India: Opportunities Unlimited 5 November 2009 Rahul Chongtham Trade Representative
India : Basic Facts • India is a union of states with Parliamentary system of Govt. • 28 States & 7 Union Territories • Land Area: 3.29 Million sq.km • Population: 1.2 Billion • Language: English & Hindi • Independence Day: 15 August 1947 • Republic Day: 26 January 1950 • GDP (PPP) – US$ 3.29 trillion (2008 est.) • GDP (Official exchange rate) – US$ 1.21 trillion (2008 est.) • Age structure: • 0-14yrs ( 31%) • 15-64 ( 63.6%) • 65 years & over ( 5.3%)
India: An Attractive Investment Destination • World Investment Report 2008 from UNCTAD affirms India as the second most attractive FDI destination in the world. • Top 5 Sector attracting FDI are: • Services • Computer – Software & Hardware • Telecom • Housing & Real Estate • Construction sectors • FDI is open to almost all sectors.
India Overseas Direct Investment (ODI) • Increase in India’s ODI is due to large scale acquisitions by Indian companies growing appetite for an overseas presence and hunt for energy assets . • 65% of ODI was routed through tax-friendly countries.
Movement of India’s Foreign Exchange Reserve • Increase in FDI and FII has facilitated an increase in forex reserves. • Increase Forex Reserves has enabled prepayment of certain high cost foreign currency loans of the government. • It offers adequate security against any possible currency crisis or monetary instability.
India: Vibrant Capital Market • The Sensex breached the 17000 mark on 30th September 2009 as FII inflows continued to flood the market. This level was last seen in May 2008.
India: Foreign Trade India’s Merchandise Exports/Imports India’s Services Exports/Imports * All figures in US $ Billion * All figures in US $ Billion • Petroleum products are the major contributors towards India’s growing imports • Services sector has been a major contributor for the increase in exports from India. • Quality and cost advantage are two important parameters leveraged by the Indian producers to market their products and services
Merchandised Trade between Iceland & India * All figures in US $ Million Main Export items: Animal and vegetable fats and oils, organic & inorganic chemicals, raw hides and skins, animal hairs, machinery and mechanical appliances etc. Main Import items: Organic chemicals, pharma products, rubber and leather articles, saddles and harness, apparels and clothing accessories, iron and steel, toys, games and sports requisite etc.
Indian Telecom Industry • Fifth-largest telecom network in the world; second largest among the emerging economies. • The Indian telecom industry generated revenues of approximately US$ 32 billion in 2007–08 with a growth rate of 60 per cent over previous year. • It witnessed a CAGR of approximately 29 per cent from 2002–03 to 2007–08.
Indian Telecom Industry • The mobile subscriber base in India is likely to reach 500 million by 2010. • On an average, over 8 million users are added per month, making India the world’s fastest growing wireless services market. • The subscriber base grew at a CAGR of 43.6 per cent from June 2004 to June 08. • As on June 2008, India had a tele-density of 28.33 per cent. Tele-density in the rural areas is even lower at 9.2 per cent. • The government is promoting telecom manufacturing by providing tax sops and establishing telecom-specific SEZs.
Indian Telecom Industry Top Five Internet Service Providers by Market Share (as on June 2008) • The total number of internet subscribers grew from 9.22 million in June 2007 to 11.66 million in June 2008. • BSNL is the largest Internet Service Provider followed by MTNL.
Market Share of Wireless Operators in India (as of June 2008) • Bharti Airtel has crossed 100 Million subscriber mark in May 2009.
Opportunities for Telecom Companies • 3G Services • Worldwide Interoperability for Microwave Access (WiMax) • Managed Service • Virtual Private Network • Enterprise Telecom Services • Rural Telephony • Value-Added Services
IndianTelecom Industry • Recommendations • The VAS segment will offer ample opportunities to Icelandic companies keen on tapping this sector. Demand for good VAS content providers from mobile operator is expected to increase when the 3G spectrum rolls out early next year. We will see more VAS in banking, gaming, advertising, mobile commerce applications which will improve margins over current SMS value added services. • The Embassy of Iceland in India can assist Icelandic companies to market their products and services as well as identify potential Indian partners for JVs. • Participating in trade exhibitions such as India Telecom- International Exhibition & Conference will provide the right exposure for Icelandic companies to enter the Indian telecom sector.
