Strength and Vitality of the Indian economy
Overview
Birth of world’s largest democracy - ‘A tryst with destiny’
- After two centuries of British rule India gained independence in 1947.
- Nehru’s dream of Public sector drove modernization but later became a burden on the state.
- In 1984 the country lost its dynamic leader Indira Gandhi who was assassinated by bodyguards.
- A nuclear weapons state, it carried out tests in the late 1990s in defiance of world opinion.
- In 1992, sectarian violence between Hindus and Muslims extremists threatened to tear the nation apart.
Overview
India is a large and diverse country
• 2nd Largest Population of 1 Billion people
- 26 States, 6 Union Territories
- Area similar to Greater Europe
• Multiple Religions
- 82% Hindu 12% Muslims 3% Christians
2800 km
& 3% Sikhs
• Languages
- 17 Major Languages, 70 Dialects
-Hindi/English are the common languages
• Life Expectancy - 63 years
• 70% of population below 35 yrs of age
• GDP per caps of $ 600
2700 km
Overview
Economy expected to grow at high rates over next 3 years Fourth largest economy in purchasing power parity
GDP Growth (%)
8.5 8.1 10,978
7.5
5.8 GDP US$ Bn
6,410 (PPP) 2005
4.4
3.8
3,629
3,062
2,279
FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 E US China Japan India Germany
Source Economic Survey Source Economic Survey
Strong Forex Reserves, FDI and high business
Benefits from stable inflation, reducing fiscal deficit
confidence reflected in buoyant stock market
Fiscal Deficit %
6,679 11,000
6.2%
7.1% 5.6% 5.9% 5,613 136.0 152.0
3,808
6.4%
4.5% 4.3% 107.0
4.1%
5.4% Sensex 3,508 3,581
4.8% 10.0
US$ Bn
3.7% 72.0
3.4%
51.0
40.0 6.1
5.6
5.0
4.0 FDI 4.3
FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 E
Source Economic Survey FY 01 FY 02 FY 03 FY 04 FY 05 FY 06Source Economic Survey
Overview
The world now recognizes the rise of an Economic Powerhouse
- Far reaching economic reforms in the 80s has encouraged foreign investment.
- IT boom and skilled English speaking workforce makes it attractive to MNCs seeking to outsource work.
- Burgeoning urban middle class with a decent disposable income makes it an attractive market for all Cos.
- With a cutting edge space programme India launches its own satellites.
- It boasts a massive cinema industry, affectionately called Bollywood
- However, the vast majority of the rural population remains illiterate and impoverished.
There are two India in existence which we should recognize…
INDIA 1 : Metro – Mini Metro INDIA 2 : Bharat
Population : 221 MM Population : 810 MM
Households : 41 MM Households : 150 MM
Annual HH Income - Annual HH Income :
Metro’s : $10M + <$1.5M - $4M
Mini Metro’s : $4M - $10M
Per Cap GDP (at PPP) : $6,000 Per Cap GDP (at PPP) : $2,500
Metro/Mini Metro’s … as big as Geographically spread Market,
some developing economies Agrarian economy
Villages 600000
India (Metro-Mini Metro) indexed to developing countries
Outlet Base 850000
Country Population GDP (at PPP) Per Caps (BSD) 5.5
TT 90%
Thailand 3.45 2.4
Brazil 1.19 0.8
Trickle down effect of infrastructure led
investment will fuel rural growth
The differing profiles of the 2 Faces of India will drive the need for Ambidexterity
Freedom
Our strength of Democracy manifests as freedom of media
- Doordarshan, the public TV service, operates 21 services, 400 m viewers.
- India's cable TV market has more than 60 million subscribers since it was opened up in 1992
- Private radio is a newcomer (2000). Only AIR can broadcasts news
- Internet use has soared, more than 38 million Indians were online by ’06.
