Indian Alum

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India's role in the Aluminium World of tomorrowIndia's role in the Aluminium World of tomorrow

D.Bhattacharya

President, AAI

MD, Hindalco IndustriesVice Chairman, Novelis

INCAL 2007INCAL 2007



India as a Desired DestinationIndia as a Desired Destination



3

Emerging Market Growth : 1980 – 2005Emerging Market Growth : 1980 – 2005

PPP adjusted GDP ($ bn)PPP adjusted GDP ($ bn)

Emerging economies amongst the fastest growing

China

India

Japan

Korea

Taiwan

United States

Euro Area

-

300

600

900

1,200

1,500

1,800

2,100

2,400

2,700

1 9 8 0

1 9 8 2

1 9 8 4

1 9 8 6

1 9 8 8

1 9 9 0

1 9 9 2

1 9 9 4

1 9 9 6

1 9 9 8

2 0 0 0

2 0 0 2

2 0 0 4

2 0 0 6

(1980 = 100)



4

Global growth driven by developing nationsGlobal growth driven by developing nations

Source: IMF World Economic Outlook 2006 - GDP Growth (Constant Prices, Local Currency)

G7 Countries

Asian Countries

Former USSR Countries

Average GDP Annual GrowthAverage GDP Annual Growth ––2000-20072000-2007

World GDP growth to remain ~5% over next 5 years, ~4% to 2030

9.5

6.6

5.45.0

5.4

2.7 2.8

1.2

3.0

2.0

1.21.9

6.7

14.714.3

9.7

C h i n a

I n d i a

M a l a y s i a

I n d o n e s i a

P a k i s t a n

U n i t e d K i n g d o m

U n i t e d S t a t e s

G e r m a n y

C a n a d a

F r a n c e I t a

l y

J a p a n

R u s s i a

A z e r b a i j a n

T u r k m

e n i s t a n

K a z a k h s t a n



5

Phases of economic growthPhases of economic growth

GDP at Factor CostGDP at Factor Cost

India: Accelerating growth over the years

-

5,000

10,000

15,000

20,000

1 9 5 0 - 5 1

1 9 5 7 - 5 8

1 9 6 4 - 6 5

1 9 7 1 - 7 2

1 9 7 8 - 7 9

1 9 8 5 - 8 6

1 9 9 2 - 9 3

1 9 9 9 - 0 0

2 0 0 6 - 0 7

CAGR = 3.4%

CAGR = 5.5%

CAGR = 6.9%

Rs. Bn

CAGR = 4.5%



6

India Reforms: Slow but a steady progressIndia Reforms: Slow but a steady progress

Industrial licensing systems

Distribution Controls

Restrictions on Foreign investments

Fiscal controls

Financial market Controls

Stringent labor laws

Industrial licensing systems

Distribution Controls

Restrictions on Foreign investments

Fiscal controls

Financial market Controls

Stringent labor laws

1950 – 1985

License Raj

1950 – 1985

License Raj

Easing of administrative and fiscal controls

Access to global technology

Pricing and distribution controls eased in some sectors Taxes reduced but still higher than global levels

However:

Industrial licensing systems persisted

Restrictions on Foreign investments continued

Easing of administrative and fiscal controls

Access to global technology

Pricing and distribution controls eased in some sectors Taxes reduced but still higher than global levels

However:

Industrial licensing systems persisted

Restrictions on Foreign investments continued

1985 – 1991Piecemeal

Deregulation

1985 – 1991

PiecemealDeregulation



7

India Reforms: Accelerating the pace of reformsIndia Reforms: Accelerating the pace of reforms

Industrial licensing abolished FDI policy introduced

Trade liberalization commenced

Capital Market Reforms, FII investments allowed, access to

global capital permitted, SEBI instituted.

Currency convertibility on current account

Industrial licensing abolished

FDI policy introduced

Trade liberalization commenced

Capital Market Reforms, FII investments allowed, access to

global capital permitted, SEBI instituted.

Currency convertibility on current account

1991 – 19951991 – 1995

Introduction of CENVAT in lieu of Excise Duty

Income Tax rates reduced

Introduction of CENVAT in lieu of Excise Duty

Income Tax rates reduced1995 – 20001995 – 2000

Privatization of state owned enterprises

Equity derivatives introduced

Lowering customs duty

Autonomous market regulators – TRAI, IRDA, CERC etc.

Introduction of VAT in lieu of State Sales Tax

Privatization of state owned enterprises

Equity derivatives introduced

Lowering customs duty

Autonomous market regulators – TRAI, IRDA, CERC etc.

