Transcript India - TheMarker

Indian Economy
and
Business
Opportunities for
the Israeli Business
Community
OVERVIEW
• Warm and Multifaceted relations - Underpinning
for bilateral economic and trade cooperation.
• Modern democratic societies.
• Growing warmth and comfort in relations.
• People to people contacts.
– Israelis visit India - large numbers, extended
stays.(40,000 last year).
– Nearly 70,000 strong Indian origin Jewish
community - important foundation.
BILATERAL TRADE
• Positive atmosphere.
• Significant growth from less than $ 200
million in 1992 to over $ 2.7 billion in 2006.
• Target - $ 5 billion in a couple of years.
Bilateral Trade Figures for January-September 2007
(as received from Israel’s Ministry of Industry and Trade)
India's exports to Israel
% of total
Exports
$ thousand
India's imports from Israel
% of total
Imports
$ thousand
Live animals, animal products
0.10
1,268.95
0.00
0.00
Plants and vegetable products
1.51
19,267.23
0.08
918.06
Animals, vegetable fats
0.06
708.46
0.00
32.37
Prepared foodstuffs
0.94
11,920.63
0.06
719.65
Mineral products
0.34
4,299.30
0.01
155.27
12.77
162,619.46
15.59
178,678.70
Rubber, plastics
3.96
50,484.32
0.81
9,242.98
Hides, leather
0.30
3,786.61
0.00
3.20
Wood and wood products
0.10
1,223.86
0.00
0.00
Paper and paper products
0.06
714.82
0.11
1,278.85
Textile and textile articles
7.16
91,206.66
0.37
4,290.76
Footwear, headgear
0.35
4,449.13
0.00
8.13
Non-metallic mineral products
0.23
2,957.75
0.01
139.90
66.10
841,797.11
56.92
652,488.07
Base metals
2.75
35,008.62
1.92
22,040.04
Machinery
1.85
23,601.26
21.99
252,104.17
Transport equipment
0.27
3,383.73
0.02
242.67
Optical medical, other equip.
0.62
7,910.25
1.82
20,816.48
Miscellaneous
0.55
6,991.22
0.28
3,251.40
100.00
1,273,599.37
100.00
1,146,410.69
Chemical products
Precious stones and Metals
Total
Bilateral Exchanges
•
A new momentum with a series of decisions and agreements.
During the last two years :
• Prime Minister Mr. Ehud Olmert, as the then Vice Prime Minister and Minister of
Industry, Trade, and Labor of Israel, in December 2004.
• Mr. Kapil Sibal, Minister for Science and Technology and Ocean Development,
May 2005.
• Dr. Y.S. Rajasekhara Reddy, Chief Minister of Andhra Pradesh, July 2005.
• Mr. Kamal Nath, Commerce & Industry Minister of India, November 2005.
• Mr. Sharad Pawar, Minister of Agriculture, Food & Civil Supplies, Consumer
Affairs and Public Distribution, in November 2005 and most recently from May
10-12, 2006 along with 3 Chief Ministers and 7 State Agriculture / Irrigation
Ministers.
• Mr. Eliyahu Yishai, Minister of Industry, Trade & Labour of Israel, December 3-8,
2006.
• Mr. Shivraj Singh Chouhan, Chief Minister of Madhya Pradesh, January 29February 1, 2007.
• Mr. Shaul Mofaz, Minister of Transport & Road Safety of Israel, March 19-22,
2007.
• Dr. Ashwani Kumar, Minister of State of Industry of India, August 4-7, 2007
• Dr. Mukul Sangama, Dy. Chief Minister of Meghalaya, October 30 – Nov. 5, 2007
• Mr. Meir Sheetrit, Minister of Interior, November 6-8, 2007
JOINT STUDY GROUP REPORT
• Released By Mr. Ehud Olmert and Mr.
Kamal Nath in November 2005.
• Identifies the Potential Areas for Future
Cooperation
and
Mechanisms
for
Realizing the Agreed Goals.
