Indian Economy Overview

Last Updated: November 2011 The Indian economy has continuously recorded high growth rates and has become an attractive destination for investments, according to Ms Pratibha Patil, the Indian President. "India's growth offers many opportunities for mutually beneficial cooperation," added Ms Patil. "Today India is among the most attractive destinations globally, for investments and business and FDI had increased over the last few years," said Ms Patil. The Indian economy is expected to grow at around 7.5 per cent, according to Dr Manmohan Singh, the Indian Prime Minister. The PM acknowledged Asia's emerging economies were "growing well" and were, "in fact, contributing to the recovery of the world economy". The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Revised Estimates, was 8.5 per cent in 2010-11 representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of September 2011 by the Ministry of Finance. Overall growth in the Index of Industrial Production (IIP) was 4.1 per cent during August 2011. The eight core Infrastructure industries grew by 3.5 per cent in August 2011 and during April-August 2011-12, these sectors increased by 5.3 per cent. In addition, exports and imports in terms of US dollar increased by 44.3 per cent 41.8 per cent respectively, during August 2011. Over the next two years India could attract foreign direct investment (FDI) worth US$ 80 billion, according to a research report by Morgan Stanley. India has received US$ 48 billion FDI in the last two years. Considering the pace of FDI growth in India, KPMG officials believe that FDI in 2011-12 might cross US$ 35 billion mark. In addition, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009. The Economic Scenario

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A report titled, 'World Investment Prospects Survey 2009-2012' by the United Nations Conference on Trade and Development (UNCTAD) has ranked India at the second place in global foreign direct investments (FDI) in 2010 and expects India to remain among the top five attractive destinations for international investors during 2010-12 India Inc announced 177 mergers and acquisitions (M&A) deals worth US$ 26.8 billion in the first nine months of 2011. For the quarter July-September 2011, inbound deals worth US$ 7.32 billion were registered as against the deals worth US$ 2.65 billion in the previous quarter. Foreign institutional investors (FIIs) have invested more than Rs 41,000 crore (US$ 7.81 billion) in government papers and Rs 68,000 crore (US$ 12.95 billion) in corporate bonds as on October 31, 2011 The latest available data from the Reserve Bank of India show a 77 per cent jump in the FDI in the first half of the current financial year (April-September), compared to what was US$ 19.5 billion during the same period a year ago The total amount of FDI equity inflows during financial year 2011-12 from April 2011 to September 2011 stood at US$ 19.14 billion aggregating to 74 per cent growth over last year India's foreign exchange (Forex) reserves have increased by US$ 2 billion to US$ 320 billion for the week ended October 28, 2011, on account of revaluation of foreign currency assets, according to the weekly statistical bulletin released by the Reserve Bank of India (RBI) The Government has approved fund raising worth Rs 60,950 crore (US$ 11.61billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011 India's merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago, according to Mr Rahul Khullar, Commerce Secretary. Exports in the referred period increased on back of demand for engineering and petroleum products, gems and jewellery and readymade garments Private equity (PE) investments in India stood at US$ 6.14 billion in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by Chennai-based Venture Intelligence. The rise in the value of the deals so far (June 2011) recorded a growth of 52 per cent, as compared to US$ 4.04 billion raised last year The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players;

in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials India currently holds the 12th position in Asia and 68th position in the overall list world's most attractive tourist destinations, as per the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF). A study conducted by global hospitality services firm, HVS, to measure marketing effectiveness on Internet puts Karnataka Tourism's Web site in the sixth position in India The wind energy sector has attracted foreign direct investment (FDI) worth Rs 1,510 crore (US$ 287.62 million) over the past three years. In the renewable energy sector, wind energy has emerged as the fastest growing category, according to Dr Farooq Abdullah, Union Minister for New and Renewable Energy

Furthermore, the Indian Railways has generated Rs 37,392.88 crore (US$ 7.12 billion) of revenue earnings from commodity-wise freight traffic during April-October 2011 as compared to Rs 34,337.11 crore (US$ 6.54 billion) during the corresponding period last year, registering an increase of 8.90 per cent. Railways carried 536.92 million tonnes (MT) of commodity-wise freight traffic during April-October 2011 as compared to 516.89 MT carried during the corresponding period last year, registering an increase of 3.88 per cent.

