Enabling the prospects EY s 2014 attractiveness survey India
Methodology EY s 2014 India attractiveness survey is based on... 1. The real attractiveness of India to foreign investors based on based on the fdi Markets database, which tracks new greenfield and expansion foreign direct investment (FDI) projects but excludes portfolio investments and M&A. 2. The perceived attractiveness of India by foreign investors, based on telephone interviews with 502 international business leaders. 2013 rapid-growth markets attractiveness surveys 2013 Africa attractiveness survey 2013 Turkey attractiveness survey 2013 Russia attractiveness survey 2013 Kazakhstan attractiveness survey Page 2
A multi-speed world India in context Set for a modest recovery 2012 2013E 2014E 2015E 2.8% 1.6% 2.6% 3.4% Moving out of recession, but downside risks remain 2012 2013E 2014E 2015E Eurozone -0.6% -0.5% 0.9% 1.4% UK 0.2% 1.4% 1.9% 2.0% Enjoying a short-term rebound 2012 2013E 2014E 2015E 2.0% 1.9% 1.2% 1.1% India Geared for the long term 2012 2013E 2014E 2015E 5.1% 4.1% 4.5% 5.9% Drivers of world economy but external pressures weigh on growth 2012 2013E 2014E 2015E 4.6% 4.3% 4.7% 5.3% Sources: World Economic Outlook, International Monetary Fund (IMF), October 2013; EY Rapid-Growth Markets Forecast, October 2013; EY Eurozone Forecast, December 2013. Page 3
India s competitive position The FDI story in India FDI in India (2007-2012) Project numbers 1.023 945 732 761 776 744 Job creation (in 000) 341,4 229,3 194,1 222,0256,8 152,3 Capital investment (US$b) 80,6 56,5 57,2 52,0 48,9 30,9 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 2007 2008 2009 2010 2011 2012 2007-2012 Projects Jobs Capital investment 4,981 1.4m US$326.1b Source: fdi Intelligence Page 4
Fourth most attractive destination in 2012 India s share of global FDI World s top five FDI destinations US Number of FDI projects (2011) 1.700 Number of FDI projects (2012) 1.549 China UK India Brazil 515 1.002 945 1.432 1.083 921 744 459 India s share in global FDI (2012) Source: fdi Markets, from the Financial Times Ltd. 6.3% projects 9.4% jobs 5.5% value Page 5
Manufacturing and services India s key activities Projects 6.7% 6.6% 9.9% 7.8% Jobs 3.1% 3.1% 15 % 16.8% 31.2% 24.3% 50.2% 41.5% 52.2% 61.3% 31.7% 38.6% 2007-12 2012 2007-12 2012 Services Manufacturing Retail, construction, recycling and extraction Note: Strategic functions include Education & training; Research & development; and Headquarters Strategic functions Page 6
Increasing interest from the west and beyond India s sources of FDI FDI by region/countries (2007-2012) 40.5% 38.6% 30.2% 19.7% 10.4% 10% 5.1% 10.2% 1.8% 4.1% 3.5% 1.9% 1.6% 1.5% Western Europe Projects Inflows US Japan UAE South Korea Singapore China 123% project rise from Middle East in 2012 Primary sector: Financial services Main origin: The UAE and Bahrain Source: fdi Intelligence Page 7
Where to? India s FDI destinations Projects Value US$b Jobs 602 19.9 1,03,210 Projects Value US$b Jobs 556 15.3 63,977 Projects Value US$b Jobs 291 11.1 76,367 Projects Value US$b Jobs 235 10.8 70,464 Projects Value US$b Jobs 561 24.5 1,24,210 Projects Value US$b Jobs 380 25.1 1,17,952 *NCR includes New Delhi and surrounding regions. Source: fdi Intelligence Page 8
Investments delayed but prospects brighten up FDI in India in 2013 FDI snapshot in 9M13 310 projects 72,928 jobs US$12.3b Sectors Top five sectors No. of projects Share TMT 78 25.2% Industrials 39 12.6% Infrastructure 34 11.0% Consumer goods 30 9.7% Financial Services 29 9.4% Countries Top five sources No. of projects Share US 95 30.6% Japan 29 9.4% UK 29 9.4% UAE 24 7.7% Germany 21 6.8% Source: fdi Intelligence Page 9
Occupying a prominent spot within emerging markets Capital allocation in India Emerging market strategy and capital allocation Does your company have an emerging market strategy? Yes 62.6% No 25.3% Can t say 12.1% What is the approximate investment capital allocation for India? EY's 2014 India attractiveness survey Total respondents: 502 Capital allocation range: % of respondents 0.5% 5-10% 10-20% >20% Can t say 24% 15% 10.5% 19.5% 31% EY's 2014 India attractiveness survey Total respondents: 314 Page 10
Current investors remain certain Immediate plans in India Is your company considering entering/increasing existing operations in India over the next year? 53.2% 31.8% 15,0% EY's 2013 India attractiveness survey Total respondents: 502 Yes No Can't say What is the nature of the business activity you are planning in India? Manufacturing/services for the Indian market Manufacturing for global market Sales and marketing office Regional headquarters Research center/ design unit Off shoring/outsourcing Warehouse / logistics center Education and training Others Can't say 5% 5% 4.4% 3.4% 1.6% 2.1% 13% 14.8% 30.8% 42.5% Source: EY's 2014 India attractiveness survey Total respondents: 267 (group considering entering/expanding existing operations in India over the next year); respondents selected more than one possible answer; 100% have international presence Page 11