TV Stations News Papers Radio Stations
• Doordarshan TV - Public • Deccan Herald - Bangalore-based daily • All India Radio - public, operates domestic
• The Hindu - Madras-based daily and external networks
• Zee TV - satellite, cable TV services
• The Hindustan Times - N Delhi-based daily • Radio Mirchi - commercial network,
• STAR TV - operates satellite, cable TV stations in Mumbai, Delhi and other cities,
• The Pioneer - New Delhi-based daily
• Sony Entertainment - commercial mainly music, operated by The Times Group
• The Indian Express- New Delhi-based daily
• Aaj Tak - 24-hour news • Radio City - commercial, FM stations in
• The Statesman - Calcutta-based daily Mumbai , owned by News Corporation
• New Delhi TV (NDTV) - 24x7 news • The Times of India - Mumbai-based daily • Red FM - commercial, operated by India
• Sun Network – comm. multi-channel • India Today - N Delhi news magazine Today Group
• Outlook - New Delhi-based news magazine
Future
The world community is bullish on India’s future
- In 2016, 110-130 m will be searching for jobs, 80- -Chinese economy will pass United States around
100 m looking for their first jobs. 2035, while India will do so in 2045
- India's media and entertainment business to -India's growing prosperity, will fuel a ravenous
demand for resources as per capita quadruples.
more than double over the next 5 years to
US$22.5 billion by 2011 fueled by rising incomes - Indians will buy five time more cars and use three
and a surge in consumerism times more oil than they now do.
- The growth momentum in IT will continue, with -India has 10 of the 30 fastest- growing cities in the
an 18 % rise in sales annually over next 5 years world. 140 million rural dwellers would migrate to
the cities by 2020, and 700 million (population
- The economy to grow at 8 % a year through equivalent to that of all Europe) by 2050.
2020. Growth in trade at 25% a year since 2003.
- India is liberalizing gradually (stated & stable)
versus fast pace of China(efficient but sporadic)
Source: Goldman Sach’s BRIC report in 2006
Govt. Challenges
#1 FISCAL DISCIPLINE
- The combined fiscal deficit of the Central and State Government remains unacceptably high.
- Down-sizing of Government, rationalizing and better targeting of subsidies
- Curtailing of wasteful expenditure, putting a ceiling on fresh Government employment
- Implementing Power sector reforms and privatizing the loss making public sectors
- Government cannot afford to dither on privatization policies
Source: Report by NK Singh in Indian Economy, Next 5 years
Govt. Challenges
#2 ATTITUDINAL CHANGE
- For government to realize that people in general are not anti-reforms but are pro-growth
- Economic deregulation to be coupled with credible social safety nets (health & Infrastructure)
- 700 million people (younger demographic profile) seek improved quality of life / employment
- Provision of improved infrastructure will be perceived as reforms being consumer-friendly.
-Conversely speaking, electoral penalty for weak economic management and growth is not yet
high in the psyche of the average electorate.
Source: Report by NK Singh in Indian Economy, Next 5 years
Govt. Challenges
#3 CONTINUED POLICY OF REFORMS
- A policy of continuous reforms in areas like Banking, Coal, Ports, Company law.
- Banking reform :Reduce Government equity to 33% has yet to secure the support opposition
- An average borrower may be paying 150 basis points higher due to inefficient banking,
making economic activity by small and medium entrepreneurs uncompetitive.
- Converting Indian Ports into Port Trusts will help India becoming an efficient trading nation
- Permitting private sector participation will impart competitiveness to the energy sector.
Source: Report by NK Singh in Indian Economy, Next 5 years
Infosys Story
India’s buoyancy is reflected in success stories of entrepreneurs
- Murthy borrowed $250 from his wife - On July 2, 1981. Infosys co-founder - In tough times and good times
Sudha to start the company. N S Raghavan's house in Mumbai, 6 founders stuck together
was its registered office.
- In ’81 started with 12 employees -Infosys founders Nandan
Nilekani, S Gopalakrishnan, N R
Narayana Murthy, K Dinesh, N
S Raghavan and S D Shibulal
Changed India’s image from a land of snake charmers to an economic giant to reckon
with, bursting with brilliant software engineers and ambitious entrepreneurs !!!
Infosys Story
Among many eg. of corporate governance…Infosys sets the bar
Key milestones
Year of Incorporation : 1981
Became a public limited company in India : 1992
ISO 9001/TickIT Certification : 1993
Attained SEI-CMM Level 4 : 1997
Listed on NASDAQ : 1999
Crossed $100 million in annual revenues : 1999
Attained SEI-CMM Level 5 : 1999
Crossed $400 million in revenues : 2001
Crossed $ half a billion in revenues : 2002
Crossed $ billion in revenues : 2004
- In 90s Infosys began getting big Crossed $ 2 billion in revenues : 2006
breakthroughs from the US market.
Group companies:
- Infosys derives about two-thirds of its
revenue from the United States - It was the first Indian - Progeon Ltd: The Infosys BPO arm.
- Serves clients like Reebok, Visa, company to list on the
- Infosys Technologies (Shanghai)
Boeing, Cisco Systems, Nordstrom and Nasdaq in 1999.
