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FASTEST GROWING FREE MARKET DEMOCRACY IN A GLOBAL ECONOMY

INDIA

Presentation by: Kamal Meattle, CEO, PBC-STIP, New Delhi, India www.pbcnet.commeattle@pbcnet.com

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• THE INDIA STORY

• INDIAN SUCCESS STORIES

• INTERNATIONAL SUCCESS STORIES

• INDIA ADVANTAGE

• BUSINESS OPPORTUNITIES

• BUSINESS OPPORTUNITES FOR PHILIPPINES

• SME : ADDING VALUE

• WINNING ATTITUDE

• ACKNOWLEDGEMENT

CONTENTS

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THE INDIA STORY

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1947 : Year of Indian Independence

Today’s India is one of the fastest growing Democratic Market Economy, well on it’s way to be integrated with the world economy

The famous Goldman Sachs report ( Dreaming with BRICs: The Path to 2050 ) states that, among Brazil, Russia, India and China, India will grow the fastest over the next 30 to 50 years by leveraging its demographic advantages and through continued development

India’s GDP will exceed Italy’s in 2016, France’s in 2019, Germany’s in 2023 and Japan’s in 2032

INDIA TO BECOME THE 3RD LARGEST ECONOMY IN THE WORLD BY 2032

AND…THE STORY BEGAN IN 1947

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• Planned Industrial Development

• Industry Licensing and Quotas

• Dominance of Public Sector

• Restriction on Private Investment

• Socialism

• Mixed Economy

India Pre - Liberalization

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• Liberalization of Industrial Licensing

De-licensing

De-control

De-regulation

Broad banding

Abolition of registration

• FERA LiberalizationLiberalization of foreign investment

Liberalization of Technology Import

The New Industrial Policy for liberalization-1991

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• MRTP LiberalizationAbolition of threshold assets limit

No MRTP clearance needed for expansions, mergers

• Curtailment of Public Sector

Several industries hitherto reserved for public sector opened up to private sector

Only eight core industries remain reserved for the public sector

Purview of Board for Industrial and Financial Reconstruction (BIFR) extended to Public sector

The New Industrial Policy for liberalization - 1991

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• Government’s role changed to Regulator from Licensor

• All Licenses Rationalized

• Active participation of private sector

• FDI being Welcomed (100%) - Automatic Route

• Barriers Dismantled & Procedures Simplified

• Indian Industries Actively Investing Abroad

• Bureaucracy - Less Government is Good Governance

• Allowing Market Forces to Govern the Efficient Allocation of Resources with Minimum State Intervention

• Reducing and rationalising foreign trade barriers

India Liberalization Stage - Strategies Developed

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• India - One of the fastest growing economies in the world

• Average GDP growth (1995 -2005) : 6.2 % per annum

• Average annual growth (1995 - 2005)

Agriculture & Allied : + 2.1 % per annum

Industry : + 6.6 % per annum

Services : + 7.8 % per annum

• Average Per Capita Income growth (1995 - 2005): 3.8 % per annum

• Inflation down to a single digit level continuously for the last ten years

• Foreign exchange reserves increased from US $ 2 b (March 1991) to US $ 145 b (September 2005)

• Merchandise Exports : +20 % average rate of growth in last three years

• Booming Services Exports from US $ 4.6 b in 1990-91 to US $ 51.3 b in 2004-05

Economic Scenario : Post Liberalisation

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• Balance of Payments surplus (US $ 26 b in 2004 - 05)

• External Debt Service Ratio down from 26.2 % in 1995 to 6.2 % in 2005

• Foreign Direct Investment (FDI) : Average +US $ 5 b pa in the last five years.

• Foreign Portfolio Investment : US $ 11.4 b in 2003-04 and US $ 8.9 b in 2004-05

• Reforms continuing and have unleashed dynamic forces – putting the economy on a trajectory of unparalleled economic growth in the future

• The Indian Government is working in close co-operation with industry and trade to mitigate the remaining problems and constraints

• Broad consensus across the political spectrum on the need for and direction of the reforms. Some issues still need to be resolved

Economic Scenario : Post Liberalization

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28.023.8 20.5

27.2

40.6 43.948.9 52.4

32.2 28.1 27.2 27.1

0

10

20

30

40

50

60

1990-91 1995-96 2000-01 2004-05

Agriculture Industry Services

Share Of Services Sector In GDP On The Rise (%)

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India

• the world’s most irrigated land mass

• world’s 2nd largest exporter of rice & 5th largest exporter of wheat

Food production: India’s Ranking in the World

1st Tea, Milk

2nd Rice, wheat, sugar

Agriculture

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• Rate of growth

2003-04 7 %

2004-05 9.2 %

• Diversified base of world class capabilities

• State-of-the-art technologies

• TQM,TPM, Six Sigma & Lean Manufacturing - part of

everyday practice

• Diversified industrial base with supporting ancillary industries

• Overseas acquisitions worth US$ 500 m

Manufacturing

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• Consistent growth

2003-04 9.1 %

2004-05 8.9 %

• Sectors Driving Growth

- ITES

- Healthcare

- Financial Services

- Education

Source:Economic survey, 2004 - 05

Services

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Average GDP Growth (1990-2001)

9.4

6.25.5

4.9 4.7

3.32.9 2.9

2.0

1.5

2.53.5

4.5

5.56.5

7.5

8.5

9.5

Chi

na

S.K

orea

Indi

a

Tha

iland

Indo

nesi

a

Mex

ico

Phi

lippi

n es

US

A

Bra

zil

Gro

wth

(%

)

Source: WDI, World Bank, 2003

Average GDP growth - India & the World

16

Share of external trade in GDP

18.123.1 25.5 26.9 30.3 28.9 31.6 32

0

10

20

30

40

1991-92 1994-95 1997-98 1999-2000

2000-01 2001-02 2002-03 2003-04

Rising share of India’s external trade in GDP

Target :To double share of exports from 0.7 % to 1.5 % of world trade

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• Land Area: 3.29 m sq. km.