Growth Potential Story

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India's exports grew by 36.3 per cent in September 2011, demonstrating impressive growth. Exports stood at US$ 24.8 billion compared to US$ 18.2 billion in the same period last year, while imports grew by 17.2 per cent to record US$ 34.5 billion Exports from special economic zones (SEZs) during April-September 2011 increased by 26.2 per cent to Rs 176,479.69 crore (US$ 33.62 billion), as per a statement by the Export Promotion Council for EOUs and SEZs (EPCES) Andhra Pradesh (AP) with 75 notified special economic zones (SEZs), which is the highest number of SEZs in any State in India, has attracted investment of approximately Rs 15,000 crore (US$ 2.86 billion) The July-September 2011 quarter observed an increase in foreign institutional investor (FII) stakes in major automakers as compared to the previous quarter of 2011 Information technology (IT) spending in India by enterprises will rise by 9.1 per cent in 2012, according to a report by research firm Gartner. IT spending in India is projected to touch US$ 79.8 billion in 2012 as compared to US$ 73.1 billion in 2011. The telecommunications market is the largest IT segment in India with IT spending forecast to reach US$ 54.7 billion in 2012, followed by the IT services market with spending of US$ 11.1 billion. The computing hardware market in India is projected to reach US$ 10.7 billion in 2012, while software spending will total to US$ 3.2 billion, reported Gartner The Government plans to set up a Rs 2,500 crore (US$ 476.19 million) development fund for the auto component sector. The industry, which aims to almost triple its size to US$ 115 billion by 2020, envisages annual capital investment of up to US$ 3 billion India is the 9th or 10th largest car maker in the world, but given its very ambitious production plans, in the next five to ten years it will jump to the third or fourth spot, according to Diane H Gulyas, President, DuPont Performance Polymers. The firm's Innovation Centre will focus on automobile trends working towards making vehicles faster, lighter, safer and fuel efficient The Rs 15,000 crore (US$ 2.86 billion) Indian forging industry is poised to grow over 20 per cent per year and see investments of about US$ 3 billion by 2015 for capacity expansion, according to the Association of Indian Forging Industry A public-private partnership (PPP) fund worth Rs 5,000 crore (US$ 952.38 million) is being set up to support research and development efforts-especially in the field of vaccines, drugs and pharmaceuticals, super computing, solar energy and electronic hardware-as well as commercialisation of products and services, according to Mr Ashwani Kumar, Minister of State for Science & Technology In addition, the Indian banking sector is poised to become the world's third-largest in terms of assets over the next 14 yearswith its assets poised to touch US$ 28,500 billion by 2025according to a report titled Being five-star in productivity Roadmap for excellence in Indian banking', prepared for the Indian Banks' Association (IBA) by The Boston Consultancy Group (BCG), IBA and an industry body Investment in logistics sector in India is projected to grow annually at 10 per cent. India's logistics market achieved revenues of US$ 82.1 billion in 2010 and is expected to reach revenue worth US$ 90 billion in 2011. The logistics industry forecasts to generate revenues worth US$ 200 billion by 2020, as per Eredene Capital PLC's 2010-11 annual report India's engineering research and development (ER&D) providers is estimated to capture about 40 per cent share of global offshore revenues in 11 key verticals by 2020, according to a new report titled 'The Futures Report 2011', by Global Futures and Foresight (GFF)

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India's power sector will generate revenue of Rs 1,300,000 crore (US$ 247.62 billion) during the Twelfth Five Year Plan (2012-17), as per Mr P Uma Shankar, Secretary, Ministry of Power. The plan is to generate 17,000 MW power during the referred period The food processing industry is set to triple to reach US$ 900 billion by 2020, provided the key issues are addressed, as per a study by Boston Consulting Group (BCG) and an industry body The National Agricultural Innovation Programme (NAIP) will spend Rs 500 crore (US$ 95.24 million) more in the next two years on different projects to add value to agriculture and allied sectors. This programme aims at developing technology-based innovations to improve the income of farmers and those living on allied sectors Gaining momentum from fashion trends, many Indian consumers now spend an equivalent amount on footwear as on their apparels, as they associate variety of shoes to different occasions. The footwear industry in India has almost doubled in the past five years to an estimated Rs 20,000 crore (US$ 3.81 billion)