New York Life. Company Limited.
- State of the art HQ in Bangalore - Infosys Australia Pty Ltd.
- Infosys Consulting Inc.
Has 53,000 Employees, operates in 50+ countries and a Market Cap of US$ 22 Billion !
Reliance Story
Story of Dhirubhai H Ambani… father of Indian capital markets
- Dhirubhai embarked on his business venture with capital of US$ 300
- In 1977, when Reliance first went public, the Indian stock market was a place
patronized by club of elite investors dabbling in a handful of stocks.
- Undaunted, he managed to convince a large number of first-time retail investors to
participate and put their hard-earned money in the Reliance Textile IPO
- It was to be the start of one of great stories of mutual respect and reciprocal gain
- Over the next three and a half decades, he converted this fledgling enterprise into a
US$ 20 B colossus—which earned Reliance place on the global Fortune 500 list
- Through out this amazing journey, Dhirubhai always kept the interests of the
ordinary shareholder uppermost in mind, making millionaires out of many of the initial
investors in the Reliance, and creating one of the world’s largest shareholder families.
Today, Reliance has 2.3 million share holders and growing…
Nirma Story
When David took on the Goliath
- In 1969, Mr. Karsanbhai Patel, a chemist with GMDC, with a paltry salary of Rs.400,
decided to concoct an inexpensive yet effective detergent.
- Rolled out the first bag of phosphate free Synthetic Detergent Powder.
- Broke all rules in the business world when he locked horns with Unilever
- As word-of-mouth spread about his product, Karsanbhai got more and more
customers to whom he affected his deliveries on foot.
- Today, Nirma sells over 800,000 tones of detergent products annually, giving it a
35% share of the Indian market
- Within a short span of three decades, Nirma has completely rewritten the rules of the
game. Offering high quality products at unbeatably low prices.
With USD 1 B in sales, NIRMA is acknowledged as a marketing miracle
Other Stories
Indian start-ups which dreamt big and made it happen
WIPRO ASIAN PAINTS
- Journey of Vanaspati maker to an IT leader - In ‘47 four friends with USD 100 each started a co.
-Azim Premji, the founder started the co. in 1970 - It was a period of MNCs like ICI and BP and the
and today finds himself in the Forbes Billionaire List Asian Paints struggled in Metros so went rural !
- Wipro works with leading global companies, such - Driven by its strong consumer-focus and innovative
as Alcatel, Nokia, Cisco and Nortel spirit, in ’68 Asian Paints outperformed competition
and became the leader…today has > 45% share
- In 2003 Premji was named by Fortune as one of
the 25 most powerful business leaders outside the - Has World's latest technology for its manufacturing
US and Forbes listed him in top ten people globally. capabilities: Powder coatings and high-tech resins
- Leads Corporate India in Business Ethics - Today operates in over 26 countries and ranks
among the top ten coatings companies in the world
- USD 2 Billion organization with 40,000 employees
- From USD 400 to a USD 1Billion company shows
the commercial competence of Indian Businessmen
Companies like Wipro and Asian Paints hold the high Moral ground of Business ethics
Other Stories
Indians who made an impact Globally in the last 10 years
Sabeer Bhatia : Hotmail L N Mittal : World’s 3rd Richest Man
- Sabeer Bhatia came to USA in ’88 as 19 year old -Mittal began his career working in the family’s
with only $250 in his pocket steelmaking business. LNM Group formed in 1976.
- His first job was with Apple Computers.In mid- - Focused on buying sick Steel mills in East Europe
1995, he began his business plan for a net based and Latin America and turning them around.
personal database called Javasoft.
- 2006 takeover of Luxemburg-based Arcelor has
- In July 4, 1996 – Hotmail launched because seen the creation of the world's largest steel entity.
Sabeer thought free email was a great Independent
idea and populist tool. - He was awarded Fortune magazine's 'European
Businessman of the Year 2004' and also the
- In 2 1/2 years, he built Hotmail's user base faster 'Steelmaker of the Year' ’96
than any media company in history. By summer ‘98,
with 25 million active e-mail accounts, the company - Mittal, who was born in a village in India with no
was signing up new users at the rate of 125,000 a electricity, bought what is believed to be the world's
day. most expensive house -- a 12-bedroom, $131 million
property in Kensington Palace Gardens in London.
