Investment Opportunities in India

1. Investment Opportunities in India New Delhi Sept. 27, 2005

2. Indian Economy – An Overview • Economic Growth • Sustained economic performance • Average since 1991 6.2% • 2004-05 6.9% • Forecast till 2050 –Goldman Sachs 5 % p.a. • Services account for over 50% of GDP • Manufacturing sector grew at 9% in 2004-05 • Trade (2004-05) • Exports growth 24% in 2004-05 reaching US$80 billion • Imports growth 35% reaching US$106 billion • Investment • Foreign Investment - US$16 billion in 2003-04 • Mature Capital Markets • NSE third largest, BSE fifth largest in terms of number of trades • Well developed banking system

3. Fiscal Reforms • Rationalisation of tax structure – both direct and indirect • Progressive reduction in peak rates of duties; • Direct and indirect taxes further reduced this year • Peak Custom duty reduced to 15% • Corporate Tax reduced to 30% • Tariff to be aligned with ASEAN levels • Value Added Tax introduced from 1st April 2005 • Rupee made fully convertible on trade account India among the top reformers in 2003: World Bank’s Doing Business in 2005

4. ‘Made in India’ • Third most attractive destination for manufacturing • ATKearney’s FDI Confidence Index 2004 • Indian industry equally competitive in a wide range of manufacturing skill-intensive products: • Apparels, electrical and electronics components; speciality chemicals; pharmaceuticals; etc. • Automotive components: Major MNC’s & their OEMs sourcing high-quality components from India • Volvo, GM, GE, Chrysler, Ford, Toyota, Unilever, Cliariant, Cummins, Delphi • Indian companies now having manufacturing presence in multiple countries • Over 55% of approved outward investment by India companies in manufacturing activities

5. Human Resources • India’s competitive edge - its highly-skilled manpower • 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 PhDs • Knowledge workers in software industry increased from 56,000 in 1990-91 to 650,000 in 2003; • to reach 2 million by 2008 • Due to its young demographic profile, India would continue to be surplus in working population for a long-time

6. Competitive Strengths Rank out of 102 countries • Availability of scientist and engineers3 • Quality of management schools 8 • State of cluster development 17 • Quality of scientific research institutions 20 • Government intervention in corporate investment 34 • Quality of educational system 36 • Sophistication of financial markets 37 • Foreign ownership restrictions 41 (Source: World Economic Forum’s ‘Global Competitiveness Report, 2003-04’)

7. Investing in India – Entry Routes Investing in India Automatic Route Prior Permission (FIPB) General rule No prior permission required Only information to the Reserve Bank of India within 30 days of inflow/ Issue of shares By exception Prior Government Approval needed Decision generally Within 4-6 weeks

8. Policy on FDI • FDI up to 100% is allowed under the ‘Automatic Route’ in all activities except: • Sectors attracting compulsory licensing • Transfer of shares to non-residents under certain circumstances • Investor having existing venture in same field • Equity/route limit in few sectors under sectoral policies • Investment made receive National Treatment • Bilateral Investment Promotion and Protection Agreement with 57 countries • National and Most Favored Nation Treatment to investment; Investment protection features

9. 100% FDI Under ‘Automatic Route’ Manufacturing Activities • All manufacturing activities except defence items • items reserved for small-scale sector Infrastructure Sector • Electricity generation (except atomic energy) • Electricity transmission & distribution • Mass Rapid Transport System • Roads and Highways • Toll Roads & Vehicular bridges • Ports and Harbors • Hotel and tourism • Townships, housing, built up infrastructure and construction development Services Sector • Health, education, Research & Development services • Tourism services; • Consultancy services • Construction & design services.

10. RecentPolicyInitiatives • FDI up to 100% allowed under the automatic route for development of townships, housing, built up infrastructure and construction development projects • FDI in domestic airlines increased to 49% and allowed under automatic route • Fresh guidelines for investment with previous joint ventures in same field issued • Transfer of shares from residents shareholders put on automatic route

11. India: FDI Outlook • Third most attractive investment destination – AT Kearney’s FDI Confidence Index, 2004 • Second most attractive destination for manufacturing and telecommunication services • Among the top 3 investment ‘hot spots’ for the next 4 years • UNCTAD & Corporate Location – April 2004 • Most Preferred Off shoring destination- AT Kearney’s 2004 Offshore Location Attractiveness Index