Road Ahead "I really think that India is a land of billion opportunities and not a billion problems," as per Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd. In the last 20 years, the country has added a trillion dollars of output. The Twelfth Five Year Plan is going to maintain its target growth rate at 9 per cent. The planning commission is due to firm up its approach to the Twelfth Five Year Plan (2012-2017) on August 20, 2011, in a meeting chaired by Prime Minister Dr Manmohan Singh. The priority for resource allocation will continue to be the social sector and infrastructure. The Government of India has set ambitious targets for more than US$ 1 trillion to be invested in infrastructure over the Twelfth Five Year Planmore than double the amount invested in the previous five-year period, according to Eredene Capital PLC's 2010-11 annual report. Significantly, the Government has set an export target of US$ 292 billion for 2011-12, up 19 per cent from US$ 246 billion in 2010-11. Moreover, the Government of India has been ranked fifth in wielding economic clout globally after the US, China, Japan and Germany, and ahead of European powers France and the UK, according to a study authored by Kaushik Basu, Chief Economist Advisor. India's fast-moving consumer goods (FMCG) industry's major players continue to pursue acquisitions over the medium term, given the scope for expansion in under-penetrated product segments and geographies, as per a report by credit rating agency Crisil. India remains an attractive market for the global FMCG majors. Exchange Rate Used: 1 USD = INR 52.50 (as on November 22, 2011) References: United Nations Conference on Trade and Development (UNCTAD), Ministry of Finance, Press Information Bureau (PIB), Media Report, Consolidated FDI Policy

Investments
Last Updated: October 2011 India has emerged as an important investment destination for domestic as well as international investors and it is the key element which has taken the country on a robust growth trajectory. India was ranked the ninth most attractive investment destination in 2009 and is considered as an ideal destination for investments on the back of vibrant democratic setup, presence of a vast network of bank branches, financial institutions, and a well-organised capital market. There are different investment options available in India. These include Bank Fixed Deposits (FD), Stock Market, Mutual Funds, National Saving Certificate (NSC), Gold, Real estate, Equity etc.

Domestic Investments
Last Updated: November 2011 Introduction The Indian investment scenario has undergone quick transformation in the post liberalisation phase. The new regime did away with licensing, capital controls, quantitative restrictions on imports and decontrolled interest rates and reduced restrictions on foreign imports. Therefore, these led to a noteworthy improvement in the 'investment climate', creating incentives for private investors, both domestic and foreign. Moreover, Central and State Governments continue to offer a number of incentives for investment projects. As a result, the share of private investment rose sharply from 12.5 per cent of gross domestic product (GDP) in the eighties to 15.4 per cent in the nineties. India is gradually emerging as a popular investment destination because of quick-paced economic growth and with more and more companies scaling up in small cities and towns, according to investors at the recent India Economic Summit of the World Economic Forum in Mumbai. Other factors contributing to growth comprise an expanding middle class, a large population with its major chunk aged 15-35 years and increasing urbanization. Investors felt that it is difficult to be bullish on investment opportunities in the short term, but India is extremely attractive from a longer-term perspective. Investors also felt that it's a good time for those who have strong balance sheets to make investments as valuations are low and assets are available at inexpensive rates. "Wait up and you will make money. It's not a time for short term realization," as per Udayan Sen, Chief Executive and Managing partners, Deloitte. At the Summit it was also discussed that Information technology (IT) and information technology enabled services (ITeS) companies will also continue to be attractive. Bengaluru, one of the major Indian economic centres, is the fastest growing cities in the country. The city has often acted as a window to deals and investment opportunities across various sectors not only in Karnataka, but also in its neighboring states Tamil Nadu and Andhra Pradesh. Investment Options in India There are various investment options available in India. The different domestic investment options in India include Bank Fixed Deposits (FD), Stock Market, Mutual Funds, National Saving Certificate (NSC), Gold, Real estate, Equity and many more.

