Spicing Up - CIBC World Marketsresearch.cibcwm.com/economic_public/download/canada...prospects look very promising, as its middle class is set to grow rapidly in the coming decades

Spicing Upthe Ontario-India Economic Relationshipby Benjamin Tal, Krishen Rangasamy and Emanuella Enenajor

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Forward

When looking at the economic ties between Ontario and India two key aspects stand out.

1. Existing trade and investment between the two jurisdictions is surprisingly small. 2. The potential to build stronger ties is significant.

Ontario’s predominant focus on its major and lucrative trading partner in the US has seen it largely ignore other markets and opportunities. While much discussion has taken place over the years about the need for Ontario to broaden its trading partners, until recent times the strength of the economic relationship with the US has precluded any real need to build ties with other markets.

However, the rapidly changing global economy is dictating the need for Ontario to broaden its trade perspectives. India should obviously be a top priority in this shift, given the size and rapid growth of the Indian economy and the many cultural and other links between the two jurisdictions. It is clearly in the interests of both economies to see trade and investment climb from current levels.

For India, Ontario has the expertise to provide many of the products and services required as it expands its economy. This includes world recognized capabilities in many of India’s highest need areas -- from developing its infrastructure by expanding its power, road and rail grids, to improving the safety of the food supply chain, to expanding educational opportunities for its young population. Given the growing role of the private sector in these sectors and services, India could clearly benefit from tapping into Canada’s stable capital markets.

For Ontario, India’s continued high rate of growth provides many opportunities to expand its export capabilities. Given Ontario’s significant Indo-Canadian population and Commonwealth and English-language ties, the opportunities for Ontario industry are significant. However, the reality is Ontario firms have been slow off the mark in developing potential opportunities in India and are lagging behind many other nations.

But the good news is that trade between India and Ontario is beginning to grow. Over the past five years, trade has increased by 39% to $1.6-billion annually. However, the balance in trade clearly favours India, as the country exports three times ($1.2-billion) as much to as it imports ($400-million) from Ontario.

Indian companies increasingly see Ontario as a gateway to the American market and corporate investment in Canada has already outstripped Canadian investments into India. The recent efforts of the Ontario government to accelerate ties between the two jurisdictions should help increase Ontario’s economic participation in India. However, in the end growth is dependent upon Ontario companies broadening their horizons and adopting a more aggressive approach to doing business in the world’s largest democracy.

Benjamin Tal Managing Director and Deputy Chief Economist

CIBC World Markets Inc.

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With the rapidly changing global economy, it is becoming clear that Ontario needs to diversify its trading relationships. And judging by its recent actions, the Ontario government recognizes that India will be one of the leading growth engines of the 21st-century world economy. It is also clear that the province is committed to further building trade and investment ties with its Commonwealth partner.

The strength of the Indian economy was most visible during the recent global recession. While much of the world’s economy was reeling, the Indian economy lost only moderate ground relative to its peers. India was also the first country to recover from the recession – a recovery driven largely by a vibrant domestic economy.

The country is one of the most attractive investment destinations across the globe due to its rapidly rising per capita income; surging manufacturing sector; expanding high technology and service sectors; renewed focus on infrastructure and natural resources requirements; and its accelerated pace of market deregulation.

Foreign direct investment into the country has risen at an annual pace of 21% over the past decade, and corporate India is emerging as a dominant outward investor. The $75 billion of overseas investments during the past decade reflects the rising trend of Indian companies seeking a North American presence. They are seeking that presence to leverage their lower cost home production base as well as to enhance their technological capabilities and expand supply chain relationships.

And India’s future looks even brighter. At this rate of economic growth, India is on track to become one of the top five major economies and consumer markets in the world by 2025. The projected increase in the size of the Indian middle-class by some 300 million people by 2025 means that consumer spending will quadruple in the coming two decades. Furthermore, India’s demographic

dividend of a growing force of young skilled people in professions such as IT services, medicine and education, positions it well to remedy the projected shortage of 35 million skilled professionals and labourers in the developed world by 2020. This will have major positive economic spin-offs to its domestic economy.

In this context, the strong cultural, family and commercial ties between Ontario and India provide the province with a significant competitive advantage over other jurisdictions. With close to 600,000 people of Indian origin in Ontario, and trade volume rising by more than 39% over the past five years, the trade and investment opportunities have already caught the eye of many Canadian organizations such as the Canadian Council of Chief Executives, Canadian Chamber of Commerce, Ontario Chamber of Commerce, and the Greater Toronto Marketing Alliance. The provincial government and those organizations are building on the important work that was pioneered by organizations such as the Indo-Canada Chamber of Commerce and the Canada-India Business Council.

Simply put, Ontario has many of the resources and capabilities that India is looking for to continue its rapid economic growth. India’s requirements for infrastructure investment offer a significant potential for both large and smaller Ontario engineering, architectural, and design firms – many of whom have amassed invaluable experience in markets like the Middle East that can easily be put to work in India. The province’s world class experience with green infrastructure, green building, water and wastewater management offers significant scope for collaboration in the coming years.

Ontario’s recognized expertise in mining financing also offers potential as India looks aggressively for resources to fuel its expanding economy. The globalization of the world automotive industry

Spicing Up the Ontario-India Economic Relationship

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offers potential for trade, technology transfer and investment. The underleveraged education sector in India is another important opportunity for Ontario with the number of Indian students looking to attend foreign universities and colleges growing rapidly. In recent years, more and more Indian students have turned their attention to Ontario’s schools. Ontario’s Educational institutions can also benefit from the growing need in India to build and develop educational infrastructure in the country.

Yes the world is coming to India, but increasingly India itself is reaching out to the world. The economic strength of corporate India, which is aggressively looking for avenues to diversify its operation base and reach out, is largely derived from a sound domestic base, significant financial resources, along with first class technology and management expertise. And as those corporate titans search to expand abroad, Ontario is emerging as a preferred destination.

In fact, Indian greenfield and M&A investments into Canada have already outstripped Canadian investments into India. Not only does Ontario provide a gateway to the American market, but its ever expanding service sector provides a natural expansion base for Indian companies in sectors such as film and information technology and communication (ITC). Indian software developers will increasingly look for “near shoring” opportunities to service the North American market by taking advantage of Ontario’s low cost environment and favourable tax-based incentives for research and development.

Canadian and Indian businesses can go even farther. The relative strength of India in fields such as management, IT support, ICT technology and specialized equipment naturally complements Canada’s strength and expertise in engineering, equipment technology and environmental sciences. These synergies can be easily translated into joint ventures for projects in developing countries.

