INDIAN ECONOMY AND INVESTMENT OPPORTUNITIES Presentation by – Dr. Amit MitraSecretary General, Federation of Indian Chambers of Commerce & Industry : INDIAN ECONOMY AND INVESTMENT OPPORTUNITIES Presentation by – Dr. Amit Mitra Secretary General, Federation of Indian Chambers of Commerce & Industry 28h October 2004


Slide2: ABOUT FICCI Largest apex organization of Indian business and industry Born of the freedom struggle in 1927 with the patronage of the Father of the Nation. Leading the way for economic freedom. ORIGINS


INTERACTIONS WITH GREAT NATIONAL LEADERS: INTERACTIONS WITH GREAT NATIONAL LEADERS “ I cannot forget the services rendered by commercial class, but I want you to make Congress your own and we would willingly surrender the reins to you. The work can be better done by you. But if you decide to assume the reins, you can do so only on one condition. You should regard yourselves as trustees and servants of the poor. Your commerce must be regulated for the benefit of the toiling millions” MAHATMA GANDHI Speaking at FICCI’s 4th Annual Session on 7th April,1931


FICCI MEMBERSHIP: FICCI MEMBERSHIP 500 Primary Members- Regional Chambers & Industry Associations 2000 Associate Members 50 Corporate Members Direct & Indirect representation of 2,50,000 companies employing 20 million people


Slide5: FICCI National Apex Body of Indian Business & Industry 74 JBCs /institutional arrangements Multilateral networking (CACCI, SAARC, SABF, G-15 FCCIS, NAM, ASEAN, etc.) Parliamentary Fora with US, Germany and UK . FICCI International Business Forum in UK and USA Overseas Offices Agriculture Banking Consumer Durables Entertainment Food Processing Infrastructure Insurance IT Power and Energy Telecom Tourism ICA AIOE AISC CIFTI FLO ICC International Division National Policy Division Select List of Expert Committees Allied bodies in FICCI


Slide6: FICCI Website: www.ficci.com Sectoral www.bisnetworld.net www.techno-preneur.net www.agroindia.org www.emcisee.com www.cleantechindia.com Regional www.nambisnet.com www.aseanindia.net www.iornet.org www.saarcnet.org www.bisnetafrica.com BISNET Business Information and Services Network Special Business Services FICCI Quality Forum Energy and Environment Audit Services Institute for Intellectual Property Development (IIPD) Food Research and Analysis Centre (FRAC) Socio Economic Development Foundation (SEDF) Business Facilitation Service Helpline


Slide7: Opening up of Insurance Sector Industry Status to Entertainment Sector Opening up of the Telecom Sector Announcement of National Highway Project (AGM 1998) Agriculture and Agro processing Reform Vision Resurgence of Development Finance Institutions First ASEAN-India Business Summit Major inputs on Free Trade Policy with Thailand and Singapore High Technology Cooperation Group (HTCG) with USA POLICY CHANGE INITIATIVES OF FICCI


Slide8: OTHER MAJOR INITIATIVES & EVENTS Electricity Act 2003 INDIACHEM: Govt.-Industry partnership to promote Chemicals & Pharma Vibrant Gujarat Summit :MOUs worth Rs.11,000 crores in Petroleum sector. Pravasi Bharatiya Divas: Dual Citizenship to NRIs / PIOs


Slide9: SOME OF THE TASKS IN HAND… Emphasis on Infrastructure Development in the Country Legal and Administrative Reforms Abolition of Inspector Raj Implementation of Electricity Act Lowering of indirect tax burden, improvement in fiscal deficit and achieving zero revenue deficit


THE MACROECONOMIC PARAMETERSOF INDIA: THE MACROECONOMIC PARAMETERS OF INDIA


Slide12: Indian Foreign Exchange Reserves: a steady rise 2003-04 figures as on September 17, 2004


