INDIA’S PROMISEINDIA’S PROMISE Challenges & Challenges & Opportunities Opportunities

APBOAPBO March 2007March 2007

Delhi, Capital City

POP: 13 million

Bangalore“Silicon Valley of

India” POP: 7 million

BJP+ 189 Seats

Left 61 Seats

Others 70 Seats

Cong+ 219 Seats

Political Political UncertaintyUncertainty

COALITION GOVERNMENTS

TO STAY

ECONOMIC REFORMS

SECURE

UNITED PROGRESSIVE UNITED PROGRESSIVE ALLIANCEALLIANCE

Sonia Gandhi Pranab Mukherjee

Kamal Nath Praful Patel

Sharad Pawar

BhattacharyajeeNirpuam Sen

Karunakaran

DMK

13 Constituents

Indian National Congress

Congress Allies

Prakash Karat

Left Front

UPA COMMON MINIMUM PROGRAM

Agriculture - “A New Deal For Rural India” Infrastructure - “Building World Class” Employment - “Rozgar Badhao” Education - “Improving Access and Excellence” Health Care - “Creating Capabilities” Water - “Better Access, Better Utilization” Urban Renewal - “Humane and Modern”

UPCOMING STATE ASSEMBLY UPCOMING STATE ASSEMBLY

ELECTIONELECTION

Population 179,000,000

80 Parliamentary Constituencies

4 Phase Poll April / May

TransparencyTransparency

BELL HELICOPTER BELL HELICOPTER

MOTOROLA MOTOROLA

Procurement Challenges

RED TAPISMRED TAPISM

1500 KM8 Days

RED TAPE / TAX ANOMALIES / POOR INFRASTRUCTURE

July 2006

Challenges in InfrastructureChallenges in Infrastructure

48 new road projects worth $12 bn are presently under construction

Indian Railways require $22 bn investment

India’s port upgrades require a total investment of $22 billion

Domestic aircraft movements have shot up by 40%

Modernization requires upgrading 25 of the country’s national airports100,000 MW required by 2012

LAND ACQUISITION-LAND ACQUISITION-SEZs SEZs

NANDIGRAM

WEST BENGAL

5000 POLICE

16 KILLED

68 WOUNDED

TOTAL BANDH

HIGHLY POLITICIZED – SEZs ON HOLD

HUMAN RESOURCE HUMAN RESOURCE CONSTRAINTCONSTRAINT

ITES/BPO INDUSTRY GROWING @ 45% Qtr ITES/BPO INDUSTRY GROWING @ 45% Qtr

QUALIFIED HELP IN SHORTAGEQUALIFIED HELP IN SHORTAGE ATTRITION RATES > 30%ATTRITION RATES > 30%

FINISHING SCHOOLS REQUIREDFINISHING SCHOOLS REQUIRED

CONTRACT LABOR & LABOR REFORMS A CONTRACT LABOR & LABOR REFORMS A MUSTMUST

INDIA’S ECONOMIC INDIA’S ECONOMIC LEADERSHIPLEADERSHIP

Manmohan SinghPrime Minister

Montek Singh AhluwaliaPlanning Commission Deputy

ChairmanP.

ChidambaramMinister of Finance

•Considered the “Father of India’s Economic Reforms”•Economist by training, Strong free-market advocate•Excellent rapport with President Bush

•Private / Public Sector Interlocutor•Economist by training, Oxonian•World Bank background / Easily accessible

• “Inclusive” Budget•Supreme Court Advocate, Harvard MBA

•Pragmatic reformer

SCORECARD ON REFORMSSCORECARD ON REFORMSProgress Progress

• Insurance FDI up to 26% Insurance FDI up to 26% • Telecom up to 74% Telecom up to 74% • Oil/Gas, Roads, Ports up to 100%Oil/Gas, Roads, Ports up to 100%

• Real estate opened to 100%Real estate opened to 100%

• Open Skies: Boeing SalesOpen Skies: Boeing Sales

• Patents Act -IPR Protection: Re-entry of MerckPatents Act -IPR Protection: Re-entry of Merck

• Retail (Single Product): Wal-Mart EntryRetail (Single Product): Wal-Mart Entry

• Civilian Nuclear Cooperation – 123 AgreementCivilian Nuclear Cooperation – 123 Agreement