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The Indian Economy – An Outperformer

India has often been referred to as a sleeping giant despite its GDP growth averaging a healthy 6.5% a year over the last two decades. With its demographic advantages and room to realign resources towards more productive areas of the economy, India could potentially outperform all countries in the coming decades offering tremendous opportunities not just for its local population but also for countries with whom it has major trade links.

Given Ontario’s significant Indo-Canadian population and Commonwealth and English-language ties, the opportunities for the Canadian economy are significant. Whether those opportunities translate into actual dollars for Canada will depend on the ability of our corporations to adopt a more aggressive approach to investing in the world’s largest democracy.

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Chart 1

WORkING-AGE POPUlATION GROWTh RATES, 2009Chart 2

CONSUMPTION SPENDING AlREADY RAMPING UP

Source: Price Waterhouse Coopers Source: Bloomberg, CIBC

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DEMOGRAPhICS: ADvANTAGE INDIA

On demographics alone, India is an attractive proposition for investors. The country already has the highest working-age population growth rates in the world (Chart 1) and that advantage is likely to be preserved, with roughly a quarter of the increase in the global population in the 15–64 age bracket over the next three decades projected to be in India1. The increase in the proportion of the working-age group and the corresponding drop in the dependency ratio (i.e. the ratio of elderly and children to working age population) should raise the savings rate beyond the current 35% of GDP in coming years, and allow India to avoid a problem that limited its growth during the 1980s and 90s when a national savings rate of only 20% of GDP constrained investment spending. More importantly, those savings can now be utilized in a much more efficient way given the significant improvement in the banking sector and financial industry in general.

As its portion of working-age population expands, India’s per capita contribution to GDP is set to increase. That demographic advantage should not only boost the Indian economy but also its asset markets. A recent study2 spanning over twenty countries and sixty years of data, showed that a 1% increase in the size of the 45-49 age group generally translates to roughly a percentage point increase in the long-term average stock market return and a half-percentage point increase in the average bond return.

Even excluding that demographic dividend, India’s prospects look very promising, as its middle class is set to grow rapidly in the coming decades as more people benefit from economic growth and step up into the ranks of the middle class. In fact, the fast-growing middle class is expected to reach over 40% of the population by 20253. The increase in purchasing power is already fueling an increase in consumption spending, particularly for durable goods (Chart 2), and is set to maintain domestic demand as a major contributor to GDP for decades to come.

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Source: Indian Central Statistical Organization, CIBC

GDP Growth By Industry (Since 2006)

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SERvICES SECTORS hAvE OUTPERFORMED (1988 - 2008 GROWTh RATE)

BIGGER POTENTIAl FOR RESOURCE-ShIFTING IN INDIA

Generally, as a developing country moves on to the next phase of maturity, resources are shifted away from low-productivity sectors, like agriculture, to high-productivity ones where economies of scale are possible. In most cases that implies expanding into the manufacturing sector before moving on to high-value services sectors. India seems to have turned that conventional wisdom around. While it is slowly starting to expand into manufacturing, its service-providing sector has already taken off. The services sector, which made up around 37% of GDP in 1980, has expanded rapidly to reach 55% of the economy today (Chart 3).

Thanks to technological advances, economies of scale are now achievable in service-providing industries as well. Call centre outsourcing, IT and engineering services are examples of successes made possible by advancements in communications technology that has effectively bridged India to consumers and businesses in the developed world. And with India’s seemingly unlimited pool of highly qualified engineers, technology-based services are likely to maintain the momentum towards a more services-based economy.

That said, productivity gains won’t be limited to services. India’s manufacturing sector, while late out of the gate, is picking up speed. The scope for manufacturing expansion is enormous. Agriculture currently accounts for 17.5% of GDP in India, meaning that there is significant room for further productivity gains in transferring resources to the factory sector.

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Chart 4

ElEvATED INFlATION FORCING RBI TO RAISE INTEREST RATES

Source: Bloomberg, CIBC

POTENTIAl ECONOMIC hURDlES

While India seems ready for take off, it faces some potential economic hurdles that need to be watched. For one, inflation remains a threat to growth. The spike in food and energy prices, which together account for over half of the weight in India’s CPI, had pushed inflation to double digits until recently (Chart 4, top), prompting the Reserve Bank of India (RBI) to raise its repo rate by 200 basis points in the last twelve months alone (Chart 4, bottom). Further tightening is needed to bring real interest rates into positive territory and we expect the RBI to hike another 50 basis points in the third quarter en route to taking the repo rate to pre-recession levels of 9% by the end of next year (Table 1 - see page 8).

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INvESTMENT AlREADY SOFTENING

Source: haver Analytics, CIBC

table 1:

INTEREST RATE AND ExChANGE RATE OUTlOOk

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End of Period Q1A Q2F Q3F Q4F Q1F Q2F Q3F Q4F Q1F Q2F Q3F Q4F

Repo Rate 6.75 7.25 7.75 8.00 8.25 8.50 8.75 9.00 9.00 9.00 9.00 9.00

Rupee 44.6 44.7 44.8 45.0 44.6 44.2 44.0 43.9 44.3 44.7 45.0 45.5

Banks are already passing such tightening signals onto borrowers, which is impacting investment demand. The growth rate in capital spending has come down quite steeply from 25% in the first quarter to about 5% in the third quarter of 2010. Clearly, higher rates are hurting corporate margins, and with the RBI attempting to stay ahead of the curve, that will pose challenges for the investment environment (Chart 5). higher rates are already having an impact in raising the savings rate and that trend will probably continue in the coming quarters. This has taken some steam out of consumption and will likely hold GDP growth below 8% this year. however, as noted earlier, a stronger savings rate also offers benefits in terms of creating additional capacity for investment spending.

Another area that will warrant attention is the value of the Rupee, India’s currency. While it remains weaker in nominal terms compared to before the global recession hit, the Rupee is now much stronger in real terms (Chart 6, top). high inflation in India relative to its trade partners has caused the real Rupee to appreciate, which has had an impact on the competitiveness of Indian goods and services in global markets. That, coupled with rising domestic demand for imports, has caused the current

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Source: IMF, Reserve Bank of India, CIBC

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REAl RUPEE hAS APPRECIATED (top), lEAvING A lARGER DENT IN INDIA’S ExTERNAl BAlANCE (bottom)

account deficit to widen in recent years (Chart 6, bottom). Also of note is the fact that the financing of the external deficit has come mostly via volatile portfolio flows. In fact, were it not for huge portfolio investment inflows into the IPO market in 2010, the Rupee could have weakened significantly last year, in line with the steady decline in net Foreign Direct Investment (FDI) inflows.

