grow at 17.3 percent CAGR to 2013 due to growing
counterparts instead of providing off-shore services2 domestic demand and increase in off-shore service1
? The Government of India has co-production agreement treaties Off-shored

? production comprise of almost 70 percent of total
with Italy, UK, France and Germany1. The advantages of such revenues, North America and Europe being the key markets for
treaties for film makers of both countries are generally in Indian companies
terms of access to technical expertise, production standards, Growth
? in number of niche channels in categories like News,
tax benefits and access to finance Kids, Infotainment, Spiritual and Lifestyle
Opportunity
? for production and co-production of Films in India
Source:
1. FICCI – KPMG, Media and Entertainment Industry Report, 2009
2. CRISIL Research, Animation Industry set to Accelerate, Mar, 2008

In EU In India
Challenges Indian animation

? companies face significant competition from Animation industry in India is faced with the challenge of
?
countries like South Korea, China, Philippine and Taiwan2 who shortage of skilled animators
also offshore animated content to European markets
The entertainment
? industry is losing ~ USD 4 billion in
revenues and over 800,000 jobs annually due to audio-video
piracy3
Player Strategies Crest animation

? has partnered with Lionsgate films to produce Financial
? Times, has got approval from the Foreign Investment
/ co-produce three films2 Promotion Board to launch its facsimile edition in India
UTV Software
? Communication entered UK gaming market via BBC operates
? television channels in India
the acquisition route
Indian broadcasting
? companies have entered European
markets via distribution partnerships
Source:
2. CRISIL Research, Animation Industry set to Accelerate, Mar, 2008
3. Thaindian News, July 16, 2009
Animation consumers and exporters
Canada
Europe
USA China South Korea
Japan
India
Taiwan
Phillipines
Animation Consumers
Consumers/Exporters
Majorly Exporters
Source: Media & Entertainment - Animation Industry set to Accelerate, CRISIL, March 2008
Success Stories:
Zee Entertainment Television

? Broadcasting across foreign shores
Enterprise (ZEE) ZEE offers
? four channels across UK and Europe reaching over 10 million households, having a viewership of over 1 million
Source: Company Website (www.zeeuk.com)
India is one of the few countries where economic growth will be led by
domestic consumption. With a low ad spend to GDP ratio of 0.47 percent, a
growing consumer class and middle class, young population, low media
penetration and increasing discretionary spending; India continues to be an
attractive market for media and entertainment.
– Dr. Amit Mitra
Secretary General, FICCI
Source:
www.indiantelevision.com, Indian media and entertainment industry set to
touch USD 22 billion by 2013, February 17, 2009
Pharma, Biotech and Healthcare

106
Pharma, Biotech and Healthcare
Size of the Industry (FY08E):

Pharma USD 16.6 billion
Healthcare delivery (2007) USD 36.6 billion
Biotechnology USD 2.5 billion
Expected Industry size

Pharma (2013) USD 37.1 billion
Healthcare delivery (2012) USD 64.2 billion
Biotechnology (2015) USD 13-16 billion
Pharma Exports FY08 (E) USD 8.9 billion
Foreign Player Presence GlaxoSmithKline, AstraZeneca, Sanofi Aventis, Novartis, Solvay
Total FDI Inflows from April 2000 to April USD 1,458.78 million
2009 in the Drugs and Pharmaceutical
Sector
Source: Crisil Research Pharmaceuticals Annual Review December 2008, Crisil Research Hospitals Annual Review May 2008,
BioSpectrum Industry Overview July 2008
Key Pharma Clusters in India
Baddi
Agra
Lucknow
Gandhinagar
Ahmedabad
Baroda
Vapi / Valsad
Mumbai
Berhampur
Hyderabad
Business Climate in India's Pharma Sector:

Parameter Details
FDI Regulations Hundred

? percent FDI under automatic route for drugs and pharmaceuticals
Constraints / India introduced

? product patents in 2005, however the intellectual property
Challenges infrastructure has to yet fully evolve and the issue on data exclusivity yet to
be resolved
Domestic
? pharma manufacturing industry is highly fragmented
Domestic
? retail distribution market is multi-layered and highly fragmented
Central Drugs Central

? Authorities - approval of new drugs, clinical trials in India, lay down
Control standards for drugs, quality control of imported drugs
Administration State authorities
? - regulate the manufacture, sale and distribution of drugs
Drug Controller
? General of India - approval of licenses of specified
categories
National NPPA fixes/

? revises prices of controlled bulk drugs and formulations in India
Pharmaceutical under the Drugs (Prices Control) Order, 1995
Pricing Authority Currently
? 74 drugs are under price control
(NPPA)
and Drug Price Proposal
? to bring 200 essential drugs under the purview of the DPCO
Control Order (DPCO)
Good Manufacturing All drugs

? must adhere to quality standards as per the Indian Drug &
Practices (GMP) Cosmetics Act, 1940
Source: DIPP, Crisil Research Pharmaceuticals Annual Review December 2008
GSK (UK) - Dr Reddy’s GSK is expected to gain exclusive access to Dr. Reddy’s 100
branded product pipeline for the emerging markets
Solvay (Belgium)- Dishman Contract manufacturing of intermediates and APIs since 2001
Nutritional Products AG (Switzerland)– Signed an in-licensing agreement in January this year, to market
Wockhardt the former’s osteoporosis product
Zydus Cadila – Etna Biotech (Italy) Zydus acquired Etna in November 2008, to gain access to the
latter’s research platform for developing new vaccines and
technology
Lupin – Hormosan Pharma GmbH Lupin acquired Hormosan in July 2008 to strengthen its presence
(Germany) in Europe and for marketing support
Siro Clinpharm- Omega Mediation Siro acquired Omega in April 2008 to gain access to access to
(Germany and four other countries) operational infrastructure in five European countries and Israel and
to gain access to Omega’s customer base of pharma and biotech
companies in Europe
Acambis plc (UK) - Bharat Biotech Signed a manufacturing & marketing agreement in November
International Limited 2005, for Acambis investigational vaccine against Japanese
Encephalitis
Source: Company Websites, IBEF Biotech Market and Opportunities Report 2008
Germany
Accounts for 30.8 percent of European generics market's value
UK
France
Spain
Italy
Source: Datamonitor, Media in Europe, Oct, 2008; Association of Commercial Television in Europe, Fact Book, 2008

Key Industry Trends Increasing

? potential of domestic drug Key Industry Trends Increased
? focus on cutting down healthcare
consumption market expenditure by governments in EU markets and
private healthcare payers
Indian pharma
? companies penetrating regulated
and semi-regulated markets Increasing
? genericisation
Indian Pharma
? emerging as an attractive
outsourcing destination in areas of Contract
Research And Manufacturing Services (CRAMS)
and clinical research outsourcing
Indian biotechnology
? industry is a sunrise sector
– India is ranked among the top 12 biotech
destinations globally and is third biggest in Asia
Pacific by number of biotech companies1
Healthcare
? delivery market is rapidly
transforming as penetration of corporate players
increases bringing in international standards of
quality
Key Drivers Domestic

? market to report robust growth with Key Drivers European
? generics markets are driven by a
rising income levels, improving living standards, series of growth factors such as favorable
improved medical infrastructure, increasing government support, significant patent expiries
health insurance penetration and the growing and an ageing population, is projected to grow
number of organised retail chains at an attractive rate
Competitive Historically
? strong chemistry and process re- Competitive EU pharma
? markets are among the largest
Advantage engineering skills due to existence of Process Advantage pharma markets in the world
Patents till 2005
Rich experience
? and strong expertise in new
Highly skilled
? technically qualified talent pool of molecular entity research and development
English speaking manpower
Recognition
? to Product Patents from 2005 has
increased confidence of Global Pharma
Source:
1. Mergent- The Asia Pacific Biotechnology Sectors December 2008

Competitive Highest number of US FDA approved plants

?
Advantage outside the US
Adherence
? to international regulatory and
quality standards like US FDA, ISO, ICH, GLP,
GCP
Low cost
? destination for drug development and
manufacturing
Government Five-year tax holiday for hospitals set up in Tier

? Government –
Incentives II and III cities between April 2008 and March Incentives
20132
Government policies on FDI and tax promote
?
foreign players foray into the country
A tax deduction to the tune of 150 percent on
?
R&D spent
Exemption of clinical trials from service tax
?
National Biotechnology Development Strategy

?
to give a major boost to the sector, resolve the
challenges faced by it, provide a uniform
regulatory system and provide incentives to
investors and financial support to undertake
research
Biotech cluster development has been
?
recognised as an important strategy to promote
innovation and technology and product
development
Source:
2. Livemint, Hospitals to get 5-years tax break, March 2008

In EU In India
Opportunities ? Increasing generics penetration in the European markets which Collaborations

? in both pharma and biotech between Indian and
India can leverage on with its high quality- low cost European companies in the area of new molecular entity
manufacturing capabilities research and development in the form of in-licensing, out-
licensing and joint development
? Outsourcing (CRAMS and clinical research services): Indian
companies have progressed from being the ‘Vendor of Choice’ Strong
? potential of Indian drug consumption market: The
to being considered as the ‘Partner of Choice’ and are future demand is expected to be driven by favorable socio-
acquiring better technologies and developing expertise in economic drivers and tilting profile towards chronic
niche segments and pursuing acquisitions to boost capabilities therapeutic segments like anti-diabetic, cardiac and oncology
with newer technologies, service portfolios, production sites Healthcare
? delivery: With a demand-supply gap and poor bed
and clients density ratio, an immediate need exists to add about ~1.2
? India’s Bio-services’ offerings (includes clinical research and million beds and another 1.66 million beds during 2008 to
2026 requiring an investment of ~USD 42 billion by 2017 and
contract research and custom manufacturing) to European
additional ~USD 55 billion during 2018 to 2026
companies

In EU In India
Challenges ? Generics market is intensely competitive leading to serious Domestic

? drug consumption market
price erosion
- Further strengthening of the intellectual property regime is
? Prevailing credit crunch has caused many companies across required
manufacturing and supply chain to reduce inventory levels - Uncertainty in terms of price controls; the Indian pricing
leading to an overall reduction in demand and orders authority is considering expanding the scope of drugs
under price control
Healthcare
? delivery
- Shortage of medical professionals due to a gap between
demand and supply
Player Strategies ? Companies are entering the Indian market by setting up their Acquisition
? of European companies is one of the most sought
offices, acquiring Indian assets or increasing stake in existing after strategy by Indian companies to again access to the
investments latter’s niche technologies, product portfolios, distribution
networks, marketing dossiers and manufacturing facilities
? Companies are also increasingly partnering with Indian
companies in the area of product development and
manufacturing or even setting up their own R&D centres and
other offshoring units
Source: Analyst Report, Commerce Ministry, Government of India
Success Stories:
GlaxoSmithKline UK-based
? GSK Plc. owns ~51 percent share in GSK Pharma India
(GSK) GSK India
? product portfolio includes prescription medicines and vaccines across therapeutic areas such as anti-infectives, dermatology,
gynaecology, diabetes, cardiovascular disease and respiratory diseases
GSK Pharma
? has a field strength of 2100 people of which 1700 are in mass markets
Has 400
? area business managers
Has 100-125
? contract field force to facilitate the company to enter rural markets
In the process
? of foraying into Tier 5 towns
Source: Company Website, Karvy Equity Research July 2009
India is a natural aspirant, for becoming the

global hub for pharmaceutical and biotech
manufacturing, because of our large talent
pool of engineers and scientists.
Dr Kiran Mazumdar Shaw

Chairman and Managing Director, Biocon Limited
Source
CII-KPMG Pharma Summit 2008 Report titled
“India Pharma Inc- An Emerging Global Pharma Hub”
Retail
112
Retail
Industry Size – 2007-08 USD 345 billion
Share of organized retail in the total retail USD 20 billion

market (2007-08)
Expected growth rate (2008 - 2013) 12.5 percent
Expected growth rate of organized 18.9 percent

retailing (2008 - 2013)
Foreign Player Presence Walmart, Tesco, Metro AG, Gap, Shoprite, DKNY, Marks &
Spencer, Mc Donalds, Guess, Home Depot, staples, Benetton,
Body Shop
Regulatory Hundred percent FDI is permitted in cash and carry format with
restrictions upto 51 percent in single brand retailing. FDI in multi-
brand retailing is still restricted
Source: Crisil Research, Press Articles
NCR
NCR and Mumbai are the

key regions with ~50% of
Ahmedabad
the organized retail activity
Kolkata
Mumbai
Pune
Ahmadabad, Bangalore, Hyderabad,

Chennai, Kolkata and Pune are
Hyderabad
Bangalore, Hyderabad, Gurgaon and Mumbai emerging as promising cities for retailing
Bangalore
have emerged as favorite destinations among
European Players such as Metro AG, Tesco
Chennai
Marks and Spencer and Lerros India that
have set up operations in most of these cities
Source: EuroMonitor, Retailing in India, 2009
Business Climate in India's Retail Sector:

