Transcript Slide 1

Macro Business Environment in India &
Opportunities for Investment in Creative Industry
Ajay Shankar
Berlin, September 22, 2007
Largest Democracy
Stable Democratic System
 Sub-continental Nation – Religious, Ethnic & Linguistic diversity
 Federal structure:
– 28 states
– 18 languages
 Multi-party system:
– Changes in government through elections both at Centre and state levels
– Coalition governments at Centre for over 10 years
– Strong independent judicial system
– Free vibrant, strong media (mushrooming growth in print as well as electronic media)
3
Stable Democratic System
 Democracy
– Gradual incremental policy changes
– Broad consensus across parties and civil society.
Prior to 1990s
1990s
2000-2005
 Closed economy
 Gradual liberalization
 Centralized planning
 Industrial licensing dismantled
 Completion of integration with global
economy
 Government permission necessary for
Setting up industrial plant
 Trade liberalization – tariff/tax
reduction
 Financial/capital markets reforms as
consolidation
 Import of capital goods / technology
 Opening up of FDI
 Tariff down to 10%.
 Expansion of capacity
 Government regulation to facilitation
 To reach ASEAN levels by 2010
 Key sectors of economy reserved for
public sector only
 Bilateral Comprehensive Economic
Partnership Agreements with EU,
Japan, ASEAN etc in pipeline
4
India - a strong and vibrant economy
Macroeconomic stability
Forex Reserves (USD bn)
250
220
 Steady increase in forex reserves.
192
200
141
150
100
75
50
5.8
42
32
22
20
6.4
0
FY08 (till Aug)
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
FY91
Trends in Inflation- WPI (%YoY)
 Moderate inflation over last few years
16
14
13.7
12
10
8
6
5.4
4.4
4
2
0
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
FY91
6
Economy – high growth rates
Robust GDP growth
Real GDP growth (%)
9.4
10
9
14
8
12
11
10
10.9
7
6
5.3
5
8
4
6
7
3
5.15
4
2
1
2
0
0
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
FY91
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
FY91
Industry growth (%)
Services growth (%)
Source: Reserve Bank of India, CMIE
7
Economy – high growth rates leading to increasing FDI
Increasing FDI trend
Svgs & Cap Formation % of GDP ( Current prices)
40
18000
15726
33.8
32.4
35
26.3
30 23.1
14000
12000
25
10000
20
8000
15
6000
10
4000
Goss domestic savings
Source: RBI, DIPP
FY06
FY05
FY04
FY03
FY02
FY01
FY00
FY99
FY98
FY97
FY96
FY95
FY94
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
0
FY93
5
97
FY91
0
FY92
2000
FY91
USD million
16000
Gross domestic capital formation
Source: Reserve Bank of India
•Trade liberalization: Import tariff to reach ASEAN level by 2010
• CEPA being negotiated with EU, Japan etc.
8
Macroeconomic stability - Stable currency
Rupee exchange rate
( INR / USD)
60
47.68
50
45.94
45.29
42.04
40
35.47
31.39
30
20
17.94
10
0
FY 07
FY 06
FY 05
FY 04
FY 03
FY 02
FY 01
FY 00
FY 99
FY 98
FY97
FY96
FY95
FY94
FY93
FY92
FY91
INR/ USD
Source: RBI
High Degree of autonomy of India’s Central Bank


Credible independent Central Bank
Sound professional management
9
Going Forward
Going forward
Goldman Sachs has revised its timelines for India’s GDP exceeding the G6’s GDP
India’s GDP (in US$ terms) will surpass that of the US before 2050, to make it the second largest economy
Italy France/UK Germany
New India
Projection
Japan
US
Cars indicate when Indian US$GDP exceeds that of the Country
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
Source: Goldman Sachs, Global Economic Paper No 152, 22 January 2007
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Investment Opportunities
Investor-friendly, liberal open-market economy
Large skill and intellectual capital base
 Over 2.5 million graduates added every year
–
Most of them English-speaking
–
300,000 Engineers
–
150,000 IT professionals
 Strong emphasis on human resource development
–
Skills missions being launched
–
Up gradation of workers training
–
Increased public spending in Education and health
13
Firms in India – globally competitive
91 percent of MNC’s make profits in India compared to 45- 50 percent in China
69% of survey respondents report higher profitability averages in India
than they do globally
India’s ROE quite high relatively
4.0
3.5
India
Indonesia
3.0
China
P/B (2007) (x)