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The large external imbalance remains the Rupee’s Achilles heel and that’s why, despite India having favourable interest rate spreads and a buoyant economy, we expect any appreciation to be minimal through 2012. With the U.S. Fed starting to hike rates in a couple of years and India’s repo rate stabilizing near pre-recession levels, we expect the narrowing spread to take some steam out of the Rupee/US$ exchange rate come 2013 (Table 1 - see page 8).

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GROWING PRIvATE SECTOR INvOlvEMENT IN INFRASTRUCTURE

While investment in infrastructure has traditionally run at about 3% of GDP in India, this number has been growing steadily in recent years and is expected to continue to grow. Recently, the government has been targeting wider private sector involvement. For instance, with regards to funding, the government is encouraging bank participation in order to tap retail investors. how quickly India capitalizes on its massive potential will depend, in large part, on the success of government reforms in unleashing a new wave of infrastructure projects.

GOvERNMENT SEEkS MORE SUSTAINABlE FINANCING

A third area that needs focus is government finances. last year, the budget deficit was over 10% of GDP and the public debt over 70% of GDP (Chart 7). The government is, accordingly, working towards a more sustainable path for the deficit. Tax reform is being aimed at eliminating distortions and reducing the size of the underground economy. The thirteenth Finance Commission tabled in parliament last year called for the budget deficit to shrink by 4 percentage points of GDP, and for public debt-to-GDP to drop from 79% to 68% by 2014-15. Those targets may be ambitious given the hardships brought by the recent food price spike which warrant more, not less, government spending and subsidies on food, fuel and fertilizers. So, for now, fiscal tightening towards the target is an unlikely scenario meaning that the RBI will have to continue shouldering the burden of reining in inflation. But letting monetary policy do all the heavy lifting for too long can be hazardous as India would have learnt from its own experience of the late 1990s when interest rates went up to 12% and growth slowed to 2%.

Source: IMF, CIBC

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ROOM FOR IMPROvEMENT IN GOvERNMENT FINANCES

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Ontario boasts the largest provincial economy in Canada and the seventh largest in North America, producing $613 billion in goods and services in 2010. In real terms, the province accounts for around 40% of the nation’s overall output. Given the province’s close manufacturing ties to the US, economic activity contracted more severely in Ontario than in most other provinces during the recent global recession. however, since then, the economy has recovered at a healthy pace of 2.8% GDP growth in 2010, and is on track to regain the ground lost during the economic downturn. Ontario’s economy has been expanding at an average pace of 1.8% in the past 10 years, which is slightly below the national average over the same period. Over the next two years, the province is expected to grow above its historic trend, rising by 2.3% in 2011 and 2.7% in 2012 in real terms, supported by rebounding manufacturing activity and an expanding services sector.

Ontario’s Economic landscape

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Chart 9

ONTARIO’S ECONOMIC STRUCTURE

Source: Statistics Canada

Manufacturing15%Other Services

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Source: Government of Ontario, CIBC

Chart 8

lEADING SOURCES OF IMMIGRATION TO ONTARIO

China, 14%

Pakistan, 8%

Europe, Africa, Latin America,

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India, 15%

Philippines, 7%

Sri Lanka, 3%

ChANGING DEMOGRAPhICS

With 13.3 million inhabitants, Ontario is Canada’s most populous province, known for its rich diversity and tremendous growth potential. 30% of Ontario residents are foreign born, with a similar proportion speaking a language other than English as a mother tongue. The province benefits from a net international migration of approximately 100,000 residents annually, with the population growth there accounting for nearly half of that seen in Canada from 2001-2006 (latest census). India was the top source of foreign migration into Ontario over that period, encompassing 15% of new immigrants to the province (Chart 8).

The province boasts an increasing proportion of college/university-educated residents, helping to lift the median family income in the province to 6% above the national average in 2009.

About 85% of the province lives in urban areas, with roughly half of the population located in the GTA or “Greater Toronto Area”, the largest metropolitan area in Canada. Other large metropolitan areas in Ontario include Ottawa (the nation’s capital), hamilton and kitchener. The median age of the province, 39, stands slightly below the national average of 39.5.

ECONOMIC OUTPUT INCREASINGlY SERvICES DRIvEN

Three quarters of Ontario’s economic output is driven by the fast-growing services sector (Chart 9).

however, goods-sector activity is also an important component of the province’s economic growth. Ontario is known as the manufacturing heartland of Canada, accounting for nearly half of the nation’s factory activity. The province’s manufacturing base accounts for about 15% of output in the province, and is highly tilted towards durables (i.e. metal products, machinery, motor vehicles).

historically, manufacturing has accounted for a larger share of provincial activity, but the strength of the Canadian dollar, as well as a booming services sector has seen activity diversify more broadly. Ontario’s manufacturing sector was hurt during the recent crisis, with factory output dropping nearly 25% during the recession, and it has not yet fully recovered. The Ontario economy will likely continue diversifying activity into high-growth services sectors (Chart 10 - see page 14), while maintaining a relatively strong

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factory presence. Business capital investment is helping to boost productivity in the factory sector, countering some of the drag to output associated with a higher currency.

Chart 10

ONTARIO’S hIGh GROWTh PRIvATE SECTORS

Source: Statistics Canada, CIBC

Chart 11

ONTARIO’S INTERNATIONAl ExPORT MARkETS, 2010

Source: Government of Ontario

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Ontario’s trade activity is heavily influenced by its close geographic ties with the US (Chart 11). Nearly 80% of the province’s exports are US-bound, with only a small fraction headed to other regions such as the Uk (<10%).

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Source: Statistics Canada

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ONTARIO’S INTERNATIONAl ExPORT MIx, 2010

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Most of Ontario’s exports are manufacturing in nature (Chart 12), with automotive exports encompassing nearly a third of the total share. On the imports side, the US is a major supplier.

POTENTIAl ECONOMIC hURDlES

During the recent recession, Ontario lost 256,000 jobs (or 4% of total provincial employment), but has been able to recapture all jobs shed. Almost all of those jobs created in the economic recovery have been in the services sector (i.e. science/technology, health care). At present, 80% of jobs in Ontario are based in the services sector, with a significant presence in the retail/wholesale and health-care industries. The diminishing importance of goods sector work is largely attributable to job losses in the highly cyclical manufacturing industry.

