1. Manufacturing: The India Value Proposition October 2006

2. © IMaCS 2006 Printed 10-Aug-15 Page 2 www.imacs.in Contents Market Overview Government regulations & policy Business Opportunities and Advantage India

3. © IMaCS 2006 Printed 10-Aug-15 Page 3 www.imacs.in Manufacturing has contributed to India’s economic growth  India’s GDP of USD 691 bn makes it the 10 th largest economy in the world and 4 th largest in terms of purchasing power parity  One of the fastest growing economies in the world - growing at over 8 % p.a for the last 3 years  World's second largest small car market  One of only three countries that makes its own supercomputers  World's largest producer of milk, tea and pulses and the world’s largest livestock population  Second largest producer of food including fruits and vegetables  World’s largest diamond cutting and polishing centre and the second largest jewellery market Manufacturing contributes to  79% of FDI investment  27% of India GDP  53% of Indian exports Source: GoI website, IMaCS analysis

4. © IMaCS 2006 Printed 10-Aug-15 Page 4 www.imacs.in Indian Manufacturing : A macro perspective Indian economy expected to grow at 8% to 10% over the next decade The quality of Indian work force is one of India’s key competitive advantages Indian manufacturing sector is expected to grow at 12% to 14 % over the next decade Indian manufacturing competitively positioned for a high growth rate era  India is a stable democracy with strong macro- economic fundamentals  The BPO migration to India is getting replicated in the manufacturing sector  FDI inflow into India has doubled from USD 3.4 bn in 2001 to USD 8 bn in 2005 India is ranked 43 in the latest GCI index (1) ahead of other BRIC (2) economies (1) Global Competitiveness Index (2) Brazil, Russia, India, China Source: National Manufacturing Competitiveness Council, IMaCS analysis

5. © IMaCS 2006 Printed 10-Aug-15 Page 5 www.imacs.in Key sectors in Indian manufacturing Auto Industry:The Indian auto industry is a USD 44 bn industry (Automotives is USD 34 bn and Auto components is USD 10 bn) Chemicals:The size of chemical industry in India (Petrochemicals to Paints) is USD 30 bn Electronics:The electronics industry is USD 11 bn (consumer electronics to electronic components) Engineering:A USD 22 bn including including heavy and light engineering Food Processing:A USD 70 bn industry growing at 9% to 12% Gems & Jewellery:A USD 13 bn industry (Gold growing at 15% p.a and Diamond growing at 27% p.a) Leather:Industry size is USD 4 bn Machine Tools:Industry Size is USD 225 mn Textiles:Industry Size is USD 38 bn These sunrise sectors (1) of Indian manufacturing is enabling higher growth rates for the manufacturing sector (1) - list illustrative and not exhaustive Source: IMaCS analysis

6. © IMaCS 2006 Printed 10-Aug-15 Page 6 www.imacs.in Domestic Competitiveness Export Competitiveness India's manufacturing output is USD 450 bn Domestic and Export competitiveness in manufacturing : Key drivers India’s liberalization, key policy interventions, competition and infrastructure build up have been key drivers India’s manpower advantage, indigenous technology advantage have played a leading role in achieving domestic competitiveness Many Indian sectors (e.g. Textiles, Glass, Automotive, Jewellery, Leather, Agro based, Pharmaceuticals, etc) have achieved export competitiveness Regional FTA’s, FDI in select sectors, stable currency, stable economic regime have been key drivers This interplay has enhanced India’s competitiveness Indian manufacturing exports have been growing at a CAGR of 14% for the last five years Source: IMaCS analysis

7. © IMaCS 2006 Printed 10-Aug-15 Page 7 www.imacs.in A handful of sectors contribute to 75% of India’s manufacturing exports Leather Jewellery Textiles Chemicals 75% of mfg exports Engg Goods Gems è The balance 25% exports are from sectors like è1) Automotive2) Cement 3) Food Processing4) Drugs/Pharmaceuticals 5) Telecom equipt6) IT hardware/Electronics 7) Paper8) Minerals and Metals èIndian manufacturing is forecasted to grow at 12%- 14% over the next decade and sectors like Automotive, Food Processing and Pharmaceuticals are expected to be the growth drivers Source: National Manufacturing Competitiveness Council India is presently at the cusp of a “Manufacturing take-off”

8. © IMaCS 2006 Printed 10-Aug-15 Page 8 www.imacs.in Where does the advantage arise from..... India’s manufacturing cost advantages vis-à-vis high-cost locations a)Production design andSavings to the extent of 80% vis-à-vis plants in developed Process Engineering costmarkets (due to the low cost, high quality engineering talent in India) b)Capital Cost efficiencySavings to the extent of 30% to 60% vis-à-vis plants in developed markets (due to local fabrication and labour intensiveness) c)Higher Asset utilization Many manufacturing units in India follow a 3 shift seven day week (unlike a 2 shift-5 day week in high cost locations) Source: IMaCS analysis A sustainable competitive advantage for India in Manufacturing

9. © IMaCS 2006 Printed 10-Aug-15 Page 9 www.imacs.in Contents Market Overview Government regulations & policy Business Opportunities and Advantage India

10. © IMaCS 2006 Printed 10-Aug-15 Page 10 www.imacs.in Regulatory Scenario for Indian manufacturers 1)Government of India offers a five year tax holiday for a) Power projects b) Firms engaged in exports c) New industries in notified states d) Units in Electronic hardware, software parks e) EOU’s and Free Trade Zones 2)Tax deductions of 100% on export profits 3)Deduction of 30% on net income for 10 years for new industries 4)Deduction in respect of certain inter- corporate dividends 1.Each state & Union Territory (UT) offers their unique industrial and sectoral policy and incentives 2.The policies offered relate to industrial estates, taxes, power tariff, capital investment subsidies 3.States and UT in India typically follow a Single Window Clearance (SWC) mechanism 4.Competition among the states and UT to attract investment has proven to be beneficial for investors 5.Customized packages designed for capital intensive projects Regulatory advantage Better project economics Central (Federal) Government State (Provincial) Government Source: GoI website, IMaCS analysis