Parameter Details
FDI Regulations Cash and

? carry retailing permits 100 percent FDI
In 2006,
? the Government permitted 51 percent FDI in single-brand retailing
Constraints / Owing to
? restrictions in FDI, international retailers have not been able to move
Challenges into India as swiftly as they would have liked
Existing
? supply chain has too many intermediaries. Various strategies are to
be implemented to improve core business processes, such as logistics,
innovation, transparency, distribution and inventory, management of point sale
(POS) data
Despite
? rapid growth expected in organised retail, small independent grocery
retailers still remain the most important channel and opposition from small
retailers against large domestic corporate entry into retailing is on the rise
Trained
? manpower shortage in India
Counterfeit
? products are present across a wide range of products particularly
in packaged food, alcoholic drinks, cosmetics and toiletries, apparel and
pharmaceutical products
Infrastructure
? bottlenecks need to be overcome. Transportation, including
railway systems, highways have to meet global standards. Airport capacities,
power supply. warehouse facilities and timely distribution are other areas
which need to be enhanced
The percentage
? of shrinkage in retail sales is the highest in world. Total
shrinkage in India in 2008 stood at USD 2.5 billion, equivalent to 3.10 percent
of retail sales
Source: EuroMonitor Retailing in India, 2009, KPMG Analysis, Global Retail Theft Barometer 2008 Survey

Fabindia Overseas - India Acquired a 25 percent stake in UK's bohemian women’s wear retailer EAST in
January 2009
Bombay Rayon Fashion -India Acquired a 70 percent stake in Birmingham-based DPJ Clothing Ltd. in 2007
Metro AG- Germany Entered India in 2003 operating through cash and carry business
Tesco - UK Tie up to develop the Indian company's Star Bazaar (Tata’s) hypermarkets in
2008
Carrefour- France Plans wholesale operations in India by 2010 and has initiated discussions
with over 600 suppliers
Gautier- France Entered into a joint venture with Ebony Retail in 2008, to set up exclusive
home decor stores. The stores will be operational by 2010
Marks and Spencer-UK Tie up with Planet Retail in 2007 and has 14 franchisee stores
In 2008, the UK retailer signed a Joint Venture (JV) with Reliance Retail that
aims to open at least 50 new stores by 2013
Pearl Europe- Netherlands Formed a 50-50 JV with Reliance Retail in 2008 and plans to open 500 outlets
in India over seven years
Lee Cooper-UK Entered into an equal JV with Indus League Clothing (Pantaloons Retail), in
September 2006
Spar- Netherlands Entered in to a 51:49 JV with Solutions Integrated Marketing Services in

2004
Key Markets in EU
Latvia - 13
Lithuania - 16
The eastern European countries Hungary - 27 Romania - 23

have emerged as windows Slovenia - 9
of opportunity in retailing and
have been occupied key position Bulgaria - 21
in the world’s top 30 retail
markets as per the global
retail development Index, 2009 Country, Rank
Source: AT Kearney, Global Retail Development Index (GRDI), 2009

Emerging Industry Trends

Key Industry Trends Big players
? are getting bigger. Some retail
chains have already left the region
Retail Verticals Rising health,
? fitness and wellness retailing
Private
? labeling and value retaliating have
Increasing
? popularity of home décor and emerged as strong verticals as consumers
furnishing stores become price conscious
The untapped
? and non-discretionary nature of Retailers
? have also started to focus more on
food and grocery makes it an attractive cost optimization, given the current slowdown in
investment segment demand. Cost cutting, inventory management
Beauty
? products, fashion accessories and outsourcing to low cost destinations are the
jewellery segments are other under-penetrated flavors of the season
potential retail opportunities
Retail Formats Cash and

? carry is an attractive option for foreign
retailers as 100 percent FDI is permitted only
through this format.
Direct retailing
? and internet retailing are
emerging as attractive non-store based retail
formats
Key Drivers Rising urbanization

? and internationalization
Increase
? in income leading to rise in purchasing
power
Young population
? willing to experiment with
new trends
Source: KPMG Analysis Source: KPMG Analysis

Competitive Low-cost
? destination Competitive Retailers
? in developed markets are strong
Advantage Advantage players and have already witnessed slowdown
Competitive
? and efficient workforce
in the past. Their maturity and experience to
Low penetration
? of organized retail can provide deal with fall in demand makes them less
early mover advantage vulnerable to the recessionary phase.
Large and
? untapped rural market Retailers
? in Europe use innovative designs and
systems which capture customer data and help
to improve quality in product and service as well
as manage inventory
Developed
? market players also have the
infrastructure advantage. Supply chain
infrastructure and distribution channels coupled
with excellent logistics
Government Octroi has

? been abolished in many states to
Incentives boost trade in retail
Labor laws
? in India are under the scanner for
higher liberalization, with the Government
relaxing certain norms / permitting flexibility in
the laws for emerging retail hubs such as
Bengaluru and Hyderabad
The Government
? is releasing large tracts of
undeveloped land for retail development in the
Mumbai and National Capital Region
Source: KPMG Analysis, Press Releases etc. Source: KPMG Analysis, Press Releases

In EU In India
Opportunities ? Partner with European players and leverage on their India is

? ranked as one of the most attractive markets for retail
experience and expertise with respect to various formats, investment
segments, and technological know-how The country,
? with its young and increasingly urban population,
? India is a low-cost destination for manufacturing and could be cost advantages, under-penetrated retail segments, provides
leveraged as the sourcing hub by European retailers an ideal location for foreign companies to invest in
Increasing
? interdependence between countries has led to
increased awareness about international brands and products
and thus created a huge market for international brands
The entry
? of global players in the Indian market is also
expected to boost healthy competition which will eventually
lead to better practices in terms of price and quality in the
industry
Player Strategies Fab India in UK JV- Marks and Spencer and Reliance Retail
Indian ethnic wear chain, Fabindia picked up a 25 percent
? Marks and
? Spencer entered into a JV with Reliance retail to
stake in the UK-based women’s wear, retailer EAST. The set up stores in India. Marks and Spencer had the retail
synergy between the two is apparent not only in the product capability to operate in India, but would need capabilities from
but also in the approach and sourcing. Brand EAST also stands a domestic partner in three specific areas: property, logistics &
to gain in India as well as in other emerging markets such as supply chain, and experience of the Indian market place,
Dubai, Qatar and Bahrain where Fabindia is already present. which were suitably provided by Reliance Retail

In EU In India
Player Strategies Fabindia employs joint venture route in most markets. It has
? Cash and Carry the Metro way
around 35 joint venture companies in different states, with
Metro AG
? entered India using the wholesale cash and carry
weavers and craftsmen holding 51 percent stake in each of format, in which 100 percent FDI is permissible. The company
these companies. These joint ventures ensure investment back purchases most of its merchandise from India suppliers and
into the supply base, making it easier for weavers to access has created a very efficient distribution network
funds and design inputs
Sourcing from India- Tesco
Bombay Rayon’s forward integration
Tesco Plc
? has set up a shared services centre in India which
Bombay Rayon’s, a leading manufacturer of fashion fabrics
? provides IT and business services. The Bangalore centre also
and garments has acquired UK- based DPJ Clothing, an offers business process
apparel wholesale retailing & distribution. The acquisition
Services
? to Tesco operations, particularly in the financial
helped Bombay Rayon to expand its customer base in the
processing area. Tesco leverages the low cost advantage of
European region for its designer garments and also get a
India for sourcing cheap but quality products. Tesco sources
headway for outsourcing and distributing the other related
USD 72 million worth of textiles from India annually
products in that region
Source: KPMG Analysis, IBEF, Press Releases, IBEF-UK companies in India
Success Stories:
Success Story
METRO
? Group was quick to recognize the potential of the Indian market. Metro Cash and Carry was the first international retailing company to set up operations in
India through the cash and carry format
The company
? forayed into the Indian market in 2003 by setting up whole sale operations in Bangalore. After a two-year orientation phase in the market, it
expanded its presence in India and started a store in Hyderabad. The year, 2008 saw further expansion with stores being set up in Kolkata (West Bengal) and in
Mumbai. More stores are planned in other regions – with 34 cities numbering more than one million inhabitants, the rest of India has vast potential
Metro’s
? entry in India has also helped the domestic market. The company is making a significant contribution to the development and expansion of the country’s
retail infrastructure. Besides bringing in superior technology, better inventory management and production planning processes have also been introduced. The
company also cooperates closely with local producers; thereby, creating employment opportunities and using local resources more efficiently. It purchases up to 90
percent of its merchandise from suppliers and producers in the region it operates
The success
? of Metro’s cash and carry operations in India has led to a number of global players foraying into India using the cash and carry format. Players such as
Walmart and Tesco have already entered the Indian market using this format while Carrefour is looking at plans to set up its first wholesale cash & carry outlet in
the National Capital Region in 2010
Source: Company Website
India is a very exciting opportunity for Marks

& Spencer and a market where there is the
potential for M&S to become a major retail
brand
Sir Stuart Rose
Marks & Spencer chief executive
Source
Timesonline, Marks & Spencer plans 50 stores
in India with Reliance Industries joint venture, April 2008
Telecommunications
118
Telecommunications
Total Telecom Subscribers 452.91 million
Wireless Subscribers 415.25 million
Wireline Subscribers 37.66 million
Monthly Net Adds 11.44 million
Teledensity 38.88 percent
Broadband Subscribers 6.40 million
Telecom Equipment Industry USD 23.61 billion

Source: TRAI, Press Release, May 2009; Voice & Data, Strong & Steady, July 04, 2009
Delhi Uttar Pradesh (W)
Rajasthan Bihar
Gujarat Madhya Pradesh

Kolkata
Mumbai
Pune
Goa
Hyderabad
Bangalore
Metros
Chennai
Tier I
Emerging Tier II & Tier III City/State
Source: KPMG Analysis, Company websites, TRAI website
Business Climate in India's Telecommunication Sector:

Parameter Details
FDI Regulations Seventy-four

? percent FDI permitted for telecom services
Hundred
? percent FDI permitted in telecom manufacturing
EU is one
? of India’s largest sources of FDI in Indian telecom
Constraints / Very low

? Average Revenue Per User (ARPU) – INR 204 for GSM, INR 99 for
Challenges CDMA
Falling
? mobile tariffs
Intense
? competition due to number of players in the market
Regulatory
? issues that need to be dealt with before a foreign player can enter
the market
High costs
? associated with setting up network and infrastructure
Heavy taxation
? on the Indian telecom industry
Any other relevant Upcoming

? implementation of MNP and MVNO will open up the market to new
parameters entrants
Upcoming
? 3G spectrum allocation will also expand the market
Source: KPMG Analysis, TRAI Performance Indicators, Centad

Vodafone - UK In February 2007, Vodafone entered the Indian market by acquiring a majority
stake in Hutchison Essar
Virgin Mobile - UK In March 2008, Virgin Mobile started offering services through Tata
Teleservices
Telenor – Norway In October 2008, Telenor acquired Unitech Wireless
Alcatel-Lucent - France In September 2005, Alcatel formed a JV with CDOT for the development of
Broadband Wireless Access solutions like WiMAX
Bharti Airtel – India, British In May 2008, Bharti signed an agreement along with 15 international players
Telecom – UK, Plus 14 more to build the Europe India Gateway cable system from India to the United
players Kingdom via the Middle East
Source: KPMG analysis
Key Markets in EU
Germany
Highest contributor towards telecom revenues in EU (20%)
UK
Contributed 13% of the telecom revenues in EU
Belgium
France
Spain
Italy The EU telecom market is extremely

mature with very high teledensity

Key Industry Trends Large untapped

? market in rural India Key Industry Trends Mature
? market
Data services
? likely to grow the market Low fixed-line
? subscriber base; High mobile
subscribers
Foreign
? players entering India in a big way
Key Drivers Government

? focus on increasing rural Key Drivers Innovative
? products and services
connectivity
High network
? quality and coverage
Implementation
? of MNP and MVNO
Rollout
? of 3G, BWA and Wimax
Telecom
? manufacturing an emerging industry
Competitive Low cost

? destination Competitive EU is a
? world leader in the mobile
Advantage Advantage communications sector
BSNL/ MTNL
? looking at foreign participation for
their 3G services Advanced
? technical expertise
Changing
? demographics and increasing
disposable income
Government Subsidies
? for developing rural telecom Government -
Incentives infrastructure Incentives ?
Policies
? for developing the Next Generation
Networks (NGN)
Network
? expansion to cover 90 percent
geographical areas by 2010
Providing
? incentives for infrastructure sharing
Source: KPMG Analysis Source: KPMG Analysis

In EU In India
Opportunities ? Infrastructure cost management Developing

? advanced technologies and networks
? Providing value added services for Indian population in EU Developing
? the market for revenue-rich data services
? JVs and Acquisitions by Indian companies Developing
? a market for value added services
MTNL/BSNL
? inviting foreign participation in their 3G services
Offshoring
? of telecom manufacturing
Challenges ? EU is already a leader in terms of products, innovation and Tough regulatory

? environment
quality of service
High taxation
?
Large geographical
? spread
Spectrum
? constraints
Lack of
? ancillary infrastructure
Player Strategies ? Providing Indian content VAS targeted at Indian population Entering
? India through JVs with existing players
? Identifying acquisition targets Leveraging
? from key EU learnings (network rollout, developing
data services, QoS)
Success Stories:
Vodafone Essar Entered

? the market with a focus on rural growth and expansion
Within
? the first year itself, the Indian operations helped Vodafone witness a 16 percent growth in revenues
Also introduced
? the ‘magic box’ handsets - base level handsets bundled with connections and special call rates. This move was primarily
to tap the low level income segment
Vodafone’s
? strategy to tap the rural market also enabled it to set up a JV (Indus Towers) with Bharti and Idea cellular for tower sharing
Recently
? Vodafone has managed to enhance its network coverage in seven regions which was made possible by Nokia Siemens
networks
Vodafone
? announced that it intends to continue investing in India due to the massive potential in terms of the rural customer base that
remains untapped due to lack of towers
Source: Company Website
This [acquisition of Unitech Wireless] marks

the formal entry of Telenor into the world's
fastest growing mobile market and we are
now embarking on an operational phase and
the preparations for the launch of our
services
Jon Fredrik Baksaas

