9182020 1 Invest India Policies Opportunities Rajeeva Ratna

9/18/2020 1

Invest India Policies & Opportunities Rajeeva Ratna Shah Secretary Department of Industrial Policy and Promotion Ministry of Commerce & Industry Government of India November 3, 2003, Paris 9/18/2020 2

India – Land of Opportunities Fourth largest Economy (PPP) A safe place to do business Largest reservoir of skilled/semiskilled manpower Long-term sustainable Competitive advantage - High growth rate economy Largest democracy – political stability & consensus on reforms Second Largest Emerging Market Liberal & transparent investment policies Highest returns on investment; India 19. 33%, China 14. 25%, Thailand 13. 3% 3

Strong Macro-Economic Performance n Sustained Economic growth; n n n n n 7% Current Year 8% Next quinqennium / decade Over 6% - Next 50 Years – Goldman Sachs Exports growth - over 19 % in 2002 -03; Non Oil imports growing at 31%-Economic vibrancy Positive balance of trade with USA and China FII Investment – over US$ 5 billion so far this year Developed Banking system moving rapidly towards ICT integrated core banking/net banking Mature Capital Market – NSE third largest, BSE fifth largest in terms of number of trades 9/18/2020 4

Sustained Economic Growth 9/18/2020 (Base year: 1993 -94 ) 5

9/18/2020 Exchange Rate (Rs/US$) Foreign Exchange Reserves (US$ billion) Growing Foreign Exchange Reserves 6

Select Indicators Brazil 7. 5 USA 7. 4 Mexico 6. 6 Czrch 6. 3 1=Low 10= High China 4. 2 Availability of Qualified Engineers 9/18/2020 1=Low 10= High India 8. 4 Availability of Skilled Labour 7

Economic Liberalization n Fiscal Policy Reforms : n n n Industrial Policy Reforms : n n n n Interest rates brought down – Bank rate/Prime lending rate lowered Banking Sector reforms – prudential norms stiffened Securatization Act for better security for creditors Competition law enacted. Competition Commission constituted Independent regulators in place for Insurance sector (IRA) and Capital Markets (SEBI) Exchange Controls relaxed; n 9/18/2020 Most items on Open General License, Quantitative Restrictions lifted; Monetary Policy and Financial Sector Reforms : n n Capacity licensing dispensed with Compulsory licensing only in 6 sectors: restrictions on grounds of national security, public health, public safety FDI policy being progressively liberalized Trade policy Reforms : n n Stable tax regime with just 3 rates for both Excise as well as Customs duties Full National treatment foreign Cos. incorporated in India Profits and dividends can be freely repatriated; 8

Infrastructure Development n US$ 12 billion Highways Development Programme; n n n 9/18/2020 Over 13, 000 Kms of Highways being developed. US$ 22 billion ‘Sagar Mala’ programme to develop ports and shipping sector Modernization of Airports at New Delhi & Mumbai. World ‘s Fastest growing telecom market with a unified licensing regime and world class international and domestic connectivity; The Electricity Act, 2003 enables captive generation and trading in electricity; 9

Brand India n R&D base for 100 of Fortune 500 companies; n n Large pool of World class scientific and technical manpower; n n n GE’s largest R&D Center outside US; Indian Institutes of Technology; Indian Institutes of Management. S&T policy aims at R&D investments of 2% of GDP by 2007 Among the only three Asian countries with super computing competence Strong base for manufacturing; n n n n 9/18/2020 n Bharat Forge world’s largest forging facility Most major MNC’s like Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever, Cliariant, Cummins, Delphi sourcing high quality components and hardware from India Essel Propack worlds largest manufacturer of laminated tubes(30% of global market/70% Indian, Chinese market). Hyundai Motors India – Global base for manufacturing small cars; Indica(100% indigenous car) being exported to Europe as Rover City. India exporting steel worth more than US$1 billion to China Hero Honda world’s largest manufacturer of motorbikes Precision Automation & Robotics India (PARI) - 20 Fortune 500 clients 10

Competitive Entrepreneurship n n n Prevalence of foreign technology licensing – Rank 1 Availability of scientist and engineers – Rank 2 Quality of management schools – Rank 9 Firm level innovation – Rank 12 Firm level technology absorption – Rank 16 Company spending on R&D Rank 32 (Source Global Competitiveness Report, UNCTAD 2003) n 9/18/2020 India amongst the leading entrepreneurial hotbeds globally (Red Herring Clubs India with Israel) 11

The Emerging Market: India Traditional & Emerging Focus Traditional MNC Business Model Some MNCs? Local Firms Future Opportunity? 5 -10 million, Rich PPP>$10, 000, 50 -60 m PPP $ 3 -10, 000, 150 m PPP $ 2 -3, 000, 150 m PPP>$ 2000, 500 m 9/18/2020 © C. K. Prahalad 12