During the recession, when Ontario’s private sector experienced a substantial contraction in activity and investment, the government increased spending and investment to help boost the economy. however, with economic activity on a stronger footing, the Ontario government has been gradually scaling back stimulus and introducing measures such as pay freezes and program expenditure reviews.

Although Ontario is the most highly indebted province in Canada, a steady plan of government expense reduction should see the budget deficit shrink from its current 2.7% of GDP to surplus by 2017-18.

The Ontario legislature is currently governed by the liberal Party, led by Premier Dalton McGuinty. The province will be holding a general election in October, 2011.

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Trade and investment opportunities will likely continue to grow for jurisdictions that have existing major trade links with India – as well as for those that can identify and capitalize on this potential. Despite some natural ties, Ontario and India, for now, do not have a significant trade or investment relationship.

Ontario-India Business Opportunities

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Distance between India and Ontario is an obvious impediment to trade, but controlling for that in a gravity model of trade (i.e. one using distance between trade partners and GDP of trade partners) to gauge India’s trade potential with the rest of the world, we observe that trade with Ontario has underperformed not just relative to potential (i.e. model estimates) but also relative to most of India’s trade partners (Chart 13).

however, things are changing and the potential to grow trade and investment is significant as rapid growth in India has driven up consumption of many of the goods and services produced in Ontario. Machinery and transportation equipment, which accounted for 10% of all of India’s imports last year, came primarily from China, Germany and to a lesser extent the US. Gold and jewellery, which accounted for another 10%, were shipped primarily from Switzerland. Moreover, a third of India’s merchandise imports were petroleum and coal products, which came mostly from nearby OPEC nations. The result is that Ontario exporters

Chart 13

CANADA-INDIA TRADE hAS POTENTIAl FOR SIGNIFICANT GROWTh

Source: CIBC

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Actual trade flows with India divided by Model Estimates for 2010

Better than model estimatesWorse

are producing the goods that India is importing but businesses in Canada’s most populous province need to take a more aggressive approach in order to compete with other jurisdictions that have established deeper trade linkages with India.

A similar pattern is observed by looking at foreign direct investment. While the share of Canadian direct investment to the US has dropped over the last couple of decades, Canada has yet to redirect these dollars to India in significant numbers. The share of Canadian direct investment going to India was indeed only 0.1% last year, unchanged over the past two decades ago (Chart 14). While Canadian corporations were looking elsewhere to invest their dollars, others were looking at India as a land of opportunity, pumping in US$37.9 billion last year, up 67% from US$22.7 billion just five years ago.

Chart 14

CANADIAN DIRECT INvESTMENT IN INDIA hAS STAYED FlAT

Source: haver Analytics, CIBC

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That said, it’s not too late for Ontario companies to participate in India’s economic ascent. There will be growing demand for a whole range of goods and services in which Ontario is well represented and where the province holds a positive worldwide reputation, such as education services, infrastructure and construction, power and nuclear energy, resources, and agriculture.

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Source: IBEF, India Planning Commission, CIBC

Chart 15

INFRASTRUCTURE’S INCREASING IMPORTANCE IN INDIA’S GROWTh

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INFRASTRUCTURE INvESTMENT

With increasing industrialization, investment in infrastructure is expected to capture a growing share of India’s economic output (Chart 15). The country’s 12th Infrastructure Plan (which will cover the period 2012-2017) is expected to boost infrastructure investment by around $1 trillion over the period, with a target of about 50% private sector participation4. That should benefit not just Canadian heavyweights, but also smaller players with strength in engineering services and expertise in construction of ports, airports, rail and roads.

India’s strategic geographic location has been a boon for the nation’s port sector, which has enjoyed tremendous growth in the past 10 years. Activity at Indian ports has more than tripled in the past decade, as measured by cargo unit volumes (Chart 16). Significant foreign investment into ports to the tune of around $1.62 billion over the period has helped to boost the sector’s growth.

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Chart 16

INDIA’S ExPANDING PORTS

Source: World Bank

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Over the next 10 years, port volumes are targeted to expand fourfold, as revealed in the Ministry of Shipping’s “Maritime Agenda 2020” released this year. Many of these projects will follow the public-private partnership model, with tens of projects already implemented in the past year.

With the ongoing development of India’s economy, the nation’s railways are seeing rapidly increasing volumes of goods transported. That is one of the reasons why rail and freight-related infrastructure investment is a key priority for the Indian Planning Commission, and another source of potential growth opportunities for Ontario firms. Over the 2012-17 period, the government is targeting a significant increase in railway wagons for bulk and freight transportation, as well as the addition of high-horsepower locomotives (Chart 17). Railway-related opportunities also exist in areas such as bridge building/repair, with a significant number of bridges over a century old.

Source: India Planning Commission, CIBC

Chart 17

INDIA PlANS TO BOOST TRANSPORTATION INFRASTRUCTURE

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With demand for power exceeding supply, India plans to add 100,000 MW of capacity over the 2012-2017 period, en route to satisfying the projected need of 800,000 MW by 2032.

There is interest in green technology, with the aim to develop solar capacity to 20,000 MW by 2022, an industry in which Ontario has been investing significantly in recent years. In fact, in addition to solar, Ontario has greatly increased its expertise in a variety of clean and renewable sources of energy including wind, water, biomass and biogas powder.

India is also planning to grow its nuclear capacity to 20,000 MW by 2020 and 63,000 MW by 20323. If such ambitious plans come to fruition, Canadian uranium producers, could come out as a major winners. This could also create opportunities for Ontario suppliers of nuclear equipment and services.

India is looking for additional partners in its ongoing indigenous civil nuclear programme to accelerate the growth of nuclear power in India in collaboration with interested nuclear vendors. Ontario’s nuclear supply chain industries are fully mobilized and capable of delivering to the most exacting international standards. The Canadian nuclear industry is a $6.6 billion a year industry, generating more than $1.5 billion in federal and provincial revenues through taxes and more than 70,000 direct, indirect and spin-off jobs.

Another key Ontario expertise is in water purification. Two of the world’s leading water and wastewater treatment technologies – Uv purification and membrane filtration – were developed in the province. Ontario companies are leaders in a variety of clean water technologies including detecting leaks in underground water mains, extracting value from industrial wastewater, and monitoring water quality in real time.