• Population: 1.09 b

• GDP: US $ 630 b

• Real GDP Growth: 6.9 %

• Gross Domestic Savings: 28.1 % (2003 - 04)

• Gross Domestic Investment: 26.3% (2003 - 04)

• Per Capita Income: US $ 580

• Inflation Rate: 6.4 %

Macro Economic Indicators (2004 - 05)

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• Exchange Rate: US $ 1 = 43.75

• Merchandise Exports: US $ 80b

• Merchandise Imports: US $ 106b

• Services Exports: US $ 51b

• Foreign Direct Investment: US $ 5.5b

• Foreign Portfolio Investment: US $ 8.9b

• Direct Investment Abroad: US $ 1.5b

Macro Economic Indicators (2004-05)

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INDIAN SUCCESS STORIES

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• Number of foreign firms acquired 120 by Indian companies during 2001 - 03

• Total worth US $ 1.6 b

• India - 8th largest investor in the UK

• No of investments 440

• No of Indian companies with 1,441 operations in Singapore

Indian MNCs - On a global buying spree

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• Hero Honda - Largest producer of motorbikes in the world

• Moser Baer - World’s 3rd largest producer of optical media

• Hero Cycles - World’s largest bicycle producer

• Bharat Forge - Amongst the world’s top 3 forgings manufacturers

• UB Group - World’s 2nd largest producer of alcoholic beverages

• Paharpur Cooling Towers - World’s 2nd largest manufacturer of

Cooling Towers

India – Leading The World

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India – Leading The World

• Apollo Hospitals - Single largest hospital chain in South Asia

• TISCO - world’s cheapest producer of steel

• Reliance Industries - World’s largest producer of PTA, a chemical

used in textile production

• Mahindra & Mahindra - Amongst top 3 tractor manufacturers in the

world

• Telco - Amongst top 3 truck manufacturers in the world

• Welspun - World’s largest producer of terry-towels

• Gujarat Ambuja - Amongst top 5 cement producers in the world

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Some Indian Examples Benchmarked with the Best In The World

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Success Story of RELIANCE

The Reliance Group founded in 1932, is India's largest business house with total revenues of over US $ 22.6 b and exports of US $ 3.6 b

It began as a an SME

The Group's activities span exploration and production of oil and gas, refining and marketing, petrochemicals, textiles, financial services, insurance, power, telecom and infocom initiatives

The Group exports its products to more than 100 countries the world over

Reliance Group revenue is equivalent to about 3.5 % of India's GDP

The Group contributes nearly 10 % of the country's indirect tax revenues and over 6% of India's exports

Today, the Reliance Group has one of the largest family of shareholders in the world

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Success Story of WIPRO

Wipro was set up in the backdrop of the small town of Amalner in Maharashtra in 1945

An SME and primarily an oil factory, the chief products were Sunflower Vanaspati and 787 laundry soap

It was in the early eighties that Wipro made its foray into the Infotech arena

With this began the Wipro Infotech story

Today, Wipro stands at the firmament, as a trusted and experienced provider of a comprehensive range of IT services, solutions and products, worldwide

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Success Story of BHARTI

Bharti Enterprises has successfully focused its strategy on telecom while straddling diverse fields of business

It all began as a Small Industry

Bharti Tele-Ventures is today acknowledged as one of India's finest companies, and its flagship brand 'Airtel', has over 12 million customers across India

Recently, Bharti has successfully launched an international venture with EL Rothschild Group owned ELRO Holdings India Ltd., to export fresh Agri- products exclusively to markets in Europe and USA

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Success Story of DR.REDDY’S

Dr.Reddy’s Laboratories was founded in 1984, with a capital of US $40,000 in cash and US $120,000 in bank loan

In fact, it is this spirit of entrepreneurship that has shaped the company to become what it is today

Today, the company with revenues of US $446 m, in fiscal year 2005, is India’s second largest pharmaceutical company and the youngest among its peer group

Dr. Reddy’s started its drug discovery programme in 1993 and within three years it achieved its first breakthrough by out licensing an anti-diabetes molecule to Novo Nordisk in March 1997

With this very small but significant step, the Indian industry went through a paradigm shift in its image from being known as just ‘copycats’ to ‘innovators’!