•15 Special Economic Zones (SEZ’s) at present 42 approved for 2007

GDP Growth Rate > 8%GDP Growth Rate > 8%

6 Million New Cell Phones Registered Last Month!

020406080

100120140160180200

1995 2000 2006

More than 300 of the Fortune 500 are in India

IBMIBM :: 53,000 employees 53,000 employeesCognizantCognizant :: 48,000 employees 48,000 employeesGeneral Electric:General Electric: :: 20,000 employees 20,000 employeesOracleOracle : : 18,000 employees18,000 employeesHewlett-PackardHewlett-Packard :: 11,000 employees 11,000 employeesHoneywellHoneywell :: 7,000 employees 7,000 employeesAmerican ExpressAmerican Express : : 4,000 employees4,000 employeesDellDell : : 3,800 employees3,800 employees

IT/ BPO BoomIT/ BPO Boom

MANUFACTURINGMANUFACTURING

Automobile Components - Worth $15 bn 20 % Annual Growth in Exports

Ford – Producing 30,000 units; Doubling Capacity in 2006-2009 timeframe

General Motors – Expecting to sell 30,000 units in 2006; output to be doubled

Boeing - $12.1 bn sale of civilian aircraft to Air India with significant co-production; recognition of India’s manufacturing prowess

OPPORTUNITIES IN AGRICULTUREOPPORTUNITIES IN AGRICULTURE

$15 bn investment opportunity in storage,

transportation, and refrigeration facilities.

Blue Diamond Growers – India is 4th Blue Diamond Growers – India is 4th

largest and fastest growing marketlargest and fastest growing market

Coca Cola has major presence Coca Cola has major presence

throughout the countrythroughout the country

Pepsi is a major player Pepsi is a major player

with sales $700 mn with sales $700 mn

McDonald’s has introduced the McVeggie McDonald’s has introduced the McVeggie

burger and Veg Pizza McPuffburger and Veg Pizza McPuff

Domino Pizza, Pizza Hut and Kentucky Fried Domino Pizza, Pizza Hut and Kentucky Fried Chicken Chicken

have all established restaurants in India.have all established restaurants in India.

U.S. DEFENSE COMPANIESU.S. DEFENSE COMPANIES

Fremont Group

DEFENSE TRADE DEFENSE TRADE

F-18 Super Hornet

FireFinder & PAC

III

P-3 Orion

F-16 Fighting Falcon

GE-404 Engine

Bell 407 Helicopter

C-131 Transport

Boeing 737 Countermeasure Equipment

Pac-3 Antimissile

System

Next Steps in U.S.-India Strategic Partnership:Major Opportunities in Defense Cooperation - $30

billion

Indian Space Program 5Indian Space Program 5thth largest after U.S., Russia, Europe, China largest after U.S., Russia, Europe, China

$450 mn annual budget, but due to lower wages is equivalent to $450 mn annual budget, but due to lower wages is equivalent to multi-billion dollar program in U.S.multi-billion dollar program in U.S.

Space Exploration – Chandrayan I: India plans to launch its first Space Exploration – Chandrayan I: India plans to launch its first unmanned mission to the moon by 2008unmanned mission to the moon by 2008

NASA agreement with ISRO to send scientific instruments into space NASA agreement with ISRO to send scientific instruments into space aboard India’s Chandrayan Iaboard India’s Chandrayan I

Export Control Regimes; Strategic Partnership ChallengesExport Control Regimes; Strategic Partnership Challenges

US-INDIA SPACE US-INDIA SPACE PARTNERSHIPPARTNERSHIPAn Important Component of Strategic Partnership

NEXT WAVE: NEXT WAVE: PHARMACEUTICALSPHARMACEUTICALS

$6.5 bn and growing at 8-10% $6.5 bn and growing at 8-10%

4th largest pharmaceutical 4th largest pharmaceutical industry in the worldindustry in the world

Expected by 2008 to be Expected by 2008 to be worth $12 billionworth $12 billion

Private Hospitals firmly entrenched: Private Hospitals firmly entrenched: Apollo, Manipal, Escorts, Max HealthcareApollo, Manipal, Escorts, Max Healthcare

Medical TourismMedical Tourism

R&D Centre, Bangalore

India Development Centre,Bangalore, Hyderabad

India Engineering Centre, Bangalore

Software Lab, Bangalore, Pune

Labs India, Bangalore

Innovation Campus, Bangalore

Bangalore

R&D Centre, Bangalore and Mumbai

INNOVATION FRONTIER: R & DINNOVATION FRONTIER: R & D

R&D Centre, Bangalore

INDIA LOOKS OUTWARD INDIA LOOKS OUTWARD

Tata Group - $12 BNTata Group - $12 BN Reliance - $22 BNReliance - $22 BN Essar - $9 BNEssar - $9 BN Birla - $6 BNBirla - $6 BN

