India's Growth- A Story of Resilience

National Competitiveness Forum
New Delhi, September 25th 2015
India’s growth – a
story of resilience

2Presentation_NCF_vf.0.pptx
The Indian elephant has learned how to dance – India's GDP has incre-
ased by about 7.5x since 1980, 3 times faster than global expansion
Indexed GDP growth1) [1980 – 2014, 1980 = 1 ]
Source: US Department of Agriculture Economic Research service, Real GDP (2010 dollars) Historical,
available at http://www.ers.usda.gov/data-products/international-macroeconomic-data-set.aspx
0
1
2
3
4
5
6
7
8
1995 2000 2005 2010 20141980 1985 1990
GDPgrowth,xtimes
World
India
GDP
CAGR
1980-
1985
1985-
1990
1990-
1995
1995-
2000
2000-
2005
2005-
2010
2010-
2014
India 5.16 5.95 5.08 6.08 6.72 8.31 5.45
World 2.67 3.54 2.09 3.46 3.05 2.59 2.65
Comments
> India’s GDP growth has consistently
exceeded 5% over the last 35 years
> Since economic reforms of 1991,
India has achieved the following:
– Four-fold GDP growth
– Poverty alleviation for ~225 mn
Indians
– Increase in telecom penetration
from 6 mn in 1991 (1% penet-
ration) to 915 mn in 2013 (73%
penetration)
– Construction of 45,466 km of
national highways between 1991
and 2013 – four times the length of
the total Autobahn network!
> Growth has been achieved despite
vagaries of global markets, internal
strife, and politics – proof of India’s
resilience
1) All GDP numbers used for calculation are in 2010 US dollars

278
2,371
88.4%
6.12%
China’s
GDP in 2001
India’s GDP
in 2014
2,097
India’s GDP
in 1980
While its GDP growth has been much below that of China, consider-
ing the 13 year lag in reforms, the difference does not seem so stark
Comments
> China’s GDP has not dipped
below 8% in the 6-year periods
between 1980 and 2014
> Chinese GDP has increased by
a factor of 24 since 1980 levels
(compared to 7.5x in India over
the corresponding period)
> Key success factors of the
‘Chinese economic miracle’
has been abundant investment
in infrastructure and creation of
a strong export-focused
manufacturing sector
> India’s 2014 GDP was 88.4%
of China’s 2001 GDP
– China’s economic reforms
took place in 1978, 13 years
prior to India’s landmark
economic reforms and end
of the License Raj
Indexed GDP growth1) [1980 – 2014,1980 = 1 ]
Comparison of India’s 2014 GDP with China’s
2001 GDP, accounting for 13-year lag1) [USD m]
Source: USDA, Roland Berger
Comparison of GDP growth: India vs. China, 1980 to 2014 [%]
0
5
10
15
20
25
20142010200520001995199019851980
GDPgrowth,xtimes
GDP
CAGR
1980-
1985
1985-
1990
1990-
1995
1995-
2000
2000-
2005
2005-
2010
2010-
2014
China 9.58 9.80 10.79 9.13 9.76 11.21 7.99
India 5.16 5.95 5.08 6.08 6.72 8.31 5.45
China India
1) All GDP numbers used for calculation are in 2010 million US dollars
time adjusted
difference of
12% vs.
China & India