Sanitary ware maker Hindustan Sanitaryware and Industries Ltd, Flagship Company of the Somany Group, plans to invest nearly Rs 500 crore (US$ 98.20 million) to set up a greenfield plant in Gujarat, expected to be operational by the end of 2013. Emami, the Kolkata-based diversified group, would be investing around Rs 2,000 crore (US$ 392.81 million) in the next two years on in the healthcare segment. Advance Medicare and Research Institute (Amri) Hospitals Ltd, controlled by Emami, is setting up seven hospitals across North and East India, with an investment of Rs 1,750

crore(US$ 343.71 million). Additionally, Rs 300 crore (US$ 58.91 million) would be spent on adding beds at existing hospitals. A joint venture (JV) of BGR Energy and Hitachi to get orders worth Rs 3,600 crore (US$ 706.83 million) from NTPC Ltd for the supply of super-critical steam turbine and generators has led the Chennai-based company to emerge as the winner for supplying nine units of steam turbines. Fresh and Healthy Enterprises Ltd (FHEL), a fully owned subsidiary of Container Corporation of India (Concor), has planned an expansion in its cold storage business. "The investment will be to the tune of Rs 1,500 crore in opening cold storage units. Capacity expansion at various cities will depend on the location of the place and the quantity of horticulture produce at nearby places," said a senior Concor executive. India Infrastructure Finance Company Ltd (IIFCL) and Life Insurance Corporation (LIC) have drawn up plans to invest Rs 10,000 crore (US$ 1.96 billion) during 2011-12 in the infrastructure sector, through the take-out financing route. The Indian Institute of Management-Ahmedabad (IIM-A) will launch the Indian Fund for Sustainable Energy (INFUSE) for about Rs 100 crore(US$ 19.62 million) in association with the Union Ministry of New and Renewable Energy (MNRE), Technology Development Board (TDB) and British Petroleum (BP). Indian Metals & Ferro Alloys Ltd (IMFA) is planning to spend Rs 6,600 crore (US$ 1.29 billion) over the next five years to set up a 1,320 mega watt (MW) power plant in Orissa. Future Group, the country's largest retail chain, will invest Rs 900 crore (US$ 176.58 million) in the next three years for expansion. Along with its flagship brand Big Bazaar, the company is exploring new retail segments like sports, theme parks, food, fashion and consumer electronics, according to Kishore Biyan, Group CEO, Future Group. Government Initiatives The Government of India has taken various initiatives to attract domestic investment in India's diverse sectors. It has announced a slew of attractive schemes and policies from time to time to increase investments. The various ministries of different industries have made special attempts to make the rules and regulations more flexible. Besides formulating attractive policies for investors the Ministries also provide guidance to the investors with regards to the infrastructure availability, the market structure, and so on. Road Ahead India is a diverse and vibrant country whose economy is increasingly incorporating changes with the ever changing world economy. The recent economic reforms undertaken by the Government during the last few years have made the investment environment conducive for development. If we consider the present state then Indian operations have occupied a centre stage in the global network. The huge and increasing market, classy financial sector, developing infrastructure, flexible regulatory environment along with the stable and strong outlook of economy makes India an attractive destination for investment.

Indian Investments Abroad

Last Updated: November 2011 Brief Overview Indian companies or entities are on a continuous look-out for new investment destinations (markets and resources). Recent data released by the Reserve Bank of India (RBI) shows that overseas investments by Indian companies rose by 51 per cent to US$ 3.46 billion in September 2011 from US$ 2.28 billion in August 2011. Outward investment by India companies or entities was at US$ 19 billion for the first six months of 2011-12. Indian Investments Abroad: Recent Developments Liberalised overseas investment policies have given enough room to Indian corporates to invest abroad and make their presence felt globally. Some of the overseas investments that took place in the recent past or that

would fructify in near future are discussed hereafter:

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Fortis Healthcare (India) will acquire Singapore-based Fortis Healthcare International for US$ 665 million. The deal, subject to regulatory approval, is expected to close by mid-December 2011. State-run company Gas Authority of India Ltd (GAIL), India has plans to spend around US$ 1 billion over 2012 to explore fast-emerging shale gas sector, primarily in the US and Canada. Corresponding deal is expected by April-May 2012. The company acquired 20 per cent stake in Carrizo's Eagle Ford shale asset in America in September 2011 and would spend US$ 300 million to develop the same. Coal India - World's largest coal producer, is in discussions with the US-based Peabody Energy and Massey Energy for stakes in the mines owned by these companies, while steel major Steel Authority of India Ltd (SAIL) along with NTPC, Coal India, Rashtriya Ispat Nigam Ltd (RINL) is exploring opportunities to acquire coal mines in Australia and other coal-rich nations by forming a joint venture (JV) company - International Coal Ventures Ltd.