Slide13: Foreign Investments in India go up


STABLE FINANCIAL SECTOR: STABLE FINANCIAL SECTOR India complies with BIS 26 norms of best practices for supervisory criteria, country risk and convertibility Gross NPAs as % of total assets reduced from 5.4% in 2000 to 4% in 2003. Incremental NPAs were negative in 2002-03. Ernst & Young study – NPAs in India are 5% of GDP as against 44% in China, 41% in Malaysia, 26% in Japan, 25% in South Korea


Slide15: SOCIAL INDICATORS LOOK UP Source: Census of India States with high literacy Kerala: 90.9 Mizoram: 88.5 Delhi: 81.82


Slide16: SOCIAL INDICATORS LOOK UP Reduction in incidence of poverty States with low incidence of poverty Goa: 4.4 Punjab: 6.2


Steady Globalization of India: Steady Globalization of India


Slide18: Import duty Reductions


Slide19: Rising share of India’s external trade in GDP Total Exports in 2003-04 - US$ 61.8 Bn; Imports – US$ 75.2 Bn. Envisaged target for exports for 2009 - US$150 Bn


Slide20: USA JAPAN INDIA


Slide21: Pace of Reforms will be sustained Dr Manmoham Singh – Prime Minister of India : Economist of global repute, recipient of Adam Smith prize. Started India’s liberalization process in 1991. Mr P Chidambaram – Finance Minister : Harvard educated, leading corporate lawyer. Mr Kamal Nath – Commerce Minister : Business leader in his own right and a Member of Parliament for 25 years


Slide22: Highlights of Budget 2004-05 Thrust Areas – Agriculture & Agro-Processing, Manufacturing, Infrastructure A new Investment Commission – for foreign and domestic investors and a new Manufacturing Competitiveness Council 100% exemption of Corporate Tax on agro=processing 150% tax deduction on in-house R&D in automobiles De-Reservation of 85 SSI products. Inter-institutional group with a pool of Rs 40,000 crore to cover all infrastructure sectors Up-gradation of 500 ITIs over next 5 years Introduction of VAT from 1st April 2005 Long-Term Capital Gains Tax abolished


Slide23: Highlights of New Foreign Trade Policy 2004-09 Special Focus Initiatives for Agriculture, Handicrafts, Handloom, Gems & Jewellery, Leather & Footwear Import of 2nd hand capital goods allowed without any restrictions Separate Export Promotion Council established for promoting Services Exports New Scheme to establish Free Trade & Warehousing Zones – to make India a global trading hub - trade transactions in free currency allowed in these zones 100% FDI permitted in development & establishment of these zones and their infrastructure facilities Policy introduced to accord 100% EOU Status to Biotech Parks New and Comprehensive SEZ Policy likely to be tabled in the Parliament soon.


Simplification of Foreign Investment Procedures: Simplification of Foreign Investment Procedures Following placed under General Permission route (RBI) instead of existing Govt approval route (FIPB) Transfer of shares from Resident to Non-Resident investors, other than in Financial Services Conversion of ECB/ Loan into equity, provided activity of the company covered under automatic route Cases of increase in foreign equity participation by fresh issue of shares, as well as conversion of preference shares into equity capital


National Competitiveness : Advantage India: National Competitiveness : Advantage India


Slide26: THE HUMAN CAPITAL EDGE Over 3 million scientific & technical manpower Stock of over 0.8 million post graduates in science. Over 1 million graduate engineers 0.4 million doctors 0.3 million graduates in agriculture and veterinary sciences. Today India turns out more than 50,000 computer professionals and 360,000 engineering graduates each year.


Slide27: 2. SIZE OF DOMESTIC MARKET 1.1 billion population Estimated Number of Households by Income Groups (Based on 1999-2000 prices) Middle (Rs 80,000 – Rs 1,20,000): 27.3 Million Upper Middle (Rs 1,20,000 – Rs 1,60,000): 12.5 Million High (Above 1,60,000): 12.2 Million Size of the market at Purchasing Power Parity (PPP) – US$ 1.5 trillion


Slide28: ENTREPRENEURIAL TALENT 5000 years of entrepreneurship Indians’ business acumen now globally acknowledged From Africa to Silicon Valley to South East Asia – one can witness the footprints of Indian entrepreneurship


