IndiaIsrael Economic and Trade Cooperation

1

Indian Economy and Business Opportunities for
the Israeli Business Community
2
OVERVIEW

• Warm and Multifaceted relations - Underpinning
  for bilateral economic and trade cooperation.
• Modern democratic societies.
• Growing warmth and comfort in relations.
• People to people contacts.
• Israelis visit India - large numbers, extended
  stays.(40,000 last year).
• Nearly 70,000 strong Indian origin Jewish
  community - important foundation.

3
BILATERAL TRADE

• Positive atmosphere.
• Significant growth from less than 200 million
  in 1992 to over 2.7 billion in 2006.
• Target - 5 billion in a couple of years.

4
Bilateral Trade Figures for January-September
2007 (as received from Israels Ministry of
Industry and Trade)
5
Bilateral Exchanges

• A new momentum with a series of decisions and
  agreements.
• During the last two years
• Prime Minister Mr. Ehud Olmert, as the then Vice
  Prime Minister and Minister of Industry, Trade,
  and Labor of Israel, in December 2004.
• Mr. Kapil Sibal, Minister for Science and
  Technology and Ocean Development, May 2005.
• Dr. Y.S. Rajasekhara Reddy, Chief Minister of
  Andhra Pradesh, July 2005.
• Mr. Kamal Nath, Commerce Industry Minister of
  India, November 2005.
• Mr. Sharad Pawar, Minister of Agriculture, Food
  Civil Supplies, Consumer Affairs and Public
  Distribution, in November 2005 and most recently
  from May 10-12, 2006 along with 3 Chief Ministers
  and 7 State Agriculture / Irrigation Ministers.
• Mr. Eliyahu Yishai, Minister of Industry, Trade
  Labour of Israel, December 3-8, 2006.
• Mr. Shivraj Singh Chouhan, Chief Minister of
  Madhya Pradesh, January 29-February 1, 2007.
• Mr. Shaul Mofaz, Minister of Transport Road
  Safety of Israel, March 19-22, 2007.
• Dr. Ashwani Kumar, Minister of State of Industry
  of India, August 4-7, 2007
• Dr. Mukul Sangama, Dy. Chief Minister of
  Meghalaya, October 30 Nov. 5, 2007
• Mr. Meir Sheetrit, Minister of Interior, November
  6-8, 2007

6
JOINT STUDY GROUP REPORT

• Released By Mr. Ehud Olmert and Mr. Kamal Nath in
  November 2005.
• Identifies the Potential Areas for Future
  Cooperation and Mechanisms for Realizing the
  Agreed Goals.

7
JSG Recommendations

• Promote Negotiations on Preferential Trade
  Agreement Between India and Israel
• Mutual Recognition Agreements to Overcome SPS/
  TBT Barriers in Each Others Country
• Greater Cooperation Between the Customs
  Authorities of Both the Countries to Facilitate
  Smooth Trade
• (IV) Full Utilization of the India-Israel
  Industrial RD Fund
• EXIM Bank and its counterpart In Israel to
  Finalise the Financial Protocol to Ensure Timely
  Payments to the Israeli Exporters Particularly
  Working With the State Governments and Local
  Bodies

8
JSG Recommendations continued

• Establish Investment Dialogue to Facilitate
  Investments in Both the Countries
• Exchange Information Concerning Civil Public
  Procurement as per Rules
• (VIII)Establish a Joint Working Group For
  Liberalization Of Trade in Services
• Facilitate Joint Business Website to sensitise
  the Business Communities about the Rules And
  Procedures in Each Others Country
• Expedite Negotiations on Bilateral Shipping
  Agreement
• (XI)Facilitate Opening Of Bank Branches in Each
  Others Countries.

9
Israeli Companies in India

• Israeli companies making major strategic
  decisions.
• Moving away from a buyer-seller relationship.
• Setting up RD and development centres or
  production units.
• A number of Israeli companies have facilities in
  India or are getting work done in India

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India-Israel Cooperation in Agriculture

• Extensive.
• 3-year comprehensive Work Plan for cooperation in
  the field of agriculture signed in May, 2006.
  (agriculture research, energy efficient
  greenhouses, irrigation, input delivery
  mechanisms, dairy development, recycling of
  wastewater, exchange of genetic material, higher
  education and training).
• Several Israeli companies are active in India.
• JVs for manufacture of drip irrigation systems
  and in the areas of floriculture and
  horticulture.(Olive plantations in Rajasthan)

11
Science and Technology

• Wide-ranging cooperation.
• Comprehensive ST agreement reached during
  Israeli Science Minister Zandbergs visit to
  India in December 2003.
• Bilateral India-Industrial RD Fund
• 1 million each by Israel and India.
• India willing to contribute 25 million to this
  fund over a period of time.
• The first three calls for proposals closed
  successfully.
• The fourth call is open now.

