India Positive Economic Outlook

No Part of it may be quoted, circulated or reproduced for distribution without prior written approval from Zinnov

Zinnov Management Consulting

The Indian Promise Why it still holds…

20th June, 2012

Skeptics question India’s potential…

2

“Slowing GDP growth and political roadblocks to economic policymaking could put India at risk of losing its investment grade rating”

“Misguided policy approach focused on consumption is to be blamed for the steep fall in the growth momentum”

“The country faces an awkward combination of slow growth and elevated inflation and is a constant worry for foreign investors”

“Indian stock market does not present attractive prospects for investors in the near term amid sluggish domestic & global economic outlook”

Standard & Poor’s

Morgan Stanley

Fitch Ratings

Goldman Sachs

…enough reasons to counter! Favorable demographic dividend will pay in the long run 1

Indian technology consumption is exploding 2

GST implementation will accelerate economic growth 3

Indian MNCs and vast base of SMBs will be impossible to ignore 4

Large states in India are already booming 5

Indian non-metro markets hold tremendous untapped potential 6

Infrastructure improvements are on the rise 7

Indian Media & Entertainment industry will outpace major global markets 8

Rising education level is making large base of Indians employable 9

Tremendous growth in philanthropy 10

3

1 Favorable Demographic Dividend will pay in the long term

4

Source: Goldman Sachs Report: ‘India’s Rising Labour Force’

“Our analysis suggests demographics alone may contribute about 4 percentage points of annual GDP growth for the next two decades, from increases in labour force, higher

productivity due to urbanization and having the right age structure”

To Increase by 250%

Consumption of Food and Beverages

4x increase expected

Spending on Housing and Appliance

5x increase expected

Education and Healthcare Spending

Potential for urbanization much greater than China, Japan, Russia and the US

Additional 175 mn people

Urban Population

In contrast, china to add 15 mn people; Japan to go 3 mn short

110 mn additions; 50% in the most productive age group of 30-40 years

Labour Force

Indian technology consumption is exploding (1/2)

5

Source: Comscore, Google, Edelweiss, Avendus, Zinnov Analysis; Press Articles

Mobile Phone Users

Greater than France and the UK, combined

Over 800 mn

Number of Debit Cards

Over 400% increase in the last 5 years

Over 228 mn

People making online

Transactions To grow over 250% by 2015 Over 15 mn

Facebook Users Second largest Facebook nation

worldwide after the US Over 51 mn

Internet Users Second largest in the

world after China Over 123 mn

2

Indian technology consumption is exploding (2/2)

6

Source: Comscore, Google, Edelweiss, Avendus, Zinnov Analysis

Domestic IT market, currently greater than

USD30 bn, is growing faster than exports

E-commerce market expected to surpass $23 bn

within 4 years; second fastest growth worldwide

With almost 4 fold growth, online advertising market

expected to reach $1.55 bn by 2015

Cloud computing expected to grow at more than 2X

the worldwide rate; revenues to touch $5 bn by

2015

170 mn Aadhar (Unique ID Cards) already

allocated

Online travel penetration (28%) higher than that in China, Japan, Italy, Spain,

and Singapore

Multiple startups already approaching $B+ sizes

2

GST implementation will accelerate economic growth

India’s GDP is expected to increase by 0.9% -1.7%

post GST’s implementation

Gains from

GST

While export gains are expected to vary between 3.2% to 6.3%, imports are set to benefit by 2.4% to

4.7% Combined effect of FDI in retail and implementation

of proposed GST is expected to raise Indian

FMCG industry’s size to $47 bn by 2013

7

Source: NCAER, FICCI-Technopak report

3

Indian MNCs and vast base of SMBs will be impossible to ignore (1/2)

8

Source: Forbes, Zinnov Analysis

Indian Companies in Forbes Top 2,000

Number of Companies in Forbes Top 2,000

61

33 28

India Brazil Russia

Potentially 175 Indian companies can make it to the

list by 2020

4

Indian MNCs and vast base of SMBs will be impossible to ignore (2/2)

9

Source: Forbes, Zinnov Analysis

Russia 8 Mn

Brazil 14 Mn

US 26 Mn

India 45 Mn

50+ Mn China

SMB’s share…

~16.0 Mn

~1.3 Mn

~29.7 Mn

Medium enterprises 100-1000

employeess

Small enterprises

11-100 employees

Micro enterprises

1-10 Employees

in total GDP 17%

in all enterprises 99%

in total workforce 40%

in total manufacturing output 45%

in total exports of India 40%

4

Uttar Pradesh (UP) GDP: $70.4 bn

Maharashtra GDP: $138.4 bn

Andhra Pradesh (AP) GDP: $68.2 bn

Tamil Nadu (TN) GDP: $69.9 bn

Gujarat GDP: $65.2 bn

Large states in India are already booming

India’s top 5 states by population can jointly accommodate the combined population of

Brazil, Mexico, Philippines, Vietnam and Egypt

10

Source: Business Standard, MOSPI

• Indian states viz. Delhi, Bihar, Chhattisgarh, and Goa, grew at more than 10% Y-o-Y in 2011

• In Jan 2012, Gujarat, witnessed

signing of 2,700 MoUs in a single day at the Global Investors’ summit

• Maharashtra, UP, AP, TN and Gujarat contributed over 48% to the country’s GDP in 2011; the states also have the highest number of factories in India