India a Preferred VC Destination in Asia-2001 Country Amt. Invested ($min) No. of Companies Australia $ 1, 228. 8 213 South Korea $ 1, 228. 1 169 India $ 907. 6 101 China $ 628. 0 23 Hong Kong $ 247. 5 33 Taiwan $ 235. 7 18 Singapore $ 186. 2 38 Malaysia $ 65. 1 11 Thailand $ 35. 7 10 New Zealand $ 30. 9 17 Indonesia $ 20. 0 3 Philippines $ 4. 8 3 $ 0. 0 1 9/18/2020 Sri Lanka Source : AVCJ 13

Investing in India – Entry Routes Investing in India Automatic Route General rule No prior permission required Inform Reserve Bank within 30 days of inflow/issue of share 9/18/2020 Prior Permission By exception Prior Government Approval needed. Decision generally Within 4 -6 weeks 14

Manufacturing Sectors with 100% FDI under ‘Automatic Route’ n n n 9/18/2020 Cars and motor vehicles Refrigerator and fire fighting equipments Food processing Electronic Hardware Iron and steel Private Oil Refineries Agriculture tools and implements Fertilizers and pesticides Pollution control equipments Tyres and tubes Packaging products n n n Construction Machinery Domestic air conditioners Electric motors, industrial electric furnaces Mining and Querying Machinery Steam engines and turbines Non-metallic mineral products Rice, oil mill machinery Chemical machinery Drugs and pharmaceuticals except those requiring industrial licensing Medical equipments Office computing and accounting machinery 15

Infrastructure Sectors with 100% FDI Under ‘Automatic Route’ n n n n n 9/18/2020 Electricity Generation (except Atomic energy) Electricity Transmission Electricity Distribution Mass Rapid Transport System Roads and Highways Toll Roads Vehicular Bridges Ports and Harbors Hotel and tourism 16

Services Sector with 100% FDI under Automatic Route n n n 9/18/2020 Advertising and films Computer related services Research and development services Construction and related engineering services Pollution control and Management services Urban Planning and Landscape services Architectural services Health related and social services Travel related services Road transport services Maritime transport services Internal waterways transport services 17

Sectors with Restrictions on FDI n Sectors with limits on FDI Caps n n n n Sectors where FDI is prohibited n n n 9/18/2020 Private Banking ( 49%) Insurance (26%) Domestic Airlines (40%) Basic and mobile services (49%) Print Media (26%) Defence production (26%) Gambling, betting, lottery Retail Trade Agriculture Plantation, except tea plantation 18

Country wise FDI inflows (Since July 1991) France ranks 7 th 9/18/2020 19

Investment from France- Sectors (Since July 1991) 9/18/2020 20

Some of the French Companies in India n n n n n 9/18/2020 Lafarge Ciments Francis Saint Gobain Compagnie International L’Oreal France Peugeot Alcatel Spacecom Vetrotex International GAZ de France Schinder Electric n n n n n Air Liquide International Groupe Danone GDF International Radio Telephone Total SA France Telecom Vantico International Essilor International ELF Gas Alstom 21

Intellectual Property Rights-Initiatives • Modernization/revamping of legislations on Intellectual Property IP; § IPR Laws are TRIPS compliant; • Intellectual Property Appellate Tribunal functional from 15 th September 2003; n Major initiative underway at modernizing IP administration; n n n 9/18/2020 Computerization of IP administration; Digital database library of patent, trademark & design records; For more information visit www. ipindia. nic. in. 22

Investment Facilitation § Foreign Investment Implementation Authority (FIIA) - to sort out any operational difficulty and facilitate implementation; § Last meeting with French investors on 6. 10. 2003 § ‘FDI In India- Policies and Procedures’ § Also available in Spanish, German, French & Italian. n An Empowered Sub-Committee of the National Development Council set up on ‘Creating an investor-friendly climate; n n To focus on removing regulatory barriers to investments. Web site www. dipp. nic. in § On-line chat, bulletin board and e-mail; 9/18/2020 23

India: FDI Outlook n n n 9/18/2020 Rated as the best BPO destination; AT KEARNEY Best technology licensing regime - UNCTAD’s Global Competitiveness Report, 2003; Rated among the most favourite investment destinations (UNCTAD, JETRO, JBIC, Deutsche Bank, EIU, etc. ) Major destination foreign venture capital funds (Far Eastern Economic Review) Sixth most attractive investment destination – ATKEARNEY Business Confidence Index, 2003 Also among the top 10 Tourist Destinations. 24

Opportunities and Potential Areas of Cooperation Roads Power Generation Transmission & $ 143 bn Coal $ 26 bn Cross-Country Pipelines $ 10 bn Ports US $ 20 Billion 9/18/2020 $ 40 bn Investment Requirement in Energy & infrastructure up to 2012 LNG Terminals $ 10 bn Distribution $ 116 bn Refineries $ 22 bn Oil & Gas $ 100 bn Railways US $ 15 Billion 25

Investment Opportunities n Roads: n n n Urban Infrastructure: n n n 9/18/2020 Capacity enhancement of highways; 7000 kms of National Highways being offered during the current year; Many more opportunities in the States; Opportunities for equipment manufacturers; technical support; Development of townships for the rapidly growing, increasingly affluent urban middle class; City level infrastructure; roads, bridges, IT Parks, sanitation and water supply etc. Consultancy in urban planning; 26

