Namrata Gurung Brian DaltonKris KohtzRachel Oleniacz   Suresh Lee Krishnamoorthy : Namrata Gurung Brian Dalton Kris Kohtz Rachel Oleniacz   Suresh Lee Krishnamoorthy FIN 444 Final Presentation April 4, 2007 INDIA


India - Introduction: India - Introduction History India’s Economic Reform Foreign Direct Investment Centralized v. Market Based Economy


Slide3: DELHI Namrata Gurung


Delhi: Delhi Capital of India Parliament of India, District Administration of Delhi, Financial Institutions situated in Delhi Center of Supervisory Power


Urbanization of Delhi: Urbanization of Delhi Four Satellite Suburbs Gurgaon is the most developed Hub for outsourcing and off-shoring business Increase workforce and businesses Increasing middle-class families. Increase in Net domestic Product - Delhi


Delhi – Policies: Delhi – Policies India’s economic growth by 10% this year. State Bank of India raised the prime-lending rate from 11.5% to 12.25% 2nd time in two months Central bank raised the interest rate by a quarter-point to 7.5% control the rapid credit expansion Help stem inflation *Tightening the Money supply


Delhi – Politics: Delhi – Politics Decision-making Congress is the largest party in the coalition but other left leaning parties and the Communist party play a vital role The decision of raising the futures price of wheat and rice – primary sustenance of the poor farmers The government was forced to freeze the futures price Affects the farmers as well as the NCDEX


Delhi – Politics cont……: Delhi – Politics cont…… Recently Congress Party lost 2 local elections Chances of ruling coalition to become unstable Policies remain undecided E.g. 1999 Parliament election


MUMBAI, Economy, Financial: MUMBAI, Economy, Financial Brian Dalton


Mumbai: Mumbai Formerly known as Bombay Most populous city in India (over 25 million people) Financial and entertainment capital of India National Stock Exchange of India (NSE) Bombay Stock Exchange (BSE) Reserve Bank of India (RBI) Bollywood


Indian Economy: Introduction: Indian Economy: Introduction In terms of PPP, India is the fourth largest economy in the world Economy has been growing at around 8% per year for the past four years 2007 growth is estimated at ~ 9% Total nominal GDP is expected to surpass $1 trillion USD in 2008 Rapid growth has been leading to concerns over inflation


Indian Economy: Introduction: Indian Economy: Introduction …But with over a billion people, it is no wonder that the World Bank still classifies India as a “Low Income” country Nevertheless, it is still remarkable how far India has come over the past few decades


Indian Economy: Brief History: Indian Economy: Brief History Pre-1757: India ruled by various warlords, clans, and empires. Rich in “exotic” goods desired by Europeans Extensive world trade In 1700, it is estimated that the amount of world income controlled by India was nearly as great as all of Europe 1757 – 1947: Colonial Era The great wealth and natural resources entices Britain to colonize much of India Britain exploits the country’s resources Britain makes some positive contributions to India, however. The develop roads, institute standard currency, property rights, capital markets, transportation and communication networks. They also emphasize education.


Indian Economy: Brief History: Indian Economy: Brief History 1947 – Present: Independence 1947- 1970s: Isolation and Socialism leads to extreme poverty and stagnation Beginning in the 1980s and through the ‘90s India began to liberalize its economy, and start the move towards a more capitalist-type economy Today India is the second fastest growing larger economy and the fourth largest economy in the world.


Indian Economy: Industries, Exports and Trading Partners: Indian Economy: Industries, Exports and Trading Partners Most Indians still work in agriculture-related jobs, but services are becoming and increasing important sector Unlike countries like China, India is not so well known for its manufacturing exports. Exports include textiles, natural resources like tea and cotton And of course the cultural exports like food and Bollywood India has recently become associated with its service exports (outsourcing), and this is becoming a very important part of the economy India is a net importer Main trading partners include: US, China, EU, Russia and Japan


Banking System: Banking System Reserve Bank of India (RBI): The Central Bank Controls currency (Rupee) Manages foreign exchange Supervises and regulates the financial system Promotes economic development Bank of the central government Headquarters in Mumbai, and 22 regional branches