EDUCATION SERvICES

Of India’s 220 million primary school students, only about 14 million (i.e. well under 10%) move on to the post-secondary level. While over the last 10 years India has invested more in its education sector, there are only 504 universities and 22,000 colleges in India, serving a population of more than 1.2 billion. This makes the overall rejection rate at Indian universities generally higher than their western counterparts — for example the acceptance rate at the Indian Institute of Technology in Mumbai is reported to be an astounding 1% compared with 7% for harvard University in Boston.

Consequently, a huge number of Indian students study abroad. But only a few thousand are enrolled in Ontario colleges or universities, compared to 100,000 in the US4. This is somewhat surprising, given

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the high quality of Ontario’s education system, and the province’s reputation as multicultural, tolerant and safe. Over the last few years the Ontario government has made it easier for foreign students to gain work experience in Canada and this is making the province a more attractive destination for Indian students.

Nonetheless, a number of important linkages have been established between Ontario and Indian educational institutions. For example, Ontario universities have ongoing research collaboration with Indian institutes of technology and universities. In addition, Ontario colleges are delivering training and education programs in partnership with academic institutions in Punjab, Delhi, Rajasthan, Goa, Orissa and Tamil Nadu.

Ontario’s network of 20 universities and 24 colleges has helped the province develop one of the best educated workforces in the world. In fact, according to OECD surveys, more Ontario workers have completed post-secondary education than in any OECD country.

Although Ontario’s post-secondary education system was primarily focused in the past on meeting the needs of the province’s industries and employers, it is now attracting a growing number of international students in science, engineering, technology, business, finance, media arts and numerous other programs. Moreover, the provincial government has committed to increasing the number of international students by 50%.

Ideally, this should include a significant increase in the number of Indian students studying in Ontario, given the significant Indian-Canadian population in Ontario, common language and commonwealth heritage.

An additional opportunity is for Ontario’s colleges and universities to set up satellite campuses in India. For now, that channel has been restricted to collaborative research between Indian universities and Canadian ones, such as York University, the University of Western Ontario and Georgian College, which offer executive training via partnerships with Indian counterparts. But there is room to expand, particularly with legislation now being considered by the Indian parliament to make it easier for foreign universities to establish satellite campuses. Canadian educators should closely follow developments on that front because of the expanding size of India’s student population.

ThE FIlM INDUSTRY

By sheer volume, India has the largest film industry in the world, producing over a thousand feature films a year. While the industry’s success has been primarily domestic in nature, the increasing Indian Diaspora around the world has made the overseas market increasingly attractive for producers. To broaden public appeal

22 |

beyond the domestic market, an increasing number of Indian movies are now being shot outside of India. Ontario, with its beautiful landscapes, natural wonders, and sophisticated cities, coupled with its production expertise and state-of-the-art facilities, is a prime location for filming and film production and could be marketed more aggressively to those producers.

The Canadian film industry has been moving in the right direction in recent years, earning the moniker of “hollywood North”, but efforts should be geared towards widening Canada’s appeal beyond the American market. The film, television and video production industry’s revenues fell over 9% in 2009 compared to the prior year due to the recession, highlighting the dangers of relying too much on the US market. So, marketing Canada to established non-US film producers such as India has a measurable upside.

The Canadian Film or video Production Tax Credit (CPTC), which is a refundable tax credit, can be pitched as one of the federal government policies that can facilitate further foreign involvement in the film industry. Ontario has its own Film and Television refundable tax credit which increases the province’s attractiveness as a destination for movie producers. That likely played an important role in allowing Ontario firms to generate almost 50% of national film-related revenues in 2009.

In addition to the traditional film industry, Ontario is home to a rapidly growing digital media industry, which includes more than 120 video game producers and companies that specialize in digital special effects as well as 3D software and hardware developers. Underpinning this industry are sophisticated facilities (including a comprehensive motion capture complex and a new state-of-the-art 51,000 square metre media complex), competitive costs, government incentives and steady supply of university and college graduates in interactive digital media.

TOURISM OPPORTUNITIES

India’s emerging middle class, with rising disposable incomes, is a key target market for Ontario’s tourism industry. Indian travelers could be attracted to the province given close cultural ties (as a leading source of immigration to the province), as well as Ontario’s natural wonders such as Niagara Falls. Outbound travel from India is on the rise, and travel to Canada from India has nearly doubled from 2001-2009. Part of the reason for the increased domestic visits could be family members visiting Indo-Canadians residing in Ontario, and with the province’s Indian-born population expected to increase, that suggests an upside to Ontario’s tourism from that nation.

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With the rise in tourism and business travel between the two countries, airlines are now reportedly looking at starting non-stop daily flights from India to Toronto.

Around three quarters of all Indian visits to Canada are to Ontario. This presents a significant opportunity for Ontario’s retail and restaurant segments, with over half of all expenditures of Indian visitors made in these categories (Chart 18).

Chart 18

ExPENDITURES OF INDIAN vISITORS TO ONTARIO

Source: Government of Ontario, Ontario Tourism

Based on data available through Ontario Tourism, India’s visitors to the province tend to engage in “group-oriented” activities such as sightseeing, shopping and visiting family members (Chart 19). Given Ontario’s vast natural parks and extensive retail networks, the province has the resources to cater to the needs of the growing number of Indian tourists.

Chart 19

ACTIvITIES OF vISITORS FROM INDIA ON A TRIP TO ONTARIO

Source: Ontario Tourism

24%

72%

83%

84%

43%

30%

0% 20% 40% 60% 80% 100%

Musems/Art Galleries

Historic Sites

Nationa/Provincial Nature Parks

Visit Friends/Relatives

Shopping

Sightseeing

Transport, 14%Recreation/Other, 17%

Food/Beverage, 24%

Accommodation, 14%

Retail/Shopping, 31%

24 |

FINANCIAl SERvICES

As mentioned earlier, India’s services sector has outperformed the rest of the economy in the last five years, particularly with the booming finance, insurance, real estate, and business services industries carrying the flag. India is clearly reaping the benefits of the 1990s’ financial sector reforms. While latecomers may have missed the initial spurt, there are still opportunities to capitalize on India’s evolving financial sector. There’s still a lot of growth potential in that sector especially with the further modernization of financial markets currently underway. The rise in the savings rate is occurring more through formal channels, i.e., the banking system as opposed to gold hoarding. While no licenses have been granted to foreign banks in the last decade, the RBI is currently examining options to allow licensing, something Canadian banks should be watching very closely3.