Through its success, Dr. Reddy’s pioneered drug discovery in India Today, the company manufactures and markets API (Bulk Actives), Finished Dosages and Biologics in over 100 countries worldwide, in addition to having a very promising Drug Discovery Pipeline

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Success Story of BIOCON

Biocon is India's leading biotechnology enterprise

Over the past 25 years, they have evolved from an small enzyme manufacturing company to a fully integrated biopharmaceutical enterprise, focused on healthcare

At Biocon, success has been their ability to develop innovative technologies and products and to rapidly leverage them to adjacent domains

This unique "integrated innovation" approach has yielded a host of patented products and technologies that have enabled multi-level relationships with their global clientele

As India's first and leading biotechnology company, Biocon extends its support to numerous community outreach and corporate citizenship initiatives with special concentration in the areas of healthcare, education and environment

The Biocon Foundation, set up in 2004 has recently launched Arogya Raksha Yojana, a unique health initiative for rural India

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Success Story of Paharpur Cooling Towers

In its over four decades of existence, Paharpur has come to be acknowledged as the pioneer in the Indian cooling tower industry

It all began as a small industry with a capital of US $ 11,000

At today's selling prices, Paharpur has sold cooling towers valued at over US$ 1 b

If these cooling towers were all working together, they would be able to cool more than 265 million liters of water every minute or 382 b liters in 24 hours

The Paharpur team consists of highly qualified engineers & professionals with over 1,000 man years of experience in the field of cooling tower application engineering, designing, erection and trouble shooting

Paharpur has pioneered several improvements in cooling tower design and operation and has emerged as one of the largest cooling tower manufacturers in the world, with exports to more than 40 countries

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Success Story of Standipack

A successful SSI unit set up in 1980, in NCR, Delhi

• It is the largest lube oil flexible packaging company in India producing packaging materials, machinery and systems and doing contract packaging

• Produces /contract packages over 300 m packages a year, for the oil majors in Delhi, Kolkata, Chennai and Mumbai

• Patents in most countries of the World

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Success Story of Paharpur Business Centre & Software Technology Incubator Park

• Began operations in 1990 in New Delhi, with an equity capital of Less than US $ 15,000

• Current net worth of US $ 10 m

• Provides a suite of 28 services, employing 450 persons

• Has Fortune 500 companies, MNC's and corporate, as clients

• Has five international certifications, ISO 9001, ISO 14001, SA 8000, OHSAS 18001 and HACCP

• Commitment to UN Global Compact

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• Publishes its annual Sustainability Report following the GRI system

• Reports its triple bottom line - relating to profit, environment and sustainability

• Now providing technical support to setting up of a 1.7 m ft2 Software Park near Delhi that has been given the SEZ status by the GOI – ‘The Haryana Technology Park’

• Company showcased by CII at the World Summit on Sustainable Development in Johannesburg in 2002 for its sustainability initiatives

• Its USP is the Clean Indoor Air in its Center in Delhi - Certified Mountain Quality Air using biotechnology developed by NASA, USA to clean air

Success Story of Paharpur Business Centre & Software Technology Incubator Park

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INTERNATIONAL SUCCESS STORIES

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1,858

1,1051,054

965

548393

263 17236 22 17 8 7

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1

Japan

India

South Korea

Singapore

Australia

China

Hong Kong

Taiwan

Malaysia

Sri Lanka

New Zealand

Philippines

Thailand

India attracts second highest privateequity investment in Asia

Total equity flow to India between 1999 and 2004 doubled

from US $ 5.12 b to US $ 11.50 b

Preferred Destination For Foreign Equity Investors

Source: NASSCOM

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MNCs leveraging the India Advantage

36

*

FDI INFLOWS TO INDIA

4029

6125

50364674

5526

0

1000

2000

3000

4000

5000

6000

7000

2000-01 2001-02 2002-03 2003-04 2004-05

FDI Inflows ($ million)

37

• More than 100 global companies outsource R&D facilities from India

• GE John F Welch Technology Centre – Company’s largest research outfit outside the USA

• 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

International Brands Utilizing The Indian Knowledge Base

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Beiersdorf Problems at beginning:

• Existence of rival company (Nivea) in the market (personal hygiene market)

Reason for success:

• Relative name recognition • Adaptable Indian staff• Suppliers who are willing to cooperate• Immense support in form of technology and know-how transfer

from side of Germans• Great market potential

What is important for business-collaboration with India?

• Patience and endurance• Local manager who knows mother company• Collection of experience through business connections

Case Study of Selected German Companies in India

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Daimler Benz

• Decentralized research was quite essential • Achievement of local representation to assess market

specified interests

Why India?

• Great resources of highly qualified scientists as staff• Availability of human capital with low labor costs• Internationality: English language and understanding of European culture

(due to British history, existence of numerous institutions, administrations, school etc)

• Economic Policy

Case Study of Selected German Companies in India

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“Quite simply, I was blown away by what I

saw on my first trip to India”

Stephen Roach, Managing Director &

Global Chief Economist, Morgan

Stanley 2004

“India's highly educated workforce,

management talent, rule of law,

transparency, cultural affinity and regulator

environment are more favorable than

China's.”