JSG Recommendations
(I) Promote Negotiations on Preferential Trade
Agreement Between India and Israel;
(II) Mutual Recognition Agreements to Overcome SPS/
TBT Barriers in Each Other’s Country;
(III) Greater Cooperation Between the Customs
Authorities of Both the Countries to Facilitate Smooth
Trade;
(IV) Full Utilization of the India-Israel Industrial R&D
Fund;
(V) EXIM Bank and its counterpart In Israel to Finalise the
Financial Protocol to Ensure Timely Payments to the
Israeli Exporters Particularly Working With the State
Governments and Local Bodies;
JSG Recommendations
continued
(VI) Establish Investment Dialogue to Facilitate
Investments in Both the Countries;
(VII) Exchange Information Concerning Civil Public
Procurement as per Rules;
(VIII)Establish
a
Joint
Working
Group
For
Liberalization Of Trade in Services;
(IX) Facilitate Joint Business Website to sensitise the
Business Communities about the Rules And
Procedures in Each Other’s Country;
(X) Expedite Negotiations on Bilateral Shipping
Agreement;
(XI)Facilitate Opening Of Bank Branches in Each Other’s
Countries.
Israeli Companies in India
• Israeli companies
decisions.
making
major
strategic
• Moving away from a buyer-seller relationship.
• Setting up R&D and development centres or
production units.
• A number of Israeli companies have facilities in
India or are getting work done in India:
India-Israel Cooperation in
Agriculture
•Extensive.
•3-year comprehensive Work Plan for cooperation in
the field of agriculture signed in May, 2006.
(agriculture research, energy efficient greenhouses,
irrigation,
input
delivery
mechanisms,
dairy
development, recycling of wastewater, exchange of
genetic material, higher education and training).
•Several Israeli companies are active in India.
•JVs for manufacture of drip irrigation systems and in
the areas of floriculture and horticulture.(Olive
plantations in Rajasthan)
Science and Technology
• Wide-ranging cooperation.
• Comprehensive S&T agreement reached during
Israeli Science Minister Zandberg’s visit to India
in December 2003.
• Bilateral India-Industrial R&D Fund:
– $ 1 million each by Israel and India.
– India willing to contribute $25 million to this fund over
a period of time.
– The first three calls for proposals closed successfully.
– The fourth call is open now.
India’s Advantages
• Emergence of India's services sector, and
creation of a technology hub serving the
entire globe.
• Advantages of speed and cost in research
and development, process development,
design, project management, etc.
• Increasingly being leveraged by world
corporations.
India: Astounding Demographics
DEMOGRAPHIC TRANSFORMATION OF INDIA
Annual Household Income
(in USD)
Population (million)
Growth in the higher
income categories of
India’s population is
creating an affluent
section with high
purchasing power
2
9
20
Rich (Above 115,000)
9
17
33
High Income (57,000 – 115,000)
48
74
120
Consuming class (23,000 – 57,000)
221
285
404
Working class (10,200 – 23,000)
726
710
613
Needy (Below 10,200)
2005-06
2001-02
2009-10(E)
* In PPP terms
651
583
600
400
Increasing per capita income
coupled with an emerging middle
class has provided the necessary
impetus to consumerism in India
519
461
500
USD
Increasing per capita
income and a growing
middle class is driving
a high level of
consumerism in India
Per Capita Income
700
393
300
200
100
0
2002-03
2003-04
2004-05
2005-06
2006-07
Source: RBI Statistics
Young Population
• One billion people - greatest strength.
• Some 20% of the world’s population
under the age of 24.
• 70% of India’s population is less than
36 years old.
• Literacy rate of 70%.
India’s Demographic Dividend
Youngest workforce in the world…
% SHARE OF AGE GROUP
80
60
40
20
0
0-14
2000
15-64
2005
2010
2015
65+
2020
2025
Skilled Human Resources
• Over 380 universities, 11,200 colleges, 1500
research institutes.