Given the strength of their balance sheets and reputations coming out of the global financial recession, Canada’s banks are in a very strong position to market their products, services and expertise. The same is true for many of Ontario’s other financial services providers.

Canada’s financial services industry is predominantly located in Toronto, Canada’s largest financial centre and third largest in North America, after New York and Chicago. In addition to being the head office location for Canada’s five largest banks, Toronto also boasts some of the world’s largest life insurers, pension fund managers, securities firms and financial services technology providers.

A number of these firms have extensive operations outside of Canada. Obviously, there is tremendous potential opportunity in India for these and other firms, given the size and growth rate of the market.

RESOURCES

There are many opportunities in India for Ontario resource companies, particularly in the mining sector. Ontario is Canada’s largest producer of non-fuel minerals, and Ontario mining companies are among the most advanced in the world. Moreover, the industry has important links to other sectors in the economy, including banking, geology, transportation, remote sensing, IT, communications, robotics, environmental management, and much more.

Ontario mining companies can provide India with advanced expertise and technology in terms of geophysical surveys and exploration, mining equipment and related machinery, information technology, and mineral extraction and processing.

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In addition to going to India, and selling equipment and expertise, Ontario mining and other resource companies should be marketing their brand to bring India to Canada. India’s tremendous gold appetite, which is currently being largely met by Switzerland, could be exploited by Ontario-based producers.

AGRICUlTURE

As an aspiring economic superpower with a burgeoning population, India will need to improve its food security. Current domestic production is insufficient to meet demand, which leaves imports to fill the gap. With recent increases in food prices, this is becoming an increasingly important concern. As a result, there are clear opportunities for Ontario to grow its exports not just of food but also of agricultural equipment, services and technical expertise.

Ontario companies can also help improve efficiencies by providing capital goods to mechanize an agricultural sector that has opportunities for improved productivity. India’s current food spoilage rate is high (35-40% of fruits and vegetables and 20% of grains), suggesting that Ontario’s expertise in safe agriculture production, storage, and food processing could make a significant contribution to meeting the country’s growing needs.

26 |

Moving in the Right Direction All told, India presents tremendous growth potential and accordingly remains a land of vast opportunities, which remain largely untapped by Ontario corporations. Whether all those opportunities translate into actual dollars, however, will depend on the ability of Ontario corporations to move away from their generally risk-adverse mindset and instead adopt a more aggressive approach to investing.

The good news is that trade between India and Ontario is beginning to grow, albeit from a relatively small base. Over the past five years it has increased by 39% to $1.6 billion. however, the balance in trade clearly favours India, as the country exports three times ($1.2 billion) as much to as it imports ($400 million) from Ontario. In this context, the rising number of immigrants from India offers Ontario’s Small and Medium-sized Enterprises (SMEs) the ability to gain a foothold in one of the world’s fastest growing markets.

historically, it has proven particularly challenging for SMEs to build networks in unfamiliar global economies. however, a diverse workforce can be a key factor in overcoming such disadvantages. In fact, CIBC research has identified that one of the most important attributes of SMEs that have been successful in penetrating foreign markets is the international experience of their senior managers.

The rising number of Indian immigrants to Ontario, many of whom are entrepreneurs, offers Canadian SMEs the opportunity to enhance networking opportunities and gain a business edge in one of the world’s fastest growing economies, for example, by gathering knowledge about specific markets and tailoring business strategies to effectively address Indian market realities.

Furthermore, contrary to popular belief, firms do not graduate to export markets only after developing an established foothold in Canada. Instead, evidence suggests that “born global” companies are as likely to achieve similar levels of export intensity despite fewer resources.

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The ongoing reorganization of production at the international level, through increased outsourcing and the development of global value chains, merely reinforces this opportunity.

Such fragmentation of production paves the way to new niches for the supply of products and services where SMEs can quickly take advantage of their flexibility. In addition, operating in a relatively familiar business environment can significantly reduce entry barriers and other impediments to international sales.

As a result, Ontario’s SMEs and many other sectors in Ontario’s economy have significant opportunities to expand two-way trade with India.

BIBlIOGRAPhY

1 The Demographic Dividend, Evidence from the Indian States: Aiyar and Mody, 20112 Demographic Changes, Financial Markets, and the Economy: Arnott and Chaves, 20113 Seizing Opportunities for Canadians, India’s Growth and Canada’s Future Prosperity: The Standing Senate

Committee on Foreign Affairs and International Trade, 20114 IMF Country Report on India, 2011

28 |

APP

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ICES

Top 25 Canadian exporTs To india (C$ million) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