A T Kearney, FDI Index 2004

"We want to bring to the world various facets

of this extraordinary country, its people and

progress"

Chris Cramer, International Managing

Director, CNN 2004

"India has the potential to deliver the fastest

growth over the next 50 years with an

average rate of more than 5 per cent a

year for the entire period”

Dominic Wilson, Senior Global

Economist and Vice President,

Goldman Sachs 2005

India – A Preferred Destination

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INDIA ADVANTAGE

42

Trained manpower and knowledge base

Rich biodiversity

Extensive clinical trial opportunities

Excellent network of research laboratories

Well-developed base industries

Pro active policy framework

Proficiency in English

Low manpower costs

The India Advantage

43

Working

age

population

to rise

to 65%

Urban

population

to rise

to 40%

30-40 mnpeople joiningmiddle class every year

By 2020

Demographics: A strong demand driver

44

Source: IMD Competitiveness Yearbook 2003Source: UN, Morgan Stanley

ISO:9001:2000

Partnership Driver - Skilled Manpower

Global Growth in Working-AgePopulation (15~64) Over the Next

Six Years (Mln)

375

83

73

56

41

38

20

13

0.04

-3

Availability of SkilledManpower, 2003

7.4

7.3

7.2

7.1

7.1

7.0

6.6

5.7

5.3

4.3

Availability of QualifiedEngineers, 2003

10 = High

1 = Low

8.9

7.9

7.3

6.9

6.4

5.8

3.9

6.7

6.7

World

India

Africa

China

S E Asia

L America

W Asia

USA

W Europe

Japan

4,087

675

477

921

355

352

127

197

123

85

StockPosition 2004

Addl workingage population

by 2010

Singapore

USA

India

Germany

Hong Kong

Japan

Taiwan

Korea

Mexico

China

10 = High

1 = Low

India

Singapore

USA

Hong Kong

Germany

Taiwan

Mexico

Korea

China

Growing Knowledge Pool

45

2.4

5.88 6.4 6.5 7.2 7.2 88.9

25 28

6

0

5

10

15

20

25

30

Average wage / year (in thousand US dollars)

Source: NASSCOM

Costs for offshore work 30 - 50 % lower than in USA / Europe

The Cost Advantage

46

Total Compensation for Workers in Heavy Manufacturing (US$ per Hour)

20.32

8.35

2.270.75 0.43 0.35

0

5

10

15

20

25

USA Korea Mexico China India Indonesia

Source: IMD Competitiveness yearbook, 2003

Low Wages

47

Reduction in Peak Customs Duties on Manufactured items

150

110

5038.5 30 25 2042

0

20

40

60

80

100

120

140

160

1991 Mar-92 Mar-95 Mar-97 Mar-00 Mar-02 Mar-03 w.e.f March2004

in p

er c

ent

Import duty Reductions

48

10th largest economy in the world - 4th in terms of PPP

Will overtake Japan in PPP terms by 2010, to be 3rd largest in the world

Large entrepreneurial base and diversified manufacturing structure

Large reservoir of skilled labour at internationally competitive cost

Vast pool of scientifically and technically qualified manpower of 20m

A large domestic market - 300 m + strong middle class population having substantial purchasing power

Largest democratic set - up

A broad based and transparent legal framework including arbitration

India - Economic Enablers

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Vast network of bank branches, financial institutions and well-organized

capital and money markets

A network of technical and management institutes of highest

international standards for development of human resources

India has a record of meeting its international financial obligations as

per schedule and has never been a defaulter

No communication barrier, as English is the most prevalent business language

Strong and vibrant small scale sector that is keen to establish strategic alliances with their foreign counterparts

India - Economic Enablers

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Supportive infrastructure base

Strategic location for third country markets, particularly in the rapidly growing south and south-east Asian countries

The strategic location of India and its easy and efficient access to the Middle East, East European countries, CIS countries, Africa, South East Asia and Asia-Pacific countries places it in a unique position as a sourcing ground for entering into strategic alliances in export-oriented industries

Foreign companies can take advantage of India’s strategic location and tap the markets of these countries.

India is slowly but surely emerging as an attractive destination for foreign investment

Liberalized industrial and foreign investment policies

India - Economic Enablers

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Recognising the need and the potential in certain areas, the Government has also come out with specialised packages of incentives for setting up projects in the fields of power, roads and highways, telecommunications, mining, drugs and pharmaceuticals,hydrocarbons, shipping and ports, tourism, electronics, food processing, etc

The Government is vigorously promoting and approving foreign direct investment keeping in view the objective of attracting at least US $ 10 b per annum

The Government is very keen to attract sizeable foreign investment into infrastructural projects like roads, power, ports, telecommunications, etc. as the demand for infrastructural services is expected to rise several times to match the projected economic growth of around 8 % per annum in the next ten years

India - Economic Enablers

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Sector FDI Limits

• Defence up to 26 %

• Telecom up to 74 %

• Civil Aviation up to 49 %

• Real estate & construction sector up to 100 %

• Integrated township development up to 100 %

• Tea plantation up to 100 %

India - Economic Enablers

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• Road length 2.5 m km

Second largest road network in the world

• Railway routes 63,000 km

• Cargo handled 298 m tonnes

• Electricity installed capacity 126,000 MW

Sixth in world electricity generation

• Telephone Connections 77 m lines

• Fixed lines (Dec, 2004) 44.76 m

8th largest telecom network in the world

Source: Department of Economics & Statistics, Tata Services Ltd

The India Advantage: Infrastructure

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Indian Brains Abroad

• Though foreign multinational have dominated the research agenda in India

to date, a growing number of Indians who have worked abroad are

returning home with cash, contacts and confidence to set up companies

of their own

• These are people who have the experience and exposure to best practices

abroad

• For the first time, Indians who have been exposed to the world, realize they

can do something just as good and they can be world-class

• They have an attitude to meet challenges and succeed and also give back

something to their country

• 35 % of Doctors in USA• 36 % of NASA Scientists in USA• 35 % of Silicon Valley Start-Ups are by Indians• India emerging as outsourcing hub