Overseas Investments As per the recent RBI data, Indian companies carried out as much as 401 overseas investment transactions that resulted in outward foreign direct investment (FDI) of US$ 3.46 billion during September 2011. Some of them are:

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GVK Power has infused US$ 1.41 billion in its Singapore-based JV -- GVK Coal Developers (Singapore) which is engaged in the business of transport, storage and communication services. ETHL Communications Holdings has committed US$ 776.88 million in its Mauritius-based wholly owned subsidiary (WoS) - ETHL Communications Mauritius, which is engaged in financial, insurance, real estate and business services. Tata Steel invested US$ 173.55 million in its Singapore-based WoS, Tata Steel Asia Holdings Pte, which is also engaged in financial, insurance, real estate and business services. RHC Holding investments invested US$ 113.62 million in its WoS based in Mauritius. Furthermore, Jindal Saw invested US$ 78.64 million in its Cyprus-based manufacturing WoS -- Ralael Holdings Ltd. Besides, the Indian company has also committed an investment of US$ 48.31 million in its UAE-based WoS Jindal Saw Holdings FZE. The WoS is engaged in manufacturing activities.

Indian Investments Abroad: Government Initiatives Facilitating greater autonomy to profit-making public sector undertakings (PSUs), the Government of India has unveiled a new policy that would make acquisition of raw material assets easier for them. The new policy may also involve a provision that would enhance the investment limit by Navratna firms to Rs 3,000 crore (US$ 612.37 million) from the current Rs 1,000 crore (US$ 204.12 million) for any asset buy-out. However, involvement of any additional amount beyond the prescribed limit would require Government's approval. The limit is Rs 5,000 crore (US$ 1.02 billion) for the firms with Maharatna status. As per the estimates generated by US geologists and experts, Afghanistan has untapped mineral resources worth US$ 1 trillion. As a part of the Manmohan Singh-led Government's initiative to highlight Indias presence in Afghanistan, SAIL and NMDC are heading a consortium of seven companies to bid for a contract in Hajigak iron ore mining that would entail the single largest foreign investment by any country. Further, the Indian central bank has decided to further liberalise the overseas investment policy with a view to facilitate more operational flexibility to the corporate. The modifications include:

Indian corporate bodies and registered partnerships are allowed to invest to the extent of 400 per cent of the net worth of the bonafide businesses abroad, under automatic route. They can further increase their exposure beyond 400 per cent with a prior approval from the RBI The RBI has also decided to allow Indian companies investing abroad to write-off capital and other receivables like loans, royalty, technical know-how fees and management fees in respect to those joint ventures and wholly owned subsidiaries in which they have more than 51 per cent stake. The RBI has cut by 50 per cent the financial commitment for companies when they provide guarantees for projects on behalf of their overseas subsidiaries or joint ventures. In place of the 100 per cent performance guarantees issued to or on behalf of the JV or the WoS that was taken into consideration while arriving at the financial commitment, it has now been lowered to 50 per cent.

Road Ahead

India Inc is now looking for new markets and resources to strengthen its presence globally. This would not only provide a great impetus for their future growth, but would mark India as an international partner for inward and outward foreign investments. Indian businesses are expected to invest around US$ 40-50 billion in the overseas market during 2011-12 as global economy improves. Ajay Kumar Dhir, Executive Director, LancoInfratech Ltd, has stated that 15 per cent of the Indian businesses have already forayed into the international markets, and 30 per cent more would be doing so by 2016-17. The new entities that would venture into foreign arena would include small and mediumsize enterprises (SMEs) to a great extent.