DRY PEA AND BEAN FARMING 198 122 122 107 169 149 371 423 536 416

OThER NON-METAllIC MINERAl MINING AND QUARRYING 74 79 105 127 183 177 235 754 512 399

PAPER MIllS 99 72 155 162 195 207 135 236 62 295

PUlP MIllS 63 78 79 80 77 118 133 129 130 141

GOlD AND SIlvER ORE MINING 0 0 0 0 18 3 1 60 72 83

IRON AND STEEl MIllS AND FERRO-AllOY MANUFACTURING

9 10 16 19 25 13 41 32 68 61

COPPER, NICkEl, lEAD AND ZINC ORE MINING 19 32 20 14 47 149 109 46 21 51

NAvIGATIONAl, MEASURING, MEDICAl AND CONTROl INSTRUMENTS MANUFACTURING

8 15 19 66 35 37 61 48 54 45

NON-FERROUS METAl (ExCEPT AlUMINUM) SMElTING AND REFINING

1 9 12 16 15 35 65 53 46 45

RECYClABlE METAl WhOlESAlER-DISTRIBUTORS 5 3 3 20 34 28 49 26 34 34

AEROSPACE PRODUCT AND PARTS MANUFACTURING 2 5 57 18 23 142 46 73 72 33

RESIN AND SYNThETIC RUBBER MANUFACTURING 7 4 2 6 17 13 21 49 41 33

COMMERCIAl AND SERvICE INDUSTRY MAChINERY MANUFACTURING

2 5 3 4 6 24 30 37 21 25

METAl vAlvE MANUFACTURING 1 1 4 5 4 3 13 12 20 24

MINING AND OIl AND GAS FIElD MAChINERY MANUFACTURING

2 7 5 9 5 4 15 18 19 22

COMPUTER AND PERIPhERAl EQUIPMENT MANUFACTURING

7 6 7 8 12 22 17 30 19 22

All OThER ChEMICAl PRODUCT MANUFACTURING 2 4 3 2 4 3 2 4 15 20

OThER INDUSTRIAl MAChINERY MANUFACTURING 6 3 6 14 11 16 37 30 24 19

OThER RECYClABlE MATERIAl WhOlESAlER-DISTRIBUTORS

4 5 8 8 12 14 28 19 18 18

RUBBER AND PlASTICS INDUSTRY MAChINERY MANUFACTURING

4 6 4 5 2 7 3 20 20 18

All OThER GENERAl-PURPOSE MAChINERY MANUFACTURING

1 1 2 5 3 4 12 10 21 16

ENGINE, TURBINE AND POWER TRANSMISSION EQUIPMENT MANUFACTURING

4 47 2 5 6 9 9 10 8 15

SEMICONDUCTOR AND OThER ElECTRONIC COMPONENT MANUFACTURING

3 8 5 8 8 10 12 9 24 15

PhARMACEUTICAl AND MEDICINE MANUFACTURING 2 3 2 4 7 4 8 8 8 13

TElEPhONE APPARATUS MANUFACTURING 3 52 25 20 29 55 64 49 30 13

OThER 150 97 96 129 140 429 273 232 253 213

ToTal Canadian exporTs To india 676 675 763 861 1087 1675 1792 2418 2147 2089

| 29

Top 25 Canadian imporTs from india (C$ million) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

OThER BASIC ORGANIC ChEMICAl MANUFACTURING 62 103 141 145 154 159 275 407 291 250

JEWEllERY AND SIlvERWARE MANUFACTURING 57 73 85 120 138 190 193 212 161 201

WOMEN'S AND GIRlS' CUT AND SEW ClOThING MANUFACTURING

167 192 184 160 185 180 151 148 155 136


MEN'S AND BOYS' CUT AND SEW ClOThING MANUFACTURING

145 141 136 136 123 133 123 111 115 94

CURTAIN AND lINEN MIllS 47 63 68 79 84 86 89 91 81 79


PETROlEUM REFINERIES 0 0 0 0 63 98 0 0 0 51

SEAFOOD PRODUCT PREPARATION AND PACkAGING 29 38 50 54 50 56 62 40 51 49

FlOUR MIllING AND MAlT MANUFACTURING 13 17 17 18 18 22 24 46 49 49

CARPET AND RUG MIllS 36 38 38 46 48 52 53 50 45 46

IRON AND STEEl PIPES AND TUBES MANUFACTURING FROM PURChASED STEEl

4 4 4 3 4 6 5 18 13 40

All OThER NON-METAllIC MINERAl PRODUCT MANUFACTURING

13 15 18 20 27 31 36 39 33 37


7 12 11 36 33 27 35 76 24 35

ElECTRICAl EQUIPMENT MANUFACTURING 8 9 6 9 13 26 30 41 35 31

All OThER ElECTRICAl EQUIPMENT AND COMPONENT MANUFACTURING

13 13 19 15 15 17 20 28 26 30

FRUIT AND vEGETABlE CANNING, PICklING AND DRYING 7 9 10 9 13 21 17 24 30 28

BROAD-WOvEN FABRIC MIllS 41 43 45 36 36 31 30 27 26 27

CUTlERY AND hAND TOOl MANUFACTURING 14 15 18 20 22 22 24 26 23 26

OThER CUT AND SEW ClOThING MANUFACTURING 56 61 79 86 64 52 52 42 36 26

OThER ClOThING kNITTING MIllS 11 15 18 16 26 27 30 27 28 26

OThER lEAThER AND AllIED PRODUCT MANUFACTURING 21 21 21 22 25 22 21 23 20 22

FOOTWEAR MANUFACTURING 21 19 15 15 17 14 16 17 17 21

All OThER CROP FARMING 15 15 13 10 11 14 15 19 17 21


3 4 4 5 6 8 9 9 48 20

OThER 309 347 362 432 523 528 535 574 539 617

ToTal Canadian imporTs from india 1155 1327 1423 1577 1786 1919 1979 2237 2003 2123

30 |

APP

END

ICES

Top 25 onTario exporTs To india (C$ million) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

GOlD AND SIlvER ORE MINING 0 0 0 0 1 3 1 60 72 83


9 10 16 18 25 11 33 28 32 54

RECYClABlE METAl WhOlESAlER-DISTRIBUTORS 2 1 1 11 22 20 29 16 27 22

NAvIGATIONAl, MEASURING, MEDICAl AND CONTROl INSTRUMENTS MANUFACTURING

6 8 14 13 11 16 36 21 24 21

RUBBER AND PlASTICS INDUSTRY MAChINERY MANUFACTURING

4 6 3 4 1 7 3 18 17 17

COMPUTER AND PERIPhERAl EQUIPMENT MANUFACTURING

2 1 3 4 5 8 11 23 12 15

SEMICONDUCTOR AND OThER ElECTRONIC COMPONENT MANUFACTURING

2 1 2 5 6 6 6 5 21 12

TElEPhONE APPARATUS MANUFACTURING 2 4 5 7 23 30 27 19 28 11

METAlWORkING MAChINERY MANUFACTURING 0 3 2 2 21 18 7 17 10 10

OThER RECYClABlE MATERIAl WhOlESAlER-DISTRIBUTORS

3 4 6 5 6 10 10 11 10 10

FERROUS METAl FOUNDRIES 0 0 0 0 0 0 0 0 0 10


OThER INDUSTRIAl MAChINERY MANUFACTURING 2 1 2 5 4 7 24 19 12 9


2 4 4 8 7 8 7 13 8 9

CONSTRUCTION MAChINERY MANUFACTURING 1 2 2 3 6 6 10 13 5 8

All OThER ChEMICAl PRODUCT MANUFACTURING 0 1 1 1 1 1 1 1 2 8



MINING AND OIl AND GAS FIElD MAChINERY MANUFACTURING

0 0 0 1 1 1 2 2 4 7

All OThER GENERAl-PURPOSE MAChINERY MANUFACTURING

0 1 1 3 2 3 8 6 16 7

PUMP AND COMPRESSOR MANUFACTURING 0 0 1 2 1 1 1 2 2 6

RESIN AND SYNThETIC RUBBER MANUFACTURING 7 4 2 1 7 7 6 14 7 6

RADIO AND TElEvISION BROADCASTING AND WIRElESS COMMUNICATIONS EQUIPMENT MANUFACTURING

1 1 5 6 7 6 12 16 10 6

MOTOR vEhIClE BRAkE SYSTEM MANUFACTURING 0 0 0 0 0 0 2 7 4 6


3 4 1 2 3 2 1 3 1 5

OThER 17 26 26 39 39 54 60 100 84 73

ToTal onTario exporTs To india 67 88 101 150 211 237 320 431 423 440

| 31

Top 25 onTario imporTs from india (C$ million) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


