India – China Trading With

the World

ASHISH KUMAR THANVI

India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

The “confidence” called India
One of the fastest growing economies, second only after
China
Fourth-largest economy on purchasing power parity
basis

3rd in investor confidence for FDI investments

India offers the best return on investment among

emerging markets

“The Time is now..to be in India. This is perhaps the most

optimistic I’ve felt about India in the last 10-15 years that I’
ve been coming here.” – Jeffrey Immelt
Advantage India – the growth factor
Indian Economy – The 4th largest & 2nd fastest growing
economy in the world (based on PPP adjusted GDP ~ USD 3.3
tri)
Estimated GDP growth (2005-06) is 8,1 %
GDP composition is well diversified across sectors with robust
growth. Agriculture 22.1%, Industry 21.7% & Services 56.2%

10
8.6 10 year GDP growth CAGR %
9
8
7 6.2
6 5.0 5.0 4.8 4.6 4.2
5
%

3.5
4 3.1 2.8
3
2
1
0
Singapore

Phillipines

Indonesia
Malaysia

Thailand
Taiwan
Korea
China

India

Hong
Kong
Growth of
Economy
 Global Leaders from India
3rd largest producer of Largest
One of the top IT optical storage media in producer of
Services company in the world motorbikes in
the world the world

World’s largest
World’s largest tube based
refinery plant television
manufacturer
Amongst top 3 truck
manufacturers in the
world

World leader in viscose World’s largest

staple fibre and 3rd World’s 2nd largest producer of
largest producer of forging company with terry-towels
insulator outsourcing to major car
manufacturers
India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

 Trade - On an All time High
 India’s total external trade in goods and
services grew by 41.5% in H12005-06 to US $
Economy is 153 billion. This is expected to go up to US $
more Open 310 billion by the end of this year. This was just
than ever over US $ 74 billion in 1994.
before
 The trade to GDP ratio, calculated at current
prices, has risen to 29.36% in 2004-05 from
18.28% in 1993-94.
Strong  Exports have grown to US $ 57.05 billion during
Export April-November 2005-2006. They are expected to
Growth grow at 26% during the current year to US$ 100
billion.
Strong  Service Exports grew by 71% in 2004-05. India's
Service IT-ITES exports have shown robust growth and
Exports are expected to grow by 32% this year to US $ 23
billion.
Strong  Non-oil imports grew at over 28% during April -
Imports September 2005 led by demand for capital
growth goods.

Source: Reserve Bank of India

 Trade Trends ..
India Exports - Goods and Services India's Foreign Trade
350
200 300
US $ billion

150 250

US$ million
200
100
150
50 100
0 50
96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 0
97 98 99 00 01 02 03 04 05 06 1984 1994 2004-05 2005-06 (A )
(A)
Goods Services E xp o rts Imp o rts T o tal T rad e

Share of Asia India Capital Good Imports

180
160 140.00
140 120.00
120
US $ billion

100.00

US $ billion
100
80.00
80
60.00
60
40 40.00
20 20.00
0 0.00
96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 96-97 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05

Asia Non Asia Capital Goods Imports Total Imports

Source: Reserve Bank of India

India - On A Strong Growth Path

Trade Trends

Key Growth Drivers

Key Growth Drivers

Strong
Incresed Growth oriented
Performace of
Investments Trade Policy
Key Industries

Active Efforts in the area of Regional Integration

Increased Investments
Infrastructure Development
Expenditure on Infrastructure
development expected to be US $
330 billion by 2012
Power - Estimated Investment of US
$ 259 billion for power generation,
transmission and distribution
Ports - Estimated investments of US
$ 22 billion for developing 50 new
ports and upgrading the existing ports
Roads - Investments of USD 40 billion
for road development
Railway - Estimated Investment of
US $ 22 billion for devlopment of
better railway infrastructure
Investment Cycle on the up, getting a double thrust
Result in additional demand for materials, with a multiplier effect
on: Cement, Steel, Capital goods and other equipment
Source: Ministry of Finance, Budget Speech February 2005
Capital Expansion
Gross capital formation up 30% in
FY05
Savings rate up to 29.2% in FY05
Strong domestic and export demand
growth has led to a sharp rise in
capacity utilizations across sectors
The domestic demand is expected to
grow strongly, encouraging all
industries to go for capacity addition
expenditures
High capacity utilisation in core
industries like Steel, Alluminium and
Cement.
Leading to Strong Growth in
Industry
10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
98 99 00 01 02 03 04 05

