The Rise and Future Development of ICT in India

1. The Rise and Future Development of ICT in India 31 May, 2011 Casa Asia, Madrid

2. Key agenda India – an emerging economy and market Key growth trends in the IT-BPO industry Future outlook India and Spain

3. Indian market – opportunities unlimited Fastest Growing Democracy Vibrant Economy • A $ trillion economy • GDP growth rate at 8.6% • for FY11 • Rated as one of the most attractive investment • destinations across the globe • Forex reserves of USD 303 bn, • as on March 2011 Huge Domestic Market Combination of Contemporary and Traditional Infrastructure Investment • Lucrative market of 1.2 bn • people, a young population • Growing middle class – will be • nearly 600 mn by 2025 • The 5th largest consumer • market by 2025, worth over • USD 1,500 bn USD 1.7 tn investment potential over the next 10 years Source: RBI, IBEF and McKinsey

4. Indian market – opportunities unlimited Hub for Knowledge-based industries Increasing Connectivity Healthcare spending 125 Fortune 500 Companies have R&D bases in India Opportunity of USD 77 bn by 2013 • Fastest growing telecom market • in the world • 787 mn subscribers with 10-15 • mn mobile subscribers being • added every month Large Automotive growth Retail market attracting major players Increasing Adoption of ICT India’s automobile exports grew at 29 percent in FY11 Source: MAIT, Frost & Sullivan, TRAI and IBEF

5. What is driving growth? • Booming Indian services and industry sector are providing the required impetus to economic growth • Growth primarily driven by the strong domestic market • Domestic savings rate at more than 35% • Rising index of global investor confidence – 3rd most attractive FDI destination in the world • Rise in the size of the Indian middle class • Rapid rise in incomes will lead to an even faster increase in demand for consumer durables and expendables • Investments in improving infrastructurefacilities (hydro, transportation, roadways, telecommunications, etc.) • Key emerging sectors in India – Infrastructure, Education, Health care, Insurance, etc. Source: A T Kearney FDI Confidence Index 2010

6. Working age (15-60 years), Millions Comparison of population shifts Demographic dividend – Increasing working age population Retiree (60+ years), Millions 207 38 US 222 54 40 UK 41 39 Italy • World anticipating shortage of working population in the future. • India is among the world's youngest nations, with a median age of 25 years. • India will see an increase in working age population from 63 percent in 2008 to 67 percent in 2020. • India will have skilled resources that the world can leverage. 37 14 55 16 Germany 18 53 83 27 Japan 75 35 750 India 920 2008 2020 Significant shift

7. Increasing emphasis on education – science and technology professionals OUTTURN COMPOSITION ENROLLMENT*** Technical Graduates (’000s) Technical & Post Graduates, (’000s) 100% ~4 million Postgraduates 3 yr Engg Diploma/ MCA` 4 yr Engg Degree Other Graduates**** Science Graduates Commerce Graduates Non-technical Graduates (’000s) Non-technical & Post Graduates, (’000s) Arts + Other Graduates * Provisional estimates ** NASSCOM estimates based on past trends in annual enrollments / intake and outturn *** Enrollment figures reflect the total number of students enrolled across all years of study Technical graduates include people with a 4 year engineering degree, 3 year diploma or a masters degree in computer applications (MCA) Source: NASSCOM, IAMR, Indiastat, UGC, MHRD, AICTE

8. Government spending on IT for masses Government leveraging technology for inclusive growth • 250,000 panchayats (village councils) to be connected through broadband • National eGovernance Program – 27 MMPs at the central and state levels • To make all Government services accessible to the common man, through common service delivery outlets and ensure efficiency, transparency & reliability of such services at affordable costs to realise the basic needs of the common man • Investments of INR 30-40 bn over the next four years on developing IT infrastructure • Unique ID Project (Aadhar) – Mission mode project for creating an unique Identity number for every resident in India