4Presentation_NCF_vf.0.pptxSource: www.moneycontrol.com, Economic Times, Roland Berger
1) Standalone company revenue
While the resilience of the Indian economy is encouraging, the growth
of India's top 50 companies has been nothing short of spectacular
Consolidated Revenue of India's Top 50 companies in 2014, CAGR 2005-2014 [%]
Overall, India’s top 50 companies have grown at a combined CAGR of 21% between 2005 and 2014!
Sr
No
Company
Revenue
FY05 (INR bn)
Revenue
FY15 (INR bn)
CAGR
1 India Oil Corporation Limited 1,334.07 4,495.09 13%
2 Reliance Industries Limited 665.97 3,754.35 19%
3 TATA Motors 195.33 2,627.96 30%
4 State Bank of India 545.36 2,572.89 17%
5 Bharat Petroleum Corporation* 638.57 2,380.87 14%
6 Hindustan Petroleum Corporation* 652.18 2,066.26 12%
7 Oil and Natural Gas Corporation 597.47 1,608.95 10%
8 Larsen & Toubro 597.47 1,608.95 10%
9 TATA Steel 159.99 1395.04 24%
10 Hindalco Industries 101.05 1,042.81 26%
11 TATA Consultancy Services 97.48 946.48 26%
12 ICICI Bank 169.17 902.16 18%
13 Essar Oil* 6.37 832.06 63%
14 NTPC 235.16 806.22 13%
15 Coal India Ltd 298.87 741.20 12%
16 Adani Enterprises 150.05 645.82 16%
17 Mangalore Refinery and Petrochemicals 206.93 574.77 11%
18 HDFC Bank 37.31 574.66 31%
19 GAIL* 135.91 567.42 15%
20 Bharti Airtel* 79.03 554.96 22%
21 Punjab National Bank 103.88 548.84 18%
22 Infosys Ltd 71.29 533.19 22%
23 Maruti Suzuki 110.33 508.01 16%
24 Housing Development Finance Corporation 36.89 483.16 29%
25 Canara Bank* 91.16 483.00 18%
Sr
No
Company
Revenue
FY05 (INR bn)
Revenue
FY15 (INR bn)
CAGR
26 Bank of India 71.77 479.63 21%
27 JSW Steel* 70.35 460.87 21%
28 Bank of Baroda 80.44 460.18 (2014) 21%
29 SAIL* 325.69 457.11 3%
30 AXIS Bank 23.28 438.44 34%
31 Chennai Petroleum Corporation 162.96 418.66 10%
32 Wipro* 72.36 416.35 19%
33 Petronet LNG 19.45 395.00 35%
34 Mahindra & Mahindra* 76.96 389.45 18%
35 ITC Ltd 76.39 365.07 17%
36 Union Bank of India 57.36 356.07 20%
37 Motherson Sumi Systems 7.81 350.32 46%
38 TATA Power Company 49.55 343.67 21%
39 Grasim Industries 94.10 328.47 13%
40 Vedanta* 14.09 325.02 37%
41 HCL Technologies 33.51 321.44 (2014) 29%
42 Idea Cellular 27.95 (2007) 312.79 35%
43 Hindustan Unilever 110.61 (Dec 2005) 308.06 11%
44 Bharat Heavy Electricals* 106.86 301.83 11%
45 IDBI Bank 33.59 297.20 (2014) 27%
46 Ruchi Soya Industries 39.08 283.09 22%
47 Central Bank of India 61.44 283.03 17%
48 Hero Motorcorp 100.86 (2006) 275.85 12%
49 Aditya Birla Nuvo Limited 3,1.89 265.16 24%
50 Indian Overseas Bank 47.51 260.77 19%

India Inc.'s innovation focus and need to differentiate has come
about as a result of its need to compete in higher margin businesses
Source: Competitive Advantage of Emerging Market Multinationals, Roland Berger
Comparison of China vs. India on competitive advantage
Government-specific
advantages (GSA)
Firm-specific
advantages (FSA)
China India
Country-specific
advantages (CSA)
(E.g., land, natural resources,
labour, location, climate etc.)
(E.g., physical infrastructure, human
capital, educational systems, quality
of governance reflected in policy
making and execution, etc.)
(E.g., firm-level assets and
capabilities that contribute to
competitive advantage)
> Strict labour law
regulations
> Good pool of talent
> Poor physical
infrastructure
> Inconsistent, ineffective
government policies
> Ranks low on Ease of
Doing Business
> Historically, Indian
companies have not
competed on cost alone
as weak government and
infrastructure impact cost
competitiveness
negatively
> In this environment, a
purely operational
excellence, low cost
manufacturing strategy is
insufficient as CSA and
GSA prevent Indian
companies from achieving
the same cost position as
their Chinese counterparts
> Innovative, higher
margin businesses are a
must for survival
> Successful Indian
companies have had to
overcome significant
challenges in terms of
CSA and GSA
> Professional management
> Clear focus on becoming
best-in-class in knowledge-
intensive industries