5

Indian non-metro markets hold tremendous untapped potential

IIT Joint Entrance Examination (JEE) topped by students from non-metros

nine times in the last eleven years

Since 1990, five out of the total six Indian Olympic medalists have been

from non-metros

Nearly 60% Indian international cricketers in the last decade hailed

from non-metro cities

Growth in rural FMCG markets (17.2%) outpaced urban markets (16.5%) in

Q1-2012; the former to grow tenfold and reach $100 bn by 2025

Indian Non-metros Rising to Prominence

11

Source: Cricinfo, Nielsen, Press Articles, Zinnov Analysis

6

Infrastructure improvements are on the rise

Note: 1. Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), Sarva Siksha Abhiyan (SSA), National Rural Health Mission (NRHM), Pradhan Mantri Gram Sadak Yojana (PMGSY), Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Rajiv Gandhi Drinking Water Mission (RGDWM), Accelerated Irrigation Benefit Programme (AIBP), Indira Awas Yojana (IWY) 12

Source: Ministry of Railways, DIFF, Planning Commission; CIA World Factbook, World Bank

MGNREGA 27.9

SSA 13.9

NRHM 12.4 PMGSY

11.6

JNNURM 8.7

RGDWM 8.3

AIBP and other water resources

programme 8.3

IWY 7.4

Others 26.0

100% = $ 124.5 bn

Government Spending on Development Programs1 – Eleventh Five Year Plan ($bn)

Gro

wth

in In

fra

stru

ctu

re

Projected infrastructure investments grew 2.5 times from 10th to 11th five

year plan

Employment to 41 mn households during 2010-11 under MGNREGA

Projected investment in 11th five year plan; over $78 bn for road and $64 bn

for railway infrastructure

51.73% annual growth in FDI in construction since 2005

Delhi Metro supporting greater daily ridership than Taipei Metro; per km

installation cost 1/4th of the latter

Third largest road network, highway density more than thrice that of China and Brazil

Fourth largest railways network, additional 20,000 km railway track to be laid by 2020

7

Rising education level is making large base of Indians employable

13

Source: Census 2011, World Bank and UGC Report, Finance Minister Speech (FY 2013)

India had 700,000 fresh technical graduates in 2011, compared with China’s 600,000 and

the US’s 70,000

2010 2011

Fresh Technical College Graduates

Growth: 27% Literacy level increased by 9.21% in the past 10 years

to reach 74.04% in

2011

National Skill Development Policy framed

by GOI to cater to needs of the

industry for skilled workers

Number of Universities

increased from 364 to 654 from

2004-05 to 2010-11

Government decided to set

up 6,000 model schools at the block level to benchmark excellence

Enrollments for higher education

increased by 103% in the last decade

99% villages have primary

schools within 1 km radius

Rising Education Levels in India

8

Indian Media & entertainment industry will outpace major global markets

14

Source: FICCI, PWC, Ernst and Young, Sports Media – SportsPro, RNI

Television and Newspapers Indian Cinema Indian Premier League

Largest movie making industry worldwide

1,100 movies produced per year compared with

700 in Hollywood

20 mn people go to movies everyday

More than 600 TV channels

More than 82,000 newspapers

7 times higher circulation than US newspapers

Brand value ~ 4 Bn

160 mn + viewers world over

Higher valuation than NBA

9

Tremendous growth in philanthropy

Philanthropy in India

Fastest Growing HNI population in

all of Asia

Top 20 billionaires doubled their

combined wealth since 2008

50% increase in private charitable

spending since 2006

Having increased 5 times since 2006, corporate giving

totals $1.5 bn

Over 3.3 mn NGOs active in India as

against 1.5 mn in the US; 700 opening every day on an

average1

15

Source: Bain & Co Note: 1) During last three years

10

16

India promises a positive outlook

Consumer spending contributes 60% to

GDP – shielded from external

influence

Declining debt to GDP ratio – 67.6%1 in 2012 as opposed

to 84% in 2004

$12.3 Bn FII investments from

Jan to May 2012, as against $8.3 Bn in

2011

Similar slowdown in peers such as China and Brazil, indicate

external influence to be the cause of slow

growth; raises questions on rating

downgrade on account of latter

India’s Strong Economic Fundamentals

Source: RBI, IMF, Press Articles Note: 1) IMF Estimates

Low external Debt to GDP ratio of 20% (Dec 2011) renders default

highly unlikely; it is 3/5th compared with Russia and less than 1/5th compared with

the US

Total gross savings equivalent to 1/3rd

of total GDP

No Part of it may be quoted, circulated or reproduced for distribution without prior written approval from Zinnov

Zinnov Management Consulting

Thank You

69 "Prathiba Complex", 4th 'A' Cross, Koramangala Ind. Layout 5th Block, Koramangala Bangalore – 560095 Phone: +91-80-41127925/6

4701 Patrick Henry Dr Building 7 Santa Clara CA 95050 Phone: +1-408-716-8432

21, Waterway Ave, Suite 300 The Woodlands TX – 77380 Phone: +1-281-362-2773

11, Paras Downtown Centre, Golf Course Road, Sector 53 Gurgaon – 122002 Phone: +91-124- 4378211/13

[email protected] www.zinnov.com

@zinnov