Confederation of Indian Industry

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Confederation of Indian Industry
FOCUS INDIA State of the Indian
Economy Presented by Ms Anshula Kant CEO, State
Bank of India, Singapore
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Key Features of the Indian Economy

• Robust GDP growth
• Manufacturing Services are leading the way
• Growth is Sustainable
• Growing Externalisation of the Economy
• India is emerging as a global manufacturing hub
• Large Population and favorable demographics
• High Skill-level in Labour force
• Continuing Economic Reforms
• 
  

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Large and Growing Economy (2005-06)

• GDP Inflation
• GDP grew by 9.0 to US 738 bn
• Average Inflation - 4.5.
• Foreign Trade Reserves
• Exports grew by 25 to US100.7 billion
• Imports grew by 36 to US140.2 billion
• Forex reserves (Feb 07) US 185.0 bn
• Investment
• The FDI inflows grew by 37 to US 7.7 billion

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High GDP Growth ()
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Sectoral Growth
Source Economic Survey 2006-07
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Sectoral Growth
Industry Improving Trend in Sectoral Growth ()
Source Economic Survey 2006-07
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Sectoral Growth
Services Improving Trend in Sectoral Growth ()
Source Economic Survey 2006-07
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Composition of GDP
GDP Composition Undergoing a Drastic Change
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Inflation ()

Source Economic Survey 2006-07
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Per Capita Income
People Getting Richer
Source Economic Survey 2006-07
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Savings Investment
Rising Savings Investment
Source Economic Survey 2006-07
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Non Food Credit
Consumption and Investment Moving Northward
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Corporate Performance
Growth in Sales On a High
Source CMIE
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Stock Market
Sensex Spiraling up
NSE third largest and BSE fifth largest in terms
of number of transactions in the world
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Improving Fiscal Situation
Source Economic Survey 2006-07
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Social Sector
Social Sector Spending Needs to Rise (Centre and
State Government combined- As a of GDP)
Source Economic Survey 2006-07
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Trade Performance
Impressive Growth in Export and Import ()
Source RBI
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Growing Externalization
Trade as a of GDP is on a rise
Source Economic Survey 2006-07
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Foreign Capital Inflows ( US Billion)
Expanding Foreign Investment
7.1 (Nov)
4.0 (April-Aug)
Source RBI
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Forex Reserves
Rapid Expansion in Foreign Reserve (US Bn)
Source RBI
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Indias FDI Abroad Rapid Increase
Source RBI
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India Advantage General
Excellent network of research laboratories
Well-developed base industries
Fast rising middle class and consumption
Proficiency in English
Trained manpower and knowledge base
Low manpower costs
Pro active policy framework
Favorable Demography
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India Advantage Young
Percentage of Population aged 65 and older
Source WEF
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India Advantage Favorable Demographics
A strong demand driver
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India Advantage Growing Knowledge Pool
Source World Bank, World Development Indicator
Report
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India Advantage High Investors Confidence
FDI Confidence Index 2005 shows India as 2nd most
Favoured destination
Source AT Kearney
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India Advantage Innovation
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India Advantage Stable Exchange Rate
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India Advantage Continuing Economic Reforms

• Rupee made fully convertible on current account
  since Mar-93
• Capital Account Convertibility for foreigners and
  NRIs
• Abolition in Industrial licensing except for a
  few strategic sectors
• Rationalization of Direct and Indirect taxes
  Implementation of VAT creating ground for GST
• Removal of all quantitative restrictions on
  imports
• Greater autonomy for PSUs

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India Advantage Continuing Economic Reforms

• Portfolio investments by FIIs allowed both in
  Equity and Debt markets
• FDI allowed in most sectors including insurance,
  and limits raised in telecom, refining, banking
  and real estate
• The Fiscal Responsibility and Budget Management
  (FRBM) Act to restrict the fiscal deficit.
• Banking sector reforms
• -Entry of private banks
• -Conditions for foreign banks liberalized
• Financial sector reforms
• -RBI Autonomy
• -Pension Reform Bill
• -Creation of regulators in stock market,
  insurance sector, telecom etc.

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Union Budget 2007-08 Snapshots
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Key Budget Highlights

• Manufacturing growth rate estimated at 11.3 per
  cent.
• Saving rate of 32.4 per cent, investment rate of
  33.8 per cent will continue
• Bank credit grew by 29 per cent during first ten
  months of 2006-07.
• A number of proposals to perk up agriculture to
  be announced.
• Outlay on rural infrastructure to increase by
  31.6.
• Allocation on Healthcare to increase by 21.9 per
  cent.
• Allocation for education to be enhanced by 34.2
  per cent.
• Spending on national highway programme increased
  to 106.67 billion rupees for next fiscal year
  from 99.45 billion in previous year.

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Budget Allocation for Major Sectors

• Industry
• Textiles
• Provision for Scheme for Integrated Textiles
  Parks to increase from US 44.0 mn to US 98.0
  mn
• Technology Upgradation Fund scheme to continue
  with provision of US 211 mn.
• Handlooms
• Additional 100-150 clusters to be taken up in
  2007-08
• Health insurance scheme to be extended to more
  weavers
• Allocation for the sector to be enhanced from US
  56.0 mn to US 74.0 mn.
• Services
• Tourism
• Provision for tourist infrastructure to increase
  from US 98.0 mn to US 120 mn.
• Foreign Trade
• Merchandise exports expected to cross US125
  billion by the end of the current fiscal.

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Budget Allocation for Major Sectors

• Information Technology
• Allocation for e-governance to increase from US
  91.0 mn to US 166 mn
• Rs.330 mn to be provided for a new scheme of
  manpower development for software export
  industry.
• VAT, CST and a Roadmap towards GST
• Agreement reached with State Governments to phase
  out CST
• CST Rate to be reduced from 4 to 3 with effect
  from April 1, 2007
• A roadmap for introducing a national level Goods
  and Services Tax (GST) with effect from April 1,
  2010 to be prepared.
• Deficits
• As per the revised estimates (RE) 2006-07, the
  fiscal and revenue deficit as a percentage of GDP
  stood at 3.7 and 2.0 respectively.
• For 2007-08, the fiscal and revenue deficits as a
  proportion of GDP have been proposed at 3.3 and
  1.5, respectively.

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Tax Proposals

• Indirect Taxes
• Customs duties
• Peak rate of duty for non-agricultural products
  to be reduced from 12.5 to 10 .
• To promote research and development, concessional
  rate of 5 duty to be extended to all research
  institutions registered with the Directorate of
  Scientific and Industrial Research
• Excise Duties
• Reduction in advalorem component of excise duty
  on petrol and diesel from 8 to 6.
• Exemption limit for small scale industry (SSI) to
  be raised from Rs.10 mn. to Rs.15 mn.
• To encourage food processing sector, biscuits
  whose retail sale price does not exceed Rs.50 per
  kilogram and all kinds of food mixes including
  instant mixes to be fully exempt.
• Service tax
• Exemption limit for small service providers to be
  raised from Rs. 0.4 mn to Rs. 0.8 mn.
• Direct Taxes
• Threshold limit of exemption in the case of all
  assessees to be increased by Rs.10,000 (USD 233 )
• Surcharge on income tax on all firms and
  companies with a taxable income of Rs. 10 mn or
  less to be removed.
• Rate of Dividend Distribution Tax to be raised
  from 12.5 to 15 on dividends distributed by
  companies.

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