Singapore
2.5
Malaysia
Taiwan
Philippines
2.0
Thailand
Hong Kong
1.5
Korea
1.0
12
14
16
18
20
22
24
26
28
RoE (2007) (%)
Source: Prowess, CLSA Asia-Pacific Markets
P/B = Price to Book value
14
Indian firms seek global reach
Acquisition made Tata Steel world’s
fifth largest steel producer globally
Tata Steel bought
Corus Plc
USD 12.1
billion
Hindalco acquired
Novelis Inc.
USD 6 billion
Acquisition made Hindalco the world's
largest aluminum rolling company
Suzlon Energy Ltd.
acquired REpower
USD 1.6
billion
Acquisition made Suzlon world's third
largest wind power company
Dr. Reddy’s
acquired Betapharm
USD 0.5
billion
Acquired German’s third largest
generic companies
United spirits
acquired W&M
USD 0.5
billion
Acquisition made United Spirits world's
second largest spirit company
15
India- Attractive location for R&D
MNCs finding location of R&D in India : Increases global competitiveness

Large R&D facility of major MNCs
–
Microsoft
–
IBM
–
ADOBE
–
SAP
–
Sony Ericsson
–
Dell
–
The DaimlerChrysler
–
Boeing
–
Texas Instruments
16
Creative Industries in India
Strength of Creative Industry
 India’s strengths in the Creative Sector:
 Its diversity in terms of content.
 Its spread in terms of the market.
 Rich tradition provides a store house of content.
 Advantage of a multi cultural, multi lingual, multi religious
pluralistic heritage that enables it to understand varied markets
with ease.
 Indian writers in English gaining international acclaim- Nobel
Prize, Booker Prize
 Films, literature, music that would appeal to a niche audience in
Western as well as South East Asian nations are being produced.
FDI Policy in Creative Industry
Liberal policy with regards to FDI ushering the growth of Creative
Industries.
• FDI up to 100% under automatic route in the Advertising industry.
• 100% FDI under automatic route in production and distribution of
Films.
• FDI up to 26% is allowed through FIPB route in print media
(newspapers & periodicals dealing with news/ current affairs).
• 100% FDI is allowed through FIPB route in publishing of scientific
magazines/ specialty journals/ periodicals.
FDI Policy in Creative Industry
…contd.
Liberal policy with regards to FDI ushering the growth of Creative
Industries.
• FDI + FII up to 20% is allowed through FIPB route in broadcasting
FM radio.
• FDI + FII up to 49% is allowed through FIPB route in cable network.
• FD + FII up to 49% is allowed through FIPB route in DTH.
• 100% FDI is allowed in uplinking of non-news and current affair TV
channel.
• 26% FDI/FII is allowed in uplinking of news and current affair TV
channel.
Initiatives in Creative Industry
 Signing co-production treaties with other countries.
 Tax incentives to investors investing in multiplexes.
 Broadband has been introduced to create more demand
for content.
Fight Against Piracy
 Strong IPR Regime
 TRIPS compliant IPR law
 Public consensus on adherence to IP
 Anti – piracy campaign over TV, radio and hoardings.
 Aggressive measures against all forms of piracy will continue to
help limit losses in distribution
 1589 raids conducted in 2005
 Promotion, public awareness and enforcement of copyright law.
 Supporting International copyright conventions such as IFPI
(International Federation of the Phonographic Industry).
 Promoting digital technologies to assist rights owners.
Indian Film Industry
 No. of Film Produced 1041(2005)
 Hollywood produces about 500 films per year
 Industry expected to have a growth rate of more than 20% over
next five years
 Global spread in terms of the market
 A Karan Johar Film can find an audience in the affluent Indian
Diaspora in the UK and the US.
 Tamil Films find a niche audience in Malaysia and Singapore
 Bengali films, literature and music have an eager audience in
Bangladesh.
 India also has a growing young population that will spend freely
on entertainment.
Indian Television Industry
 Number of Channels: Estimated 300 (2005)
 No. of cable & satellite connected homes: 55 million (2005)
 Projected to grow 10.7 billion by 2010
 The television industry is projected to grow @ 24% to reach US$
10.7 billion in 2010
 Huge potential in Regional Programming, Dubbed Foreign
Content, Niche Channels, Digitalization of Cable TV
Music Industry
 Indian music industry: Estimated US$175 million (2005)
 Projected to grow 185 million by 2010
 338 licenses given for FM radio channels in 91 big and small towns
to private players: major growth opportunity to music industry
 Specialized music stores- such as Planet-M and Music World by
music production companies coming up in towns and cities
 Potential of growth due to deluge of FM radio channels, rising
popularity of remixes, organized retailing in music, overseas
potential.
Print Media
 Reach of Print Media: 200 million
 Reach of Newspapers: 176 million
 Reach of magazines: 69 million
 Size of the Indian print media industry : US$ 2.7 billion (2005)
 Projected to grow 4.8 billion by 2010
 Growth potential due to rising literacy market, expansion from
regional to pan India level by regional players
Thank You
www.dipp.gov.in