Australia & India Trade, Investment and Opportunities June 2010

1. Australia & India Trade, Investment and Opportunities June 2010 Doug McTaggart , CEO- Queensland Investment Corporation

2. Section 1 The Australia – India Relationship

3. Australia, India and China: A Quick Comparison

4. Australia’s trade with India Composition of Australia's trade with India Trends in Australia's trade with India

5. The changing Economic Relationship • India’s become Australia's third largest Export partner, up from # 13 a decade ago • India is now Australia's seventh largest trading partner • India is Australia’s fastest growing two-way trade partner • The trade is expected to grow at double digit rates in the medium term as India’s demand for resources shoots up • Beyond Gold and Coking Coal trade • Thermal Coal- India’s import demand for coal will grow manifold during the next few years • Travel- Education and Tourism related travel have shown potential to grow • Manufacturing- Indian companies have grabbed opportunities in textiles, tractors and machinery • IT Services- Indian companies have a significant presence in Australia • Beyond Trade • Opportunities in building, managing and investing in Indian Infrastructure • India’s trillion dollar economy and a growing market presents opportunities to Australian companies in India’s emerging sectors like Dairy Products, Healthcare, Retail, Engineering Consulting and Education

6. Beyond Economics • India, the largest democracy, emerging as a leading economic, political and military power in Asia during the last two decades • Australia and India complement each other in several areas: • Australia can provide resources to fuel the Indian economy in the form of coal, metals, minerals, technology and capital • India has the potential to provide human resources and a vast consumer market to Australian companies • There are exponential growth opportunities for both the countries through collaboration in the areas of financial services, capital investment, infrastructure development, professional services and obviously the resources trade • With increasing trade, the two countries can diversify their existing trade partnerships • Strategic cooperation between the two countries is important for stability in the Asia-Pacific region • India has always looked to the ‘west’ for technology, expertise and capital • Australia provides an alternative • Australia has focussed on Japan and China for exports of its mineral resources • India provides a large and long-term option

7. Section 2 An overview of the Indian Economy

8. India: A Quick Overview National Income Savings, Investments and FDI GDP Composition (%, FY09) Market Statistics

9. A Regional Comparison Market Cap (2009) ROEs-high capital utilisation India’s corporate sector and individuals under-leveraged, hence insulated from the financial crisis Loans as % of GDP: Regional Comparison (2009)

10. India coming out of the Global Recession Capacity Utilization-Picking Up (RBI survey) Industrial Production picking up Sharp recovery in Exports Credit growth likely to increase

11. Signs of Revival… Upward Earnings Revisions (y/e Mar 2011) Consensus GDP Growth expectations uptick Apartment Registrations in Mumbai Cement Sales Growth

12. Coming out of the Global Recession Markets have recovered Capital Flows are improving fast Leading to an exit from an easy Monetary Policy Leading to a withdrawal of the Fiscal Stimulus

13. Key Trends and Reforms • The Government is committed to reduce the Fiscal Deficit to 4.8% of GDP by FY12 • The deficit shot up to 6.7% in FY10 (6.0% previous year) driven by fiscal stimulus to support the economy during the global recession • Tax reforms • Consolidated Goods and Service Tax regime to be implemented from April 2011 • Direct Tax Code targeted to be introduced in April 2011 • Significant rural push • Has improved rural income • Reduced dependence on Agriculture for rural demand • The Government has initiated an aggressive divestment program • Stake sales of USD5bn in key Government enterprises such as NTPC, NHPC, REC, SJVNL, NMDC • Financial institutions remain strong • Asset quality of Indian bank has remained good through the global crisis • Demographics • Bucking the trend witnessed in the western economies and in China, the proportion of dependents in India’s population fell from 64.7% in 2000 to around 50% in 2010

14. Key Risks • Inflationary pressures building up in India • While non-food inflation is around 5%, food inflation remains high at 17% • Oil and commodity prices • Can stoke up inflation again • India’s fiscal deficit could balloon, however • 3G auctions yield around USD15bn • Privatisation could yield a further USD10bn • Drying up of capital flows remains a risk • The high current account deficit has been sustained by capital flows • NPA’s of banks could rise • RBI allowed a one-time restructuring of assets in 2009 Inflation remains a concern

