India: Towards Global

Leadership

Madras Management Association

Convention February 17, 2007
 India: One of fastest growing
economies
10.4%
9.1%

GDP
growth
5.0%
4.0% 3.4% 3.0%
2.7%
China

S Korea
India

Area
Taiwan

Britain
U.S.

Euro
Source: CSO for data on India and Economist dated February 3rd, 2007 for other countries. All data pertain to the
fourth quarter of calendar year 2006. Data on India pertains to first half of fiscal year 2007

…fourth-largest economy on purchasing

power parity basis (1)
1. Source: World Bank

2
 Factors driving economic
growth
Demographic
forces

Continued GDP Resurgent

expansion of growth of industrial
services over 8% sector
sector

Globalisation

Rural potential is still largely untapped

3
 Growth driven by knowledge
economy
 Growth paradigm: knowledge as the key
driver
 IT and IT-enabled services, financial
services, health care, research &
development, engineering & design

 Cascading effect on demand for

manufactured and agricultural goods,
•Services sector contributes about 61% to
GDPhousing and infrastructure
•Total ITdirect
 High and BPO
and exports of US$ 23.6
indirect demand bn
for skilled
in FY2006
4 manpower
 India is already a leader in
knowledge services
Israel Ireland
Total labour costs

Singapore Canada
Mexico

Malaysia
Czech
Vietnam
Hungary
Philippines India
Russia
China

Quality of
Key question: How do
supply we extend our
leadership?
Source: neoIT 2005
5
 Industrial sector driving
growth
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 2005-
98 99 00 01 02 03 04 05 06

Index of Industrial Production

Manufacturing

Robust industrial investment outlook –

capital expenditure plans of US$ 400 bn

Source: CMIE
6
 Industrial sector: achieving
global scale
 What makes Indian companies unique?
 Ability to operate in the presence of several
constraints and demanding value conscious
consumers
 Constraints have forced our companies to
innovate on products, processes and
distribution
 Created companies which are able to offer
superior products and services at a fraction
of the cost anywhere else in the world
 In the next 10 years: Indian industry will
assume global prominence
 Hub for specialised manufacturing goods
like automobiles, pharmaceuticals and
biotechnology and telecommunications
 Growth to be driven by core strengths in
technology and research and development
7
 Continuing growth momentum
 Focus on requirements of the knowledge
economy
 Education: updating and expanding curricula
and increasing manpower with relevant skills
 Physicalinfrastructure: development of new
urban centres
 Only
28% of the India’s population live in
urban areas compared to 50% for the world
 Investmentsin urban infrastructure: mass
transit, commercial and residential space,
power and other utilities
 Service infrastructure: services to support
urban, knowledge-based growth, with
backward linkages to rural India
8
 Improving infrastructure & market
access
 Increasing efficiency at each stage of the
agricultural value chain
 Increasing productivity on a sustained basis
 Proper storage facilities for produce
 Developing distribution networks enabling
price discovery
 Developing rural infrastructure:
electrification, rural roads and water
 Enabling better price realisations, higher
savings and long-term poverty reduction
 Connectivity with urban markets necessary
 Developing commodity exchanges and spot
markets
 Public private partnerships as important
development tool
9
 Diversification of rural economy
 About 70% of population in rural areas
 Agriculture/GDP at less than 20%
 However, rural economy contributes about 50% to
GDP
 Creating economic opportunities and
employment in rural India
 Provide higher than subsistence level livelihood
 Create new income streams for the rural
population
 Enhance productivity of physical resources
 Better overall supply chain management
10
 Building alternative economic
channels
 Significant potential for diversification
 Rural tourism
 Rural business process outsourcing
 Health services, restaurants and construction
 Develop “missing” markets to increase
opportunities
 Creating specialised network organisations to build
links between rural and urban markets
 Partnerships between rural enterprises and larger
corporates
 Increasing SME activity thereby increasing
11 employment
 Leading to…
 GDP growth of about 10% in the medium
term
 Continued momentum in the services sector
and industrial sector and resurgence of
agriculture

 Demand growth driven by demographic

advantage
 Increased
Taking India’saggregate
growth to supply due
the next to level
higher
improved productivity, efficiency and
market linkages
12
 India’s growth: the next level
 India’s GDP will grow to US$ 28 trillion by
2050
 France at US$ 3 trillion, Germany and UK
at US$ 4 trillion

 India’s GDP would surpass that of France

by 2020 and Germany and UK by 2025

 India’s economy will be larger than all

but the US and China in 30 years

 India will record the fastest growth in the

world over the next 50 years
Source: Goldman Sachs BRICS report
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