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SUBJECT- ECONOMICS

Indian Economy Opportunities Unlimited

India: Fastest Growing Free Market Democracy

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India: Among the Top-15 Countries in terms of GDP at constant prices
India¶s GDP witnessed high growth and was the second fastest growing GDP after China

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The Indian economy has witnessed an unprecedented growth«. Booming Indian services and industry sector are providing the required impetus to the economic growth
India's GDP: 2002-07 700 600 USD Billion 500 400 300 200 100 0 2002-03 2003-04 2004-05 2005-06 2006-07 4% 424 484 534 590 631 8.5% 7.5% 8.4% 9.4%

Fastest GDP growth of 9.4 percent in 2006-07, since last 18 years

Indian economy is the 4th largest in terms of PPP ± USD 4.1 trillion in 2006

GDP at Constant Prices
Contribution of Services increased from 49 percent to 55 percent

USD Billion

The sound performance of each industry segment is leading to the overall robust performance of the Indian economy

700 600 500 400 300 103 200 100 0 205 104

155 109 91 319 223 116

168 117

Growth in sectors (2006-07): Industry: 10.9% Services: 11% Agriculture: 2.7%

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1999-00 2002-03 2005-06 Services Agriculture Industry

2006-07

India: Robust Economic Platform
India's Forex Reserves: 2001-07 (Till 22 June 2007)

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USD Billion

India¶s enhanced economic performance has been the major contributor towards increased Forex reserves

250 199 200 150 112 100 54 50 75 141 152

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«at present level of Forex reserves, the country has adequate cover for 12 months of imports

Steadily increasing Forex reserves offer adequate security against any possible currency crisis or monetary instability

0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (Till 22 June)

External Debt-to-GDP Ratio 22 21.1 20.4 19

Forex reserves witnessed an increase of 200 percent for the period 1990-2007
Ratio

Falling Dollar inflates the India¶s external debt
17.8 17.3 15.8 16.4

India¶s Forex reserves are in excess of external debt«

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Increased confidence of investors in Indian companies have led to a surge in cross border borrowing by the corporate houses

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«the decreasing external debt to GDP ratio indicates that India has a sound economic platform
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07

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India: Surging Exports
Services sector has been a major contributor to increased exports from India
India's Exports: 2002-07 (till February 2007) 120 100 USD Billion 80 60 40 20 0 2002-03 2003-04 2004-05 2005-06 2006-07 (upto Feb. 07) 52.81 63.95 83.81 103.42 112.40

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Acceptance of Indian products along with the cost advantage has provided an edge to Indian companies

Quality and cost advantage are the two important parameters leveraged by the Indian producers to increasingly market their products and services

USD Billion

Indian companies have chalked out extensive plans to increase their presence abroad

India's Import: 2002-07 (till February 2007) 180 160 140 120 100 80 60 40 20 0 149.65 111.89 78.28 61.52 162.30

Imports of products by India mainly includes petroleum products and minerals

Petroleum products are the major contributors towards India¶s growing imports
2003-04 2004-05 2005-06 2006-07 (upto Feb. 07)

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India: Attractive Investment Destination
India is ranked second in AT Kearney FDI confidence index

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With improved performance on PE ratio and ROE, Indian markets have attracted large investments
FDI Inflow - India: 2001-07 18,000 16,000 14,000 15,730

Telecom and Electronics topped the list of inward FDI

USD Million

12,000 10,000 8,000 6,000 4,000 2,000 0 2001-02 2002-03 2003-04

180 percent Increase

Return on the Investments in India (2006 Q1)
Market India China PE Ratio 16.1 10.62 10.26 9.85 13.21 12.17 9.84 11.19 9.35 10.9 P/B Ratio 4.53 2.06 3.09 1.84 1.82 2 2.32 2.12 2.46 2.39 22 17 NA 16 16 RoE (%)

5,546 4,222 3,134 2,634 3,755

FDI inflow for the period 2006-07 witnessed a growth of 180 percent over the same period last year

Indonesia Korea Malaysia Taiwan Thailand EM Asia

2004-05

2005-06

2006-07

Net FII into India: 2001-07
11 23 15

12 10.00 10 USD Billion 8 6 4 2 0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 1.80 0.60 10.20 9.40 6.72

Mauritius has been the largest contributor towards FDI into India«..