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BUSINESS OPPORTUNITIES

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Opportunity in various Industry Sectors

• Software

• Biotechnology

• Outsourcing

• Retailing

• Real Estate

• Auto Components

• Telecommunication

• Media & Entertainment

57

• The Software industry in India is witnessing an explosive growth and expects to generate US $ 87 b including US $ 50 b from exports by 2008

• More than 150 global business giants have set up research and development facilities in India

Some of these firms are GE, Microsoft, TI, HP, IBM, Daimler Chrysler and Motorola

• Bangalore has over 150,000 software engineers and a concentration of hi-tech companies

• Delhi and NCR is the 3rd largest exporter of Software services from India

• More than 70,000 software professionals enter the Indian market each year

Opportunities in Software

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Opportunities in Software – The China Connection

• China has a worker base equal to India's in terms of cost, quality and scale

• In future, the Indian software Industry will use China as a base to cater to the local markets including Japan

• Indian firms such as HCL, TCS, Infosys and Wipro have already opened centers in China to outsource technology talent

59

Size (2002 - 03) US $ 24 bGrowth rate 28 %

Share of IT and BPO 1.4 % of GDP2008 projection 7 %

Exports (2003 - 04) + US $ 12 bGrowing at + 30 % pa

CAGR (since 1999) 46 %

Employment Over 650,000Second largest employer in IT services sector

Growing IT Market

60

Opportunities in Biotechnology

• Biotechnology is a fast emerging sector in India

• The consumption of biotech products in India was US $ 1.8 b in 1999 and is expected to cross US $ 4.2 b by 2010

• It is estimated that 10 % of the researchers and 15% of the scientists in pharmaceuticals and biotech R&D in USA are of Indian origin • India is churning out 2 m graduates, 300,000 post graduates and 1,500 PhD's, every year

• Biocon, the first biotech company was launched in 1978 • Indian Firms such as Shantha Biotech, Bharat Biotech, Dr. Reddy's Lab and Biocon are all very successful firms

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2002- 03

2010

25 % growth in investment

70 % growth in employment

74 % growth in R&D manpower

10 % of global industry

1 m skilled jobs

US $ 5 b annual revenues

Source: Confederation of Indian Industry (CII)

Size 2003 - 04 US $ 705 m

Biotech Market - A consistent Uptrend

62

Volume – wise 8 % of global market

4th largest in the world

CAGR (1995 - 2002) 16.6 %

Exports 23 %

CAGR(1995 - 2002)

Size (2002- 03) US$ 7 b

Share of formulations 80 %

Size 2010 (estimated) US$ 25 b

Pharma Market

63

• The Indian Outsourcing industry is moving up the value chain

• It is BPO today but the future is for Knowledge Process Outsourcing (KPO), Financial Process Outsourcing (FPO) and Legal Process Outsourcing (LPO)

• It is providing value through domain expertise rather than process expertise

• India, in the new knowledge economy, is all set to emerge as a global KPO,FPO and the LPO hub

• It is estimated to capture 71 % of the world market by 2010 against 56 % today giving it a market of US $12 b

• There are new opportunities, given that there is a serious shortage of

quality teachers, in the USA

Opportunities in Outsourcing

64

• The remote education market is expected to be US $ 15 b by 2008

• The current leaders are Engineering design – US $ 400 m, basic

data search, integration and management – US $300 m and Biotech and

Pharma – US $ 280 m

• The Compounded estimated annual growth of KPO for India is 50 %

whereas BPO will grow at about 30 %

• KPO is expected to engage 250,000 people by 2010

• It will be in areas such as biotechnology,animation and graphics,design

in aerospace & automotive, health care, pharma research, learning

solutions, data management, customer analytics and entertainment

• FPO will include insurance underwriting, risk assessment, equity

research and corporate market research

Opportunities in Outsourcing

65

Contribution of IT Enabled Services in total ITexports

1999-200020%

2000-200120%

2002-2003

33%

2001-200227%

- ITES exports projected to touch US$ 24 b by 2008

- India offers combination of cost-quality-scale advantage

ITES - BPO Sector

66

The ongoing buoyancy in India’s spending, arising from the changing demographics and the resultant rise in income levels, has resulted in a distinct consumer preference for value-added products across the retail spectrum, providing a platform for the rapid growth of the retailing sector which could emerge as one of the fastest growing sector in coming years

• Organized retailing industry to rise from US $ 4b to US $ 15b by 2010 The total retailing industry, estimated at US $ 200b is largely in the unorganized

sector with organized retailing accounting for less than 2 % (US $ 4b)

• The organized retailing segment to grow fourfold in 5 years

• According to NCAER, the Indian middle class (household income between US $ 4,500 – 23,000) currently at 92m, is expected to cross 153m by 2010

• Substantial mall construction: The number of malls is expected to rise from the current 40 to around 250 by

2010

• Close to 50m sq. ft. of retail space is expected to be developed over the next 5 years

Opportunities in Retail Sector

67

Opportunities in Real Estate

• The US $ 50 b Indian real estate market is booming and expected to grow at 25 per cent annually