Slide29: DEMOGRAPHIC PROFILE Total population below 25 years of age – 547 million DEMOCRACY Amongst the most vibrant in the world with a well established Judicial system and Free Press


Slide30: PHARMACEUTICALS India is world's 4th largest pharmaceuticals producer with 8% share of global production by volume 3 New Molecules discovered by Indian companies - 12 more in the final stages. Over 100 Indian formulations have received United States FDA approval


Slide31: BIOTECH More than 900 companies involved in traditional biotech products rDNA biopharma products – 35 new companies set up in past 5 years R&D and commercialization of products on agricultural biotechnology is the latest trend Opportunities for fresh investment in Indian biotech sector in next 5-7 years - US$ 1.5 – 2 billion


Slide32: AGRI & FOOD PROCESSING India - One of the largest food producers of the world Output of the organized segment - US$ 34,827 million (2002-03) Marine and Spices together contribute more than 70% of Export earnings India is looking for investment in infrastructure, packaging and marketing, where ASEAN countries have shown technological prowess. The Indian scientific and research talent - a knowledge source that can be tapped by the ASEAN food industry to its advantage


Slide33: AUTO & AUTO COMPONENTS 2nd largest small car market in the world. Largest motorcycle manufacturer in the world 2nd largest scooter and tractor manufacturer in the world Many international auto majors are manufacturing in India – Daimler Chrysler, General Motors, Toyota, Ford, Honda, Hyundai, Volkswagen, Suzuki Most of them are also outsourcing their components from India


Slide34: Production of Automobiles (4 Wheelers)


Slide35: Production of Automobiles (2 Wheelers)


Slide37: STEEL Tata Steel – one of the world’s cheapest producers of Hot Rolled coils (Source : World Steel Dynamics)


RESEARCH & DEVELOPMENT: RESEARCH & DEVELOPMENT More than 100 global companies outsource R&D facilities from India GE John F Welch Technology Centre – Company’s largest research outfit outside the US GE Medical Systems – India as sole sourcing base for its portable ultrasound scanner Monsanto – First non-US research facility Eli Lilly – largest research facility in Asia and 3rd largest in the world Texas Instruments – Digital Signal Processor developed in India – controls 50% of the world market AVL, Austria – India as base to do R&D for the company’s Japan centre


Slide39: IT & IT ENABLED SERVICES Compounded annual growth rate (CAGR) exceeding 50 % over the last five years IT enabled services key driver of growth. Engine for outsourcing This segment poised to grow very rapidly, world-wide - India has potential to tap 38 % of the world market. Revenues from ITeS (remote services) showed an annual growth rate of 68.2 %.


Several World leaders have outsourced Business Processes to India : Several World leaders have outsourced Business Processes to India


India scores highest in locational advantages for business process outsourcing : AT Kearney: India scores highest in locational advantages for business process outsourcing : AT Kearney


ENTERTAINMENT: ENTERTAINMENT Industry growing at 15% - Total industry valued at US$ 4.267 billion in 2003 Expected to reach US$ 9.4 billion by 2008 Largest producer of films and enterntainment content in the world - More than 1000 films produced in 2003-04 Co-production treaties being signed with UK, Canada, China, Italy Animation and gaming – one of the fastest growing sectors Animation and special effects for SPIDERMAN and GLADIATOR done in India


HEALTHCARE: HEALTHCARE Size of the Healthcare industry - over US$22 billion Sector employs over 60 lakh people One of the fastest growing sectors in India - expected to grow at 12-13% per annum. Over 80% of healthcare spending is captured by private sector. Investment Potential : 750,000 extra beds over the next 10 years at a cost of approximately US$30 billion.


