HK Prsn

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Binay Chandgothia 10th March 2004
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The India Story

• GDPUS 477bn (2002-03)
• 50 services, 25 manufacturing 25 agriculture
• Savings Rate 24 of GDP
• GDP Growth expected to be around 8

The India Story

• .

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The Pretty side of it..
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Strong Industrial Production Growth

• After five years of decline, the Industrial
  growth is on an upswing since April 2002
• IIP growth was 6.2 in Apr-Nov03 against 5.4 in
  Apr-Nov02
• Manufacturing growth was 6.8 in Apr-Nov03
  compared to 5.6 in same period last year

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Affordability Consumers reap benefits of free
markets

• Apr-Nov03 consumer durable sector index grew by
  7.7 against 5.9 decline in the same period last
  year

• TV receivers, passenger cars and wrist watches
  are major source of growth of production index of
  consumer durables

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Impressive growth in Passenger Car Sales

• In 1990 India produced 125,000 motor cars. In
  2003-04 India is expected just to export as many
  cars
• April-Dec03 car sales grew by 31 against 8.2 in
  Apr-Dec02
• Buoyant economic growth, low interest rates major
  factors for robust sales growth

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Telecom Sector At cusp of an inflection point

• Tariffs have declined 70 since 2000
• Total Cellular base to touch 100mn by 2007
• Incremental Volumes/sub to drive volumes 22
  growth in revenues through 2007

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Strong External Position

• Foreign Exchange Reserves exceeded US 100 bn
  from less than US 1 bn in 1991
• External trade rises sharply as both imports and
  exports go up

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Indian Goods Services, now globally Competitive

• Every Automobile produced in the world, has
  atleast one component made in India

• Significant Growth in BPO/ITES

• Software, Pharma- 1/3rd of global costs

• Pharma products- All FDA certified

• Steel Tata Steel is the lowest cost producer

• Jaipur Foot US 30 in India as compared to US
  10000 globally

• US 7 per Cornea compared to US 800 globally

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Significant Thrust on Infrastructure Spending

• Power generation reaches an all time
  high,Apr-Dec03 electricity shortage of 6.9
  against 9 last year
• Corporate volumes growth owing to infrastructure
  and private capacity creation.
• Government spending on infrastructure to
  accelerate going forward

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And the Not so PRETTY side..
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Is Capex Really Happening?

• Non-food credit is up 15 yoy but.
• outstanding gross bank credit to the industry
  (large and medium) has actually declined by 0.9
  between April and November 2003. This segment
  actually repaid Rs 20bn of bank credit. Is
  internal accruals financing the capex?
• housing has been a amongst the major contributors
  to growth. Gross bank credit jumped by Rs 88bn
  during the same period, implying a growth of over
  24

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Fiscal Deficit-The party spoiler

• The combined (state and centre) fiscal deficit
  has been at 10-11 of the GDP.
• Such a large combined deficit has the potential
  of derailing any sustained economic recovery
• Will the revised estimate by FM of fiscal deficit
  declining to 4.8 of GDP this year be achieved
  and sustained?

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FDI InflowsWhere is the money?

• Between April and December 2003, the FDI inflows
  (net of acquisitions) have amounted to just USD
  799 m. On the other hand FII inflows during April
  to October 2003 amounted to USD 4,800mn
• The low level of FDI inflows remain an area of
  concern.

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Higher Inflation threatens to spoiling the Party?

• Supply Side pressures higher metal and oil
  prices finished product prices still soft
• Further rise in basic commodity prices can cause
  monetary stance to change disrupt growth

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Interest Rates where are they headed?

• RBI policy critical Market Stabilisation Bonds,
  LAF
• IF MSBs and LAF are market friendly, yields
  should stay in the 5.10-5.30 band (10yr gilt)
  else they could edge up by 25-50bps during the
  year
• Jokers in the Pack
• Oil and METAL Prices
• Election outcome
• US Fed Stance

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We are on a different level

• We are now on a different level, ready to TAKE
  OFF
• Sky is the limit if only we IMPLEMENT well
• Continuity of reforms holds the Key

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Thank You