• India adds each year 3 million graduates,
700,000 post graduates and 1,500 doctorates to
its knowledge capital.
• The largest English speaking IT talent pool in the
world - over 120,000 trained IT professionals.
• Some of the best engineering and management
institutes.
Free Trade Agreements
• SAFTA – FTA: On January 1, 2006, SAFTA
(South Asian Free Trade Area) came into being
– a leap forward from the previous SAPTA.
• India-ASEAN FTA may soon become a reality
• With Singapore and Thailand, agreements
already in place.
• Engaging with the Latin American countries
through MERCOSUR.
• With the South African countries through SACU
(South African Customs Union).
Economic Reform
• Indians recognize the value of globalization.
• Direct and indirect taxes - rationalised.
• Special tax breaks in certain sectors like
power, electronics, telecom, software,
hydrocarbons, R&D and exports.
• Government divesting its stake in public
sector.
India’s Economic Growth
• The 4th largest economy in terms of purchasing power
parity after the US, China and Japan.
• India is among the group of 12 countries with a trillion
dollar economy.
• Among the fastest-growing economies.
• Average annual growth rate has been 6.5% over the
past decade.
GDP Growth
Forex
FII Flow ‘93
FDI
Per Capita
Inflation
1990
4.9 percent
< USD 1 billion
USD 1 million
USD 97 million
USD 390
9 percent
2007
9.4 percent
USD 246 billion
USD 15 billion
USD 16 Billion
USD 720
3.4 percent
India: Among the Top-15 Countries in terms of GDP at constant prices
India's GDP at Current Prices: 2002-07
USD Billion
India’s GDP has
witnessed high
growth, and was the
second fastest
growing GDP after
China in 2006-07
The Indian economy has witnessed unprecedented growth…. Booming services and industry sectors are
providing the required impetus to economic growth
Indian economy is
expected to be 3rd
largest in terms of
PPP – USD 4.5 trillion
by the end of 2007
900
800
700
600
500
400
300
200
100
0
Fastest GDP growth of 9.4 percent
in 2006-07, since last 18 years (at
constant prices)
556
469
830
737
237
2002-03
The sound
performance of each
industry segment is
leading to the overall
robust performance of
the Indian economy
638
2003-04
2004-05
2005-06
2006-07
2007-08
(Q1)
Growth in sectors at Current
Prices (2006-07):
Industry: 16.2%
Services: 16.3%
Agriculture: 10.2%
Contribution of
Services increased from
48 percent to
55 percent
900
800
USD Billion
700
600
453
398
500
400
300
200
191
237
103
125
105
105
100
204
231
135
145
Estimated growth rate in various GDP
sectors for Q1 (2007-08) is: Industry – 15.9
percent, Agriculture – 11.4 percent and
Services – 15.7 percent
0
1999-00
2002-03
2005-06
Agriculture
Industry
Services
2006-07
Source: MOSPI Statistics
Projections for India’s
Economic Growth
• Projections for the coming decades
continue to be optimistic.
• BRICS report of Goldman Sachs
predicts a sustained rate of over 5%
growth for India during the next thirty
years.
• Morgan Stanley believes that India can
grow at over 7% for the next ten years.
India: Robust Economic Platform
India's Forex Reserves: 2001-07 (Till 28 September 2007)
300
248
250
199
150
141
152
2005-06
200
2004-05
USD Billion
India’s strong
economic
performance has been
the major contributor
towards increased
Forex reserves
…at present level of Forex
reserves, the country has adequate
cover for 12 months of imports
112
100
54
75
50
Steadily increasing
Forex reserves offer
adequate security
against any possible
currency crisis or
monetary instability
2007-08 (Till
28
September)
2006-07
2003-04
2002-03
2001-02
0
External Debt-to-GDP Ratio
22
Forex reserves
witnessed an increase
of 200 percent for the
period 1990-2007
Falling Dollar inflates the
India’s external debt
20.4
19
Ratio
Increased confidence
of investors in Indian
companies has led to
a surge in cross
border borrowing by
corporate houses
21.1
17.8
India’s Forex
reserves are in
excess of external
debt…
17.3
15.8
16
16.4
…the decreasing external debt to
GDP ratio indicates that India has a
sound economic platform
13
10
2001-02
2002-03
2003-04
2004-05
2005-06
Source: RBI Statistics
2006-07
India: Surging Exports
Exports have recorded a growth of
25% during the last three years.