Telenor Group President and CEO
Source
Telenor company website, March 21, 2009
We have to keep in mind that in the world

landscape, India is a country which
apparently is holding up pretty well in
recession. It may have less growth but it is
pretty robust. So it is going to be a very
important platform for us
Vittorio Colao
Vodafone Chief Executive Officer
Source
Moneycontrol, India remains important platform:- Vodafone, May 21, 2009
Travel & Leisure

124
Travel & Leisure
Industry Size – 2007-08

Travel & Tourism USD 36.2 billion
Hospitality USD 3.8 billion
Growth rate
Travel & Tourism: 2008 to 2018E 9.4 percent
Hotels: 2006-07 to 2007-08 12 percent
Share of premium segment hotel 2007-08 USD 2.3 billion (60 percent)
Foreign Player Presence InterContinental Hotels Group, Accor, Hilton Group Plc,
Kempinski Hotels & Resorts
Regulatory Hundred percent FDI subject to sectoral policy regulation
Share of EU in tourist arrivals (2006) UK, Germany & France account for 24 percent of total tourist
arrivals
Source: CRISIL, Hotels 2008-12, December 2008; Technopak, International Hospitality Fair, February 2009
Chandigarh
Ludhiana
Delhi NCR
Agra
Guwahati
Jaipur
Ahmedabad
Kolkatta
Mumbai Bhubaneshwar
Pune
Goa
Hyderabad Metros
Bengaluru Tier I cities
Chennai Emerging Tier II & III cities
Intercontinental
Hilton Hotel Plc
Kochi
Accor
Source: Assocham & Company Websites
Business Climate in India's Travel & Leisure Sector:

Parameter Details
FDI Regulations FDI allowed

? in all construction development projects including construction of
hotels and resorts, and recreational facilities
Constraints / No uniformity
? in taxes & high tax structures
Challenges Poor on-ground
? infrastructure
Industry
? status to tourism in few states only
Security
? concerns
Future Outlook Tourism

? is a primary catalyst for growth of demand in hospitality
On an average
? 5 million foreign tourist visited India every year since 2006, this
number is expected to touch 11 million by 2011
In 2007,
? UK and US were the leading nationalities that arrived into India with a
share of 17 and 16 percent respectively
Domestic
? tourist count is expected to increase 12 percent annually until 2011
from the 529 million tourists in 2007
Medical
? tourism is expected to further enhance industry potential
India is
? still facing a shortfall of 150,000 rooms across categories indicating
untapped opportunities
Source: KPMG Analysis, CRISIL, Hotels 2008-12, December 2008; Technopak, International Hospitality Fair, February 2009

InterContinental Hotels -UK Tie-up with Emaar MGF since 2007, for management of hotels in India
Hilton Group Plc –UK In April 2008, tied-up with DLF to jointly develop hotels in India
Accor – France In November 2006, entered into an equal JV with Emaar MGF for
development of hotels in India
Taj Hotels UK India Business Council in June this year, announced Taj as its ‘official
hospitality partner’
Kempinski Hotels – International marketing and distribution partner for The Leela Group hotels
Switzerland since 1987
Key Markets in EU
Germany , Berlin
London
One of the major business hotel market
Paris
Highest number of inbound visitors
France
Spain
Switzerland
Italian Cities
receives up to 40 million visitors a year and Rome is the major
attraction, the others being Venice ,Milan, Florence and Moscow
Turkey, Istanbul
One of the fastest growing hotel market
Source: HVS, Market Snapshot - Milan Italy, July 2009

Key Industry Trends Budget

? and premium segments to drive growth Key Industry Trends Emerging
? low cost brands targeting business
in future travellers
More 3-4
? star hotels to come up in tier II & III Development
? of extended stay and service
cities apartments
Premium
? hotels to grow in markets of excess
demand, such as the metros and Tier 1 cities
Changing
? business model from franchisee to
management contracts
Key Drivers The hospitality

? sector contributed 1.56 percent Key Drivers Tourism
? is key catalyst for destinations such as
(USD 1.07 Billion) of the total FDI inflow Paris, Switzerland
between 2000 and 2008
Business
? travellers are the key demand drivers
Increasing
? income levels and Government in cities like Milan (60-70 percent), London, etc.
spending is likely to boost tourism
Poland,
? Ireland and Scotland are emerging as
Emergence
? of new form of tourism such as outsourcing destinations, in turn creating
medical tourism, MICE* and Religious tourism demand for hotels
Government Government
? of India has introduced a new Government Germany’s
? National Tourism Board promoting
Incentives category of visa - ‘Medical Visa’ (M’-Visa) Incentives Germany by focusing the country’s palaces,
Parke and Gardens
Incentives
? at the Central and the State level
Turkey’s
? government has reduced VAT for
tourism from 18 to 8 percentage to boost
tourism
Italy has
? re-launched ‘Choose Italy’ website to
attract more tourist
Source: KPMG Analysis, Technopak, International Hospitality Fair, February 2009 Source: HVS, Market Snapshot - Milan Italy, July 2009; Kuzeybati, Reduced VAT & Transfer Tax lead to
* Meeting Incentive, Conference and Exhibitions Turkish property investment boom, April 2009
Foreign tourist arrivals in India Domestic tourist arrivals in India
12 30% 800 20%

10 25% 700
16%
600
million tourists
million tourists
8 20%
500 12%
6 15% 400
300 8%
4 10%
200
2 5% 4%
100
0 0% 0 0%
2003 2004 2005 2006 2007 2008 2011 2003 2004 2005 2006 2007 2011
Tourists Growth Tourists Growth
Source: CRISIL Monthly Report, June 2009 Source: CRISIL Monthly Report, June 2009

In EU In India
Opportunities ? Management partnership with European hotel players to Establish

? franchisee or management contracts with Indian
expand in European countries such as Russia which is facing a hotel players
shortfall in room inventory Partner
? with real-estate players for development of hotels in
? Acquisition of a hotel property in European markets India
? Tie-ups with travel agencies to promote Indian Medical

tourism
Challenges ? Several European markets face low occupancies during winter High land
? prices: Land prices in India constitute almost 25
season percent of the cost of property, whereas, it accounts for only
15 -20 percent of project cost overseas
Player Strategies ? Indian players can enter the European markets with a Currently
? the players like Intercontinental and Accor have
management tie-up entered into a management contract with Indian players
The primary reasons as to why

medical tourism would flourish in
India include much lower medical
treatment costs for various
ailments, such as bone narrow
transparent, by-pass surgery, knee
surgery and liver transplant as
compared to western countries.
Venugopal Dhoot
President Assocham
Source
ASSOCHAM, Medical Tourism forex
earnings to grow INR 8000 crore from 2012, May, 2008
Doing Business in India

130
Doing Business in India

Foreign direct investment in India

The objective of India’s Foreign Direct Investment (FDI) policy is to invite and encourage
foreign investments in India. Since 1991, the guidelines and the regulatory process has
been substantially liberalised to facilitate foreign investment in India. The administrative and
compliance aspects of FDI including the modes / instruments of investments in an Indian
Company (e.g. Equity, Compulsorily Convertible Preference Shares, Compulsorily Convertible
Debentures, ADR / GDR, etc) are embedded in the Foreign Exchange Regulations prescribed
and monitored by the Reserve Bank of India (RBI). The Foreign Exchange Regulation also
contains beneficial schemes / provisions for investments by Non-Resident Indians / Person of
Indian Origin within the overall framework / policy.
For the purpose of FDI in an Indian Company, the following categories assume relevance:
Sectors in which FDI is prohibited

?
Sectors in which FDI is permitted

?
- Investment under Automatic Route; and

- Investment under Prior Approval Route i.e. with prior approval of the Government
through the Foreign Investment Promotion Board (FIPB)
The following diagram depicts the FDI policy in India:
Foreign Investment
Automatic Route Prior Approval Route (FIPB)
Investment in Sectors Previous venture in FDI in excess of 24% Investment exceeding

requiring prior India in the same field for manufacturing sectoral caps for
Government approval as stipulated items reserved for Automatic Route to the
small scale sector extent permitted
Apart from fresh investments in an Indian company, the above is also relevant for transfer of
shares, etc which are subject to detailed guidelines / instructions and approval requirements
to the extent applicable.
Automatic Route
The Automatic Route connotes no requirement of any prior regulatory approval but only post
facto filing / intimation with the RBI through Authorized Dealer / Bankers as under:
Filing of an intimation by the Indian Company with the RBI, in the prescribed format,
?
within 30 days of receipt of FDI in India; and
Filing of prescribed form and documents by the Indian Company with the RBI within 30
?
days of issue of shares to foreign investors
FDI by a Foreign Company / Investor in an Indian Company in most of the business /

commercial sectors now falls under the Automatic Route and very few cases / transactions
require prior Government / FIPB approval.
Prior Approval Route existing joint venture / collaboration is defunct or sick.

?
FDI in sectors / transactions requiring prior Government Approval is existing joint ventures in specified sectors which inter alia
?
categorized as that falling under the Prior Approval Route. Such includes the information technology sector
approval is granted by the Government of India, Ministry of Finance,
the Foreign Investment Promotion Board (FIPB). An existing venture for this purpose has been clarified to mean a
venture existing as on January 12, 2005. Consequently, only a
FDI in the following activities / sectors generally requires prior foreign investor who has entered into a technical and/ or financial
approval of the government: collaboration prior to 12 January 2005 and subsisting on that date
Where more than 24 percent foreign equity is proposed to be
? would require prior approval of the FIPB for making further
inducted for manufacture of items reserved for the Small Scale investment in the same field.
sector
Proposals in which the foreign collaborator has an existing
? Portfolio investment in India
financial / technical collaboration in India in the ‘same’ field as Foreign Institutional Investors (FII) registered with SEBI and Non-
per the Press Notes 1 and 3 of 2005. resident Indians are eligible to invest in India under the Portfolio
All proposals falling outside notified sectoral caps or under
? Investment Scheme within prescribed guidelines and parameters.
sectors in which FDI is not permitted under the Automatic
Route. Investment by FIIs are primarily governed by the Securities and
Exchange Board of India (Foreign Institutional Investors) Regulations,
FDI policy is reviewed on an ongoing basis and changes in sectoral 1995, (‘SEBI Regulations’). Eligible Institutional Investors that can
policy / sectoral equity caps are notified through Press. register as FIIs include Asset Management Companies, Pension
Funds, Mutual Funds, Banks, Investment Trusts, Insurance
An application is required to be filed with the Secretariat for Companies, Re-insurance Companies, Incorporated/Institutional
Industrial Assistance (SIA) / Department of Industrial Policy and Portfolio Managers, Investment Manager / Advisor, International or
Promotion setting out the details of investment, business plan, Multilateral organisation, University Funds, Endowment
financials of the foreign company, etc. Along with the application, a Foundations, Charitable Trusts and Charitable Societies, Foreign
declaration as to whether the applicant has or had any previous Government Agencies, Sovereign Wealth funds, Foreign Central
financial / technical collaboration or trade mark agreement in India in Bank, Broad based Fund, Trustee of a Trust.
the same field for which approval has been sought is required to be
submitted in compliance with the Press Notes 1 and 3 of 2005. Sub-account means any person resident outside India, on whose
behalf investments are proposed to be made in India by a foreign
Approval is granted by the Foreign Investment Promotion Board institutional investor and who is registered as a sub-account under
(‘FIPB’) on a case to case basis after examining the proposal for these regulations. Entities eligible to register as sub-account are
investment. Post FIPB approval, prescribed filings as applicable braid based funds, portfolio which is broad based, proprietary funds
under the automatic route are also required to be carried out by the of the FII, foreign corporate and foreign individuals satisfying the
Indian Company under the Prior Approval Route. prescribed conditions, etc.
Conceptually, an application for registration as an FII can be made in