Slide44: TOURISM Tourism accounts for 5.3% of India's GDP and is the third largest foreign exchange earner Foreign tourist arrivals in India were 2.75 million in the year 2003 According to World Tourism Organization estimates, India will lead in South Asia with 8.9 million arrivals by 2020 Travel and Tourism demand in India is projected to grow at an annual rate of 8.8% after 2004


REAL ESTATE: REAL ESTATE Real estate development market size - US$ 12 billion – growing at 30% annually Of this US$10 billion is Residential, Rest Office, Shopping Malls, Hotels and Hospitals ITES fuelling growth in commercial space India ranks 5th amongst 30 emerging retail markets Return on investment in Indian metros : Shopping Malls :10-12%; Office segment : 9-11% Residential Segment : 4-8%


REAL ESTATE: REAL ESTATE FDI in Real Estate 100% FDI permitted in Integrated Townships Property Management – New Avenues for Foreign Companies Design & Planning of integrated / luxury townships, residential, commercial and retail units Facilities Management recognized as an investment into real estate Advisory & Consultancy Services like economic analysis, valuation, viability studies, market analysis and forecasting, investment strategies


Slide48: OIL & GAS World’s 6th largest consumer of Energy World’s 8th largest consumer of Oil Demand for Petroleum Products expected to be 179 MMT by 2006-07. Investments of US$ 150 Billion required to meet burgeoning demand. More than US$ 6 Billion already committed for exploration and development work over next few years Liberalized Govt policies on exploration, production, refining, distribution, marketing and pipelines for private sector participation 100% FDI allowed for exploration, petroleum product marketing and laying pipelines.


Slide49: POWER By 2012 Peak Demand (Expected) – 1,57,000 MW Envisaged Capacity Addition – 1,00,000 MW Estimated Investment for National Grid Development – US$ 20 Billion Up-to 100% FDI allowed in projects relating to electricity generation, transmission and distribution (other than atomic reactor power plants). No investment ceilings on project cost and quantum of Foreign Direct Investment


Slide50: PORTS & ROADS Roads Investments of US$12 Billion envisaged for National Highway Development Project 100% FDI under automatic route allowed in projects for construction and maintenance of roads, highways, vehicular bridges, toll roads Sea-Ports 7517 Km of Coastline dotted by 12 major and 185 minor ports. Investments of US$22 Billion needed for SAGARMALA Project for developing 50 new ports and upgrading existing ports 100% FDI permitted in Construction, maintenance and support services for ports. 100% Tax Holiday for 10 years for enterprises in developing, maintaining and operating ports, inland waterways, etc. International Container Transshipment Terminal planned in Kochi Port on BOT basis.


Slide51: AIRPORTS Projection 2010: International Passenger Traffic – 26 Million; Domestic Passenger Traffic – 40 Million; Cargo Movement – 1.8 Million tonnes FDI up-to 74% under Automatic Route (up-to 100% with Special Permission) allowed in ventures for airports FDI up-to 49% and NRI/OCB Investment up-to 100% permitted in Domestic Airport Services 100% tax holiday for 1st five years, 30% deduction for next 5 years, 40% of total profits also deductible for financial institutions providing long-term finance for airport infrastructure projects.


Slide52: DESTINATION INDIA India is one of the fastest growing economies in the world AT Kearney’s FDI Confidence Index Report – India has been upgraded to 6th most attractive destination worldwide in 2003 (from 15th in 2002) In Services’ sector, India was ranked as the 4th most attractive destination (up from 14th place in 2002)


CHALLENGES: CHALLENGES Governance Need for elimination of large number of Rules & Regulations in the books Sharply reducing the number of implementing agencies Moving towards single window clearance Infrastructure: A Challenge and an opportunity Investments required upto 2012 – US$ 334 billion Power Generation - US$ 143 billion Power Transmission & Distribution – US$ 116 billion Roads – US$ 40 billion Ports – US$ 20 billion Railways – US$ 15 billion


What the Future Beholds: BRIC Study of Goldman Sachs (2003) predicts that: INDIA WILL EXCEED France’s GDP in 2020 Germany’s in 2025 Japan’s in 2035 TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY 2050 What the Future Beholds


INDIA – SINGAPORESynergies: INDIA – SINGAPORE Synergies


Bilateral Trade: Bilateral Trade (Value in US $ Million) Source: Ministry of Commerce and Industry