India's Exports: 2002-08
USD Billion
Services sector has
been a major
contributor to
increased exports
from India
Acceptance of Indian
products along with
the cost advantage
has provided an edge
to Indian companies
140
120
100
80
60
40
20
0
126.33
103.42
83.81
52.81
2002-03
63.95
46.80
2003-04
2004-05
2005-06
2006-07
Quality and cost advantage are the two
important parameters leveraged by the
Indian producers to increasingly market
products and services
2007-08
(AprilJuly)*
* - 2007-08 provisional data for period of April to July only
Product imports by
India mainly include
petroleum products
and minerals
India’s global economic engagement
in 2006, covering both merchandise
and services trade, was close to US$
440 billion.
India's Imports: 2002-08
250
190.50
200
USD Billion
Indian companies
have chalked out
extensive plans to
increase their
presence abroad
149.65
150
100
111.89
61.52
78.28
72.40
50
Petroleum products are the major
contributors towards India’s growing
imports
0
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
(AprilJuly)*
* - 2007-08 provisional data for period of April to July only
Source: Ministry of Finance (August Report)
India: Vibrant Capital Market
23 stock exchanges with over 9000 listed companies. Bombay Stock
Exchange is the second largest in the world after NYSE.
India is among the
major destinations
across the globe for
inflow of US Dollar i.e.
FIIs
Sensex – The Bombay Stock Exchange index has risen 18 times from 1990s to reach
18,000 mark in October 2007.
10/9/2007
Crossed
18,000
mark
Sensex has risen
18 times in the
period 1990-2007
09 July 2007
Crossed 15,000 mark
20000
18000
07 February 2006
Crossed 10,000 mark
16000
14000
30 December 1999
Crossed 5,000 mark
12000
10000
Emergence of industry
and confidence of
local investors along
with the FIIs has led to
increased movement
of the Sensex
8000
6000
4000
2000
0
12-Oct-97
12-Oct-98
12-Oct-99
FIIs have infused
large investments
into the Indian stock
market
12-Oct-00
12-Oct-01
12-Oct-02 12-Oct-03
Encouraging
industry
performance
12-Oct-04
12-Oct-05
12-Oct-06
12-Oct-07
Increased local
investors’ confidence
Foreign Direct Investment
• India rated as the second most attractive destination
for investment according to the World Investment
Report 2005 of UNCTAD.
• One of the most liberal FDI policies in the world.
• FDI trebled to US$ 11.4 billion in the first half (H1)
of 2007, from US$ 3.6 billion in H1 2006.
India: Attractive Investment Destination
With improved performance on PE ratio and ROE, Indian markets have attracted large
investments
India is ranked second
FDI Inflow - India: 2001-07
18,000
in AT Kearney’s FDI
15,730
16,000
confidence index
USD Million
14,000
180 percent
Increase
12,000
10,000
Electronic equipment,
manufacturing and telecom
have witnessed significant FDI
inflow
8,000
6,000
5,546
4,222
4,000
4,909
3,755
3,134
2,634
2002-03
2003-04
2,000
0
2001-02
2004-05
2005-06
2006-07
Net FII into India: 2001-07
FDI inflow for the
180 percent over the
same period last year
Large FII activity in India has
led to an upsurge in the
Sensex
USD Billion
period 2006-07
witnessed a growth of
2007-08
(till June)
18
16
14
12
10
8
6
4
2
0
16.60
10.00
9.40
6.71
1.80
2001-02
Source: DIPP (June Report), SEBI
10.20
0.60
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
(till 12
October)
Mergers/Acquisitons and
Investments Abroad
• Increased confidence in the global arena
• (Mergers/Acqusitions in Israel: Naan-DanJain Irrigation, Alliance Tyre Company,
Pharmaceutical sector, and some others in
the offing).