12. Civil Aviation • Investment Policy • In the airports, FDI up to 100% permitted • In domestic airlines, FDI up to 49% permitted subject to no direct or indirect equity participation by foreign airlines • 100% investment by NRIs • Investment Opportunities • Modernisation of International airports at Delhi, Mumbai, Chennai and Kolkata • Modernisation of non -metro airports • Private sector participation is allowed in support services and aircraft manufacture

13. Civil Aviation Project on Offer Development of Metro and non Metro Air ports Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987

14. Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987

15. Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987

16. Civil Aviation Airports – Traffic Projections Passenger • By 2010: 90-100 million (59 million domestic passengers & 35 million intl. Passengers) Cargo • By 2010: 3360 thousand tonnes Airports – Traffic Projections Contact person: Ms. S. Narendra, Deputy Secretary, Ministry of Civil Aviation, TeL; 24610987

17. Policy Duty free zones, deemed foreign territories FDI up to 100% permitted in almost all manufacturing activities Transfer of goods from DTA to SEZ treated as exports, Units to be net foreign exchange earner within 5 years. No export commitments No limits on DTA sales Can be set up in the public, private or joint sector Single Window Clearance System Incentives For developer: Income tax exemption for a block of 10 years in 15 years For units: 100% Income Tax exemption for first 5 years, 50% for next 5 years and 50% of the ploughed back export profits for next 5 years Exemption from indirect taxes; excise, sales, services tax, etc. Freedom to raise ECB with out any maturity restrictions Special Economic Zones New Law on SEZ

18. Thank You Visit at:www.dipp.nic.in

19. Telecommunications • Among the fastest growing telecom markets • 550,000 km of optical fibre cable laid • Cellular phones increasing by 2 million every month • To reach 200 million in 3 years • Lowest mobile tariff in the world • Share of privet sector 46%; expected to cross 50% by year end • Tele-density of 9, expected to be 20 in next three years • New Broad Band Policy envisages: • 20 million broadband subscribers by 2010 • Investment Opportunities • Setting up manufacturing facilities; • Supply of hand sets and equipments • Telecom & Value added service.

20. Roads • Policy: • FDI up to 100% is permitted for construction and maintenance of roads, highways, vehicular bridges, toll roads, vehicular tunnels. • Ten year tax holiday for road and highway projects; • Investment Opportunities • India has a road network of 3.3 million kilometers • 18,000 km of highways being developed under National Highway Development Programme; • Investment US$20 billion envisaged • Projects for 10,000 km would be on offer • Major programmes being taken up • Many more opportunities in the States;

21. Ports • Policy & Incentives • FDI up to 100% permitted for construction and maintenance of ports and harbours. • Ten year tax holiday • Public-private partnership • 12 major ports, 185 minor ports • 12 private/ captive projects with investment of US$ 600 million completed • 24 projects with investment of US$1.6 billion under implementation/award • Investment requirement of US$22 billion to develop maritime sector • Ports & Shipping • Inland waterways

22. Tourism Investment Policy • FDI up to 100% is allowed under the automatic route in townships, housing, built-up infrastructure and construction development projects including housing, commercial, premises, hotels, resorts, hospitals, educational institutions, recreational facilities etc. Projects on Offer • International Trade cum Convention Centre , Jaipur • Offered to private sector for designing, finance, construct, operate and maintain the facility • Estimated cost Us $ 22 million • Time frame for implementation 18 months • Development of Tijara Fort, Alwar • Private sector would require to restore the Fort and develop interior & surroundings of the fort, would be provided for long term lease • Estimated cost Us $ 5.5 million • Time frame for implementation 18 months • Championship Golf Course, Udaipur, Jodhpur or Jaipur • Land would be acquired and offered on long term lease • Estimated cost Us $ 5.5 million excluding land cost • Time frame for implementation 18 months • International Convention Centre , Bangalore • Karnataka Govt would acquire the land for investors • Facilities to be provided in convention Centre : Exhibition space of 50000 sq Mt, food court, Conference Hall & suites, Convention Centre, shopping malls, health club, golf course, % & 7 star hotels, handicraft village, multiplexes etc. • Estimated cost Us $ 111 million Contact person: Mr. Amitabh Kant, Joint Secretary, Ministry of Tourism, TeL; 23715084