Previous Venture conditions / criteria for FDI as per Press Notes
two capacities, namely as an investor or for investing on behalf of its
1 and 3 of 2005
sub-accounts.
In case, a foreign investor with an existing venture or collaboration
(technical and / or financial) with an Indian partner as on 12 January SEBI grants registration as FII based on certain criteria, namely
2005 in a particular field proposes to invest in another proposal in constitution and incorporation of FII, being regulated in home
the same field in India, such additional investment is permissible country, track record, previous registration with any Securities
only subject to a prior FIPB approval wherein both parties are Commission, legal permissibility to invest in securities as per the
obliged to submit / demonstrate that the new venture does not norms of the country of its incorporation, fit and proper person, etc.
prejudice the earlier venture. SEBI grants registration to the FII and sub-account which is
permanent unless suspended or cancelled by SEBI, subject to
The FIPB approval, however, is not applicable under the following
payment of fees and filing information every three years. The
circumstances:
approval of the sub-account is co-terminus with that of the FII.
investment by a venture capital fund registered with the
?
Securities and Exchange Board of India (SEBI); FIIs / sub-accounts can invest in Indian equities, units, exchange traded
existing joint venture has less than 3 percent investment by
? derivatives, commercial papers and debt. FIIs can also invest in security
either party; receipts of Asset Reconstruction Companies on its own behalf.
A FII can invest any portion of its portfolio in debt instruments as the terms of scope, coverage, computation and go beyond the pro-
requirement to maintain 70:30 (equity: debt) investment limit by rata methodology which was hitherto being applied in most
pure equity FIIs has been removed by SEBI subject to limits being cases
sanctioned by SEBI.
The entry level guidelines / conditions for FDI in an Indian Company
have been expressly clarified to extend to downstream investments
Foreign Investment Policy on FII investment
as well. Further, prior Government approval followed by notification
FII investments in India are subject to the following policy / limits: has been stipulated for Foreign Investments in an Indian Company
which is an Investment Company or which does not have any
i) As per RBI, no single FII / sub-account can acquire more than
operation. Prior Government approval has also been stipulated for
10 percent of the paid-up equity capital or 10 percent of the
transfer of ownership or control of Indian Companies in specified /
paid-up value of each series of convertible debentures issued
controlled sectors from resident Indian citizens / entities to Non-
by the Indian company. In case of foreign corporate or
resident entities.
individuals, each such sub-account shall not invest more than 5
percent of the total issued capital of that company For downstream Investment by an operating-cum-holding company
with foreign investment as stipulated, a notification to the
ii) All FIIs and their sub-accounts taken together cannot acquire
Government is stipulated within the prescribed timeframe /
more than 24 percent of the paid-up capital or paid up value of
parameters.
each series of convertible debentures of an Indian Company.
The investment can be increased upto the sectoral cap /
statutory ceiling, as applicable to the concerned Indian Investment as Foreign Venture Capital Funds
company. This can be done by passing a resolution by its A SEBI registered Foreign Venture Capital Investor (FVCI) with
Board of Directors followed by passing of a special resolution specific approval from the RBI under FEMA regulations can invest in
to that effect by its General Body. Also, in certain cases, the Indian Venture Capital Undertakings (IVCU) or Indian Venture Capital
permissible FDI ceiling subsumes or includes a separate sub- Fund (IVCF) or in a Scheme floated by such IVCF’s subject to the
ceiling for the FII Investment as per stipulation which needs to condition that the IVCF should also be registered with SEBI and
be complied with compliance with the underlying framework / guidelines.
iii) FIIs/sub-accounts can transact in dematerialized form through The FVCI can purchase equity / equity linked instruments / debt /
a recognized stock broker and on a recognized stock exchange debt instruments, debentures of an IVCU or of a VCF through initial
and are required to give or take delivery of securities. Further, public offer or private placement in units of schemes / funds set up
short selling is permitted within prescribed parameters / by a VCF. The purchase, sale of shares, debentures, and units can be
norms. FIIs /sub-accounts can also lend or borrow securities in at a price that is mutually acceptable to the buyer and the seller.
the Indian market under a scheme framed by SEBI
iv) FIIs can buy / sell securities on Stock Exchanges in most

sectors except those prohibited. They can also invest in listed
and unlisted securities outside Stock Exchanges subject to
prescribed guidelines / compliances / approvals
Calculation of Total Foreign Investment

The Government Press Notes 2, 3 and 4 of 2009 lay down the
guidelines / methodology for calculation of Total Foreign Investment
in an Indian Company for the purpose of sectoral cap and approval
requirements which means Direct as well as Indirect Foreign
Investments in an Indian company as under:
Direct investment i.e. all specified types of foreign investment in

?
an Indian company; and
Indirect foreign investment i.e. investments in an Indian

?
company through investing Indian companies which are ‘owned
or controlled’ by non-resident entities to be calculated as per the
prescribed methodology. These provisions are very complex in
Sector-wise regulation in foreign investment (illustrative)
Automatic route specified activities subject to Prior approval from FIPB where investment is above Prohibited list
sectoral cap and conditions (if any)# sectoral cap for activities listed below#
Airports Existing Airports beyond 74% up to 100% Agriculture [excluding floriculture,

Greenfield 100% Asset reconstruction companies 49% horticulture, development of seeds, animal
Existing 74% Broadcasting husbandry, pisciculture, aqua-culture,
Air transport services –scheduled FM Radio 20% cultivation of vegetables and mushrooms
Non resident Indians 100% Cable network 49% (specified) and services related to agro and
FDI 49% Direct-To-home(DTH) 49% allied sectors ) and plantations (other than
Air transport services – non scheduled Setting up hardware facilities 49% tea plantations).
/ chartered and cargo airlines Uplinking a news and current affairs TV channel 26%
Non resident Indians 100% Uplinking a non-news and current affairs TV channel 100% Atomic energy
FDI 74% Cigar and cigarettes manufacture 100%
Business of chit fund Gambling and
Air transport services – others Helicopter Commodity Exchanges 49%#
Betting Housing and real estate
services / seaplane services (specified) 100% Courier services other than those under
business
Alcohol distillation and brewing 100% the ambit of Indian Post Office Act, 1898 100%
Banking (private sector) 74% / 100% Credit Information Companies 49%# Lottery business
Civil Aviation Services Defense production 26%
Ground Handling services Investment companies in infrastructure / Nidhi Company
Non resident Indians 100% services sector (except telecom) 100%
FDI 74% Mining and mineral separation of titanium Retail Trading (except 51% in single
Maintenance and repair organisations, bearing minerals and ores, its value brand product retailing)
flying training institutes; and technical training addition and integrated activities 100%
Trading in Transferable Development
institutions 100% Petroleum and natural gas – Refining (PSU) 49%
Rights
Coal and lignite mining (specified) 100% Print Media
Coffee, rubber processing and warehousing 100% Publishing of newspapers and periodicals
Construction development projects (specified) 100% (including foreign news papers subject to
Drugs and Pharmaceuticals including those prescribed condition) dealing with news
involving use of recombinant DNA technology 100% and current affairs 26%
Floriculture, horticulture, development of Publishing of scientific magazines / specialty
seeds, animal husbandry, pisciculture, journals / periodicals 100%
aqua-culture, cultivation of vegetables and Satellite Establishment and Operation 74%
mushrooms (specified) and services related Tea Sector – including tea plantation 100%
to agro and allied sectors 100% Telecommunication
Hazardous Chemicals (specified) 100% Basic / cellular services unified access services,
Industrial explosives manufacture 100% value added and other specified
Industrial parks 100% services beyond 49% up to 74%
Insurance 26% ISP with gateways, radio paging, end
Mining covering exploration and mining of to end bandwidth beyond 49% up to 74%
diamonds, and precious stones, gold, silver ISP without gateway, infrastructure
and minerals) 100% provider (specified), electronic mail and
Non banking finance companies (specified) 100% voice mail beyond 49% up to 100%
Petroleum and Natural gas Trading
Refining (private companies) 100% Trading of items sourced from Small Scale sector 100%
Other specified areas 100% Test marketing of such items for which a
Power including generation (except atomic energy), company has approval for manufacture 100%
transmission, distribution and Power Trading 100% Single brand product retailing 51%
Special Economic Zones and Free Trade
Warehousing Zones (setting up of Zone and setting
up of units in these Zones) 100%
Telecommunication
Basic / cellular services unified access services,
value added and other specified services 49%
ISP with gateways, radio paging, end to end bandwidth 49%
ISP without gateway 49%
Infrastructure provider (specified), electronic mail
and voice mail 49%
Manufacture of telecom equipment 100%
Trading
Wholesale / cash & carry 100%
Trading for exports 100%
# Certain sectoral cap include investments by NRI / FII / FVCI investments and need to be read with various underlying Press Notes / Notifications / Conditions as stipulated
Investment vehicles for foreign investors
Choice of vehicle Branch office

Depending upon its business needs, a foreign company can choose A Foreign Company is permitted to establish a Branch office (BO) in
between setting-up a liaison office, a branch office, a project office India to undertake prescribed commercial activities and is generally
or incorporating an Indian company, either its wholly owned suitable for manufacturing and trading foreign companies wanting to
subsidiary or joint venture with an Indian / Overseas partner. market / sell their products in India or IT Enabled / Consultancy
Firms wanting to render services in India. The opening and
Liaison office operation of BO is regulated by the RBI on similar lines as that of LO
A liaison office (LO) is permitted to act as a channel of including obtaining of a prior approval but excluding the period and
communication / carry out a liaison / representation role between upgrade obligation.
the head office / group companies and parties in India. It is not
permitted to undertake any commercial/ trading/ industrial activity, The activities permitted for a BO do not include manufacturing
directly or indirectly. The LO is obliged to maintain itself and meet its (unless setup in Special Economic Zone which set-up and operation
expenditure through inward remittances from the Head Office. A LO is governed under that separate regulations) and retail trading.
is generally approved only for specified period which is subject to
As per the Draft RBI circular referred earlier, the RBI has clarified its
renewal and in certain sectors, the LO is obliged to upgrade into a
internal norms that the foreign entity proposing to set-up a BO in
Company (wholly owned subsidiary / joint venture) post the initial
India needs to have a successful profit making track record during
approval period.
immediately preceding 5 years in the home country. Further, a net
Establishing an LO requires prior approval of RBI which is location worth of not less than USD 100,000 is also required. Approval for
specific and subject to guidelines issued in this regard. The RBI also BO is location specific and various criteria apply to the same.
monitors its activities on an ongoing basis primarily by seeking an
Project office
annual compliance / activity certificate for the LO’s operation from
its Auditors in India. Foreign companies undertaking projects in India and satisfying
prescribed requirements can set up project/ site offices (PO) for the
A draft circular was issued by the Reserve Bank of India (RBI) in May purpose of executing the project.
2008 and is placed in the public domain which laid down the
eligibility criteria and procedural guidelines for establishment of The requirement of obtaining prior RBI approval for PO that meets
liaison offices by foreign entities in India. As per the draft guidelines specified conditions has been dispensed with. A PO can only
the foreign entity needs to have a successful profit making track undertake activities relating to and incidental to the execution of
record during immediately preceding 3 years in the home country. specific projects in India and has to wind up post the completion of
Further, a net worth of not less than USD 50,000 is also be required. the Project.
Through this draft Circular, the RBI had also proposed certain A PO can is now permitted to open foreign currency accounts
procedural changes to the application procedure and to delegate subject to prescribed conditions / parameters.
certain powers to Authorised Dealers regarding extension of validity
period of liaison offices of foreign entities and closure of their liaison Local Indian Subsidiary or Joint Venture Company
offices in India. Subject to Foreign Direct Investment Guidelines and Foreign

Exchange Regulations, a foreign company can set-up its own wholly
The foreign exchange provisions for LO and the proposed owned Indian Subsidiary or Joint Venture Company with an Indian or
amendments do not fully apply to applications for banks (which are Foreign Partner.
covered and need approval under the banking regulations from the
RBI) and insurance companies (which are permitted to set-up liaison Subsidiary or a Joint Venture Company can be formed either as a
office under general permission subject to necessary approval from Private Limited Company or a Public Limited Company. A private
Insurance Regulatory and Development Authority of India). limited company is obliged to restrict the right of its members to
transfer the shares, can have only 50 shareholders and is not
allowed to have access to deposits from public directly. It is also
Post set-up in India, various registrations and compliance obligations
subject to less corporate compliances requirements as compared to
entail on the LO, and in view of sizeable paperwork and time frame
a public company which is eligible for listing on stock exchanges. A
obligations, the entire process needs to be carefully planned and
company is regulated inter alia by the Registrar of Companies (ROC)
implemented.
under the Companies Act, 1956. The table bellow highlights certain
key differences between a private and public company
Sr. No. Particulars Private Company Public Company
1. Minimum number of shareholders Two Seven
2. Maximum number of shareholders Fifty Unlimited
3. Minimum number of directors Two Three
4. Maximum number of directors Seven Twelve (can be increased with Government approval)
5. Minimum paid - up capital requirement in general INR 1,00,000 (Approx. USD 2,200) INR 5,00,000 (Approx. USD 11,000)
A private company can commence business immediately on obtaining a Certificate of

Incorporation from the Registrar of Companies (ROC). A public company is required to
obtain a “Certificate of Commencement of Business” by filing additional documents with
the ROC.
Limited Liability Partnership