Rising disposable incomes combined with falling interest rates and
increasing net domestic savings show a strong consumption story
India Net domestic savings [INR bn], Lending rates [%], PDI per capita1) [INR] and Avg.
amount of debt per household [INR]
Source: RBI, World Bank, NSS reports
0
10
20
30
40
50
60
70
80
90
100
1980 1985 1990 1995 2000 2005 2010 2015
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
INR
Percent
Personal disposable income per caita , INR
Net domestic saving, INR bn
Lending interest rate, %
1) PDI = Personal Disposable Income
32,522
7,539
1,906661
84,625
11,771
3,618
1,030
2012200219911981
Urban
Rural
Average amount of debt per household [INR]Select macro-economic indicators of India

Further, India's labour productivity gains over the period 1999-2007
and 2008-2011 have clearly outpaced increases in salaries
Growth in wages and labor productivity in Asia, 1997-2007 and 2008-11 (%)
Source: Global Wage Report 2012/13, International Labor Organization
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Labour productivity growth (%)
Realwagegrowth(%)
IRA
CDA
CHI
MAC
ISA
KOR
MYA
BAN
SNG
ITHA
IND
HK
SRI
PHL
NEP
PAK
FU
-6
-4
-2
0
2
4
6
8
10
12
14
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Realwagegrowth(%)
Labour productivity growth (%)
CHI
MAC
VN
BAN
MON
NEP
ISAMYA
HK
IND
THA
SNG
KOR
PHL
IRA
1) China CHI, Cambodia CDA, Indonesia ISA, Islamic Republic of Iran IRA, Republic of Korea KOR, Malaysia MYA, Singapore SNG, Bangladesh BAN, Thailand THA, India IND, Macau
(China) MAC, Hong Kong (China) HK, Sri Lanka SRI, Philippines PHL, Myanmar MYN, Mongolia MON, Nepal NEP, Pakistan PAK, Fiji FIJ
45°
1999-20071) 2008-20111)
45°

India's import and export intensity has also consistently grown over
the last 35 years, comparable with China during the last 5 years
Import/Export Share [1980 – 2014, % GDP]
Source: World Bank database
0
5
10
15
20
25
30
35
40
45
50
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
% of GDP
Germany, export India, exportChina, exportIndia, importGermany, importChina, import

FDI as well as FII flows have grown significantly since 1991, with a
cumulative inbound FDI /FII of nearly USD 0.5 trillion since 1993
India FDI & FII inflow [1993 – 2014, USD bn]
Source: Department of Industrial Policy & Promotion, UNCTAD, SEBI
-10
-5
0
5
10
15
20
25
30
35
40
45
50
55
60
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
USD bn1)
1) USD billion at current prices and current exchange rates 2) For period Apr 2000 to Jan 2015 3) Except fertilizers 4) INR/USD exchange rate = 60 has been used
FDI inflows by country & Sector, cumulative 2000-20152)
Netherlands
23.0%
6.0%
6.0%
7.0%
Japan
9.0% UK
USA
Mauritius
Singapore
13.0%
36.0%
Others
17.0%
7.0%
Construction10.0%
4.0%
Automobile
5.0%
Drugs & Pharma
5.0%
Computer hardware & software
6.0%
Telecommunications
Services
Chemicals3)
45.0%Others
FDI inflow in India FII inflow in India4)

Moreover, India’s outward FDI performance has been impressive –
and has grown by 30x since the period 1990-99!
37,224
3,3511528732
1980-891970-791961-69 2007-14
102,850
2000-071990-99
0
10,000
20,000
30,000
40,000
50,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Indian OFDI 1961-2014 [USD mn]
Indian OFDI and IFDI [USD mn]
Comments
> Outward FDI in India increased
significantly post-2004 due to
– key policy relaxations, e.g.,
ceiling on outward FDI was
removed, state-owned
enterprises were
encouraged to invest abroad
(e.g., oil and gas companies
like GAIL and ONGC)
– restructuring activities of
large Indian conglomerates
in the 1990s had generated
large cash reserves, which
they used to acquire
international companies
> Knowledge-intensive industries
such as pharmaceuticals,
information technology, and
automotive dominated outward
FDI during the period 2004 to
2010
>
Source: UNCTAD, The Rise of Indian multinationals, Roland Berger
Overview of India’s Outward FDI (OFDI) and Inward FDI (IFDI)
Inflow Outflow