India: Vibrant Economy Driving M&A Activities
Trends:
 Ratio of the Size of
acquisition to the
size of acquirer has
grown from 10
percent in 2004 to
25 percent in 2006.
 Cross-border deals
are growing faster
than domestic deals
 Private Equity (PE)
houses have funded
projects as well as
made a few
acquisitions in India
28.2
30
782
25
18.3
20
15
10
467
12.3
306
5
0
2004
2005
Deal Value
900
800
700
600
500
400
300
200
100
0
Number of deals
Number of Deals and Value
USD Billion
Growth Drivers:
 Globalisation and
increased
competition
 Concentration of
companies to
achieve economies
of scale
 Lower interest rates
and vibrant global
markets
 Cash Reserves with
corporates
2006
No. of Deals
SECTOR
USD
(Mn)
SECTOR
USD
(Mn)
Automotive
518
Manufacturing
933
Banking and Financial
1,375
Media
630
Chemicals and
Plastics
1,133
Oil & Gas
384
Electrical and
Electronics
896
Pharma &
Biotech
2,520
Energy
1,484
Telecom
2,198
FMCG, Food and
Beverages
1,327
Others
4,006
IT and ITES
2,903
Total
20,305
In 2006, there were a total
of 480 M&A deals and 302
private equity deals…
… Average deal size close to
USD 36 million…
Indian companies have clocked M&A
deals approximately worth USD 31
billion during the first eight months in
2007
Source: Dealtracker Grant Thornton, Economic Times
…Average private equity
investment deal size
increased to USD 26.02
million in 2006 from USD
16.4 million in 2005
Major M&A Deals Undertaken Abroad by India Inc.
Tata Steel buys Corus Plc
USD 12.1 billion
Hindalco acquired Novelis Inc.
USD 6 billion
Essar Steel acquired Algoma Steel
USD 1.58 billion
Suzlon Energy Ltd. acquires REpower
USD 1.6 billion
United Spirits Ltd. acquired Whyte &
Mackay
USD 1.1 billion
Major M&A and Investments Announcements in India
Vodafone buys Hutch
USD 11 billion
Plans to spend on its development operations
in India over the next four years
USD 1.7 billion
Plans investment in private equity, real estate,
and private wealth management
USD 1 billion
Aditya Birla Group increased its stake in Idea
Cellular by acquiring 48.14-percent stake
USD 0.98 billion
Renault, Nissan and Mahindra & Mahindra
have initiated a Greenfield automobile plant
project in Chennai.
USD 0.905 billion
Mylan Laboratories acquired a majority stake
in Matrix Laboratories
USD 0.74 billion
Market Size
• Consumer, infrastructure, transportation,
energy,
environment,
healthcare,
education, hi-tech sectors - market that
exceeds tens of billions of dollars in
each sector.
• The fastest-growing car market in the
world.
• Spending through credit cards has
doubled during the past two years.
IT Industry
• With a CAGR of 28% during the last 5 years, India has
emerged as the fastest growing IT Hub in the world.
• The IT industry's contribution to GDP rose from 1.2 % in
1999-2000 to an estimated 5.2% in 2006-07.
• According to NASSCOM, gowing at the rate it is now, the
total IT industry can touch US$ 100 billion by 2010.
• Revenues - US$ 47.8 billion in 2006-07.
• The software and services exports from India amounted
to US$ 31.4 billion during 2006-07, up 33% from the
previous year.
• In terms of quality, 82 companies certified at SEI CMM
Level 5 - higher than any other country in the world.