Indian Energy Sector Installed capacity: 145,440 MW as on September 2008. • Thermal - 64% • Hydro - 25% • Other Renewables - 8% • Nuclear - 3% • State Sector - 53% • Central Sector - 34% • Private Sector - 13% • Coal is the dominant source contributing 53% of the energy generation in the thermal segment. • Besides hydro energy, wind energy dominates the renewable power generation in India
Indian Energy Sector Projected Growth • Present Per capita Consumption – 631 kwh • Per capita Consumption by 2012 – 1,000 kwh • Peak demand Estimation by 2012 – 157 GW • Investment requirement by 2012 – USD 100 Billion • Generation – USD 50 Billion • Transmission & Distribution – USD 50 Billion • Power for all by 2012
Indian Energy Sector Capacity Addition – Targets & Achievements • In the first 2 years of the Eleventh Five Year Plan only 12500 MW was added. • The current power shortfall in India is 15000 MW.
Indian Energy Sector Small Hydro Project (SHP) upto 25 MW • Total installed capacity of Hydro Power in India – 36,348 MW. • India’s exploitable Hydro Electric potential is estimated to be 150,000 MW. So far only 23% of this potential has been harnessed. • An estimated potential of about 15,000 MW of SHP exist in India. Ministry of New & Renewable Energy identified 5415 potential sites with an aggregate capacity of 14,305.47 MW for projects up to 25 MW capacity. • The government has fixed a target to add 1400 MW during the 11th Plan • (2007-12).
Indian Energy Sector State Wise Identified Small Hydel Sites And Potential Up To 25 MW Capacity (as on 31.3.2009)
Indian Energy Sector State Wise Identified Small Hydel Sites And Potential Up To 25 MW Capacity (as on 31.3.2009) • 23 States have announced policies for setting up commercial SHP projects through private sector participation.
Indian Energy Sector – Geothermal Energy • Indian Geothermal provinces can produce up to 10600 MW of power. • Government has identified 340 hot springs in the country and are planning to develop some of the Geothermal fields for power generation.
Indian Energy Sector – Geothermal Energy • International consultant, GeothermEx Inc., USA has identified has identified 6 most promising Geothermal sites for development in order of the following ranking: • Tattapani in Chhatisgarh • Puga in Jammu & Kashmir • Cambay Graben in Gujarat • Manikaran in Himachal Pradesh • Surajkund in Jharkhand • Chhumanthang in Jammu & Kashmir • National Hydro Power Corporation (NHPC) has been appointed by the government as the nodal agency to promote geothermal energy in India. NHPC plans to develop 2 to 5 MW geothermal power plant at Puga. • Chhatisgarh Renewable Energy Development Agency (CREDA) is currently developing the Tattapani geothermal site.
Indian Energy Sector Key Players (i) National Hydro Power Corporation (ii) Tata Power (iii) Reliance Power (iv) Jaiprakash Hydro Power (v) L&T (vi) Bhilwara Energy (vii) Athena Energy & (viii) State renewable energy agencies such as CREDA, OREDA, etc. • Recommendations: • As most renewable energy projects in India are with the State Governments, Embassy of Iceland in India can assist Icelandic companies to approach the concerned State Governments. • The Embassy can also facilitate link-ups with Indian energy companies for possible JVs. • It would be beneficial for Icelandic energy companies to participate in trade exhibitions such as the Renewable Energy India Expo.