- Microsoft bought Hotmail for 700 Million in 2000
Today the world recognizes the spirit and tenacity of an Indian to play in a global space
Indian companies are globalizing as well…another healthy trend
Tata Steel (post Corus):
- Bid USD12 billion and won control of A/D steelmaker Corus Group
- The deal is the largest Indian takeover of a foreign company
- Will create the world's fifth-largest steel group from 56th place in ‘05
Birlas (of Hindalco fame):
- In Feb’07, Hindalco announced intention to buy Novelis for $6 billion
- Will become a leader in high-value aluminum products.
- One of the lowest-cost producers of aluminum in the world
Bharat Forge Limited: Indian MNC
- BFL, flagship company of the USD 1.50 billion Kalyani Group
To top
- Has allthrough
grown stories, new breed
acquisitions “the
to become Indian
the 2nd MNCs” are creating news
largest forging
company in the world
- Customers include the top five Passenger Car & top five Commercial
Vehicle Manufacturers in the world
Suzlon:
- Suzlon was first in Asia to see the opportunities offered
by the global wind energy markets
- In 2005, Suzlon ranked as the fifth leading wind turbine
supplier in the world, with over 6% of global market share
Visit India
Four great reason to visit India…
Experience Incredible India Ideal place for medical tourism
- A trip in Palace of Wheels will stump you - Tourists are combining holidays with health care.
- Himalayas in North and the 3200 KM of beaches - Offers first-rate medical care at third-world prices.
- Wild life Sanctuaries :80 N P and 441sanctuaries - 1,50,000 visitors a year already
spend about USD 300M expected
to grow to USD 2.2B in 2012
- Visit IndiaMedicalTourism.net
Education Institutions which are world class Global business environment
- World class Engineering, Medical & Biz. schools - Presence of Global players ensures new global
- Young student population shows high D&I launches in the market.
- World famous IITs and IIMs - Strong MNC presence characterized by a well
established distribution network
- Good distribution key to achieving high penetration
Problems
There are success stories but India has battles to fight as well…
- China started their family planning policy in 1970, India in 1952
9 India has 27 births per 1000 as against 8.8 for China!
- How will we provide additional 10 million jobs per year?
9 The Public Sector and Govt is overstaffed : 18.7 million employees
- The Govt can only facilitate jobs, cannot provide for the 300 million partly or fully unemployed
9 At 10 m jobs /yr it will take us 30 years, at 5 m jobs /yr it will take us 60 years!
- India's per capita earning is US$440 per year against US$990 per year in China
9 China has 3% pop below poverty line vs India’s 26%! Only better governance will help
- China attracts 87 million tourists per year against 2.5 million per year to India.
- In FDI, China received US$106 billion vs US$3.6 billion for India!
9 Only better Governance attracts FDI and Tourists. China exports is +700% of India
- In Education, 99.1% of Chinese attend school for 9 years. In India, literacy is 50 to 60%
9IIT and IIMs are good but real growth comes from primary /secondary / vocational education
Source: wakeupcall.org/China_India comparison
Future of Growth
With hope and excitement India takes a step forward…
- Infrastructure which is being rapidly modernized to meet global challenges
9 Telecom rates are internationally competitive
9 Road connectivity is improving dramatically
9 Turn-around time in Ports are no more a strain on international trade
9 Power sector is bracing itself for a major reform
- Reforms of the health and education sectors
9 Beneficiaries will have a greater role in the management of primary schools and health centers
9 Fostering some competition between public and private institutions to broaden consumer choice.
- Deregulation of the Urban and the Construction sector
9 Computerization of Land records, modern tenancy regulations
9 Easier access to housing finance should free up the latent energy giving incremental 1.5% to GDP
Source: Report by NK Singh in Indian Economy, Next 5 years
Bright future
Dec’06 economic roadmap is a 8% growth for next decade…
- By then, the per capita income would double with multiplier effects
- Our share in global exports would be 540 B US$ , making us a formidable global player
- Stable macro-fundamentals makes us less susceptible to exogenous vulnerabilities
9 Modest inflation, High forex reserves
9 Rising industrial growth rate, sustained growth of services sector
9 Self-sufficiency in food grains
- Large reservoir of skilled manpower with 700 million Indians in the younger age group
9 Rest of world due to ageing population and social pressures on the wrong side.
- Emphasis on Knowledge economy will move us to a society driven by science / technology / innovation
9 Harness country’s skills in IT, IT Enabled Services, e-medicine, bio-technology
- A financial sector which is robust and will continue to impart confidence to foreign investors
Source: Report by NK Singh in Indian Economy, Next 5 years
Thank You