15. Section 3 Opportunity areas for India-Australia trade

16. Coal Exports • Coal is the second largest export commodity to India from Australia • India’s coal imports have increased from near zero five years back to around 70mn tonnes in FY10. India’s annual coal imports can potentially increase to more than 200mn tonnes by 2014. • Australia exported around 261mn tonnes of coal in FY09, 24.7mn tonnes of which was to India. • Going forward, Australia exports could rise significantly • More than 90% of coal exports comprises coking coal • The demand is likely to grow significantly as steel production in India likely increases at 10-12% per annum during the medium term. • India will likely become third largest steel producer in FY11 producing 71.6mn tonnes of steel (9.4% CAGR since FY06). • However, growth in thermal coal exports will likely be exponential as: • India plans around 50GW of power capacity addition during the next five years mostly coal-based • Although India has the 4th highest proven reserves, quality and infrastructure issues point to continuing reliance on coal imports • Large planned power capacities and scarce domestic coal supply will mean India will be importing at least 60 mn tonnes of coal per annum in near future • Australia with its large thermal coal reserves can potentially become a large thermal coal exporter to India • Challenges • Port and Rail capacity in Australia

17. Financial Services • During the global credit crisis, the Indian banking system emerged largely unscathed • India’s growing economy will continue to drive demand for banking services, financial products, technology and capital • Financial sector engagements between Indian and Australian firms are gaining momentum • Insurance Australia Group recently announced an investment of AUS$ 126 million for a 26% stake in its general insurance JV with the State Bank of India • On the banking side, Australia's four major banks ANZ, NAB, Commonwealth and Westpac are all in various stages of processing applications for entering the Indian banking sector • Meanwhile, Indian banks are increasing their presence in Australia • There are other opportunities for Australian companies • The Insurance and Pension sector reforms in India continue to throw up opportunities for Australian firms • As the Indian banking system continues to open up to foreign players, Australian Banks will have opportunities to participate in growing demand for credit, mortgages, asset-management and other financial-products

18. Other Opportunities • Travel and Tourism • Education-related Travel • Australia's education related exports to India were A$3.2bn in 2009 • Australia is now the 2nd biggest overseas education destination for Indian students • Total students enrolment in Australia from India were 120,000 in 2009 • The two –way personal travel between the two countries was A$624mn in 2009 • As the trade and business between the two countries grow travel will grow significantly • Both the countries are great tourist destinations • Agriculture and Agri Processing • Australia- India trade in Agriculture, despite growing at 15% CAGR during the 2005-2009 period, remains modest at US$456mn • The key imports to Australia are tea, rice, cashew nuts and tobacco, while export items are wool, pulses, almonds and paper • The opportunity for growth is significant as: • India needs expertise in setting up large efficient dairy farms • Demand for various wheat and dairy products grows in India

19. Section 4 India Infrastructure Space: Opportunities

20. Infrastructure • India long-term growth is constrained by the lack of adequate infrastructure in most sectors • The country is likely to spend US$1 trillion over the next seven years to bridge the infrastructure gap • Significant investments are being planned for Ports, Roads, Energy, Airports, Mining and Urban Infrastructure segments • Australian companies have cumulatively invested around A$2bn across sectors In India • Australian companies are currently playing a significant role in planning, construction and financing of various infrastructure projects (Leighton, Thiess, Macquarie) • Going forward, India will present significant opportunities for Australian companies in: • Strategic and Financial investments in infrastructure projects • Design and construction of infrastructure projects • Consulting and engineering services for projects • Firm supply agreements for resources like coal with Indian energy companies

21. Infrastructure—picking up again Infrastructure Investment again picking up Highest growth in lending is to the Infra. sector Power Sector: Despite aggressive buildups, deficits will continue

22. Infrastructure The roads sector: Likely to pickup after a slowdown during 2008-2009 The logistics sector: Rail traffic turnaround

23. Infrastructure The ports sector: Traffic has picked up…and is back to 2008 levels …while Utilization remains high

24. The growing relationship • Australian Companies in India • Mining - BHP, Rio Tinto • Macquarie Group • Bluscope Steel • Leighton Holdings • QBE- Insurance JV with Raheja Group • Woolworth- JV with Tata group • Indian Companies in Australia • Aditya Birla Group’s Mount Gordon Copper mine in north-west Queensland and Nifty Copper Mine in western Australia • Sterlite’s Copper mine in Tasmania • Gujarat NRE Coke’s two mines in Queensland • Gujarat NRE Coke’s investment in Hunter Coal mining industry in NSW • All large Indian IT services companies have presence in Australia (Infosys, TCS, Wipro) • Tata group owns Hotel Blue in Sydney • Recent Activity • Mahindra & Mahindra Group’s acquisition of Gipps Aero • NTPC, India’s largest Electricity generation company’s plan to acquire coal mine near Perth • Coal India’s plans to buy coal mines in Australia

25. Long term comparisons – Buy chaos, sell order!

26. Thanks