Contrary to China's manufacturing-led growth model, India's growth
has been propelled by services
GDP split by sectors1) , India vs. China [%]
Source: Planning commission database, ADB Economics working paper "The service sector in India", June 2013
GDP split – India vs. China [2014] Sectoral split in India's GDP Comments
1) Share to total GDP at constant 2004-05 prices
> Financing and business services were
the fastest growing categories in the
Indian services sector in 1980, while
growth in Industry, mining and
manufacturing remained stagnant
> Transport, storage and communication
services were the main drivers of
growth in the services sector in 2000,
while growth in Industry and
manufacturing remained stagnant
> In 2014, export of software services
was the largest contributer to India's
services sector, whereas Telecom and
software together drive India's global
brand image in services
> India's export of financial services too
witnessed a high growth of 34.4% in
2013-14
43%
48%
26%
Agriculture14%
Services60%
Industry
China India
9%
50%
60%
15%
15%
15%
9%
9%
9%
28%
20%
12%
39%
7%
2000
3%
1980
2%
2%4%
2014
3%
Agriculture Manufacturing
Services
Mining & QuarryingAllied services
Other Industry

"Make in India" – The government's promise to the world about the
changing Indian manufacturing
Source: makeinindia.com; Press research
Vision To facilitate investment, foster innovation, enhance
skill development, protect intellectual property and
build best-in-class manufacturing infrastructure in India
Mission > Increase manufacturing sector's growth to 12-14% p.a. over
the medium term
> Increase manufacturing sector's share in India's GDP from
16% to 25% by 2022
> Create 100 million additional jobs by 2022 in manufacturing
sector
Enablers > Eliminating unnecessary processes, laws and regulations
> Focusing on time-bound project clearances through a single online
portal
> Creation of appropriate skill sets through quality education
> Making the govt. more transparent, responsive and accountable
> Enhance India's global competitiveness
> Increase in domestic value addition and technological depth

China's rising wage rates creates an opportunity for other Asian
economies to replace it as the go-to manufacturing destination
Source: Salaryexplorer, 'Hourly wage rates' retrieved from http://www.salaryexplorer.com/hourly-
wage.php , accessed on Sept 14, 2015; Payscale, retrieved from
http://www.payscale.com/research/IN/Industry=Manufacturing/Hourly_Rate#by_Years_Experience
Organised Manufacturing1) manpower
Hourly Wage rates, 2015 (USD)
5,45,5
6,77,0
15,5
0
2
4
6
8
10
12
14
16
Philippines
-57%
-64%
-55%
Vietnam Indonesia IndiaChina2)
-65%
1) Organised manufacturing wages represented by Factory and manufacturing average wages
2) Mainland China Wages
Labour availability (millions) vs. English
speaking population (%), 2011
Availability of labour English speaking population %
Source: World Development Indicators, World Bank, 'Labor force, total', available at
http://data.worldbank.org/indicator/SL.TLF.TOTL.IN;
Wikipedia available at https://en.wikipedia.org/wiki/List_of_countries_by_English-speaking_population;
Secondary research
4052
116
470
0
100
200
300
400
500
600
700
800 60
50
0
20
10
40
30
Indonesia
10%
India
20%
12%
Vietnam Philippines
56%