12
Indias Advantages

• Emergence of India's services sector, and
  creation of a technology hub serving the entire
  globe.
• Advantages of speed and cost in research and
  development, process development, design, project
  management, etc.
• Increasingly being leveraged by world
  corporations.

13
India Astounding Demographics
DEMOGRAPHIC TRANSFORMATION OF INDIA
Growth in the higher income categories of Indias
population is creating an affluent section with
high purchasing power
Annual Household Income (in USD)
2
Rich (Above 115,000)
9
High Income (57,000 115,000)
Population (million)
48
Consuming class (23,000 57,000)
221
Working class (10,200 23,000)
726
Needy (Below 10,200)
2001-02
2005-06
2009-10(E)
In PPP terms
Increasing per capita income and a growing middle
class is driving a high level of consumerism in
India
Increasing per capita income coupled with an
emerging middle class has provided the necessary
impetus to consumerism in India
Source RBI Statistics
14
Young Population

• One billion people - greatest strength.
• Some 20 of the worlds population under the age
  of 24.
• 70 of Indias population is less than 36 years
  old.
• Literacy rate of 70.

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Indias Demographic Dividend
Youngest workforce in the world SHARE
OF AGE GROUP
16
Skilled Human Resources

• Over 380 universities, 11,200 colleges, 1500
  research institutes.
• India adds each year 3 million graduates, 700,000
  post graduates and 1,500 doctorates to its
  knowledge capital.
• The largest English speaking IT talent pool in
  the world - over 120,000 trained IT
  professionals.
• Some of the best engineering and management
  institutes.

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Free Trade Agreements

• SAFTA FTA On January 1, 2006, SAFTA (South
  Asian Free Trade Area) came into being a leap
  forward from the previous SAPTA.
• India-ASEAN FTA may soon become a reality
• With Singapore and Thailand, agreements already
  in place.
• Engaging with the Latin American countries
  through MERCOSUR.
• With the South African countries through SACU
  (South African Customs Union).

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Economic Reform

• Indians recognize the value of globalization.
• Direct and indirect taxes - rationalised.
• Special tax breaks in certain sectors like power,
  electronics, telecom, software, hydrocarbons, RD
  and exports.
• Government divesting its stake in public sector.

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Indias Economic Growth

• The 4th largest economy in terms of purchasing
  power parity after the US, China and Japan.
• India is among the group of 12 countries with a
  trillion dollar economy.
• Among the fastest-growing economies.
• Average annual growth rate has been 6.5 over the
  past decade.

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India Among the Top-15 Countries in terms of GDP
at constant prices
The Indian economy has witnessed unprecedented
growth. Booming services and industry sectors
are providing the required impetus to economic
growth
Indias GDP has witnessed high growth, and was
the second fastest growing GDP after China in
2006-07
Fastest GDP growth of 9.4 percent in 2006-07,
since last 18 years (at constant prices)
Indian economy is expected to be 3rd largest in
terms of PPP USD 4.5 trillion by the end of
2007
Contribution of Services - increased from 48
percent to 55 percent
Growth in sectors at Current Prices
(2006-07) Industry 16.2 Services
16.3 Agriculture 10.2
The sound performance of each industry segment is
leading to the overall robust performance of the
Indian economy
Estimated growth rate in various GDP sectors for
Q1 (2007-08) is Industry 15.9 percent,
Agriculture 11.4 percent and Services 15.7
percent
Source MOSPI Statistics
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Projections for Indias Economic Growth

• Projections for the coming decades continue to be
  optimistic.
• BRICS report of Goldman Sachs predicts a
  sustained rate of over 5 growth for India during
  the next thirty years.
• Morgan Stanley believes that India can grow at
  over 7 for the next ten years.