Latin America EM Europe

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India: Vibrant Capital Market
Sensex ± The Bombay stock exchange index has risen 15 times from 1990s to reach 15,000 mark in July 2007

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India is among the major destinations across the globe for inflow of US Dollar i.e. FIIs

7/9/2007 Crossed 15,000 mark

Sensex risen 15 times in the period 1990-2007

16,000 14,000 12,000 10,000 IN R 8,000 6,000 4,000 2,000 7/1/1997 7/1/1998 7/1/1999 7/1/2000 7/1/2001 7/1/2002 7/1/2003
12/30/1999 Crossed 5,000 mark

1/12/2007 Crossed 14,000 mark

FIIs augmented support by infusing large investments in Indian stock market

2/7/2006 Crossed 10,000 mark

Emergence of industry and confidence of local investors along with the FIIs has led to increased movement of sensex

Exorbitant industry performance

7/1/2004

7/1/2005

7/1/2006

7/1/2007

Increased local investors¶ confidence

India: Vibrant Economy Driving M&A Activities
Growth Drivers: Globalisation of competition Concentration of companies to achieve economies of scale Lower interest rates and vibrant global markets Cash Reserves with Corporates Trends: Ratio of the Size of acquisition to the size of acquirer has grown from 10 percent in 2004 to 25 percent in 2006. Cross-border deals are growing faster than domestic deals Private Equity (PE) houses have funded projects as well as made a few acquisitions in India
Number of Deals and Values 30 25 20 USD Billion 15 10 5 0 2004 2005 Deal Values 2006 No. of Deals 12.3 306 18.3 467 28.2 782 900 800 700 600 500 400 300 200 100 0

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SECTOR
Automotive

USD (Mn)
518 1,375 1,133 896 1,484 1,327

SECTOR
Manufacturing Media Oil & Gas Pharma & biotech Telecom Others

USD (Mn)
933 630 384 2,520 2,198 4,006

Number of deals

Banking and Financial Chemicals and Plastics Electrical and Electronics Energy FMCG, Food and Beverages IT and ITES

2,903

Total

20,305

In 2006, there were a total of 480 M&A deals and 302 private equity deals« « Average deal size close to USD 36 million« «Contribution of private equity deals to total number of deals have increased from nearly 9 percent in 2004 to 28 percent in 2006

Major M&A Deals Undertaken Abroad by India Inc.

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Tata Steel buys Corus Plc

USD 12.1 billion

Hindalco acquired Novelis Inc.

USD 6 billion

Essar Steel acquired Algoma Steel

USD 1.58 billion

Suzlon Energy Ltd. acquires REpower

USD 1.6 billion

Videocon Industries acquired Daewoo Electronics Corporation Limited

USD 730 million

Major M&A and Investments Announcements in India
Vodafone buys Hutch
USD 11 billion

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Plans to spend on its development operations in India over the next four years

USD 1.7 billion

Plans investment in private equity, real estate, and private wealth management

USD 1 billion

Aditya Birla Group increased its stake in Idea Cellular by acquiring 48.14-percent stake

USD 0.98 billion

Renault, Nissan and Mahindra & Mahindra has initiated a Greenfield automobile plant project in Chennai.