Telecom Industry
• One of the fastest growing sectors.
• With share of 12-15 %, second-largest in terms of
approved FDI.
• Investments up to US$ 25 billion over the next five years
(E&Y study).
• Teledensity increased by nearly 48% in the last 12
months from 12.80% to 22.52%.
• 256 million telephone subscribers (November 2007).
(Projection: 500 million by the year 2010)
• With 8.05 million added in October 2007, there are close
to 220 million mobile phone subscribers.
• 2.69 million Broadband connections (Oct.2007)
(Projection: 20 million connections by 2010)
Biotechnology
• Over 30% growth for past 3 years.
• With over 325 companies, revenues of US$ 2 billion and
exports of US$ 1.2 billion in 2006-07. (US$ 5 billion in
revenues estimated by 2010)
• Investments crossed US$ 580 million in 2006-2007 with
companies like Jubilant, AstraZeneca, GE Healthcare
and Biocon.
• One of the most favoured destinations for collaborative
R&D,
bioinformatics,
contract
research
and
manufacturing and clinical research.
• The Contract Research Organizations (CRO) market in
India is worth US$ 250 million and is growing at 30-40 %
per year.
Pharmaceuticals
• US$ 4.5 billion pharmaceutical industry growing at 8-9%.
• With 60% of bulk drugs production being exported,
global recognition as a producer of low-cost high quality
bulk drugs and formulations.
• Ranked 4th globally in terms of volume and 13th in terms
of value, India has the highest number of manufacturing
plants approved by the United States Food and Drug
Administration (USFDA).
Automotive Industry
• One of the fastest-growing manufacturing
sectors and a globally competitive one .
• Outsourcing centre for manufacture of auto parts
for Ford, Daimler Chrysler, Fiat, Volvo and
Renault, etc .
• Toyota - India a global hub for transmission
systems.
• Volvo and GM - purchasing offices.
• Rising share of Indian auto parts exports - to
Original Equipment Manufacturers (OEMs).
Agriculture and Food Processing
• With 601 million tonnes, one of the world’s largest food
producers.
–
–
–
–
Largest producer of milk and dairy products.
Second-largest producer of fresh fruits and vegetables.
Third-largest producer of food grains in the world.
Largest producer, consumer and exporter of spices. (more than
50 types of spices with annual production of 3.02 million tonnes).
• Total Food market - USD 91.66 billion (estimated to
double by 2015).
• The processed food market - $30 billion.
• India needs $28 billion of investment to raise food
processing levels by 8-10 %.
• 60 Agri Export Zones and 53 Food Parks approved to
enable small and medium food and beverage units.
Infrastructure
• Forecast for requirements: $320 billion in the next five
years.
– Highways: India undertaking the world’s largest
highway project of 14000 km. $39 Billion
– Ports and Airports undergoing modernization and
upgradation. Ports : $11 Billion; Airports - $ 9 billion
– Rail: $5.7 Billion
– Communications : $69.2 Billion
• Electricity (108,000 MW of additional power by next
decade), water & gas supply : $31.5 billion
REAL ESTATE
• Annual growth rate of 30%.
• Investment of $16 billion expected over the next five to six years in
Real Estate. ($7-$8 billion in next 18-30 months).
• Returns in India range in 12-15% compared to 3-4% in more
advanced countries.
• 100% FDI allowed under automatic route in townships, housing,
built-up infrastructure and construction-development project, subject
to certain conditions.
• Venture funds can invest in local real estate. Over 30 foreign funds
have applied to start operations in India.
• Real Estate Mutual Funds (REMF) can invest directly or indirectly in
real estate property.
Additional Potential Areas of
Cooperation
• Israel and India are major knowledge centres.
–
–
–
–
–
–
–
Non-conventional energy.
Nanotechnology
Venture capital funding
High-end security software development
IT products and Telecom software
Medical Equipment
Environmental Technologies (including water management
and non-conventional energy)
– Homeland Security
Thank You