9. geography What will Aadhar do? • The focus resident segments are: • Below Poverty Line (BPL) families • Marginalized and the deprived • Landless labourers • Daily wage earners • Minorities (by caste, religion, region, etc.) • Migrants • Women • Children, especially those in the 6-14 age group • Benefits and usage • Empowering poor and underprivileged residents to access government programmes and services such as – banking, public distribution system (PDS), education, healthcare, taxes, direct benefit transfers, etc. • Aadhaar will thus give migrants mobility of identity. The Unique Identification number (Aadhaar) conceived by the Indian government is a 12 digit number for every individual, including infants. Will enable 'anytime, anywhere, anyhow' authentication. Creation of the world’s largest database – 1.2 bn people. Source: www.uidai.gov.in

10. Why India? – Quote Unquote India has among the highest returns on foreign investment. India has evolved into one of the world's leading technology centers. India is not simply emerging, India has already emerged. US Department of Commerce India is a developed country as far as intellectual capital is concerned. Barack Obama, President, US We came to India for the costs, stayed for the quality and are now investing for innovation. Craig Barrett, Intel Corporation The Indian market has two core advantages - an increasing presence of multinationals and an upswing in the IT exports. Jack Welch, General Electric By 2032, India will be among the three largest economies in the world. Dan Scheinman, Cisco System Inc. TravynRhall, ACNielsen BRIC Report, Goldman Sachs Source: IBEF

11. However, there are challenges in the current environment Its because we have problems that we have opportunities • While we have a rising economy, there are problems to tackle • Upgradation of Infrastructure • Agriculture and land reforms • Lack of education and basic healthcare facilities • Income and social inequalities – bridging the gap • Bureaucracy and Governance • Steps taken to address these • Building world class airports – investments of USD 8 bn for mordernization of the airport infrastructure • Some of the largest infrastructure creation in the world (Golden quadrilateral - 5,400 Kms) • Transport alternatives – Metro Rail

12. Technology can transform India’s ability to provide basic services Basic services Potential technology and services’ solutions Healthcare 50% of Indians do not have access to primary healthcare – technology can provide it at half the cost Financial services 80% of Indian households are unbanked – technology can enable access for 200 million families Education India faces a 3-fold shortage in teachers – technology can address this through remote solutions (e.g., virtual classrooms, recorded lectures by senior faculty, modular multimedia content) Public services India suffers from a leakage of 40-50% in public food distribution – technology can ensure transparency

13. Key agenda India – an emerging economy and market Key growth trends in the IT-BPO industry Future outlook India and Spain

14. IT-BPO industry – the India story Stronggrowth in industry revenues A unique industry From USD 5.8 bn in FY 2000 to current estimates of USD 76 bn for FY11 Contributing to economy Contributing to 9% of India’s incremental GDP; 26% of India’s exports and 11% of services revenues Employment generation Direct employment of 2.5 mn and indirect employment of 8.3 mn professionals Global leader Leader in the global sourcing landscape Business transformation Indian IT-BPO Industry catalysing business transformation for global clients A truly global industry Mission critical in nature Ever changing technology environment Entirely people and skill based industry Young industry - average age 27 years Products and services are not defined, but are constantly evolving Adhering to global policies and laws

15. Current snapshot of industry Sourcing model for IT-BPO exports FY2010 IT-BPO revenues, USD bn 76.1 IT Services BPO Engg Design & Products 19.1% Indian Providers Foreign Captives Foreign Providers IT-BPO exports by Geography, FY2011E IT-BPO exports by Vertical, FY2011E • 55% of total global sourcing market • Foreign providers – over 30% of the total market • Services delivered from 50+ locations and 20+ • villages (Rural BPO) • Transformation, new business models, driving • organisation wide efficiencies • Emerging segments – healthcare, retail, RIM • and Asia-Pacific experiencing increased adoption