• The boom owing to the consumption powered growth of the country's economy has seen investors planning nearly 250 new shopping malls

by 2008, as against just three that existed till 2002

• The central government adopted a regulation in 2005 allowing foreigners to bid for Indian construction projects with local partners and also reducing their minimum land - holding limit from 100 acres to 25 acres

• Enthused by the liberalized investment guidelines, a slew of foreign builders are rushing to launch projects in Asia's third largest economy

• Expected annual shortfall of 20 m housing units by 2011 Mumbai alone would need more than 180,000 housing units

• An opportunity – for developing large- scale commercial and residential townships in six cities – Kolkata, Bangalore, Mumbai, Chennai, Hyderabad and New Delhi

68

The Indian automotive industry has grown at a staggering pace over the last few years

The US$ 6.8 b industry has registered a CAGR of 17 % between 1998 - 2003 and is projected by ACMA to grow at a 15 % CAGR till fiscal 2012

The opening up of the sector over the last decade has caught the attention of global auto majors

In the 1990’s, economic liberalization allowed foreign automakers such as Hyundai, Ford, Toyota and GM set up base in India

They also persuaded their overseas components suppliers to set up local manufacturing bases in India

For example, Delphi followed General Motors and opened their plant in the state of Gujarat in 1995 and Visteon followed Ford in 1998

Opportunities in Auto Components

69

Opportunities in Auto Components

• Present Industry size US $ 6.8b

By 2012 US $ 17b

• Total Exports By 2010 US $ 5b

• Key Features

- Suitability as a low cost manufacturing base for MNCs

- Costs 20 - 30 % lower, compared to USA

- High product quality, superior design & engineering

capabilities

* Source: ACMA

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Opportunities in Telecommunication

• Until 1995, during the more than forty years of government monopoly, there

were 9.4 m telephone connections

• There are 46.2 m fixed line subscribers and 52.2 m mobile phones

• The mobile phone market is growing at 2 m per month

• Estimated rise in Cellular by 100 m subscribers by 2007

• Basic telephone connections 175 m by 2010

• 100 % FDI in telecom equipment manufacturing

• Almost 2 m wireless subscribers getting added every month

• Unlike many developed countries, the GSM and CDMA technologies co - exist

• The outsourcing boom would not have occurred without the private telecom sector

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• The Indian media and entertainment industry, with the prominent segments being films, television, and music has grown in recent times

• The entertainment industry is currently generating revenue of US $ 7.2b

• The average growth budget for films has been increasing by 15 % p.a

• Another high growth segment of the entertainment industry is television broadcasting

• The present size of this segment is estimated to be US $ 1b

• The penetration of cable TV, in the rural segment is expected to grow by 12 % pa

• The music industry in India is expected grow at 20 % pa

• FM radio broadcasting has been privatized

Opportunities in Media & Entertainment

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FOR PHILIPPINES

BUSINESS OPPORTUNITIES

73

Year Export Import Total Trade Balance of Trade

1997- 98 239.01 27.77 266.78 211.24

1998 - 99 118.71 37.25 155.96 81.46

1999 - 00 143.68 56.31 199.99 87.37

2000 - 01 201.63 62.97 264.60 138.66

2001- 02 248.63 95.17 343.80 153.46

2002 - 03 473.23 123.98 597.21 349.25

2003 - 04 321.54 122.11 443.65 199.43

2004 - 05 393.90 181.87 575.77 212.03

Bilateral Trade

Value in US $ m

Source: Ministry of Commerce, India

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• Meat & preparation

• Drugs, Pharmaceuticals & fine Chemicals • Rubber manufactured products except footwear

• Plastic & Linoleum Products

• Primary & semi finished iron steel

Major Indian Exports To Philippines

Major Indian Imports From Philippines

• Metal ores & scrap

• News print

• Non - ferrous metals

• Gold

• Electronic goods

75

• IT & ITES

• Sharing information & technology for clean environment

• Gems and Jewelry

• Natural and Herbal Products

• Renewable Energy Sources

• Dairy

• Drugs and Pharmaceuticals

• Construction and Material and services

• Mining

• Oil and Gas

Potential for Business

76

The major sources of air pollutants

Motor vehicles

Industrial plants

Burning and construction work

The continuing increase in motor vehicles and population, the inadequate mass transit system, worsening traffic conditions, the establishment of pollutive industries, the widespread practice of open burning, and inadequate enforcement, if not adequately addressed, are bound to contribute to increasing air pollution in the surrounding areas The most effective approach in improving air quality is to stop the generation of pollutants at their source

This involves replacing a highly pollutive technology or energy source with a non-polluting or a less polluting one, including shifting to cleaner fuels

Deteriorating Air Quality

77

The world’s best practices in preventing air pollution and maintaining ambient air

quality reflect the creative use of technology and fuel options, which range from

• Use of cleaner vehicle fuels - CNG, Gasohol, Biodiesel, Fuel cell, Electricity

• Solar energy

• Wind energy

• Mass transportation systems – Underground, Monorail

• Usage of Appropriate technologies for ‘Green Buildings’

• Innovative urban planning incorporating walkways and bike lanes

Air Quality Management

78

* American Society for Heating, Refrigeration, Air Conditioning Engineers 62-1999 (revised)** American Society for Heating , Refrigeration, Air Conditioning Engineers 62-2001 (revised)# Below Detectable Levelϒ Any presence of Benzene is carcinogenic ^ Data validated to August 2005

ASHRAE*

StandardASHRAE**

Standard(maximum) (maximum)

CO 21000 PPM 455 350 339 300-500 ppm 331 341 345

Carbon monoxide

0.055 ug / m3 BDL# BDL# BDL# 10 mg / m3 BDL# BDL# BDL#

O zone 100 ug / m3 BDL# BDL# BDL# 0.005 mg / m3 BDL# N.A. N.A.