The Rupee: The Rupee The Rupee is relatively confined to India, and is not used extensively in any other country Later years of British colonial rule: Pegged to gold standard b/w of British Pound 1966: de-pegged from the British pound; pegged to the US dollar 1971: de-pegged from US dollar (b/c USD was tanking) Today, the RBI conducts a managed float on the INR/USD exchange rate; INR/EUR and INR/JPY are market determined


Financial Markets: Financial Markets The Securities and Exchange Board of India regulates India’s 22 financial exchanges The largest financial exchanges in India are: The National Stock Exchange of India (NSE) The Calcutta Stock Exchange (CSE) The Bombay Stock Exchange (BSE) The Delhi Stock Exchange (DSE) The two most important exchanges to foreign investors are the NSE and BSE, both located in Mumbai SEBI Mumbai Offices


National Stock Exchange of India (NSE): National Stock Exchange of India (NSE) The third largest stock exchange in the world (number of transactions/day) Traditionally, the first exchange to introduce new technology and trading advancements First to create a clearing corporation First to begin internet trading First to trade ETFs


Bombay Stock Exchange (BSE): Bombay Stock Exchange (BSE) Oldest stock exchange in Asia Smaller than the NSE, but to foreigners, often the more important exchange BSE Sensex index closely followed by international investors Many of the largest Indian companies list on the BSE (Wipro, Infosys, Tata Group)


Forex: Forex Indian forex market tightly regulated by the RBI RBI often directly intervenes in INR/USD trade to stabilize the rupee Forex market is small, but growing rapidly Currency derivatives market is larger than the spot market Most of the trade is in INR/USD


Bonds: Bonds Government bonds T-bills (91-day and 364-day) sold by RBI Many investors don’t like them because they offer no tax benefits Foreigners are allowed to purchase Government market is growing as a result of increased liquidity in Indian market Corporate bonds Regulated by the SEBI Corporate debt placements have increased by over 40% in the past two years Companies are required to be rated as “investment quality” to issue public debt Debt market primarily limited to wholesale orders No market for junk bonds, but probably will be developed in the near future


Bollywood: Bollywood India’s Hollywood Largest film industry in the world Puts out more than 1000 films/year (most are crap, but some are worthwhile… kinda’ like Hollywood) Many films funded by foreign investors, Indian banks, and Mumbai’s criminal underground Important part of the Mumbai economy and Indian culture


Bengalūru: Bengalūru Kris Kohtz


Basics: Basics Capital of Karnataka Population of 7 million $6460 per capita income Fastest growing market


Strengths: Strengths Business Process Outsourcing (BPO) Comparative Advantages Software exports Information Technology


Challenges: Challenges Infrastructure Regulations Expansion into China


CHENNAIAlso known as Madras: CHENNAI Also known as Madras Rachel Oleniacz  


Demographics: Demographics City of 6,400,000 Fourth largest metropolitan Second largest exporter of IT & services Connected by the Golden Quadrilateral Project


Culture & Roots: Culture & Roots Tamil Nadu ~ The Province Tamil ~ The Language Bharatanatyam Kalakshetra Carnatic music Music Season Hindu Temples


Nomenclature & History: Nomenclature & History The city with two names Madras Patnam by The East India Company Chennaipuri by the locals Foreigners’ role in the then town Port and trade சென்னை


Commerce & Trade: Commerce & Trade Chennai port General industrial (containers) Automobiles Shift to green & clean Ennore port Coal Ore Bulk cargo


Automobiles: Automobiles Detroit of South Asia Potential as one of top three automobile giants in the world Ford, Hyundai, Mitsubishi, TVS, Ashok Leyland, & BMW


Slide34: CALCUTTA Suresh Lee Krishnamoorthy


CALCUTTA: CALCUTTA 14 million inhabitants Manufacturing centered Faced major productivity crisis Political instability


RECOVERY ISSUES: RECOVERY ISSUES Strong focus on certain industries Major devaluation of the rupee High associated inflation Currency trading and speculation could not be controlled


RECOVERY AVENUES: RECOVERY AVENUES Major growth in the IT sector Calcutta Stock Exchange


Slide38: QUESTION?