Investing in India Macro Economic Outlook

India Investment Strategy

Macro Economic Outlook

Rising GDP

India is the 4th Largest economy in the world on PPP Basis – IMF and World Bank 2007.

GDP Growth- 8.3 % in 2006-07

GDP Growth- 9.5% in 2007 first quarter.

Projected GDP growth- for 2007-08- 9.2%.

Projected GDP growth for up-to 2011 above 8.7%.

One of the fasted growing economy.

India World Ranking

India Transformed

World’s second fastest growing economy.

4th largest GDP (PPP basis)–growing at 8.1% (05-06)

Forex Reserves of US $ 165 billion

FDI inflows US$ 7.5 billion (05-06), up 42% y-o-y.

India ranked 43 in Global Competitiveness Index -ahead of China (54), Brazil (64) & Russia (62).

Indian companies looking for acquisitions abroad GDP of Major

India’s Trade Transformation

U S

India emerging as vital US ally.

Indo-US Bilateral Trade US $25 billion (up 20% y-o-y).

China

Rapid increase in bilateral trade (521% growth from 2000 to 2005)

Current Bilateral Trade US $ 17.5 billion (up 37% y-o-y)

Indo-China trade expected to touch US $ 25 billion by 2010.

Pakistan & ASEAN

India & Pakistan declare renewed peace dialogue process.

Indo-Pak Bilateral Trade nearly US$ 1billion (expected to be US$ 10 billion by 2010)

FTA with Thailand already in existence. Bilateral Trade crossed US $2bn.

Indo –ASEAN negotiating bilateral FTA.

Australia

Bilateral Trade at nearly AUD$ 10 billion (up 25% y-o-y).

India is Australia’s 6th largest trading partner.

Services

Services account for more than 50% of India’s GDP

Growing sectors : entertainment; CG2010

Infrastructure Transformation

Total investment required in Infrastructure US$ 320 billion (2007-12).

Hot sectors are Roads, Ports, Aviation, Railways, Power & Telecommunication.

Public-Private Partnership (PPP) sought for mega projects.-India to emerge as 4thlargest consumer of energy by 2010 (currently 6th).

Electricity generation is 6th highest in the world (4% of world total).

Building & Construction Transformation

Construction is 2ndlargest economic activity after agriculture (20% of GDP).

Construction industry to grow to US$ 180 billion by 2020 (presently US$ 60 billion).

60 malls currently, will grow to 500 by 2010.

100% FDI permitted in residential & commercial projects.

New program on SEZ under consideration

Resources Transformation-major increase in minerals and energy required to power infrastructure changes: total installed capacity to be doubled by 2012 –100,000 MW to 200,000MW (4,000 MW added annually) steel production to rise to 80MTPA by 2014 Coal supply gap of 100MT by 2011/12 Gas to rise to 25% of total energy use by 2025 Hooda report on changes to mining regulations.

Stock Market

BSE and NSE indices raised almost 100% in last seven years.

It is projected to grow more than 40% year on year basis. It is believed to cross 20,000 mark from today’s 15000 by March 2008 and rise will continue because of high FDI and FII in India.

Indian stock market rise more than 30% year on year basis for last 4 year.

Performance of strong stock market will continue for next 5 years.

Rising Rupee

At present rupee is at its nine year high against the dollar.

Rupee has rise of more than 10% in last one year against the dollar.

It is projected that rupee will rise more than 5% year on year basis for next 3 years.

Presently Rupee is capital account convertible only (partially convertible, controlled by RBI). The government is planning to make Rupee fully convertible by 2011-12 in phased manner.

(The government want strong rupee against dollar to keep inflation under control. India’s main import is oil and gas which are denominated in dollar, rising oil prices has made Indian government to keep rupee strong. Oil prices will remain strong in short to medium term.)

Sector Watch

Sector which will have cascading effect on our primary sector of investment are Retail, Railway, Infrastructure, Real Estate.

Indian Retail Scenario

Total Private Consumption Expenditure in India – 375 Billion USD

Retail Sale – 205 Billion USD (55%)

Organized Retail – 6.2 Billion USD (3%)

Retailing – 35% of GDP

Outlet Estimates – Over 12 Million

Format – Only 4% larger than 500 sq.ft.

Second Largest Employer after Agriculture

A decade ago - not a single mall

A year ago - less than half a dozen

Today - 40-50 malls

2 years from now – 300-500 malls

Projected Growth of 60% year on year basis.

The size of the organised Retail industry estimated at ~ USD 7.8 bn in 2004 – 05 (only 3.5% of total retail industry).

Organised retailing is projected to grow at the rate of 25–30% p.a. to ~USD 25 bn by 2010.

Clothing, Textile & Fashion accessories segments have a dominant share in the organised retail industry accounting for 39% of the market.

Real Estate

Real estate sector growing at 30% per annum and one of the largest employer – a key contributor to GDP

Residential market is 80% of the total real estate market

Gap between supply and demand in residential market is 41 billion sq. ft.

Office space demand of 66 million sq.ft. for IT industry over next 5 years

Real Estate in India projected to be USD 50 billion in 2008

Organized retail space demand of 40 million sq.ft. over next 3-4 years

India is ranked the 5th largest retail destination across the globe

Consumerism – the order of the day, which is fueling the growth in both the commercial as well as the retail sector

Infrastructure- Road and Railway and Airport

Indian railway the biggest employer of India is growing fast at 25% year on year basis with participation from Private Sector.

Rail Freight Corridor Project a 50b USD with help of Japan government.

Private participation in railway wagon and rail on demand will spur demand.

Indian Aviation industry is growing at 30% with traffic at some airport at 293% growth.

Modernization of all international airport and construction of five new international airport.

Development of new 200 airport at regional centers and up gradation of facilities at existing airport will make this sector grow above 20% year on year basis for next five year.

National Highway Development Authority’s expansion program has resulted in growth of highway more than 20% per annum for last 7 year and this trend will continue for next five years.

Other Sector

Technology

◦ Bio-tech- Alternative medicine

◦ Security and innovation

◦ Un-convention energy

◦ Virtual technology- IT and learning system, medicine etc

Power

◦ Power accessories and engineering product

◦ Etc

Services

◦ KPO

◦ Management and Financial Services

Agriculture

◦ Food processing

◦ Agriculture Technology and Farm Implements

◦ Agriculture Services