JEWEllERY AND SIlvERWARE MANUFACTURING 45 57 66 96 111 164 160 180 123 156


WOMEN'S AND GIRlS' CUT AND SEW ClOThING MANUFACTURING

32 35 37 40 55 61 53 52 58 60

CURTAIN AND lINEN MIllS 19 24 29 32 31 38 44 37 33 40

MEN'S AND BOYS' CUT AND SEW ClOThING MANUFACTURING

52 46 46 42 45 41 43 41 42 35

FlOUR MIllING AND MAlT MANUFACTURING 8 11 11 12 12 15 17 31 34 32

CARPET AND RUG MIllS 17 18 18 24 26 28 31 28 26 27

SEAFOOD PRODUCT PREPARATION AND PACkAGING 17 23 32 31 26 30 32 17 21 26



9 9 14 12 10 11 12 18 17 22

All OThER NON-METAllIC MINERAl PRODUCT MANUFACTURING

9 10 12 12 17 18 21 23 17 19


6 9 9 13 19 17 26 41 15 19


CUTlERY AND hAND TOOl MANUFACTURING 7 8 9 10 11 11 12 13 13 16

FRUIT AND vEGETABlE CANNING, PICklING AND DRYING 5 7 7 6 9 10 10 14 18 16

OThER CUT AND SEW ClOThING MANUFACTURING 12 12 10 12 12 16 18 13 15 14

OThER lEAThER AND AllIED PRODUCT MANUFACTURING 10 10 11 11 12 11 12 13 12 14


2 1 2 2 2 3 4 3 42 13

All OThER FABRICATED METAl PRODUCT MANUFACTURING

10 13 14 16 14 14 13 13 11 13

OThER MOTOR vEhIClE PARTS MANUFACTURING 4 5 7 8 9 5 9 8 5 13

BROAD-WOvEN FABRIC MIllS 12 13 12 12 12 14 13 13 11 12

UNSUPPORTED PlASTIC FIlM, ShEET AND BAG MANUFACTURING

3 1 2 2 4 3 4 4 4 10

FERROUS METAl FOUNDRIES 3 2 3 4 10 9 7 8 6 10

SYNThETIC DYE AND PIGMENT MANUFACTURING 2 4 3 4 5 6 9 11 8 10

OThER 151 167 176 212 238 268 280 314 285 327

ToTal onTario imporTs from india 525 620 697 774 868 990 1180 1343 1158 1210

32 |

APP

END

ICES

india's share in overall Canadian exporTs (%) 2001 2010

OThER NON-METAllIC MINERAl MINING AND QUARRYING 2.0 4.9

PAPER MIllS 0.7 4.0

PUlP MIllS 0.9 2.0

NAvIGATIONAl, MEASURING, MEDICAl AND CONTROl INSTRUMENTS MANUFACTURING 0.3 1.2

IRON AND STEEl MIllS AND FERRO-AllOY MANUFACTURING 0.3 1.1

GOlD AND SIlvER ORE MINING 0.0 0.6

RESIN AND SYNThETIC RUBBER MANUFACTURING 0.1 0.6

NON-FERROUS METAl (ExCEPT AlUMINUM) SMElTING AND REFINING 0.0 0.4

AEROSPACE PRODUCT AND PARTS MANUFACTURING 0.0 0.3

PhARMACEUTICAl AND MEDICINE MANUFACTURING 0.1 0.2

all exporTs 0.2 0.5

india's share in overall Canadian imporTs (%) 2001 2010

OThER BASIC ORGANIC ChEMICAl MANUFACTURING 1.2 4.5

PhARMACEUTICAl AND MEDICINE MANUFACTURING 0.5 0.8

ElECTRICAl EQUIPMENT MANUFACTURING 0.2 0.7

IRON AND STEEl MIllS AND FERRO-AllOY MANUFACTURING 0.2 0.5

PETROlEUM REFINERIES 0.0 0.5

ENGINE, TURBINE AND POWER TRANSMISSION EQUIPMENT MANUFACTURING 0.1 0.4

all imporTs 0.3 0.5

Benjamin Tal Managing Director and Deputy Chief Economist , CIBC World Markets Inc.

Benjamin Tal is a Managing Director and Deputy Chief Economist with CIBC World Markets Inc. He is responsible for analyzing economic developments and their implications for North American fixed income, equity, and foreign exchange and commodities markets. He also acts in an advisory capacity to bank officers on issues related to wealth management, household/corporate credit and risk.

Recently described as one of Canada’s leading experts on the real estate market by the International Monetary Fund, Mr. Tal is a regular commentator on financial and economic trends in the Canadian and American print and electronic media.

In addition to providing expert testimony on various economic issues in front of Canadian Parliamentary committees, Mr. Tal has represented Canada in NAFTA discussions with regards to the structure of the North American labour market. He has also led investment seminars on behalf of the Canadian Ministry of Foreign Affairs and leading institutional investors in major European cities.

Mr. Tal is a member of the Economic Committee of The Canadian Chamber of Commerce and a board member of the Toronto Association for Business and Economics (TABE).

Canadian Imperial Bank of Commerce (CIBC) (TSX: CM) (NYSE: CM) is a leading Canadian-based global financial institution with a market capitalization of $30.7 billion and a Tier 1 capital ratio of 13.9%. Through our two major operating groups, CIBC Retail Markets and Wholesale Banking, CIBC provides a full range of financial products and services to 11 million individual, small business, commercial, corporate and institutional clients in Canada and around the world. We have more than 42,000 employees dedicated to helping our clients achieve what matters to them, delivering consistent and sustainable performance for our shareholders and giving back to our communities.

You can find other research and information from CIBC World Markets Inc. on our website at www.cibcwm.com/research.

CIBC HEAD OFFICE Commerce Court, Toronto, Ontario,

Canada M5L 1A2Telephone number: 416 980-2211

Website: www.cibc.com

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Spicing Up - CIBC World Marketsresearch.cibcwm.com/economic_public/download/canada...prospects look very promising, as its middle class is set to grow rapidly in the coming decades