Formaldehyde 0.4 mg / m3 0.278 BDL# BDL# 0.012 mg / m3 BDL# N.A. N.A.

Lead 1.5 mg / m3 2 0.003 BDL# 1.5 ug / m3 BDL# N.A. N.A.

Nitrogen dioxide

100 ug / m3 67 38 34 100 ug / m3 32 33 35

Sulphur dioxide

365 ug / m3 69 40 32 365 ug / m3 31 32 32

SPM 260 ug / m3 1047 593 390 260 ug / m3 389 399 404

RSP 75 ug / m3 672 502 355 - 349 356 354

Benzene 10 ug / m3 45 18.5 10 Carcinogenicϒ 10 N.A. N.A.

Parameter 1996 1999 2001 2002 2004 2005^

Improvement Of Ambient Air - Nehru Place Greens, New Delhi 1996 - 2005

79

American Society for Heating, Refrigeration, Air Conditioning Engineers 62-1999 (revised) American Society for Heating , Refrigeration, Air Conditioning Engineers 62-2001 (revised) Below Detectable Levelϒ any presence of Benzene is carcinogenic

ASHRAE*

StandardASHRAE**

Standard(maximum) (maximum)

CO 21000 PPM

818 369 358700 ppmexcess ofambient

351 357 362

Carbon monoxide

0.055 ug / m3

BDL# BDL# BDL#10 mg / m3 BDL# 0.072 0.070

O zone 100 ug / m3

BDL# BDL# BDL#100 ug / m3 BDL# N.A. N.A.

Formaldehyde 0.4 mg / m3

0.156 0.013 BDL#0.5 mg / m3 BDL# N.A. N.A.

Lead 1.5 mg / m3 0.087 BDL# BDL# 1.5 ug / m3 BDL# N.A. N.A.

Nitrogen dioxide

100 ug / m3

30 22 22100 ug / m3 20 21 22

Sulphur dioxide

365 ug / m3

20 28 23365 ug / m3 23 19 19

SPM 260 ug / m3 606 118 94 260 ug / m3 92 90 82

RSP 75 ug / m3 218 55 47 - 46 39 37

Benzene 10 ug / m3

18.5 BDL# BDL#Carcinogenicϒ BDL# N.A. N.A.

2002 2004 2005^Parameter 1996 1999 2001

IAQ Results After IAQ Program At PBCTM - STIP 1996 - 2005

80

Areca Palm(Living Room Plant)

Sansevieria Trifasciata(Bed Room Plant)

Using toxin removing plants to clean the air

Biotechnology originally developed by NASA, USA and research done by

PBC - STIP on plants suitable for the Delhi climate

Air Quality Management – Grow Fresh Air

81

SME: ADDING VALUE

82

SME’s IN EU

Category Max.# Employees Max. Turnover Euro m

Medium 249 50

Small 49 10

Smallest 9 2

Wef. January 2005

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The definition of small-scale industries (SSI), is given below

Norms for Definition of SSI in India Maximum Limit of Investment in plant and machinery in INR m

Year SSI Ancillary

1985 3.5 4.5

1991 6 7.5

1997 30 30

1999 10 10

Source: Ministry of SSI, Govt. of India

SME’s IN INDIA

INR 10 m = US $ 227,000

84

Country Share of total establishments

Share of output

Share of employment

Share of exports

India 95% 40% 45% 35%

Japan 99% 52% 72% 13%

Taiwan 97% 81% 79% 48%

Singapore 97% 32% 58% 16%

U.S.A 98% n.a. 53% n.a.

Korea 90% 33% 51% 40%

Malaysia 92% 13% 17% 15%

Indonesia 99% 36% 45% 11%

Contribution Of SME’s Across Diverse Economies

85

To say it in Sam Pitroda’s words

“ Technology is for problem solving at personal, community and national levels It is about doing things differently It is about change in mindset, processes, products and preferences Technology is about opportunities and experiences”

• This is where the SSI is creating a successful niche for itself.

• Technology is empowering people at all levels cutting across sectors

• This has helped India graduate from being a promising economy to one of the fastest growing economies

Technology & SSI

86

• Textiles, Knitwear, Garments, Woolen and Hosiery• Leather and Leather products including footwear and

garments• Food Processing• Drugs, Pharmaceuticals and Biotech• Auto parts and components• Chemicals, Dyes and intermediaries• Hand Tools• Electronic Industry particularly relating to design and

measuring

SSI Dominant Sectors In India

•Glass and Ceramic items including tiles•Information Technology and ITES•Rubber and Plastic Products, Parts & Components•Bicycle and Bicycle parts•Foundries – Ferrous and Cast Iron •Lubricant Manufacturing•Gems and Jewelry•Paper and Paper products, Corrugated Boxes