23. UrbanInfrastructure FDI Policy • FDI upto 100% is allowed in townships, housing, built-up infrastructure and construction development projects Opportunities • Us$ 26 billion proposed to be invested in next 5 years in urban infrastructure in 60 cities as a part of National Urban Renewal Mission • The Mission covers physical infrastructure such as water, lighting, sanitation, energy & housing. •  CII

24. Petroleum Refining Status • Total 18 refineries with production of 116 million tonnes (April- Feb. 2004-05) in terms of crude through put. • by the year 2006-07 demand is expected to increase to 155 million tonnes per annum. FDI Policy • FDI is permitted up to 100% under automatic route in private sector Indian companies Investment opportunities • Additional refining capacity of about 110 million tonnes per annum excluding EOUs is planned for implementation by the end of tenth plan( 2002-07) • Investment requirement of over US $ 22 billion. • Opportunity for the transfer of technologies for upgrading the bottom of the barrel and to meet the predominant demand for middle distillates and also to improve the quality of petroleum products to make them environment-friendly and globally competitive.

25. Banking Sector Status • No of Scheduled Banks: 362( As on March 2003) * • Indian Private Sector Banks: 30 (market share: 10%) • Foreign Banks: 36 (market share: 12%) FDI Policy • FDI up to 74% from all sources under automatic route is permitted in Private Sector Banks subject to conformity of guidelines issued by RBI • Foreign Bank can also establish as branch or Wholly owned subsidiary * Source: Indian bank Association http://www.indianbanksassociation.org/home/

26. Textiles • Indian textiles sector: • Turnover US$37 billion; • Exports US$13 billion; • Investments of US$11 billion in the last five years; • India is 2nd largest producer of cloth and 3rd largest producer of cotton yarn; • Textiles sector has the potential to reach US$85 billion by 2010 • Exports can reach US$50 billion • Garments to account for 50% of exports; • Investment required US$30 billion

27. Pharmaceuticals • Indian Pharmaceutical : A US $ 4 billion industry (retail sales) • Exports: US $ 3.18 billion (2003-2004) • The country ranks 4th worldwide accounting for 8% of world’s production by volume and 1.5% by value. Opportunities • Due to rising costs of R&D overseas, greater tendency towards outsourcing and networking. • Increasing competence in molecular biology, immunology and biotechnology • Potential for clinical research and initiating clinical trials • An efficient and cost effective source for procuring generic drugs especially the drugs going off patent in the next few years.

28. Biotechnology India’s inherent strengths • 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 : • Biotech based new drugs / pharmaceuticals • Bio-technology parks get all facilities of 100% EOU

29. Food Processing • Third largest producer of food items • Largest milk producer • Largest livestock population; • 2nd largest in fruits & vegetables • Opportunities in food processing sector • 50% of household income spent on food items • With increasing income levels and urbanisation fast growth in demand of processed food expected; over 250 million strong middle class • Low levels of value addition in food sector: only 7% • New Integrated Food Law being enacted • Investment of US$ 28 billion required to raise food processing from 2% to 8-10%. • Investment opportunities in • Processing of fruit & vegetable, meat, fish & poultry, milk products, packaged food & drinks. • Establishing infrastructure, cold chain, etc.

30. Power Projects on offer • Bairabi dam Hydro Electric project (80mw) –Mizoram • Ministry of environment and forests has granted environment clearance to the project. • CEA has issued techno economic clearance of the project • Athirapilly Hydro Electric project (160 MW) Kerala • Ministry of environment and forests has granted environment clearance to the project. • Techno economic clearance of the project has been accorded • Matnar Hydro Electric Project (60 MW) Chhattisgarh • Environment and forest clearances are yet to be obtained. • Techno economic clearance of the project has be accorded Contact person: Mr. Dev Dutt, Under Secretary, Ministry of Power, TeL; 23715507

31. Power Projects on offer • Private Sector Hydro Electric Projects • Dhamwari Sunda (70 MW) Himachal Pradesh by M/s Dhamwari Power Company Ltd economic clearance of the project has been accorded • Alliain Duhangan (192 MW), Himachal Pradesh , by M/s A.D. Hydro Power Ltd • Karcham Wangtoo (100 MW) Himachal Pradesh by Karcham Hydro Corporation Ltd. • Srinagar (330 MW), Uttaranchal by M/s Alaknanda hydro Power Co. Ltd. Contact person: Mr. Dev Dutt, Under Secretary, Ministry of Power, TeL; 23715507