16. India’s value proposition Strong Fundamentals Robust ecosystem Enhanced value • Sustained cost competitiveness • Sustained cost advantage of • 60 - 70% • Productivity gains and operational efficiencies • Government policy • Overall policy approach has • aided IT-BPO growth • Targeted policy actions e.g. • ITAA, SEZ, Telecom • deregulation, etc. • Maturing landscape • Enhancing overall • value proposition • Adoption of Green IT, • focus on innovation • Proactive capability building • Investing with customers • in capability building • across domain, • process, technology • Role of private enterprise • World class business • infrastructure - office space, • telecom, highways, etc. • Entrepreneurs providing key • input services like Training, etc. • Abundant talent • Largest share (28%) of global talent pool • Quality and data security • High standards of quality and data security • Global quality certifications

17. India beyond cost – some examples • Client benefits • Revenue growth by 33.1% • Sales conversion from 18 to 32% • Customer complaints down by 80% • 66% reduction in refund claims • Transformational Business impact across the value chain; Client: Global Bank • Client benefits • 20% reduction in cycle time, revenue addition of USD 21 mn • USD 21 mnreduction in net market risk, unmatched bond trades reduced to 10% from 22% • Banking operations –Efficiency up by 30%, 12% additional space creation, improved workflow and layouts • Improved customer experience –C-SAT score up by 40 bps • Value engineering services; Client: Medical solutions provider • Client benefits • Reduction in number of parts, production time, assembly time etc • Reduced 60% of initial component cost, against a target of 30%. Additionally, the solutions also reduced cost of inventories, which is a recurring cost advantage • Redesigned various mechanisms and integrated multiple parts Outcome-based pricing model; Client: Global low-cost airline Service provider benefits • 14% rise in revenues from client • Sales per day for new hires from 4 to 7 • Lower attrition, flexibility

18. Key agenda India – an emerging economy and market Key growth trends in the IT-BPO industry Future outlook India and Spain

19. Future outlook for the industry – a redefined market with tremendous potential 1 Global Megatrends Demographic shifts will fuel the growth of new sectors, markets and service lines 2 Social, environmental and technology trends will create hitherto unseen opportunities and risks that could endanger up to a third of today’s market A Redefined Market 3 The addressable market for global sourcing will triple in size from USD 500 billion today to USD 1.5-1.6 trillion in 2020. 4 80% of incremental growth will be driven by opportunities outside the current core markets, verticals and customer segments The exports component of the Indian industry is expected to expand three-fold and reach USD 175 billion in revenues by 2020. 5 Industry Outlook The domestic component will grow to USD 50 billion, equal to today’s exports revenues. 6 7-Jun-14

20. 9 The industry’s vision for 2020 – Transform Business, Transform India IT/BPO industry revenue potential Industry contribution by 2020 USD billion • 7% of annual GDP • 30% of annual exports • 14.3 million* employment opportunity (direct and indirect) • Increased diversity (women are 50% of the total workforce) • 4-5 satellite townships around Tier-I cities • 8-10 Tier-II cities with upgraded basic and business infrastructure • ICT as the key enabler for delivery of public services • Innovation hub driving additional GDP contribution 225 50 Domestic 3.5x 76 Exports 175 17 59 FY2011E 2020 Note: *As global employment and non-linearity increase, the employment multiplier will decrease

21. Key agenda India – an emerging economy and market Key growth trends in the IT-BPO industry Future outlook India and Spain

22. India – Spain Opportunities • Indian industry can partner with Spanish companies to transform and offer innovative solutions that are competitive globally • Uniqueness of Indian market • A virgin market with new opportunities in the fast growing Indian domestic market • Large market, open for investment • Opportunity to sell more to India – Spanish companies can partner with Indian companies to enter the market • Potential areas for Spanish investments in India • Automotives industry • Pharmaceutical & Chemical Products • Food, beverages and Wine industry • Tourism industry • Textile, Garment & Apparel industry

23. Indian companies in Spain Spanish companies in India Technology Companies Non-technology Companies

24. In summary • Time to create win-win partnerships through entrepreneurial connect between India and Spain • Focussed efforts required to facilitate and enhance two way investments between the countries • Partnering with Spanish companies to promote their goods and services • To deepen co-operation in: Trade in goods, Information technology, Manufacturing sector, etc. • Technology and business services will play transformation role for countries and businesses • Globalization demanding higher efficiencies and competitiveness

25. Thank You