The Limited Liability Partnership Act, 2008 has introduced a new form of business structure
in India i.e. a Limited Liability Partnership (LLP). LLP is alike a private limited company
having a distinct legal entity separate from its partners. It has perpetual succession and a
common seal unlike a traditional partnership firm. LLP adopts a corporate form combining
the organizational flexibility of partnership with advantage of limited liability for its partners.
Currently there are no specific guidelines for foreign investment in LLP. However, like
Partnership Firms, this should need prior approval of the Reserve Bank of India.
Comparative summary
A comparative summary of previously discussed business entities is as under:
Particulars Representative / Liasion Branch office Project office Subsidiary / joint venture
office
1. Setting- up requirements Prior approval of RBI Prior approval of RBI Prior If activities / sectors falls
approval not required if under Automatic Route, no
certain conditions are fulfilled prior approval but only post
facto filings with the RBI is
obligated. Otherwise obtain
Government/ FIPB approval
and then comply with post
facto filings
2. Permitted activities Only liaison / representation / Activities listed / permitted by Permitted if the foreign Any activity specified in the
communication role is RBI can only be undertaken. company has a secured memorandum of association
permitted. No commercial or Local manufacturing and retail contract from an Indian of the company. Wide range
business activities or trading is not permitted company to execute a project of activities permissible
otherwise giving rise to any in India subject to FDI guidelines /
business income can be framework
undertaken
Particulars Representative / Liasion Branch office Project office Subsidiary / joint venture
office
3. Funding for local Operations Local expenses can be met Local expenses can be met Local expenses can be met Funding may be through
only out of inward through inward remittances through inward remittances equity or other forms of
remittances received from from Head Office or from from Head Office or from permitted capital infusion or
abroad from Head Office earnings from permitted earnings from permitted borrowings (local as well as
through normal banking operations operations overseas per prescribed
channels norms) or internal accruals
4. Limitation of liability Unlimited liability in India Unlimited liability in India Unlimited liability in India Liability limited to the extent
within overall liability within overall liability within overall liability of equity participation in the
obligation of Foreign Company obligation of Foreign Company obligation of Foreign Company Indian Company
5. Compliance requirements Requires registration and Requires registration and Requires registration and Required to comply with
under Companies Act periodical filing of accounts / periodical filing of accounts / periodical filing of accounts / substantial higher statutory
other documents other documents other documents compliance and filings
requirements As compared to
LO / BO
6. Compliance Requirements Required to file an Annual Required to file an Annual Compliance certificates Required to file Periodic and
under Foreign Exchange Compliance Certificate from Activity / Compliance stipulated for various Annual filings relating to
Management Regulations the Auditors in India with the Certificate from the Auditors purposes receipt of capital and issue of
RBI in India with the RBI shares to foreign investors
7. Compliance Requirements No tax liability as generally it The company is obliged to pay The company is obliged to pay Liable to tax on global income
under Income Tax Act cannot / does not carry out tax on income earned and tax on income earned and on net basis. Dividend
any commercial or income required to file return of required to file return of declared is freely remittable
earning activities. May be income in India. No further tax income in India. No further tax but subject to distribution tax
advisable to file an Income- on repatriation of profits on repatriation of profits of 16.995 percent on
tax return. May be liable to which are permissible in both which are permissible in both Dividends declared /
Fringe Benefit Tax (FBT) and cases. Liable to FBT and cases. Liable to FBT and distributed / paid pursuant to
obliged to file FBT Return obliged to file FBT Return obliged to file FBT Return which dividend is tax free for
annually if it has employee annually if it has employee annually if it has employee all shareholders – limited
base in India. The FBT levy is base in India. The FBT levy is base in India. The FBT levy is inter-corporate dividend set-
proposed to be abolished from proposed to be abolished from proposed to be abolished from off apply. Liable to FBT and
Financial year 2009-10 Financial year 2009-10 Financial year 2009-10 obliged to file FBT Return
annually pursuant to
employee base in India. The
FBT levy is proposed to be
abolished from Financial year
2009-10
8. Permanent Establishment LO generally do not constitute Generally constitute a Generally constitute a It is an independent taxable
(PE) PE / taxable presence under Permanent Establishment (PE) Permanent Establishment (PE) entity and does not constitute
Double Taxation Avoidance and are a taxable presence and are a taxable presence a PE of the Foreign Company
Agreements (DTAA) due to under DTAA as well domestic under DTAA as well domestic per se unless deeming
limited scope of activities in income-tax provisions income-tax provisions provisions of the DTAA are
India attracted
Transfer Pricing in India

India introduced detailed transfer pricing regulations in the Income Determination of arm’s length price
Tax Act, 1961 (Act), as an anti - avoidance measure aimed to ensure The Indian transfer pricing regulations require arm’s length price in
that fair and equitable proportion of profits arising from cross border relation to an international transaction to be determined in
transactions between related entities are received in India. accordance with the most appropriate method from out of the
following prescribed methods:
The Indian transfer pricing provisions are generally in line with the
Transfer Pricing Guidelines for Multinational Enterprises and Tax Comparable uncontrolled price (CUP) method;
?
Administrators issued by Organisation for Economic Co - Operation Resale price method (RPM);
?
and Development (“OECD Guidelines”) albeit with some significant
Cost plus method (CPLM);
?
differences such as a wider definition of the term associated
enterprise; and the concept of arithmetical mean as opposed to Profit split method (PSM); and
?
internationally followed statistical measures of median / arm’s length Transactional Net Margin Method (TNMM)
?
range. The regulations also prescribe rigorous mandatory
documentation requirements and impose steep penalties for non - Unlike the OECD guidelines, there is no order of preference
compliance. prescribed, although in practice transfer pricing authorities do
attempt to use traditional methods such as CUP, RPM and CPLM,
Since its introduction in April 2001, the transfer pricing regulations before accepting a profit-based approach. The choice of the most
have assumed great importance in the Indian taxation arena, with appropriate method is required to be made having regard to factors
the Indian Revenue Authority setup special infrastructure for which inter alia include nature and class of transaction, the classes
enforcement and administration of transfer pricing matters. of associated enterprises undertaking the transaction, the functions
Separate transfer pricing officers have been appointed to audit performed by them etc.
taxpayers having related party international transactions.
Compliance Requirements
Section 92 of the Act provides that the price of any transaction
The burden of proving that the international transactions comply
between associated enterprises, either or both of whom are non
with the arm’s length principle lies with the taxpayer. Further the
resident for Indian income - tax purposes (international transaction),
Act requires every person entering into an international transaction
shall be computed having regard to the arm’s length price.
to maintain prescribed information and documents relating to
Two enterprises are considered to be associated if there is direct / international transactions.
indirect participation in the management or control or capital of an
The prescribed documentation includes details of ownership
enterprise by another enterprise or by same persons in both the
structure, description of functions performed, risks undertaken and
enterprises. Further, the transfer pricing regulations have prescribed
assets used by respective parties, discussion on the selection of
certain other conditions that can trigger an associated enterprise
most appropriate method and economic analysis resulting into
relationship. Significant conditions among these include:
determination of arm’s length price. Failure to maintain the
Direct / indirect shareholding giving rise to 26 percent or more of
? prescribed documentation can result in penalties up to 2 percent of
voting power; the value of the international transactions. Further, failure to furnish
the prescribed documentation within the prescribed time limit can
Dependency relating to source of raw materials / consumables
? result in penalties that can extend up to 2 percent of the value of the
as well as dependency relating to customer(s) for manufactured international transactions.
/ processed goods, price and other conditions being influenced
by the other contracting party; In addition to maintaining the prescribed documentation, taxpayers
are also required to obtain a certificate (detailing the particulars of
Authority to appoint more than 50 percent of the board of
?
international transactions) from an accountant and file the same
directors or one or more of the executive directors;
with the Revenue Authorities on or before the due date of filing
Dependency in relation to intellectual property rights (know -
? return of income. Penalty of INR 100,000 can be levied for non -
how, patents, trademarks, copyrights, trademarks, licenses, filing of the certificate by the prescribed date.
franchises etc) owned by either party; and
Transfer Pricing Assessments
Dependency relating to borrowings i.e. advancing of loans
?
amounting to not less than 51 percent of total assets or Transfer pricing matters are dealt by specialised Transfer Pricing
provision of guarantee amounting to not less than 10 percent of Officers. In accordance with the past internal administrative
the total borrowings guidelines of the Revenue Authorities, all taxpayers reporting
international transactions with associated enterprises exceeding INR Judicial Guidance

150 million are subjected to a mandatory transfer pricing audit. To Over the past eight years, four years of audits have been completed.
the extent of transfer pricing adjustments made as a result of the A lot has been debated on several key issues relating to the
audit, taxpayers lose any tax exemption to which they are otherwise interpretation and implementation of the transfer pricing principles
entitled to. Further, there are potential penalties to the extent of in the Indian context. Several of the issues saw divergent positions
one - time to three - times of the incremental tax arising as a result being adopted by the tax payers and the Revenue Authorities –
of any adjustment. selection of comparables with related party transactions, use of
multiple year data, risk / working capital adjustments, need to
Dispute Resolution Mechanism demonstrate tax avoidance motive before initiating transfer pricing
inquiry for a tax holiday entity, etc. Several of these issues were
In order to facilitate expeditious resolution of transfer pricing
escalated in appeal before the tribunal benches and high courts and
disputes and disputes relating to taxation of foreign companies, an
even though in the past 18 months there have seen several
alternate dispute resolution mechanism is provided in the form of
decisions from the judiciary; these are certainly not the last word
Dispute Resolution Panel (DRP) [a collegium comprising of three
and a lot more is yet to come. The judicial guidance on a wide range
Commissioners of Income - tax]. Under the proposed mechanism,
of transfer pricing related issues is evolving rapidly.
the Assessing Officer (AO) is required to forward the draft of the
proposed assessment order to the taxpayer, which the taxpayer may
accept or lodge an objection with the DRP within 30 days. The DRP Transfer Pricing and Customs Valuation
upon hearing both sides shall issue necessary directions to the AO The Indian Revenue Authorities set up a Joint Working Group,
for completing the assessment, within a period of 9 months from comprising of transfer pricing and customs officers. Considering the
the end of the month in which the draft order is forwarded to the lack of synchronization between customs valuation procedure and
taxpayer. Such directions of the DRP would be binding on the AO. transfer pricing regulation under Act, this initiative was undertaken
Any appeal against the order passed by the AO in pursuance of the by the Revenue Authorities in order to bring greater harmonization,
directions issued by the DRP shall be filed by the taxpayer directly coordination and communication between the two departments as
with the Income - tax Appellate Tribunal. regards valuation of imported goods.
Safe Harbour
The Central Board of Direct Taxes (CBDT) has been empowered to
formulate Safe Harbour Rules to reduce the disputes and
judgmental errors relating to transfer pricing matters.
Advance Pricing Agreements

Currently, the Indian transfer pricing provisions do not provide any
facility for advance pricing agreements (APAs) as prevalent in some
other jurisdictions. To mitigate disputes and uncertainty on transfer
pricing issues, it is expected that the Government in the near future,
may provide for legislative amendments to enable APAs. Towards
this objective consultation discussions have already been held with
the Industry and the consultants.
Mutual Agreement Procedure

The taxpayers can choose Mutual Agreement Procedure (MAP) to
resolve bilateral transfer pricing issues with certain foreign
jurisdictions depending on the provisions in the relevant Double
Taxation Avoidance Agreements (DTAAs). The Revenue Authorities
have issued notifications whereby subject to the satisfaction of
certain conditions and depending on the relevant foreign jurisdiction,
the taxpayers choosing the MAP process may not need to pay the
tax demand until the closure of the MAP proceedings.
Direct Taxes
In India, under the constitution taxes can be levied by the Central India adopts the self-assessment tax system. Taxpayers are required
and the State Governments, and by the local government bodies. to file their tax returns by specified dates. The Tax Officer may
Principal taxes, including Income-tax, Custom Duties, Central Excise choose to make a scrutiny assessment to assess the correct
Duty and Service Tax are levied by the Central Government. On the amount of tax by calling for further details.
other hand, States levy taxes like State Excise Duties, Value-Added
Tax, Sales Tax and Stamp Duties. Local government bodies levy Generally, taxpayers are liable to make Income-tax payments as
Octroi Duties and other taxes of local nature like Water tax, advance tax, in three or four installments, depending on the
Property Tax, etc. Income is taxed in India in accordance with the category they belong to, during the year in which the income is
provisions of the Income-tax Act, 1961. The Ministry of Finance earned. Balance tax payable, if any, can be paid by way of self-
(Department of Revenue) through the Central Board of Direct Taxes assessment tax at the time of filing the return of income. Employed
(CBDT), an apex tax authority implements and administers direct tax individuals are subject to tax withholding by the employer on a ‘pay-
laws. as-you-earn’ basis. Certain other specified incomes are also subject
to tax withholding at specified rates.
India has embarked on a series of tax reforms since the early 1990s.
The focus of reforms has been on rationalization of tax rates and Residential status
simplification of procedures.
Individual
India follows a ‘residence’ based taxation system. Broadly, taxpayers Depending upon the period of physical stay in India during a given
may be classified as ‘residents’ or ‘non-residents’. Individual tax year, an individual may be classified as a resident or a non-
taxpayers may also be classified as ’residents but not ordinary resident or a ‘not ordinarily resident’ in India.
residents’.
Company
The ‘tax year’ (known as the financial year) in India, runs from 1 April A resident company (also referred to as an Indian Company) is a
to 31 March of the following calendar year for all taxpayers. The company formed and registered under the Companies Act, 1956 or
‘previous year’ basis of assessment is used i.e. any income one whose control and management is situated wholly in India. An
pertaining to the ‘tax year’ is offered to tax in the following year Indian company by definition is always a resident.
(known as the assessment year).
A non-resident company is one, whose control and management are
Taxable income has to be ascertained separately for different situated wholly outside India. Consequently, an Indian company that
classes of income (called as ‘heads of income’) and is then is wholly owned by a foreign entity but managed from India by
aggregated to determine total taxable income. Income tax is levied foreign individuals / companies is also considered as a resident
on ‘taxable income’, comprising of income under the following Indian company.
categories, referred to as ‘Heads of Income’:
Kinds of taxes
Salaries
?
Corporate income tax
Income from house property
?
Income-tax is levied on income earned during a tax year as per the
Profits and gains of business or profession
?
rates declared by the annual Finance Act.
Capital gains and
?
Income from other sources.