•Videocon–Daewoo Electronics-Videocon–Daewoo Electronics-$650 $650 •Dr. Reddy’s Lab–Betapharm - Dr. Reddy’s Lab–Betapharm - $570$570•Ranbaxy–Terpia - $324Ranbaxy–Terpia - $324•VSNL Tyco Global-$130VSNL Tyco Global-$130

WHY INDIA ?WHY INDIA ?

Coherent democracy; Pluralist/SecularCoherent democracy; Pluralist/Secular 1/5th World’s Population; 21/5th World’s Population; 2ndnd largest military in the largest military in the

worldworld Common Values: Against Terrorism, Trafficking, Common Values: Against Terrorism, Trafficking,

NarcoticsNarcotics Ideological Partner re: Nepal, Sri Lanka, Bangladesh, Ideological Partner re: Nepal, Sri Lanka, Bangladesh,

ChinaChina Common Law Judicial SystemCommon Law Judicial System 22ndnd largest number of Doctors, Engineers, PhDs in the largest number of Doctors, Engineers, PhDs in the

worldworld 100,000 Students to U.S. Each Year100,000 Students to U.S. Each Year 1.8 mil Americans of Indian Origin1.8 mil Americans of Indian Origin Politically significant; Politically integratedPolitically significant; Politically integrated 54% of Indian Population is under the Age of 2554% of Indian Population is under the Age of 25

ECONOMIC, IDEOLOGICAL, AND ECONOMIC, IDEOLOGICAL, AND STRATEGIC PARTNERSSTRATEGIC PARTNERS

India is Rising, Becoming Vital to U.S. Interests

AccentureAdobe Systems, Inc.Akin Gump LLPAltria Group, Inc.AM General LLCAmas Investment & Project ServicesAmway CorporationAndrews Kurth LLPBaker & McKenzie LLPBank of AmericaBloombergBoeing CompanyCargillCaterpillar, Inc.CBay Systems

ChevronCMS EnergyThe Coca-Cola CompanyComputer AssociatesCovanta EnergyDell Computer Corp.Deloitte & ToucheDiscovery CommunicationsDow AgroSciencesDow JonesDuPont, Inc.eBay Inc.Estee LauderFord Motor CompanyFremont Group Limited

General DynamicsGeneral Motors Gerson Lehrman GroupGuardian Life InsuranceGerson LehrmanGuardian Life InsuranceHughes Network SystemsIBM, CorporationIDFC Ltd.Johnson & JohnsonJ.P. Morgan ChaseK. Raheja UniversalKotak MahindraL-3 CommunicationsLockheed Martin

McGraw-HillMerck & Co.Microsoft CorporationMonsantoMotorola, IncNews Corporation Ltd.Northrop GrummanOracle CorporationPanAmSatPaul Weiss LLPPfizer Inc.Pratt & Whitney/United TechnologiesSony Pictures EntertainmentStandard Chartered Bank

Target CorporationTata, Inc.Texas InstrumentsTextron Inc. Time Warner Inc.Thomson FinancialUnited Parcel ServiceVickery InternationalWal-Mart Inc.Watson Wyatt WorldwideXerox Corporation

Griffith & Rogers

BARBOUR GRIFFITH &

ROGERS

eMR Technology Ventures

Steptoe & Johnson LLP U.S.-INDIA BUSINESS COUNCIL

32 YEARS of GROWING ENTERPRISE

INDIA’S ENERGY SECURITY INDIA’S ENERGY SECURITY CHALLENGECHALLENGE

Gas pipeline from Iran, discouraged

by U.S.

Coal supplies for 200 years, but high/ash, low calorie value

Oil discovery by Cairn Energy in 2004; India’s demand will

outstrip supply

Gas discovery by Reliance in 2003 but will service only fraction of India’s power

needs

Tarapur- India’s “civilian” nuclear reactor requires

refueling

Kakrapar- World’s first thorium-based nuclear

reactor

Gas pipeline from Turkmenistan,

through Pakistan, but questionable

reserves

Gas pipeline from Myanmar through

Bangladesh discouraged by U.S.

Hydro-Electric Dam at Narmada

constrained by problems with environment