Major items of Exports to Singapore: Major items of Exports to Singapore Gems & Jewellery Electronic Goods Aluminium Other Than Products Machinery & Instruments Man Made Yarn, Fabric, Made Up Drugs, Pharmaceuticals & fine Chemicals


Major items of Imports from Singapore: Major items of Imports from Singapore Electronic Goods Transport Equipments Organic Chemicals Machinery Except Electronics Printed Books, Newspaper, Journals


THRUST AREAS: THRUST AREAS IT (including BPOs ) and Telecom Infrastructure including Special Economic Zones Human Resource Development Joint R&D Financial Services Biotechnology Entertainment Chemicals Healthcare


FICCI Initiatives in SingaporeEvents organized till now:: FICCI Initiatives in Singapore Events organized till now: Mr Yogendra Kr Modi, President-FICCI visited Singapore for the Distinguished Visitors Programme Third India-ASEAN Business Summit – A large delegation led by H E Mr. Lim Hng Kiang, Minister for Trade and Industry, Singapore form Singapore for the summit – 19-21st October 2004.


FICCI’s Initiatives With Singapore: FICCI’s Initiatives With Singapore Meeting with H E Mr Goh Chok Tong, the then Prime Minister of Singapore-July 2004. FICCI signed a MoU with Institute of South Asian Studies in his presence. Meeting with Mr George Yeo, the then Minister for Trade and Industry: February 2004 Meeting with Mr David Chin, Executive Director, Singapore Business Federation:January 2004 Business delegation to Global Entrapolis@ Singapore:October 2003 Chamber Presidents’ and Leading Businessmen Delegation to Singapore: October 2003 Second India-ASEAN Business Summit, co-organized by FICCI from September 4-6, 2003. The Summit was also addressed by Dr Vivian Balakrishnan, Minister of State for Trade & Industry, Singapore.


FICCI’s Initiatives With Singapore: FICCI’s Initiatives With Singapore Meeting with the 25-member business delegation from Singapore, led by Mr Stephen Lee, Chairman, Singapore Business Federation - April 9, 2003. FICCI co-hosted an interactive meeting with the Prime Minister of Singapore, Mr Goh Chok Tong, at New Delhi - April 8, 2003. Exclusive meeting of senior FICCI officials / business members with Mr George Yeo, Hon’ble Minister of Trade & Industry, Singapore - April 8, 2003. Presentation on “Indian Budget Review 2003-04” at the Centre of Innovation and Entrepreneurship- March 5, 2003, Singapore.


FICCI’s Initiatives With Singapore: Interactive meeting with Mr George Yeo, the then Minister of Trade & Industry of Singapore- November 26, 2002, New Delhi. FICCI co-organised the First India-ASEAN Business Summit along with the Ministries of External Affairs and Commerce & Industry in October 2002. A large delegation from Singapore, comprising 46 members, led by then Minister of State for Trade and Industry, Mr. Tharmam Shanmugaratnam, participated in the event. MoU with Singapore Business Federation signed in October 2002 to discuss and explore business opportunities in trade, investments, transfer of technology, services and other industrial sectors. Visit of the the then Hon’ble PM of India to Singapore - April 7-9, 2002. The Singapore-India Business Forum, organised on April 8, was addressed by the Prime Ministers of both countries FICCI’s Initiatives With Singapore


FICCI’s Initiatives With Singapore: MoU with Economic Development Board of Singapore signed on April 8, 2002 to promote new synergies especially in IT and knowledge intensive industries. Regular interaction with the International Enterprise Singapore. FICCI delegates participated in the IE Networking Session - April 8, 2002. India Centre in Singapore: This is a unique commercial venture, set up by Economic Development Board (EDB) and Jurong Town Corporation (JTC) of Singapore, supported by FICCI. The Centre, set up as a Technopreneur Park, is now being converted into a virtual network of seven ‘hot spots’. JBC Agreement with Singapore-Indian Chamber of Commerce and Industry (SICCI). FICCI’s Initiatives With Singapore


Slide65: THANK YOU