“BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING? By Ravi K Mehrotra Chairman Foresight Group, London At European Parliament, Brussels (Conference Room 3E-2) On 9 th November 2005

When I visited China in late 1980’s

When I visited China in 2005

When I visited India in late 1980’s

When I visited India in the present day

WHAT DO THE PREVIOUS FOUR IMAGES TELL US? India in 1980 Ahead of China esp. in free enterprise and per capita earnings China in 1980 Still struggling with Communist Egalitarian past and lack of enterprise India in 2005 Full of vigour but political system still trapped in clanship management of the Nation instead of taking charge of enterprise China in 2005 Government took charge of enterprise in late 1980’s, transforming China into a modern industrial nation which increased per capita income by a factor of 5 How will India’s Industrial Growth look in 2010? How did China imbibe Entrepreneurship into their Management?

In October Bombay Stock Exchange crossed 8,500 points: More than 35% growth in one year But is it the effect of Globalisation of Indian Economy or Industrial Revolution? Will it follow China? Or Brazil? BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING ?

IS INDIA THE NEXT BIG STORY? Is India ready for a repeat of the China Effect on Global Shipping? India’s Intellectual Industry Growing, Why? India presently lacks development of infrastructure and full utilisation of labour force more than 20% population unemployed or partly-employed India is the world’s largest democracy but has archaic labour employment laws

Total GDP and PPP GDP 2004 Source: World Bank: World Development Indicators Database, 15/07/2005 The total GDP data shown here measured in current U.S. dollars use annual, market exchange rates. This means that the values and derived rankings are subject to greater volatility due to variations in exchange rates. Inter-country comparisons based on GDP at market prices should, therefore, be treated with caution. The PPP method eliminates the effects of differences and changes in relative price levels Total GDP Total PPP GDP

GDP Growth 2000 to 2050 Source: Goldmann Sachs: The Path to [2003 bn US Dollars] Germany Brazil Japan Russia

WEAKNESSES OF INDIAN ECONOMY Still dependent on agriculture – 25% of GDP and 40% of labour employment Labour Laws archaic – contributes to keeping people below poverty line Political system controlled by clan mentality Day-to-day economic activity shackled in bureaucracy Legal system slow & time consuming Acute shortage of infrastructure development in the country

Urbanisation Trends 60,5% 57,2% 53,6% 49,5% 45,1% 35,8% 31,4% 27,4% 23,0% 19,6% 17,4% 17,6% 16,0% 14,2% 12,5% 39,5% 42,8% 46,4% 50,5% 54,9% 64,2% 68,6% 72,6% 77,0% 80,4% 82,6% 82,4% 84,0% 85,8% 87,5% ,5% 30,0% 30,1% 29,7% 29,1% 28,2% 27,0% 25,6% 24,1% 22,6% 21,1% 19,8% 18,4% 17,0% 15,6% 14,3% 13,1% 70,5% 70,0% 69,9% 70,3% 70,9% 71,8% 73,0% 74,4% 75,9% 77,4% 78,9% 80,2% 81,6% 83,0% 84,4% 85,7% 86,9% Urban population Rural population Urbanisation Trends World Population Prospects: The 2004 RevisionUnited Nations Population Database Population Division

Value of Merchandise Exports & Imports [mn US-Dollars]2003 Exports: bn USD Imports: bn USD 2003 Exports: 55.9 bn USD Imports: 70.7 bn USD Imports Exports

STRENGTHS OF INDIAN ECONOMY Self-sustaining & not implanted by foreign investments to utilise cheap labour Industrial Growth improved from 6-7% to 11.7% Largest middle-class purchasing power Largest number of Professionals Largest percentage of computer literate people Self-sufficient in food production in fact net exporter

China vs. India – FDI Attractiveness India China 6% 22% 29% 34% 35% 36% 39% 40% 41% 42% 45% 46% 50% 57% 66% 70% 73% 78% 94% 78% 71% 66% 65% 64% 61% 60% 59% 58% 55% 54% 50% 43% 34% 30% 27% 22% Market Size Market Growth Potential Access to Export Markets Government Incentives Production/Labor Costs Infrastructure Financial/Economic Stability Economic Reform Political/Social Stability Quality of Life Tax Regime Competitor Presence Consumer Sophistication Availability of M&A Targets Regulatory Environment Cultural Barriers Transparency Management Talent Rule of Law Highly Educated Workforce Source: FDI Confidence Index. A.T. Kearney. October Volume 7

Infrastructure *) Investments Source: China Statistical Yearbook, RBI, Morgan Stanley Research [% of GDP] *) Transportation, Electricity, Telecom etc.

SUMMARY ON INDIA It will still take time to sort out distortions in society and its economy Acute shortage of infrastructure development in the country Above two weaknesses will limit economic growth For next 5 years India will have a negative trade balance Population growth means young labour force for next 20 years Hydrocarbon exploration in river deltas due perennial rivers from Himalayas will contribute to India being self-sufficient in energy Due globalisation of Indian economy Bombay Stock Exchange will continue in positive direction

CONCLUSION India will reach 8% Growth Rate in next 5 years Economy will grow to between 10 – 12% between 2010 – 2015 QUOTE: “We can be a developed Nation by 2020 if we make this our Mission Statement” – Dr A P J Abdul Kalam, Indian President Will India fulfil the President’s Statement? Will India’s Development have an effect on Global Shipping? Will International Ship Owners reap similar profits which they had from China over the last two years?

“BOOMING INDIAN ECONOMY: WHAT IS IN IT FOR GLOBAL SHIPPING? By Ravi K Mehrotra Chairman Foresight Group, London At European Parliament, Brussels (Conference Room 3E-2) On 9 th November 2005