? Minimum Alternate Tax (MAT)
With a view to bring zero tax paying companies having book profits,
Generally, the global income of domestic companies, partnerships
under the tax net, the domestic tax law requires companies to pay
and local authorities are subject to tax at flat rates, whereas
MAT in lieu of the regular corporate tax, in a case where the regular
individuals and other specified taxpayers are subject to progressive
corporate tax is lower than the MAT.
tax rates. Foreign companies and non resident individuals are also
subject to tax at varying rates on specified incomes which are However, MAT is not applicable in respect of:
received / accrued or deemed to be received / accrued in India.
Income exempt from tax (excluding exempt long-term capital
?
gains from tax-year ending 31 March 2007)
Agricultural income is exempt from Income-tax at the central level
but is taken into account for rate purposes. Income earned by Income from units in specified zones including Special Economic
?
specified organisations e.g. trusts, hospitals, universities, mutual Zones (SEZs) or specified backward districts
funds etc., is exempt from Income-tax, subject to the fulfillment of Income of certain sick industrial companies.
?
certain conditions.
MAT is levied at 15 percent (plus applicable surcharge and education cess) of the adjusted
book profits of companies where the tax payable is less than 15 percent of their book
profits. Surcharge is applicable at 10 percent in the case of companies other than a foreign
company, if the adjusted book profits are in excess of INR 10,000,000. Education cess is
applicable at 3 percent on income-tax (inclusive of surcharge, if any).
A tax credit is available being the difference of the tax liability under MAT provisions and
regular provisions, to be carried forward for set off in the year in which tax is payable under
the regular provisions. However, no carry forward shall be allowed beyond the tenth
assessment year succeeding the assessment year in which the tax credit became
allowable.
Dividend Distribution Tax (DDT)

Dividends paid by an Indian company are currently exempt from Income-tax in the hands of
the recipient shareholders in India; however, the company paying the dividends is required
to pay DDT on the amount of dividends declared. The rate of tax is 16.995 percent (inclusive
of surcharge and educational cess). DDT is a tax payable on the dividend declared,
distributed or paid. An exemption from this tax has been granted in case of dividends
distributed out of profits of SEZ developers.
Domestic companies will not have to pay DDT on dividend distributed to its shareholders to
the extent of dividend received from its subsidiary if:
The subsidiary has paid DDT on such dividend received; and

?
Such a domestic company is not a subsidiary of any other company.

?
A company would be subsidiary of another company if such a company holds more than
half in nominal value of equity share capital of the company.
Tonnage Tax Scheme for Indian Shipping Companies

Indian shipping companies are taxed on a presumptive basis. Tax is levied on the notional
income of the shipping company arising from the operation of ships at normal corporate tax
rates. The notional income is determined in a prescribed manner on the basis of the
tonnage of the ship. Tax is payable even in the case of loss. The scheme is applicable to
shipping companies that are incorporated under the Indian Companies Act (with its effective
place of management in India) with at least 1 ship with minimum tonnage of 15 tonnes and
holding a valid certificate under the Merchant Shipping Act, 1959. Shipping companies have
an option to opt for the scheme or taxation under normal provisions. Once the scheme has
been opted for, it would apply for a mandatory period of 10 years and other tax provisions
would not apply.
Fringe Benefit Tax (FBT)

FBT has been abolished by the Finance Act 2009 with effect from 1 April 2009.
Securities Transaction Tax (STT)

STT is levied on the value of taxable securities transactions at specified rates.
The taxable securities transactions are –

Purchase / Sale of equity shares in a company or a derivative or a unit of an equity-
?
oriented fund entered into in a recognized stock exchange
Sale of unit of an equity-oriented fund to the mutual fund
?
Transaction Purchase/Sale of Sale of equity Sale of Derivatives Sale of an option Sale of derivatives Sale of unit of an
equity shares, shares, units of (on the premium in securities (where the option equity oriented
units of equity equity oriented amount) is exercised) fund to the
oriented mutual mutual fund mutual fund
fund (delivery (non-delivery
based) based)
Rates 0.125% 0.025% 0.017% 0.017% 0.125% 0.25%
Paid by Purchaser/ seller Seller Seller Seller Purchaser Seller
Wealth Tax
Wealth tax is leviable on specified assets at 1 percent on the value of the net assets plus
surcharge and cess as held by the assessee (net of debts incurred in respect of such
assets) in excess of the basic exemption of INR 3,000,000.
Tax rates
Personal taxes
Individuals (excluding women and senior citizen) are liable to tax in India at different rates of
tax as under:
Individual
Income Slab Effective Tax rate (including educational cess of 3 percent)
Upto USD 3,300 NIL
USD 3,300 to USD 6,250 10.3%
USD 6,250 to USD 10,400 20.6%
Above USD 10,400 30.90%
Women
Income Slab Effective Tax rate (including educational cess of 3 percent) #
Upto USD
US$ 4,000
4,000 NIL
US$ 4,000
USD 4,000 to
to US$
USD6,250
6,250 10.3%
US$ 6,250
USD 6,250 to
to US$
USD10,400
10,400 20.6%
Above USD
US$ 10,400
10,400 30.90%
Senior Citizens (Individuals of the Age of 65 years or more)
Income Slab Effective Tax rate (including educational cess of 3 percent)
Upto USD 5,000 NIL
USD 5,000 to USD 6,250 10.3%
USD 6,250 to USD 10,400 20.6%
Above USD 10,400 30.90%

Note: Income slabs rounded off to nearest US-$ 100, US$ 1 = INR 48. The closing rate as per Economic Times dated 6 July 2009.
The Finance Act 2009 has removed surcharge on all the non corporate taxpayers.
Capital gains tax

Capital Gains arising from the transfer of capital assets (e.g. shares, stocks, immovable
property, etc.) are liable to capital gains tax. The length of time of holding of an asset
determines whether the gain is short term or long term.
Long term capital gains arise from assets held for 36 months or more (12 months for
shares, units, etc).
Gains arising from transfer of long-term capital assets are taxed at special rates / eligible for
certain exemptions (including exemption from tax where the sale transaction is chargeable
to STT). Short-term capital gains arising on transfer of assets other than certain specified
assets are taxable at normal rates. The following figure shows the rates of capital gains tax:
Type of gain Tax rate in case of transfer of assets subject to Tax rate in case of transfer of other assets
payment of Securities Transaction Tax (STT)
Long-term capital gains NIL 20 percent
Short-term capital gains 15 percent Normal Tax Rates applicable to corporates/ individuals
# Corporate tax rates are given under the head 'Companies' and individual tax rates are given under head 'Personal taxes'
Taxability of non resident Indians

Non-resident Indians are also be liable to tax in India on a gross basis depending upon the
type of income received.
Foreign nationals
Indian tax law provides for exemption of income earned by foreign nationals for services
rendered in India, subject to prescribed conditions. For example:
Remuneration from a foreign enterprise not conducting any business in India provided
?
the individual’s stay in India does not exceed 90 days and the payment made is not
deducted in computing the income of the employer
Remuneration received by a person employed on a foreign ship provided his stay in
?
India does not exceed 90 days.
Companies
A resident company is taxed on its global income. A non-resident company is taxed on
income which is received / accrued or deemed to accrue / arise in India. The scope of Indian
income is defined under the Act. The tax rates for the tax year 2009-10 are given in the table
below:
Type of Company Effective tax rate (including surcharge and educational cess)
Domestic company 33.99 percent#
Foreign company 42.23 percent

# Income-tax 30 percent plus surcharge of 10 percent (if the total income exceeds USD 0.2 million) thereon plus education cess of 3 percent on
Income-tax including surcharg
* Income-tax 40 percent plus surcharge of 2.5 percent thereon plus education cess of 3 percent on Income-tax including surcharge
A company is additionally required to pay the other taxes e.g. STT, MAT, Wealth tax, DDT
etc.
Modes of taxation
Gross basis of taxation
Certain specific incomes streams earned by non-residents are liable to tax on gross basis in
certain cases, i.e. a specified rate of tax is applied on the gross basis and no deduction of
expenses is allowed. The details of nature of income and applicable rate of tax are as under:
Income stream Rate of tax
Interest 21.11 percent
Royalties 10.55 percent
Fees for technical services 10.55 percent
The rates are in the case of a foreign company and are inclusive of surcharge of 2 and a half
percent and education cess of 3 percent on tax and surcharge in respect of agreements
made on or after 1 June 2005 respectively.
Presumptive basis of taxation

Foreign companies engaged in certain specified business activities are subject to tax on a
presumptive basis i.e. income is recognized at a specific percentage of gross revenue and
thereafter tax liability is determined by applying the normal tax on deemed income. Certain
activities taxed on a presumptive basis along with the basis of taxation are set out below:
Activity Basis of taxation Effective tax rate (including surcharge of 2.5%

and education cess of 3%)
Oil and gas services Deemed profit of 10 percent of revenues 4.223%
Execution of certain turnkey contracts Deemed profit of ten percent of revenues 4.223%
Air transport Deemed profit of 5% of revenues 2.115%
Shipping operations Deemed profit of 7.5% of freight revenues 3.167%
Deductions allowable from business income

Generally, all revenue expenses incurred for business purposes are deductible from the
taxable income. The requirement for deductibility of expenses is that the expenses must be
wholly and exclusively incurred for business purposes; that the expenses must be incurred
or paid during the previous year and supported by relevant papers and records. Expenses of
a personal or a capital nature are not deductible. Income tax paid is not allowable as a
deduction. Depreciation on specified capital assets at prescribed rates is also deductible.
Expenditure incurred on taxes (excluding Income-tax) and duties, bonus or commission to

employees, fees under any law, interest on loans or borrowings from public financial
institutions and interest on loans and advances from scheduled banks is deductible only if it
is paid during the previous year, or on or before the due date for furnishing the return of
income. However, interest on capital borrowed for acquisition of assets acquired for
extension of existing business is not allowed as a deduction until the time such assets are
actually put to use.
Employee’s contributions to specified staff welfare funds – that is, provident funds, gratuity
funds, etc. – are allowed only if actually paid on or before the applicable due date. However,
employer’s contributions to these funds are deductible even if paid before the due date of
filing of the return of income. Salaries, interest, royalties, technical service fees,
commissions or any other amount payable outside India or in India to a non-resident (other
than a foreign company) or a foreign company or a resident, or any sums payable to resident
contractor / sub-contractor, on which the applicable withholding tax has not been withheld
or after deduction has not been paid are not deductible. Such amounts are deductible in the
year in which the withholding tax is paid. Where, in respect of these payments, tax has
been deducted in the relevant year but paid in the subsequent year within the prescribed
time limit, such payments made are deductible in the relevant year. However, if the tax so
paid in the subsequent year is not paid within the prescribed time limit, the deduction is
allowed only in the subsequent year.
Similarly, any payment made to residents for interest, commission or brokerage, rent,
royalty, fees for professional or technical services, contract / sub-contract payments, where
taxes have not been withheld or after withholding have not been paid as per prescribed
regulations, will be disallowed in the hands of the payer. The deduction for such a sum will
be allowed in the year in which the withholding taxes are paid.
Head-office expenditure
?
Foreign companies operating in India through a branch are allowed to deduct executive
and general administrative expenditure incurred by the head office outside India.
However, such expenditure is restricted to the lower of:
- Five percent of adjusted total income (as defined) or

- Expenditure attributable to the Indian business.
In cases where the adjusted total income for a year is a loss, the expenditure is
restricted to 5 percent of the average adjusted total income (as defined).
Bad debts
?
Bad debts written off are tax deductible. Provision for doubtful debts is not tax
deductible. Banking companies are allowed a deduction for provisions for bad and
doubtful debts upto 7.5 percent of total income or 10 percent of its assets classified as
doubtful assets restricted to the provision for doubtful debts made in the books. Banks
incorporated in a country outside India and public financial institutions are allowed a
deduction for provisions for doubtful debts up to 5 percent of income, as specifically
defined for this purpose. Bad debts actually written off by banks and public financial
institutions, in excess of the accumulated provision for doubtful debts, are deductible.
Depreciation
?
Depreciation allowance on various assets is available at specified rates on the written

down value of the asset based on a block asset concept. Further, in case of
manufacturing or production activities, additional depreciation is allowable at the rate of
20 percent of the cost of new plant and machinery (other than ships or aircraft) acquired
and installed during the year. Assets used for less than 180 days in the year of
acquisition are entitled to half of the normal depreciation allowance. Depreciation not
set off against current year’s income can be carried forward as unabsorbed depreciation,
for set off against any future income for unlimited period.
Amortization Expenses
?
Indian companies are allowed to claim certain preliminary expenses such as expenditure
in connection with preparation of feasibility report, project report, legal charges for
drafting Memorandum and Articles of Association of the company etc. as specified, and
incurred before commencement of his business, or after commencement of his
business, in connection with the extension of his industrial undertaking or in connection
with his setting up a new industrial unit.
A deduction shall be allowed of an amount equal to 1/5th of such expenditure for each
of the five successive previous years beginning with the previous year in which the
business commences or, the previous year in which the extension of industrial
undertaking is completed or the new industrial unit commences production or operation.
Grouping / consolidation
No provisions currently exist for the grouping / consolidation of losses of entities within the
same group.
Type of income Foreign companies# Other non-residents*
Type of income Foreign companies# Other non-residents*
Interest on foreign currency loan 21.115 percent 20.60 percent
Winnings from horse races 31.67 percents 30.90 percent
Royalties and technical services fee approved by 10.55 percent 10.30 percent
the Government or in accordance with the
industrial policy
Winnings from lotteries and crossword puzzles 31.67 percent 30.90 percent
Long term capital gains 21.115 percent 20.60 percent
Any other income 42.23 percent 30.60 percent

# Effective tax rate including surcharge of 2.5 percent and education cess of 3 percent
* Effective tax rate including education cess of 3 percent.
Carry forward of losses and unabsorbed depreciation

Subject to the fulfillment of prescribed conditions:-
Business loss can be carried forward for eight consecutive financial years and can be
?
set off against the profits of subsequent years. Losses from a speculation business can
be set off only against gains from speculation business for a maximum of four years
Unabsorbed depreciation may be carried forward for set-off indefinitely

?
Capital losses may also be carried forward for set-off for eight subsequent financial
?
years subject to fulfillment of certain conditions. Long-term capital losses can be set off
only against long-term capital gains, whereas short- term capital losses can be set off
against short-term as well as long-term capital gains. These losses cannot be set off
against income under any other head
Carry back of losses or depreciation is not permitted.