Introduction of VAT in lieu of State Sales Tax

2000 – 20072000 – 2007



8

Net Result: Rising savings and investments (bothNet Result: Rising savings and investments (bothdomestic and foreign)domestic and foreign)

Savings and InvestmentsSavings and Investments(As % of GDP)(As % of GDP) FDI (US$ bn)FDI (US$ bn)

$ 19.5 bn

10%

15%

20%

25%

30%

35%

1 9 7 0 - 7 1

1 9 7 5 - 7 6

1 9 8 0 - 8 1

1 9 8 5 - 8 6

1 9 9 0 - 9 1

1 9 9 5 - 9 6

2 0 0 0 - 0 1

-

GDS GCF

0

4

8

12

16

20

1 9 9 0 - 9 1

1 9 9 2 - 9 3

1 9 9 4 - 9 5

1 9 9 6 - 9 7

1 9 9 8 - 9 9

2 0 0 0 - 0 1

2 0 0 2 - 0 3

2 0 0 4 - 0 5

2 0 0 6 - 0 7

34%

32%



9

Net Result: Rising trade volumes with reducingNet Result: Rising trade volumes with reducingbarriersbarriers

Trade volumes (US$ bn)Trade volumes (US$ bn)Customs collectionsCustoms collections

(As % of Imports)(As % of Imports)

-

50

100

150

200

250

1 9 7 0 - 7 1

1 9 7 3 - 7 4

1 9 7 6 - 7 7

1 9 7 9 - 8 0

1 9 8 2 - 8 3

1 9 8 5 - 8 6

1 9 8 8 - 8 9

1 9 9 1 - 9 2

1 9 9 4 - 9 5

1 9 9 7 - 9 8

2 0 0 0 - 0 1

2 0 0 3 - 0 4

2 0 0 6

- 0 7 P

Exports Imports

5%

15%

25%

35%

1 9

9 5 - 9 6

1 9

9 6 - 9 7

1 9

9 7 - 9 8

1 9

9 8 - 9 9

1 9

9 9 - 0 0

2 0

0 0 - 0 1

2 0

0 1 - 0 2

2 0

0 2 - 0 3

2 0

0 3 - 0 4

2 0

0 4 - 0 5

2 0

0 5 - 0 6

2 0

0 6 - 0 7

190.6

126.3

29%

10%



10

Net Result: Increasing bank lending withNet Result: Increasing bank lending withreducing interest ratesreducing interest rates

Banking Non Food Credit (Rs. Crs)Banking Non Food Credit (Rs. Crs)Interest ratesInterest rates

(10 year G-Sec yield)(10 year G-Sec yield)

One of the finest banking systems in the world

1882

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1 9 7 0 - 7 1

1 9 7 3 - 7 4

1 9 7 6 - 7 7

1 9 7 9 - 8 0

1 9 8 2 - 8 3

1 9 8 5 - 8 6

1 9 8 8 - 8 9

1 9 9 1 - 9 2

1 9 9 4 - 9 5

1 9 9 7 - 9 8

2 0 0 0 - 0 1

2 0 0 3 - 0 4

-

-

2

4

6

8

10

12

14

1 9 9 8 - 9 9

1 9 9 9 - 0 0

2 0 0 0 - 0 1

2 0 0 1 - 0 2

2 0 0 2 - 0 3

2 0 0 3 - 0 4

2 0 0 4 - 0 5

2 0 0 5 - 0 6

2 0 0 6 - 0 7

12.18%

7.78%



11

Significant improvement in social normsSignificant improvement in social norms

Poverty Rates*Poverty Rates* Infant mortality ratesInfant mortality rates

Literacy ratesLiteracy rates

____________ hreshold as defined by the Government: Income of Rs.296 per month in Urban areas and Rs.276 per month in Rural ar rld Bank Reports

(%)

(%)

(Per ‘000 births)

Urban PopulationUrban Population

20

30

40

50

60

1 9 5 0

1 9 6 0

1 9 7 0

1 9 8 0

1 9 9 0

2 0 0 0

50

75

100

125

150

1 9 5 0

1 9 6 0

1 9 7 0

1 9 8 0

1 9 9 0

2 0 0 0

0

15

30

45

60

75

1 9 1 9 1 9 1 9 1 9 2 0

10%

15%

20%

25%

30%

1 9 7 0

1 9 8 0

1 9 9 0

2 0 0 0

2 0 0 5

45.31%

26%

146

63

18.33

64.84

20%

29%



12

India and China: Can India match the pace of India and China: Can India match the pace of China?China?

?

_____________________

India: 1990-2005

China: 1980-2005

GDP per capita at PPP (US$)GDP per capita at PPP (US$) GDP per capita at PPP (US$)GDP per capita at PPP (US$)

(India with a time lag)(India with a time lag)

No, of Years

India: lagging China by 10 years

-

2,000

4,000

6,000

8,000

1 9 8 0

1 9 8 5

1 9 9 0

1 9 9 5

2 0 0 0

2 0 0 5

China

India

-

2,000

4,000

6,000

8,000

1 6 11 16 21 26

China

India

7204

3344

7204

3344



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