Index of Industrial Production

Manufacturing

% EBITDA/Gross Fixed Assets

26.0

25.0

24.0

23.0

22.0

21.0

20.0

19.0

18.0

17.0
1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Source: CMIE date of select sectors

 Strong Performance of Key
Industries
 Industry estimated to be US $ 36 billion in 2005-
06. growing at CAGR of 35% since 2000. To reach
US $ 60 billion by 2010
 TCS, Infosys, Wipro, and HCL are billion dollar
IT-ITES companies
 India well placed become a major player in the
global Knowledge Process Outsourcing business
by 2010
 Companies capitalizing on availability of vast
skilled IT knowledge workers
 India is a top 10 producer of low cost high quality
bulk drugs and formulations.
 Highest number of annual bulk drugs filings (120)
Pharma with US FDA
 Exports growing at CAGR of 23% since 1993. To
reach US $ 12 billion by 2010 from US $ 5 billion
this year.
 Ranbaxy is the 9th largest generics company in
USA.
 Strong Performance of Key
Industries ..
 Textile exports in 2005-06 likely to be US $ 15
billion, up 20% over 2004 due to opening up of
US and EU.
Textiles
 Exports targeted to reach US $ 50 billion by 2010
 Strong craftsmanship skills and low cost drive the
global competitiveness of this industry
 Exports have grown 31% in 2005
 Industry has shown CAGR of 11.3% since 1995 to
reach 1.5 million units, US $ 12 billion, in 2005
 Major global players have setup facilities in India
Auto / Auto
Ancillariarie  Component exports CAGR at 20.3% since 1998
s  A host of auto majors including Ford, General
Motors, Volvo sourcing from India
 Auto component Industry expected to triple to US
$ 17 billion by 2012
 Growth Oriented Trade Policy
 Double India's share in global merchandise trade
by 2009 to 1.5%
Aim
 Give thrust to employment generation, especially
in semi-urban and rural areas.
 Removal of Quantitative Restrictions on imports
 Peak customs duty rate down to 12.5% for 2006-
07 from a high of 150% in 1991-92
 Rationalization of duties across sectors
 Specific sectoral strategies prepared for
Key important sectors like Services, Agri, Gems and
Initiatives Jewellery
 Export promotion of Capital Goods Scheme for
furthering import of capital goods
 Active promotion of Special Economic Zones for
Export oriented industries.
 Incentives for exclusive Export Oriented Units
 Trade Policy Measures ..
 Founding member of the Bangkok Agreement in
1975
 Signed Framework Agreement with ASEAN
nations in 2003.
 Adopted SAFTA with SAARC countries from Jan
2005
 Has Free Trade Agreements with BIMST-EC
Regional countries.
Integration
 Has Free Trade and Transit treaties with Nepal
and Bhutan
 Signed a bilateral Free Trade Agreement with Sri
Lanka, operational from 2000
 Executed a FTAs with Sri Lanka (2000), Thailand
(2003) and Singapore (2005)
 Negotiations involving preferential or free trade
arrangements are on with GCC, Mercosur, South
Africa, Brazil and Egypt.
Conclusion
 Banks to play an active role to support emerging
trade dynamics
 Asian corporates increasingly becoming global sized
 Create models to support open account transactions
 Efficiencies
would be one of the key drivers to retain
competitive edge
 Integrate technology to build supply chain structures
 Corporates to have wider geographical presence
 Regional strategic alliances amongst banks to support
local corporate requirements
Thank You