87

• 350 SSI and 2,000 artisans clusters

• Panipat (Haryana) accounts for 75 % of the total blankets produced in India

• Tirupur (Tamilnadu) contributes 80 % of the country’s hosiery exports

• Agra (Uttar Pradesh) produces 150,000 shoes per day valued at US $ 1.3 m

• Ludhiana (Punjab) produces 95 % of the country’s woolen knitwear, 85 per cent of country’s sewing machines and 60 per cent of bicycle and bicycle parts

SSI Enablers - CLUSTERS

88

Dedicated Ministry and allied organisations offer

• Policy Support - Reservation, Priority Sector Lending, SEZ, Labor

• Institutional support - Through testing centres, tool rooms,

entrepreneurship development institutes, training, warehousing

• Partnership support - Sub-contracting, ancillarisation & vendor

development

• Marketing Support - Through Trading Houses, Subsidizing the

participation at international Trade Fairs, sales promotion and

business travel

SUPPORT FOR SSI

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• Credit Guarantee Fund Trust Scheme

• Collateral free loans of lenders to SSIs up to US $ 58,000

• Payment to SSI suppliers should be made within 120 days

• Reimbursement scheme in respect of ISO 9000 Quality Certification

• Instituting marketing development assistance scheme

Additional Government Initiatives

90

• Reservation of items for exclusive purchase from SSI

• 358 items reserved for preferential purchase from SSI

• Price preference up to 15 % on Government purchase

• Development of Industrial Estates In selected towns

• Technology : Adoption of new technology

• Technology up gradation of existing units

POLICY FRAMEWORK: Important Features

91

Networking of SSI for Globalization

• The promotion of inter-firm linkages

• Use of Internet: Web Portals like eBay have opened a new avenue, which the SSI are using as a tool, for marketing

• The increasing presence of Multinational corporations have opened new opportunities for subcontracting

92

SSI Sector Facilitating Institutions

SSI Sector

Technical Training SIDO, SISIs, EDIs, TCOs , PPDCs, DICss, CFTIs

Industrial Infrastructure SIDCs,

SSIDCs, HUDCO

Entrepreneurship Development SIDO, EDI, NIESBUD, SISIs

Specialized Institutions

Technology SupportNSIC, SIDO,

SISIs,RTCs,PPDCs, TBSE

Funding Institutions Banks, SIDBI, SFCs, SIDCs, NSIC

Marketing SIDO, NSIC,SSIDCs, EPCs

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An Engine of Growth

95% of Industrial Units

7% of GDP

35% of NationalExports

> 8,000 Products

Over 11 m Units

Over 27 m Employed

SSI

Contribution Of SSI In India

94

Year Total SSI Units (million)

Registered SSI Units (million)

Unregistered SSI Units(million)

Employment (million)

Employment per Unit

ExportsUS $ (billion)

1998- 99 9.3 1.2 8.1 22 2.4 11

2002- 03 11 1.5 9.5 26 2.4 20

2004- 05 (P)

12 2 10 28 2.3 24

Source: Ministry of SSI

Growing Competitiveness of SSI

The Average Export per unit is US $ 2,000

95

Growing Productivity & Quality Controls

Year Average CapitalUS $

Employment Per Unit ProductionUS $

1993-94 2,100 6.3 17,000

1999-00 3,700 3.6 71,000

Source: Second Census & Sample Survey of 1999-2000 by DC(SSI)

50 % of the total number of ISO 9001 / 14001 certified units are from the SSI Sector

96

WINNING ATTITUDE

97

• Differentiating themselves through the products and services they provide

• Standing out by creating special interfaces with their customers and building unique ways by which they can be held accountable by them

• Building a very strong quality story

• Benchmarking innovations against well set, globally accepted standards and aim for targets, creating an environment and culture of innovation within the organization

• Developing systems to nurture innovation making full use of the availability of information and by rightful dissemination of knowledge to foster goal driven innovation

• Building efficient processes to cut time - to- market

• Providing opportunities to their people to do roles that go beyond their existing work profiles

• Providing continuing education

It Is All About Attitude - Management

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• Need to hone their skills • More adaptive thinking

• Greater entrepreneurial drive to find new horizons of growth with a competitive spirit

• Foresight with a fierce unrelenting passion to execute and act today to improve the future

• Bring change more aggressively and lead the organization to implement sustainable changes

• Energizing their team and inspiring them for excellent team performance

• Delegating authority to allow people to perform

It Is All About Attitude – Business Person

99

• Ability to reach out to a wide international network for ideas and problem solving

• Understanding on how things get decided and done

• Using customized strategies to influence specific stakeholders

• Executive maturity and emotional wisdom to respond to others and embody the aspirations of ones organization

• Inner strength to do the right thing at the right time

• Courageous dedication to super ordinate goals, doing what is right and what will make India great

• To keep learning and be abreast of new technology

It Is All About Attitude – Business Person

100

Acknow ledgement

PHDCCI – PHD Chamber of Commerce and Industry

CII – Confederation of Indian Industry

FICCI – Federation of Indian Chamber of Commerce and Industry

Assocham – Associated Chamber of Commerce and Industry of India

IGCC – Indo German Chamber of Commerce

IACC – Indo American Chamber of Commerce

ICRIER – Indian Council for Research in International Economic Relations

NASSCOM – National Association of Software and Service Companies

USCAN – Uniting Services Consulting Advocacy and Networking

Paharpur Business Centre – The International Division

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THANK YOU