?
Corporate reorganizations
Corporate re-organizations, such as mergers, demergers and slump sales are either tax
neutral or taxed at concessional rates subject to the fulfillment of prescribed conditions.
Merger
?
Mergers are tax neutral, subject to the fulfillment of following conditions:

- All assets and liabilities are transferred to transferee company
- Transferee company should issue shares to the shareholders of the transferor
company as consideration for merger
- Transferee company continues to hold at least 3/4th of the book value of assets of
the transferor company for a minimum period of 5 years
- Business of the transferor company is continued for at least 5 years
- Transferee company shall achieve minimum production level of 50 percent of the
installed capacity within 4 years of the merger and maintain the minimum level of
production until the end of fifth year.
Upon fulfillment of the above conditions, the losses and the depreciation of the
transferor company are available for carry forward and set off to the transferee company.
Demerger
? The profits or gains arising from a Slump Sale in excess of its
Demergers are also tax neutral, subject to certain conditions. net worth are deemed to be income chargeable to tax as capital
The conditions in relation to the method of demerger are gain /loss arising from transfer of a long term capital asset
relatively more restricted than in the case of mergers. For e.g., it provided the undertaking is held for at least three years. If
is provided that the entire assets and liabilities of the relevant undertaking is held for less than three years, the gain / loss shall
undertaking must be demerged, shares must be issued to the be treated as short term capital gain / loss.
shareholders of the transferor company in the transferee
The Limited Liability Partnerships
company and the assets and liabilities must be transferred at
book value in order for mergers to be tax neutral. Further, losses The Finance Act 2009 has introduced the tax treatment for the
related and attributable to the undertakings transferred are also Limited Liability Partnerships which are recently introduced by the
allowed to be carried forward in the hands of transferee Limited Liability Partnership Act, 2008 in India. The terms ‘Firm’,
company ‘Partner’ and ‘Partnership’ has amended and an LLP defined under
the LLP Act has been put on par with a partnership firm under the
Tax Neutrality
? Indian Partnership Act, 1932 (General Partnership) for the purpose of
If the transferee company is an Indian company, then, subject to income-tax. Consequently, provisions relating to interest and
the fulfillment of prescribed conditions, transactions pursuant to remuneration to partners would apply to a LLP, while provisions
merger / demerger are entitled to various other tax concessions, applicable to companies such as MAT, DDT, etc. will not apply to an
including the following: LLP.
- No capital gains to the shareholders in transferor company Foreign Institutional Investors (FII)
- No capital gains to the transferor company To promote the development of Indian capital markets, qualified FIIs
- Merger / demerger expenses shall be allowed to be / sub accounts registered with the Securities and Exchange Board
amortized 1/5th every year for a period of five years of India (SEBI) and investing in listed Indian shares and units, are
- Pursuant to restructuring, various tax incentives hitherto subject to tax as per beneficial regime as under:
available to the transferor company will be available to the
transferee company Interest 20 percent
Long-term capital gains # NIL

Slump Sale
?
Slump Sale refers to the transfer of one or more undertaking/s Short- term capital gains # 15 percent
by way of sale for a lump sum consideration without values # Subject to payment of Securities Transaction Tax (STT)
being assigned to the individual assets and liabilities comprised

In addition, there is a surcharge of 2.5 percent in case of companies
in the undertaking/s. The term ‘undertaking’ for this purpose has
and 10 percent in case of non-corporate where the income exceeds
been defined under the Act in an inclusive manner and means:
INR 1,000,000 and education cess of 3 percent. Additionally, capital
- Any part of an undertaking or gains earned by an FII are not subject to withholding tax in India.
- A unit or division of an undertaking or

- A business activity taken as a whole The rate of tax on other short-term capital gains is 30 percent plus
surcharge and education cess; and on long-term capital gains (if not
but does not include individual assets or liabilities or any exempt) is 10 percent plus surcharge and education cess.
combination thereof not constituting a business activity.
The Finance Act 2009 has removed surcharge of 10 percent.
To qualify as a Slump Sale, it is necessary to ensure that:
- All the assets and liabilities relating to the business activity Relief from Double Taxation
are transferred For countries that have Double Tax Avoidance Agreements (DTAAs)
- The transfer is on a going concern basis with India, bilateral relief is available to a resident in respect of
- The transfer is for a lump sum consideration i.e. no part of foreign taxes paid. Generally, provisions of DTAAs prevail over the
the consideration should be attributed to any particular asset domestic tax provisions. However, the domestic tax provisions may
or liability. apply to the extent that they are more beneficial to the taxpayer.
The DTAAs would also prescribe rates of tax in the case of dividend income, interest,
royalties and fees for technical services which should be applied if the rates prescribed in
the Act are higher. Business income of a non-resident may not be taxable in India if the non-
resident does not have a permanent establishment in India.
For countries with no DTAA with India, a foreign tax credit is available under Indian
domestic tax law to a resident taxpayer in respect of foreign taxes paid. The amount of
credit allowable should be the lower of the tax suffered in the foreign country or the Indian
tax attributable to the foreign income. Currently, there is no carry forward / carry back of
excess tax credits. Also, there are no detailed rules for availing foreign tax credit but is
governed by the DTAA’s clauses. With effect from 1 June 2006, a statutory recognition has
also been given to agreements entered into between specified Indian association and a
non-resident specified association for grant of double taxation relief, for avoidance of double
taxation, for exchange of information for the prevention of evasion or avoidance of income
tax or for recovery of income tax. It is also clarified that a higher charge of tax on the foreign
entity will not be considered as discrimination against such an entity.
The Central Government may enter into agreement with the Government of any specified
territory outside India for the purpose of double tax relief and specified purposes in the
same manner as with the Government of any country outside India.
Special Economic Zones (SEZs)

Units set up in SEZs biological agents or for producing bio-gas or making pellets or
A unit which sets up its operations in SEZ is entitled to claim briquettes for fuel or organic manure, for the first 5 consecutive
Income-tax holiday for a period of 15 years commencing from the years.
year in which such unit begins to manufacture or produce articles or
Commercial production or refining of mineral oil
things or provide services. The benefits are available against export
profits, as under: A 100 percent tax holiday to undertakings (excluding undertakings
located in North eastern region) engaged in commercial production
Deduction of 100 percent for the first 5 years; of mineral oil for the first 7 consecutive years. An undertaking,
which is wholly owned by a public sector company or any other
Deduction of 50 percent for the next 5 years (unconditional); company in which a public sector company or companies hold at
least forty-nine percent of the voting rights, engaged in refining of
Deduction of 50 percent for the next 5 years (subject to conditions mineral oil set up before 31 March, 2012 will be entitled to a 100
for creation of specified reserves). percent tax holiday for the first 7 consecutive years provided it has
been notified by the Indian Government before 31 May, 2008.
SEZ developer
In-house research and development
A 100 percent tax holiday (on profits and gains derived from any
business of developing an SEZ) for any 10 consecutive years out of A deduction is available of one and one-half times of the scientific
15 years has been extended to undertakings involved in developing research expenditure incurred (excluding expenditure on cost of land
SEZ’s notified on or after 1 April, 2005 under the SEZ Act, 2005. or building) on an in-house research and development facility as
approved in bio-technology or in the manufacture or production of
drugs, pharma, electronic equipments, computers, telecom
Offshore Banking Units (OBU) and International Financial
equipments, chemicals, or other specified articles. The weighted
Services
deduction is available on such expenditure incurred up to 31 March,
Center units (IFSC) set up in SEZs 2012.
OBUs and IFSCs located in SEZs are entitled to tax holiday of 100
percent of income for the first 5 years and 50 percent for next 5 A deduction is available of 150 percent of the scientific research
consecutive years. expenditure incurred (excluding expenditure on cost of land or
building) on an in-house research and development facility engaged
Export oriented Units (EOU) in the business of manufacture or production of any article or thing
Undertakings set-up in Export Processing Zones (EPZ) / Free Trade other than prohibited article or thing listed in the Eleventh Schedule
Zones (FTZ) or Electronic Hardware Technology Park (EHTP) or The weighted deduction will be available from 1 April 2010.
Software Technology Park (STP) or 100 percent EOUs, are eligible for
a deduction of 100 percent on the profits derived from exports for 10 Capital expenditure incurred in specified industries
consecutive years beginning from the year in which such The Finance Act, 2009 has introduced a deduction in respect of
undertaking begins manufacturing or commences its business entire capital expenditure (excluding expenditure on cost of land or
activities. Such a deduction would be available only up to financial goodwill or financial instrument) incurred by the taxpayer engaged in
year 2010-2011. following businesses:
Food processing Setting up and operating cold chain facilities for specified
?
A 100 percent tax holiday to undertakings from the business of products
processing, preservation, and packaging of fruits or vegetables or Warehousing facilities for storage of agricultural produce
?
meat and meat products or poultry or marine or dairy products or Laying / operating cross-country natural gas or crude or
?
from the integrated business of handling, storage, and petroleum oil pipeline network for distribution / storage
transportation of food grains for the first 5 consecutive years and
thereafter, 30 percent (25 percent for non-corporate entities) for the Deduction to the expenditure incurred prior to commencement of
next 5 consecutive years. operation of the above specified business will be allowed, if the
expenditure was capitalised in the books of the taxpayer on the date
Business of collecting and processing biodegradable waste of commencement of operation. The deduction will be allowed to
A 100 percent tax holiday to undertakings from the business of the taxpayer in the year of commencement of operation.
collecting and processing or treating of bio-degradable waste for
generating power or producing bio-fertilizers, bio pesticides or other
Industrial parks, model towns, and growth centers Tax holiday in respect of hospitals / hotels / convention centres’
For developers of industrial parks A 100 percent tax holiday for the first 5 consecutive years to
?
Hundred percent tax holiday is available to developers of industrial an undertaking deriving profits from the business of operating
parks for any 10 consecutive assessment years out of 15 years and maintaining a hospital located anywhere in India (subject
beginning from the year in which the undertaking or the enterprise to exclusions), provided the hospital is constructed and has
develops, develops and operates or maintains and operates an started or starts functioning at anytime before 31 March,2013
industrial park, provided the date of commencement (i.e. the date of A tax holiday for the first 5 consecutive years to an
?
obtaining the completion certificate or occupation certificate) of the undertaking deriving profits from the business of a hotel or
industrial park is not later than 31 March, 2011. from the business of building, owning and operating a
convention centre, in specified areas, if such hotel / convention
Tax holiday in respect of infrastructure projects centre is constructed and has started or starts functioning
Undertakings engaged in prescribed infrastructure projects are before 31 March, 2010
eligible for a consecutive 10 year tax holiday as set out below: A tax holiday for the first 5 consecutive years to an
?
undertaking deriving profit from the business of a hotel located
A 10 year tax holiday in a block of 20 years has been extended to
?
in the specified district having a World Heritage Site, if such
undertakings engaged in developing / operating and maintaining hotel is constructed and has started or starts functioning
/ developing, operating and maintaining any infrastructure facility before 31 March, 2013
such as roads, bridges, rail systems, highway projects including
housing or other activities being an integral part of the project,
water supply projects, water treatment systems, irrigation
projects, sanitation and sewerage systems or solid waste
management system
A 10 year tax holiday in a block of 15 years has also been
?
extended to undertakings involved in developing / operating and
maintaining,/ developing, operating and maintaining, ports,
airports, inland waterways, inland ports or navigational channels
in the sea
A similar tax holiday (10 years out of a block of 15 years) has
?
been extended to undertakings engaged in the business of
laying and operating cross country natural gas distribution
network, including pipe lines and storage facilities being an
integral part of such a network. Since the Finance Bill, 2009 has
proposed to introduce this incentive in a modified form (given
above under the heading “Capital expenditure incurred in
specified industries”) the same has been proposed to be
discontinued
Tax holiday in respect of power projects

Undertakings engaged in prescribed power projects are eligible for a
consecutive 10 year tax holiday as set out below:
A tax holiday of 10 years in a block of 15 years has also been

?
extended to undertakings set up before 31 March, 2010 with
respect to the following:
- generation / generation and distribution of power
- laying of network of new lines for transmission or distribution
- undertaking a substantial renovation (more than 50 percent)
and modernization of the existing network of transmission or
distribution lines.
Indirect taxes
The Ministry of Finance, Government of India (Department of (Service tax at 10 percent, Education Cess at 3 percent of Service
Revenue) through the Central Board of Excise and Customs tax and Secondary and Higher Education cess at 1 percent of
(‘CBEC’), the apex Indirect tax authority, implements and Service tax) on the gross amount charged for services provided.
administers Central Excise, Customs and Service tax laws. Presently, more than 100 taxable services are notified under Chapter
Circulars, notifications and clarifications issued by the CBEC V of the Finance Act, 1994 which is the governing legislation for
supplement these Indirect tax laws. Service tax.
Export of Services
Customs duty
As per the Export of Service Rules, 2005 (the Export Rules), Service
Customs duty is a federal levy payable on the import of goods into
tax is not applicable on ‘export’ of taxable services.
India. The rate of Customs duty is based on the tariff classification
of goods being imported in terms of the Customs Tariff Act, 1975 Export Rules prescribe three different categories under which
(Customs Tariff) [which is aligned with the Harmonized System of taxable services may be classified depending on their nature, in
Nomenclature (‘HSN’) followed internationally]. Further, various order to determine whether provision of the same to an offshore
concessions/ exemptions are available depending on the nature of service recipient would qualify as an export of service. The essential
goods, their intended use, status of the importer, country of export concept of ‘export’ is based on zero-rating principles adopted by
etc. several countries around the world.
The general effective rate of Customs duty on import of capital

goods is 21.52 percent and for other goods is 24.42 percent, and Import of Services
comprises of various duties and cesses levied on a cumulative basis As per the Taxation of Services (Provided from outside India and
[Basic Customs Duty is usually levied at the rate of 7.5 percent on Received in India) Rules, 2006 (the Import Rules), where any taxable
capital goods and at 10 percent on other goods; Additional Customs service is provided by a service provider based outside India to a
Duty in lieu of Excise duty (‘CVD’) at 8.24 percent; Additional Duty service recipient located in India, liability to discharge Service tax
of Customs in lieu of local sales tax (‘ADC’) at 4 percent; Education devolves upon the recipient of such services in India under the
Cess (including the Secondary and Higher Education Cess) at 3 reverse charge mechanism, subject to the satisfaction of specified
percent]. conditions.
Import-export policy Cenvat credit