While India focusses on leveraging its cost advantage, the global
mfg. industry is gearing up for the next level of industrial revolution
Time
1784
Mechanical
weaving loom
Introduction of
mechanical
production assets
based on water and
steam power
First industrial
revolution Drivers of this
development
> Large amount of data
available
> Rising demand for
(mass) customized
products
> Advanced algorithms
allowing better real-time
and large data analysis
> More affordable
sensor/actor
technologies
> Increasing prevalence of
communication incl.
wireless technology in
the factory
1923
Introduction of a
"moving"
assembly line at
Ford Motors
Introduction of mass
production based on
division of labour
and electrical
energy
Second industrial
revolution
1969
First program-
mable logic
controller (PLC)
Introduction of
electronics and IT
for higher auto-
matization of
production
Third industrial
revolution
2014
Cyber-physical-
systems
Introduction of
intelligent machines,
embedded cyber-
physical sensors,
collaborative
technologies, and
networked processes
Fourth industrial
revolution?
Development stages of industrial manufacturing
Source: Roland Berger

…the idea has evolved into a means of reindustrialization in EU and
is being pursued in a significant way by Germany, France and Italy
Source: PWC, Roland Berger Analysis
Industry 4.0 will reduce cost advantage of low-cost labour countries
Expected cost reductions within next 5 years
CommentsCost advantage India vs. Germany [RB est.]
21%
38%11-20%
41%0-10%
>20% Ø 13.8%
Current cost advantage Industry 4.0
25-30%
<15%
> Industry 4.0 promises substantial cost savings for
companies, 1 out of 5 firms believe they can save >20%
within the next 5 years
> India currently has a cost advantage of 25-30% to developed
countries like Germany; China has a cost advantage of 20-
22%, and Indonesia 30-34%
> With a more efficient use of resources, these cost
advantages will significantly reduce – manufacturing in low-
cost countries
Eliminate the
need for low
cost labour
Eliminate the
manufacturing
disadvantage
≈

Indian manufacturing industry has arrived at an inflection point – and
is currently not prepared for the changes which Industry 4.0 brings
> Industry 4.0 is – besides other challenges
– seriously threatening India's position as
a low-cost country
> With increasing digitalization of the
manufacturing Industry in EU, cost
advantage through availability of cheap
labor vanishes
> Low automation rate shows that India is
not ready for Industry 4.0 yet – urgent
changes are needed!
> India needs to reposition itself, and go
beyond current efforts to focus on 'Make
in India'
India currently has only 1/8 of automation rate compared to China
Current Automation Rate: Industrial Robots/1,000 Workers
3
3
8
23
60
75
125
140
225
330
490
Brazil
58
(Global Average)
India
Russian Federation
United Kingdom
China
Australia
France
USA
Germany
Japan
Republic of Korea
The Leaders
The Aspirers
The Laggards
Source: World Robotics 2013, Roland Berger Analysis

India remains a laggard in the world of innovation - for every patent
India files, China files 35 patents!
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
2,2
-200.000 0 200.000 400.000 600.000 800.000 1.000.000
R&D spend as a % of GDP
Number of Patents
6,846/1.21
Brazil
20,907/0.81India
34,065/1.09Russia
734,081/1.98 China
> India spends the lowest,
0.81% of GDP, on R&D
within the BRIC nations
> As a consequence, India
in 2013, only filed ~21K
patents
> China spends ~2.5x (as a
% of GDP) on R&D and
given the size of its GDP
they have overtaken even
the US in number of
patent filings
> If India is to compete and
upgrade itself to
innovation driven
manufacturing hub, we
have a long way to go
Source: WPIO, UNESCO Institute of Statistics
BRIC spending on R&D (% of GDP) vs. international patent filed in 2013 (# of patents)

Given India’s resilience, performance, and thriving corporate sector,
one cannot afford to miss the opportunities of this complex economy
1. India is resilient – long-term GDP growth will exceed 5% until 2030
India has performed – a time-adjusted analysis shows a
difference vis-à-vis China of ~12%
2.
Indian companies are conquering the world - Growth of top 50
Indian companies with CAGR of 21% over the last decade with
growing global footprint
3.
Manufacturing is a must: However, the window of opportunity is
finite!
4.
Source: Roland Berger
Summary

India's Growth- A Story of Resilience

India's Growth- A Story of Resilience

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