New destinations emerging Next wave of competitors From a general point of view, in your opinion, which country is India s main competitor in terms of attractiveness? China Brazil USA South Korea Indonesia Philippines Malaysia Vietnam Poland Thailand UAE Mexico Others None Can t say 2.9% 1.5% 1.3% 1.2% 1.0% 1.0% 0.7% 0.7% 0.7% 0.6% 0.5% 4.0% 5.5% 7.6% Source: EY s 2014 India attractiveness survey (Total respondents 502). 70.8% USA and Brazil have interchanged positions from 2012 India attractiveness survey from 8% and 4%, respectively. India s new competitors Page 12
Labor, skills and a lucrative market India s competitive advantages Please rate the following parameters for investment in India as attractive or not attractive. Local labor costs 86.1% 10.1% Domestic market Strong business and management education system Availability of educated workforce 82.1% 80.4% 79.1% 13.4% 13% 14.4% Local labor skills 77.6% 15.4% Sound telecommunications infrastructure 74.6% 18.6% Entrepreneurial culture Attractive 72.4% Not attractive 16.6% Source: EY s 2014 India attractiveness survey (Total respondents 502). Page 13
Infrastructure opportunities expected to rise India s top FDI sectors Reality % share of projects 2007-2012 Perception In the next two years TMT 21.6% TMT 29.9% Industrials 16.6% Infrastructure 11.3% Business services 11.4% Industrials 11.2% Automotive 8.4% Retail 8.6% Consumer goods 7.7% Automotive 8.4% Financial services 6.6% Life sciences 4.7% Infrastructure 5.9% Business services 3.8% 93% project rise in 2012 in financial services from 2011. Source: EY s 2014 India attractiveness survey (Total respondents 502); fdi Intelligence. Page 14
Beyond the metropolis India s emerging cities Top FDI choices % share in number of % of survey Most attractive projects 2007-2012 responses cities (Reality) (Perception) Mumbai 14.8% 51.2% Bengaluru 15.0% 37.8% New Delhi/NCR* 16.1% 37.4% Chennai 10.1% 14.6% Pune 7.8% 13.1% Reality and perception matches for top FDI cities in India. *NCR for reality and New Delhi for perception. However There is a significant awareness gap about second-tier and third-tier Indian cities. Emerging cities What are the emerging Indian cities for investment? Ahmedabad Jaipur Chandigarh Coimbatore Surat Kochi Nagpur Aurangabad Nashik Indore Can't say 8.9% 6.5% 6.1% 5.9% 5.8% 4.7% 4.4% 3.7% 3.0% 20.7% 43.1% Source: EY s 2014 India attractiveness survey (Total respondents 502); fdi Intelligence - Respondents selected more than one possible answer. Page 15
Great expectations India in 2020 How do you see India in 2020? Responses 2013 survey 2012 survey Among top three growing economies* 28.6% 29% Among leading three manufacturing destinations 23.6% 25% Country with substantially improved infrastructure 18.3% 24% R&D & innovation hub 15.4% 19% Competing directly with developed economies 14.5% n/a Among leading three shared services destinations 14.3% 27% With one of the best business education and higher learning systems 10.8% 20% A regional and global hub operations hub 9.4% 19% * 2012 response was phrased as "Achieved double-digit growth rates". Sources: EY's 2014 India attractiveness survey (Total respondents 502); EY's 2012 India attractiveness survey (Total respondents 506) - Only 382 had an international presence - Respondents in both the surveys selected more than one possible answer. Page 16
Improvement in six steps India s action plan 122% demand improvement in effectiveness of the rule of law; increased transparency of business regulation and increased consistency in regulatory policy. 31.8% demand improvement in labor laws, labor skills and access to capital 12.8% demand easing FDI limits. Enhance the business environment Develop infrastructure Advance the factors of production Improve the taxation system Eliminate FDI-related barriers Increase awareness about emerging cities 42% feel upgrading the infrastructure will increase India s appeal. 21.8% want an improvement in the taxation system. 43.1% could not name any emerging city in India. Source: EY s 2014 India attractiveness survey (Total respondents 502) - Respondents selected more than one possible answer. Page 17
Belgian contact details Geert Gemis ITS Partner Operational leader Asia-Pacific Desk Belgium Tel +32 3 270 14 57 Mobile+32 475 58 28 81 Email geert.gemis@be.ey.com Jos Reniers ITS Director Tel +32 3 270 1238 Mobile+32 476 50 65 79 Email jos.reniers@be.ey.com Page 18
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