USD 0.905 billion

Mylan Laboratories acquired a majority stake in Matrix Laboratories

USD 0.74 billion

India: Pacing Ahead to Emerge as a Major Economy in the World
2007 Global Retail Development Index (GRDI) 2007 Global Services Location Index India 80 GRDI Score 60 40 20 0 India Russia Vietnam Ukraine China Chile Latvia China Malaysia Thailand Brazil Indonesia 3.2 2.9 2.8 3.2 2.6 3.3 1.3 1.2 1.8 1.5 2.3 2.3 2 1.6 1.5 1.1 1.4 1.4

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India has been ranked superior to other major countries by many prominent surveys«

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AT Kearney placed India among the top three in its FDI confidence index«

Financial s tructure Business environment

People and skill availablity

GDP Growth Rate (%)

« the retail market along with the services sector has been attracting the interest of major players

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Projected GDP Growth Rates for Select Upcoming Economies

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India is expected to outperform its rivals in the BRIC, in terms of GDP growth rates, from 2015 onwards«

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0 2005-10 2010-15 2015-20 Brazil 2020-25 2025-30 China 2030-35 India 2035-40 Russia 2040-45 2045-50

India: Astounding Demographics
Growth in the higher income categories of India¶s population has created an affluent section of society, which has significant level of purchasing power

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DEMOGRAPHIC TRANSFORMATION OF INDIA
Annual Household Income (in USD) 2 9 17 74 285 710

Population (million)

20 33 120 404 613

Rich (Above 115,000) High Income (57,000 ± 115,000) Consuming class (23,000 ± 57,000) Working class (10,200 ± 23,000) Needy (Below 10,200)

9 48 221 726

2001-02

2005-06

2009-10(E)
* In PPP terms

Increasing per capita income and large population moving into middle class has led to high level of consumerism in India

700 600 500 USD 400 300 200 100 0 2002-03 393

Per Capita Income 583 519 461

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Increasing per capita income coupled with an emerging middle class has provided the necessary impetus to consumerism in India

2003-04

2004-05

2005-06

2006-07

India: Increasing Working Population
Growth in Global Working Age Population (15-64)
Stock Position 2005 World India Africa China South East Asia Latin America Southern Asia USA Europe Japan 4,168 691 500 934 362 359 132 200 497 85 -3
-5 45 95 145 In Million 195 245 295 0 10 17 33 31 44 64 71

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Addition to Working Age Population by 2010
314

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Countries worldwide are anticipating a shortage of working population in the future. India is expected to emerge as a clear winner, and by 2050, it will have the largest working age population.

Growth Expected in India
To sustain the GDP growth of more than 8 percent, India requires an investment of USD 1.5 trillion in the next five years

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2010
GDP ± USD 900 billion GDP growth rate ± 9%

2008
GDP ± USD 750 billion GDP growth rate ± 9.5%

Services contribution ± 60-65 % FDI limit is expected to be 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade ± Should be positive with increased level of exports as compared with imports Investment goal ± USD 370 billion

2006
GDP ± USD 590 billion GDP growth rate ± 9 % Services contribution ± 54 % FDI limit not 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade ± USD (-)46.2 billion Investment goal ± USD 250 billion

Services contribution ± 60 % FDI limit is expected to be close to 100 percent in major industry sectors such as Telecom, Semiconductors, Automobiles, etc. Balance of Trade ± Should increase with surging exports as compared with imports Investment goal ± USD 305 billion

Why India? ² Quote Unquote
India is among the three most attractive FDI destinations in the world. ³India has evolved into one of the world's leading technology centers³.
Craig Barrett Intel Corporation A T Kearney FDI Confidence Index 2005

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India has among the highest returns on foreign investment.

By 2032, India will be among the three largest economies in the world.

US Department of Commerce

BRIC Report, Goldman Sachs

³We came to India for the costs, stayed for the quality and are now investing for innovation´.

³The Indian market has two core advantages - an increasing presence of multinationals and an upswing in the IT exports´.
Travyn Rhall, ACNielsen

³India is a developed country as far as intellectual capital is concerned´.

- Dan Scheinman, Cisco System Inc. as told to Business Week, August 2005 Jack Welch General Electric

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