Import of goods into India and export of goods from India is In order to reduce the cascading effect of both Excise duty and
regulated by the Foreign Trade Policy (the Policy) which is framed by Service tax, the Cenvat Credit Rules, 2004 provide for Cenvat credit
the Ministry of Commerce and Industry, Government of India. The of Excise duty paid on inputs and capital goods and Service tax paid
Policy remains in force for five years and is periodically amended. on input services that are used in the manufacture of excisable
The Policy provides for various exemptions and concessional goods or for provision of taxable services. Such credit may be used
schemes which may be availed for the import and export of goods. to discharge an output Excise duty or Service tax liability.
Further, Cenvat credit is also available in respect of specified

Excise duty
components of the import duties paid (Generally CVD and ADC in
Excise duty is a federal duty levied on manufacture of goods in India case of manufacture and any CVD in case of services) where such
and is payable upon clearance of the goods from designated imported goods are used in the manufacture of excisable goods /
establishments (factories, warehouses etc.). Excise duty is levied provision of taxable services in India.
as per the provisions of the Central Excise Act, 1944 (the Excise Act)
at the rates prescribed in the Central Excise Tariff Act, 1985 (Excise
Value Added tax (VAT) / Central Sales tax (CST)
Tariff). The Excise Tariff is also aligned with the HSN.
VAT and CST are levied on the sale of movable goods in India
The duty is usually levied at the rate of 8.24 percent (Excise Duty at including various intangibles (e.g. Patent, Trade Mark etc.).
8 percent, Education Cess at 2 percent of Excise Duty and
Secondary and Higher Education cess at 1 percent of Excise duty. VAT
VAT is a State specific levy on sale of goods within a State in India.
VAT is generally payable at the rates of 4 percent (on specified
Service tax
products including industrial inputs, information technology
Service tax is a federal levy on provision of notified taxable services
products, capital goods, etc.) or 12.5 percent (residual rate
in India. Service tax is currently leviable at the rate of 10.30 percent
applicable to most of the goods), though higher rates are also R&D Cess paid is available as deduction with respect to Service
prescribed for specified goods. tax payable for Consulting Engineer’s services and Intellectual
Property Right related services.
Further, subject to prescribed conditions, VAT paid on inputs may be
available as credit for set-off against output VAT or CST liability of the Octroi duty
dealer. Octroi duty is a local authority levy, which is levied on entry of
goods into a municipal/ local area for use, consumption or sale.
CST
This levy is presently applicable only in certain municipalities.
Where a sale transaction entails the movement of goods from one
State in India to another, the transaction would qualify as an inter- Goods and Service tax – Proposed
state sale and would be chargeable to CST under the Central Sales In the Union Budget 2009-10, the Government of India has
Tax Act, 1956 (‘the CST Act’). In case the purchaser can issue the signaled its intention to facilitate the introduction of dual GST
required statutory declaration forms, CST would be levied at a regime comprising of Central GST and State GST with effect from
concessional rate of 2 percent, else the VAT rate applicable on local 1 April 2010. Central government and State governments would
sale of goods in the dispatching State, would be applicable on such legislate, levy and administer Central and State GST respectively.
sales. However, the road map for its implementation is still to be
released.
Further, it is pertinent to note that the CST is a non-creditable levy
and cannot be off-set against an output VAT or CST liability.
It may be noted that CST is intended to be phased out on

introduction of Goods and Service Tax (‘GST’) which is proposed to
be introduced from April 2010.
Entry tax
Entry tax is a State levy on the entry of specified goods into a State
for consumption, use or resale within a specified jurisdiction. Entry
tax is payable by the person bringing such goods into the local area/
State (typically referred to as ‘importer’).
Typically, most States allow a set-off of the Entry tax paid against
the output VAT payable on the sale of goods. Alternately, a refund is
provided for in case the goods are sent out of the local area/ State in
the same condition. The rate of Entry tax on different products
varies from State to State, and generally ranges between 2 percent
to 15 percent.
It may be noted that the constitutionality of Entry tax laws in various

states is under review before the Supreme Court of India and
developments with respect to the same need to be monitored
closely.
Research and Development Cess (R&D Cess)

R&D Cess is leviable at the rate of 5 percent on import of
technology under a foreign collaboration. The term ‘foreign
collaboration’ has been defined to include Joint ventures,
partnerships, etc.
Import of any designs/ specifications from outside India or

deputation of foreign technical personnel, under a foreign
collaboration, would also be liable to R&D Cess.
Conclusion
154
Conclusion
The 21st century has given rise to a set of unique challenges for the globalizing and crisis-
hit world. Nonetheless, the ascent of information and communication technology, scientific
progress and ever-expanding business frontiers has opened a Pandora’s Box of immense
and diverse opportunities for economic agents. Countries should derive benefits from this
dynamic business environment and collaborate and cooperate with each other.
One such partnership that the Knowledge Paper endeavors to highlight is between India
and the member countries of the EU. The paper identifies certain key sectors where
specific industrial strengths of India and the EU countries complement each other. There are
strong opportunities for Indo-EU partnerships in a number of sectors like agriculture and
food processing, banking and financial services, fashion and luxury, gems and jewellery,
IT/ITeS, travel and tourism and media and entertainment. Furthermore, negotiations for a
Free Trade Agreement between the two regions are likely to conclude successfully and will
High open up newer areas of mutual interest.
Medium, owing to regulatory constraints
Sector: Segments Key Countries in the EU Bilateral Opportunity Growth Drivers
Consumer Markets:
Agriculture and Processed Food UK, Germany, France, Italy, Spain Changing consumption patterns
Fashion UK, France, Italy Brand conscious market
Gems and Jewellery UK, Belgium, Italy, France Design and quality expertise
Retail Latvia, Hungary, Romania, Bulgaria, Slovenia, Lithuania Rising organized retail penetration
Financial Services:
Financial Services Netherlands, UK, Germany, Belgium, France, Switzerland Untapped potential in SME finance, insurance, rural finance etc.
Information, Communication and Entertainment:
IT-ITeS UK, Germany, France Changing global IT needs, R&D offshoring
Telecom Germany, UK, Belgium, France, Italy, Spain Value added services, rural connectivity
Media and Entertainment UK, Belgium, France, Spain, Italy, Luxembourg, Germany Rising convergence of media platforms
Travel and Leisure Germany, UK, Italy, France, Spain, Switzerland Emergence of medical, religious tourism etc.
Infrastructure:
Education UK, Norway, Italy, Spain, France, Finland, Sweden Increasing demand for skilled services from services sector
Energy UK, Spain, Germany, Italy, France Rising global energy needs
Pharma, Biotech and Healthcare Germany, UK, Spain, France, Italy Changing disease profile, rising aging population
Ports/Roads/Railways Bulgaria, Greece, France, Germany, Slovenia, Capacity additions to meet growth in trade and industries etc.
Czech Republic, Estonia, Latvia, Lithuania, Poland,
Romania, Slovakia
+
Demographic Rising Domestic Stable and
India’s
Dividend Consumption Market Burgeoning Economy
Expected Bilateral trade:

USD 572 billion by 2015*, leading to long-term sustainable partnership
Source: *www.europarl.europa.eu
In the global context, India offers a distinctive and compelling package: business and
political stability, opportunities of a vibrant emerging market, a cultural climate that fosters
growth and a demographic advantage. Similarly, the EU has long been acknowledged for its
conducive business environment. Most of the EU nations offer regulatory policies and
regulatory standards which are among the worlds finest. In fact, regulation in a liberalized
framework is an area of concern for both regions and each can benefit from the other’s
experience.
India and EU share common goals of arriving as competitive and dynamic knowledge based
economies on the world map. EU can take advantage of India’s demographic dividend and
India can adopt technical expertise from the skilled and experienced labour force of the EU.
These synergies will not only help both India and the EU in riding out the downturn but also
assist in developing a long-term sustainable focus in business partnerships between the
two regions.
Apart from highlighting the sectors in which India and EU can have a win-win partnership,
the Knowledge Paper also sheds light on the regulatory framework for investment in India.
This is presented with the aim of providing a brief overview for investors aiming to benefit
from India’s growth story. India is increasingly looking at ‘governance’ reforms and a move
to develop a Unique Identification Code for its massive population, along with greater focus
on e-governance is a case in point. A number of tax reforms such as the implementation
Goods and Services Tax are in the offing. Similarly, foreign investment norms are being
increasingly liberalized and offer vast scope for businesses to benefit from a ‘slowly but
steadily’ opening economy.
In short, this knowledge book aims to take Indo-EU economic and business partnership to
still greater heights.
Acknowledgements
We would like to acknowledge the contribution of the Ministry of Overseas Indian

Affairs, Government of India , Embassy of India in Brussels, (Belgium), Embassy
of Belgium in India and EU Commission and the Consulate Generals of all EU
Countries and we express our sincere gratitude to all of them.
In addition, we would like to acknowledge the collective and individual

contributions to this document from Kiran Nanda, Director, Indian Merchants'
Chamber and the Economic Research & Training Foundation team at IMC.
This report would not have been possible without the commitment and
contributions from Bhavna Doshi, Mrugen Trivedi from the Tax Team and Preeti
Sitaram, Ranjeet Javeri, Rajiv Parekh, Kunal Jain, Neha Dayal, Sidharth
Balakrishna, Parnika Patil, Pallavi Phatak, Ruchika Anand, Rajiv Somani, Nandita
Kudchadkar, Mehul Desai, Nitin Dehadraya, Asmita Deshmukh, Sonia Topiwala
and Suman Lala from the Research Analytics and Knowledge team from KPMG
in India.
We would also like to express our thanks to Nisha Fernandes, Design Cell for her
valuable inputs on Global Branding and Regulatory Compliance and Remedios
D’silva, Senior Graphic Designer, Design Cell for designing this Knowledge Paper
from KPMG in India.

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India Calling 2009

India - Europe Business Partnership Summit

Global Economic Overview 08

India - A Global Manufacturing Hub

Agriculture and Food Processing

Energy (Oil, Gas and Power)

Environment and Technology Transfer

Fashion (Luxury Brands)

Gems and Jewellery

Media and Entertainment

Pharmaceutical, Biotech and Healthcare

Travel and Leisure

Doing Business in India - Regulatory Framework on Investment in India 130

Gul Kripalani Russell Parera

…necessitating the need for global collaboration….

…through industry opportunities and potential partnerships…

Sectoral opportunities identified…

1. Ministry of Commerce, Government of India

…thereby, strengthening the Indo-EU partnership…

The Global Economic Overview

The Global Economic Overview

Revival Measures by Nations Impacted by the Sub-prime

Iceland Netherlands Russia

Source: www.federalreserve.gov, Aug 21, 2009; www.cfr.org, 2009

1. EIU Estimates as on August 2009 – includes services

Is the Worst Behind Us?...

Real GDP Growth (%) 2008 2009E 2009E*

Global (Mkt exchange rates) 1.9 -3.1 1.3

USA 1.1 -2.9 1.0

Eurozone 0.7 -4.5 -0.7

Japan -0.7 -7.0 1.0

China 9.0 6.8 7.3

India** 9.0 6.7 6.0

Improvement in growth in the developing economies is also reflected in moderate

Additionally, stimulus measures taken by Governments have helped in reviving consumer

2. Bloomberg 4. India Strategy, ENAM, 16 April 2009

Source: Bloomberg, August 2009

Crisis has necessitated collaboration between global economies…

Demographic synergies between EU and India

Demographics (2008) Working Population (aged 15-64)

Source: CIA World Factbook

! India’s emergence as a knowledge economy in addition to the rising consumer market

Relations between India and EU continue to blossom…

The negotiations cover:

! In 2007-08 India’s bilateral trade with the EU stood at USD 73 billion

Framework for cooperation on mobility

! Demographics: EUs demographic profile suggests an increasingly ageing population,

1. www.euractiv.com, May 26, 2009

advantage of a young demographic profile. Hence, a smooth flow of professional will

! India is emerging as a knowledge and service driven economy and skilled

The ‘EU Blue Card’2

Country Highlights Agriculture Industry

Austria (14) Center for communication, trade and

Belgium (19) Founding member of the EU.Enjoys a

Bulgaria (76) Represents a mixed economy with

Cyprus (40) Market economy dominated by services

Country Highlights Agriculture Industry

Czech One of the most stable and prosperous

Denmark (3) Modern market economy with high

Estonia (32) Enjoys one of the highest per capita

Finland (6) Highly industrialized, free market

World leader in telecommunication

equipment the building of icebreakers, luxury liners

3.9 2.6 : 38.7 : 58.7 26,100 5.0 Chief exports include