22
India Robust Economic Platform
Indias strong economic performance has been the
major contributor towards increased Forex reserves
at present level of Forex reserves, the country
has adequate cover for 12 months of imports
Steadily increasing Forex reserves offer adequate
security against any possible currency crisis or
monetary instability
Indias Forex reserves are in excess of external
debt
Falling Dollar inflates the Indias external debt
Forex reserves witnessed an increase of 200
percent for the period 1990-2007
Increased confidence of investors in Indian
companies has led to a surge in cross border
borrowing by corporate houses
the decreasing external debt to GDP ratio
indicates that India has a sound economic platform
Source RBI Statistics
23
India Surging Exports
Exports have recorded a growth of 25 during the
last three years.
Services sector has been a major contributor to
increased exports from India
Quality and cost advantage are the two important
parameters leveraged by the Indian producers to
increasingly market products and services
Acceptance of Indian products along with the cost
advantage has provided an edge to Indian companies
- 2007-08 provisional data for period of April
to July only
Indian companies have chalked out extensive plans
to increase their presence abroad
Indias global economic engagement in 2006,
covering both merchandise and services trade, was
close to US 440 billion.
Petroleum products are the major contributors
towards Indias growing imports
Product imports by India mainly include petroleum
products and minerals
- 2007-08 provisional data for period of April
to July only
Source Ministry of Finance (August Report)
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India Vibrant Capital Market
23 stock exchanges with over 9000 listed
companies. Bombay Stock Exchange is the second
largest in the world after NYSE.
Sensex The Bombay Stock Exchange index has
risen 18 times from 1990s to reach 18,000 mark in
October 2007.
India is among the major destinations across the
globe for inflow of US Dollar i.e. FIIs
Sensex has risen 18 times in the period 1990-2007
Emergence of industry and confidence of local
investors along with the FIIs has led to
increased movement of the Sensex
FIIs have infused large investments into the
Indian stock market
Encouraging industry performance
Increased local investors confidence
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Foreign Direct Investment

• India rated as the second most attractive
  destination for investment according to the World
  Investment Report 2005 of UNCTAD.
• One of the most liberal FDI policies in the
  world.
• FDI trebled to US 11.4 billion in the first half
  (H1) of 2007, from US 3.6 billion in H1 2006.

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India Attractive Investment Destination
With improved performance on PE ratio and ROE,
Indian markets have attracted large investments
India is ranked second in AT Kearneys FDI
confidence index
Electronic equipment, manufacturing and telecom
have witnessed significant FDI inflow
FDI inflow for the period 2006-07 witnessed a
growth of 180 percent over the same period last
year
Large FII activity in India has led to an upsurge
in the Sensex
Source DIPP (June Report), SEBI
27
Mergers/Acquisitons andInvestments Abroad

• Increased confidence in the global arena
• (Mergers/Acqusitions in Israel Naan-Dan-Jain
  Irrigation, Alliance Tyre Company,
  Pharmaceutical sector, and some others in the
  offing).

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India Vibrant Economy Driving MA Activities

• Growth Drivers
• Globalisation and increased competition
• Concentration of companies to achieve economies
  of scale
• Lower interest rates and vibrant global markets
• Cash Reserves with corporates

In 2006, there were a total of 480 MA
deals and 302 private equity deals

• Trends
• Ratio of the Size of acquisition to the size of
  acquirer has grown from 10 percent in 2004 to 25
  percent in 2006.
• Cross-border deals are growing faster than
  domestic deals
• Private Equity (PE) houses have funded projects
  as well as made a few acquisitions in India

Average deal size close to USD 36 million
Average private equity investment deal size
increased to USD 26.02 million in 2006 from USD
16.4 million in 2005
Indian companies have clocked MA deals
approximately worth USD 31 billion during the
first eight months in 2007
Source Dealtracker Grant Thornton, Economic
Times
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Major MA Deals Undertaken Abroad by India Inc.
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Major MA and Investments Announcements in India
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Market Size

• Consumer, infrastructure, transportation, energy,
  environment, healthcare, education, hi-tech
  sectors - market that exceeds tens of billions
  of dollars in each sector.
• The fastest-growing car market in the world.
• Spending through credit cards has doubled during
  the past two years.