11. © IMaCS 2006 Printed 10-Aug-15 Page 11 www.imacs.in Foreign Investment Policy relating to the manufacturing sector  Indian capital markets are open to FII’s  Decision on all foreign investment proposals within 30 days of application  FDI approval are processed through the automatic route or the FIPB (1) route  FDI (automatic route) => No approval of GoI or Reserve Bank of India reqd  FDI (FIPB route) => Subject to approval of the board and the respective sector wise guidelines Some of the sectors in which 100% FDI is allowed 1)Airports 10) Mining 2)Coal 11) SEZ / FTZ 3)Agro & allied 12) Rubber 4)Roads13) Construction 5)Ports14) Petroleum (2) 6)Coffee 7)Tea 8)Telecom equipment 9)Hazardous Chemicals (2) Except refining Source: FDI policy 2006, GoI (1) FIPB: Foreign Investment Promotion Board FDI inflow into India has doubled in the last five years

12. © IMaCS 2006 Printed 10-Aug-15 Page 12 www.imacs.in Infrastructure improvements are expected to facilitate manufacturing Investment in infrastructure is estimated to reach USD 125 bn between 2005 - 2010 Roads  Four laning 6000 kms of highways that link India’s top 4 metros has been nearly completed (Golden Quadrilateral)  The project linking the ten major ports of the country to the GQ mentioned above is nearing completion  FDI investment upto 100% permitted in the road sector Ports  India’s long coastline (7517 kms) and the 12 major ports cater close to 90% of India’s foreign trade in volume terms and 70% in value terms  FDI investment upto 100% permitted in the port sector 18 port privatization projects worth USD 1.39 bn are under way (Private participants are P&O, PSA, Maersk, Gammon India, CWC and Dubai Port Authority) Airports  India has 450 airports including 11international airports  India plans to invest USD 5.07 bn in the next five years  FDI investment upto 100% permitted in the port sector  The privatization of New Delhi and Mumbai airports have been completed Emphasis on infrastructure development would support Indian manufacturing to be competitive Source: IMaCS analysis

13. © IMaCS 2006 Printed 10-Aug-15 Page 13 www.imacs.in Contents Market Overview Government regulations & policy Business Opportunities and Advantage India

14. © IMaCS 2006 Printed 10-Aug-15 Page 14 www.imacs.in Attractiveness of India as a manufacturing destination 1.Economics and Ease of operations 2.Favourable economic policies, flexible manufacturing practices in terms of design, scale and delivery 3.Robust domestic demand for the manufactured goods 4.Infrastructure support, Favourable legal systems, Policy framework, Ancilliary linkages and Services support 5.Skilled and Productive labour force Investor’s expectations manufacturing locations India’s manufacturing competitiveness 1.Economical labour costs and business transactions costs 2.Many manufacturing companies have emerged as centres of manufacturing excellence 3.The aspirational huge Indian middle class is a “readily available market” 4.Competition among states/UT’s to attract investments is addressing these issues 5.Large pool of well qualified manpower India has compelling advantages

15. © IMaCS 2006 Printed 10-Aug-15 Page 15 www.imacs.in India is transforming from an “attractive labour pool” to a “preferred manufacturing destination” èManpower advantage: Over 58 % of the Indian population is under the age of 20 (Approx. 564 mn people) èMarket advantage: The 300 million aspirational Middle-class is growing at 5% per annum èTechnology Advantage: Around 100 Fortune 500 have their R&D base in India Source: IMaCS analysis Over the next few decades India can overtake the economic growth rate of Brazil, Russia, China (the other fast growing economies) @ @ BRIC report by Goldman Sachs

16. © IMaCS 2006 Printed 10-Aug-15 Page 16 www.imacs.in A conglomerate of 96 operating companies in several sectors with revenues of USD 22 bn (2.8% of India GDP) in 2006. The Tata brand is a household name in India One of India’s largest private sector enterprise, with interests in downstream petrochemicals. Group revenues are about USD 20 bn. Reliance Industries Limited is a Fortune 500 company Pepsi is one of the biggest FMCG brands in the country. The company plans to invest around USD 500 Mn in India this year Ford is one of India’s popular brands in the car market. Ford manufactures around 100,000 cars per annum in India Key players in India Illustrative, not exhaustive

17. © IMaCS 2006 Printed 10-Aug-15 Page 17 www.imacs.in Coca Cola is one of the largest beverage player in the country. The company has invested more than USD 1 bn since its entry into India Wockhardt is one of India’s leading companies with interests in pharmaceuticals and healthcare with a market capitalization of USD 1.3 bn and an annual turnover of over USD 300 mn A US$ 8.3 bn conglomerate, with a market capitalisation of US$ 12 bn, it is anchored by 82,000 employees belonging to over 20 different nationalities Present in India for over 50 years. Leading player in the power sector. Employs over 4,000 people in India; has its global R&D centre in Bangalore Key players in India Illustrative, not exhaustive

18. © IMaCS 2006 Printed 10-Aug-15 Page 18 www.imacs.in The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email ajay.khanna@ciionline.org Web www.ibef.org

19. © IMaCS 2006 Printed 10-Aug-15 Page 19 www.imacs.in ICRA Management Consulting Services Limited Disclaimer  This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and ICRA Management Consulting Services Limited, IMaCS (“Authors”)  All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF.  This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.  The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation.  Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.