Investment Opportunities n Ports: n n Power: n n 9/18/2020 Government of India’s initiative of developing ports – ‘Sagar Mala’ with an investment of US$ 22 billion; n Development of Ports; n Shipping; Addition of 100, 000 MW required over the next 10 years; n Installed capacity 106, 000 MW; Hydro-electric initiative to develop 50, 000 MW; n Detailed project reports being prepared to facilitate private investment. 27

Investment Opportunities n Telecommunications n Cellular phones increasing @ 1. 5 million every month; n n n Telephone connections to rise to 75 million by 2005 and 175 million by 2010; Investment Opportunities: n n Setting up manufacturing base. Value added services; Food Processing n n 9/18/2020 To increase by 20 million this year; by 100 million in the next 34 years; Large production of variety of food products; Investment of US$ 28 billion required to raise food processing levels by 8 -10 %. Indian’s spend about 50% of household expenditure on food items. Demand for processed food rising with growing urbanisation and income levels. 28

Skilled knowledge workforce n India’s competitive edge is its manpower n n n n 9/18/2020 Over 380 universities (11200 colleges) 1500 research institutions Over 200, 000 engineering graduates Over 300, 000 post graduates from non-engineering colleges 2, 100, 000 other graduates Around 9, 000 Ph. Ds Knowledge workers in software and service industry increased from 6, 800 in 1985 -86 to 650, 000 in 2003 29

ICT opportunities n n India’s inherent strengths IT Industry US $ 14 billion; growing at 50% p. a. n Exports US $ 10 billion n 2008 exports target : US $ 60 billion , to be 35% of India’s total exports; Job creation: a million direct & 2 -3 Million indirect; High quality standards; n n 62 SEI/CMM level 5 companies, two third of world’s total. 250 Fortune 500 companies clients of Indian firms; • Opportunities : JV/FDI • • Multi purpose smart cards with PKI protection Health informatics and telemedicine network Setting up a deep submicron fab facility Collaborative ICT research in language technologies / next generation communication / Internet technologies • Joint Software development in super computing applications in fluid dynamics, structural mechanics, bioinformatics, nanoinformatics, etc 9/18/2020 30

India - The Backoffice hub n India has become the most preferred destination – Outsourcing trend increasing n n Customer needs are being met n n n 9/18/2020 GE, TI, Intel, CISCO, Microsoft, Dell, Sun Micro, Oracle, LG, Ford, American Express and other financial sector companies; Large pool of skilled English speaking workforce – skills and scalability, 24 x 7 support Productivity and quality enhancement Conducive policy environment and Government support Highly improved telecom infrastructure Call center career is aspirational unlike a low choice in the West 31

Cost savings by off shoring BPO services to India Key opportunity areas Impact* Overall cost saving Per cent n n Insurance 10. 0 -15. 0 n Retail financial services / Retail banking Pharmaceuticals n 8. 0 -12. 0** n n 5. 0 -6. 5 n Telecom 1. 5 -2. 5 n n Automotive Airlines 9/18/2020 1. 0 -2. 0 0. 8 -1. 8 n 40 -60% cost saving for processes offshored n n n Claims processing Servicing Call centre operations Loan processing (consumer, corporate, mortgage) Research and development Call centre operations Billing Engineering and design Accounts payable/ receivable Revenue accounting Call centre operations Frequent flyer programmes 32

Country Advantage Likely to be Comoditized Country advantage (45 -55% savings) 100 60 -65 10 -15 Original Cost base Factor Cost Savings Additional Telecom & management costs Task migration 9/18/2020 Vendor advantage (30 -40% savings) 45 -55 Off-shore Location cost 8 -13 5 -7 Consoli. Task ation, Reengi Standar- neering Dization & superior skills Task level improvement Does not Include gains from Over-delivery and continuous improvement 3 -5 Economies of scale 15 Process Reengine -ering 30 -35 New cost base Task aggregation And process level improvement 33

Joint Venturing opportunities in Biotech India’s inherent strengths n n n Rich Biodiversity Large reservoirs of valuable diagnostic and clinical data Vibrant and inventive pharmaceutical industry World class network of educational and research institutions Known strengths in mathematics, logic and computational skills Super Computing and Software strengths enable extensive use of bio-informatics in new drug discovery Opportunities : n 9/18/2020 Joint Ventures in Biotech based new drugs / pharmaceuticals 34

Global Business Leaders - Bullish On India’s Potential “India is a developed country as far as intellectual capital is concerned” JACK WELCH, GE “India can be a major part of Dell’s operations and we are looking to capitalize on India’s human capital” MICHAEL DELL, DELL 9/18/2020 “We are expanding our presence in India to take advantage of the ample R&D talent available” JOHN CHAMBERS, CISCO “India is handling the most sophisticated projects in the world. . I am impressed with the quality of work” BILL GATES, MICROSOFT 35

Thank You Visit us at www. dipp. nic. in E-mail at rrshah@ub. nic. in 9/18/2020 36

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