Indian IT & IT Enabled Services Sector IT/ITeS industry: On a steady growth track • Total IT revenues reached US$ 64 billion in 2008-09 growing at 33 per cent over previous year. • Contribution of IT/ITeS industry to India’s GDP has grown from 1.2 per cent in 1998 to an estimated 5.5 per cent in 2008. • BFSI vertical continues to account for the largest share of exports at 31 per cent. Telecom vertical accounts for second largest share of the pie at 19 per cent.
Indian IT & IT Enabled Services Sector IT/ITeS industry: On a steady growth track Indian domestic market, 2008 (US$ billion) • Size of the domestic market in 2008 was US$ 23.2 billion. • Hardware accounted for about 50 per cent of the total domestic IT-BPO spend. • Direct employment for four million and indirect employment for 10 to 12 million by 2015.
Indian IT & IT Enabled Services Sector Key Indian IT Players in the Sector • Tata Consultancy Services, Wipro, Infosys, HCL Technologies, Tech Mahindra, Patni Computer Systems, I-Flex solutions Ltd, L&T Info Tech Ltd and Polaris Ltd. Large Off-Shoring Contracts • TCS won a US$1.2 billion IT & operations support deal from the Nielsen Company. • British Telecom awarded a US$1 billion contract to Tech Mahindra. • GM awarded Wipro a 5-year contract valued at US$300 million • ABN AMRO awarded a US$500 million 5-year contract to TCS, Infosys & Patni Computers. • Infosys won US$250 million outsourcing deal from Philips Electronics.
Indian IT & IT Enabled Services Sector India: Value proposition • Cost advantage • Cost of an engineer is about 20 – 40 per cent of comparable cost in European Union (EU) • Selling, general and administrative costs approximately 80 per cent of comparable cost in EU • Average offshore billing rate of US$ 20 to 35 per hour; about 50 to 70 per cent lower than EU • Ease of scalability • 675,000 technical graduates per annum, of which 4,00,000 are engineers • Over 50,000 MBAs graduating per annum • Leading firms add more than 10,000 new employees per annum • Global and 24/7 delivery capability
Indian IT & IT Enabled Services Sector Key Opportunities • Domestic Market • Overall size of the domestic market in 2008 was US$ 23.2 billion. It is currently growing at 20 per cent. • Domestic IT market is dominated by the hardware spending accounting for over 50 per cent of the total spending. • Government is taking up e-governance initiatives and increasing its IT spends/outlays • Demand for domestic BPO services increasing rapidly, with niche verticals like healthcare and retail fast gaining traction apart from the traditional verticals of BFSI and manufacturing
Indian IT & IT Enabled Services Sector Key Opportunities • Knowledge Process Outsourcing (KPO) • KPO opportunities exist in R&D, business & technical analysis, animation and design, business market research, etc. • Engineering services outsourcing • Range of services includes engineering and designing solutions across diverse industry verticals like telecommunications, automotive, construction, aerospace, utilities and industrial design. • Legal Process Outsourcing • Over 1 million lawyers and over 70,000 law graduates passing out every year; Cost arbitrage -Indian lawyers billing one-tenth of their US counterparts (US$ 40 to $60 in India compared to US$ 350 per hour in the US).
Indian IT & IT Enabled Services Sector Key Opportunities • Research and analytics • India emerged as the choice destination for their front-end research and analysis divisions, migrating from the back-room services off-shoring. • Testing services outsourcing • Indian export revenues from software testing services were estimated at US$ 385 million in 2006-07. • Software products • Indian software products segment presently forms a very small percentage of the overall Indian IT-ITeS industry. Top 10 companies contributed 85 per cent to segment revenues.
Indian IT & IT Enabled Services Sector Recommendations • Embassy of Iceland in India can assist Icelandic companies to market their products & services to the fast growing Indian domestic market. • Trade associations like NASSCOM, FICCI & CII can facilitate meetings & link-ups with Indian companies. • Indian Embassy in Iceland can be approached for information on government projects such as National e-Governance Plan. • Icelandic companies can showcase their products & services by participating in trade exhibitions like Convergence India. • Business Consultants.