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IT Industry

• With a CAGR of 28 during the last 5 years, India
  has emerged as the fastest growing IT Hub in the
  world.
• The IT industry's contribution to GDP rose from
  1.2 in 1999-2000 to an estimated 5.2 in
  2006-07.
• According to NASSCOM, gowing at the rate it is
  now, the total IT industry can touch US 100
  billion by 2010.
• Revenues - US 47.8 billion in 2006-07.
• The software and services exports from India
  amounted to US 31.4 billion during 2006-07, up
  33 from the previous year.
• In terms of quality, 82 companies certified at
  SEI CMM Level 5 - higher than any other country
  in the world.

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Telecom Industry

• One of the fastest growing sectors.
• With share of 12-15 , second-largest in terms of
  approved FDI.
• Investments up to US 25 billion over the next
  five years (EY study).
• Teledensity increased by nearly 48 in the last
  12 months from 12.80 to 22.52.
• 256 million telephone subscribers (November
  2007). (Projection 500 million by the year
  2010)
• With 8.05 million added in October 2007, there
  are close to 220 million mobile phone
  subscribers.
• 2.69 million Broadband connections (Oct.2007)
  (Projection 20 million connections by 2010)

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Biotechnology

• Over 30 growth for past 3 years.
• With over 325 companies, revenues of US 2
  billion and exports of US 1.2 billion in
  2006-07. (US 5 billion in revenues estimated by
  2010)
• Investments crossed US 580 million in 2006-2007
  with companies like Jubilant, AstraZeneca, GE
  Healthcare and Biocon.
• One of the most favoured destinations for
  collaborative RD, bioinformatics, contract
  research and manufacturing and clinical research.
• The Contract Research Organizations (CRO) market
  in India is worth US 250 million and is growing
  at 30-40 per year.

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Pharmaceuticals

• US 4.5 billion pharmaceutical industry growing
  at 8-9.
• With 60 of bulk drugs production being exported,
  global recognition as a producer of low-cost high
  quality bulk drugs and formulations.
• Ranked 4th globally in terms of volume and 13th
  in terms of value, India has the highest number
  of manufacturing plants approved by the United
  States Food and Drug Administration (USFDA).

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Automotive Industry

• One of the fastest-growing manufacturing sectors
  and a globally competitive one.
• Outsourcing centre for manufacture of auto parts
  for Ford, Daimler Chrysler, Fiat, Volvo and
  Renault, etc.
• Toyota - India a global hub for transmission
  systems.
• Volvo and GM - purchasing offices.
• Rising share of Indian auto parts exports - to
  Original Equipment Manufacturers (OEMs).

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Agriculture and Food Processing

• With 601 million tonnes, one of the worlds
  largest food producers.
• Largest producer of milk and dairy products.
• Second-largest producer of fresh fruits and
  vegetables.
• Third-largest producer of food grains in the
  world.
• Largest producer, consumer and exporter of
  spices. (more than 50 types of spices with annual
  production of 3.02 million tonnes).
• Total Food market - USD 91.66 billion (estimated
  to double by 2015).
• The processed food market - 30 billion.
• India needs 28 billion of investment to raise
  food processing levels by 8-10 .
• 60 Agri Export Zones and 53 Food Parks approved
  to enable small and medium food and beverage
  units.

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Infrastructure

• Forecast for requirements 320 billion in the
  next five years.
• Highways India undertaking the worlds largest
  highway project of 14000 km. 39 Billion
• Ports and Airports undergoing modernization and
  upgradation. Ports 11 Billion Airports - 9
  billion
• Rail 5.7 Billion
• Communications 69.2 Billion
• Electricity (108,000 MW of additional power by
  next decade), water gas supply 31.5
  billion

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REAL ESTATE

• Annual growth rate of 30.
• Investment of 16 billion expected over the next
  five to six years in Real Estate. (7-8 billion
  in next 18-30 months).
• Returns in India range in 12-15 compared to 3-4
  in more advanced countries.
• 100 FDI allowed under automatic route in
  townships, housing, built-up infrastructure and
  construction-development project, subject to
  certain conditions.
• Venture funds can invest in local real estate.
  Over 30 foreign funds have applied to start
  operations in India.
• Real Estate Mutual Funds (REMF) can invest
  directly or indirectly in real estate property.

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Additional Potential Areas of Cooperation

• Israel and India are major knowledge centres. 
• Non-conventional energy.
• Nanotechnology
• Venture capital funding
• High-end security software development
• IT products and Telecom software
• Medical Equipment
• Environmental Technologies (including water
  management and non-conventional energy)
• Homeland Security

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• Thank You